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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
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.
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(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
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 617-510-3898
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 ___ No _X_
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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 March 30, 2000, the aggregate market value of the Common Stock held by
non-affiliates (based upon the last reported price on the bid-ask average on the
OTC Bulletin Board) on March 30, 2000) was approximately $167,031,887. As of
March 30, 2000, there were 7,783,925 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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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 Dr. 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 Dr.
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 Dr. 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 Dr. 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 Dr. John A. Solomon were not affected
by those hearings or the restraining order issued against the relief defendants.
The latest 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 Dr. John A. Solomon have filed answers to the
Commission's verified complaint. Both the Company and Dr. 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 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.
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.
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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.
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
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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.
The Company has offices at 5061 North Dixie Highway Boca Raton, Florida
33431. The offices at this location are leased under a month-to-month
arrangement at a monthly rental of $150. The Company's current intention is to
close this office at the end of June, 2000.
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 March 31, 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 72.
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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
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
- ---- --- -----
Dr. John A. Solomon 50 President and C.E.O*
Wayne B. Kight 48 Executive Vice President/Operations*
Gary S. Baker 52 Vice President/ Engineering
Nina L. Cannon 41 Director
Alfred T. Saker 52 Treasurer and Secretary
* Indicates Directors
Dr. John A. Solomon has been President, Chief Executive Officer and
Director of the Company from October, 1999 to present. Dr. Solomon was President
and Chief Executive Officer of CEA, Inc., a systems integration and security
technology company, from 1979 to 1995. He was Chief Executive Officer of ACG,
Inc., a telecommunications provider, from 1996 to 1997 and has been Managing
Principal of Madison Consulting LLC, a high tech consultancy firm since 1997.
Wayne B. Kight has been Executive Vice President and Director of the
Company from June 1998 to present. He was Vice President of Homeowners Financial
Corp., a mortgage banking company, from May 1994 to June 1998 (this corporation
filed for Chapter 11 Bankruptcy in 1997 and for Chapter 7 Bankruptcy in 1998).
Mr Kight had his own consultancy practice from 1998 to 1999. He is also on the
Board of Directors of American ATM, Corp.
Gary S. Baker has been Vice President and Director of Engineering of
the Company since August 1999. He was a Senior Engineer at Stratus Computer from
1993 to 1996, a Senior Engineer and Manager at Novell Computer from 1996 to 1998
and Director of Engineering at Sistex from 1998 to 1999. He also serves as a
director of the Company's Secure Systems Solutions Division.
25
<PAGE>
Nina L. Cannon has been a Director of the Company since September 1,
1999. She earned her B.S. B.A. degree from the American University in 1979 and a
Juris Doctor from Western New England College School of Law in 1982. She
recently completed a masters certificate program in Global Contract Management
from George Washington University in August 1999. She was with Nortel Networks
from 1988 to 1997 and, from June 1995 to November 1997, she was Director of
Business Management and Marketing for GSM Wireless Networks. From December 1997
to September 1999 she was Vice President, Operations at Lucent Technologies.
She has been, since April 24, 2000, the President and CEO of American
WirelessWeb Corp., a high speed broadband internet access provider.
Alfred T. Saker is the Treasurer and Secretary of the Company. 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).
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 Dr. 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 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
26
<PAGE>
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 $3.50 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 of options to purchase 10,000 shares
of Common Stock at an exercise price of $3.50 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 Dr. 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 Dr. John A.
Solomon, the term of which is for three years from September 15, 1999. The
agreement provides for Dr. 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,
Dr. 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, Dr. 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. As of May 10, 2000, the Company had not advanced any loan
amounts to Dr. Solomon under this provision. The agreement provides for the
issuance of 225,000 shares of common stock of the Company to Dr. 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, Dr. 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 March 31, 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
------------------- ----------------- -------
Dr. John A. Solomon(1) 75,000(2) *
Wayne B. Kight(3) 55,000(3) *
Nina L. Cannon(4) 15,000(4) *
All directors and officers as a group *
*Less than 1%
27
<PAGE>
(1) The address for Dr. Solomon is c/o the Company at 140 Wood Road, Braintree,
Massachusetts 02184.
(2) To be issued under Dr. Solomon's employment agreement.
(3) The address for Mr. Kight is 18701 Cassandra Lane, Boca Raton, Florida
33496. 40,000 shares are to be issued under Mr. Kight's employment
agreement.
(4) These shares are owned by Omega Funding, Inc., a corporation 100% owned by
Nina L. Cannon. Ms. Cannon's address is c/o Omega Funding, Inc. PMB 231,
Suite 4, 7040 West Palmetto Park Road, Boca Raton, Florida 33433.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omega Funding, Inc., a corporation 100% owned by Nina L. Cannon, a
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.
Such loans are due on demand and bear interest at the rate of 8% per annum.
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
The following Exhibits are filed by attachment to this Amendment No. 1
to the Annual Report on Form 10-KSB:
EXHIBIT
NUMBER
- ------
3.3 Amended and Restated By-Laws [This Exhibit supersedes the Amended and
Restated By-Laws filed as Exhibit 3.3 to Amendment No. 1 to Form 10-SB
dated January 3, 2000.]
10.3 Employment Agreement by and between the Company and Dr. John A.
Solomon. [This Exhibit supersedes the Employment Agreement between the
Company and Dr. John A. Solomon filed as Exhibit 10.3 to Form 10-SB
dated November 17, 1999.]
10.7 License Agreement dated May 1, 2000, for the Company's executive
offices.
28
<PAGE>
In addition to those Exhibits shown above, 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
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
10.4 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
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: May 15, 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 May 15, 2000.
SIGNATURE CAPACITY
--------- --------
/s/ Wayne B. Kight Executive
- ----------------------
Wayne B. Kight Vice President,
Director
/s/ Nina L. Cannon Director
- ----------------------
Nina L. Cannon
30
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
- ------- -----------
3.3 Amended and Restated By-Laws
10.3 Employment Agreement by and between the Company and
Dr. John A. Solomon
10.7 License Agreement dated May 1, 2000 for the Company's
executive offices.
31
<PAGE>
Exhibit 3.3
AMENDED AND RESTATED BY-LAWS
OF
ENTERPRISES SOLUTIONS, INC.
ARTICLE I - OFFICES
The registered office of the Corporation in the State of Nevada shall be
located at 202 South Minnesota Street, Carson City, Nevada 89703, and it may be
changed from time to time by the Board of Directors. The Corporation may also
maintain offices at such other places within or without the United States as the
Board of Directors may, from time to time, determine.
ARTICLE II - MEETINGS OF STOCKHOLDERS
SECTION 1 - ANNUAL MEETINGS.
The annual meeting of the stockholders of the Corporation shall be held
within six (6) months after the close of the fiscal year of the Corporation, for
the purpose of electing Directors, and transacting such other business as may
properly come before the meeting.
SECTION 2 - SPECIAL MEETINGS.
Special meetings of the stockholders may be called at any time by the Board
of Directors or by the President, and shall be called by the President or the
Secretary at the written request of the holders of twenty-five percent (25%) of
the shares then outstanding and entitled to vote thereat, or as otherwise
required by law.
SECTION 3 - PLACE OF MEETINGS.
All meetings of stockholders shall be held at the principal office of the
Corporation, or at such other places as shall be designated in the notices or
waivers of such meetings.
SECTION 4 - NOTICE OF MEETINGS.
(a) If under the provisions of the Nevada Private Corporations Law stockholders
are required or authorized to take any action at a meeting, the notice of the
meeting must be in writing and signed by the President or a Vice President, or
the Secretary, or an Assistant Secretary, or by such other natural person or
persons as the Directors may designate. The notice must state the purpose or
purposes for which the meeting is called and the time when, and the place, which
may be within or without the State of Nevada, where it is to be held.
(b) A copy of the notice must be delivered personally or mailed postage prepaid
to each stockholder of record entitled to vote at the meeting not less than 10
nor more than 60 days before the meeting. If mailed, it must be directed to the
stockholder at his or her address as it appears upon the records of the
Corporation, and upon the mailing of any such notice the service thereof is
complete, and the time of the notice begins to run from the date upon which the
notice is deposited in the mail for transmission to the stockholder. Personal
delivery of any such notice to any officer of a Corporation or association, or
to any member of a partnership, constitutes delivery of the notice to the
Corporation, association or partnership.
<PAGE>
(c) Notice of any meeting need not be given to any person who may become a
stockholder of record after the mailing of such notice and prior to the meeting,
or to any stockholder who attends such meeting, in person or by proxy, or
submits a signed waiver of notice either before or after such a meeting. Notice
of any adjourned meeting of stockholders need not be given, unless otherwise
required by statute.
SECTION 5 - QUORUM.
(a) Except as otherwise provided herein, or by statute, or in the Articles of
Incorporation (such certificate and any amendments thereof being hereinafter
collectively referred to as the "Articles of Incorporation"), at all meetings of
stockholders of the Corporation, the presence at the commencement of such
meetings in person or by proxy of stockholders holding of record a majority of
the voting power, which includes the voting power that is present in person or
by proxy, regardless of whether the proxy has authority to vote on all matters,
constitutes a quorum for the transaction of business. The withdrawal of any
stockholder after the commencement of a meeting shall have no effect on the
existence of a quorum, after a quorum has been established at such meeting.
(b) Despite the absence of a quorum at any annual or special meeting of
stockholders, the stockholders, by a majority of the votes cast by the holders
of shares entitled to vote thereat, may adjourn the meeting. At any such
adjourned meeting at which a quorum is present, any business may be transacted
at the meeting as originally called if a quorum had been present.
SECTION 6 - VOTING.
(a) Except as otherwise provided by statute or by the Articles of Incorporation,
any corporate action, other than the election of Directors, to be taken by vote
of the stockholders, shall be authorized by a majority of votes cast at a
meeting of stockholders by the holders of shares entitled to vote thereat.
(b) Except as otherwise provided by statute or by the Articles of Incorporation,
at each meeting of stockholders, each holder of record of stock of the
Corporation entitled to vote thereat shall be entitled to one vote for each
share of stock standing in his or her name on the records books of the
Corporation.
(c) Unless elected pursuant to Section 78.320 of the Nevada Revised Statutes,
Directors of the Corporation shall be elected at the annual meeting of
stockholders by a plurality of the votes cast at the election.
(d) Each stockholder entitled to vote or to express consent or dissent without a
meeting, may do so by proxy; provided, however, that the instrument authorizing
such proxy to act shall have been executed in writing by the stockholder himself
or herself or by his or her attorney-in-fact thereunto duly authorized in
writing. No proxy shall be valid after the expiration of six (6) months from the
date of its execution, unless the person executing it shall have specified
therein the length of time it is to continue in force. Such instrument shall be
exhibited to the Secretary at the meeting and shall be filed with the minutes of
the meeting.
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(d) Any action, except election of Directors, which may be taken by a vote of
stockholders at a meeting, may be taken without a meeting if authorized by a
written consent of shareholders holding at least a majority of the voting power,
provided that if a greater proportion of voting power is required by such action
at such meeting, then such greater proportion of written consents shall be
required.
SECTION 7 - RECORD DATE.
The Directors may prescribe a period not exceeding 60 days before any meeting of
the stockholders during which no transfer of stock on the books of the
Corporation may be made, or may fix, in advance, a record date not more than 60
or less than 10 days before the date of any such meeting as the date as of which
stockholders entitled to notice of and to vote at such meetings must be
determined. Only stockholders of record on that date are entitled to notice or
to vote at such a meeting. If a record date is not fixed, the record date is at
the close of business on the day before the day on which notice is given or, if
notice is waived, at the close of business on the day before the meeting is
held. A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders applies to an adjournment of the meeting unless the
Board of Directors fixes a new record date for the adjourned meeting. The Board
of Directors must fix a new record date if the meeting is adjourned to a date
more than 60 days later than the date set for the original meeting.
ARTICLE III - BOARD OF DIRECTORS
SECTION 1 - NUMBER, ELECTION AND TERM OF OFFICE.
(a) The number of the Directors of the Corporation shall be not less than one
(1) nor more than nine (9), unless and until otherwise determined by vote of a
majority of the entire Board of Directors. The number of Directors shall not be
less than three (3), unless all of the outstanding shares of stock are owned
beneficially and of record by less than three (3) stockholders, in which event
the number of Directors shall not be less than the number of stockholders or the
minimum permitted by statute.
(b) Except as may otherwise be provided herein or in the Articles of
Incorporation by way of cumulative voting rights, the members of the Board of
Directors of the Corporation, who need not be stockholders, shall be elected by
a majority of the votes cast at a meeting of stockholders, by the holders of
shares of stock present in person or by proxy, entitled to vote in the election.
(c) Each Director shall hold office until the annual meeting of the stockholders
next succeeding his or her election, and until his or her successor is elected
and qualified, or until his or her prior death, resignation or removal.
<PAGE>
SECTION 2 - DUTIES AND POWERS.
The Board of Directors shall have full control over the affairs of the
Corporation and may exercise all powers of the Corporation, except as are in the
Articles of Incorporation or by statute expressly conferred upon or reserved to
the stockholders.
SECTION 3 - ANNUAL AND REGULAR MEETINGS; NOTICE.
(a) Regular annual meeting of the Board of Directors shall be held immediately
following the annual meeting of the stockholders, at the place of such annual
meeting of stockholders.
(b) The Board of Directors, from time to time, may provide by resolution for the
holding of other regular meetings of the Board of Directors, and may fix the
time and place thereof.
(c) Notice of any regular meeting of the Board of Directors shall not be
required to be given and, if given, need not specify the purpose of the meeting;
provided, however, that in case the Board of Directors shall fix or change the
time or place of any regular meeting, notice of such action shall be given to
each Director who shall not have been present at the meeting at which such
change was made within the time limited, and in the manner set forth in
Paragraph (b) Section 4 of this Article III, with respect to special meetings,
unless such notice shall be waived in the manner set forth in Paragraph (c) of
such Section 4.
SECTION 4 - SPECIAL MEETING; NOTICE.
(a) Special meetings of the Board of Directors shall be held whenever called by
the President or by one of the Directors, at such time and place as may be
specified in the respective notices or waivers of notice thereof.
(b) Except as otherwise required by statute, notice of special meetings shall be
mailed directly to each Director, addressed to him or her at his or her
residence or usual place of business, at least four (4) days before the day on
which the meeting is to be held, or shall be sent to him or her at such place by
telegram, radio or cable, or shall be delivered to him or her personally or
given to him orally, not later than the day before the day on which the meeting
is to be held. A notice, or waiver of notice except as required by statute, need
not specify the purpose of the meeting.
(c) Notice of any special meeting shall not be required to be given to any
Director who shall attend such meeting without protesting prior thereto or at
its commencement, the lack of notice to him or her or who submits a signed
waiver of notice, whether before or after the meeting. Notice of any adjourned
meeting shall not be required to be given.
SECTION 5 - CHAIRMAN.
At all meetings of the Board of Directors, the Chairman of the Board, if any and
if present, shall preside. If there shall be no Chairman, or he shall be absent,
then the Vice Chairman shall preside, and in his or her absence, a Chairman
chosen by the Directors shall preside.
SECTION 6 - QUORUM AND ADJOURNMENTS.
(a) At all meetings of the Board of Directors, the presence of a majority of the
Directors then in office shall be necessary and sufficient to constitute a
quorum for the transaction of business, except as otherwise provided by law, by
the Articles of Incorporation or by these By-Laws.
<PAGE>
(b) A majority of the Directors, present at the time and place of any regular or
special meeting, although less than a quorum, may adjourn the same from time to
time without notice, until a quorum shall be present.
SECTION 7 - MANNER OF ACTING.
(a) At all meetings of the Board of Directors, each Director present shall have
one vote, irrespective of the number of shares of stock, if any, which he or she
may hold.
(b) Except as otherwise provided by statute, by the Articles of Incorporation,
or by these By-Laws, the action of a majority of the Directors present at any
meeting at which a quorum is present shall be the act of the Board of Directors.
(c) Unless otherwise required by amendment to the Articles of Incorporation or
statute, any action required or permitted to be taken at any meeting of the
Board of Directors or any Committee thereof may be taken without a meeting if a
written consent thereto is signed by all the members of the Board or Committee.
Such written consent shall be filed with the minutes of the proceedings of the
Board or Committee.
(d) Unless otherwise prohibited by amendments to the Articles of Incorporation
or statute, members of the Board of Directors or of any Committee of the Board
of Directors may participate in a meeting of such Board or Committee by means of
a conference telephone or a similar communications method by which all persons
participating in the meeting can hear each other. Such participation constitutes
presence in person at the meeting.
SECTION 8 - VACANCIES.
Any vacancy in the Board of Directors, occurring by reason of an increase in the
number of Directors, or by reason of the death, resignation, diqualification,
removal (unless vacancy created by the removal of a Director by the stockholders
shall be filled by the stockholders at the meeting at which the removal was
effected) or inability to act of any Director, or otherwise, shall be filled for
the unexpired portion of the term by a majority vote of the remaining Directors,
though less than a quorum, at any regular meeting or special meeting of the
Board of Directors called for that purpose.
SECTION 9 - RESIGNATION.
Any Director may resign at any time by giving written notice to the Board of
Directors, the President or the Secretary of the Corporation. Unless otherwise
specified in such written notice, such resignation shall take effect upon
receipt thereof by the Board of Directors or such officer, and the acceptance of
such resignation shall not be necessary to make it effective.
SECTION 10 - REMOVAL.
Any Director may be removed with or without cause at any time by the affirmative
vote of stockholders holding of record in the aggregate at least a two-thirds
majority of the outstanding shares of stock of the Corporation at a special
meeting of the stockholders called for that purpose.
<PAGE>
SECTION 11 - SALARY.
No stated salary shall be paid to Directors, as such, for their services, but by
resolution of the Board of Directors a fixed sum and expenses of attendance, if
any, may be allowed for attendance at each regular or special meeting of the
Board; provided, however, that nothing herein contained shall be construed to
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor.
SECTION 12 - CONTRACTS.
(a) A contract or other transaction is not void or voidable solely because: (1)
the contract or transaction is between the Corporation and (A) one or more of
its Directors or officers; or (B) another corporation, firm or association in
which one or more of its directors or officers are Directors or officers of the
Corporation, or are financially interested; (2) A common or interested Director
or officer (A) is present at the meeting of the Board of Directors or a
Committee thereof which authorizes or approves the contract or transaction; or
(B) joins in the execution of a written consent which authorizes or approves the
contract or transaction pursuant to subsection 2 of Nevada Revised Statutes
78.315; or (3) The vote or votes of a common or interested Director are counted
for the purpose of authorizing or approving the contract or transaction, if one
of the circumstances specified in subsection (b) exists.
(b) The circumstances in which a contract or other transaction is not void or
voidable pursuant to subsection (a) are: (1) the fact of the common
Directorship, office or financial interest is known to the Board of Directors or
Committee, and the Board or Committee authorizes, approves or ratifies the
contract or transaction in good faith by a vote sufficient for the purpose
without counting the vote or votes of the common or interested Director or
Directors; (2) the fact of the common directorship, office or financial interest
is known to the stockholders, and they approve or ratify the contract or
transaction in good faith by a majority vote of stockholders holding a majority
of the voting power (The votes of the common or interested Directors or officers
must be counted in any such vote of stockholders); (3) the fact of the common
directorship, office or financial interest is not known to the Director or
officer at the time the transaction is brought before the Board of Directors of
the Corporation for action; or (4) the contract or transaction is fair as to the
Corporation at the time it is authorized or approved.
(c) Common or interested Directors may be counted in determining the presence of
a quorum at a meeting of the Board of Directors or a Committee thereof which
authorizes, approves or ratifies the contract or transaction, and if the votes
of the common or interested Directors are not counted at the meeting, then a
majority of the disinterested Directors may authorize, approve or ratify a
contract or transaction.
SECTION 13 - COMMITTEES.
(a) Unless it is otherwise provided in the Articles of Incorporation, the Board
of Directors may designate one or more Committees which, to the extent provided
in the resolution or resolutions, have and may exercise the powers of the Board
of Directors in the management of the business and affairs of the Corporation,
and may have power to authorize the seal of the Corporation to be affixed to all
papers on which the Corporation desires to place a seal.
<PAGE>
(b) The Committee or Committees must have such name or names as may be stated in
the By-Laws of the Corporation or as may be determined from time to time by
resolution adopted by the Board of Directors.
(c) Each Committee must include at least one Director. Unless the Articles of
Incorporation provide otherwise, the Board of Directors may appoint natural
persons who are not Directors to serve on Committees.
ARTICLE IV - OFFICERS
SECTION 1 - NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE.
(a) The officers of the Corporation shall consist of a President, a Secretary, a
Treasurer, or a President and Secretary-Treasurer, and such other officers,
including a Chairman of the Board of Directors, and one or more Vice Presidents,
as the Board of Directors may from time to time deem advisable. Any officer
other than the Chairman or Vice Chairman of the Board of Directors may be, but
is not required to be, a Director of the Corporation. Any two or more offices
may be held by the same person.
(b) The officers of the Corporation shall be elected by the Board of Directors
at the regular annual meeting of the Board following the annual meeting of
stockholders.
(c) Each officer shall hold office until the annual meeting of the Board of
Directors next succeeding his or her election, and until his or her successor
shall have been elected and qualified or until his or her death, resignation or
removal.
SECTION 2 - RESIGNATION.
Any officer may resign at any time by giving written notice of such resignation
to the Board of Directors, or to the President or the Secretary of the
Corporation. Unless otherwise specified in such written notice, such resignation
shall take effect upon receipt thereof by the Board of Directors or by such
officer, and the acceptance of such resignation shall not be necessary to make
it effective.
SECTION 3 - REMOVAL.
Any officer may be removed, either with or without cause, and a successor
elected by a majority vote of the Board of Directors at any time.
SECTION 4 - VACANCIES.
A vacancy in any office by reason of death, resignation, inability to act,
disqualification or any other cause, may at any time be filled for the unexpired
portion of the term by a majority vote of the Board of Directors.
SECTION 5 - CHAIRMAN OF THE BOARD.
The Chairman of the Board, if one is elected, shall preside at all meetings of
stockholders and at all meetings of the Board of Directors, and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
<PAGE>
SECTION 6 - PRESIDENT.
The President shall be the Chief Executive Officer of the Corporation, shall
have general and active management of the business of the Corporation and shall
see that all orders and resolutions of the Board of Directors are carried into
effect. He or she shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the Corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to some
other officer or agent of the Corporation. If a Chairman of the Board is not
elected or, if one is elected, in the absence of the Chairman of the Board or in
the event of his or her inability or refusal to act, the President shall preside
at all meetings of stockholders and at all meetings of the Board of Directors,
and shall perform such other duties and have such other powers as the Board of
Directors may from time to time prescribe.
SECTION 7 - VICE PRESIDENT.
The Vice President, or if there be more than one, the Vice Presidents in the
order determined by the Board of Directors (or if there be no such
determination, then in the order of their election), in the absence of the
President or in the event of his or her inability or refusal to act, shall
perform the duties and exercise the powers of the President and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
SECTION 8 - SECRETARY AND ASSISTANT SECRETARIES.
The Secretary shall attend all meetings of the Board of Directors and all
meetings of the stockholders and shall record all the proceedings of such
meetings in a book to be kept for that purpose, and shall perform like duties
for the standing Committees when required. He or she shall give, or cause to be
given, notice of all meetings of the stockholders and special meetings of the
Board of Directors, and shall perform such other duties and have such other
powers as may from time to time be prescribed by the Board of Directors or the
President. He or she shall have custody of the corporate seal of the
Corporation; he or she, or an Assistant Secretary, shall have authority to affix
the same to any instrument requiring it; and when so affixed, it may be attested
by his or her signature or by the signature of such Assistant Secretary. The
Board of Directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his or her signature.
The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the Board of Directors (or if there be no
such determination, then in the order of their election), shall, in the absence
of the Secretary or in the event of his or her inability or refusal to act,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as the Board of Directors may from
time to time prescribe.
<PAGE>
SECTION 9 - TREASURER AND ASSISTANT TREASURERS.
The Treasurer shall have the custody of the corporate funds and securities and
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Corporation and shall deposit all moneys and other valuable
effects in the name and to the credit of the Corporation in such depositories as
may be designated by the Board of Directors. He or she shall disburse the funds
of the Corporation as may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the President and the Board
of Directors, at its regular meetings, or when the Board of Directors so
requires, an account of all his or her transactions as Treasurer and of the
financial condition of the Corporation.
If required by the Board of Directors, he or she shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors for
the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his or her death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his or her possession or under his or her
control belonging to the Corporation.
SECTION 10 - SURITIES AND BONDS.
In case the Board of Directors shall so require any officer, employee or agent
of the Corporation shall execute to the Corporation a bond in such sum, and with
such surety or sureties as the Board of Directors may direct, conditioned upon
the faithful performance of his or her duties to the Corporation, including
responsibility for negligence for the accounting for all property, funds or
securities of the Corporation which may come into his or her hands.
SECTION 11 - SHARES OF STOCK OF OTHER CORPORATIONS.
Whenever the Corporation is the holder of shares of stock of any other
corporation, any right or power of the Corporation as such stockholder
(including the attendance, acting and voting at stockholders' meetings and
execution of waivers, consents, proxies or other instruments) may be exercised
on behalf of the Corporation by the President, any Vice President or such other
person as the Board of Directors may authorize.
ARTICLE V - SHARES OF STOCK
SECTION 1 - CERTIFICATE OF STOCK.
(a) The certificates representing shares of the Corporation's stock shall be in
such form as shall be adopted by the Board of Directors, and shall be numbered
and registered in the order issued. The certificates shall bear the following:
the Corporate Seal, the holder's name, the number of shares of stock and the
signatures of: (1) the Chairman of the Board, the President or a Vice President
and (2) the Secretary, Treasurer, any Assistant Secretary or Assistant
Treasurer.
(b) No certificate representing shares of stock shall be issued until the full
amount of consideration therefor has been paid, except as otherwise permitted by
law.
<PAGE>
(c) To the extent permitted by law, the Board of Directors may authorize the
issuance of certificates for fractions of a share of stock which shall entitle
the holder to exercise voting rights, receive dividends and participate in
liquidating distributions, in proportion to the fractional holdings: or it may
authorize the payment in cash of the fair value of fractions of a share of stock
as of the time when those entitled to receive such fractions are determined; or
it may authorize the issuance, subject to such conditions as may be permitted by
law, of scrip in registered or bearer form over the signature of an officer or
agent of the Corporation, exchangeable as therein provided for full shares of
stock, but such scrip shall not entitle the holder to any rights of a
stockholder, except as therein provided.
SECTION 2 - LOST OR DESTROYED CERTIFICATES.
The holder of any certificate representing shares of stock of the Corporation
shall immediately notify the Corporation of any loss or destruction of the
certificate representing the same. The Corporation may issue a new certificate
in the place of any certificate theretofore issued by it, alleged to have been
lost or destroyed. On production of such evidence of loss or destruction as the
Board of Directors in its discretion may require, the Board of Directors may, in
its discretion, require the owner of the lost or destroyed certificate, or his
or her legal representatives, to give the Corporation a bond in such sum as the
Board may direct, and with such surety or sureties as may be satisfactory to the
Board, to indemnify the Corporation against any claims, loss, liability or
damage it may suffer on account of the issuance of the new certificate. A new
certificate may be issued without requiring any such evidence or bond when, in
the judgment of the Board of Directors, it is proper to do so.
SECTION 3 - TRANSFER OF SHARES.
(a) Transfer of shares of stock of the Corporation shall be made on the stock
ledger of the Corporation only by the holder of record thereof, in person or by
his or her duly authorized attorney, upon surrender for cancellation of the
certificate or certificates representing such shares of stock with an assignment
or power of transfer endorsed thereon or delivered therewith, duly executed,
with such proof of the authenticity of the signature and of authority to
transfer and of payment of taxes as the Corporation or its agencies may require.
(b) The Corporation shall be entitled to treat the holder of record of any share
or shares of stock as the absolute owner thereof for all purposes and,
accordingly, shall not be bound to recognize any legal, equitable or other claim
to, or interest in, such share or shares of stock on the part of any other
person, whether or not it shall have expenses or other notice thereof, except as
otherwise expressly provided by law.
ARTICLE VI - DIVIDENDS
Subject to applicable law, dividends may be declared and paid out of any funds
available therefor, as often, in such amount, and at such time or times as the
Board of Directors may determine.
<PAGE>
ARTICLE VII - FISCAL YEAR
The fiscal year of the Corporation shall end on December 31, and may be changed
by the Board of Directors from time to time subject to applicable law.
ARTICLE VIII - CORPORATE SEAL
The corporate seal shall be in such form as shall be approved from time to time
by the Board of Directors.
ARTICLE IX - INDEMNITY
SECTION 1 - POLICY.
It is the policy and intention of the Corporation to provide to its officers and
Directors broad and comprehensive indemnification from liability to the fullest
extent permitted by law.
SECTION 2 - RIGHT TO INDEMNIFICATION.
Each person who was or is a party or is threatened to be made a party to or is
involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative (hereinafter a "proceeding"), by reason of the
fact that he or she, or a person of whom he or she is the legal representative,
is or was a Director or officer of the Corporation or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is an alleged action or inaction in an official capacity or in
any other capacity while serving as a director, officer, employee or agent,
shall be indemnified and held harmless by the Corporation to the fullest extent
permitted by the laws of Nevada, as the same exist or may hereafter be amended,
against all costs, charges, expenses, liabilities and losses (including
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith, and such indemnification shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of his or her heirs, executors and administrators; provided,
however, that except as provided in paragraph (c) hereof, the Corporation shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
The right to indemnification conferred in this Article shall be a contract right
and shall include the right to be paid by the Corporation the expenses incurred
in defending any such proceeding in advance of its final disposition; provided,
however, that, if Nevada law requires, the payment of such expenses incurred by
a Director or officer in his or her capacity as a Director or officer (and not
in any other capacity in which service was or is rendered by such person while a
Director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the Corporation of an undertaking, by or on behalf of such
Director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such Director or officer is not entitled to be indemnified under
this Article or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees and agents of the Corporation
with the same scope and effect as the foregoing indemnification of Directors and
officers.
<PAGE>
SECTION 3 - RIGHT OF CLAIMANT TO BRING SUIT.
If a claim under this Article is not paid in full by the Corporation, the
claimant may at any time thereafter bring suit against the Corporation to
recover the unpaid amount of the claim and, if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any proceeding advance of its
final disposition where the required undertaking, if any is required, has been
tendered to the Corporation) that the claimant has failed to meet a standard of
conduct which makes it permissible under Nevada law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
shareholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is permissible in the circumstances
because he or she has met such standard of conduct, nor an actual determination
by the Corporation (including its Board of Directors, independent legal counsel
or its shareholders) that the claimant has not met such standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
failed to meet such standard of conduct.
SECTION 4 - NON-EXCLUSIVITY OF RIGHTS.
The right to indemnification and the payment of expenses incurred in defending a
proceeding in advance of its final disposition conferred in this Article shall
not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Articles of Incorporation, By-Laws,
agreement, vote of shareholders or disinterested Directors or otherwise.
SECTION 5 - INSURANCE.
The Corporation may maintain insurance, at its expense, to protect itself and
any Director, officer, employee or agent of the Corporation or other
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under
Nevada law.
SECTION 6 - EXPENSES AS A WITNESS.
To the extent that any Director, officer, employee or agent of the Corporation
is by reason of such position, or a position with another entity at the request
of the Corporation, a witness in any action, suit or proceeding, he or she shall
be indemnified against all costs and expenses actually and reasonably incurred
by him or her or on his or her behalf in connection therewith.
SECTION 7 - INDEMNITY AGREEMENT.
The Corporation may enter into agreements with any Director, officer, employee
or agent of the Corporation to the fullest extent permitted by Nevada law.
<PAGE>
SECTION 8 - EFFECT OF REPEAL OR MODIFICATION.
Any repeal or modification of this Article IX shall not result in any liability
for a Director with respect to any action or omission occurring prior to such
repeal or modification.
ARTICLE X - AMENDMENTS
SECTION 1 - BY STOCKHOLDERS.
All By-Laws of the Corporation shall be subject to alteration or repeal, and new
By-Laws may be made, by the affirmative vote of stockholders holding of record
in the aggregate at least a majority of the outstanding shares of stock entitled
to vote in the election of Directors at any annual or special meeting of
stockholders, provided that the notice or waiver of notice of such meeting shall
have summarized or set forth in full therein, the proposed amendment.
SECTION 2 - BY DIRECTORS.
The Board of Directors shall have power to make, adopt, alter, amend and repeal,
from time to time, these By-Laws, provided, however, that the stockholders
entitled to vote with respect thereto as in this Article X above-provided may
alter, amend or repeal By-Laws or amendments thereto made by the Board of
Directors, except that the Board of Directors shall have no power to change the
quorum for meetings of stockholders or of the Board of Directors or to change
any provisions of the By-Laws with respect to the removal of Directors of the
filling of vacancies in the Board resulting from the removal by the
stockholders. If any provision of these By-Laws regulating an impending election
of Directors is adopted, amended or repealed by the Board of Directors, there
shall be set forth in the notice of the next meeting of stockholders for the
election of Directors, the By-Laws so adopted, amended or repealed, together
with a concise statement of the changes made.
<PAGE>
CERTIFICATE OF SECRETARY
THIS IS TO CERTIFY that I am the duly elected, qualified and acting
Secretary of
Enterprises Solutions, Inc.
----------------------------------
and that the above and foregoing Amended and Restated By-Laws constituting a
true original copy were duly adopted as the Amended and Restated By-Laws of said
Corporation.
IN WITNESS WHEREOF, I have hereunto set my hand.
DATED:
-----------------------
-------------------------------
SECRETARY
<PAGE>
Exhibit 10.3
EMPLOYMENT AGREEMENT
AGREEMENT dated September 15, 1999, by and between Enterprises
Solutions Inc., a Florida corporation ("Company"), and John A. Solomon
("Employee").
WHEREAS, the Company is engaged in the business of developing and
operating internet and computer security solutions, government and corporate
systems integration and contract selling and development work;
WHEREAS, the Company and the Employee wish to enter into an Employment
Agreement in order to retain Employee's ongoing services as the President and
Chief Executive of the Company or in such capacities as the Company's Board from
time to time determines;
WHEREAS, Employee is employed by the company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
will become familiar with and aware of information as to the specific manner of
doing business and the customers of and its afflilates and future plans with
respect thereto, all of which will be maintained at great expense to the
Company; this information is a trade secret and constitutes the valuable
goodwill of the Company.
WHEREAS, employee recognizes that the Company's business is dependent
upon a number of trade secrets, including locations, trade contacts, supplies,
techniques, methods and data. The protection of the trade secrets is of critical
importance to the successful operation of the Company;
WHEREAS, the Company will sustain great loss and damage if during the
terms of this Agreement or Employee's employment with the Company, or for a
period of one (1) year immediately following the termination of the Agreement or
Employee's employment, for whatever reason, Employee should violate the
provisions of Articles III or IV of this Agreement. Further, monetary damages
for such losses would be extremely difficult to measure.
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, it is
hereby agreed as follows:
ARTICLE I
Employment and Duties
A. The Company hereby employs Employee as its President and Chief Executive
Officer. Additional or different duties, titles or positions, however,
may be assigned to Employee or may be taken from Employee from time to
time by the Board of Directors ("Board") of the Company. Employee hereby
accepts this employment upon the terms and conditions herein contained
and agrees to devote his time, attention and efforts to promote and
further the business and services of the Company. Employee shall
faithfully adhere to, execute and fulfill all policies established by the
Company.
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B. Employee shall perform such duties, assume such responsibilities and
devote such time, attention and energy to the business of the Company as
the Board shall from time to time require and shall not, during the term
of his employment hereunder, be engaged in any other business activity
pursued for gain, profit or other pecuniary advantage if such activity
interferes with Employee's duties and responsibilities hereunder.
However, the foregoing limitations shall not be construed as prohibiting
Employee from making personal investments in such form or manner as will
neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms
of Paragraphs 3 or 4 hereof.
C. All funds received by Employee on behalf of the Company, if any, shall be
held in trust for the Company and shall be delivered to the Company as
soon as practicable.
ARTICLE II
Compensation
2.01 Salary. From and after the effective date of this Agreement, the Employee
shall receive a salary ("Salary") from the Company in an amount equal to
$200,000.00 per year.
The Employee's Salary shall be payable pursuant to a monthly schedule consisting
of semimonthly payments ("Salary"), each such payment being in an amount equal
to 1/72 of $600,000.00 or $8,333.33, Once the Company first receives funding in
the amount of $10MM dollars, the Employee's Salary shall be increased to an
amount equal to $500,000 per year minimum or set to equal the industry standard
for other such executives in a similar size and scope as the Company, whichever
is greater. All other conditions in Paragraph 2.01 and elsewhere in this
agreement shall be adjusted to take into account the Employee's increased
salary.
2.02 Expense Reimbursement. The Company shall reimburse Employee for all
reasonable travel, entertainment and other expenses related to his employment by
or promotion of the Company. Employee shall provide a written accounting and
receipt of all expenses for which reimbursement is sought on a monthly basis and
the Company shall reimburse all such expenses within ten (10) days following
receipt of each written accounting.
2.03 Bonuses. The Employee shall be entitled to receive such bonuses as the
Board shall determine om time to time in accordance with Company policy and at
the sole discretion of the Board, but not less than 7% of the Net Before Tax
corporate profits in each year of employment.
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2.04 Plan Participation. The Employee shall be entitled to participate in any
and all stock option, stock bonus, pension, profit sharing, retirement or other
similar plans adopted by the Company.
2.05 Other. The Employee shall be entitled to such fringe benefits as the
Company shall establish for its employees generally which shall include with
respect to the Employee at least four weeks paid vacation annually, (family)
medical, life and disability insurance, disability pay, automobile and such
other benefits as the Company shall adopt, subject to the discretion of the
Company to add or delete such standard benefits as the Board deems appropriate,
from time to time. During the term of his employment, Employee shall be entitled
to borrow from the Company up to $750,000 on a secured basis. Any loan(s) taken
by Employee pursuant to this provision shall bear simple interest at the
annualized rate of 7%. Employee shall pay to the Company all accrued interest on
a monthly basis. Employee's monthly interest payment shall be determined based
on the applicable interest rate applied against the then current principal
amount of the loan outstanding. Employee shall repay the principal amount of any
loan(s) taken pursuant to this provision not later than ten (1O) years after
receiving his first distribution of loan proceeds. As security for any loan(s)
taken by Employee, Employee agrees to pledge to the Company that amount of the
Company's stock owned by Employee representing 125% of the outstanding balance
of any and all loans taken by Employee. The amount of stock to be pledged by
Employee shall be adjusted monthly and shall be based on the closing bid price
of the Company's stock on the first trading day of each month. Employee shall be
entitled to receive one or more loans from the Company, however, the cumulative
principal amounts of all loans taken shall not exceed $750,000.
2.06 Stock Compensation. The Employee shall be entitled to receive in the form
of Common Stock of the Company shares in the amount of 225,000, shares, which
shall be held in escrow by the Company, with 1/3rd being released to the
Employee at the end of each year of employment completion. The right to the
first 1/3rd of Common Stock shall vest upon execution of this contract and shall
be issued to Employee on or before December 31, 1999. The employee shall receive
275,000 additional shares, which shall be earned at such time as his salary is
increased pursuant to paragraph 2.01 above.
During the period of any restriction on Employee's ability to transfer the
Company's stock issued to Employee pursuant to this Agreement, Company agrees
that it shall reacquire from Employee, at current market prices, that number of
shares of such stock as is necessary for Employee to satisfy his tax
obligations, if any, resulting from the Company's issuance of stock to Employee.
In the event the Employee's employment by the Company is terminated on or before
September 14, 2002 or following a "change in control of the Company", as defined
in section 5.02E below, any stock bonus provided for above shall be deemed to be
earned in full and shall be paid by the Company simultaneously with such change
in control.
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<PAGE>
ARTICLE III
Non-Competition Agreement
A. Employee will not, during the period of this Agreement or of his
employment by or with the Company, and for a period of one (1) year
immediately following the termination of this Agreement or his
employment, whichever is longer, for any reason whatsoever, directly or
indirectly, for himself or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of
whatever nature (i) call upon any customer of the Company (including, but
not limited to, any customer obtained for the Company by Employee) for
the purpose of soliciting or selling any products or services in
competition with those of the Company or its affiliates; (ii) call upon
any employee of the Company or any of its affiliates for the purpose or
with the intent of enticing them away from or out of the employ of the
Company or any reason whatever; (iii) establish, enter it, be employed by
or, advise, consult with or become a part of, any company, partnership,
corporation or other business entity or venture, or in any way engage in
business for himself or for others, in competition with the Company or
its affiliates within one hundred (100) miles of the home office (of the
Company and/or any affiliated company location, such location having a
permanent and known facility wherein the Employee has served in any
capacity and wherever Employee has performed duties or had management
responsibility on behalf of the Company or its affiliates; or (iv) during
or after the term of his employment with the Company, disclose the
Company's customers or any other trade secrets of the Company whether in
existence or proposed, to any person, firm partnership, corporation or
business for any reason or purpose whatsoever.
B. Because of the difficulty of measuring economic losses to the Company and
its affiliates as a result of his breach of the foregoing covenant and
because of the immediate and irreparable damage that would be caused to
the Company and its affiliates for which it would have no other adequate
remedy, Employee agrees that the foregoing covenant may be enforced by
the Company and its affiliates in the event of breach by him by
injunctions and restraining orders.
C. It is agreed by the parties that the foregoing covenants in this
Paragraph 3 are necessary to protect the goodwill and business interests
of the Company and its affiliates and impose a reasonable restraint on
Employee in light of the activities and business of the Company and its
affiliates on the date of the execution of this Agreement and the future
plans of the Company; but it is also the intent of the Company and
Employee that such covenants be construed and enforced in accordance with
the activities and business of the Company and its affiliates on the date
of the termination of the employment of the Employee.
D. The covenants in this Paragraph 3 are severable and separate and the
unenforceability of any specific covenant shall not affect the provisions
of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial
restriction set forth are unreasonable, then it is the intention of the
parties that such restrictions be enforced to the fullest extent which
the court deems reasonable and the Agreement shall thereby be reformed.
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<PAGE>
E. All of the covenants in this Paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement and the
existence of any claim or cause of action of Employee against the Company
or its affiliates, whether predicated in this Agreement or otherwise,
shall not constitute a defense to the enforcement by the Company of such
covenants. It is specifically agreed that the period of one (1) year
stated at the beginning of this Paragraph 3, during which the agreements
and covenants of Employee made in this Paragraph 3 shall be effective,
shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this Paragraph 3 and
any time during which there is pending in any court of competent
jurisdiction any action (including any appeal from any final judgment)
brought by any person, whether or not a party to this Agreement, in which
action the Company or its affiliates seeks to enforce the agreements and
covenants of Employee or in which any person contests the validity of
such agreements and covenants or their unenforceability or seeks to avoid
their performance or enforcement
ARTICLE IV
Non-Disclosure Agreement and Proprietary Information.
A. The Employee recognizes and acknowledges that the information,
techniques, processes, formulas, developments, experimental work, work in
progress, business, list of the Company's customers and any other trade
secret or other secret or confidential information relating to Company's
business as they may exist from time to time are valuable, special and
unique assets of Company's business. In addition, Employee recognizes
that Company is continually engaged in research and development of new
inventions and improvements to the information, techniques, processes,
formulas, developments, trade secrets, and other secrets and confidential
matters relating to Company's business. Therefore, Employee agrees as
follows:
1. That Employee will hold in strictest confidence and not disclose,
reproduce, publish or use in any manner, whether during or subsequent to
his employment, without the express authorization of the Board of
Directors of the Company, any information, manufacturing technique,
process, business customer lists, trade secrets or any other secrets or
confidential matter relating to any aspect of the Company's business as
designated from time to time by the Board of Directors of Company, except
as such disclosure or use may be required in connection with Employee's
work for the Company.
2. That upon request or at the time of leaving the employ of the Company,
the Employee will deliver to the Company, and not keep or deliver to
anyone else, any and all notes, memoranda, documents and, in general, any
and all material relating to the Company's business.
5
<PAGE>
3. That the Board of Directors of the Company may from time to time
designate other subject matters requiring confidentiality and secrecy
which shall be deemed to be covered by the terms of this Agreement.
B. In the event of a breach or threatened breach by the Employee of the
provisions of this Paragraph 4, the Company shall be entitled to an
injunction:
1. Restraining the Employee from disclosing, in whole or in part, any
information as described above or from rendering any services to any
person, firm, corporation association or other entity to whom such
information, in whole or in part, has been disclosed or is threatened to
be disclosed; and/or
2. Requiring that Employee deliver to Company all information, documents,
notes, memoranda and any and all discoveries or other material as
described above upon Employee's leave of the employ of the Company.
Nothing herein shall be construed as prohibiting the Company from
pursuing other remedies available to the Company for such breach or
threatened breach, including the recovery of damages from the Employer.
ARTICLE V
Term; Terminations
5.01 Term. The term of this agreement shall begin on September 15, 1999 and
continue until September 14, 2002, unless further extended or sooner terminated
as herein provided. On September l4, 2002, and on the 14th day of September each
year thereafter, the term of the Employee's employment shall be automatically
extended one (1) additional year unless, on or before sixty (60) days in advance
of such 14th day of September 2002, the Company shall have delivered to the
Employee or the Employee shall have delivered to the Company written notice that
the term of the Employee's employment hereunder will not be extended.
5.02 Termination. This Agreement and Employee's employment may be terminated in
any one of the following ways:
A. The death of Employee.
B. The Company may terminate the Agreement after thirty (30) days
written notice ("Notice of Termination") to Employee if, because
of illness or physical or mental disability or other incapacity
which continues for a period in excess of three (3) months,
Employee is unable to perform his duties under this agreement.
1. Employee shall not be discharged during the Employment
Period except for justifiable cause. For purposes of
this Agreement, justifiable cause is limited to the
following: willful, material dishonesty, including
theft, misappropriation or material intentional
falsehood; invidious discrimination or significant
harassment, battery or assault of an officer, employee,
customer,
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<PAGE>
client or vendor of the Company, whether associated
with race, color, religion, national origin, age, sex,
non-job related disability or any other factor or
status protected by law; willful or wanton breach of
fiduciary duties; material and persistent refusal to
carry out lawfully assigned duties; intentional or
grossly reckless defamation, conviction of a felony or
other illegal public action that materially damages the
Company's reputation. The termination of the Employee
for reasons other than those specified in the preceding
paragraph shall be deemed to be without justifiable
cause. No action or inaction by the Employee shall be
deemed to have occurred under this Agreement unless
written notice of such action or inaction shall have
been given to the Employee by the Company and the
Employee shall have failed to cure or remedy such
defect to the Company's reasonable satisfaction within
sixty (60) days after the Employee receives written
notice of the offending action or inaction. Any
termination of the Employee without justifiable cause
shall entitle the Employee to a minimum severance
package of two (2) years current salary payable over
six (6) monthly installments, or the balance of
$600,000 less any payments made to Employee pursuant to
this agreement, whichever is less. Employee will also
be entitled to immediate issuance of shares in the
Company equal to (he amount that shall be adjusted
proportionately with any salary increase pursuant to
paragraphs 2.01 and 2.06 above that will be 225,000
less shares already issued Employee or 500,000 less
shares already issued Employee whichever number is in
force at the time of the termination.
C. Thirty (30) days notice by Employee of his intent to resign his position.
D. For purposes of this Agreement, a "change in control of the Company"
shall mean a change in control that would be required to be reported in
response to Item I (a) of Form 8-K under the Securities Exchange Act of
1934 (the "Exchange Act"); provided that, without limitation, such a
change in control shall be deemed to have occurred if i) any "person" (as
that term is used in Sections 13(d) and 14(d) of the Exchange Act), other
than the Company, as constituted, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding securities, (ii)
during any period of three consecutive years during the term of this
Agreement, individuals who at the beginning of such period constitute the
Board cease for any reason to constitute at least a majority thereof,
unless the election of each director who was not a Director at the
beginning of such period has been approved in advance by Directors
representing at least two-thirds of the Directors then in office who were
Directors at the beginning of the period.
F. In the event the Company terminates, or attempts to terminate, the
employment of the Employee other than as provided above, or the Company
otherwise is in breach of the terms of this Agreement, the Company agrees
to pay or reimburse the Employee for, all legal fees, costs and other
damages, including back-pay and benefits if applicable, incurred as a
result of such breach or wrongful termination.
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<PAGE>
5.3 Compensation Upon Termination or During Disability
A. During any period that the Employee fails to perform his duties
hereunder as a result of incapacity due to physical or mental
illness ("disability period"), the Employee shall continue to
receive his full salary at the rate then in effect for such
period until his employment is terminated pursuant to section
5.02B hereof.
B. If the Employee's employment shall be terminated pursuant to
Section 5.02B, the Company shall pay the Employee his full
salary through the date of termination, at the rate in effect at
the time Notice of Termination is given, plus all outstanding
expenses payable pursuant to Section 2.02 hereof and the Company
shall have no further obligations to the Employee under this
Agreement.
C. If the Employee shall terminate his employment under Section
5.02D hereof, the Company shall pay the Employee his full salary
through the date of termination at the rate in effect at the
date of termination, plus all outstanding expenses payable
pursuant to section 2.02 hereof.
D. If the Company shall terminate the Employee's employment in
breach hereof or within one year of a "change in control of the
Company", for any reason other than death or disability under
section 5.02A or B, then:
2. The Company shall pay the Employee for any termination
without justified cause a minimum severance package of (2)
years current salary payable over six (6) months
installments, or the balance of $600,000 less any payments
made to Employee pursuant to this agreement, whichever is
less. The amount and stock in this paragraph shall be
adjusted proportionately with any salary increase pursuant to
paragraphs 2.01 and 2.06 above. Employee will be entitled to
immediate issuance of shares in the Company equal to 225,000
less shares already issued Employee or 500,000 less shares
already issued Employee whichever number is in force at the
time of the termination.
3. The Company shall maintain in full force and effect, for the
continued benefit of the Employee for three (3) months from
the date of termination, all employee benefit plans and
programs in which the Employee was entitled to participate
immediately prior to the date of termination provided that
the Employee's continued participation is possible under the
general terms and provisions of such plans and programs. All
such benefit plans and programs shall be maintained at the
level and value provided immediately prior to the date of
termination. In the event that the Employee's participation
in any such plan or program is barred, the Company shall
arrange to provide the Employee with benefits substantially
similar to those which the Employee would otherwise have been
entitled to receive under such plans and programs from which
his continued participation is barred.
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<PAGE>
Employer shall be permitted to take key man life insurance
out on employee, with the company as beneficiary in the
amount up to $1,000,000.
Except as required above, the Company shall not be required
to maintain in force for the benefit of the Employee any
employee benefit plans or programs following the date of
termination.
E. The Employee shall not be required to mitigate the amount of any
payment provided for in this Section by seeking other employment
or otherwise.
ARTICLE VI
Representations of Employee
Employee has represented and hereby represents and warrants to the
Company that he is not subject to any restriction or non-competition covenant in
favor of a former employer or any other persons or entity and that the execution
of this Agreement by Employee and his employment by the Company or its
affiliates and the performance of his duties hereunder will not violate or be a
breach of any agreement with a former employer or any other person or entity.
Further, Employee agrees to indemnify the Company and its affiliates for any
claim, including, but not limited to, attorney's fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Company or its affiliates based upon or
arising out of any non-competition agreement or invention and secrecy agreement
between Employee and such third party.
ARTICLE VII
Miscellaneous
7.01 Complete Agreement. This Agreement is not a promise of future employment.
There are no oral representations, understandings or agreements with the Company
or any of its officers, directors or representatives covering the same subject
matter as this Agreement. This written Agreement is the final, complete and
exclusive statement and expression of the agreement between the Company and
Employee and of all the terms of this Agreement and it cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous oral or
written agreements. This written agreement may not be later modified except by a
further writing signed by the Company and Employee, and no term of this
Agreement may be waived except by writing signed by the party waiving the
benefit of such terms.
7.02 No Waiver. No waiver by the parties hereto of any default or breach of any
terms, condition or covenant of this Agreement shall be deemed to be a waiver of
any subsequent default or breach of the same or any other term, condition or
covenant contained herein.
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7.03 Non Delegation of Duties. Employee understands that he has been selected
for employment by the Company on the basis of his personal qualifications,
experience and skills. Employee agrees, therefore, that he cannot delegate any
part of his duties under this Agreement.
7.04 Notice. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To the Company: Enterprises Solutions Inc.
5061 N. Dixie Highway
Boca Raton, FL 33431
To Employee: John A. Solomon
15 Raven Road
Canton, MA 02021
Notice shall be deemed given and effective three (3) days after the deposit in
the Unites States mail of a writing addressed as above and sent first class
mail, certified, return receipt requested, or when actually received. Either
party may change the address for notice by notifying the other party of such
change in accordance with this Section 7.04.
7.05 Severability: Headings. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held invalid or inoperative. The paragraph
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of this Agreement
or of any part hereof.
7.06 Arbitration. Any controversy or claim arising out of or relating to this
Agreement or the breach thereof shall be settled by arbitration in the City of
Boca Raton, Florida in accordance with the rules then existing of the American
Arbitration Association and judgement upon the award may be entered in any Court
having jurisdiction thereof.
7.07 Governing Law. This Agreement shall in all respects be construed according
to the laws of the State of Florida.
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IN WITNESS WHEREOF, the parties,have executed this Agreement as of the day and
date herein first set forth.
ENTERPRISES SOLUTIONS INC.
WITNESSED BY:
/s/ Wayne B. Kight, Pres.
-------------------------
___________________ Wayne Kight
Corporate President
Dated: ____________
EMPLOYEE:
WITNESSED BY:
___________________ /s/ John A. Solomon
-------------------
John A. Solomon
Dated:_____________
<PAGE>
Exhibit 10.7
Highland-March Executive Suites
License Agreement
This License Agreement is dated as of the 1st day of May, 2000 by and between L-
Square, Inc. d/b/a Highland-March Executive Suites ("Highland-March"), and
Enterprises Solutions, Inc., 15 Raven Road, Canton, MA 02021 ("Client").
Highland-March and Client agree that Highland-March will provide to
Client for and in consideration of the agreements and fee(s) set forth
herein, an exclusive License to use the Office(s) from time to time
designated by Highland-March and, in common with Highland-March's other
clients, the non-exclusive License to use Highland-March's Suites
facilities and services located at 140 Wood Road, Suite 200, Braintree,
Massachusetts 02184 (the "Highland-March Braintree Suites").
1. Basic Terms. This Section I contains the basic terms of this
Agreement and all provisions of this Agreement are to be read
in accord therewith:
A. Base Services: Offices, including a proportionate share
of the common area of Highland-March Suites. The Offices
include the reception and administrative area, conference
rooms and hallways, as shown on the attached floor plan,
complete with professional administrative staff,
telephone answering and such other inclusive services as
are defined in Schedule "A".
B. Additional Services: Access to additional business
services for purchase as needed by Client, including
secretarial, administrative, telecommunications support
and such other services as defined in Schedule "B."
C. Office [number(s)] 33 having a maximum occupancy capacity
of two persons (the "Office").
D. Commencement Date May 1, 2000
<PAGE>
E. Initial Term 60 days (followed by month to month)
F. End of Initial Term June 30, 2000
G. Monthly Base Service Fee $1,680
H. Refundable Services Retainer 1,680
2. Office. The Client shall, as part of the Base Services, be provided
with the exclusive use of the Office and shall have access to the Office
twenty-four (24) hours a day, seven (7) days a week. Highland-March agrees to
provide office cleaning, maintenance services, electricity, heating and air
conditioning to the Office for normal office use in such reasonable quantities
and during such reasonable hours as shall be determined by Highland-March. In
addition, the client will have reasonable use of Highland-March common area
facilities. The Client shall use the Office and Auxiliary areas of the
Highland-March Suites solely for general Office use in the conduct of the
Client's business.
If, for any reason whatsoever, Highland-March is unable to provide Client
the exclusive right to use of the Office or a mutually agreed upon alternative
Office at the time herein agreed, Client may either extend the
Commencement Date until the Office becomes available or, as its sole remedy for
such failure, cancel and terminate this Agreement if the Office is not made
available for Client's exclusive use within five (5) business days after written
notice to Highland-March by Client, in which case any prior payments shall be
fully refunded and Highland-March shall thereafter have no further obligation to
the Client pursuant to this Agreement. No such failure to provide Client the
exclusive right to use of the Office shall subject Highland-Match to any
liability for loss or damage.
Highland-March will have the right, upon ten (10) days written notice,
to relocate the client to another office in the Highland-March Suites, and to
substitute such other office for the office contracted herein, provided such
other office is substantially similar in area and configuration to Client's
contracted office and provided the Client shall incur no increase in the Monthly
Base Services Fee or any relocation cost or expense.
3. Services. Highland-March agrees, in consideration of the Monthly Base
Services Fee, to provide Base Services to Client as described in Schedule "A."
From time to time during the Term, Highland-March may, at its option, make other
services available to Client of the nature described in Schedule "B," at fees
that are from time to time established by Highland-March. Highland-March shall
be under no obligation to provide Schedule "B" services if the monthly cost
thereof exceeds the Refundable Service Retainer. In the event Client is in
default of the Agreement, Highland-March may, at its option, cease furnishing
any and all services including telephone services.
Client will not offer to any party in the Highland-March Suites or
the building, any of the services which Highland-March provides to its Clients
including, but not limited to, services described in Schedules "A" or "B".
Furthermore, Client agrees that Client will not offer or use the premises to
provide any such services to any other party even though such party may not be
in the Highland-March Suites or the building. Also, Client will not make nor
permit any use of the premises which is forbidden by law or regulation, or may
be hazardous or unsafe, or may invalidate or increase the premium of any policy
of insurance carried on the Highland-March Suites or may tend to impair the
character, reputation, appearance or operation of the Highland-March Suites.
<PAGE>
Highland-March will answer all incoming phone calls, unless otherwise
mutually agreed, during normal business hours, 8:30 a.m. to 5:30 p.m., Monday
through Friday, except holidays. Answering service will be limited to normal
business communications, excluding inbound telemarketing and advertising
response which requires pre-approval by Highland-March and shall be subject to
fees established from time to time by Highland-March.
Client will use only telecommunications systems and services as
provided by Highland-March. Client will pay to Highland-March a monthly fee for
each voice mailbox.
Client acknowledges that due to the imperfect nature of verbal, written
and electronic communications, Highland-March shall not be responsible for
damages, direct, indirect or consequential, which may result from the failure of
Highland-March to furnish any service, including but not limited to the service
of conveying messages, communications and other utilities or services required
under this Agreement or agreed to by Highland-March. Client's sole remedy and
High-March's sole obligation for any failure to render any service, any error or
omission, or any delay or interruption with respect thereto, is limited to an
adjustment to the Client's billing in an amount equal to the charge for such
service for the period during which the failure, delay or interruption
continues.
THE CLIENT EXPRESSLY AGREES TO WAIVE, AND AGREES NOT TO MAKE ANY
CLAIM FOR DAMAGES, DIRECT OR CONSEQUENTUAL, ARISING OUT OF ANY FAILURE TO
FURNISH ANY UTILITY, SERVICE OR FACILITY, ANY ERROR OR OMISSION WITH RESPECT
THERETO, OR ANY DELAY OR INTERRUPTION OF THE SAME UNLESS CAUSED BY THE GROSS
NEGLIGENCE OR A WILLFUL OR WANTON ACT OF HIGHLAND-MARCH OR ITS OFFICERS, AGENTS
OR EMPLOYEES
4. Duration of Agreement.
(A) Upon the End of Initial Term, or any extension thereof,
the term of this Agreement and the License herein granted shall be automatically
extended for the same period of time as the initial Term, upon the same terms
and conditions as contained herein, unless either party gives notice to the
other in writing to the contrary at least sixty (60) days prior to the End of
Initial Term (90 days if client has three or more offices).
(B) Upon termination of this Agreement, whether by lapse of
time or otherwise, or upon any revocation of the client's License herein
granted, Client shall thereafter have no further right to use the premises in
any manner whatsoever and all rights to services hereunder shall end
immediately; and Client shall thereafter make no further use of the Office or
the Highland-March Suites pursuant to this License other than for the purpose of
forthwith removing any personal property located within the Highland-March
Suites and belonging to Client. For each and every month or portion thereof that
Client makes any use of the Office or the Highland-March Suites or any of the
services provided by Highland-March after the termination of this Agreement by
lapse of time or otherwise, without the express written consent of
Highland-March, Client shall pay Highland-March as liquidated damages, an amount
equal to double the Monthly Base Fee computed on a per-month basis for each
month or portion thereof. For purposes of this Agreement, failure on the part of
Client to remove personal property from the Highland-March Suites shall be
deemed to be a use of the Highland-March Suites.
<PAGE>
5. Payments and Escalations. Client agrees to pay to Highland-March
the Monthly Base Fee plus applicable sales or use taxes, in advance, on the
first day of each calendar month during the initial term and all extensions
thereof, without any deduction, offset, notice or demand. Charges for any
"Schedule 33" service purchased by Client are due on the thirtieth (30th) day of
the month following the month of service. Invoices for service charges are
issued by the seventh (7th) day following the month of service. If the term
shall not commence on the first day of a month, fees for any such month shall be
prorated.
One year after the commencement date of this Agreement and each
and every anniversary date thereafter, the Monthly Base Fee will be
automatically increased by TBD percent (_____%) of the Monthly Base fee due for
the month preceding said anniversary date.
All Monthly Base Fees and other sums payable hereunder shall be
payable at the office of Highland-March or to such other location or to any
agent designated in writing by Highland-March. Client shall, in addition to any
other sums due, pay a late charge equal to five percent (5%) of the total
outstanding balance that is due and has not been paid to Highland-March within
five (5) calendar days of the date such amount is due. The parties agree that
such late charges are fair and reasonable and are in addition to
Highland-March's other remedies under this Agreement and applicable law and
equity.
Upon the execution of this Agreement, Client shall pay Highland-
March or its agent the Refundable Services Retainer. The Refundable Services
Retainer need not be kept separate and apart, no interest shall be paid thereon
and may be used by Highland-March to provide Schedule "A" and "B" services under
this Agreement. In addition to the Refundable Services Retainer, Client will,
upon execution hereof pay to Highland-March the monthly Base Fee for the first
full month of the Initial Term.
Client agrees that the Refundable Services Retainer shall not be
used by Client as payment for the Monthly Base Fee for the last month of the
term. In the event (Client defaults in the performance of any of the terms
hereof, Highland-March may terminate this Agreement and the License herein
granted and may also use, apply or retain the whole, or any part of the
Refundable Service Retainer for the payment of any service fee or any other
payment due hereunder, or for payment of any other sum which Highland-March may
spend by reason of Client default. If Client shall, at the end of the term of
this Agreement, have fully and faithfully complied with all of the terms and
provisions of this Agreement, and surrendered all keys, access cards and
building passes, the Refundable Services Retainer, or any balance thereof, shall
be returned to Client within forty-five (45) days thereafter.
<PAGE>
6. Damages and Insurance. Client will not damage or deface the
furnishings, walls, floors or ceilings, nor make holes for the hanging of
pictures or make or suffer to be made any waste, obstruction or unlawful,
improper or offensive use of Office or the common area facilities. Client will
not cause damage to any part of the Building or the property of Highland-March
or disturb the quiet enjoyment of any other Licensee or occupant of the
building. At the termination of this Agreement, Client will return the Office in
as good condition as when client commenced exclusive use, normal wear and tear
excepted. Highland-March will have the right, from time to time, to enter the
Office to inspect the same, to make such repairs and alterations as
Highland-March reasonably deems necessary, and the cost of any such repair
resulting from the act or omission of Client shall be reimbursed to
Highland-March by Client upon demand. Within sixty (60) days prior to
termination of this Agreement, Highland-March shall have the right to show the
Office to prospective Clients, provided Highland-March will use reasonable
efforts not to disrupt Client's business.
Highland-March and its respective directors, licensors, officers,
agents, servants, employees and owners shall not, to the extent permitted by
law, be liable for, and Client waives all right of recovery against such
entities and individuals for any damage or claim with respect to any injury to
person or damage to, or loss or destruction on any property of Client, its
employees, authorized persons and invitees due to any act, omission or
occurrence in or about the Highland-March Suites or the building, unless such
injury, damage, loss or destruction of property, or other injury, is the
proximate result of the gross negligence or- willful or wanton misconduct of
Highland-March, its officers, agents and employees. Without limitation of any
other provision hereof, Client agrees to indemnify, defend, protect and save
Highland-March and its respective directors, licensors, officers, agents,
servants, employees and owners harmless from and against all liability to third
parties arising out of Client's use and occupancy of the Office or actions or
emissions of Client and its agents, employees, contractors, and invitees. Client
further agrees that all personal property of Client, its agents, employees,
contractors, and invitees, within or about the Highland-March Suites shall be at
the sole risk of the Client. Client acknowledges that it is the Client's
responsibility to maintain insurance to cover the risks set forth in this
paragraph. Client must have its employees working in the Office covered by
Worker's Compensation Insurance, as required by Massachusetts law.
Highland-March and Client each hereby waive any and all rights of
recovery against the other, or against the officers, employees, agents or
representatives of the other, for loss of or damage to its property or the
property of others under its control, to the extent such loss or damage is
covered by any insurance policy.
If Highland-March Suites is made unusable, in whole or in part due
to condemnation by any public authority, fire or other casualty not due to
negligence of Client, Highland-March may, at its option, terminate the Agreement
upon notice to Client, effective upon such casualty or condemnation, or may
elect to repair, restore or rehabilitate, or cause to be repaired, restored or
rehabilitated, the Highland-March Suites, without expense to Client, within
ninety (90) days or within such longer period of time as may be required because
of events beyond Highland-March's control. Highland-March reserves and Client
grants to Highland-March, all rights which Highland-March may have for damages
or injury to the Highland-March Suites for any taking by condemnation, except
for damage to Client's personal property or Client's moving expenses. The
Monthly Base Fee shall be abated on a per diem basis for the portions of the
Office that are unusable.
<PAGE>
7. Default. The Client shall be deemed to be in default under
this Agreement: (a) if Client defaults in the payment of the Monthly Base Fee or
other sums due hereunder and such default continues for more than five (5)
business days from the due date of such payment; (b) if the Client shall be
declared bankrupt or insolvent according to the law or makes an assignment for
the benefit of creditors, or (c) if the Client defaults in the prompt and full
performance of any other provision of this Agreement and any such default
continues in excess of five (5) business days after written notice by
Highland-March.
Should the Client be in default hereunder, Highland-March
shall have the option to pursue any one or more of the following remedies
without any additional notice or demand whatsoever and without limitation to
Highland-March in the exercise of any remedy:
(A) Highland-March may, if Highland-March so elects, without
any additional notice of such election or demand to Client, either forthwith
terminate this Agreement and the License to use any portion of the
Highland-March Suites, and may license the use of the Office to any other party
and the provisions of Section 4(b) relating to termination of the License shall
apply. In addition Highland-March may take and hold possession of any of
Client's personal property located in the Highland-March Suites, without
releasing the Client, in whole or in part, from the Client's obligation
hereunder. Additionally, Highland-March shall have the power to terminate
Client's services immediately upon default and Highland-March may, at its
option, declare the entire amount of the Monthly Base Fee which would become due
and payable during the remainder of the term to be due and payable immediately,
in which event, Client agrees to pay the same at once.
(B) Pursue any other remedy now or hereafter available to
Highland-March. Highland-March's exercise of any right or remedy shall not
prevent it from exercising any other right or remedy.
Client shall indemnify Highland-March for all costs,
attorney's fees and other expenses which Highland-March may incur by reason of
any default or to recover damage by reason of such default.
8. Restriction of Hiring. Client, including its principals and
any affiliated companies, agrees that during the term of this Agreement and
within one (1) year of the termination of this Agreement, neither client nor any
of its employees will hire, directly or as an independent contractor, any person
who is employed by Highland-March Suites located in Massachusetts until such
time as such person has been separated from service with Highland-March for a
period of time in excess of six (6) months. In the event that Client shall
breach any obligation of Client contained in this paragraph, Client shall be
liable to Highland-March for, and shall pay to Highland-March, on demand,
liquidated damages in the sum of $10,000.00 for each employee with respect to
whom such breach shall occur. It being mutually agreed that the actual damage
which would be sustained by Highland-March as the result of any such breach
would be, from the nature of the case, extremely difficult to fix and that the
aforesaid liquidated damage amount is fair and reasonable.
<PAGE>
9. Miscellaneous.
A. This is the only Agreement between the parties. No other
agreements are effective. If any provisions of this Agreement shall be held
invalid, the remainder of the terms of this Agreement shall not be affected. All
amendments to this Agreement shall be in writing and signed by all parties. Any
other attempted amendment shall be void.
B. All waivers must be in writing and signed by the waiving
party. Highland-March's failure to enforce any provision of this Agreement or
its acceptance of fees shall not be a waiver and shall not prevent
Highland-March from enforcing any provision of this Agreement in the future. No
receipt of money by Highland-March shall be deemed to waive any default of
Client or to extend, reinstate or continue the term hereof.
C. All Schedules and Addenda attached hereto are hereby
incorporated herein.
D. All parties signing this Agreement as a partnership or
co-signing individuals shall be jointly and severally liable for all
obligations of the Client.
E. Client represents and warrants to Highland-March that there
are no agents, brokers, finders or other parties except with whom Client has
dealt who are or may be entitled to any commission or fee with respect to this
Agreement. Client agrees to hold Highland-March harmless from all loss or
damage, including attorney's fees, arising from any claim by any broker claiming
to have dealt with the Agreement.
F. Neither Client nor anyone claiming by, through or under
Client shall assign this Agreement or permit the use of any portion of the
Highland-March Suites by any person other than the Client.
G. The Rules and Regulations of the building and of Highland
March as defined on Schedule "C" hereto are expressly made a part of this
Agreement and Client expressly covenants and agrees to abide by all of said
Rules and Regulations, as well as such reasonable modifications as may be
hereafter adopted by Highland-March. In the event that Client, or any staff
member, guest or invitee of Client fails to comply with said Rules and
Regulations, Highland-March shall have the right, in addition to all rights and
remedies enumerated in this Agreement, to terminate client's License and/or
refuse to (a) continue service at the expiration of Client's term and/or (b) to
extend Client's term.
H. Highland-March's failure to render payments due to Client
under this agreement, including but not limited to any refunds of the Refundable
Services Retainer, within any time periods required in this Agreement shall be
deemed to be inadvertence or error on the part of Highland-March and such delay
shall not render Highland-March liable for any additional monies whatsoever.
<PAGE>
I. Client specifically waives all rights to a jury trial for
any actions brought by Client for matters arising out of this Agreement. Client
also agrees that jurisdiction for such matters shall be limited exclusively to
the Commonwealth of Massachusetts and within the county, city, town and/or
region in which the Highland-March Suites described in Section I (C) of this
Agreement is located.
J. This Agreement shall be construed and governed in
accordance with the laws of the Commonwealth of Massachusetts.
K. All notices hereunder shall be in writing. Notices to
Client shall be deemed to be duly given if delivered to the office or mailed by
registered or certified mail, postage prepaid, addressed to Client at:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
L. THIS AGREEMENT IS NOT INTENDED TO CREATE ANY INTEREST
IN REAL PROPERTY IN FAVOR OF THE CLIENT, BUT MERELY CREATES A REVOCABLE LICENSE
IN ACCORDANCE WITH THE TERMS HEREOF. This Agreement grants the Client a License
to use the Highland-March Suites and the Office for the specific purpose herein
set forth without diminution of the legal possession or control thereof by
Highland-March and shall be revocable at the option of Highland-March upon the
destruction of the Highland-March Suites or the breach by the Client of any term
or condition herein set forth. This Agreement is subject and subordinate to any
underlying Lease or Contract of the premises as it may be amended from time to
time (said underlying Lease or Contract together with any amendments,
hereinafter referred to as the Master Lease). This Agreement shall terminate
simultaneously with the termination of the Highland-March Suites operation for
any reason. The Client is not a party to nor shall have any rights under the
Master Lease.
M. The Client acknowledges that Highland-March Suites will
comply with U. S. Postal Service regulations regarding client mail and, upon
termination of this Agreement it will be the Client's responsibility to notify
all parties of termination of the use of the above described address, assigned
telephone number, telex and facsimile numbers. For thirty (30) days after the
termination of the Agreement has taken affect, Highland-March will, at the
Client's written request and cost, provide the Client's new telephone number and
address to all incoming callers and will hold or forward once a week all mail,
packages, facsimiles and telexes.
N. Highland-March may assign this Agreement and/or any fees
hereunder and the Client hereby consents to any such assignee. In the event the
property is transferred to another party, the prior owner shall be released from
all liability from performance or observance of the terms of this Agreement
applicable to Highland-March, and only the transferee shall be responsible.
<PAGE>
0. By signing this Agreement, Client acknowledges that Client
has read this agreement and fully understands the provisions hereof each person
signing this Agreement on behalf of a party hereto individually warrants and
represents to the other party hereto that such person has the authority to
execute and deliver this Agreement on behalf of the party such person purports
to represent. Each such person shall indemnify and hold the other party hereto
harmless against any breach of the foregoing warranty.
P. In any action brought to enforce the obligations of
Highland-March under this Agreement, judgement shall be enforceable against
Highland-March only to the extent of Highland-March's interest in the property
and no such judgement shall be the personal liability of Highland-March or the
basis of execution on assets of Highland-March.
HIGHLAND-MARCH
By: _________________________
Its: __________________________
CLIENT
CORPORATION: _______________________
By: _______________________
Its: ________________________
<PAGE>
SCHEDULE "A"
Base Services
Individual Executive Office
Personalized Telephone Answering of Incoming Calls
Furnished and Decorated Reception Area
Professional Receptionist, Message Center Secretaries and Office Manager
12 hours Secretarial Service monthly
Use of furnished, and Audio-Visual Equipped Conference Rooms
(12 hours per month at no charge)
Business Identity on Building Lobby Directory
Facsimile Number for Client's Use
(see Alternative Schedule B for pricing)
Mail and Package Receipt
Utilities and Janitorial Service
Building Operating Expenses
One Desk, One Desk Chair and One Guest Chair Per Office
One Telephone
200 Copies on Copy Machine monthly
SCHEDULE "B"
Additional Services
Word Processing Services
Secretarial Services
Facsimile and Telex Services
Voice Messaging Service
Copy and Binding Services
Outgoing Mail & Express Delivery Services
Additional Office furniture
Specialized Equipment
Printing & Office Supplies
Miscellaneous Purchasing- Services
Catering & Beverage Services
Paging Services Telephone Equipment
Specialized Telephone Services
Excess Message Usage
Excess Conference Room Usage
Videoconferencing Services
Color Document Layout and Printing
Other Client Requested Services Where Available
<PAGE>
SCHEDULE"C"
RULES AND REGULATIONS
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1. Client's employees and guests will conduct themselves in a businesslike
manner; proper business attire will be worn at all times- the noise level
will be kept to a level so as not to interfere with or annoy other Clients
and Client will abide by Highland-March's directives regarding security,
keys, parking and other such matters common to all occupants.
2. Client will not prop open any corridor doors, exit doors or doors
connecting corridors during or after business hours.
3. Client can only use public arm with the consent of Highland-March and those
areas must be kept neat and attractive at all times.
4. All corridors, halls, elevators and stairways shall not be obstructed by
Client or used for any purpose other than egress and ingress.
5. No advertisement or identifying signs, other than provided by
Highland-March, or other notices shall be inscribed, painted or affixed on
any part of the corridors, doors or public areas.
6. Client shall not, without Highland-March's prior written consent, store or
operate any computer (excepting a personal computer)or any other large
business machines, reproduction equipment, heating equipment, stove,
radios, stereo equipment or other mechanical amplification equipment,
vending or coin operated machines, refrigerator or coffee equipment, or
conduct a mechanical business thereon, do any cooking thereon, or use or
allow to be used in the Building, all burning fluids, gasoline, kerosene
for heating, warming or lighting. No article deemed extra hazardous on
account of fire or any explosives shall be brought into the Highland-March
Suites. No offensive gases, odors or liquids will be permitted.
7. The electrical current shall be used for ordinary lighting purposed only
unless written permission to do otherwise shall first have been obtained
from Highland-March at an agreed cost to the Client.
8. If client requires any special installation or wiring for electrical use,
telephone equipment or otherwise, such wiring shall be done at Client's
expense by the personnel designated by Highland-March.
9. Client may not conduct business in the hallways, reception area or any
other areas except in its designated offices without prior written consent
of Highland-March.
10. Client will bring no animals other than seeing-eye-dogs in the company of
blind persons into the Building.
11. Client shall not remove furniture, fixtures or decorative material from
offices without consent of Highland-March and such removal shall be under
the supervision and regulations of the Highland-March Suites.
12. Client will not use the Highland-March Suites for manufacturing or storage
of merchandise except as such storage may be incidental to general office
purposes.
13. Client will not occupy or permit any portion of the Highland-March Suites
to be occupied or used for the manufacture, sale, gift or use of firearms,
liquor, narcotics or tobacco in any form. Possession of firearms within the
highland-March Suites is strictly prohibited at all times.
<PAGE>
14. Client will not use the Office for lodging or sleeping or for any immoral
or illegal purposes.
15. No additional locks or bolts of any kind shall be placed upon any of the
doors or windows of the Highland-March Suites by the client nor shall any
changes be made on existing locks or the mechanisms thereof
16. Client shall, before leaving the Office unattended for an extended period
of time, close and securely lock all doors and shut off all lights and
other electrical apparatus. Any damage resulting from failure to do so
shall be paid by client.
17. Canvassing, soliciting and peddling in the Building are prohibited and
Client shall not solicit other clients for any business or other purpose
without prior approval of Highland-March.
18. All property belonging to the client or any employee, agent or invitee of
Client shall be at the risk of such person only and Highland-March shall
not be liable for damages thereto or for theft or misappropriation thereof.
19. If Client does not remove any property belonging to Client from the
Highland-Much Suites by the end of the Term, at the option of
Highland-March, the client shall be conclusively presumed to have conveyed
such property to Highland-March under this Agreement as a bill of sale
without further payment or credit by Highland-March to Client and
Highland-March may remove same and Client shall pay Highland-March all
costs of such removal upon demand. If Highland-March exercises this option
to take title to such property, Client shall not be liable for the
liquidated damages provided in Section 4(B).
20. Smoking (including but not limited to cigarettes, cigars and pipes) shall
be prohibited in all areas of the Highland-March Suites (including, but not
limited to, licensed offices and conference and training rooms).
21. Highland-March's policy is to provide its employees with a harassment free
environment. Highland-March will not tolerate verbal or physical conduct by
Client which creates an intimidating, offensive, or hostile environment to
its employees- Harassment of any nature, sexual or otherwise, is strictly
prohibited.
22. Client shall refrain from any verbal or physical conduct which creates an
intimidating, offensive or hostile environment to any other client.
23. Notwithstanding anything herein which may be implied to the contrary,
Highland-March shall have no responsibility to Client for the violation or
nonperformance by any other Client or Clients of any of the Rules and
Regulations but shall use reasonable efforts to uniformly enforce all Rules
and Regulations among clients.
