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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 017833
GREENLAND
CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 87-0439051
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
1935 AVENIDA DEL ORO
OCEANSIDE, CA 92056
(ADDRESS AND ZIP CODE OF PRINCIPAL EXECUTIVE OFFICES)
(760) 414-9941
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Common Stock,
par value $.001 per share
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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.
[X] YES NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (*229.405 of this chapter) is not contained herein, and will
not 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-K
or any amendment to this Form 10-K. [ ]
As of March 31, 2000, the aggregate market value of the voting stock held by
non-affiliates of the registrant was $36,800,000 based upon a $0.80 per share
trading price on that date.
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date.
CLASS A COMMON STOCK 51,851,945 SHARES OUTSTANDING
$0.001 PAR VALUE AS OF MARCH 31, 2000
DOCUMENTS INCORPORATED BY REFERENCE
Certain information required by Part III of this Form 10-KSB is included by
reference to the Company's definitive proxy statement filed in accordance with
rule 14a-101, Schedule 14A.
Traditional Small Business Disclosure Format (check one): Yes [X] No []
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PART I
Item 1. Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters
Item 6. Management's Discussion and Analysis or Plan of Operations
Item 7. Financial Statements and Supplementary Data
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Party Transactions.
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on Form
8-K
SIGNATURES
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PART I
ITEM 1. BUSINESS
Forward Looking Information
This annual report contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Forward-looking statements can be identified by the use
of forward-looking terminology such as "believes," "expects," "may,"
"estimates," "will," "should," "plans," or "anticipates" or the negative
thereof, or other variations thereon, or comparable terminology, or by
discussions of strategy. Such statements include, but are not limited to, the
discussions of the Company's operations, liquidity, and capital resources.
Forward-looking statements are included in the "Liquidity and Capital Resources"
section of this annual report. Although the Company believes that the
expectations reflected in forward-looking statements are reasonable, there can
be no assurances that such expectations will prove to be accurate. Generally,
these statements relate to business plans, strategies, anticipated strategies,
levels of capital expenditures, liquidity and anticipated capital funding needed
to effect the business plan. All phases of the Company's operations are subject
to a number of uncertainties, risks and other influences, many of which are
outside the control of the Company and cannot be predicted with any degree of
accuracy. Factors such as changes in regional or national economic conditions,
changes in governmental regulations, unforeseen litigation, changes in interest
rates or tax rates, significant changes in the prevailing market price of gold,
future business decisions and other uncertainties may cause results to differ
materially from those anticipated by some of the statements made in this report.
In light of the significant uncertainties inherent in the forward-looking
statements made in this report, the inclusion of such statements should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved. Security holders are
cautioned that such forward-looking statements involve risks and uncertainties.
The forward-looking statements contained this report speak only as of the date
of this report and the Company expressly disclaims any obligation or undertaking
to release any updates or revisions to any such statement to reflect any change
in the Company's expectations or any change in events, conditions or
circumstance on which any such statement is based.
GENERAL
Greenland is a corporation formed on July 17, 1986, as Zebu, Inc. On September
11, 1994, the shareholders approved changing the name of the company to
Greenland Corporation. In September 1994, the Company acquired GAM Properties,
Inc., which it sold for stock, to Golden Age Homes, Inc. in December, 1997.
The Company was previously engaged in the development and marketing of advanced
communications technology known as automated meter reading ("AMR"), which enable
utilities to automate meter reading functions via the Company's AirLink system.
On April 5, 1999, the Company consummated an agreement for the sale of the AMR
technology to Telenetics Corporation, a publicly traded corporation and received
shares of convertible preferred stock of Telenetics with a face value of
$900,000.
In May 1998 the Company entered into an exchange agreement and acquired all the
issued and outstanding stock of Check Central, Inc ("Check Central"), making
Check Central, Inc., a wholly owned subsidiary of Greenland. Check Central is
the inventor of proprietary software that is capable of providing consumers with
automated payroll check cashing, ATM and other financial services delivered
through a freestanding kiosk, similar in appearance to an ATM machine (the
"Check Cashing ATM" or "System" or "Product").
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Since the acquisition of Check Central, the Company has significantly improved
and developed the Check Cashing ATM by adding features such as, money order and
pay day advance and phone card dispensing services and expects to have
additional services including, wire transfers, bill paying, electronic tax
filing and on-line purchases. In addition, the Company has redesigned the
hardware and touch screens to make the Product user friendly and easy to use.
The Company placed its first production units in the field in the second quarter
of 1999 and currently has 11 Check Cashing ATMs in operation in eight States
including, California, Nevada, North Carolina, Louisiana, Georgia and Michigan
and in locations with nationally recognized entities such as: Wal Mart, Piggly
Wiggly and Texaco-Star Mart.
Management believes that the check cashing industry is experiencing explosive
growth and the Company is currently positioning itself to take maximum advantage
of the growth in this industry. In addition, management believes that by
positioning the Company as a provider of additional financial services related
to check cashing, the Company can become a significant force in automated
banking industry.
BUSINESS OPERATIONS
The Company is engaged exclusively in the development of proprietary software
that is capable of providing consumers with a full range of automated financial
services including payroll check cashing, ATM, payday advance, wire transfers,
bill paying, money order and phone card dispensing services delivered through a
freestanding kiosk, similar in appearance to an ATM machine. The Company
acquired this technology in May 1998, when Check Central was incorporated into
Greenland Corporation as a wholly owned subsidiary.
The Company is addressing what it believes is an ever-increasing market demand.
During the last decade, the number of consumers who have no bank affiliation or
infrequently use their accounts has grown substantially and, based on
information the Company believes is reliable, now numbers about 35% of U.S.
households. Accordingly, check cashing businesses are proliferating. These
businesses cash checks for a fee based upon a percentage of the face amount of
the check. As recently reported in the L.A. Times on March 3, 2000 it is
estimated that the fringe bank community generates about $60 billion in fees
annually.
Management believes that the check cashing industry is highly fragmented and
that significant economies of scale, increased operating efficiencies and
revenue growth are achievable through the automation of the check cashing
process and providing additional automated financial services. Until very
recently, check cashing stores have been a one stop, one service industry
generally centered in lower economic neighborhoods. In the 1990's, many of these
stores have expanded services by selling stamps, money orders, and special event
tickets.
The Company's goal is to capture a significant share of the $60 billion market
by offering automated payroll check cashing, ATM, money order services, payday
advances, phone card dispensing, wire transfers, bill paying and other services.
The Greenland Check Cashing ATM is designed for installation in retail
environments such as convenience stores, liquor stores, military exchange
stores, entertainment establishments, banks, supermarkets and other locations
where our clientele frequent.
In addition to revenue generated from the sale of the Check Cashing ATM
hardware, the Company will receive a continuous revenue stream from transaction
fees from check cashing, ATM, money order services, payday advances, wires
transfers, bill paying and other services.
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BUSINESS STRATEGY
The Company's primary business plan is to provide a full range of financial
banking services through a fully automated free standing kiosk similar in
appearance to an ATM machine. The Company intends to market the Check Cashing
ATM on a nation-wide basis through an established network of Distributors and
Independent Sales Operators (see Sales Strategy).
The Company placed its first production units in the field in the second quarter
of 1999. These units are providing check cashing, ATM, money order and phone
card dispensing services. In addition, the Company has placed one unit in the
field for the purpose of testing the payday advance service. The Company
presently has 11 units in operation located in eight States, including
California, Michigan, Nevada, North Carolina, Maryland and Georgia.
The Company plans to add future services including: bill paying, wire transfers,
on-line purchases, and electronic tax filings, all provided through new software
upgrades. The Company believes these services will not only increase the
Company's competitive advantage but will generate additional revenues for both
the owner of the Check Cashing ATM and the Company as part of the ongoing
transaction revenue stream.
Greenland believes that no comparable check cashing system in the market today
that offers what it believes are the potential benefits and broad menu that the
Company has incorporated and will continue to incorporate into the Check Cashing
ATM. The Company believes that the technology is ahead of the competition, that
competitor's machines are substantially larger (taking too much store space),
substantially more expensive, and do not offer the full complement of services
offered by the Check Cashing ATM. The current competitor's hardware is limited
to ATM and check cashing only. In addition, management believes that no other
competitor can provide the back room processing that is critical for the full
operation of the check cashing process. The Company believes that it has the
opportunity to change the manner in which check cashing services are performed
and to become a significant competitor in the market for check cashing and
related services.
OPERATING CONTROLS
The Company has an organizational structure that it believes is capable of
supporting a nation-wide base of units in operation. The Company has implemented
an employee training program for its personnel that stresses productivity and
professionalism. Each machine in the field is monitored direct from the
Companies headquarters via on line, real time network, customer service and
support is available 24 hours a day, 7 days a week and the Company has
strengthened its operating and financial controls by increasing its internal
financial staff. Management believes that the current operating and financial
controls and systems are adequate for the Company's existing base and can
accommodate reasonably foreseeable growth in the near-term.
RECENT DEVELOPMENTS
Company strategy in 1999 has centered on the completion of a fully operational
production, market-ready unit. In support of the Company's objective to produce
a highly reliable system, the Company chose to introduce two company-owned beta
units into operational stores during January and February of 1999. A third fully
operational beta unit and two bench units were installed in a simulated market
environment and used for accelerated age testing.
As a result of what the Company believes were successful in-store beta tests and
in-house testing, the Company delivered its first production unit in the third
quarter of 1999. Throughout 1999 the Company has placed 11 machines in eight
states.
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The Company continued to improve the Check Cashing ATM and emphasized the
improvement in communication lines, which led to the formation of relationships
with Cisco Systems, MC Info and Sprint.
Sprint is responsible for providing nationwide communication services between
Greenland's Check Cashing ATM and both its Oceanside and Hermosa Beach call
centers. Sprints is also responsible for end-to-end communication service from
each kiosks using frame relay circuits that move data over fiber optic lines at
the speed of light. Sprint has contractually guaranteed a 99.99% uptime. The
first quarter of 2000 Greenland and Sprint communication enjoyed 100% uptime.
Because of the improved speed of Frame Relay System, the Company has seen
decreased processing times. Most dramatically, the ATM transactions that have
averaged 25-30 seconds decreased to approximately 10 seconds.
To meet the requirement of a state of the art router to inject and receive the
automatic digital messages between the kiosks and the Company's call centers the
Company chose the Cisco hardware, which is rated the best in the world. It is
capable of handling data transmission many times faster than the hardware
formerly in use and has a proven reliable record.
The Company also engaged MC Info to offer 7 day a week, 24 hour a day network
monitoring for the Check Cashing ATM. This monitoring enables the Company to
upgrade the system easily and can do so on a machine by machine basis.
Therefore, each store can tailor their specific machine to fit their needs.
In December of 1999, the Company added Affiliated Computer Services (ACS)(NYSE:
ACS) as a Distributor pursuant to a two year, non-exclusive distributorship
agreement which allows ACS certain exclusive rights to represent the Greenland
Check Cashing ATM in the United States. ACS is a diversified company with annual
sales of approximately two billion dollars. Supported by field sales office in
most major cities, ACS Electronic Commerce Group (a division of ACS, Inc. based
in Dallas, Texas) provides processing for more than 17,000 ATM machines
nationwide and provides maintenance for more than 7,000 machines.
The Company believes it is introducing the latest innovation in self-service
check cashing and financial services. This new high-tech kiosk provides the high
returns of check cashing without incurring the excessive franchise fees,
overhead costs, or normal security risks. Engineered with security in mind, the
Check Cashing ATM takes up minimal floor space and provides full vault
protection against theft. With the look and feel of a standard ATM. The Company
believes the Check Cashing ATM is the ideal method of providing multiple
financial services for customers.
Future services are expected to include bill paying, wire transfers, electronic
tax filings, and on-line purchases. The Company believes that by automating the
delivery of financial services into a self-service kiosk, the Check Cashing ATM
should build traffic and increase sales without adding staff or huge overhead
expense for retail outlets.
INDUSTRY OVERVIEW
The Check cashing and payday advance industry is a relatively new industry, and
the Company estimates that there are approximately 7,000 dedicated check cashing
and payday advance locations throughout the United States. Ten's of thousands of
independently owned convenience and grocery stores offer check cashing on an ad
hock basis. Some states have enacted formal check cashing laws which regulate
the amount of fees that operators may charge for check cashing and in some cases
states have regulated the amount of service charges that may be charged on small
consumer advances, commonly referred to as "payday advances". The Company
believes that at least half of the check cashing locations in the United States
are operated by individuals owning from one to ten locations. The Company
further believes that this fragmented nature of the industry is due among other
factors to the lack of qualified management personnel, the difficulty of
developing adequate financial controls and reporting systems and lack of
financial resources.
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In the 1990's, a strong trend emerged in the convenience store industry
toward providing alternative financial services to its customers. As an
example, the Company believes convenience stores are currently the leading
vendors of money orders and a significant number have ATM machines on
premise. Therefore, the check cashing kiosk with ATM, money order and other
financial services offers the convenience store owner a new reliable profit
center requiring only a small amount of space, increased retail customer
traffic, and the generation of new customers with ready cash to make
purchases.
As a result of what the Company believes to be increasing number of new
customers seeking payroll check cashing services outside a banking environment
and their tendency to turn toward neighborhood convenience stores for these
services, it is natural that several companies were attracted to the idea of
providing this capability from a free-standing kiosk. The Company is aware of
two other companies that have attempted to build free-standing, ATM, check
cashing kiosks. The Company believes that each have used machines with retail
purchase prices substantially higher and with fewer services than the Company's
product.
MARKET OPPORTUNITY
As the number of consumers without formal bank affiliations grows, so do the
check cashing businesses that cater to them. These consumers generally do not
have checking accounts; some do not have any formal banking relationship
whatever.
Check cashing businesses (in storefronts) are proliferating. These businesses
cash checks for a fee based upon a percentage of the face amount of the check.
These businesses have to absorb traditional operating costs such as rent,
telephone, and personnel.
Additionally, losses due to bad checks can be substantial.
Until recently, there has never been an automated machine that could cash a
check. The Company provides a highly rational and profitable alternative to
serve what it believes is a large population that requires check cashing, ATM,
money orders, and on-line transaction services. The underlying technology
appears to mitigate much of the risk of bad checks and theft.
There are a wide variety of retail establishments that could profit from the
Check Cashing ATM. These include: convenience stores, supermarkets, laundromats,
liquor stores, military exchange stores and entertainment establishments.
The Company believes there is an emerging trend in the convenience store
industry toward providing alternative financial services to its customers and
the Check Cashing ATM provides the perfect solution for those retailers who want
to increase sales, profits, and market share. Customers who use the Check
Cashing ATM may be prone to impulse spending right after they cash a check or
withdraw cash. The Check Cashing ATM provides a full check cashing operation
with no additional staffing overhead and no loss exposure from bad checks.
By cashing checks, dispensing money orders, accepting ATM cards, dispensing
phone cards and providing other financial services, the Check Cashing ATM
generates multiple sources of revenue from a single piece of equipment.
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HOW IT WORKS
CHECK CASHING/GENERAL OPERATION
A potential check cashing customer can enroll for a check cashing membership at
any Check Cashing ATM location by simply filling out and inserting the
application into the machine or enrolling by voice over a dedicated telephone.
The check is scanned and returned to the customer. A photo image of the
customer, the application, and the check are transmitted for approval to the
Company's call center. The initial approval process may take as little as 10
minutes, depending upon how quickly the applicant's information can be verified.
The approval process involves confirmation of basic information such as
employment, employer's bank account, driver's license, and address. Upon
approval, customers can then cash their payroll check by inserting the check
into the scanner and following the on screen directions. The customer has a
choice of selecting either Spanish or English by simply touching the screen.
Once the check is inserted, the customer will be prompted to enter a Personal
Identification Number ("PIN") the customer selected when filling out the
application. If there are any questions, a phone handset is conveniently
provided and when lifted by the customer, it dials directly into the customer
service center. With the video camera display, a well-trained customer service
professional can easily help the customer through the prompts in either Spanish
or English. If there are no questions, the screen will prompt the customer to
enter the check date and amount, insert the check into the scanner, and once
approved, the check is cashed. The advanced processing software used by the
Company's call center is designed to perform up to one hundred and twenty-four
separate algorithms and can approve the check in seconds. Any checks that are
not approved are rejected and returned to the customer.
For all future transactions, the customer will be mailed a membership card that
contains a magnetic strip and looks like an ATM card. If a card is lost or
stolen, customers will still be able to cash checks by remembering the social
security or unique identification number and PIN. If the customer loses his card
and forgets all his numbers, the Company can still cash the check by comparing
the customer's original photo with the person standing in front of the Check
Cashing ATM camera.
Once the check is approved, the check cashing fee is deducted from the face
value of the check and the remaining balance is then available to the customer
to be taken as cash and/or money orders, phone cards and/or other services
purchased. The customer is prompted to select the amount to be dispensed in any
combination of cash or services purchased. No coins are dispensed so the Check
Cashing ATM dispenses cash to the customer in increments of $50's and $20's with
any balance paid via a voucher. This in-store voucher is good for purchases or
cash back at the register. The Company also has a four-drawer dispensing model
has $1, $5, $20 and $100 denominations which means the in-store voucher is
eliminated by rounding the transaction up or down to the nearest whole dollar.
This in-store voucher feature provides a valuable means of getting the check
cashing customers to spend more while they are in the store.
The checks cashed during the day are stored in a keyed lock box. The retailer
will remove the checks from the Check Cashing ATM at the end of the day and
deposit the checks into a designated clearing account at a local bank. A fee
based on a percentage of the total amount of checks authorized will be deducted
from the clearing account on a daily basis. A transaction detail report will be
provided that clearly shows the fee breakdown along with all in-store vouchers,
money orders, checks cashed, ATM withdrawals and any other transactions. The
daily reports are available via on-line Internet access provided by the Company.
This detailed report enables the retailer to quickly reconcile the daily check
deposits to the daily summary.
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Cash loading is the responsibility of the retailer, unless other arrangements
are made. The Company has entered into an arrangement with Bantec to load
certain machines placed in operation by the Company. Bantec loads the machine
twice a week and deposits the checks at a central bank account. Depending on the
volume of checks cashed and other services provided a merchant is expected to
load approximately, $50,000 to $100,000 of cash in each machine. If a merchant
does not have cash available, the Company can assist in the supply of vault cash
through third party sources.
PAYDAY ADVANCE
The Company's payday advances are unsecured, short term advances in which the
customer writes the Company a personal check in exchange for cash, net of a
transaction fee. Fees for payday advances may be regulated by state law and are
generally 15% to 18% of the amount advanced per transaction. The term of these
advances is thirty days or less.
To qualify for a payday advance, customers generally must have proof of steady
income, a checking account with a minimum of returned items within a specified
period, and valid identification. Upon completing an application and subsequent
approval, the customer writes a check on their personal checking account for the
amount of the advance, plus applicable fees. At maturity, the customer may
either, return to the location and pay off the advance with cash, in which case
the check is returned to the customer, or the Company can deposit the check into
its checking account. The Company anticipates that a significant amount of
payday advance checks deposited by the Company will be returned by the bank;
however, a large percentage of these bad debts will subsequently be collected by
the Company through various means. The profitability of the Company's payday
advance activities will be dependent upon adequate collection of these returned
items.
OTHER SERVICES
The Company will supply money orders and wire transfers through an arrangement
with Western Union, Travelers Express and others as required. Bill payment
services, telephone card sales, auto and medical discount programs will be
available to those in the near future.
WARRANTY/MAINTENANCE
The Company provides a one year full parts and labor warranty for the Check
cashing ATM and an extended maintenance plan at additional cost to the
purchaser.
COMPETITION
The Company encounters significant competition in connection with all aspects of
its business operations. These competitive conditions may adversely affect the
Company's revenues, profitability and ability to expand. The Company competes
with traditional check cashing businesses performing the services in a non
automated over the counter manner and other companies that utilize automated
check cashing kiosks.
Because the automated check cashing technology is relatively new and has only a
limited operating history, the competition is limited to a few competitors.
However, check cashing is a growing industry and traditional check cashing
businesses are now considering automating some of their operations as well.
In addition, the Company is in competition with financial institutions, such as
consumer finance companies, which generally lend on an unsecured as well as on a
secured basis, often on terms more favorable than provided by the Company. The
majority of the Company's competitors have greater financial resources than the
Company.
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The Company expects to be highly competitive with retail pricing of the machine.
In addition, no other competitor can offer the power and security provided by
the Company's system.
SALES STRATEGY
The initial principal strategy selected for the Company's sales was through an
experienced ATM kiosk Master Distributor for both independent store outlets and
chain markets. In March 1999, the Company consummated an agreement with
SmartCash ATM, an affiliate of ATM International, Inc., to be the Master
Distributor on an exclusive basis for the Company.
The strategy of a single, exclusive Master Distributor was altered in the fourth
quarter of 1999 through the addition of Affiliated Computer Services (ACS) as a
distributor for the Company pursuant to a two year, non-exclusive
distributorship agreement which allows ACS certain exclusive rights to market,
sell and distribute the Check Cashing ATM in the United States. ACS is a
diversified company with annual sales of approximately two billion dollars.
Supported by field sales office in most major cities, ACS Electronic Commerce
Group (a division of ACS, Inc. based in Dallas, Texas) provides processing for
more than 17,000 ATM machines nationwide and provides maintenance for more than
7,000 machines. Management believes that ACS can provide the access to large
chain outlets and banking institutions that otherwise may not be accessible to
the Company.
The Company continued to adjust its sales strategy by repurchasing the rights to
the Master Distributorship from SmartCash ATM, while allowing SmartCash ATM to
remain a non-exclusive distributor of the Company (see Subsequent Events). The
Company believes the repurchase of the rights to the Master Distributorship
offers significant advantages to the Company including; increased gross hardware
and software profits, enables the Company to work directly with the Independent
Sales Operators and Distributors and provides the Company unencumbered access to
corporate chain market sales such as Wal Mart and Piggly Wiggly.
The Company added to its marketing efforts by implementing a sales and marketing
support staff at the Oceanside facility. This staff is primarily engaged in
locating and supporting qualified Distributors and Independent Sales Operators
for the distribution of the Check Cashing ATM and coordinating effective
coverage of regional and national chain accounts. Presently the Company has
contracts with approximately 37 Distributors. The Company's distributor
agreements provide for two level pricing depending on the number of machines
sold. Distributors are not required to purchase product for inventory.
In addition, to directing sales to nationally recognized customers such as
Piggly Wiggly and Texaco Star Mart, the Company has demonstrated a willingness
to place machines with nationally recognized chains, such as Wal Mart, on a test
basis (see Subsequent Events) as a means of solidifying market acceptance.
The banking industry interest in the Check Cashing ATM has subtle differences
from those in the convenience store business sector. Both want to provide
customers a reliable and highly desired service at a profitable fee. However,
banks unlike other customer sectors, will also want to convert the best clients
into full time bank customers or at least provide them additional banking
services such as car, home, or other loans.
The Company believes that it is in its best interest to develop a strategic
banking relationship with possibly one or two nationwide banks that will become
the cash provider, and master check processor to the Company. In return, the
Company will pay for these financial services and provide the selected bank with
exclusive on-screen advertisement to help handle customers who need additional
banking services.
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MANUFACTURING AND QUALITY CONTROL
The Check Cashing ATM has been designed using a fully modular approach. The
outside case is made of a thick, high-grade steel to provide maximum protection.
Each sub-component (monitor, magnetic card reader, printer, scanner, money
dispenser, CPU, etc.) is common to ATM machines and chosen for its high
reliability. All key sub-components are mounted on easy access slides to
facilitate replacement if necessary. Brackets, power supplies, cable bundles,
hinges and all other peripherals are heavy-duty components to ensure long life
and low repair cost. In addition, Check Central has taken special care in the
final design phase to provide itself a complete design package with full CAD/CAM
digital drawings, which will be used to set up a multiple vendor supply system.
The Company is ready for just-in-time production through the support of Fourth
Shift Complete Care Program. The implementation of this system enables the
Company to meet its goal of becoming a paperless factory and supply product on
demand. Fourth Shift Corporation is a Minneapolis based global software company
that provides e-business solutions. Fourth Shift software is licensed by more
than 3,700 customer sites in 60 countries.
The Company has a fully certified set of subcontractors, suppliers and
assemblers to build machines to meet the Company's requirements. The Oceanside
manufacturing facility is now able to manufacture and deliver hundreds of units
per month starting in late spring of 2000.
PATENTS AND PROPRIETARY TECHNOLOGY
The Company intends to protect its technology by filing copyright and patent
applications for the patentable technologies that it considers important to the
development of its business. The Company also intends to rely upon trade
secrets, know-how and continuing technological innovations to develop and
maintain a competitive advantage.
The Company has filed a copyright application with the U. S. Patent and
Trademark Office with respect to its proprietary server technology. The Company
is filing patent applications with respect to its proprietary kiosk system and
any other technology it has developed for use with the Check Cashing ATM. There
can be no assurance that any U.S. Patent application filed by the Company, if
any and when filed, will be granted or, if obtained, will sufficiently protect
the Company's proprietary rights.
Even if the patents the Company applies for are granted, they do not confer on
the Company the right to manufacture and market products if such products
infringe patents held by others. The Company has not undertaken or conducted any
comprehensive patent infringement searches or studies. If any such third parties
hold any such conflicting rights, the Company may be required in the future to
stop making, using or selling its products or to obtain licenses from and pay
royalties to others, which could have a significant and material adverse effect
on the Company. Further, in such event, there can be no assurance that the
Company would be able to obtain or maintain any such licenses on acceptable
terms or at all.
11
<PAGE>
REGULATION
GENERAL
The Company is subject to extensive regulation in several jurisdictions in which
it operates, including jurisdictions that regulate check cashing fees and payday
advance fees. The Company could also become subject to federal and state
regulations relating to the reporting and recording of certain currency
transactions. There can be no assurance that additional state or federal
statutes or regulations will not be enacted at some future date which could
inhibit the ability of the Company to expand, significantly decrease the service
charges for check cashing, payday advances and/or other services, or prohibit or
more stringently regulate the sale of certain goods which could cause a
significant adverse effect on the Company's future prospects.
STATE
Certain states have different licensing requirements. Some states require that
the owner of a check cashing machine obtain the license, others require that the
provider of the vault cash (the cash in the machine) obtain a license or the
possessor of the machine obtain the license or that the Company jointly with the
owner, possessor or vault cash provider obtain a license. Certain states require
that the entity to be licensed maintain certain levels of liquid assets for each
location at which a machine is placed.
The Company operates in eight states that have licensing and/or fee regulations
on check cashing and/or other services provided by the Company. The Company
and/or the appropriate party is licensed in each of the states in which a
licensed is currently required to operate as a check casher and/or other service
provider. The Company's fee structures are at or below the applicable rate
ceilings adopted by each of these states.
FEDERAL
Under the bank Secrecy Act regulations of the U.S. Department of the Treasury
(the "Treasury Department"), transactions involving currency in an amount
greater than $10,000 or the purchase of monetary instruments for cash in amounts
from $3,000 to $10,000 must be recorded. In general, every financial
institution, including the Company, must report each deposit, withdrawal,
exchange of currency or other payment or transfer, whether by, through or to the
financial institution, that involves currency in an amount greater than $10,000.
In addition, multiple currency transactions must be treated as single
transactions if the financial institution has knowledge that the transactions
are by, or on behalf of any person and result in either cash in or cash out
totaling more than $10,000 during any one business day
OTHER
In jurisdictions that do not have favorable laws, the Company anticipates, but
there can be no assurance, will enter into agreements with out-of-state
federally insured financial institutions to act as the service/loan provider in
that jurisdiction.
There can be no assurance that additional local, state or federal legislation
will not be enacted or that existing laws and regulations will not be amended
which could have a material adverse effect on the Company's operations and
financial condition.
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EMPLOYEES
Including its officers, the Company presently employs 27 full-time employees.
The Company uses independent consultants for a variety of tasks, including
engineering, shareholder relations, and marketing. None of the Company's
employee's are covered by collective bargaining agreements and the Company
considers its employee relations to be satisfactory.
ITEM 2. DESCRIPTION OF PROPERTY
Greenland currently occupies approximately 12,000 square feet of office space at
1935 Avenida Del Oro, Oceanside, California for its executive offices and its
assembly operations. The Company entered into a five-year lease, commencing May
1, 1999 and pays approximately $11,000 per month rental payment. The monthly
rental payment includes approximately $200,000 of lease improvements, which were
amortized over the lease period. The Company believes that the facility is
suitable for its operations and that its equipment, furniture and fixtures are
in excellent condition.
ITEM 3. LEGAL PROCEEDINGS
The Company's officers and directors are aware of no threatened or pending
litigation which would have a material, adverse effect on the Company. From time
to time the Company is a defendant (actual or threatened) in certain lawsuits
encountered in the ordinary course of its business, the resolution of which, in
the opinion of management, should not have a material adverse effect on the
Company's financial position results of operations, or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is traded in the over-the-counter market, and quoted
on the OTC Electronic Bulletin Board under the symbol "GLCP". The Company's
common stock has traded, during the fiscal year ended December 31, 1999 between
$.09 and $0.62 per share. The number of shares of record of common stock, $.001
par value, of the Company was 32,298,622 at December 31, 1999 and 51,851,945 at
March 31, 2000. The following table sets forth the quarterly high and low last
sales prices per share for the common stock as reported by the OTC Electronic
Bulletin Board:
<TABLE>
<CAPTION>
Common Stock
Price Range
-----------
High Low
<S> <C> <C>
Year Ended December 31, 1998
Quarter Ended March 31, 1998 $.32 $.10
Quarter Ended June 30, 1998 $.84 $.31
Quarter Ended September 30, 1998 $.14 $.09
Quarter Ended December 31, 19998 $.34 $.08
</TABLE>
13
<PAGE>
<TABLE>
Year Ended December 31, 1999
<S> <C> <C>
Quarter Ended March 31, 1999 $.21 $.09
Quarter Ended June 30, 1999 $.46 $.17
Quarter Ended September 30, 1999 $.40 $.21
Quarter Ended December 31, 1999 $.62 $.29
</TABLE>
On March 31, 2000, the last sales price for the common stock as reported by the
OTC Electronic Bulletin Board was $.80 per share. On March 31, 2000 there were
approximately 4,300 shareholders of record of the common stock.
No cash dividends have been paid by the Company on its common stock, and the
Company does not currently intend to pay cash dividends on its common stock. The
current policy of the Company's Board of Directors is to retain earnings, if
any, to provide funds for operation and expansion of the Company's business.
Such policy will be reviewed by the Board of Directors of the Company from time
to time in light of, among other things, the Company's earnings and financial
position and limitations imposed by its lenders, if any.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward Looking Information
This annual report contains certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act. Forward-looking statements can be identified by the use
of forward-looking terminology such as "believes," "expects," "may,"
"estimates," "will," "should," "plans," or "anticipates" or the negative
thereof, or other variations thereon, or comparable terminology, or by
discussions of strategy. Such statements include, but are not limited to, the
discussions of the Company's operations, liquidity, and capital resources.
Forward-looking statements are included in the "Liquidity and Capital Resources"
section of this annual report. Although the Company believes that the
expectations reflected in forward-looking statements are reasonable, there can
be no assurances that such expectations will prove to be accurate. Generally,
these statements relate to business plans, strategies, anticipated strategies,
levels of capital expenditures, liquidity and anticipated capital funding needed
to effect the business plan. All phases of the Company's operations are subject
to a number of uncertainties, risks and other influences, many of which are
outside the control of the Company and cannot be predicted with any degree of
accuracy. Factors such as changes in regional or national economic conditions,
changes in governmental regulations, unforeseen litigation, changes in interest
rates or tax rates, significant changes in the prevailing market price of gold,
future business decisions and other uncertainties may cause results to differ
materially from those anticipated by some of the statements made in this report.
In light of the significant uncertainties inherent in the forward-looking
statements made in this report, the inclusion of such statements should not be
regarded as a representation by the Company or any other person that the
objectives and plans of the Company will be achieved. Security holders are
cautioned that such forward-looking statements involve risks and uncertainties.
The forward-looking statements contained this report speak only as of the date
of this report and the Company expressly disclaims any obligation or undertaking
to release any updates or revisions to any such statement to reflect any change
in the Company's expectations or any change in events, conditions or
circumstance on which any such statement is based.
The following discussion pertains to the Company's operations and financial
condition as of December 31, 1999.
The Company was previously engaged in the development and marketing of advanced
communications technology known as automated meter reading ("AMR"), which
enables utilities to automate meter reading functions via the Company's AirLink
system. On April 5, 1999, the Company consummated an agreement for the sale of
the AMR technology to Telenetics Corporation, a publicly traded corporation and
received shares of convertible preferred stock of Telenetics with a face value
of $900,000.
The Company is engaged exclusively in the development of proprietary software
that is capable of providing consumers with a full range of automated financial
services including payroll check cashing, ATM, payday advance, wire transfers,
bill paying, money order and phone card dispensing services delivered through a
freestanding kiosk, similar in appearance to an ATM machine. The Company
acquired this technology in May 1998, when Check Central was incorporated into
Greenland Corporation as a wholly-owned subsidiary.
The Company has invested, and continues to invest substantial amount of capital,
considerable time and effort in continuing development and evolution of the
Check Cashing ATM. The formation of relationships with Cisco Systems, MC Info,
Sprint, Fourth Shift and Bantec reflects the emphasis the Company has placed in
assembling the best available technology and service providers. Management has
engaged in considerable effort to hire the best possible talent and has
assembled a first class team.
Management believes that it has created a convenient and cost effective system
for the reporting of activity and earnings generated from its Check Cashing ATMs
through a secure website. The website allows the users to view transactions in
both summary and detail formats, and to download transaction information into
spreadsheets.
The Company's strategy for marketing and sales of the Check Cashing ATM has been
directed at locating an established large, national distributor of ATM machines.
Established distributors have the infrastructure in place to sell, service and
maintain a large volume of machines and are best equipped to penetrate the
market quickly and efficiently. This strategy allows the Company to concentrate
its resources on doing what it does best, develop reliable, efficient products.
14
<PAGE>
The strategy of a single, exclusive Master Distributor was altered in the fourth
quarter of 1999 through the addition of Affiliated Computer Services (ACS) as a
distributor for the Company pursuant to a two year, non-exclusive
distributorship agreement which allows ACS certain exclusive rights to represent
the Check Cashing ATM in the United States. Management believes that ACS can
provide the access to large chain outlets and banking institutions that
otherwise may not be accessible to the Company.
The Company continued to adjust its sales strategy by repurchasing the rights to
the Master Distributorship from SmartCash ATM, while allowing SmartCash ATM to
remain a non-exclusive distributor of the Company (see Subsequent Events).
Management believes the repurchase of the rights to the Master Distributorship
offers significant advantages to the Company including; increased gross hardware
and software profits, enables the Company to work directly with the independent
sales operators and distributors and provides the Company unencumbered access to
corporate chain market sales such as Wal Mart and Piggly Wiggly.
The Company added to its marketing efforts by implementing a sales and marketing
support staff at the Oceanside facility. This staff is primarily engaged in
locating and supporting qualified distributors and of Independent Sales
Operators for the distribution of the Check Cashing ATM and coordinating
effective coverage of regional and national chain accounts. Presently the
Company has contracts with approximately 37 distributors.
The Company will receive revenue from two revenue streams. The first is through
the sale of the Check Cashing ATM. The Company anticipates initial gross sales
margins of approximately 40% and the Company requires a deposit equal to 50% of
the wholesale purchase price of the machine to implement the order process and
the balance paid upon installation. The Company expects that the margins will
improve as larger volumes of machines are purchased and the Company can take
advantage of volume discounts.
The second revenue stream is generated from the fees earned in connection with
the various banking services provided on each of the machines in operation. Fees
from check cashing are regulated by the vast majority of the states and range
from 2% to 6% of the face value of the check cashed. Fees from payday advances
are also regulated by the states and range from 15% to 18% of the amount of the
advance. Fees from other services range from $0.35 to 30% per transaction. The
Company will share this revenue stream with the owner of the machine and/or
other parties. The fee generation of the Company will increase with the
placement of additional machines and as machines mature in the market, more
transaction fees will be generated.
RESULTS OF OPERATIONS
OPERATIONS
The Company continues to fund its operations for the development and deployment
of the Check Cashing ATM. The Company financed its operations primarily from
funds received from the Private Placement Offering, which commenced in May 1999.
The Company spent a significant part of the year building the infrastructure
necessary to support not only the research and development effort but laying the
ground work for the various support groups that will be required for successful
transition from a development stage company to a complete manufacturing,
marketing and service organization.
Management believes that during 1999, it has successfully transitioned the
Company from a development stage company to a production stage company.
15
<PAGE>
REVENUE
The Company reported revenues of $272,042 in 1999 primarily from the sale of
machines. During 1999 the Company focused its efforts and available capital to
further develop the technology and place production units in the field. To
validate the market and test mechanical and systems reliability, management
produced and placed its first beta units in Southern California in January and
February of 1999. In the third quarter 1999, the Company commenced placement of
its production units and by December 31, 1999 had placed 11 production units in
8 states.
With the successful completion of the placement of production units, the
formation of relationships with MC Info, Cisco Systems and Sprint for the
expansion and improvement of the Company's nationwide communication services and
the direct focus on sales and distribution through the reacquisition of the
rights to the Master Distributorship Agreement from SmartCash ATM, Ltd (see
Subsequent Events) and the distribution relationship with ACS, the Company
expects to commence the ramp up of the placement of Units in the second quarter
of 2000.
COST OF SALES
The Company incurred costs of sales of $545,835 for the year ending December 31,
1999. Of these costs, $282,499 related to the cost of manufacturing the
machines, resulting in a $(14,509) gross sales margin. The above costs include
overhead costs such as labor and facility expenses. Management anticipates
significant improvements in the gross margin on machine sales as the volume of
machines sold increases to a level sufficient to absorb these overhead costs.
Costs associated with transaction processing, included in cost of sales, were
$263,336 for year ending December 31, 1999, resulting in a gross margin on
transaction revenue of $(259,284). Processing costs included amortization and
depreciation, labor and communications. Management anticipates improvements in
the gross margin with the placement of additional machines in the field, and
their associated economies of scale.
EXPENSES
General and Administrative expenses for the year ended December 31, 1999 were
$4,039,826 compared with $1,186,065 for 1998. The major reason for the increase
in G&A was due directly to the extensive product development costs and costs
associated with substantial upgrades in the infrastructure. Due to lack of
capital, the Company has paid the officers and certain consultants their
compensation in the form of stock and as a result the Company has issued shares
of its common stock, which is reflected in G&A expense. Depreciation expenses
increased from $6,319 in 1998 to $253,224 in 1999 due to the depreciation and
amortization of the technology.
INCOME FROM DISCONTINUED OPERATIONS
In April 1999, the Company sold its automated meter reading technology (AMR
division) in exchange for shares of convertible preferred stock with a face
value of $900,000. Accordingly, the AMR division is accounted for as
discontinued operations and its operating results are shown separately in the
accompanying financial statements. The AMR division had no net sales in 1999 and
1998. The only asset identifiable with the AMR division consisted of the
automated meter reading technology. The Company realized a gain of $713,277 on
the disposal of this asset in 1999.
16
<PAGE>
INCOME (LOSS)
During the year ending December 31, 1999, the Company had losses of $6,822,212
compared with losses of $3,322,163 in 1998 and losses of $1,663,040 for the
calendar year ending 1997. The increase in losses were due to increased product
development costs; a $1,900,000 reserve against an assets of the Company
represented by 1,100,000 Convertible Preferred Shares of a public company
("Reserve"); and the sale of 290,000 Convertible Preferred Shares of Golden Age
Homes, Inc., previously valued at $1,450,000, for a loss of $1,300,000. ("GAHI
Transaction").
LIQUIDITY AND CAPITAL RESOURCES
During 1999, the Company received approximately $1,106,000 in proceeds from the
Offering. The Offering was completed in February 2000 and the Company received
an additional $2,171,000 plus approximately $583,000 from the exercise of
certain Warrants (See Subsequent Events). The proceeds from the exercise of all
outstanding warrants could total $36 million.
Current assets increased substantially in 1999 to $792,530 compared with $99,250
in 1998. Total Assets decreased substantially in 1999 due to the Reserve (see
above) and the GAHI Transaction (see above). The decrease in assets was offset
in part by the sale of AMR Technology and receipt of the Convertible Preferred
Stock of Telenetics valued at $900,000. The year ending December 31, 1997,
assets totaled $4,410,000 versus $6,337,242 for year ending 1998. The Company's
total liabilities increased for 1999 primarily because of accrued expenses.
Total liabilities were $1,367,976 for the year ending 1999 compared with
$556,672 for 1998 and $812,000 for year ending December 31, 1997.
The Company's strategy has been and will continue to be to maximize the return
of assets for the Company and its shareholders. The Company reevaluates its
assets on an on-going basis to determine the most effective use and benefit to
the Company in relation to the Company's operations needs. Based on this review,
the Company will either sell or leverage the asset for liquidity to support the
Company's capital requirements.
Stockholder's equity was $3,384,961 at December 31, 1999, a decrease from
$5,780,570.
The Company has a working capital deficiency of $(575,446) at December 31, 1999
and a retained deficit of $(13,706,533). The Company's needs for working capital
is a key issue for management and necessary for the Company to meet its goals
and objectives. The Company continues to pursue additional capitalization
through private placement and other activities in order to raise funds for
ongoing operations, including institutional lending, lines of credit, purchase
order financing and the sale of or financing of its assets.
Management believes that institutional lending will be available to the Company
once the Company establishes a track record of production and shipping
stability.
RISK FACTORS
LIMITED OPERATING HISTORY, SUBJECT TO RISKS ENCOUNTERED BY EARLY STAGE COMPANIES
The Company began its check cashing operations in 1998. Accordingly, the Company
has a limited operating history and its business and prospects must be
considered in light of the risks and uncertainties to which early stage
companies in rapidly evolving industries such as automated check cashing are
exposed to. These risks include that our check cashing machines may not operate
effectively after we have completed development and sell them on a commercial
scale, risks that competition and rapid technological change in the check
cashing industry could adversely affect market acceptance of our products and
services; risks that automated check
17
<PAGE>
cashing machines may not be accepted. The Company cannot provide assurances
that its business strategy will be successful or that the Company will
successfully address these risks and the risks described herein.
HISTORY OF LOSSES, NO ASSURANCE OF PROFITABILITY
Although the Company has generated revenues from the sale of its check cashing
machines, the Company is not profitable and cannot be certain it will achieve
sufficient revenue to achieve profitability. The Company has incurred net losses
of $1,663,040 in the year ended December 31, 1997, $3,322,163 in the year ended
December 31, 1998, and $6,822,212 in the year ended December 31, 1999. As of
December 31, 1999, the Company had an accumulated deficit of $13,706,533. The
Company plans to increase its operating expenses to continue research and
development to refine its check cashing machines, expand its distributors and
sales and marketing staff, broaden its check cashing machine support
capabilities and to build its operational infrastructure and establish
relationships with suppliers, manufacturers and banking and finance entities.
The Company expects that it will continue to lose money at least through the
year 2000.
NEWLY INTRODUCED PRODUCTS MAY CONTAIN UNDETECTED UNRESOLVED DEFECTS
Any new or enhanced services to its machines the Company may introduce, such as
bill paying, wire transfer and on-line purchases may contain undetected or
unresolved software or hardware defects when they are first introduced or as new
versions to the system are released. In the past the Company has discovered
errors in the products and it is possible design defects will occur in new
products or upgraded products. These defects could result in a loss of sales and
additional costs as well as damage to our reputation and the loss of
relationships with our customers.
FUTURE CAPITAL REQUIREMENTS UNCERTAIN, NO ASSURANCES OF FUTURE FUNDING
The Company will be required to make substantial expenditures for existing
and future research and development to continue the manufacture of its check
cashing machines, to market its check cashing machines, and to supplement its
relationships with the service providers. As of December 31, 1999 the Company
had a working capital deficiency of $575,000. The company will need
additional funding during the next twelve months and could seek additional
funding after that time. There can be no assurances any additional funding
will be available on acceptable terms or at all, when required by the
Company. If additional funding is not available, the Company could be
required to reduce or suspend its operations, such as acquiring partners, or
sell securities on terms that may be highly diluted. The Company has
experienced in the past and may continue to experience, operational
difficulties and delays in its product development and commercial products
due to working capital deficiency. Any such difficulties or delays could have
a material adverse effect on the Company's business, financial condition and
results of operation.
DEPENDENCE ON OTHERS FOR MANUFACTURING AND DISTRIBUTION OF PRODUCTS
The company is also currently dependent on other parties for the distribution
and marketing of its product. The company has entered into distribution
agreements with a party to provide distribution, processing and maintenance of
its Check Cashing machines. There can be no assurances that its distributor
agreements will prove effective for the Company.
GOVERNMENT REGULATIONS
The business of check cashing is subject to regulation in certain states,
including states which regulate check cashing fees, require the registration of
the check cashing companies or money transmission agents, and licensing of
companies which offer payday loans. There are also federal and state regulation
relating to the reporting and recording of certain currency transactions. The
failure of the Company and/or it licensees to be
18
<PAGE>
licensed and/or to comply with the requirements register as check cashing or
money transmitter agent, or to comply with the regulations on check cashing
fees or the reporting or recording of certain currency transactions could
have a material adverse effect on the Company's business, financial condition
and results of operation.
DEPENDENCE ON LIMITED NUMBER OF COMPONENT SUPPLIERS
The Company acquires the components for its check cashing machines from a
limited number of third parties. The Company does not have any written supply
agreements with any of its current suppliers. Therefore, the Company's future
success will be dependent upon maintaining its relationships with existing
suppliers and developing relationships with new suppliers. Any significant
disruption or delay in the supply of components from the Company's suppliers or
any diminishment of quality resulting from such supplies, insufficient controls,
or inadequate component testing, would have a material adverse effect on the
Company's business, financial condition, and results of operation.
RISK OF TECHNICAL PROBLEMS OR PRODUCT DEFECTS
Once the Company completes the development of its check cashing machines and
begins manufacturing them for broad commercial scale production and sale, there
can be no assurances that despite testing and quality assurance effort that may
be performed by the Company and/or its manufactures and subcontractors that
technical problems or product defects will not be found. These problems or
product defects could result in the loss of or a delay in market acceptance and
sales, diversion of development resources, injury to the Company's reputation,
increased service and support costs, any one of which could have material
adverse effects on the Company's business, financial condition, and results in
operation.
KEY EMPLOYEES
If the Company loses its key personnel, it may not be able to successfully
operate its business. The Company believes its future success is highly
dependent upon its senior management and in particular upon it's Chief Executive
Officer, Louis Montulli, it's President Max Farrow and its Vice President and
Corporate Counsel Thomas Beener. The Company has employment contracts with
Messer's Montulli, Farrow and Beener. The terms of the employment contracts
would not prevent any key employees from terminating their employment with the
Company. The loss of the services of any senior management could have a material
adverse effect on the Company's business, financial condition, and results of
operation.
YEAR 2000 COMPLIANCE
In 1999, the Company completed its year 2000 compliance review of its
information technology systems and non-information technology systems and
successfully implemented all related upgrades, replacements, or modifications
necessary. The Company experienced virtually no year 2000 business interruptions
either internally or related to its major vendors. The total cost of the year
2000 related enhancements was approximately $50,000, including an estimate of
internal payroll committed to year 2000 related projects.
SUBSEQUENT EVENTS
Subsequent to December 31, 1999, the Company entered into a transaction on March
20, 2000, with SmartCash ATM, Ltd. ("SmartCash") whereby the Company reacquired
the rights to the Master Distributorship from SmartCash. Although SmartCash will
remain an non-exclusive distributor, the Company believes that the repurchase of
the rights to the Master Distributorship provides the Company with the certain
advantages including: increase in gross hardware and software profits, allows
the Company to work directly with Independent Sales Representatives and provides
the Company with unencumbered access to corporate
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chain market sales. Among other terms and conditions the Company loaned
SmartCash $200,000 (which SmartCash will repay from proceeds of sale of
stock) and the Company will continue to pay commission on sales of machines
by SmartCash until said commissions equal $320,000. SmartCash released its
distributors from any obligation to SmartCash that would have prevented said
distributor from contracting directly with Greenland for the sale of the
Company's Product.
Subsequent to December 31, 1999, the Company entered into an agreement with Wal
Mart whereby the Company placed five check cashing machines at five locations in
California. The machines will provide check cashing services and will operate as
a test for Wal Mart. The Company will pay Wal Mart a monthly fee of $1,000 per
location and the Company will retain all fee revenues generated from the
operation of the machines.
Subsequent to December 31, 1999, the Company fully subscribed its Private
Placement Offering (the "Offering"), which was commenced on May 1999 pursuant to
Regulation D Rule 506 of the Securities Act of 1933, as amended. The Offering
provided for the sale of units, each unit consisting of 11.5 Shares of Common
Stock of Greenland and Class A Warrants to purchase 10 Shares of Greenland
Common Stock at $.50, Class B Warrants to purchase 10 Shares of Greenland Common
Stock at $1.00 and Class C Warrants to purchase 10 shares of Greenland Common
Stock at $1.50. The Class A Warrants expire in 12 months from date of issuance,
Class B warrants 18 months from date of issuance and Class C Warrants 24 months
from date of issuance.
The Company realized approximately $3,450,000 net proceeds from the Offering and
issued 16,000,000 restricted shares of Common Stock. As of March 31, 2000 the
Company had also realized proceeds of $582,500 from the exercise of the Class A
Warrants. If all Class A Warrants are exercised the Company will realize
approximately $6,080,000 of proceeds, if all Class B Warrants are exercised the
Company will realize approximately $12,160,000 of proceeds and if all Class C
Warrants are exercised the Company will realize approximately $18,240,000 of
proceeds. There can be no assurance that any portion of the Class A, Class B
and/or Class C Warrants will be exercised. Said exercise is dependant upon many
factors outside the control of the Company.
Subsequent to December 31, 1999, Randell Coleman resigned from the Company's
Board of Directors.
Subsequent to December 31, 1999, Lee Swanson resigned his position of President
of Check Central and acting CFO of Greenland to accept a position with another
company. Mr. Swanson will remain a member of the Board of Directors of
Greenland.
Subsequent to December 31, 1999, Max Farrow accepted the position of President
of Greenland Corporation and Check Central, Inc., and was appointed to the Board
of Directors of Greenland.
On or about June 11, 1999 Hwa Sook Shin commenced a legal action in the San
Diego Superior Court against Greenland Corporation. On or about March 13, 2000
the Company entered into a settlement agreement with Ms. Shin, which provided
for the payment to Ms. Shin in the form of Shares of Common Stock of Greenland
Corporation in an amount equal to the original loan of $125,000 plus interest.
Other claims of Ms. Shin were released and certain shares of Greenland Common
Stock previously issued to Ms. Shin were returned to Greenland.
Manuel Zambrana and Mary Zambrana ("Zambrana") commenced a legal action in the
San Diego Superior Court against Eleven defendants, including Greenland
Corporation (the "Defendants"). On or about February 12, 2000, Zambrana
dismissed with prejudice all claims against Greenland Corporation in exchange
for Greenland releasing Zambrana from any and all actual or potential claims
Greenland had or may of had against Zambrana.
20
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ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See index to financial statements included herein
ITEM 8. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The information required by this item relating to the Company's directors and
nominees and disclosure relating to compliance with Section 16(a) of the
Securities Exchange Act of 1934 is included under the captions "Election of
Directors" and "Compliance with Section 16(a) of the Securities Exchange Act of
1934" in the Registrant's Proxy Statement for the 2000 Annual Meeting of
Shareholders and is incorporated herein by reference.
ITEM 10. EXECUTIVE COMPENSATION
The information required by item 10 of Form 10-KSB is incorporated by reference
to the information contained in the section captioned "Executive Compensation"
in the Proxy Statement to be filed with the Commission on or before April 30,
2000.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by item 11 of Form 10-KSB is incorporated by reference
to the information contained in the section captioned "Security Ownership of
Certain Beneficial Owners and Management" in the Proxy Statement to be filed
with the Commission on or before April 30, 2000.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by item 12 of Form 10-KSB is incorporated by reference
to the information contained in the section captioned "Certain Relationships and
Related Transactions" in the Proxy Statement to be filed with the Commission on
or before April 30, 2000.
PART IV
<TABLE>
<CAPTION>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
<S> <C> <C>
(A) List of documents filed as part of this report.
(1) Financial Statements
Reference is made to the index to Financial Statements under
Item 7 in Part II hereof, where these documents are listed.
(2) Financial Statement Schedules
None
(3) Exhibits
(3a) On April 9,1999 the Company filed Form 8-K to report the terms
of the Stock Purchase Agreement with Louis T. Montulli.*
21
<PAGE>
<S> <C> <C>
(3b) On August 20, 1999, the Company filed Form 8-K to report the
change of its certifying accountant to Levitz, Zacks &
Ciceric*
(3c) Amended Certificate of Incorporation*
(3d) Amended Bylaws*
(3e) Common Stock Specimen*
(10a) Greenland Corporation 1999 Stock Option Plan*
(10b) Employment Agreement, Louis T. Montulli dated September 1,
1999
(10c) Employment Agreement, Thomas J. Beener dated September 1, 1999
(10d) Employment Agreement, Lee Swanson dated September 1, 1999
10(e) Confidential Settlement Agreement by and between SmartCash ATM
and Greenland Corporation dated March 30, 2000 for the
repurchase of rights to master Distributorship.
10(f) Asset Purchase Agreement by and between Telenetics Corporation
and Greenland Corporation dated April 7, 1999 for the sale of
AMR Technology.
(10g) Standard Industrial/Commercial Multi-Tenant Lease dated May 1,
1999. (10g) Cisco Master Agreement to Lease Equipment dated
February 10, 2000.
(10h) Cisco Master Agreement.
(10i) Mc Info Agreement with Greenland Corporation dated December 1,
1999 for monitoring of services.
(10j) Distribution Agreement between Greenland Corporation and ACS
dated December 1, 1999.
(10k) Master Distribution Agreement between SmartCash ATM, Ltd and
Greenland Corporation dated March 1999*
</TABLE>
*Incorporated by Reference from previous filing.
The Company will furnish a copy of any exhibit to a requesting stockholder upon
payment of the Company's reasonable expenses in furnishing such exhibit.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
<TABLE>
<S> <C>
Greenland Corporation
Date: April 14, 2000 By:/s/ LOUIS T. MONTULLI
---------------------
Louis T. Montulli
CEO, Chairman of Board
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C>
Date: April 14, 2000 By:/s/ GENE CROSS
--------------
Gene Cross
Chief Financial Officer, Director
Date: April 14, 2000 By:/s/ THOMAS J. BEENER
--------------------
Thomas J. Beener
Secretary, Director
</TABLE>
22
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants
for the year ended December 31, 1999............................................ F-1
Independent Auditor's Report for the year ended December 31, 1998 F-2
Consolidated Balance Sheets at December 31, 1999 and 1998.......................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998....................................................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1999 and 1998........................................... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998....................................................... F-6 - 7
Notes to Consolidated Financial Statements......................................... F-8 -31
</TABLE>
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
GREENLAND CORPORATION AND SUBSIDIARY
OCEANSIDE, CALIFORNIA
We have audited the accompanying consolidated balance sheet of Greenland
Corporation and Subsidiary as of December 31, 1999, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the December 31, 1999 consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Greenland Corporation and Subsidiary as of December 31, 1999, and
the results of their operations and their cash flows for the year then ended in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
2, the Company has suffered recurring losses from operations, has a working
capital deficiency of $575,446 and a retained deficit of $13,706,553 at December
31, 1999, and limited cash resources with which to carry out management's plans.
These conditions raise substantial doubt about its ability to continue as a
going concern. Management's plans regarding these matters are also described in
Note 2. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
LEVITZ, ZACKS & CICERIC
San Diego, California
February 18, 2000 (except Notes 2 and 24 as to
which the date is March 23, 2000)
F-1
<PAGE>
SMITH & COMPANY
A PROFESSIONAL CORPORATION OF
CERTIFIED PUBLIC ACCOUNTANTS
MEMBERS OF 10 WEST 100 SOUTH,SUITE 700
AMERICAN INSTITUTE OF SALT LAKE CITY, UTAH 84101
CERTIFIED PUBLIC ACCOUNTANTS TELEPHONE: (801)575-8297
UTAH ASSOCIATION OF FACSMILE: (801)575-8306
CERTIFIED PUBLIC ACCOUNTANTS E-MAIL: [illegible]
- -------------------------------------------------------------------------------
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Greenland Corporation
We have audited the accompanying consolidated balance sheet of Greenland
Corporation (a development stage company) and subsidiary as of December 31,
1998, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the year ended December 31, 1998.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial 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 respect, the financial position of Greenland
Corporation (a development stage company) and subsidiary as of December 31,
1998, and the results of their operations, changes in stockholders' equity,
and their cash flows for the year ended December 31, 1998, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As shown in the
consolidated financial statements, the Company has a working capital
deficiency of $(457,422) at December 31, 1998, and a retained deficit of
$(6,884,321). The Comapny has suffered losses from operations and has a
substantial need for working capital. This raises substantial doubt about its
ability to continue as a going concern. Management's plans in regard in these
matters are described in Note 3 to the consolidated financial statements. The
accompanying financial statements do not include any adjustments that may
result from the outcome of this uncertainty.
/s/ Smith & Company
CERTIFIED PUBLIC ACCOUNTANTS
Salt Lake City, Utah
April 5, 1999
F-2
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
December 31, 1999 and 1998
...ASSETS...
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Current Assets:
Cash $ 235,574 $ 3,332
Accounts receivable (less allowance for uncollectible accounts
of $120,300 in 1999) 6,508 -0-
Receivables from employees 26,080 -0-
Inventories 299,116 -0-
Accounts receivable - officers 161,838 44,250
Prepaid officers compensation 63,414 51,668
============= =============
Total current assets 792,530 99,250
Property and equipment, net 190,004 24,600
Notes receivable (less allowance for uncollectible
accounts of $1,900,000 in 1999) -0- 1,900,000
Investments 900,000 1,450,000
Intangibles, net 2,862,903 2,811,723
Other assets 7,500 51,669
------------- -------------
Total assets $ 4,752,937 $ 6,337,242
============= =============
...LIABILITIES AND STOCKHOLDERS' EQUITY...
Current Liabilities:
Notes payable $ 98,100 $ 150,000
Trade accounts payable 426,918 172,672
Accrued expenses 572,958 -0-
Notes payable to related parties 270,000 223,000
Stock subscription refunds payable -0- 11,000
------------- -------------
Total current liabilities 1,367,976 556,672
------------- -------------
Stockholders' Equity:
Common stock, $.001 par value; and 100,000,000 shares authorized,
35,298,622 (12,708,331 in 1998) issued and outstanding 35,298 12,708
Additional paid-in capital 16,881,759 12,652,183
Subscribed shares unissued 174,437 -0-
Retained deficit (13,706,533) (6,884,321)
------------- -------------
Total stockholders' equity 3,384,961 5,780,570
------------- -------------
Total liabilities and stockholders' equity $ 4,752,937 $ 6,337,242
================ =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
Consolidated Statement of Operations
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Net sales $ 272,042 $ -0-
Cost of goods sold 545,835 -0-
------------- -------------
Gross loss (273,793) -0-
General and administrative expenses 4,039,826 1,186,065
------------- -------------
Operating loss (4,313,619) (1,186,065)
Other income (expense):
Reserve for note receivable (1,900,000) -0-
Loss on sale of investments (1,300,000) (627,025)
Interest expense (43,353) (22,349)
Other income (expense) 22,283 15,683
------------- -------------
Loss from continuing operations before income taxes (7,534,689) (1,819,756)
Income tax expense 800 -0-
------------- -------------
Loss from continuing operations (7,535,489) (1,819,756)
Discontinued operations (Note 19):
Loss from discontinued operations (zero income taxes) -0- (1,502,407)
Gain on disposal of discontinued operations (zero income taxes) 713,277 -0-
------------- -------------
Net loss $ (6,822,212) $ (3,322,163)
============= =============
Loss per share, continuing operations:
Basic loss per share $ (.30) $ (.23)
============= =============
Diluted loss per share $ (.30) $ (.23)
============= =============
Earnings (loss) per share, discontinued operations:
Basic earnings (loss) per share $ .03 $ (.20)
============= =============
Diluted earnings (loss) per share $ .03 $ (.20)
============= =============
Net loss per share:
Basic loss per share $ (.27) $ (.43)
============= =============
Diluted loss per share $ (.27) $ (.43)
============= =============
Weighted average shares outstanding
Basic 25,261,805 7,702,050
============= =============
Diluted 25,261,805 7,702,050
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
Consolidated Statements of Stockholders' Equity
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Additional Subscribed
Common Stock Paid-in Shares Retained
---------------------------
Shares Amount Capital Unissued Deficit Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 2,709,778 $ 2,710 $ 7,155,756 $ $ (3,562,158) $ 3,596,308
Stock issued to purchase subsidiary 3,500,000 3,500 2,621,500 2,625,000
Stock issued to retire debenture 1,000,000 1,000 649,000 650,000
Sale of common stock 363,500 363 352,037 352,400
Shares issued for services,
at the cost of the services 5,135,053 5,135 1,873,890 1,879,025
Net loss (3,322,163) (3,322,163)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1998 12,708,331 12,708 12,652,183 (6,884,321) 5,780,570
------------ ------------ ------------ ------------ ------------ ------------
Shares issued to retire debt and
to purchase assets 4,273,166 4,273 766,254 770,527
Sale of common stock 5,897,231 5,897 1,099,804 1,105,701
Shares issued for services 12,419,894 12,420 2,358,618 2,371,038
Subscribed shares unissued 174,437 174,437
Warrants to purchase shares 4,900 4,900
Net loss (6,822,212) (6,822,212)
------------ ------------ ------------ ------------ ------------ ------------
Balance at December 31, 1999 35,298,622 $ 35,298 $ 16,881,759 $ 174,437 $(13,706,533) $ 3,384,961
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,822,212) $ (3,322,163)
Adjustments to reconcile net loss to cash used in
operating activities:
Depreciation and amortization 253,224 6,319
Gain on disposal of AMR technology (713,277) -0-
Allowance for uncollectible note receivable 1,900,000 189,143
Realized loss on disposal of investment 1,300,000 500,000
Gain on sale of equipment (1,488) -0-
Stock issued for services 2,119,706 1,929,025
(Increase) decrease in:
Accounts receivable (6,508) 102,336
Inventories (299,116) -0-
Accounts receivable - officers and other assets 140,086 (103,337)
Increase (decrease) in:
Trade accounts payable 254,246 49,170
Accrued expenses 583,208 (78,508)
------------- --------------
Net cash used in operating activities (1,292,131) (728,015)
------------- --------------
Cash flows from investing activities:
Purchase of equipment (189,765) (581)
Proceeds from sale of equipment 8,000 -0-
------------- ----------------
Net cash used in investing activities (181,765) (581)
------------- --------------
Cash flows from financing activities:
Proceeds from sale of stock 1,105,701 352,400
Proceeds from subscribed shares unissued 174,437 -0-
Repayment of stock subscription (11,000) -0-
Amounts borrowed from stockholders -0- 223,000
Proceeds from notes payable to related parties 327,000 -0-
Repayments of notes payable to related parties (5,000) -0-
Proceeds from notes payable 110,100 150,000
Proceeds from sale of stock warrants 4,900 -0-
------------- --------------
Net cash provided by financing activities 1,706,138 725,400
------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
GREENLAND CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
Years Ended December 31, 1999 and 1998
(continued)
<TABLE>
<CAPTION>
1999 1998
------------- --------------
<S> <C> <C>
Increase (decrease) in cash 232,242 (3,196)
Cash at beginning of year 3,332 6,528
------------- --------------
Cash at end of year $ 235,574 $ 3,332
============= ==============
Supplemental information:
Cash paid for interest $ 19,153 $ 22,349
============= ==============
Cash paid for income taxes $ -0- $ -0-
============= ==============
</TABLE>
Supplemental disclosure of non cash investing and financing activities:
The Company acquired assets in the amount of $473,277 and $2,625,000 by
assuming debt and issuing stock in 1999 and 1998, respectively.
The Company repaid debt through the issuance of stock in the amounts of
$12,000 and $650,000 in 1999 and 1998, respectively.
In 1999, the Company transferred debt and accrued interest in the amount
of $435,250 and an investment in the amount of $1,450,000 to a
stockholder in exchange for stock of $285,250.
The Company exchanged its AMR technology property for shares of
convertible preferred stock in the amount of $900,000 in 1999.
At December 31, 1999, the Company has a receivable from its officers in
the amount of $161,838 for the employee portion of withholding from
compensation paid in the form of Company stock.
At December 31, 1999, the Company has a receivable from its employees in
the amount of $26,080 for the employee portion of withholding from
compensation paid in the form of Company stock.
In 1999 the Company provided compensation advances to certain officers in
the form of common stock in the amount of $63,414.
The Company paid for1999 services by issuing shares of its common stock
in the amount of $2,119,706.
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
Years Ended December 31, 1999 and 1998
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
Greenland Corporation is engaged in the production, distribution,
servicing and marketing of advanced automatic check cashing machines
similar to bank ATMs through its wholly-owned subsidiary Check
Central, Inc. (collectively, the Company). The Company markets and
sells its products throughout the United States and grants unsecured
credit to its customers.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of
Greenland Corporation and its wholly-owned subsidiary Check Central,
Inc. All significant intercompany transactions and accounts have been
eliminated in consolidation.
DEVELOPMENT STAGE
The Company was formed on July 17, 1986 and was in the development
stage until September 1994, when it acquired its subsidiary Gam
Properties, Inc. Upon the disposition of the subsidiary at December
31, 1997, the Company reentered the development stage and was in the
development stage until the third quarter of 1999.
INVENTORIES
Inventories are stated at lower of cost, first-in first-out basis, or
market. Provision for potentially obsolete or slow-moving inventory
is made based on management's analysis of inventory levels and future
sales forecasts.
PROPERTY AND EQUIPMENT
Property and equipment, including renewals and betterments are
recorded at cost. Depreciation is computed using the straight-line
method over useful lives of 1.5 to 7 years. The cost of assets sold
or retired and the related amounts of accumulated depreciation are
removed from the accounts in the year of disposal. Any resulting gain
or loss is reflected in current operations.
Expenditures for maintenance and repairs are charged to operations as
incurred.
F-8
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CAPITALIZATION OF INTERNAL-USE SOFTWARE COSTS
The Company capitalizes internal and external costs incurred to
develop internal-use computer software during the application and
development stage. Capitalized software is amortized over a period of
5 years using the straight-line method. Amortization begins when the
software is available for its intended use.
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation plans under
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation." (SFAS 123). This accounting standard
permits the use of either a fair value based method or the method
defined in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" (APB 25) to account for stock-based
compensation arrangements. Companies that elect to use the method
provided in APB 25 are required to disclose the pro forma net income
and earnings per share that would have resulted from the use of the
fair value based method. The Company has elected to account for its
stock based compensation to employees under APB 25.
REVENUE RECOGNITION
The Company recognizes revenue and related cost of sales when product
is shipped or services are rendered.
ADVERTISING
Expenditures for advertising and sales promotion are charged to
expense as incurred. Advertising costs for the years ended December
31, 1999 and 1998 were $63,938 and $32,139, respectively.
INCOME TAXES
The Company records the income tax effect of transactions in the same
year that the transactions enter into the determination of income,
regardless of when the transactions are recognized for tax purposes.
Deferred income taxes are recorded for these temporary differences.
F-9
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
SHARES ISSUED TO ACQUIRE GOODS AND SERVICES FROM NON-EMPLOYEES
The Company accounts for the issuance of equity instruments to
acquire goods and services based on the fair value of the goods and
services or the fair value of the equity instrument at the time of
issuance, whichever is more reliably measurable.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts on the 1998 financial statements have been
reclassified to conform to the 1999 presentation.
NEW ACCOUNTING PRONOUNCEMENTS
REPORTING THE COST OF START-UP ACTIVITIES
Effective January 1, 1999, the Company adopted Statement of Position
(SOP) 98-5, "Reporting on the Costs of Start-Up Activities." SOP 98-5
provides, among other things, guidance on the reporting of start-up
costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred.
Adoption of the standard did not have a material effect on the
Company's financial statements.
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS No. 133) issued
by the FASB is effective for all fiscal quarters of fiscal years
beginning after June 15, 1999 (Deferred to all fiscal quarters of all
fiscal years beginning after June 2000 by SFAS 137). SFAS No. 133
establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments imbedded in
other contracts and for hedging activities. The Company does not
expect the adoption of SFAS No. 133 to have a material effect, if
any, on its financial position or results of operations.
F-10
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
MORTGAGE-BACKED SECURITIES RETAINED AFTER THE SECURITIZATION OF
MORTGAGE LOANS HELD FOR SALE BY A MORTGAGE BANKING ENTERPRISE.
Statement of Financial Accounting Standards No. 134, "Accounting for
Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise" (SFAS
No. 134) issued by the FASB is effective for the first fiscal quarter
beginning after December 15, 1998. SFAS No. 134 amends Statement of
Financial Accounting Standards No. 65, "Accounting for Certain
Mortgage Banking Activities". The statement does not affect the
Company's financial position or results of operations.
RESCISSION OF FASB STATEMENT NO. 75 AND TECHNICAL CORRECTIONS
Statement of Financial Accounting Standards No. 135, "Rescission of
FASB Statement No. 75 and Technical Corrections" (SFAS No. 135)
issued by the FASB is effective for financial statements with fiscal
years ending after February 15, 1999. Earlier Application is
encouraged. SFAS No. 135 rescinds FASB statement No. 75 "Deferral of
the Effective Date of Certain Accounting Requirements for Pension
Plans of State and Local Governmental Units". The Statement also
amends other existing authoritative literature to make various
technical corrections, clarify meanings, or describe applicability
under changed conditions. The Company adopted SFAS No. 135 for the
year ended December 31, 1999, and the statement did not have a
material effect on its financial position or results of operations.
TRANSFER OF ASSETS TO A NOT-FOR-PROFIT ORGANIZATION OR CHARITABLE
TRUST
Statement of Financial Accounting No. 136, "Transfers of Assets to a
Not-for-Profit Organization or Charitable Trust that Raises or Holds
Contributions for Others" (SFAS No. 136) issued by the FASB is
effective for financial statements issued for fiscal periods
beginning after December 15, 1999. Earlier application is encouraged.
SFAS No. 136 establishes standards for transactions in which a donor
entity makes a contribution by transferring assets to a
not-for-profit organization or charitable trust. The statement does
not affect the Company's financial position or results of operations.
F-11
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 2. GOING CONCERN UNCERTAINTY
As shown in the accompanying consolidated financial statements, the
Company has suffered recurring losses from operations, has a net
working capital deficiency of $575,446 and a retained deficit of
$13,706,553 as of December 31, 1999. These factors, among others,
raise substantial doubt about the Company's ability to continue as a
going concern. The Company's need for working capital is a key issue
for management and necessary for the Company to meet its goals and
objectives. The Company continues to meet its obligations and pursue
additional capitalization opportunities. Subsequent to December 31,
1999, the Company fully subscribed its private placement offering
realizing $2,170,513 in net proceeds. In addition, the Company
realized $582,500 from the exercise of class A warrants. Proceeds
from the exercise of all outstanding warrants could total $36
million. The Company is also pursuing institutional and private party
lending and purchase order financing. There is no assurance, however,
that the Company will be successful in meeting its goals and
objectives in the future.
Note 3. CONCENTRATION OF CREDIT RISK
The Company maintains cash balances at several banks. Accounts at
each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000.
Note 4. RECEIVABLES FROM EMPLOYEES
In 1999, the Company held receivables from employees for the
employees' portion of payroll tax withholding paid by the Company
from compensation paid in the form of Company stock.
Note 5. INVENTORIES
Inventories at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
<S> <C>
Raw materials $ 181,649
Work-in-process 175,981
Finished goods -0-
----------
357,630
Less allowance for obsolescence (58,514)
----------
$ 299,116
==========
</TABLE>
F-12
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 6. ACCOUNTS RECEIVABLE - OFFICERS
In 1999, the Company held receivables from officers for the officers'
portion of payroll tax withholding paid by the Company from
compensation paid in the form of Company stock.
In 1998, the Company prepaid certain compensation costs to its
officers and employees in the amount of $147,507. These costs were
expensed in 1999.
Note 7. PROPERTY AND EQUIPMENT
Net property and equipment at December 31, 1999 and 1998 was as
follows:
<TABLE>
<CAPTION>
1999 1998
------------ ----------
<S> <C> <C>
Computers and equipment $ 115,852 $ -0-
Demonstration equipment 30,334 -0-
Furniture and fixtures 71,935 43,053
Leasehold improvements 3,300 -0-
---------- ----------
221,421 43,053
Accumulated depreciation 31,417 18,453
---------- ----------
$ 190,004 $ 24,600
========== ==========
</TABLE>
Depreciation expense for the years ended December 31, 1999 and 1998
was $17,850 and $6,319, respectively.
Note 8. NOTES RECEIVABLE
During 1998, the Company exchanged 1,100,000 convertible preferred
shares in a public company for notes receivable valued at $1,900,000
with interest at 9%. The Company has substantial doubt about the
collectibility of the notes and has established a 100% allowance at
December 31, 1999. The Company does not recognize interest income on
impaired notes.
F-13
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 9. INVESTMENTS
Investments at December 31, 1999 and 1998 consisted of the following:
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
Convertible preferred stock recorded at the lower of
cost or market (Note 19). $ 900,000 $ -0-
25,000 shares in a public company at a cost of $55,000.
The stock is not currently traded and a reserve has
been established for the full amount of the assets.
During 1999, the Company eliminated the asset and
reserve account. -0- 55,000
49% interest in a limited liability company accounted
for under the equity method. The Company has been
unsuccessful in locating the principals of this LLC
in the last three years. Accordingly, a reserve has
been established for the full amount. During 1999,
the Company eliminated the asset and reserve account. -0- 134,143
290,000 convertible preferred shares in GAHI, a public
company. The shares are convertible in December 1999
to the number of common shares (at the then current
market price) equivalent to $1,450,000. The shares
were sold during 1999 to an officer of the Company (Note
17). -0- 1,450,000
----------- ------------
Total 900,000 1,639,143
Less reserve -0- 189,143
----------- ------------
$ 900,000 $ 1,450,000
=========== ============
</TABLE>
F-14
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 10. INTANGIBLE ASSETS
Intangible assets at December 31, 1999 and 1998 consisted of the
following:
<TABLE>
<CAPTION>
1999 1998
------------ --------------
<S> <C> <C>
Capitalized software costs $ 344,278 $ 186,723
Licenses 675,000 675,000
Excess of purchase price over fair value of net
assets acquired 2,079,000 1,950,000
------------ ------------
3,098,278 2,811,723
Less accumulated amortization 235,375 -0-
------------ ------------
$ 2,862,903 $ 2,811,723
============ ============
</TABLE>
In 1999, the Company capitalized $344,278 of costs incurred to
upgrade and enhance the check cashing software purchased from Check
Central, Inc. (Note 11). The software was not ready for its intended
use at December 31, 1999. The Company amortizes capitalized software
costs over 5 years. The Company incurred $1,175,982 in 1999 related
to engineering design.
During 1998, as part of the purchase of the net assets of Check
Central, Inc. (Note 11), the Company acquired licenses to use certain
software in the development of check cashing machines. The Company is
amortizing these licenses over 5 years. The excess of the purchase
price over the fair value of the identifiable net assets acquired was
capitalized and is being amortized over 12 years.
Note 11. BUSINESS COMBINATION
During 1998, the Company acquired 100% of Check Central, Inc. (a
Nevada corporation) by issuing 3,500,000 shares of its common stock
with a fair value of $2,625,000 in exchange for all of the
outstanding common stock of Check Central, Inc. The transaction was
accounted for as a purchase. The accompanying consolidated financial
statements include all of the operating results of Check Central,
Inc. since the acquisition date. The Company allocated $675,000 of
the purchase price to the software and $1,950,000 to the excess of
the purchase price over the fair value of the net assets acquired. In
1999, the Company issued additional shares with a fair value of
$129,000 in final settlement of the purchase. The fair value of these
shares was added to the excess of the purchase price over the fair
value of the net assets acquired.
F-15
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 12. LINE OF CREDIT
The Company has a revolving line-of-credit agreement with a
commercial bank which allows for advances up to a maximum of $50,000.
There were no outstanding borrowings on this line of credit at
December 31, 1999 and 1998. The line expires December 10, 2000. The
line bears interest at the bank's reference rate plus 2.5%.
Note 13. NOTES PAYABLE
Notes payable at December 31, 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Notes payable to an individual, interest at 8%,
payable monthly; balance due at various dates
through May 2000. Secured by Company assets. $ 38,300 $ -0-
Notes payable to an individual, interest at 8%,
payable monthly; principal due at various dates
through May 2000. Secured by Company assets. 33,600 -0-
Note payable to an individual, interest at 8%,
payable monthly; principal due May 2000.
Secured by Company assets. 14,400 -0-
Note payable to an individual, interest at 8%,
payable monthly; principal due July 2000.
Secured by Company assets. 11,800 -0-
Note payable to an individual, with interest at 8%.
Due December 31, 1998. -0- 125,000
Note payable to an individual, no interest.
Due January 1999. -0- 25,000
---------- ----------
$ 98,100 $ 150,000
========== ==========
</TABLE>
F-16
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 14. ACCRUED EXPENSES
Accrued expenses at December 31, 1999 consist of the following:
<TABLE>
<CAPTION>
<S> <C>
Accrued stock compensation $ 251,901
Accrued payroll liabilities 245,715
Accrued interest 38,292
Accrued warranty expense 26,500
Customer deposits 10,000
Income taxes payable 550
----------
$ 572,958
==========
</TABLE>
Note 15. NOTES PAYABLE TO RELATED PARTIES
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Notes payable to a related party and stockholder.
Interest at 8%, payable monthly. Principal due
at various times through July 2000. $ 100,000 $ -0-
Note payable to a stockholder and officer of the
Company. Interest at 8%. Principal due
December 2000. 100,000 -0-
Note payable to a stockholder and officer of the
Company. Interest at 8%. Principal due
February 2000. 25,000 -0-
Note payable to a stockholder and officer of the
Company. Interest at 8%. Principal due March
2000. 20,000 -0-
Notes payable to a stockholder and officer of the
Company. Interest at 8%. Principal due at
various times through May 2000. 15,000 -0-
Note payable to a stockholder. Interest at 8%.
Principal due January 2000. 5,000 -0-
</TABLE>
F-17
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 15. NOTES PAYABLE TO RELATED PARTIES (continued)
<TABLE>
<CAPTION>
1999 1998
---------- ----------
<S> <C> <C>
Note payable to a stockholder. Interest at 8%.
Principal due January 2000. 5,000 -0-
Notes payable to an officer and stockholder.
Interest at 8% due February 28, 2000. This note
was settled during 1999 through the issuance of
common stock and the sale of Golden Age Homes,
Inc. (Note 17). -0- 223,000
---------- ----------
$ 270,000 $ 223,000
========== ==========
</TABLE>
In connection with the loans, the Company sold warrants for $4,900 to
acquire 1,166,329 shares of Company common stock. The warrants have
an exercise period of two years and 50% are exercisable at $.10 and
50% at $.13.
Note 16. STOCKHOLDERS' EQUITY
PRIVATE PLACEMENTS OF COMMON STOCK
On July 28, 1999, the Company offered to sell, pursuant to a
confidential private placement memorandum, up to 1,600,000 units of
common stock and attached warrants at $5 per unit. Proceeds from the
offering were to be used to fund development and begin manufacture of
the Company's check cashing machines. Each unit offered included 11.5
shares of common stock and warrants to purchase 30 additional shares
of common stock at prices ranging from $.50 per share to $1.50 per
share. In 1999, the Company realized net proceeds of $1,280,138 after
deducting costs related to the offering of $1,685,450.
COMMON STOCK ISSUED IN EXCHANGE FOR SERVICES
The Company issued 12,419,894 and 5,135,053 shares of its common
stock for services during the years ended December 31, 1999 and 1998,
respectively. The Company has recognized expenses for such services
in the amount of $2,371,038 and $1,879,025 in 1999 and 1998,
respectively.
F-18
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 16. STOCKHOLDERS' EQUITY (continued)
SUBSCRIBED SHARES UNISSUED
During 1999, the Company received $174,437 for the purchase of
930,354 shares of common stock. The shares were unissued as of
December 31, 1999. The proceeds from the unissued shares are carried
in the accompanying consolidated statement of stockholders equity.
COMMON STOCK OPTION PLANS
During 1999, the Company adopted a stock option plan for employees,
directors and consultants. The Company's stockholders have authorized
a total of 8,000,000 common shares to be available for grant under
the plan. The plan allows for incentive options with exercise prices
of at least 100% of the fair market value of the Company's common
stock. However, 10% or greater shareholders may not be granted
options with exercise prices below 110% of the fair market value of
the Company's common stock.
The Company accounts for stock based compensation under Statement of
Financial Accounting Standards No. 123 ("SFAS 123"). SFAS 123 defines
a fair value based method of accounting for stock based compensation.
However, SFAS 123 allows an entity to continue to measure
compensation cost related to stock and stock options issued to
employees using the intrinsic method of accounting prescribed by
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting
for Stock Issued to Employees". Entities electing to remain with the
accounting method of APB 25 must make pro forma disclosures of net
income and earnings per share, as if the fair value method of
accounting defined in SFAS 123 had been applied. The Company has
elected to account for its stock based compensation to employees
under APB 25. No options were issued with an exercise price below the
estimated fair market value of the Company's common stock at the date
of grant. Accordingly, no compensation cost has been recognized.
Pro forma information regarding net income and earnings per share is
required by SFAS 123, and has been determined as if the Company had
accounted for its employee stock options under the fair value method
of SFAS 123. The fair value for these options was estimated at the
date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions for the years ended December
31, 1999: risk free interest rate of 5.25%; dividend yield of 0%;
expected lives of the options of 5 to 10 years; and volatility of
2.09.
F-19
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 16. STOCKHOLDERS' EQUITY (continued)
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective assumptions.
Because the Company's stock options have characteristics
significantly different from those of traded options, and because
changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do
not necessarily provide a reliable single measure of the fair value
of its stock options.
For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the options' vesting period.
Adjustments are made for options forfeited prior to vesting. The
effects on compensation expense and net income had compensation costs
for the Company's stock option plans been determined based on a fair
value at the date of grant consistent with the provisions of SFAS
123, for the year ended December 31, 1999 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Net loss, as reported $ (6,822,212)
Adjustment to compensation expense under SFAS 123 (784,724)
------------
Net loss, pro forma $ (7,606,936)
============
Loss per share, pro forma $ (.30)
============
</TABLE>
The following summary presents the options under the plan granted,
exercised, expired and outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
--------- ---------
<S> <C> <C>
Outstanding at January 1, 1999 -- $ .00
Granted 6,255,000 .16
Exercised --
Expired --
---------- -------
Outstanding at December 31, 1999 6,255,000 $ .16
========== =======
Options exercisable at December 31, 1999 2,992,000 $ .16
========== =======
</TABLE>
F-20
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 16. STOCKHOLDERS' EQUITY (continued)
The weighted average fair value of options granted during 1999 was
$.16.
The following summary presents the exercise prices, number of
options outstanding and exercisable, and the remaining contractual
lives of the Company's stock options at December 31, 1999:
<TABLE>
<CAPTION>
Non-exercisable Options Exercisable Options
----------------------- -------------------------
Weighted Weighted
Average Average
Remaining Remaining
Contractual Contractual
Exercise Price Number Life Number Life
-------------- ------ ---------- ------ ----------
<S> <C> <C> <C> <C> <C>
.15 2,540,000 6.93 years 2,510,000 7.71 years
.20 723,000 9.19 years 482,000 9.19 years
</TABLE>
WARRANTS
The following summary presents warrants sold, exercised, expired and
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Warrants Price
-------- -----
<S> <C> <C>
Outstanding at January 1, 1999 -- $ .00
Issued 21,677,385 .85
Exercised --
Expired --
------------ -------
Outstanding at December 31, 1999 21,677,385 $ .85
============ =======
Warrants exercisable at December 31, 1999 21,677,385 $ .85
============ =======
</TABLE>
F-21
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 16. STOCKHOLDERS' EQUITY (continued)
The following summary presents the exercise prices, number of
warrants outstanding and exercisable, and the remaining contractual
lives of the Company's stock warrants at December 31, 1999:
<TABLE>
<CAPTION>
Outstanding Warrants
--------------------
Weighted
Average
Remaining
Contractual
Exercise Price Number Life
-------------- ------ -----------
<S> <C> <C> <C>
.10 1,166,330 1.23 years
.13 833,330 1.17 years
.15 83,332 1.00 years
.20 933,333 2.29 years
.25 850,000 2.42 years
.50 5,937,020 .78 years
1.00 5,937,020 1.28 years
1.50 5,937,020 1.78 years
</TABLE>
COMMON STOCK SPLITS
The Company effected a 1:10 reverse stock split on July 2, 1998. All
references to stock prices and numbers of shares in these financial
statements have been adjusted to reflect the reverse split as if it
were effective on the earliest date reported.
Note 17. RELATED PARTY TRANSACTIONS
In 1999, due to cash requirements, the Company sold its 290,000
shares of convertible preferred stock in Golden Age Homes, Inc. to
one of its officers. The shares were not convertible until December
1999 and the value at the time of conversion was uncertain. The
shares were carried at $1,450,000 at the time of sale. As part of
the transaction, the Company was relieved of debts totaling $435,250
and issued 2,800,000 shares to the officer valued at $285,250. The
Company recorded a loss of $1,300,000 on the transaction.
F-22
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 18. PROVISION FOR INCOME TAXES
<TABLE>
<CAPTION>
1999 1998
---------- ----------
Current:
<S> <C> <C>
Federal $ -0- $ -0-
State 800 -0-
---------- ----------
800 -0-
---------- ----------
Deferred:
Federal 604,000 -0-
State 191,000 -0-
Tax benefit of net operating loss carryforwards 1,954,000 701,000
---------- ----------
2,749,000 701,000
Change in valuation allowance (2,749,000) (701,000)
---------- ----------
800 -0-
Discontinued operations -0- -0-
---------- ----------
$ 800 $ -0-
========== ==========
</TABLE>
The total change in the valuation allowance from continuing and
discontinued operations for the years ended December 31, 1999 and
1998 was $2,402,000 and $1,300,000, respectively.
F-23
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 18. PROVISION FOR INCOME TAXES (continued)
Income tax benefit at the federal statutory rate is reconciled to the
Company's actual income tax provision as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- -----------------------
% of % of
Pretax Pretax
Amount Income Amount Income
------ ------ ------ ------
<S> <C> <C> <C> <C>
Federal income tax
benefit at statutory rate $ (2,562,000) (34.00%) $ (618,700) (34.00%)
State tax benefit, net
of federal tax provision (439,000) (5.83%) (106,000) (5.83%)
Change in valuation
allowance 2,749,000 36.48% 701,000 38.52%
Permanent variance in stock
issued for services 283,900 3.76% -0- .00%
Other (31,100) (.41%) 23,700 1.31%
------------ --------- ------------ ---------
Total income tax
provision $ 800 0.00% $ -0- 0.00%
============ ========= ============ =========
</TABLE>
F-24
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 18. PROVISION FOR INCOME TAXES (continued)
The Company's total deferred tax assets and deferred tax liabilities
at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
Deferred tax asset:
Net operating loss carryforwards 3,997,000 2,300,000
Note receivable allowance 814,000 -0-
Other 113,000 -0-
------------- -------------
Total deferred tax asset: 4,924,000 2,300,000
Valuation allowance (4,702,000) (2,300,000)
------------- -------------
Net deferred tax asset 222,000 -0-
------------- -------------
Deferred tax liability:
State income tax 222,000 -0-
------------- -------------
Total deferred tax liability 222,000 -0-
------------- -------------
Net deferred tax $ -0- $ -0-
============= =============
</TABLE>
Federal and state net operating loss carryforwards of $10,397,000
and $5,229,000 will expire through 2019 and 2004, respectively. The
valuation allowance will be evaluated at the end of each year,
considering positive and negative evidence about whether the asset
will be realized. At that time, the allowance will either be
increased or reduced; reduction could result in the complete
elimination of the allowance if positive evidence indicates that the
value of the deferred tax asset is no longer impaired and the
allowance is no longer required.
F-25
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 19. DISCONTINUED OPERATIONS
In April 1999, the Company sold its automated meter reading
technology (AMR division) in exchange for shares of convertible
preferred stock with a face value of $900,000. Accordingly, the AMR
division is accounted for as discontinued operations and its
operating results are shown separately in the accompanying financial
statements. The consolidated statement of operations for 1998 has
been reclassified to conform with the 1999 presentation. The AMR
division had no net sales in 1999 and 1998. The only asset
identifiable with the AMR division consisted of the automated meter
reading technology. The Company realized a gain of $713,277 on the
disposal of this asset.
Note 20. OPERATING LEASE
The Company leases its office facilities under an operating lease
expiring April 30, 2000 with monthly payments of $7,488 due at the
beginning of the month. At the end of the lease term, the Company
has the right to renew the lease under the same terms and conditions
for a period of five years. Rent in the first year of the option
will be $7,488 increasing annually at a fixed rate of 4%.
Rent expense under the lease was $86,424 and $73,313 for the years
ended December 31, 1999 and 1998, respectively. Future minimum lease
payments under the lease are $29,952 for the year ended December 31,
2000.
F-26
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 21. FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of the Company's financial instruments are
as follows:
<TABLE>
<CAPTION>
1999 1998
----------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Assets:
Cash $ 235,574 $ 235,574 $ 3,332 $ 3,332
Receivables from employees 26,080 26,080 -0- -0-
Accounts receivable - officers 161,838 161,838 44,250 44,250
Notes receivable -0- -0- 1,900,000 1,900,000
Investments 900,000 1,450,000
Liabilities:
Notes payable 98,100 98,100 150,000 150,000
Notes payable to related
parties 270,000 270,000 223,000 223,000
</TABLE>
The carrying values of receivables from employees, accounts
receivable - officers, notes receivable, notes payable and notes
payable to related parties approximate fair value due to their
short-term nature and interest rates which approximate market rates.
The fair value of the investments is not determinable because quoted
market prices are not available and the costs of obtaining
independent valuations are excessive.
F-27
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 22. EARNINGS PER SHARE
The Company adopted Statement of Financial Accounting Standards No.
128, "Earnings per Share" (SFAS No. 128). SFAS No. 128 provides for
the calculation of Basic and Diluted earnings per share. Basic
earnings per share includes no dilution and is computed by dividing
income available to common stockholders by the weighted average
number of common shares outstanding for the period. Diluted earnings
per share reflects the potential dilution of securities that could
share in earnings of an entity, such as stock options, warrants or
convertible debentures.
The following is a reconciliation of the weighted average number of
shares used to compute basic and diluted earnings per share:
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
Numerators for basic earnings per share -
Loss from continuing operations $ (7,535,489) $ (1,819,756)
Gain (loss) from discontinued operations $ 713,277 $ (1,502,407)
Denominator for basic earnings per share
weighted-average shares 25,261,805 7,702,050
Denominator for diluted loss per share -
adjusted weighted-average shares and
assumed conversions 25,261,805 7,702,050
Basic earnings (loss) per share:
Continuing operations $ (.30) $ (.23)
============ =============
Discontinued operations $ .03 $ (.20)
============ =============
Net loss $ (.27) $ (.43)
============ =============
Diluted earnings (loss) per share:
Continuing operations $ (.30) $ (.23)
============ =============
Discontinued operations $ .03 $ (.20)
============ =============
Net loss $ (.27) $ (.43)
============ =============
</TABLE>
F-28
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 22. EARNINGS PER SHARE (continued)
Options and warrants in the amount of 27,932,385 were outstanding
during 1999 but were not included in the computation of diluted EPS
because the effect of their exercise would be anti-dilutive.
For the year ended December 31, 1998, common stock outstanding is
adjusted retroactively to equivalent shares as a result of a 1:10
reverse stock split during July 1998.
Note 23. SEGMENTS AND MAJOR CUSTOMERS
The Company has two reportable segments consisting of (1) the sale
and distribution of automatic check cashing machines and (2)
customer service and fee income earned through check cashing
transaction processing. The accounting policies of the segments are
the same as those described in the summary of significant accounting
policies. The Company evaluates performance based on sales, gross
profit margins and operating profit before income taxes.
The following is information for the Company's reportable segments
for the year ended December 31, 1999:
<TABLE>
<CAPTION>
Sales Processing
Segment Segment Unallocated Total
------- ------- ----------- -----
<S> <C> <C> <C> <C>
Revenue $ 267,990 $ 4,052 $ -0- $ 272,042
Gross margin (14,509) (259,284) (273,793)
Depreciation and amortization 4,213 68,020 180,991 253,224
Interest expense 43,353 43,353
Other, net 7,036,391 7,036,091
Income (loss) from continuing
operations before income
taxes (18,722) (255,232) (7,260,735) (7,534,689)
Identifiable assets $ 30,334 $ 67,202 $ 4,655,401 $ 4,752,937
Capital expenditures 30,334 540,479 92,229 663,042
</TABLE>
The processing segment's gross margin is net of $67,500 of
depreciation expense.
The Company had one reportable segment during 1998.
The Company had one customer which accounted for 100% of the
Company's sales during the year ended December 31, 1999.
F-29
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 24. SUBSEQUENT EVENTS
REPURCHASE OF DISTRIBUTION RIGHTS
During March 2000, the Company repurchased the exclusive
distribution rights to the Master Distribution Agreement with
SmartCash ATM.Ltd. (SmartCash). In consideration, the Company agreed
to release certain restrictions on Company common stock held by
SmartCash, issue warrants to repurchase shares of Company common
stock, loan SmartCash $200,000 and continue to pay commissions on
sales of machines until said commissions equal $320,000.
ADDITIONAL COMMON STOCK ISSUED
Subsequent to year-end, the Company issued 930,354 shares in
satisfaction of the sale of common stock. During 1999, the Company
received proceeds in the amount of $174,437 which is shown as
subscribed shares unissued in the accompanying consolidated
statement of stockholders equity (Note 16).
Subsequent to year-end, the Company sold an additional 11,576,342
shares pursuant to the confidential private placement memorandum
(Note 16) and realized total proceeds of $2,170,513.
SHARES ISSUED TO REPAY NOTES PAYABLE
During January and March 2000, the Company issued 1,036,000 shares
in settlement of notes payable totaling $181,851.
SHARES ISSUED FOR SERVICES
Subsequent to year-end, the Company issued 1,579,097 shares in
payment of services performed during 1999 and 2000 totaling
$1,342,402.
AGREEMENT TO SUPPLY MACHINES
Subsequent to year end the Company entered into agreements with two
companies to place its check cashing machines in stores throughout
the west coast, midwest and southwest United States.
F-30
<PAGE>
GREENLAND CORPORATION AND SUBIDIARY
Notes to Consolidated Financial Statements
(Continued)
Years Ended December 31, 1999 and 1998
Note 25. YEAR 2000 CONVERSION (UNAUDITED)
The Company recognizes the need to ensure its operations will not be
adversely impacted by year 2000 software failures.
The Company's accounting software and other applications used in its
operations were purchased from outside vendors. Management believes
that these applications are Year 2000 compliant. As a result,
management of the Company does not believe that the Year 2000 issue
will have an adverse impact on its financial statements or on its
operations.
Note 26. FOURTH QUARTER RESULTS
During the fourth quarter of 1999, certain year-end adjustments were
made to, among other items capitalize internally developed software,
amortize intangibles and record an allowance for uncollectible
receivables. The aggregate effect of fourth quarter adjustments was
to increase net losses for the fourth quarter by $750,813.
F-31
<PAGE>
EXHIBIT 10(B)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of September 1,
1999, between Greenland Corporation, a Nevada corporation (hereinafter
referred to as "Greenland") and Louis T. Montulli ("Employee").
1. TERM OF EMPLOYMENT
Greenland hereby employs Employee and Employee hereby accepts
employment with Greenland for the period beginning on September 1, 1999, and
terminating on March 1, 2001. Thereafter, this Agreement and Employee's
employment hereunder shall be automatically renewed for a one-year term. As
used herein, the phrase "employment term" refers to the entire period of
employment of Employee by Greenland hereunder; whether for the period
provided above, or terminated earlier as hereinafter provided, or extended by
mutual agreement of Greenland and Employee.
2. DUTIES OF EMPLOYEE
2.01 GENERAL DUTIES. Employee shall serve as a member of the
Board of Directors and Chief Executive Officer of Greenland. Notwithstanding the
foregoing, the precise services of Employee may be specified or changed from
time to time at the discretion of the Board of Directors of Greenland provided
that any such change shall be consistent with Section 2.02.
2.02 SPECIFIC DUTIES. Employee's responsibilities shall be
to act as the Chief Executive Officer of Greenland with overall
responsibility for all of the day to day activities of Greenland. Dr.
Montulli shall serve as a member of the Board of Directors and on such
committees of the Board of Directors to which he is appointed. Dr. Montulli
shall specifically and without limitation have the responsibility to direct
the management of Greenland in carrying out the policies of the Board of
Directors.
2.03 DEVOTION OF ENTIRE TIME TO GREENLAND'S BUSINESS.
Employee shall devote his entire productive time, ability and attention to
the business of Greenland during the term of this Agreement. Employee shall
not directly or indirectly render any services of a business, commercial, or
professional nature to any other person or organization, whether for
compensation or otherwise, without the prior written consent of the Board of
Directors of Greenland. Those entities or organizations which the Board of
Directors approve and the nature of the service to such entity which is
approved shall be listed on Exhibit "A" to this agreement, which shall be
signed by a member of the Board of Directors. In addition, Employee may
participate in social, civic or professional associations, provided such
activities do not compete directly with the business of Greenland and such
activities do not interfere materially with the performance of Employee's
duties under this Agreement. Notwithstanding the foregoing, this paragraph
shall not be construed as preventing Employee from investing his assets in
such other manner as will not require anything other than incidental services
on the part of Employee in the operation of the affairs of any entity in
which the investments are made.
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2.04 UNIQUENESS OF EMPLOYEE'S SERVICES. Employee hereby
agrees the services to be performed by him under the terms of this Agreement
are of special, unique, unusual, extraordinary, and intellectual character
which gives them a peculiar value, the loss of which cannot be reasonably or
adequately compensated by monetary damages in an action at law. Employee
therefore expressly agrees that Greenland, in addition to any other rights or
remedies which Greenland may possess, shall be entitled to injunctive and
other equitable relief to prevent a breach of this Agreement by Employee.
2.05 LOYAL AND CONSCIENTIOUS PERFORMANCE OF DUTIES.
Employee agrees, to the best of his ability and experience, he will at all
times loyally and conscientiously perform all of the duties and obligations
either expressly or implicitly required of him by the terms of this Agreement.
3. COMPENSATION OF EMPLOYEE
3.01 BASE SALARY. As compensation for services hereunder,
Greenland shall pay Employee a base salary ("Base Salary") of One Hundred Forty
Four Thousand Dollars ($144,000.00) per year for the period beginning on
September 1, 1999, and terminating on March 1, 2001. The Base Salary shall be
payable in accordance with the normal payroll practices of the Company then in
effect. The Base Salary and all other forms of compensation paid to Employee
hereunder shall be subject to all applicable taxes required to be withheld by
the Company pursuant to federal, state or local law. The Base Salary shall be
increased by a minimum of 10% of such Base Salary at each year's anniversary
hereof, and in addition thereto the Company in its sole discretion may also
increase the Base Salary from time to time as determined by the Board or a
committee of the Board.
3.02 BONUS. In addition to the Base Salary above, Employee
shall receive a bonus equal to 25% of his Base Salary upon Greenland shipping
50 check cashing machines; a bonus equal to 50% of his Base Salary upon
Greenland shipping a total of 100 check cashing machines; a bonus equal to
75% of his Base Salary upon Greenland shipping a total of 200 check cashing
machines; and Employee shall receive a bonus equal to 100% of his Base Salary
upon Greenland shipping 500 check cashing machines. Employee shall also be
entitled to participation in any other bonus program in effect for Greenland
during the employment term.
4. EMPLOYEE BENEFITS
4.01 MEDICAL, VISION, DENTAL INSURANCE COVERAGE. Greenland
agrees to include Employee in any hospital, surgical, and medical, vision and
dental benefit plan adopted by Greenland for other employees, at no cost to
Employee, and to include Employee in all additional medical and dental
benefit plans provided to other executives of Greenland. To the extent
Employee qualifies for required COBRA health continuation coverage ("COBRA
Coverage") upon termination of his employment, and for a period of twelve
months thereafter, Employee shall be entitled to receive COBRA Coverage at no
cost to Employee except if Employee is terminated for Cause.
4.02 AUTOMOBILE ALLOWANCE. Upon Greenland's receipt of Five
Million Dollars ($5,000,000.00) in revenue from operations, and continuing
thereafter during the employment
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term, Greenland shall provide Employee with a monthly automobile allowance of
$500 per month.
4.03 OTHER FRINGE BENEFITS. Employee shall be entitled to
any and all other fringe benefits which Greenland provides for its other
executive employees and for which Employee is qualified, including pension or
profit sharing, stock option and related awards, and vacation and sick leave.
In addition, at such time as revenues allow, Greenland shall purchase a club
membership to be utilized by the executive employees, including Employee, Mr.
Swanson and Mr. Beener.
5. BUSINESS EXPENSES
5.01 ENTERTAINMENT EXPENSES. The services required by
Greenland require Employee to incur entertainment expenses on behalf of
Greenland. Greenland will promptly reimburse Employee for all reasonable
business expenses incurred by Employee in promoting the business of
Greenland, including expenditures for entertainment, gifts and travel upon
presentation of supporting receipts which comply with Greenland's expense
reimbursement policies in effect from time to time.
5.02 OTHER BUSINESS EXPENSES. Greenland will promptly
reimburse Employee for all other business expenses reasonably incurred by
Employee in connection with the business of Greenland, provided, however,
unusual business expenses including without limitation first class travel,
and a private office must be approved by the Chief Financial Officer prior to
Employee incurring such expenses.
6. TERMINATION OF EMPLOYMENT
6.01 EFFECT OF TERMINATION. Employee's employment hereunder
may be terminated by Employee or Greenland as provided in this Section 6
without further obligation or liability except as expressly provided herein.
6.02 RESIGNATION, RETIREMENT, DEATH OR DISABILITY.
Employee's employment hereunder shall be terminated at any time by Employee's
resignation (other than by Resignation for Good Reason) or by Employee's
retirement at or after attainment of age 60 ("Retirement"), death or his
inability to perform his duties under this Agreement because of a physical or
mental illness ("Disability"). Disability for purposes of this Agreement
shall mean mental or physical incapacity or both, reasonably determined by
the Board of Directors of Greenland based upon a certificate of such
incapacity by Employee's regular physician, rendering Employee unable to
perform substantially all of his duties herein after a period of 90
consecutive days, or a period of 120 days in any calendar year.
6.03 TERMINATION FOR CAUSE. Employee's employment hereunder
may be terminated for Cause. "Cause" shall mean: (i) conviction of a felony
by a court of competent jurisdiction; (ii) material breach of any provision
of this Agreement or any employment policies of Greenland as the same may be
adopted from time to time; (iii) breach of Employee's fiduciary duties of
loyalty and care to Greenland including the appropriation of a material
business opportunity of Greenland; (iv) failure to diligently follow lawful
directions of the Board of
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Directors to act or refrain from acting; and (v) wilful misconduct or the
failure to discharge his duties in the manner required of other similarly
situated officers in the same industry. Notwithstanding the foregoing, Employee
shall not be terminated for Cause pursuant to this Section 6.03 unless and until
(i) Employee has received notice of a proposed termination for Cause, which
notice states in reasonable detail the basis for the termination, (ii) Employee
has had an opportunity to be heard before at least a majority of the members of
the Board of Directors, and (iii) Employee has been provided a period of 30 days
to cure the cause of such termination, if such termination is capable of being
cured. Employee shall have the opportunity to be represented by counsel at any
such hearing before the Board of Directors regarding his termination. Employee
shall be deemed to have had such an opportunity if given written notice at least
14 days in advance of such meeting.
6.04 TERMINATION WITHOUT CAUSE. Employee's employment
hereunder shall be terminated without cause upon ninety (90) days notice for
any reason, subject to the payment of any amounts required by Section 7
herein.
6.05 EXPIRATION. Employee's employment hereunder shall be
terminated upon expiration of the employment term as provided in Section 1.
6.06 RESIGNATION FOR GOOD REASON. Following a Change of
Control, as defined in Section 7.04(b), during the employment term Employee
may regard Employee's employment as being constructively terminated and may,
therefore, resign within ninety (90) days of Employee's discovery of any one
of the following events which will constitute "Good Reason" for such
resignation:
(a) Without Employee's express written consent, the assignment to
Employee of any duties materially inconsistent with Employee's position,
duties, responsibilities and status with Greenland immediately prior to the
Change in Control, or any subsequent removal of Employee from or any failure
to re-elect Employee to any such position;
(b) A material reduction by Greenland of Employee's Base Salary and
such additional compensatory benefits which are provided to Employee;
(c) Any purported termination of Employee's employment by Greenland
or the Board of Directors which is not effected pursuant to the requirements
of this Section 6 with respect to Death, Retirement, Disability or
Termination for Cause; and
(d) Failure of Greenland to renew the Agreement pursuant to Section 1.
7. PAYMENTS TO EMPLOYEE UPON TERMINATION
7.01 DEATH, DISABILITY OR RETIREMENT. In the event of
Employee's Retirement, death or Disability, all benefits generally available
to Greenland's employees as of the date of such an event shall be payable to
Employee or Employee's estate without reduction, in accordance with the terms
of any plan, contract, understanding or arrangement forming the basis for
such payment. Employee shall be entitled to such other payments as might
arise from any
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other plan, contract, understanding or arrangement between Employee and
Greenland at the time of any such event.
7.02 TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD
REASON. In the event Employee is terminated by Greenland for Cause or
Employee resigns for other than Good Reason, neither Greenland nor an
affiliate shall have any further obligation to Employee under this Agreement
or otherwise, except to the extent provided in any other plan, contract,
understanding or arrangement, or Section 8 or as may be expressly required by
law.
7.03 TERMINATION WITHOUT CAUSE. Except to the extent a
greater amount is payable to Employee pursuant to Section 7.04, upon the
occurrence of a termination without Cause, whether prior to or following the
occurrence of a Change in Control, as defined in Section 7.04(b), Greenland
shall pay to Employee, or in the event of Employee's subsequent death, to
Employee's surviving spouse, or if none, to Employee's estate, as severance
pay or liquidated damages, or both, a lump sum payment equal to the Base
Salary owed, if any, for the remaining term of this Agreement (and any
additional compensation to which he is entitled herein) provided, however,
such payment shall be paid only if Employee executes a general release of
claims in a form acceptable to Greenland releasing any and all claims
Employee has against Greenland arising out of his employment or the
termination of said employment and does not revoke the release pursuant to
its terms. Such payment shall be made not later than the fifth (5th) day
following such termination without cause.
7.04 TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON AFTER
A CHANGE IN CONTROL.
(a) If in the one (1) year period following a Change in Control, as
defined below, Employee: (i) resigns for Good Reason; or (ii) is terminated
without Cause, Greenland shall pay to Employee, as severance pay or
liquidated damages, or both, a lump sum payment ("Severance Payment") equal
to two hundred percent (200%) of Employee's average annual Base Salary and
all bonuses received for the five (5) year period immediately preceding the
Severance Payment, or such greater amount as the Board of Directors shall
provide from time to time pursuant to terms which may not be revoked or
reduced thereafter, provided, however, Employee must execute a general
release of claims in a form acceptable to Greenland releasing any and all
claims Employee has against Greenland arising out of his employment or the
termination of said employment and Employee may not revoke the release
pursuant to its terms before he shall be paid any Severance Payment pursuant
to this Section 7.04. However, the total of any payment pursuant to this
Section 7.04(a) shall be limited solely to the extent necessary, in the
opinion of legal counsel acceptable to Employee and Greenland, to avoid the
payment of an "excess parachute" payment within the meaning of Internal
Revenue Code Section 280G of any similar successor provision.
The Severance Payment shall be made not later than the fifth (5th)
day following the date of termination without Cause or resignation for Good
Reason; provided, however, that if the amount of such payments cannot be
finally determined on or before such date, Greenland shall pay to Employee on
such date a good faith estimate of the minimum amount of such payments, and
shall pay the remainder of such payments (together with interest at the rate
provided in Internal Revenue Code Section 1274(b)(2)(B) of the Code), as soon
as the amount thereof can be determined, but in no event later than the
thirtieth (30th) day after the
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applicable termination date. The Chief Financial Officer of Greenland shall
calculate the good faith estimate of such payments, and Greenland shall
provide reasonable written documentation regarding its good faith estimate of
the minimum amount of such payments. In the event the amount of the estimated
payments exceeds the amount subsequently determined to have been due, such
excess shall constitute a loan by Greenland payable on the fifth (5th) day
after receipt by Employee of a written demand for payment from Greenland
(together with interest calculated as above) accompanied by reasonable
documentation from Greenland setting forth the calculation of such excess.
(b) For the purposes of this Agreement, a "Change of Control" means,
and shall be deemed to have taken place, if: (i) any person or entity or
group of affiliated persons or entities, including a group which is deemed a
"person" by Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date hereof first acquires in one or
more transactions, at least one of which is after the date of this Agreement,
ownership of 25% or more of the outstanding shares of stock entitled to vote
in the election of directors of Greenland; and (ii) as a result of, or in
connection with, any such acquisition or any related proxy contest, cash
tender or exchange offer, merger or other business combination, sale of all
or substantially all of the assets of Greenland or any combination of the
foregoing transactions (other than a transaction unanimously approved by the
members of the Board of Directors voting thereon), hereinafter referred to as
a "Transaction," the members of the Board of Directors as it was constituted
on September 1, 1999, shall cease to constitute a majority of the membership
of the Board of Directors or any successor to Greenland during the period
commencing with the consummation of the Transaction and ending on the first
to occur of: the first anniversary of such date, or the conclusion of the
next meeting of shareholders to elect directors, except to the extent that
any new directors during such period were elected or nominated by at least a
majority of the members of the Board of Directors as it was constituted on
September 1, 1999, as a group as directors (or new directors who were so
nominated or elected). "Ownership" means beneficial or record ownership,
directly or indirectly, other than: (i) by a person owning such shares merely
of record (such as a member of a securities exchange, a nominee, or a
securities depositary system); (ii) by a person as a bona fide pledgee of
shares prior to a default and determination to exercise powers as an owner of
the shares; (iii) by a person who owns or holds shares as an underwriter
acquired in connection with an underwritten offering pending and for purposes
of their public resale or planned private placement in increments of less
than such 25% amount, or; (iv) by the members of the Board of Directors as it
was constituted on September 1, 1999, as a group or individually, as of the
date hereof or their respective successors. Without limitation, the right to
acquire ownership shall not of itself constitute ownership of shares.
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8. DEFERRAL OF PAYMENT
Employee may elect to defer all or any part of his
Severance Payment, Base Salary, and any bonus approved by the Board of
Directors until such other time or times as designated by Employee. The
election shall be exercisable by the furnishing of written notice to the
Board of Directors no later than the last day of the year prior to the year
in which the bonus is payable or the benefit vests. Any amounts deferred
shall bear interest at the six (6) month rate applicable to Treasury
securities determined as of the date of Greenland's receipt of the notice
requesting deferral furnished by Employee. Employee may request the Board of
Directors that such deferred amounts and interest thereon be set aside in
trust for the benefit of Employee subject only to claims of the creditors of
Greenland and to such other terms and conditions required by the Board of
Directors and communicated in writing to Employee; provided, however, that
this action shall be taken only in the sole discretion of the Board of
Directors except in the case of a Change in Control, in which case the Board
of Directors shall honor such a request by Employee with respect to any
amounts which have been or may be deferred pursuant to this Agreement.
Employee shall be permitted to withdraw his election to defer his Severance
Payment, Base Salary and any bonus if the Board of Directors denies his
request to have the deferred amounts and interest set aside in such a trust.
Any deferral pursuant to this Section must be accompanied by a statement that
Employee acts with the advice of counsel or waives any such representation.
Greenland has no right to claim an offset against its obligation to pay
Employee any amounts deferred in this Section 8.
9. NON-COMPETITION, NON-INTERFERENCE AND CONFIDENTIAL
INFORMATION
9.01 COVENANT OF THE EMPLOYEE. In consideration of the
Company entering into this Agreement and providing the Base Salary, Bonus and
other benefits to Employee, and further in consideration of the Employee's
continued exposure to confidential information and the Employee's continued
receipt of specialized training from the Company and its subsidiaries, the
receipt of which are hereby acknowledged by the Employee, the Employee
covenants as follows:
9.02 NON-COMPETITION. During the Employee's employment
hereunder, the Employee shall not, directly or indirectly, own, manage,
engage in, operate or conduct, prepare to or plan to conduct or assist any
person or entity to conduct any business, or have any interest in any
business, person, firm, corporation or other entity (as a principal, owner,
agent, employee, shareholder, officer, director, joint venturer, partner,
security holder) (except for the ownership of publicly-traded securities
constituting not more than five percent (5%) of the outstanding securities of
the issuer thereof), creditor (except for trade credit extended in the
ordinary course of business), consultant or in any other capacity that
engages in any business which is the same as, similar to or competitive with
the business of the Company or any subsidiary including without limitation
the check cashing or ATM business anywhere in the United States. The
covenants set forth in this Section 9.02 shall be construed as a series of
separate covenants covering their subject matter in each of the separate
states where the Company conducts business, and except for geographic
coverage, each such separate covenant shall be deemed identical in terms to
the covenant set forth above in this Section 9.02. To the extent that any
such covenant shall be judicially unenforceable in any one or more of such
states, such covenant shall
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not be affected with respect to each of the other states. Each covenant with
respect to such states shall be construed as severable and independent.
9.03 NO DIVERSION OF OTHERS. During the Executive's
employment term hereunder and for one year thereafter, the Employee shall
not, either for himself or for any other person, firm, corporation or other
entity, directly or indirectly, or by action in concert with others:
(a) induce or influence, or seek to induce or influence,
any person who is engaged by Greenland or its subsidiaries (as an agent,
employee, consultant or in any other capacity) or any successor thereto with
the purpose of obtaining such person as an employee or customer for a
business competitive with Greenland's or its subsidiaries' business; or
(b) divert or take away, or attempt to divert or take away,
or solicit or attempt to solicit, any existing or potential customer of
Greenland or its subsidiaries (whether or not such customer is actually a
customer of Greenland or its subsidiaries as of the date hereof, including
without limitation any customer solicited by the Employee or which became
known by the Employee prior to the date hereof) with the purpose of obtaining
such person as an employee or customer for a business competitive with
Greenland or its subsidiaries.
9.04 CONFIDENTIAL INFORMATION. Employee agrees to execute
the Company's Confidential Information and Invention Assignment Agreement
("Confidential Agreement") upon the execution of this Agreement, a copy of
which Confidential Agreement is attached hereto as Exhibit B.
10. INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
10.01 IN GENERAL. The Employee acknowledges and agrees that
Greenland and its subsidiaries shall suffer irreparable harm in the event
that the Employee breaches any of his obligations under Sections 2, 9 or 10
hereof, and that monetary damages shall be inadequate to compensate the
damaged members of Greenland or its subsidiaries for any such breach.
Accordingly, the Employee agrees that in the event of any breach or
threatened breach by the Employee of any of the provisions of Sections 2, 9
or 10 hereof, the damaged members of Greenland or its subsidiaries shall be
entitled to a temporary restraining order, preliminary injunction and
permanent injunction in order to prevent or restrain any such breach or
threatened breach by the Employee, or by any or all of the Employee's agents,
representatives or other persons directly or indirectly acting for, on behalf
of or with the Employee, without having to prove damages.
10.02 NO LIMITATION OF REMEDIES. Notwithstanding the provisions set
forth in Section 10.01 above, or any other provision contained in this
Agreement, the parties hereby agree that no remedy conferred by any of the
specific provisions of this Agreement, including, without limitation, this
Section 10, is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
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11. REASONABLENESS OF RESTRICTIONS
The Employee has carefully read and considered the provisions of
Sections 9 and 10 hereof and, having done so, hereby agrees that the
restrictions set forth in such sections are fair and reasonable and are
reasonably required for the protection of the interests of the Company.
12. GENERAL PROVISIONS
12.01 NOTICES. Any notices and other communications
hereunder to be given hereunder by each party to the other shall be in
writing and may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested.
Notices delivered personally shall be deemed communicated as of actual
receipt; mailed notices shall be deemed communicated as of two (2) days after
mailing. All notices and communications hereunder shall be delivered to the
respective parties at the following addresses: (i) if to Greenland,
Attention: Chief Financial Officer, 1935 Avenida Del Oro, Suite D, San Diego,
California 92056; (ii) if to Employee, at Employee's address as set forth in
the books and records of the Company; or to such other address as the person
to whom notice is given may have previously furnished the other in writing as
set forth above.
12.02 APPLICABLE LAW. This Agreement shall be construed
under the laws of the State of California and may not be altered or modified
except by an agreement in writing, signed by both parties.
12.03 ARBITRATION. Any dispute, controversy or claim
arising out of or in respect to this Agreement (or its validity,
interpretation or enforcement), the employment relationship or the subject
matter hereof shall at the request of either party be submitted to and
settled by final and binding arbitration conducted before a single arbitrator
in San Diego County, California in accordance with the Expedited Labor
Arbitration Rules of the American Arbitration Association. The arbitration
shall be governed by the Federal Arbitration Act (9 U.S.C. ss.ss. 1-16). The
arbitrator shall be a retired judge designated by the Presiding Judge of the
San Diego County Superior Court. The arbitrator in such action shall not be
authorized to change or modify any provision of this Agreement. Any award or
decision obtained from any such arbitration proceeding shall be final and
binding on Greenland and Employee, and judgement upon the award rendered by
the arbitrator may be entered by any court having jurisdiction thereof. Each
party shall bear its own expenses and one-half the aggregate amount of
arbitration costs. Arbitration shall be the exclusive remedy of Employee and
Greenland, provided, however, Greenland may institute proceedings for
temporary or injunctive and/or other equitable relief in a court of competent
jurisdiction pursuant to Sections 2.04, 9 and 10 herein, pending resolution
by arbitration of the actual dispute between the parties.
12.04 ENTIRE AGREEMENT. This Agreement, the Confidential
Agreement and the other Exhibits referenced herein or therein supersede any
and all other agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by Greenland and contain
all of the covenants and agreements between the parties with respect to such
employment in any manner whatsoever.
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12.05 PARTIAL INVALIDITY. If any provision of this
Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remaining provisions shall nevertheless continue in
full force without being impaired or invalidated in any way.
12.06 MERGER OR CONSOLIDATION. Greenland hereby agrees that
it shall not merge or consolidate into or with or sell substantially all its
assets to any firm, entity, company or person until such other firm, entity,
company or person expressly agrees, in writing, to assume and discharge the
duties and obligations of Greenland under this Agreement. This Agreement
shall be binding upon the parties hereto, their successors, beneficiaries,
heirs and personal representatives.
12.07 AMENDMENTS AND WAIVERS. This Agreement shall not be
varied, altered, waived, modified, changed or in any way amended in any of
its parts except by an instrument in writing, executed by the parties hereto,
or by their legal representatives who are designated in writing prior to any
such amendment or waiver. A waiver by either party of any of the terms of
this Agreement in any instance shall not be deemed or construed to be a
waiver of such term or condition for the future or of any subsequent breach
thereof.
12.08 HEADINGS. The headings used in this agreement have
been inserted for convenience of reference only and do not define or limit
the provisions hereof.
12.09 SEPARATE COUNSEL. The parties acknowledge that in
connection with this Agreement the law firm of Fisher Thurber LLP represents
Greenland only, and Employee has been advised to retain his own legal counsel
at his expense to represent his interests.
12.10 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by facsimile, each of which shall be deemed an
original, but all of which will constitute one and the same instrument.
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Executed at San Diego, California.
EMPLOYER:
Greenland Corporation
a Nevada corporation
By:
----------------------------------------
Lee R. Swanson, Chief Financial Officer
EMPLOYEE:
-------------------------------------------
Louis T. Montulli
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EXHIBIT A
LOUIS T. MONTULLI EMPLOYMENT LIST
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EXHIBIT B
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
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EXHIBIT 10(C)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of September 1,
1999, between Greenland Corporation, a Nevada corporation (hereinafter
referred to as "Greenland") and Thomas J. Beener ("Employee").
1. TERM OF EMPLOYMENT
Greenland hereby employs Employee and Employee hereby accepts
employment with Greenland for the period beginning on September 1, 1999, and
terminating on September 1, 2001. Thereafter, this Agreement and Employee's
employment hereunder shall be automatically renewed for a one-year term. As
used herein, the phrase "employment term" refers to the entire period of
employment of Employee by Greenland hereunder; whether for the period
provided above, or terminated earlier as hereinafter provided, or extended by
mutual agreement of Greenland and Employee.
2. DUTIES OF EMPLOYEE
2.01 GENERAL DUTIES. Employee shall serve as a member of
the Board of Directors and General Counsel and Secretary of Greenland.
Notwithstanding the foregoing, the precise services of Employee may be
specified or changed from time to time at the discretion of the Board of
Directors of Greenland provided that any such change shall be consistent with
Section 2.02.
2.02 SPECIFIC DUTIES. Employee's responsibilities shall be
to act as the principal legal officer of Greenland with overall
responsibility for all of the legal activities of Greenland. Mr. Beener shall
serve as a member of the Board of Directors and on such committees of the
Board of Directors to which he is appointed. Mr. Beener shall specifically
and without limitation have the responsibility to report to the management of
Greenland regarding legal issues arising in the business and operations of
Greenland.
2.03 DEVOTION OF ENTIRE TIME TO GREENLAND'S BUSINESS.
Employee shall devote his entire productive time, ability and attention to
the business of Greenland during the term of this Agreement. Employee shall
not directly or indirectly render any services of a business, commercial, or
professional nature to any other person or organization, whether for
compensation or otherwise, without the prior written consent of the Board of
Directors of Greenland. Those entities or organizations which the Board of
Directors approve and the nature of the service to such entity which is
approved shall be listed on Exhibit "A" to this agreement, which shall be
signed by a member of the Board of Directors. In addition, Employee may
participate in social, civic or professional associations, provided such
activities do not compete directly with the business of Greenland and such
activities do not interfere materially with the performance of Employee's
duties under this Agreement. Notwithstanding the foregoing, this paragraph
shall not be construed as preventing Employee from investing his assets in
such other manner as will not require anything other than incidental services
on the part of Employee in the operation of the affairs of any entity in
which the investments are made.
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2.04 UNIQUENESS OF EMPLOYEE'S SERVICES. Employee hereby
agrees the services to be performed by him under the terms of this Agreement
are of special, unique, unusual, extraordinary, and intellectual character
which gives them a peculiar value, the loss of which cannot be reasonably or
adequately compensated by monetary damages in an action at law. Employee
therefore expressly agrees that Greenland, in addition to any other rights or
remedies which Greenland may possess, shall be entitled to injunctive and
other equitable relief to prevent a breach of this Agreement by Employee.
2.05 LOYAL AND CONSCIENTIOUS PERFORMANCE OF DUTIES.
Employee agrees, to the best of his ability and experience, he will at all
times loyally and conscientiously perform all of the duties and obligations
either expressly or implicitly required of him by the terms of this Agreement.
3. COMPENSATION OF EMPLOYEE
3.01 BASE SALARY. As compensation for services hereunder,
Greenland shall pay Employee a base salary ("Base Salary") of One Hundred
Forty Four Thousand Dollars ($144,000.00) per year for the period beginning
on September 1, 1999, and terminating on September 1, 2001. The Base Salary
shall be payable in accordance with the normal payroll practices of the
Company then in effect. The Base Salary and all other forms of compensation
paid to Employee hereunder shall be subject to all applicable taxes required
to be withheld by the Company pursuant to federal, state or local law. The
Base Salary shall be increased by a minimum of 10% of such Base Salary at
each year's anniversary hereof, and in addition thereto the Company in its
sole discretion may also increase the Base Salary from time to time as
determined by the Board or a committee of the Board.
3.02 BONUS. In addition to the Base Salary above, Employee
shall receive a bonus equal to 25% of his Base Salary upon Greenland shipping 50
check cashing machines; a bonus equal to 50% of his Base Salary upon Greenland
shipping a total of 100 check cashing machines; a bonus equal to 75% of his Base
Salary upon Greenland shipping a total of 200 check cashing machines; and
Employee shall receive a bonus equal to 100% of his Base Salary upon Greenland
shipping 500 check cashing machines. Employee shall also be entitled to
participation in any other bonus program in effect for Greenland during the
employment term.
4. EMPLOYEE BENEFITS
4.01 MEDICAL, VISION, DENTAL INSURANCE COVERAGE. Greenland
agrees to include Employee in any hospital, surgical, and medical, vision and
dental benefit plan adopted by Greenland for other employees, at no cost to
Employee, and to include Employee in all additional medical and dental benefit
plans provided to other executives of Greenland. To the extent Employee
qualifies for required COBRA health continuation coverage ("COBRA Coverage")
upon termination of his employment, and for a period of twelve months
thereafter, Employee shall be entitled to receive COBRA Coverage at no cost to
Employee except if Employee is terminated for Cause.
4.02 AUTOMOBILE ALLOWANCE. Upon Greenland's receipt of Five
Million Dollars ($5,000,000.00) in revenue from operations, and continuing
thereafter during the employment
<PAGE>
term, Greenland shall provide Employee with a monthly automobile allowance of
$500 per month.
4.03 OTHER FRINGE BENEFITS. Employee shall be entitled to any
and all other fringe benefits which Greenland provides for its other executive
employees and for which Employee is qualified, including pension or profit
sharing, stock option and related awards, and vacation and sick leave.
5. BUSINESS EXPENSES
5.01 ENTERTAINMENT EXPENSES. The services required by
Greenland require Employee to incur entertainment expenses on behalf of
Greenland. Greenland will promptly reimburse Employee for all reasonable
business expenses incurred by Employee in promoting the business of Greenland,
including expenditures for entertainment, gifts and travel upon presentation of
supporting receipts which comply with Greenland's expense reimbursement policies
in effect from time to time.
5.02 OTHER BUSINESS EXPENSES. Greenland will promptly
reimburse Employee for all other business expenses reasonably incurred by
Employee in connection with the business of Greenland, provided, however,
unusual business expenses including without limitation first class travel, and a
private office must be approved by the Chief Financial Officer prior to Employee
incurring such expenses.
6. TERMINATION OF EMPLOYMENT
6.01 EFFECT OF TERMINATION. Employee's employment hereunder
may be terminated by Employee or Greenland as provided in this Section 6 without
further obligation or liability except as expressly provided herein.
6.02 RESIGNATION, RETIREMENT, DEATH OR DISABILITY.
Employee's employment hereunder shall be terminated at any time by Employee's
resignation (other than by Resignation for Good Reason) or by Employee's
retirement at or after attainment of age 60 ("Retirement"), death or his
inability to perform his duties under this Agreement because of a physical or
mental illness ("Disability"). Disability for purposes of this Agreement
shall mean mental or physical incapacity or both, reasonably determined by
the Board of Directors of Greenland based upon a certificate of such
incapacity by Employee's regular physician, rendering Employee unable to
perform substantially all of his duties herein after a period of 90
consecutive days, or a period of 120 days in any calendar year.
6.03 TERMINATION FOR CAUSE. Employee's employment hereunder
may be terminated for Cause. "Cause" shall mean: (i) conviction of a felony
by a court of competent jurisdiction; (ii) material breach of any provision
of this Agreement or any employment policies of Greenland as the same may be
adopted from time to time; (iii) breach of Employee's fiduciary duties of
loyalty and care to Greenland including the appropriation of a material
business opportunity of Greenland; (iv) failure to diligently follow lawful
directions of the Board of Directors to act or refrain from acting; and (v)
wilful misconduct or the failure to discharge his duties in the manner
required of other similarly situated officers in the same industry.
Notwithstanding the foregoing, Employee shall not be terminated for Cause
pursuant to this Section 6.03 unless and until (i) Employee has received
notice of a proposed termination for Cause, which notice states in reasonable
detail the basis for the termination, (ii) Employee has had an opportunity to
be heard before at least a majority of the members of the Board of Directors,
and (iii) Employee has been provided a period of 30 days to cure the cause of
such termination, if such termination is capable of being cured. Employee
shall have the opportunity to be represented by counsel at any such hearing
before the Board of Directors regarding his termination. Employee shall be
deemed to have had such an opportunity if given written notice at least 14
days in advance of such meeting.
6.04 TERMINATION WITHOUT CAUSE. Employee's employment
hereunder shall be terminated without cause upon ninety (90) days notice for any
reason, subject to the payment of any amounts required by Section 7 herein.
6.05 EXPIRATION. Employee's employment hereunder shall be
terminated upon expiration of the employment term as provided in Section 1.
6.06 RESIGNATION FOR GOOD REASON. Following a Change of
Control, as defined in Section 7.04(b), during the employment term Employee may
regard Employee's employment as being constructively terminated and may,
therefore, resign within ninety (90) days of Employee's discovery of any one of
the following events which will constitute "Good Reason" for such resignation:
(a) Without Employee's express written consent, the assignment to
Employee of any duties materially inconsistent with Employee's position,
duties, responsibilities and status with Greenland immediately prior to the
Change in Control, or any subsequent removal of Employee from or any failure
to re-elect Employee to any such position;
(b) A material reduction by Greenland of Employee's Base Salary and
such additional compensatory benefits which are provided to Employee;
(c) Any purported termination of Employee's employment by Greenland
or the Board of Directors which is not effected pursuant to the requirements
of this Section 6 with respect to Death, Retirement, Disability or
Termination for Cause; and
(d) Failure of Greenland to renew the Agreement pursuant to Section 1.
7. PAYMENTS TO EMPLOYEE UPON TERMINATION
7.01 DEATH, DISABILITY OR RETIREMENT. In the event of
Employee's Retirement, death or Disability, all benefits generally available
to Greenland's employees as of the date of such an event shall be payable to
Employee or Employee's estate without reduction, in accordance with the terms
of any plan, contract, understanding or arrangement forming the basis for
such payment. Employee shall be entitled to such other payments as might
arise from any other plan, contract, understanding or arrangement between
Employee and Greenland at the time of any such event.
<PAGE>
7.02 TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD REASON.
In the event Employee is terminated by Greenland for Cause or Employee resigns
for other than Good Reason, neither Greenland nor an affiliate shall have any
further obligation to Employee under this Agreement or otherwise, except to the
extent provided in any other plan, contract, understanding or arrangement, or
Section 8 or as may be expressly required by law.
7.03 TERMINATION WITHOUT CAUSE. Except to the extent a greater
amount is payable to Employee pursuant to Section 7.04, upon the occurrence of a
termination without Cause, whether prior to or following the occurrence of a
Change in Control, as defined in Section 7.04(b), Greenland shall pay to
Employee, or in the event of Employee's subsequent death, to Employee's
surviving spouse, or if none, to Employee's estate, as severance pay or
liquidated damages, or both, a lump sum payment equal to the Base Salary owed,
if any, for the remaining term of this Agreement (and any additional
compensation to which he is entitled herein) provided, however, such payment
shall be paid only if Employee executes a general release of claims in a form
acceptable to Greenland releasing any and all claims Employee has against
Greenland arising out of his employment or the termination of said employment
and does not revoke the release pursuant to its terms. Such payment shall be
made not later than the fifth (5th) day following such termination without
cause.
7.04 TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON AFTER A
CHANGE IN CONTROL.
(a) If in the one (1) year period following a Change in Control, as
defined below, Employee: (i) resigns for Good Reason; or (ii) is terminated
without Cause, Greenland shall pay to Employee, as severance pay or liquidated
damages, or both, a lump sum payment ("Severance Payment") equal to two hundred
percent (200%) of Employee's average annual Base Salary and all bonuses received
for the five (5) year period immediately preceding the Severance Payment, or
such greater amount as the Board of Directors shall provide from time to time
pursuant to terms which may not be revoked or reduced thereafter, provided,
however, Employee must execute a general release of claims in a form acceptable
to Greenland releasing any and all claims Employee has against Greenland arising
out of his employment or the termination of said employment and Employee may not
revoke the release pursuant to its terms before he shall be paid any Severance
Payment pursuant to this Section 7.04. However, the total of any payment
pursuant to this Section 7.04(a) shall be limited solely to the extent
necessary, in the opinion of legal counsel acceptable to Employee and Greenland,
to avoid the payment of an "excess parachute" payment within the meaning of
Internal Revenue Code Section 280G of any similar successor provision.
The Severance Payment shall be made not later than the fifth (5th) day
following the date of termination without Cause or resignation for Good Reason;
provided, however, that if the amount of such payments cannot be finally
determined on or before such date, Greenland shall pay to Employee on such date
a good faith estimate of the minimum amount of such payments, and shall pay the
remainder of such payments (together with interest at the rate provided in
Internal Revenue Code Section 1274(b)(2)(B) of the Code), as soon as the amount
thereof can be determined, but in no event later than the thirtieth (30th) day
after the applicable termination date. The Chief Financial Officer of Greenland
shall calculate the good faith estimate of such payments, and Greenland shall
provide reasonable written documentation
<PAGE>
regarding its good faith estimate of the minimum amount of such payments. In
the event the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by Greenland payable on the fifth (5th) day after receipt by Employee of a
written demand for payment from Greenland (together with interest calculated
as above) accompanied by reasonable documentation from Greenland setting
forth the calculation of such excess.
(b) For the purposes of this Agreement, a "Change of Control" means,
and shall be deemed to have taken place, if: (i) any person or entity or
group of affiliated persons or entities, including a group which is deemed a
"person" by Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), after the date hereof first acquires in one or
more transactions, at least one of which is after the date of this Agreement,
ownership of 25% or more of the outstanding shares of stock entitled to vote
in the election of directors of Greenland; and (ii) as a result of, or in
connection with, any such acquisition or any related proxy contest, cash
tender or exchange offer, merger or other business combination, sale of all
or substantially all of the assets of Greenland or any combination of the
foregoing transactions (other than a transaction unanimously approved by the
members of the Board of Directors voting thereon), hereinafter referred to as
a "Transaction," the members of the Board of Directors as it was constituted
on September 1, 1999, shall cease to constitute a majority of the membership
of the Board of Directors or any successor to Greenland during the period
commencing with the consummation of the Transaction and ending on the first
to occur of: the first anniversary of such date, or the conclusion of the
next meeting of shareholders to elect directors, except to the extent that
any new directors during such period were elected or nominated by at least a
majority of the members of the Board of Directors as it was constituted on
September 1, 1999, as a group as directors (or new directors who were so
nominated or elected). "Ownership" means beneficial or record ownership,
directly or indirectly, other than: (i) by a person owning such shares merely
of record (such as a member of a securities exchange, a nominee, or a
securities depositary system); (ii) by a person as a bona fide pledgee of
shares prior to a default and determination to exercise powers as an owner of
the shares; (iii) by a person who owns or holds shares as an underwriter
acquired in connection with an underwritten offering pending and for purposes
of their public resale or planned private placement in increments of less
than such 25% amount, or; (iv) by the members of the Board of Directors as it
was constituted on September 1, 1999, as a group or individually, as of the
date hereof or their respective successors. Without limitation, the right to
acquire ownership shall not of itself constitute ownership of shares.
<PAGE>
8. DEFERRAL OF PAYMENT
Employee may elect to defer all or any part of his
Severance Payment, Base Salary, and any bonus approved by the Board of
Directors until such other time or times as designated by Employee. The
election shall be exercisable by the furnishing of written notice to the
Board of Directors no later than the last day of the year prior to the year
in which the bonus is payable or the benefit vests. Any amounts deferred
shall bear interest at the six (6) month rate applicable to Treasury
securities determined as of the date of Greenland's receipt of the notice
requesting deferral furnished by Employee. Employee may request the Board of
Directors that such deferred amounts and interest thereon be set aside in
trust for the benefit of Employee subject only to claims of the creditors of
Greenland and to such other terms and conditions required by the Board of
Directors and communicated in writing to Employee; provided, however, that
this action shall be taken only in the sole discretion of the Board of
Directors except in the case of a Change in Control, in which case the Board
of Directors shall honor such a request by Employee with respect to any
amounts which have been or may be deferred pursuant to this Agreement.
Employee shall be permitted to withdraw his election to defer his Severance
Payment, Base Salary and any bonus if the Board of Directors denies his
request to have the deferred amounts and interest set aside in such a trust.
Any deferral pursuant to this Section must be accompanied by a statement that
Employee acts with the advice of counsel or waives any such representation.
Greenland has no right to claim an offset against its obligation to pay
Employee any amounts deferred in this Section 8.
9. NON-COMPETITION, NON-INTERFERENCE AND CONFIDENTIAL INFORMATION
9.01 COVENANT OF THE EMPLOYEE. In consideration of the
Company entering into this Agreement and providing the Base Salary, Bonus and
other benefits to Employee, and further in consideration of the Employee's
continued exposure to confidential information and the Employee's continued
receipt of specialized training from the Company and its subsidiaries, the
receipt of which are hereby acknowledged by the Employee, the Employee
covenants as follows:
9.02 NON-COMPETITION. During the Employee's employment
hereunder, the Employee shall not, directly or indirectly, own, manage,
engage in, operate or conduct, prepare to or plan to conduct or assist any
person or entity to conduct any business, or have any interest in any
business, person, firm, corporation or other entity (as a principal, owner,
agent, employee, shareholder, officer, director, joint venturer, partner,
security holder) (except for the ownership of publicly-traded securities
constituting not more than five percent (5%) of the outstanding securities of
the issuer thereof), creditor (except for trade credit extended in the
ordinary course of business), consultant or in any other capacity that
engages in any business which is the same as, similar to or competitive with
the business of the Company or any subsidiary including without limitation
the check cashing or ATM business anywhere in the United States. The
covenants set forth in this Section 9.02 shall be construed as a series of
separate covenants covering their subject matter in each of the separate
states where the Company conducts business, and except for geographic
coverage, each such separate covenant shall be deemed identical in terms to
the covenant set forth above in this Section 9.02. To the extent that any
such covenant shall be judicially unenforceable in any one or more of such
states, such covenant shall
<PAGE>
not be affected with respect to each of the other states. Each covenant with
respect to such states shall be construed as severable and independent.
9.03 NO DIVERSION OF OTHERS. During the Executive's employment
term hereunder and for one year thereafter, the Employee shall not, either for
himself or for any other person, firm, corporation or other entity, directly or
indirectly, or by action in concert with others:
(a) induce or influence, or seek to induce or influence,
any person who is engaged by Greenland or its subsidiaries (as an agent,
employee, consultant or in any other capacity) or any successor thereto with
the purpose of obtaining such person as an employee or customer for a
business competitive with Greenland's or its subsidiaries' business; or
(b) divert or take away, or attempt to divert or take away, or
solicit or attempt to solicit, any existing or potential customer of Greenland
or its subsidiaries (whether or not such customer is actually a customer of
Greenland or its subsidiaries as of the date hereof, including without
limitation any customer solicited by the Employee or which became known by the
Employee prior to the date hereof) with the purpose of obtaining such person as
an employee or customer for a business competitive with Greenland or its
subsidiaries.
9.04 CONFIDENTIAL INFORMATION. Employee agrees to execute
the Company's Confidential Information and Invention Assignment Agreement
("Confidential Agreement") upon the execution of this Agreement, a copy of
which Confidential Agreement is attached hereto as Exhibit B.
10. INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
10.01 IN GENERAL. The Employee acknowledges and agrees that
Greenland and its subsidiaries shall suffer irreparable harm in the event
that the Employee breaches any of his obligations under Sections 2, 9 or 10
hereof, and that monetary damages shall be inadequate to compensate the
damaged members of Greenland or its subsidiaries for any such breach.
Accordingly, the Employee agrees that in the event of any breach or
threatened breach by the Employee of any of the provisions of Sections 2, 9
or 10 hereof, the damaged members of Greenland or its subsidiaries shall be
entitled to a temporary restraining order, preliminary injunction and
permanent injunction in order to prevent or restrain any such breach or
threatened breach by the Employee, or by any or all of the Employee's agents,
representatives or other persons directly or indirectly acting for, on behalf
of or with the Employee, without having to prove damages.
10.02 NO LIMITATION OF REMEDIES. Notwithstanding the provisions set
forth in Section 10.01 above, or any other provision contained in this
Agreement, the parties hereby agree that no remedy conferred by any of the
specific provisions of this Agreement, including, without limitation, this
Section 10, is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
11. REASONABLENESS OF RESTRICTIONS
<PAGE>
The Employee has carefully read and considered the provisions of
Sections 9 and 10 hereof and, having done so, hereby agrees that the
restrictions set forth in such sections are fair and reasonable and are
reasonably required for the protection of the interests of the Company.
12. GENERAL PROVISIONS
12.01 NOTICES. Any notices and other communications
hereunder to be given hereunder by each party to the other shall be in
writing and may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested.
Notices delivered personally shall be deemed communicated as of actual
receipt; mailed notices shall be deemed communicated as of two (2) days after
mailing. All notices and communications hereunder shall be delivered to the
respective parties at the following addresses: (i) if to Greenland,
Attention: Chief Financial Officer, 1935 Avenida Del Oro, Suite D, San Diego,
California 92056; (ii) if to Employee, at Employee's address as set forth in
the books and records of the Company; or to such other address as the person
to whom notice is given may have previously furnished the other in writing as
set forth above.
12.02 APPLICABLE LAW. This Agreement shall be construed
under the laws of the State of California and may not be altered or modified
except by an agreement in writing, signed by both parties.
12.03 ARBITRATION. Any dispute, controversy or claim
arising out of or in respect to this Agreement (or its validity,
interpretation or enforcement), the employment relationship or the subject
matter hereof shall at the request of either party be submitted to and
settled by final and binding arbitration conducted before a single arbitrator
in San Diego County, California in accordance with the Expedited Labor
Arbitration Rules of the American Arbitration Association. The arbitration
shall be governed by the Federal Arbitration Act (9 U.S.C. ss.ss. 1-16). The
arbitrator shall be a retired judge designated by the Presiding Judge of the
San Diego County Superior Court. The arbitrator in such action shall not be
authorized to change or modify any provision of this Agreement. Any award or
decision obtained from any such arbitration proceeding shall be final and
binding on Greenland and Employee, and judgement upon the award rendered by
the arbitrator may be entered by any court having jurisdiction thereof. Each
party shall bear its own expenses and one-half the aggregate amount of
arbitration costs. Arbitration shall be the exclusive remedy of Employee and
Greenland, provided, however, Greenland may institute proceedings for
temporary or injunctive and/or other equitable relief in a court of competent
jurisdiction pursuant to Sections 2.04, 9 and 10 herein, pending resolution
by arbitration of the actual dispute between the parties.
12.04 ENTIRE AGREEMENT. This Agreement, the Confidential
Agreement and the other Exhibits referenced herein or therein supersede any
and all other agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by Greenland and contain
all of the covenants and agreements between the parties with respect to such
employment in any manner whatsoever.
12.05 PARTIAL INVALIDITY. If any provision of this
Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remaining provisions shall nevertheless continue in
full force without being impaired or invalidated in any way.
<PAGE>
12.06 MERGER OR CONSOLIDATION. Greenland hereby agrees that
it shall not merge or consolidate into or with or sell substantially all its
assets to any firm, entity, company or person until such other firm, entity,
company or person expressly agrees, in writing, to assume and discharge the
duties and obligations of Greenland under this Agreement. This Agreement
shall be binding upon the parties hereto, their successors, beneficiaries,
heirs and personal representatives.
12.07 AMENDMENTS AND WAIVERS. This Agreement shall not be
varied, altered, waived, modified, changed or in any way amended in any of
its parts except by an instrument in writing, executed by the parties hereto,
or by their legal representatives who are designated in writing prior to any
such amendment or waiver. A waiver by either party of any of the terms of
this Agreement in any instance shall not be deemed or construed to be a
waiver of such term or condition for the future or of any subsequent breach
thereof.
12.08 HEADINGS. The headings used in this agreement have
been inserted for convenience of reference only and do not define or limit
the provisions hereof.
12.09 SEPARATE COUNSEL. The parties acknowledge that in
connection with this Agreement the law firm of Fisher Thurber LLP represents
Greenland only, and Employee has been advised to retain his own legal counsel
at his expense to represent his interests.
12.10 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by facsimile, each of which shall be deemed an
original, but all of which will constitute one and the same instrument.
Executed at San Diego, California.
EMPLOYER:
Greenland Corporation
a Nevada corporation
By:__________________________________________
Louis T. Montulli, Chief Executive Officer
EMPLOYEE:
__________________________________________
Thomas J. Beener
<PAGE>
EXHIBIT A
THOMAS J. BEENER EMPLOYMENT LIST
<PAGE>
EXHIBIT B
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
<PAGE>
EXHIBIT 10(D)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of September 1,
1999, between Greenland Corporation, a Nevada corporation (hereinafter referred
to as "Greenland") and Lee R. Swanson ("Employee").
1. TERM OF EMPLOYMENT
Greenland hereby employs Employee and Employee hereby accepts
employment with Greenland for the period beginning on September 1, 1999, and
terminating on September 1, 2000. Thereafter, this Agreement and Employee's
employment hereunder shall be automatically renewed for a one-year term. As
used herein, the phrase "employment term" refers to the entire period of
employment of Employee by Greenland hereunder; whether for the period
provided above, or terminated earlier as hereinafter provided, or extended by
mutual agreement of Greenland and Employee.
2. DUTIES OF EMPLOYEE
2.01 GENERAL DUTIES. Employee shall serve as a member of
the Board of Directors of Greenland and President of Check Central, Inc.
Notwithstanding the foregoing, the precise services of Employee may be
specified or changed from time to time at the discretion of the Board of
Directors of Greenland provided that any such change shall be consistent with
Section 2.02.
2.02 SPECIFIC DUTIES. Employee's responsibilities shall be
to act as the President of Check Central, Inc. Mr. Swanson shall serve as a
member of the Board of Directors of Greenland and on such committees of the
Board of Directors to which he is appointed. Mr. Swanson shall specifically
and without limitation have the responsibility to carry out the policies
established by the Chief Executive Officer of Greenland with respect to the
operations of Check Central, Inc.
2.03 DEVOTION OF ENTIRE TIME TO GREENLAND'S BUSINESS. Employee
shall devote his entire productive time, ability and attention to the business
of Greenland during the term of this Agreement. Employee shall not directly or
indirectly render any services of a business, commercial, or professional nature
to any other person or organization, whether for compensation or otherwise,
without the prior written consent of the Board of Directors of Greenland. Those
entities or organizations which the Board of Directors approve and the nature of
the service to such entity which is approved shall be listed on Exhibit "A" to
this agreement, which shall be signed by a member of the Board of Directors. In
addition, Employee may participate in social, civic or professional
associations, provided such activities do not compete directly with the business
of Greenland and such activities do not interfere materially with the
performance of Employee's duties under this Agreement. Notwithstanding the
foregoing, this paragraph shall not be construed as preventing Employee from
investing his assets in such other manner as will not require anything other
than incidental services on the part of Employee in the operation of the affairs
of any entity in which the investments are made.
<PAGE>
2.04 UNIQUENESS OF EMPLOYEE'S SERVICES. Employee hereby agrees
the services to be performed by him under the terms of this Agreement are of
special, unique, unusual, extraordinary, and intellectual character which gives
them a peculiar value, the loss of which cannot be reasonably or adequately
compensated by monetary damages in an action at law. Employee therefore
expressly agrees that Greenland, in addition to any other rights or remedies
which Greenland may possess, shall be entitled to injunctive and other equitable
relief to prevent a breach of this Agreement by Employee.
2.05 LOYAL AND CONSCIENTIOUS PERFORMANCE OF DUTIES.
Employee agrees, to the best of his ability and experience, he will at all
times loyally and conscientiously perform all of the duties and obligations
either expressly or implicitly required of him by the terms of this Agreement.
3. COMPENSATION OF EMPLOYEE
3.01 BASE SALARY. As compensation for services hereunder,
Greenland shall pay Employee a base salary ("Base Salary") of One Hundred Forty
Four Thousand Dollars ($144,000.00) per year for the period beginning on
September 1, 1999, and terminating on September 1, 2000. The Base Salary shall
be payable in accordance with the normal payroll practices of the Company then
in effect. The Base Salary and all other forms of compensation paid to Employee
hereunder shall be subject to all applicable taxes required to be withheld by
the Company pursuant to federal, state or local law. The Base Salary shall be
increased by a minimum of 10% of such Base Salary at each year's anniversary
hereof, and in addition thereto the Company in its sole discretion may also
increase the Base Salary from time to time as determined by the Board or a
committee of the Board.
3.02 BONUS. In addition to the Base Salary above, Employee
shall receive a bonus equal to 25% of his Base Salary upon Greenland shipping 50
check cashing machines; a bonus equal to 50% of his Base Salary upon Greenland
shipping a total of 100 check cashing machines; a bonus equal to 75% of his Base
Salary upon Greenland shipping a total of 200 check cashing machines; and
Employee shall receive a bonus equal to 100% of his Base Salary upon Greenland
shipping 500 check cashing machines. Employee shall also be entitled to
participation in any other bonus program in effect for Greenland during the
employment term.
4. EMPLOYEE BENEFITS
4.01 MEDICAL, VISION, DENTAL INSURANCE COVERAGE. Greenland
agrees to include Employee in any hospital, surgical, and medical, vision and
dental benefit plan adopted by Greenland for other employees, at no cost to
Employee, and to include Employee in all additional medical and dental benefit
plans provided to other executives of Greenland. To the extent Employee
qualifies for required COBRA health continuation coverage ("COBRA Coverage")
upon termination of his employment, and for a period of twelve months
thereafter, Employee shall be entitled to receive COBRA Coverage at no cost to
Employee except if Employee is terminated for Cause.
4.02 AUTOMOBILE ALLOWANCE. Upon Greenland's receipt of Five
Million Dollars ($5,000,000.00) in revenue from operations, and continuing
thereafter during the employment
<PAGE>
term, Greenland shall provide Employee with a monthly automobile allowance of
$500 per month.
4.03 OTHER FRINGE BENEFITS. Employee shall be entitled to
any and all other fringe benefits which Greenland provides for its other
executive employees and for which Employee is qualified, including pension or
profit sharing, stock option and related awards, and vacation and sick leave.
5. BUSINESS EXPENSES
5.01 ENTERTAINMENT EXPENSES. The services required by
Greenland require Employee to incur entertainment expenses on behalf of
Greenland. Greenland will promptly reimburse Employee for all reasonable
business expenses incurred by Employee in promoting the business of
Greenland, including expenditures for entertainment, gifts and travel upon
presentation of supporting receipts which comply with Greenland's expense
reimbursement policies in effect from time to time.
5.02 OTHER BUSINESS EXPENSES. Greenland will promptly
reimburse Employee for all other business expenses reasonably incurred by
Employee in connection with the business of Greenland, provided, however,
unusual business expenses including without limitation first class travel,
and a private office must be approved by the Chief Financial Officer prior to
Employee incurring such expenses.
6. TERMINATION OF EMPLOYMENT
6.01 EFFECT OF TERMINATION. Employee's employment hereunder
may be terminated by Employee or Greenland as provided in this Section 6
without further obligation or liability except as expressly provided herein.
6.02 RESIGNATION, RETIREMENT, DEATH OR DISABILITY.
Employee's employment hereunder shall be terminated at any time by Employee's
resignation (other than by Resignation for Good Reason) or by Employee's
retirement at or after attainment of age 60 ("Retirement"), death or his
inability to perform his duties under this Agreement because of a physical or
mental illness ("Disability"). Disability for purposes of this Agreement
shall mean mental or physical incapacity or both, reasonably determined by
the Board of Directors of Greenland based upon a certificate of such
incapacity by Employee's regular physician, rendering Employee unable to
perform substantially all of his duties herein after a period of 90
consecutive days, or a period of 120 days in any calendar year.
6.03 TERMINATION FOR CAUSE. Employee's employment hereunder
may be terminated for Cause. "Cause" shall mean: (i) conviction of a felony
by a court of competent jurisdiction; (ii) material breach of any provision
of this Agreement or any employment policies of Greenland as the same may be
adopted from time to time; (iii) breach of Employee's fiduciary duties of
loyalty and care to Greenland including the appropriation of a material
business opportunity of Greenland; (iv) failure to diligently follow lawful
directions of the Board of Directors to act or refrain from acting; and (v)
wilful misconduct or the failure to discharge his duties in the manner
required of other similarly situated officers in the same industry.
Notwithstanding the foregoing, Employee shall not be terminated for Cause
pursuant to this
<PAGE>
Section 6.03 unless and until (i) Employee has received notice of a proposed
termination for Cause, which notice states in reasonable detail the basis for
the termination, (ii) Employee has had an opportunity to be heard before at
least a majority of the members of the Board of Directors, and (iii) Employee
has been provided a period of 30 days to cure the cause of such termination,
if such termination is capable of being cured. Employee shall have the
opportunity to be represented by counsel at any such hearing before the Board
of Directors regarding his termination. Employee shall be deemed to have had
such an opportunity if given written notice at least 14 days in advance of
such meeting.
6.04 TERMINATION WITHOUT CAUSE. Employee's employment
hereunder shall be terminated without cause upon ninety (90) days notice for
any reason, subject to the payment of any amounts required by Section 7
herein.
6.05 EXPIRATION. Employee's employment hereunder shall be
terminated upon expiration of the employment term as provided in Section 1.
6.06 RESIGNATION FOR GOOD REASON. Following a Change of
Control, as defined in Section 7.04(b), during the employment term Employee
may regard Employee's employment as being constructively terminated and may,
therefore, resign within ninety (90) days of Employee's discovery of any one
of the following events which will constitute "Good Reason" for such
resignation:
(a) Without Employee's express written consent, the assignment to
Employee of any duties materially inconsistent with Employee's position,
duties, responsibilities and status with Greenland immediately prior to the
Change in Control, or any subsequent removal of Employee from or any failure
to re-elect Employee to any such position;
(b) A material reduction by Greenland of Employee's Base Salary and
such additional compensatory benefits which are provided to Employee;
(c) Any purported termination of Employee's employment by Greenland
or the Board of Directors which is not effected pursuant to the requirements
of this Section 6 with respect to Death, Retirement, Disability or
Termination for Cause; and
(d) Failure of Greenland to renew the Agreement pursuant to Section 1.
7. PAYMENTS TO EMPLOYEE UPON TERMINATION
7.01 DEATH, DISABILITY OR RETIREMENT. In the event of
Employee's Retirement, death or Disability, all benefits generally available
to Greenland's employees as of the date of such an event shall be payable to
Employee or Employee's estate without reduction, in accordance with the terms
of any plan, contract, understanding or arrangement forming the basis for
such payment. Employee shall be entitled to such other payments as might
arise from any other plan, contract, understanding or arrangement between
Employee and Greenland at the time of any such event.
<PAGE>
7.02 TERMINATION FOR CAUSE OR RESIGNATION WITHOUT GOOD
REASON. In the event Employee is terminated by Greenland for Cause or
Employee resigns for other than Good Reason, neither Greenland nor an
affiliate shall have any further obligation to Employee under this Agreement
or otherwise, except to the extent provided in any other plan, contract,
understanding or arrangement, or Section 8 or as may be expressly required by
law.
7.03 TERMINATION WITHOUT CAUSE. Except to the extent a
greater amount is payable to Employee pursuant to Section 7.04, upon the
occurrence of a termination without Cause, whether prior to or following the
occurrence of a Change in Control, as defined in Section 7.04(b), Greenland
shall pay to Employee, or in the event of Employee's subsequent death, to
Employee's surviving spouse, or if none, to Employee's estate, as severance
pay or liquidated damages, or both, a lump sum payment equal to the Base
Salary owed, if any, for the remaining term of this Agreement (and any
additional compensation to which he is entitled herein) provided, however,
such payment shall be paid only if Employee executes a general release of
claims in a form acceptable to Greenland releasing any and all claims
Employee has against Greenland arising out of his employment or the
termination of said employment and does not revoke the release pursuant to
its terms. Such payment shall be made not later than the fifth (5th) day
following such termination without cause.
7.04 TERMINATION WITHOUT CAUSE OR RESIGNATION FOR GOOD REASON AFTER
A CHANGE IN CONTROL.
(a) If in the one (1) year period following a Change in Control, as
defined below, Employee: (i) resigns for Good Reason; or (ii) is terminated
without Cause, Greenland shall pay to Employee, as severance pay or
liquidated damages, or both, a lump sum payment ("Severance Payment") equal
to two hundred percent (200%) of Employee's average annual Base Salary and
all bonuses received for the five (5) year period immediately preceding the
Severance Payment, or such greater amount as the Board of Directors shall
provide from time to time pursuant to terms which may not be revoked or
reduced thereafter, provided, however, Employee must execute a general
release of claims in a form acceptable to Greenland releasing any and all
claims Employee has against Greenland arising out of his employment or the
termination of said employment and Employee may not revoke the release
pursuant to its terms before he shall be paid any Severance Payment pursuant
to this Section 7.04. However, the total of any payment pursuant to this
Section 7.04(a) shall be limited solely to the extent necessary, in the
opinion of legal counsel acceptable to Employee and Greenland, to avoid the
payment of an "excess parachute" payment within the meaning of Internal
Revenue Code Section 280G of any similar successor provision.
The Severance Payment shall be made not later than the fifth (5th)
day following the date of termination without Cause or resignation for Good
Reason; provided, however, that if the amount of such payments cannot be
finally determined on or before such date, Greenland shall pay to Employee on
such date a good faith estimate of the minimum amount of such payments, and
shall pay the remainder of such payments (together with interest at the rate
provided in Internal Revenue Code Section 1274(b)(2)(B) of the Code), as soon
as the amount thereof can be determined, but in no event later than the
thirtieth (30th) day after the applicable termination date. The Chief
Financial Officer of Greenland shall calculate the good faith estimate of
such payments, and Greenland shall provide reasonable written documentation
<PAGE>
regarding its good faith estimate of the minimum amount of such payments. In
the event the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan
by Greenland payable on the fifth (5th) day after receipt by Employee of a
written demand for payment from Greenland (together with interest calculated
as above) accompanied by reasonable documentation from Greenland setting
forth the calculation of such excess.
(b) For the purposes of this Agreement, a "Change
of Control" means, and shall be deemed to have taken place, if: (i) any
person or entity or group of affiliated persons or entities, including a
group which is deemed a "person" by Section 13(d)(3) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), after the date hereof
first acquires in one or more transactions, at least one of which is after
the date of this Agreement, ownership of 25% or more of the outstanding
shares of stock entitled to vote in the election of directors of Greenland;
and (ii) as a result of, or in connection with, any such acquisition or any
related proxy contest, cash tender or exchange offer, merger or other
business combination, sale of all or substantially all of the assets of
Greenland or any combination of the foregoing transactions (other than a
transaction unanimously approved by the members of the Board of Directors
voting thereon), hereinafter referred to as a "Transaction," the members of
the Board of Directors as it was constituted on September 1, 1999, shall
cease to constitute a majority of the membership of the Board of Directors or
any successor to Greenland during the period commencing with the consummation
of the Transaction and ending on the first to occur of: the first anniversary
of such date, or the conclusion of the next meeting of shareholders to elect
directors, except to the extent that any new directors during such period
were elected or nominated by at least a majority of the members of the Board
of Directors as it was constituted on September 1, 1999, as a group as
directors (or new directors who were so nominated or elected). "Ownership"
means beneficial or record ownership, directly or indirectly, other than: (i)
by a person owning such shares merely of record (such as a member of a
securities exchange, a nominee, or a securities depositary system); (ii) by a
person as a bona fide pledgee of shares prior to a default and determination
to exercise powers as an owner of the shares; (iii) by a person who owns or
holds shares as an underwriter acquired in connection with an underwritten
offering pending and for purposes of their public resale or planned private
placement in increments of less than such 25% amount, or; (iv) by the members
of the Board of Directors as it was constituted on September 1, 1999, as a
group or individually, as of the date hereof or their respective successors.
Without limitation, the right to acquire ownership shall not of itself
constitute ownership of shares.
<PAGE>
8. DEFERRAL OF PAYMENT
Employee may elect to defer all or any part of his
Severance Payment, Base Salary, and any bonus approved by the Board of
Directors until such other time or times as designated by Employee. The
election shall be exercisable by the furnishing of written notice to the
Board of Directors no later than the last day of the year prior to the year
in which the bonus is payable or the benefit vests. Any amounts deferred
shall bear interest at the six (6) month rate applicable to Treasury
securities determined as of the date of Greenland's receipt of the notice
requesting deferral furnished by Employee. Employee may request the Board of
Directors that such deferred amounts and interest thereon be set aside in
trust for the benefit of Employee subject only to claims of the creditors of
Greenland and to such other terms and conditions required by the Board of
Directors and communicated in writing to Employee; provided, however, that
this action shall be taken only in the sole discretion of the Board of
Directors except in the case of a Change in Control, in which case the Board
of Directors shall honor such a request by Employee with respect to any
amounts which have been or may be deferred pursuant to this Agreement.
Employee shall be permitted to withdraw his election to defer his Severance
Payment, Base Salary and any bonus if the Board of Directors denies his
request to have the deferred amounts and interest set aside in such a trust.
Any deferral pursuant to this Section must be accompanied by a statement that
Employee acts with the advice of counsel or waives any such representation.
Greenland has no right to claim an offset against its obligation to pay
Employee any amounts deferred in this Section 8.
9. NON-COMPETITION, NON-INTERFERENCE AND CONFIDENTIAL INFORMATION
9.01 COVENANT OF THE EMPLOYEE. In consideration of the
Company entering into this Agreement and providing the Base Salary, Bonus and
other benefits to Employee, and further in consideration of the Employee's
continued exposure to confidential information and the Employee's continued
receipt of specialized training from the Company and its subsidiaries, the
receipt of which are hereby acknowledged by the Employee, the Employee
covenants as follows:
9.02 NON-COMPETITION. During the Employee's employment
hereunder, the Employee shall not, directly or indirectly, own, manage,
engage in, operate or conduct, prepare to or plan to conduct or assist any
person or entity to conduct any business, or have any interest in any
business, person, firm, corporation or other entity (as a principal, owner,
agent, employee, shareholder, officer, director, joint venturer, partner,
security holder) (except for the ownership of publicly-traded securities
constituting not more than five percent (5%) of the outstanding securities of
the issuer thereof), creditor (except for trade credit extended in the
ordinary course of business), consultant or in any other capacity that
engages in any business which is the same as, similar to or competitive with
the business of the Company or any subsidiary including without limitation
the check cashing or ATM business anywhere in the United States. The
covenants set forth in this Section 9.02 shall be construed as a series of
separate covenants covering their subject matter in each of the separate
states where the Company conducts business, and except for geographic
coverage, each such separate covenant shall be deemed identical in terms to
the covenant set forth above in this Section 9.02. To the extent that any
such covenant shall be judicially unenforceable in any one or more of such
states, such covenant shall
<PAGE>
not be affected with respect to each of the other states. Each covenant with
respect to such states shall be construed as severable and independent.
9.03 NO DIVERSION OF OTHERS. During the Executive's
employment term hereunder and for one year thereafter, the Employee shall
not, either for himself or for any other person, firm, corporation or other
entity, directly or indirectly, or by action in concert with others:
(a) induce or influence, or seek to induce or influence,
any person who is engaged by Greenland or its subsidiaries (as an agent,
employee, consultant or in any other capacity) or any successor thereto with
the purpose of obtaining such person as an employee or customer for a
business competitive with Greenland's or its subsidiaries' business; or
(b) divert or take away, or attempt to divert or take away,
or solicit or attempt to solicit, any existing or potential customer of
Greenland or its subsidiaries (whether or not such customer is actually a
customer of Greenland or its subsidiaries as of the date hereof, including
without limitation any customer solicited by the Employee or which became
known by the Employee prior to the date hereof) with the purpose of obtaining
such person as an employee or customer for a business competitive with
Greenland or its subsidiaries.
9.04 CONFIDENTIAL INFORMATION. Employee agrees to execute
the Company's Confidential Information and Invention Assignment Agreement
("Confidential Agreement") upon the execution of this Agreement, a copy of
which Confidential Agreement is attached hereto as Exhibit B.
10. INJUNCTIVE RELIEF AND ADDITIONAL REMEDY
10.01 In General. The Employee acknowledges and agrees that
Greenland and its subsidiaries shall suffer irreparable harm in the event that
the Employee breaches any of his obligations under Sections 2, 9 or 10 hereof,
and that monetary damages shall be inadequate to compensate the damaged members
of Greenland or its subsidiaries for any such breach. Accordingly, the Employee
agrees that in the event of any breach or threatened breach by the Employee of
any of the provisions of Sections 2, 9 or 10 hereof, the damaged members of
Greenland or its subsidiaries shall be entitled to a temporary restraining
order, preliminary injunction and permanent injunction in order to prevent or
restrain any such breach or threatened breach by the Employee, or by any or all
of the Employee's agents, representatives or other persons directly or
indirectly acting for, on behalf of or with the Employee, without having to
prove damages.
10.02 NO LIMITATION OF REMEDIES. Notwithstanding the provisions set
forth in Section 10.01 above, or any other provision contained in this
Agreement, the parties hereby agree that no remedy conferred by any of the
specific provisions of this Agreement, including, without limitation, this
Section 10, is intended to be exclusive of any other remedy, and each and
every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law or in equity or by
statute or otherwise.
<PAGE>
11. REASONABLENESS OF RESTRICTIONS
The Employee has carefully read and considered the provisions of
Sections 9 and 10 hereof and, having done so, hereby agrees that the
restrictions set forth in such sections are fair and reasonable and are
reasonably required for the protection of the interests of the Company.
12. GENERAL PROVISIONS
12.01 NOTICES. Any notices and other communications
hereunder to be given hereunder by each party to the other shall be in
writing and may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested.
Notices delivered personally shall be deemed communicated as of actual
receipt; mailed notices shall be deemed communicated as of two (2) days after
mailing. All notices and communications hereunder shall be delivered to the
respective parties at the following addresses: (i) if to Greenland,
Attention: Chief Financial Officer, 1935 Avenida Del Oro, Suite D, San Diego,
California 92056; (ii) if to Employee, at Employee's address as set forth in
the books and records of the Company; or to such other address as the person
to whom notice is given may have previously furnished the other in writing as
set forth above.
12.02 APPLICABLE LAW. This Agreement shall be construed
under the laws of the State of California and may not be altered or modified
except by an agreement in writing, signed by both parties.
12.03 ARBITRATION. Any dispute, controversy or claim
arising out of or in respect to this Agreement (or its validity,
interpretation or enforcement), the employment relationship or the subject
matter hereof shall at the request of either party be submitted to and
settled by final and binding arbitration conducted before a single arbitrator
in San Diego County, California in accordance with the Expedited Labor
Arbitration Rules of the American Arbitration Association. The arbitration
shall be governed by the Federal Arbitration Act (9 U.S.C. ss.ss. 1-16). The
arbitrator shall be a retired judge designated by the Presiding Judge of the
San Diego County Superior Court. The arbitrator in such action shall not be
authorized to change or modify any provision of this Agreement. Any award or
decision obtained from any such arbitration proceeding shall be final and
binding on Greenland and Employee, and judgement upon the award rendered by
the arbitrator may be entered by any court having jurisdiction thereof. Each
party shall bear its own expenses and one-half the aggregate amount of
arbitration costs. Arbitration shall be the exclusive remedy of Employee and
Greenland, provided, however, Greenland may institute proceedings for
temporary or injunctive and/or other equitable relief in a court of competent
jurisdiction pursuant to Sections 2.04, 9 and 10 herein, pending resolution
by arbitration of the actual dispute between the parties.
12.04 ENTIRE AGREEMENT. This Agreement, the Confidential
Agreement and the other Exhibits referenced herein or therein supersede any
and all other agreements, either oral or in writing, between the parties
hereto with respect to the employment of Employee by Greenland
<PAGE>
and contain all of the covenants and agreements between the parties with
respect to such employment in any manner whatsoever.
12.05 PARTIAL INVALIDITY. If any provision of this
Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remaining provisions shall nevertheless continue in
full force without being impaired or invalidated in any way.
12.06 MERGER OR CONSOLIDATION. Greenland hereby agrees that
it shall not merge or consolidate into or with or sell substantially all its
assets to any firm, entity, company or person until such other firm, entity,
company or person expressly agrees, in writing, to assume and discharge the
duties and obligations of Greenland under this Agreement. This Agreement
shall be binding upon the parties hereto, their successors, beneficiaries,
heirs and personal representatives.
12.07 AMENDMENTS AND WAIVERS. This Agreement shall not be
varied, altered, waived, modified, changed or in any way amended in any of
its parts except by an instrument in writing, executed by the parties hereto,
or by their legal representatives who are designated in writing prior to any
such amendment or waiver. A waiver by either party of any of the terms of
this Agreement in any instance shall not be deemed or construed to be a
waiver of such term or condition for the future or of any subsequent breach
thereof.
12.08 HEADINGS. The headings used in this agreement have
been inserted for convenience of reference only and do not define or limit
the provisions hereof.
12.09 SEPARATE COUNSEL. The parties acknowledge that in
connection with this Agreement the law firm of Fisher Thurber LLP represents
Greenland only, and Employee has been advised to retain his own legal counsel
at his expense to represent his interests.
12.10 COUNTERPARTS. This Agreement may be executed in any
number of counterparts and by facsimile, each of which shall be deemed an
original, but all of which will constitute one and the same instrument.
<PAGE>
Executed at San Diego, California.
EMPLOYER:
Greenland Corporation
a Nevada corporation
By:
------------------------------------------
Louis T. Montulli, Chief Executive Officer
EMPLOYEE:
------------------------------------------
Lee R. Swanson
<PAGE>
EXHIBIT A
LEE R. SWANSON EMPLOYMENT LIST
<PAGE>
EXHIBIT B
CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
<PAGE>
EXHIBIT 10(E)
CONFIDENTIAL
SETTLEMENT AGREEMENT
AND
RELEASE OF CLAIMS
This Confidential Settlement Agreement and Release of Claims,
hereinafter referred to as the "Agreement," are made by and between GREENLAND
CORPORATION and CHECK CENTRAL, INC. (hereinafter collectively "GLCP"), and
SMARTCASH ATM, LTD., and its current affiliates which are owned in part or whole
by Randy Coleman and/or RBSI, Inc. and/or RBSA, Inc., hereinafter ("SCATM"),
including its employees, shareholders, directors, and any entity acquiring
SCATM, hereinafter collectively referred to as "the Parties."
This agreement is entered into with respect to the following facts:
A. On or about March 30, 1999, the parties entered into a Master
Distributor Agreement pertaining to the manufacture, distribution, sale,
servicing and related aspects of a check-cashing machine. Further, the parties
executed an Addendum to such Master Distributor Agreement on or about December
1, 1999 (hereinafter collectively referred to as the "Distribution Agreement").
B. The parties now desire to rescind, cancel and terminate the
Distribution Agreement (including Addendum thereto), fully and finally settle
and release any asserted, existing, potential or future claims with respect to
each other arising from the dealings or relationship of the Parties prior to
execution of this Agreement, terminate the existing business relationship among
the parties, and otherwise resolve their differences and disputes, including any
potential future litigation between them, thereby being bound for all purposes
from and after the date hereof, solely on the basis of the terms and conditions
hereinafter recited;
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<PAGE>
C. By executing this agreement, each of the parties intends to and
hereby does extinguish any and all claims, disputes and obligations heretofore
existing between and among the parties except as they may arise out of this
Agreement.
D. This Agreement is not and shall not be treated as an admission of
liability by any party for any purpose.
ACCORDINGLY, in consideration of the aforementioned facts and the
mutual promises and obligations contained herein, and for other good and
valuable consideration, the parties and each of them agree as follows:
1. The effective date of this Agreement shall be the on March 9th,
2000 the date when all parties hereto have executed this
Agreement.
2. SCATM agrees that it is not and shall not be the exclusive
distributor for GLCP and SCATM hereby waives all rights and
releases GLCP from any and all obligations related to the rights
and obligations associated with the exclusivity provision of the
Distribution Agreement. SCATM agrees that, among other things,
that GLCP may hire distributors, including distributors presently
under contract with SCATM, as direct distributors of GLCP.
3. SCATM shall provide an exclusion letter to GLCP and/or its current
distributors releasing said distributors from the covenant not to
compete clause in their agreements with SCATM as follows: "SCATM
hereby amends the Smart Cash Independent Distributor Agreement to
allow for the Distributor to sell products directly for Greenland
Corporation without violating the non-compete section of the
agreement." In addition, SCATM will provide all reasonable and
appropriate cooperation in assisting the distributors and/or ISO's
in entering into a business relationship with GLCP.
4. SCATM agrees that it will not solicit sales or advertise another
similar check-cashing device for 4 months after effective date of
this Agreement under the SmartCash name or any other name.
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<PAGE>
5. SCATM will have the right to sell GLCP products on a
non-exclusive arrangement consistent with the best terms and
pricing offered to other GLCP distributors selling similar
quantities of product and meeting similar standards. Provided
however; that SCATM shall receive the existing Master
Distributor commissions and residuals on all accounts sold by
any of the existing and signed distributors for the next 2
years except that if SCATM continues to sell GLCP products the
commissions and residuals will continue past 2 years for as
long as SCATM continues to purchase or sell a minimum of 12
machines per year. SCATM releases GLCP from any and all
obligation to pay to SCATM, commissions and/or residuals in
connection with transactions between GLCP and ACS. Any first
right of refusal to Wal Mart placements must be under the terms
set out by Wal Mart, CMG and GLCP. In the event SCATM elects to
purchase machines for placement with Wal*Mart/CMG, GLCP and
SCATM both agree to perform all duties in conformance with
standard industry standards and practices, and GLCP shall
guarantee to SCATM the "best terms and pricing" as offered to
others placing similar numbers of machines under similar terms
and conditions. GLCP agrees to provide SCATM with detailed
monthly reports showing all transactions and fees along with
payment of all residuals by the 15th of the month following the
month the transactions occurred. GLCP shall allow SCATM or its
designated agent reasonable access to GLCP's books and records,
at reasonable times during business hours, on a monthly basis
necessary to verify the accuracy of all reports and payments
due under this agreement.
6. As and for consideration of the SCATM obligations listed above,
GLCP agrees to the following:
a. GLCP shall take immediate action to remove the cap on 333,334
restricted shares of Greenland common stock (the "Stock") and
matching warrants held by Randy Coleman and/or RBSI and
issued on or about March 1999 and GLCP agrees to extend the
exercise period for said warrants for 6 months to September 1,
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<PAGE>
2001. SCATM and Randell Coleman represent and warrant to GCLP
that they hold all right title and interest to the Stock, that
there are no encumbrances, liens, pledges or claims against
the Stock and that they have the legal authority and power to
sell the Stock and authorize the action set forth in this
Agreement. GLCP and SCATM acknowledge and agree that RBSI
and/or Randell Coleman acquired on or about March, April and
May of 1999, approximately 400,000 shares of Greenland
Corporation common stock and presently own and/or have
assigned and/or sold to a third party said shares and that
said shares will remain subject to the "cap" provisions in
the Distribution Agreement.
b. GLCP shall grant warrants to SCATM as shown in the attached
Exhibit A to purchase 500,000 restricted shares of Greenland
common stock at $.15 per shares exercisable immediately and
expiring two years from date of this Agreement. Warrants may
be issued in whole or in part in minimum increments of
100,000 shares.
c. GLCP agrees to pay to SCATM the sum of $520,000 the (the
"Payment Amount") evidenced by the promissory note listed on
Exhibit B to be paid as follows:
(i) GLCP will loan to SCATM the sum of $200,000 evidenced
by a promissory note listed on Exhibit C signed by
SCATM and Randell Coleman and secured by the Stock
(the "Loan").
(ii) SCATM shall cooperate in removing the restrictive
ledgend on the Stock and shall deliver the Stock to
Tom Beener ("Beener"). Beener shall establish an
account with Paradise
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<PAGE>
Valley Securities in the name of the person or
entity whose name is on the stock certificate
(RBSI). Beener will deposit shares of the Stock
into the account to be sold into the market. SCATM
will execute all appropriate documents, including a
power of attorney and/or stock power as shown on
Exhibit D, directing that the first $200,000 of
proceeds from the sale of the Stock are wired to
Greenland Corporation as repayment of the Loan. All
sale proceeds of the stock over and above the first
$200,000 shall be immediately forwarded to SCATM
after receipt by Paradise Valley Securities.
(iii) Beener shall commence the sale of the Stock
immediately and shall complete the sale of the
Stock within 110 days from the date of this
Agreement. Beener shall use best efforts to achieve
the best available price and in no event shall the
price per share for any shares sold by Beener be
less than 10% back of the bid price at the time of
the sales transaction without the express written
approval of SCATM to deviate from the terms of this
Agreement.
(iv) Proceeds from the sale of the Stock shall be
applied as follows (i) the first $200,000 is paid
to Greenland Corporation as repayment of the Loan
(ii) the balance of the proceeds are paid to SCATM
and applied toward the Payment Amount (the "Proceed
Payment") (Example: if the Stock is sold for a
total of $350,000; Greenland would receive its
$200,000 loan paid back and SCATM would receive the
balance of $150,000 for a total Proceed Payment to
SCATM of $350,000 leaving a remaining balance of
$520,000 less $350,000 or $170,000).
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<PAGE>
(v) The difference between the Proceed Payment and the
Payment amount shall be paid as follows: (i) GLCP
shall pay SCATM $3,000 for each machine sold or
placed by Greenland excluding machines in Paragraph
5 that SCATM would otherwise receive a $3,000
commission until such time that the difference
between the Payment Amount and the Proceed Payment
is paid in full.
7. Except as may be necessary to provide interpretation, reference or
legal effect to the terms of this Agreement, the parties hereto hereby cancel in
their entirety those certain agreements between the parties hereto entitled
Master Distributor Agreement, dated March 30, 1999 and the Addendum Agreement
between the parties hereto, dated December 1, 1999.
8. GREENLAND CORPORATION and CHECK CENTRAL, INC., agree, on behalf
of themselves, their heirs, executors, administrators, beneficiaries,
directors, officers, shareholders, parent corporations, affiliates,
divisions, subsidiaries, past and present partners, agents, representatives,
employees, insurers, assigns and successors, and each of them, to hereby
fully, absolutely and forever release and discharge SMARTCASH ATM, LTD., and
with the sole exception of Richard Wray, its descendants, ancestors,
dependents, heirs, executors, administrators, beneficiaries, directors,
officers, shareholders, parent corporations, affiliates, divisions,
subsidiaries, firms, agents, representatives, past and present employees,
insurers, attorneys, assigns, agents, past and present partners,
representatives, successors and each of them, from any and all rights,
claims, demands, causes of action, obligations or controversy, debts,
accounts, lawsuits, judgments, costs, expenses, liens, damages, losses and
liabilities arising out of or concerning the subject matter of their business
relationship with SCATM, including the Distribution Agreement and Addendum
thereto, whether known or unknown, suspected or unsuspected by any party
(hereinafter referred to as the "Released Claims"), and whether or not said
Released Claims have been concealed or
6
<PAGE>
hidden, which GREENLAND CORPORATION and/or CHECK CENTRAL, INC., now hold or
have at any time heretofore owned or held whether said released claims have
accrued, are yet to accrue, or are liquidated or unliquidated, except as to
those representations, warranties, promises, covenants and conditions
contained in this Agreement.
9. SMARTCASH ATM, LTD., agrees, on behalf of itself, its heirs,
Executors, administrators, beneficiaries, directors, officers, shareholders,
parent corporations, affiliates, divisions, subsidiaries, past and present
partners, agents, representatives, employees, insurers, assigns and
successors, and each of them, including Randell Coleman as an individual and
in his capacity as a former director of Greenland Corporation, to hereby
fully, absolutely and forever release and discharge GREENLAND CORPORATION and
CHECK CENTRAL, INC., and their descendants, ancestors, dependents, heirs,
executors, administrators, beneficiaries, directors, officers, shareholders,
parent corporations, affiliates, divisions, subsidiaries, firms, agents,
representatives, past and present employees, insurers, attorneys, assigns,
agents, past and present partners, representatives, successors and each of
them, from any and all rights, claims, demands, causes of action, obligations
or controversy, debts, accounts, lawsuits, judgments, costs, expenses, liens,
damages, losses and liabilities arising out of or concerning the subject
matter of their business relationship with GLCP, including the Distribution
Agreement and Addendum thereto, whether known or unknown, suspected or
unsuspected by any party (hereinafter referred to as the "Released Claims"),
and whether or not said Released Claims have been concealed or hidden, which
SMARTCASH ATM, LTD., now holds or has at any time heretofore owned or held
whether said released claims have accrued, are yet to accrue, or are
liquidated or unliquidated, except as to those representations, warranties,
promises, covenants and conditions contained in this Agreement.
10. Each of the parties on its own behalf further acknowledges that
it has been advised by or had the opportunity to consult its own independent
legal counsel and understands and acknowledges the significance and
consequences of this release and
7
<PAGE>
expressly consents that the releases contained herein shall be given full
force and effect according to all their expressed terms or provisions,
including those relating to known and unsuspected claims, demands and causes
of action, if any, as well as those related to any other claims, demands and
causes of action hereinabove specified.
11. The corporate signatories to this Agreement hereby represent and
warrant that they are fully authorized to sign on behalf of their respective
business and on behalf of the individuals named. The signatories further
represent and warrant that, by their signatures to this Agreement, the
organizations that they represent are fully bound by the terms and conditions of
this Agreement and that the individuals named are fully bound by the terms and
conditions of this Agreement.
12. The parties further represent and warrant that they are the
owners of the claims released herein and that none of them has assigned any
interest, right or title to the claims released under this Agreement to any
person or entity not a party hereto.
13. This Agreement was negotiated among the parties hereto at arm's
length, with each party receiving the advise of, or having the opportunity to
consult, independent legal counsel of its choice. It is the intent of each of
the parties that no part of this Agreement be construed against any of the
parties because of the identity of the drafter.
14. This Agreement shall be confidential and shall not be disclosed
to any person or entity not a party or a principal of a party to this
Agreement unless required or privileged by law or to enforce its terms, or
with the express written permission of all parties to this Agreement.
Further, the parties, and each of them, agree that this stipulation of
confidentiality shall encompass the entirety of the relationship between and
among the parties and the parties agree, stipulate and covenant that no party
shall discuss the underlying facts of their relationship or the various
contentions raised by any party during their business relationship with
regard to any other party, and specifically agree not to discuss or comment
upon settlement terms, conditions of settlement or opinions with regard to
the others' compliance with law. However, a breach of this paragraph by
8
<PAGE>
one party shall not excuse any other party's performance of this Agreement.
Any party who breaches this paragraph shall be liable to any other party for
all damages, including but not limited to attorney fees, costs of suit and/or
investigation, proximally caused by such breach.
15. The provisions of this Agreement are severable and, if any part of
it is found to be unenforceable, the other provisions shall remain fully valid
and enforceable. This Agreement shall survive the termination of any
arrangements contained herein.
16. To the extent legal action is required to enforce the terms of
this Agreement, the prevailing party shall be entitled to its costs and
attorneys' fees. It is the intention of the parties that the laws of the
State of California shall govern the validity of this Agreement, the
construction of its terms, and the interpretation of the rights and duties of
the parties. In the event any suit is filed, the venue shall be in San Diego,
California.
17. This Agreement sets forth the entire agreement between the
parties hereto, and fully supersedes any and all prior agreements or
understandings between the parties herein pertaining to the subject matter
hereof.
18. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which together shall
constitute one and the same instrument.
19. The parties hereto shall sign or cause to be signed all
documents and shall perform or cause to be performed such further acts as may
be necessary to consummate the agreement contemplated hereunder.
20. Each Party shall indemnify, save and keep harmless, the Other
Party, including its officers, directors, affiliates, associates, attorneys,
subsidiaries and all other persons and entities associated in any manner with
the Parties through the date hereof, from and against any claims or suits
commenced or threatened against Either Party at any
9
<PAGE>
time prior to and/or after execution and arising from the sale and/or
distribution of the product(s) or services beyond Either Party's control or
not caused by the intentional or negligent conduct of Either Party. In
addition SCATM shall indemnify, save and keep harmless, GLCP, its officers,
directors, affiliates, associates, attorneys, subsidiaries and all other
persons and entities associates in any manner with GLCP, from and against
claims or suits commenced or threatened against GLCP and/or and/or its
officers, directors, affiliates, associates etc., in connection with the use,
either by GLCP, SCATM or any other person or party, of the name "SmartCash
ATM" arising from use of the name "SmartCash ATM" prior to the execution of
this Agreement. GLCP agrees to use its best efforts to discontinue use of the
name "SmartCash" or "SmartCash ATM" in any version or capacity and in no
event will it use the name(s) after 120 days after execution of this
agreement.
21. The parties agree that prior to any release of information
concerning any aspect of this agreement, the past, present or future
relationship of the parties, that each party hereto shall consent in writing,
which consent will not be unreasonably withheld, to the subject, content, and
intended recipient of the information. In the event there is a violation of
this paragraph by any party, and in addition to any other remedy, including
damages to which the non-breaching party may be entitled pursuant to this
agreement.
22. SCATM agree to continue for at least one year ATM processing for
all GLCP machines under previously contracted terms and conditions and
Greenland agrees not to terminate said services provided that the services
are consistent with industry standards and are compatible with the Greenland
machines.
23. COUNTERPARTS: A facsimile, telecopy or other reproduction of
this instrument may be executed by one or more parties hereto and such
executed copy may be delivered by facsimile or similar instantaneous
electronic transmission device pursuant to which the signature of or on
behalf of such party can be seen, and such execution and delivery shall be
considered valid, binding and effective for all purposes. At the request of
any party hereto, all parties agree to execute an original of this instrument
as well as any facsimile, telecopy or other reproduction hereof.
10
<PAGE>
24. Proceeds from sale of Machine in Michigan (Barki dba Marathon).
Notwithstanding anything to the contrary contained herein SCATM acknowledges
and agrees that GLCP is owed the full purchase price for the sale of the
machine to Barki dba Marathon and will be paid in accordance with terms of
purchase order and will not be offset by any other claims and/or expenses.
THE UNDERSIGNED HEREBY CERTIFY THAT THEY HAVE READ ALL OF THIS RELEASE AND
FULLY UNDERSTAND ALL OF THE SAME.
IN WITNESS WHEREOF, THE PARTIES HERETO HEREBY EXECUTE THIS
AGREEMENT.
For GREENLAND CORPORATION and CHECK CENTRAL, INC.:
_________________________________________ Dated: ______________
Thomas Beener, as Secretary
_________________________________________ Dated:_______________
Lou Montulli, as CEO
For SMARTCASH ATM, LTD.:
_________________________________________ Dated: ______________
Randell Coleman, CEO/President
_________________________________________ Dated: ______________
Randell Coleman, for SCATM, RBSA
and all affiliated companies.
_________________________________________ Dated ________________
Randell Coleman, an individual and as
former director of Greenland Corporation
11
<PAGE>
EXHIBIT 10(F)
ASSET PURCHASE AGREEMENT
by and between
TELENETICS CORPORATION
and
GREENLAND CORPORATION
April 5, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
1. Definitions ...............................................................1
2. Basic Transaction .........................................................2
(a) Purchase and Sale of the Acquired Assets .........................2
(b) Assumption of Liabilities ........................................2
(c) Purchase Price ...................................................2
(d) The Closing ......................................................2
(e) Deliveries at the Closing ........................................2
(f) Allocation .......................................................3
3. Representations and Warranties of the Seller ...............................3
(a) Organization of the Seller .......................................3
(b) Authorization of Transaction. ....................................3
(c) Noncontravention .................................................3
(d) Title to the Acquired Assets .....................................3
(e) Assumed Contracts ................................................4
(f) Intellectual Property ............................................4
(g) Compliance with Laws .............................................4
(h) Consents .........................................................4
(i) Tax Matters ......................................................4
(j) Litigation .......................................................5
(k) Related Parties ..................................................5
(l) Underlying Documents .............................................5
(m) Brokers' Fees ....................................................5
(n) Disclosure .......................................................5
(o) Investment Representations .......................................5
4. Representations and Warranties of the Buyer ...............................6
(a) Organization and Capitalization of the Buyer......................6
(b) Authorization of Transaction .....................................7
(c) Noncontravention .................................................7
(d) Concerning the Shares ............................................7
(e) Approvals ........................................................7
(f) Information Provided .............................................8
(g) Litigation .......................................................8
(h) Brokers' Fees ....................................................8
5. Post-Closing Covenants and Agreements .....................................8
(a) General ..........................................................8
(b) Condition to Transfer of Certain Contracts .......................8
(c) Delivery of Hardware Design and Related Materials ................9
(d) Introductions ....................................................9
(e) Survival .........................................................9
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<CAPTION>
SECTION PAGE
<S> <C>
6. Indemnification ...........................................................9
(a) Indemnification of Losses ..............................9
(b) Payment ................................................9
(c) Notice of Claims ......................................10
(d) Third Party Claims.....................................10
(e) Disputed Claims........................................10
(f) Survival of Representations and Warranties.............10
7. Miscellaneous.............................................................10
(a) Press Releases and Announcements.......................10
(b) No Third Party Beneficiaries...........................10
(c) Entire Agreement.......................................10
(d) Succession and Assignment .............................10
(e) Counterparts...........................................11
(f) Headings...............................................11
(g) Notices ...............................................11
(h) Governing Law..........................................11
(i) Amendments and Waivers ................................11
(j) Expenses...............................................12
(k) Construction ..........................................12
(1) Incorporation of Exhibits and Schedules ...............12
(m) Bulk Transfer Laws ....................................12
(n) Transfer Taxes.........................................13
Disclosure Schedule
Exhibit A - Wireless Technology
Exhibit B - Form of Certificate of Determination of Rights, Preferences,
Privileges and Restrictions of Series B Convertible Preferred Stock
Exhibit C - Form of Bill of Sale
Exhibit D - Form of Assignment and Assumption of the Assumed Contracts
Exhibit E - Form of Trademark Assignment
Exhibit F - Form of Patent Assignment
Exhibit G - AMR Inventory List
Exhibit H - "AirLink AMR"
</TABLE>
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<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (this "Agreement") is entered into on
April 5, 1999, by and between Telenetics Corporation, a California corporation
(the "Buyer"), and Greenland Corporation, a Nevada corporation (the "Seller").
This Agreement contemplates a transaction in which the Buyer will purchase
certain assets and assume certain contracts from the Seller in return for the
consideration described herein.
NOW, THEREFORE, in consideration of the premises and the mutual
promises made in this Agreement, and in consideration of the representations,
warranties and covenants contained in this Agreement, the parties agree as
follows.
1. DEFINITIONS.
"Acquired Assets" means the following assets of the Seller:
(a) All right, title and interest in and to the Wireless
Technology.
(b) All Intellectual Property associated with the Wireless
Technology.
(c) All rights under all Assumed Contracts.
(d) All RF meter modules, software, firmware, codes,
documents and other personal property or information held or used by the
Seller in connection with the Wireless Technology.
(e) All marketing plans and sales leads.
(f) All right, title and interest in and to the "Airlink"
name and trademark.
"Assumed Contracts" means the contracts identified in the
Disclosure Schedule to be assigned to the Buyer.
"Closing" and "Closing Date" have the meanings set forth in
Section 2(d) below.
"Disclosure Schedule" has the meaning set forth in Section 3
below.
"Intellectual Property" means (a) patents, patent
applications, patent disclosures, and improvements thereto, (b) trademarks,
service marks, trade dress, logos, trade names and corporate names and
registrations and applications for registration thereof, (c) copyrights and
registrations and applications for registration thereof, (d) mask works and
registration and applications for registration thereof, (e) trade secrets and
confidential business information (including ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced to
practice), know-how, manufacturing and production processes and techniques,
research and development information, drawings, specifications, designs,
plans, proposals, technical data,
<PAGE>
copyrightable works, financial, marketing and business data, pricing and cost
information, business and marketing plans, and customer and supplier lists and
information), (f) other proprietary rights, and (g) copies and tangible
embodiments thereof (in whatever form or medium).
"Ordinary Course of Business" means the ordinary course of
business consistent with past custom and practice.
"Purchase Price" has the meaning set forth in Section 2(c)
below.
"Wireless Technology" has the meaning set forth in EXHIBIT
A.
2. BASIC TRANSACTION.
(a) PURCHASE AND SALE OF THE ACQUIRED ASSETS. On and
subject to the terms and conditions of this Agreement, the Buyer agrees to
purchase from the Seller, and the Seller agrees to sell, transfer, convey, and
deliver to the Buyer, all of the Acquired Assets at the Closing for the
consideration specified below in this Section 2.
(b) ASSUMPTION OF LIABILITIES. On and subject to the
terms and conditions of this Agreement, the Buyer agrees to assume and become
responsible for all of the Assumed Contracts at the Closing as described in the
Assignment and Assumption of Assumed Contracts in the form attached as an
exhibit to this Agreement. The Buyer will not assume or have any responsibility,
however, with respect to any other obligations or liabilities of the Seller
which are not Assumed Contracts.
(c) PURCHASE PRICE. At the Closing, the Buyer shall
deliver to the Seller a certificate representing 128,571 shares (the "Shares")
of the Buyer's Series B Convertible Preferred Stock (the "Purchase Price"). The
Shares shall have the rights, preferences, privileges and restrictions set forth
in the form of Certificate of Determination of Rights, Preferences, Privileges
and Restrictions of Series B Convertible Preferred Stock attached hereto as
EXHIBIT B (the "Certificate of Determination").
(d) THE CLOSING. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Rutan & Tucker, LLP, 611 Anton Boulevard, Suite 1200, Costa Mesa, California
92626, concurrently with the execution of this Agreement by all parties or at
such other place and time as may be agreed by the parties (the "Closing Date").
(e) DELIVERIES AT THE CLOSING. At the Closing, each
party shall deliver to the other all such agreements, documents and
instruments contemplated by this Agreement or necessary for the conveyance of
the Acquired Assets to the Buyer and the assumption of the Assumed Contracts
by the Buyer. In addition, the Seller shall provide to the Buyer a list of
persons who have prior experience with the installation of the Wireless
Technology and who may be able to provide assistance to the Buyer in connection
with the Buyer's installation of the Wireless Technology.
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<PAGE>
(f) ALLOCATION. The parties agree to allocate the
Purchase Price (and an other capitalizable costs) among the Acquired Assets for
all purposes (including financial accounting and tax purposes) in the manner
determined by the Buyer.
3. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller
represents and warrants to the Buyer that the statements contained in this
Section 3 are correct and complete as of the date of this Agreement and shall be
true and correct as of the Closing Date, except as set forth in the Disclosure
Schedule and initialed by the parties.
(a) ORGANIZATION OF THE SELLER. The Seller is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. The Seller is duly qualified to conduct business as a
foreign corporation in the State of California and is in good standing under the
laws of the State of California.
(b) AUTHORIZATION OF TRANSACTION. The Seller has full
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Without limiting the generality of the foregoing, the
Seller has taken all actions required for the execution, delivery and
performance of this Agreement by the Seller and the sale of the Acquired Assets
as provided herein. This Agreement constitutes the valid and legally binding
obligation of the Seller, enforceable in accordance with its terms. The person
or persons who have executed this Agreement on behalf of the Seller are duly
authorized to do so by the Board of Directors of the Seller.
(c) NONCONTRAVENTION. Neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any statute, regulation, rule, judgment,
order, decree, stipulation, injunction, charge or other restriction of any
government, governmental agency or court to which the Seller is subject or any
provision of the articles or bylaws, as amended, of the Seller or (ii) conflict
with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify
or cancel, or require a notice under any contract, lease, sublease, license,
sublicense, franchise, permit, indenture, agreement or mortgage for borrowed
money, instrument of indebtedness, security interest or other arrangement to
which the Seller is a party or by which the Seller is bound or to which any of
the Seller's assets is subject. The Seller need not give any notice to, make any
filing with, or obtain any authorization, consent or approval of any government
or governmental agency in order for the parties to consummate the transactions
contemplated by this Agreement.
(d) TITLE TO THE ACQUIRED ASSETS. The Seller has good and
marketable title, free and clear of all mortgages, liens, pledges, claims,
easements, rights of way, conditions, security interests, encumbrances,
restrictions, charges, imperfections of title or equities of any nature
whatsoever, to all of the Acquired Assets, respectively, real and personal,
tangible and intangible, to be sold, conveyed, transferred and delivered
hereunder. At the Closing, the Buyer will obtain good and marketable title to
the Acquired Assets, free and clear of all mortgages, liens, pledges, claims,
easements, rights of way, conditions, security interests, encumbrances,
restrictions, charges, imperfections of title or equities of any nature
whatsoever. All of the equipment and tangible personal property constituting a
portion of the Acquired Assets is in good operating condition and repair, normal
wear and tear excepted.
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<PAGE>
(e) ASSUMED CONTRACTS. Set forth in the Disclosure
Schedule is a list of all written agreements, leases, contracts and commitments
relating to the Acquired Assets to which the Seller is a party or is otherwise
bound as of the date of this Agreement. The Seller has supplied the Buyer with
true, correct and complete copies of each such Assumed Contract. The Seller
makes no representations or warranties regarding the enforceability or validity
of the Assumed Contracts. Notwithstanding the foregoing, the Seller acknowledges
receipt of the following sums (the "Deposits") from certain utilities (the
"Utilities") in connection with pilot projects (the "Pilot Projects") relating
to the Acquired Assets: (i) $15,000 from Emerald People Utility District in
Eugene, Oregon; (ii) $10,000 from Third Taxing District in Norwalk, Connecticut;
and (iii) $10,000 from Springville Electric in Springville, Utah. The Seller
agrees that it is now and shall remain at all times after the Closing liable for
return of the Deposits to the Utilities and that the Buyer assumes no liability
therefor. The Seller further agrees that it will provide reasonable cooperation
to the Buyer in connection with the Buyer's pursuit, if any, of the Pilot
Projects.
(f) INTELLECTUAL PROPERTY. None of the Acquired Assets or
any Intellectual Property held or used by the Seller in connection with the
Acquired Assets infringes the Intellectual Property or other proprietary rights
of any other party. All Intellectual Property developed for the Seller was so
developed under agreements with employees, consultants or others that provide
that the Intellectual Property so developed is a "work made for hire" or
otherwise providing for the assignment of all rights thereto to the Seller. To
the knowledge of the Seller, the manufacture, use, sale, marketing or
distribution of the Acquired Assets does not violate or infringe on any patent
or any proprietary or personal right of any person or firm.
(g) COMPLIANCE WITH LAWS. The business of the Seller
has been operated in compliance with all federal, state, local and foreign
laws, regulations and orders, the violation of which would have a material
adverse effect upon any of the Acquired Assets. All reports and filings
required to be made by the Seller with respect to the Acquired Assets under
foreign, federal, state and local statutes, laws, regulations, rules and
ordinances relating to health, safety and protection of the environment have
been filed in a timely manner, and no such reports or filings are currently
required that have not been made.
(h) CONSENTS. No approvals or consents of or assignments
by any person (including, without limitation, any federal, state or local
governmental or administrative authorities) are necessary in connection with the
execution, delivery or performance of this Agreement.
(i) TAX MATTERS. All taxes, including, without
limitation, income, excise, property, sales, transfer, use, franchise,
payroll, employees' income withholding and social security taxes imposed or
assessed by the United States or by any foreign country or by any state,
municipality, subdivision or instrumentality of the United States or of any
foreign country, or by any other taxing authority, which are due or payable
by the Seller with respect to the Acquired Assets, and all interest,
penalties and additions thereon, whether disputed or not, have been paid in
full; all tax returns or other documents required to be filed in connection
therewith have been accurately prepared and duly and timely filed. No issues
have been raised (or are currently pending) by the Internal Revenue Service
or any other taxing authority in connection with any of the returns and
reports referred to above, and no waivers of statutes of limitations have
been given or requested with respect to the Seller in connection therewith.
-4-
<PAGE>
(j) LITIGATION. There is no claim, dispute, action,
proceeding (including arbitration), suit, appeal or investigation, at law or
in equity, pending (other than those, if any, with respect to which service
of process or similar notice has not yet been made and which are not within
the knowledge of the Seller) or, to the knowledge of the Seller, threatened
against the Seller involving the Wireless Technology or any of the Acquired
Assets before any court, agency, authority, arbitration panel or other
tribunal. The Seller is not subject to or in default with respect to any
notice, order, writ, injunction or decree of any court, agency, authority,
arbitration panel or other tribunal involving the Wireless Technology or any
of the Acquired Assets.
(k) RELATED PARTIES. No officer, director or other affiliate
of the Seller, directly or indirectly, is party to any material arrangement
affecting the design, development, marketing, distribution or use of the
Wireless Technology or the Acquired Assets.
(l) UNDERLYING DOCUMENTS. Copies of all documents listed or
described in the Disclosure Schedule have been furnished or made available to
the Buyer. All such documents are true and complete copies, and there are no
amendments or modifications thereto, except as expressly noted in the Disclosure
Schedule.
(m) BROKERS' FEES. The Seller has no liability or obligation
to pay any fees or commissions to any broker, finder or agent with respect to
the transactions contemplated by this Agreement for which the Buyer could become
liable or obligated.
(n) DISCLOSURE. Neither this Agreement nor any of the
schedules or exhibits hereto contains any untrue statement of a material fact or
omits a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading,
and there is no fact which has not been disclosed to the Buyer that materially
affects adversely or could reasonably be anticipated to materially affect
adversely the Wireless Technology or the Acquired Assets.
(o) INVESTMENT REPRESENTATIONS. The Seller hereby represents
and warrants to the Buyer with respect to the acquisition of the Shares as
follows:
(i) INVESTMENT EXPERIENCE. The Seller has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Buyer so that the Seller
is capable of evaluating the merits and risks of its investment in the Buyer and
has the capacity to protect its own interests.
(ii) ACCREDITED INVESTOR. The Seller is either
(i) an "accredited investor" as that term is defined in Securities and
Exchange Commission Rule 501 of Regulation D as presently in effect, or (ii)
has a preexisting personal or business relationship with the Buyer or any of
its officers, directors or controlling persons, or by reason of the Seller's
business or financial experience or the business or financial experience of
the Seller's professional advisors who are unaffiliated with and who are not
compensated by the Buyer or any affiliate or selling agent of the Buyer,
directly or indirectly, has the capacity to protect the Seller's own
interests in connection with the acquisition of the Shares.
-5-
<PAGE>
(iii) INVESTMENT. The Seller is acquiring the
Shares for investment by the Seller and its affiliates, not as a nominee or
agent, and not with the view to, or for resale in connection with, any
distribution thereof. The Seller understands that the Shares have not been,
and will not be, registered under the Securities Act of 1933 ("Securities
Act") by reason of a specific exemption from the registration provisions of
the Securities Act, the availability of which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of the
Seller's representations as expressed herein.
(iv) RULE 144. The Seller acknowledges that the
Shares must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is available. The
Seller is aware of the provisions of Rule 144 promulgated under the Securities
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability of
certain current public information about the Buyer, the resale occurring not
less than a specified number of years after a party has purchased and paid for
the security to be sold, the sale being effected through a "broker's
transaction" or in transactions directly with a "market maker" and the number of
shares being sold during any three-month period not exceeding specified
limitations.
(v) ACCESS TO DATA. The Seller has had an opportunity
to discuss the Buyer's business, management and financial affairs with its
management. The Seller also has had an opportunity to ask questions of officers
of the Buyer, which questions were answered to its satisfaction. The Seller
understands that such discussions, as well as any written information issued by
the Buyer, were intended to describe certain aspects of the Buyer's business and
prospects but were not a thorough or exhaustive description. The Seller's
decision to enter into the transactions contemplated hereby is based on its own
evaluation of the risks and merits of the purchase and the Buyer's proposed
business activities. Without limiting the generality of the foregoing, the
Seller has had the opportunity to obtain and to review the following documents
of the Buyer: (1) Form 10-KSB for the fiscal year ended March 31, 1998; (2) Form
10-QSB for the quarter ended June 30, 1998; and (3) Form 10-QSB for the quarter
ended September 30, 1998, in each case as filed with the SEC. The Buyer
understands that its investment in the Shares involves a high degree of risk.
(vi) TAX LIABILITY. The Seller has reviewed with
its own tax advisors the federal, state, local and foreign tax consequences of
this investment and the transactions contemplated by this Agreement. With
respect to such tax consequences, the Seller relies solely on such advisors and
not on any statements or representations of the Buyer or any of its agents. The
Seller understands and agrees that it (and not the Buyer) shall be responsible
for any of its own tax liability that may arise as a result of this investment
or the transactions contemplated by this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrrants to the Seller that the statements contained in this Section 4 are
correct and complete as of the date of this Agreement.
(a) ORGANIZATION AND CAPITALIZATION OF THE BUYER. The Buyer
is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of California. As
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of March 31, 1999, the authorized capital stock of the Buyer consisted of (a)
25,000,000 shares of Common Stock, without par value, (b) 2,500,000 shares of
Series A 7.5% Convertible Redeemable Preferred Stock ("Series A Preferred
Stock") and (b) 2,500,000 shares of undesignated Preferred Stock. Upon the
filing of the Certificate of Determination with the California Secretary of
State, the authorized capital stock of the Buyer shall consist of (a) 25,000,000
shares of Common Stock, (b) 2,500,000 shares of Series A Preferred Stock, (c)
128,571 shares of Series B Convertible Preferred Stock and (c) 2,371,429 shares
of undesignated Preferred Stock.
(b) AUTHORIZATION OF TRANSACTION. The Buyer has all
necessary corporate power and corporate authority to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the Buyer has taken all actions required for the
execution, delivery and performance of this Agreement by the Buyer, the
purchase of the Acquired Assets and the issuance of the Shares to the Seller
as provided herein. This Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable in accordance with its terms except as
enforceability may be limited by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws generally affecting
creditors' rights and the application of general principles of equity
including, but not limited to, the inability to exercise the right to
specific performance in certain circumstances. The person or persons who have
executed this Agreement on behalf of the Buyer have been duly authorized to
do so by the Buyer.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the actions contemplated hereby, will
(i) violate any statute, regulation, rule, judgment, order, decree, stipulation,
injunction, charge or other restriction of any government, governmental agency
or court to which the Buyer is subject or any provision of its charter or bylaws
or (ii) conflict with, result in a breach of, constitute a default under, result
in the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any contract, lease, sublease,
license, sublicense, franchise, permit, indenture, agreement or mortgage for
borrowed money, security interest, or other arrangement to which the Buyer is a
party or by which it is bound or to which any of its assets is subject in a
manner or to an extent that would materially and adversely affect the validity
or enforceability of, or the authority or ability of the Buyer to perform its
obligations under, this Agreement or any of the other documents contemplated by
this Agreement. Other than federal and state securities law notices in
connection with the issuance of the Shares, the Buyer does not need to give any
notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order for the parties to
consummate the transactions contemplated by this Agreement.
(d) CONCERNING THE SHARES. The Shares have been duly
authorized and, when issued in accordance with this Agreement, and the shares of
Common Stock underlying the Shares, when issued upon conversion of the Shares,
will be duly and validly issued, fully paid and non-assessable and will not
subject the holder thereof to personal liability by reason of being such holder.
There are no preemptive rights of any stockholder of the Buyer, as such, to
acquire any of the Shares.
(e) APPROVALS. No authorization, approval or consent of or
filing with any court, governmental body, regulatory agency, self-regulatory
organization, or stock exchange or market or the shareholders of the Buyer is
required to be obtained by the Buyer for the issuance and sale of the
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Shares and the Common Stock issuable upon conversion thereof other than the
requirements of any applicable blue sky laws. The Buyer has taken or will take
all actions necessary to satisfy the requirements of applicable blue sky laws.
(f) INFORMATION PROVIDED. The information provided by or on
behalf of the Buyer to the Seller and referred to in Section 3(o)(v) of this
Agreement does not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
(g) LITIGATION. There is no action, suit, proceeding, inquiry
or investigation before or by any court, public board or body pending or, to the
knowledge of the Buyer or any of its subsidiaries, threatened against or
affecting the Buyer or any of its subsidiaries, wherein an unfavorable
decision, ruling or finding would materially and adversely affect the validity
or enforceability of, or the authority or ability of the Buyer to perform its
obligations under, this Agreement or any of the other documents contemplated by
this Agreement.
(h) BROKERS' FEES. The Buyer has no liability or obligation to
pay any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the Seller could become
liable or obligated.
5. POST-CLOSING COVENANTS AND AGREEMENTS. The parties agree as follows
with respect to the period following the Closing.
(a) GENERAL. If at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement,
each of the parties will take such further action (including, without
limitation, the execution and delivery of such further instruments and
documents) as the other party may reasonably request. The Seller expressly
agrees that it will, without demanding any further consideration therefor, at
the request of the Buyer, provide all assistance and execute any papers deemed
necessary or desirable by the Buyer, its successors, assigns and legal
representatives, for perfecting the Buyer's right, title and interest in and to
the Intellectual Property and the Acquired Assets, including without limitation,
the acquisition, sustenance, reexamination or reissuance of patents relating to
the Intellectual Property and the maintenance and perfection of the rights of
the Buyer and its successors and assigns to such patents. The Seller further
expressly agrees that it will promptly, at the request of the Buyer, cause the
inventors and other prior owners, if any, of the Intellectual Property and the
Acquired Assets, to provide all assistance and execute all such papers for the
purposes described in this paragraph, without cost to the Buyer.
(b) CONDITION TO TRANSFER OF CERTAIN CONTRACTS. At the
Closing, the Buyer may elect to close the transactions contemplated hereby
notwithstanding the fact that the Seller may have failed to obtain consents
to the transfer of one or more Assumed Contracts which by their terms require
the consent of any other contracting party thereto to the assignment thereof
to the Buyer. The terms of this paragraph (b) shall govern the transfer of
the benefits of each such Assumed Contract. Notwithstanding anything herein
to the contrary, the parties acknowledge and agree that at the Closing the
Seller will not assign to the Buyer any Assumed Contract which by its terms
requires the consent of any other contracting party thereto unless each
consent has been obtained prior to the Closing Date. With respect to each
such unassigned Assumed Contract, after the Closing Date the
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Seller shall continue to deal with the other contracting party(ies) to that
Assumed Contract as the prime contracting party and shall use its best efforts
to obtain the consent of all required parties to the assignment of such Assumed
Contract, but the Buyer shall be entitled to the benefits of such Assumed
Contract accruing after the Closing Date to the extent that the Seller may
provide the Buyer with such benefits without violating the terms of such Assumed
Contract; and the Buyer agrees to perform at its sole expense all of the
obligations of the Seller to be performed under such Assumed Contract the
benefits of which the Buyer is receiving after the Closing Date.
(c) DELIVERY OF HARDWARE DESIGN AND RELATED MATERIALS. The
Seller expressly agrees that it will promptly, but in any event no later than
two weeks following the Closing Date, deliver to the Buyer all hardware design
and related materials relating to the Wireless Technology, including without
limitation, the RF Module designed under contract by Mr. Greg Gillis and the
notes, design specifications and related materials produced by Mr. Gillis and/or
the Seller, as more particularly described in the memo dated April 5, 1999
delivered to the Buyer by Mr. Lou Montulli.
(d) INTRODUCTIONS. The Seller agrees to introduce the Buyer to
the Utilities and to Centro de Pesquisas de Energia Eletrica and the other party
or parties, if any, who had expressed an interest in the Wireless Technology, as
soon as practicable, but in no event later than two weeks, following the
Closing.
(e) SURVIVAL. Notwithstanding anything to the contrary
contained in this Agreement, the covenants and agreements described in this
Section 5 shall survive the Closing and continue forever.
6. INDEMNIFICATION.
(a) INDEMNIFICATION OF LOSSES. The Seller hereby
indemnifies the Buyer against Losses (as defined below), and the Buyer hereby
indemnifies the Seller against Losses, as set forth in this Section 6. If the
Buyer shall have suffered a Loss by reason of (i) the breach of any of the
representations or warranties or covenants made by the Seller herein, or (ii)
any liability or claim arising prior to the Closing with respect to the
Acquired Assets, the Buyer shall be indemnified for such Loss by the Seller
as set forth in this Section 6; if the Seller shall have suffered a Loss by
reason of (iii) the breach of any of the representations or warranties or
covenants made by the Buyer herein, (iv) the manufacture or sale of any of
the Acquired Assets by the Buyer after the Closing, or (v) the Assumed
Contracts, the Seller shall be indemnified for such Loss by the Buyer as set
forth in Section 6. The party who is requested to provide indemnity is herein
referred to as "Indemnitor" and the party requesting indemnity is herein
referred to as "Indemnitee." "Loss" shall mean any losses, liabilities,
claims, damages and expenses incurred including, without limitation,
penalties, fines, interest, amounts paid in settlement and reasonable fees
and disbursements of counsel, and reasonable expenses incurred in connection
with any investigation, action, suit or proceeding instituted against
Indemnitee.
(b) PAYMENT. At such time as the indemnifiable amount of a
Loss as been determined in accordance with this Section 6 (a "Liquidated
Claim"), (A) if resulting from a claim made by the Buyer, the Seller shall
immediately pay the Buyer the amount of the Liquidated Claim, or (B) if
resulting from a claim made by the Seller, the Buyer shall immediately pay
the Seller the
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amount of the Liquidated Claim, as the case may be. No forbearance of Indemnitee
in demanding payment from an Indemnitor shall act as a waiver of any right of
Indemnitee to receive payment from Indemnitor, nor shall it relieve Indemnitor
of any obligation to Indemnitee under this Agreement.
(c) NOTICE OF CLAIMS. If Indemnitee has any claim for a Loss
(a "Claim"), it will give prompt written notice thereof to Indemnitor,
including in such notice a brief description of the facts upon which Claim is
based and the amount thereof.
(d) THIRD PARTY CLAIMS. If Indemnitee becomes aware of a
Third Party Claim that it believes may result in a Claim (a "Third Party
Claim"), Indemnitee shall notify Indemnitor of such Third Party Claim, and
Indemnitor shall be entitled, at the expense of Indemnitor, to defend such
Third Party Claim.
(e) DISPUTED CLAIMS. If Indemnitor objects to any Claim or
Third Party Claim, it shall give written notice of such objection and brief
statement of the grounds of such objection to Indemnitee within 20 business days
after notice is received. If no such notice is given, such claim shall be a
Liquidated Claim. If such objection is made, Indemnitor and Indemnitee shall
meet and use their best efforts to settle the dispute in writing which, when
resolved, shall be a Liquidated Claim.
(f) SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the parties set forth in this Agreement will
continue for a period of three years from the Closing Date.
7. MISCELLANEOUS.
(a) PRESS RELEASES AND ANNOUNCEMENTS. No party shall issue any
press release or announcement relating to the subject matter of this Agreement
without the prior written approval of the other party; provided, however, that
any party may make any public disclosure it believes in good faith is required
by law or regulation (in which case the disclosing party will advise the other
party prior to making the disclosure).
(b) NO THIRD PARTY BENEFICIARIES. This Agreement shall not
confer any rights or remedies upon any person other than the parties and their
respective successors and permitted assigns.
(c) ENTIRE AGREEMENT. This Agreement (including the documents
referred to herein) constitutes the entire agreement between the parties and
supersedes any prior understandings, agreements, or representations by or
between the parties, written or oral, that may have related in any way to the
subject matter hereof, including, without limitation, the Memorandum of
Understanding entered into by and between the parties effective as of January
18, 1999.
(d) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the parties named herein and their respective
successors and permitted assigns. No party may assign either this Agreement or
any of its rights, interests or obligations hereunder without the prior written
approval of the other party.
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(e) COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) HEADINGS. The section headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the meaning
or interpretation of this Agreement.
(g) NOTICES. All notices, requests, demands, claims and other
communications hereunder shall be in writing. Any notice, request, demand,
claim or other communication hereunder shall be deemed duly given three business
days after mailing if sent by registered or certified mail, return receipt
requested, postage prepaid and addressed to the intended recipient as set forth
below:
If to the Seller:
Greenland Corporation
7084 Miramar Road, Fourth Floor
San Diego, California 92121
Attention: Chief Executive Officer
If to the Buyer:
Telenetics Corporation
26772 Vista Terrace Drive
Lake Forest, California 92630
Attention: President
With a copy to:
Rutan & Tucker, LLP
611 Anton Boulevard, Suite 1200
Costa Mesa, California 92626
Attention: Larry A. Cerutti, Esq.
Any party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim or other
communication shall be deemed to have been duly given unless and until it any is
received by the person for whom it is intended. Any party may change the address
to which notices, requests, demands, claims and other communications hereunder
are to be delivered by giving the other party notice in the manner herein set
forth.
(h) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the law of conflicts) of
the State of California.
(i) AMENDMENTS AND WAIVERS. No amendment of any provision of
this Agreement shall be valid unless the same shall be in writing and signed by
the Buyer and the Seller.
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(j) EXPENSES. Each of the Buyer and the Seller will bear its
own costs and expenses (including legal fees and expenses) incurred in
connection with this Agreement and the transactions contemplated hereby.
(k) CONSTRUCTION. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction shall be applied against any party. Any
reference to any federal, state, local or foreign statute or law shall be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise.
(l) INCORPORATION OF EXHIBITS AND SCHEDULES. The exhibits and
schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(m) BULK TRANSFER LAWS. The Buyer acknowledges that the Seller
will not comply with the provisions of any bulk transfer laws of any
jurisdiction in connection with the transactions contemplated by this Agreement.
The Seller shall indemnify the Buyer for any liability with respect to any such
non-compliance.
[Remainder of page intentionally left blank.]
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(n) TRANSFER TAXES. Any and all sales, use or other transfer
taxes arising from the transactions contemplated by this Agreement will be paid
by the Seller.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
TELENETICS CORPORATION,
a California corporation
By: /s/ Michael A. Armani
------------------------------------------
Michael A. Armani, President
GREENLAND CORPORATION,
a Nevada corporation
By: /s/ Louis T. Montulli
------------------------------------------
Lou Montulli, Chief Executive Officer
<PAGE>
EXHIBIT 10(G)
[Logo]
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE--GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes
only April 9, 1999, is made by and between Del Oro Gateway Partners, L.P.
("LESSOR") and Greenland Corporation, A Nevada Corporation ("LESSEE"),
(collectively the "PARTIES," or individually a "PARTY").
1.2(a) PREMISES: That certain portion of the Project (as defined
below), including all improvements therein or to be provided by Lessor under
the terms of this Lease, commonly known by the street address of 1935 Avenida
Del Oro, Suites C & D located in the City of Oceanside, County of San Diego,
State of California, with zip code 92056, as outlined on Exhibit A attached
hereto ("PREMISES") and generally described as (describe briefly the nature of
the Premises): An Office/Industrial building known as the Del Oro Gateway
Commerce Centre, Suites C and D are approximately 11,520 square feet. In
addition to Lessee's rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as
defined in Paragraph 2.7 below) as hereinafter specified, but shall not have
any rights to the roof, exterior walls or utility raceways of the building
containing the Premises ("BUILDING") or to any other buildings in the
Project. The Premises, the Building, the Common Areas, the land upon which
they are located, along with all other buildings and improvements thereon,
are herein collectively referred to as the "PROJECT." (See also Paragraph 2.)
1.2(b) PARKING: forty (40) unreserved vehicle parking spaces
("UNRESERVED PARKING SPACES"); and zero (0) reserved vehicle parking spaces
("RESERVED PARKING SPACES"). (See also Paragraph 2.6.)
1.3 TERM: One (1) years and zero (0) months ("ORIGINAL TERM")
commencing May 1, 1999 ("COMMENCEMENT DATE") and ending April 30, 2000
("EXPIRATION DATE"). (Also see Paragraph 3.)
1.4 EARLY POSSESSION: upon execution ("EARLY POSSESSION DATE").
(See also Paragraphs 3.2 and 3.3.)
1.5 BASE RENT: $7,488.00 per month ("BASE RENT"), payable on the
first (1st) day of each month commencing May 1, 1999. (See also Paragraph 4.)
/X/ If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted.
1.6 LESSEE'S SHARE OF COMMON AREA OPERATING EXPENSES: thirty four
and 91/100 percent (34.91%) ("LESSEE'S SHARE").
1.7 BASE RENT AND OTHER MONIES PAID UPON EXECUTION:
(a) BASE RENT: $7,488.00 for the period May 1, 1999-May 31, 1999.
(b) COMMON AREA OPERATING EXPENSES: $691.20 for the period
May 1, 1999-April 30, 2000.
(c) SECURITY DEPOSIT: $7,500.00 ("SECURITY DEPOSIT"). (See also
Paragraph 5).
(d) OTHER: $______________for __________________________________.
(e) TOTAL DUE UPON EXECUTION OF THIS LEASE: $15,679.20.
1.8 AGREED USE: general office/warehouse light assembly. (See also
Paragraph 6.)
1.9 INSURING PARTY: Lessor is the "INSURING PARTY". (See also
Paragraph 8.)
1.10 REAL ESTATE BROKERS: (See also Paragraph 15.)
(a) REPRESENTATION: The following real estate brokers (the
"BROKERS") and brokerage relationships exist in this transaction (check
applicable boxes):
/X/ Business Real Estate Brokerage represents Lessor exclusively ("LESSOR'S
BROKER");
/X/ Coldwell Banker Commercial represents Lessee exclusively ("LESSEE'S
BROKER"); or
/ / Lessor responsible for commissions represents both Lessor and Lessee
("DUAL AGENCY").
(b) PAYMENT TO BROKERS: Upon execution and delivery of this
Lease by both Parties, Lessor shall pay to the Brokers the brokerage fee
agreed to in a separate written agreement (or if there is no such agreement,
the sum of ___________________ or _____ % of the total Base Rent for the
brokerage services rendered by the Brokers).
1.11 GUARANTOR. The obligations of the Lessee under this Lease are
to be guaranteed by _________________________________________________________
_____________________________________________________________________________
("GUARANTOR"). (See also Paragraph 37.)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or
Addenda consisting of Paragraphs 49 through 51 and Exhibits A through D,
all of which constitute a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all
of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of size set forth in this Lease, or
that may have been used in calculating Rent, is an approximation which the
Parties agree is reasonable and any payments based thereon are not subject to
revision whether or not the actual size is more or less.
2.2 CONDITION. Lessor shall deliver that portion of the Premises
contained within the Building ("UNIT") to Lessee broom clean and free of
debris on the Commencement Date or the Early Possession Date, whichever first
occurs ("START DATE"), and, so long as the required service contracts
described in Paragraph 7.1(b) below are obtained by Lessee and in effect
within thirty days following the Start Date, warrants that the existing
electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air
conditioning systems ("HVAC"), loading doors, if any, and all other such
elements in the Unit, other than those constructed by Lessee, shall be in
good operating condition on said date and that the structural elements of the
roof, bearing walls and foundation of the Unit shall be free of material
defects. If a non-compliance with such warranty exists as of the Start Date,
or if one of such systems or elements should malfunction or fail within the
appropriate warranty period, Lessor shall, as Lessor's sole obligation with
respect to such matter, except as otherwise provided in this Lease, promptly
after receipt of written notice from Lessee setting forth with specificity
the nature and extent of such non-compliance, malfunction or failure, rectify
same at Lessor's expense. The warranty periods shall be as follows: (i) 6
months as to the HVAC systems, and (ii) 30 days as to the remaining systems
and other elements of the Unit. If Lessee does not give Lessor the required
notice within the appropriate warranty period, correction of any such
non-compliance, malfunction or failure shall be the obligation of Lessee at
Lessee's sole cost and expense (except for the repairs to the fire sprinkler
systems, roof, foundations, and/or bearing walls - see Paragraph 7).
2.3 COMPLIANCE. Lessor warrants that the improvements on the Premises
and the Common Areas comply with the building codes that were in effect at
the time that each such improvement, or portion thereof, was constructed, and
also with all applicable laws, covenants or restrictions of record,
regulations, and ordinances in effect on the Start Date ("APPLICABLE
REQUIREMENTS"). Said warranty does not apply to the use to which Lessee will
put the Premises or to any Alterations or Utility Installations (as defined
in Paragraph 7.3(a).) made or to be made by Lessee. NOTE: LESSEE IS
RESPONSIBLE FOR DETERMINING WHETHER OR NOT THE ZONING IS APPROPRIATE
WAS LTM
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Initials Initials
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OR LESSEE'S INTENDED USE, AND ACKNOWLEDGES THAT PAST USES OF THE PREMISES MAY
NO LONGER BE ALLOWED. If the Premises do not comply with said warranty,
Lessor shall, except as otherwise provided, promptly after receipt of written
notice from Lessee setting forth with specificity the nature and extent of
such non-compliance, rectify the same at Lessor's expense. If Lessee does not
give Lessor written notice of a non-compliance with this warranty within 6
months following the Start Date, correction of that non-compliance shall be
the obligation of Lessee at Lessee's sole cost and expense. If the
Applicable Requirements are hereafter changed so as to require during the
term of this Lease the construction of an addition to or an alteration of the
Unit, Premises and/or Building, the remediation of any Hazardous Substance,
or the reinforcement or other physical modification of the Unit, Premises
and/or Building ("CAPITAL EXPENDITURE"), Lessor and Lessee shall allocate the
cost of such work as follows:
(a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures
are required as a result of the specific and unique use of the Premises by
Lessee as compared with uses by tenants in general, Lessee shall be fully
responsible for the cost thereof, provided, however, that if such Capital
Expenditure is required during the last 2 years of this Lease and the cost
thereof exceeds 6 months' Base Rent, Lessee may instead terminate this Lease
unless Lessor notifies Lessee, in writing, within 10 days after receipt of
Lessee's termination notice that Lessor has elected to pay the difference
between the actual cost thereof and the amount equal to 6 months' Base Rent.
If Lessee elects termination, Lessee shall immediately cease the use of the
Premises which requires such Capital Expenditure and deliver to Lessor
written notice specifying a termination date at least 90 days thereafter.
Such termination date shall, however, in no event be earlier than the last
day that Lessee could legally utilize the Premises without commencing such
Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific
and unique use of the Premises by Lessee (such as, governmentally mandated
seismic modifications), then Lessor and Lessee shall allocate the obligation
to pay for the portion of such costs reasonably attributable to the Premises
pursuant to the formula set out in Paragraph 7.1(d); provided, however, that
if such Capital Expenditure is required during the last 2 years of this Lease
or if Lessor reasonably determines that it is not economically feasible to
pay its share thereof, Lessor shall have the option to terminate this Lease
upon 90 days prior written notice to Lessee unless Lessee notifies Lessor, in
writing, within 10 days after receipt of Lessor's termination notice that
Lessee will pay for such Capital Expenditure. If Lessor does not elect to
terminate, and fails to tender its share of any such Capital Expenditure,
Lessee may advance such funds and deduct same, with Interest, from Rent until
Lessor's share of such costs have been fully paid. If Lessee is unable to
finance Lessor's share, or if the balance of the Rent due and payable for the
remainder of this Lease is not sufficient to fully reimburse Lessee on an
offset basis, Lessee shall have the right to terminate this Lease upon 30
days written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in
intensity of use, or modification to the Premises then, and in that event,
Lessee shall be fully responsible for the cost thereof, and Lessee shall not
have any right to terminate this Lease.
2.4 ACKNOWLEDGEMENTS. Lessee acknowledges that: (a) it has been
advised by Lessor and/or Brokers to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical, HVAC
and fire sprinkler systems, security, environmental aspects, and compliance
with Applicable Requirements and the Americans with Disabilities Act), and
their suitability for Lessee's intended use, (b) Lessee has made such
investigation as it deems necessary with reference to such matters and
assumes all responsibility therefor as the same relate to its occupancy of
the Premises, and (c) neither Lessor, Lessor's agents, nor Brokers have made
any oral or written representations or warranties with respect to said
matters other than as set forth in this Lease. In addition, Lessor
acknowledges that: (i) Brokers have made no representations, promises or
warranties concerning Lessee's ability to honor the Lease or suitability to
occupy the Premises, and (ii) it is Lessor's sole responsibility to
investigate the financial capability and/or suitability of all proposed
tenants.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.
2.6 VEHICLE PARKING. Lessee shall be entitled to use the number of
Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph
1.2(b) on those portions of the Common Areas designated from time to time by
Lessor for parking. Lessee shall not use more parking spaces than said
number. Said parking spaces shall be used for parking by vehicles no larger
than full-size passenger automobiles or pick-up trucks, herein called
"PERMITTED SIZE VEHICLES." Lessor may regulate the loading and unloading of
vehicles by adopting Rules and Regulations as provided in Paragraph 2.9. No
vehicles other than Permitted Size Vehicles may be parked in the Common Area
without the prior written permission of Lessor.
(a) Lessee shall not permit or allow any vehicles that belong to or
are controlled by Lessee or Lessee's employees, suppliers, shippers,
customers, contractors or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.
(b) Lessee shall not service or store any vehicles in the Common Areas.
(c) If Lessee permits or allows any of the prohibited activities
described in this Paragraph 2.6, then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved and charge the cost to Lessee, which
cost shall be immediately payable upon demand by Lessor.
2.7 COMMON AREAS - DEFINITION. The term "COMMON AREAS" is defined as
all areas and facilities outside the Premises and within the exterior
boundary line of the Project and interior utility raceways and installations
within the Unit that are provided and designated by the Lessor from time to
time for the general non-exclusive use of Lessor, Lessee and other tenants of
the Project and their respective employees, suppliers, shippers, customers,
contractors and invitees, including parking areas, loading and unloading
areas, trash areas, roadways, walkways, driveways and landscaped areas.
2.8 COMMON AREAS - LESSEE'S RIGHTS. Lessor grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive
right to use, in common with others entitled to such use, the Common Areas as
they exist from time to time, subject to any rights, powers, and privileges
reserved by Lessor under the terms hereof or under the terms of any rules and
regulations or restrictions governing the use of the Project. Under no
circumstances shall the right herein granted to use the Common Areas be
deemed to include the right to store any property, temporarily or
permanently, in the Common Areas. Any such storage shall be permitted only by
the prior written consent of Lessor or Lessor's designated agent, which
consent may be revoked at any time. In the event that any unauthorized
storage shall occur, then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove the
property and charge the cost to Lessee, which cost shall be immediately
payable upon demand by Lessor.
2.9 COMMON AREAS - RULES AND REGULATIONS. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and
management of the Common Areas and shall have the right, from time to time,
to establish, modify, amend and enforce reasonable rules and regulations
("RULES AND REGULATIONS") for the management, safety, care, and cleanliness
of the grounds, the parking and unloading of vehicles and the preservation of
good order, as well as for the convenience of other occupants or tenants of
the Building and the Project and their invitees. Lessee agrees to abide by
and conform to all such Rules and Regulations, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform. Lessor shall not be responsible to Lessee for the non-compliance
with said Rules and Regulations by other tenants of the Project.
2.10 COMMON AREAS - CHANGES. Lessor shall have the right, in Lessor's
sole discretion, from time to time:
(a) To make changes to the Common Areas, including, without limitation,
changes in the location, size, shape and number of driveways, entrances,
parking spaces, parking areas, loading and unloading areas, ingress, egress,
direction of traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance
purposes so long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Project to be
a part of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project, or any portion thereof;
and
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(f) To do and perform such other acts and make such other changes in, to
or with respect to the Common Areas and Project as Lessor may, in the
exercise of sound business judgment, deem to be appropriate.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent
shall be abated for the period of such early possession. All other terms of
this Lease (including but not limited to the obligations to pay Lessee's
Share of Common Area Operating Expenses, Real Property Taxes and insurance
premiums and to maintain the Premises) shall, however, be in effect during
such period. Any such early possession shall not affect the Expiration Date.
3.3 DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease. Lessee shall not,
however, be obligated to pay Rent or perform its other obligations until it
receives possession of the Premises. If possession is not delivered within
60 days after the Commencement Date, Lessee may, at its option, by notice in
writing within 10 days after the end of such 60 day period, cancel this
Lease, in which event the Parties shall be discharged from all obligations
hereunder. If such written notice is not received by Lessor within said 10
day period, Lessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Lessee by the Start Date and
Lessee does not terminate this Lease, as aforesaid, any period of rent
abatement that Lessee would otherwise have enjoyed shall run from the date of
delivery of possession and continue for a period equal to what Lessee would
otherwise have enjoyed under the terms hereof, but minus any days of delay
caused by the acts or omissions of Lessee. If possession of the Premises is
not delivered within 4 months after the Commencement Date, this Lease shall
terminate unless other agreements are reached between Lessor and Lessee, in
writing.
3.4 LESSEE COMPLIANCE. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its
obligation to provide evidence of insurance (Paragraph 8.5). Pending
delivery of such evidence, Lessee shall be required to perform all of its
obligations under this Lease from and after the Start Date, including the
payment of Rent, notwithstanding Lessor's election to withhold possession
pending receipt of such evidence of insurance. Further, if Lessee is
required to perform any other conditions prior to or concurrent with the
Start Date, the Start Date shall occur but Lessor may elect to withhold
possession until such conditions are satisfied.
4. RENT.
4.1 RENT DEFINED. All monetary obligations of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to be
rent ("Rent").
4.2 COMMON AREA OPERATING EXPENSES. Lessee shall pay to Lessor during
the term hereof, in addition to the Base Rent, Lessee's Share (as specified
in Paragraph 1.6) of all Common Area Operating Expenses, as hereinafter
defined, during each calendar year of the term of this Lease, in accordance
with the following provisions:
(a) "COMMON AREA OPERATING EXPENSES" are defined, for purposes of this
Lease, as all costs incurred by Lessor relating to the ownership and
operation of the Project, including, but not limited to the following:
(i) The operation, repair and maintenance, in neat, clean,
good order and condition, but not the replacement (see subparagraph(e)), of
the following:
(aa) The Common Areas and Common Area improvements,
including parking areas, loading and unloading areas, trash areas, roadways,
parkways, walkways, driveways, landscaped areas, bumpers, irrigation systems,
Common Area lighting facilities, fences and gates, elevators, roofs, and roof
drainage systems.
(bb) Exterior signs and any tenant directories.
(cc) Any fire sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to
service the Common Areas and any utilities not separately metered.
(iii) Trash disposal, pest control services, property
management, security services, and the costs of any environmental inspections.
(iv) Reserves set aside for maintenance and repair of Common
Areas.
(v) Any increase above the Base Real Property Taxes (as
defined in Paragraph 10).
(vi) Any "Insurance Cost increase" (as defined in Paragraph 8).
(vii) Any deductible portion of an insured loss concerning the
Building or the Common Areas.
(viii) The cost of any Capital Expenditure to the Building or the
Project not covered under the provisions of Paragraph 2.3 provided; however,
that Lessor shall allocate the cost of any such Capital Expenditure over a 12
year period and Lessee shall not be required to pay more than Lessee's Share
of 1/144th of the cost of such Capital Expenditure in any given month.
(ix) Any other services to be provided by Lessor that are stated
elsewhere in this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Unit, the Building or to any other building
in the Project or to the operation, repair and maintenance thereof, shall be
allocated entirely to such Unit, Building, or other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not
specifically attributable to the Building or to any other building or to the
operation, repair and maintenance thereof, shall be equitably allocated by
Lessor to all buildings in the Project.
(c) The inclusion of the improvements, facilities and services set forth
in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Project already has the same, Lessor already provides the
services, or Lessor has agreed elsewhere in this Lease to provide the same or
some of them.
(d) Lessee's Share of Common Area Operating Expenses shall be payable by
Lessee within 10 days after a reasonably detailed statement of actual
expenses is presented to Lessee. At Lessor's option, however, an amount may
be estimated by Lessor from time to time of Lessee's Share of annual Common
Area Operating Expenses and the same shall be payable monthly or quarterly,
as Lessor shall designate, during each 12 month period of the Lease term, on
the same day as the Base Rent is due hereunder. Lessor shall deliver to
Lessee within 60 days after the expiration of each calendar year a reasonably
detailed statement showing Lessee's Share of the actual Common Area Operating
Expenses incurred during the preceding year. If Lessee's payments under this
Paragraph 4.2(d) during the preceding year exceed Lessee's Share as indicated
on such statement, Lessor shall be credited the amount of such over-payment
against Lessee's Share of Common Area Operating Expenses next becoming due.
If Lessee's payments under this Paragraph 4.2(d) during the preceding year
were less than Lessee's Share as indicated on such statement, Lessee shall
pay to Lessor the amount of the deficiency within 10 days after delivery by
Lessor to Lessee of the statement.
(e) When a capital component such as the roof, foundations, exterior
walls or a Common Area capital improvement, such as the parking lot paving,
elevators, fences, etc. requires replacement, rather than repair or
maintenance, Lessor shall, at Lessor's expense, be responsible for such
replacement. Such expenses and/or costs are not Common Area Operating
Expenses.
4.3 PAYMENT. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction
(except as specifically permitted in this Lease), on or before the day on
which it is due. Rent for any period during the term hereof which is for less
than one full calendar month shall be prorated based upon the actual number
of days of said month. Payment of Rent shall be made to Lessor at its address
stated herein or to such other persons or place as Lessor may from time to
time designate in writing. Acceptance of a payment which is less than the
amount then due shall not be a waiver of Lessor's rights to the balance of
such Rent, regardless of Lessor's endorsement of any check so stating. In the
event that any check, draft, or other instrument of payment given by Lessee
to Lessor is dishonored for any reason, Lessee agrees to pay to Lessor the
sum of $25.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise
Defaults under this Lease, Lessor may use, apply or retain all or any portion
of said Security Deposit for the payment of any amount due Lessor or to
reimburse or compensate Lessor for any liability, expense, loss or damage
which Lessor may suffer or incur by reason thereof. If Lessor uses or applies
all or any portion of the Security Deposit, Lessee shall within 10 days after
written request therefor deposit monies with Lessor sufficient to restore
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said Security Deposit to the full amount required by this Lease. If the Base
Rent increases during the term of this Lease, Lessee shall, upon written
request from Lessor, deposit additional monies with Lessor so that the total
amount of the Security Deposit shall at all times bear the same proportion to
the increased Base Rent as the initial Security Deposit bore to the initial
Base Rent. Should the Agreed Use be amended to accommodate a material change
in the business of Lessee or to accommodate a sublessee or assignee, Lessor
shall have the right to increase the Security Deposit to the extent
necessary, in Lessor's reasonable judgment, to account for any increased wear
and tear that the Premises may suffer as a result thereof. If a change in
control of Lessee occurs during this Lease and following such change the
financial condition of Lessee is, in Lessor's reasonable judgment,
significantly reduced, Lessee shall deposit such additional monies with
Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on such change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within 14 days after the expiration or termination of this
Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent,
and otherwise within 30 days after the Premises have been vacated pursuant to
Paragraph 7.4(c) below, Lessor shall return that portion of the Security
Deposit not used or applied by Lessor. No part of the Security Deposit shall
be considered to be held in trust, to bear interest or to be prepayment for
any monies to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the Agreed
Use, or any other legal use which is reasonably comparable thereto, and for
no other purpose. Lessee shall not use or permit the use of the Premises in a
manner that is unlawful, creates damage, waste or a nuisance, or that
disturbs occupants of or causes damage to neighboring premises or properties.
Lessor shall not unreasonably withhold or delay its consent to any written
request for a modification of the Agreed Use, so long as the same will not
impair the structural integrity of the improvements on the Premises or the
mechanical or electrical systems therein, and/or is not significantly more
burdensome to the Premises. If Lessor elects to withhold consent, Lessor
shall within 7 days after such request give written notification of same,
which notice shall include an explanation of Lessor's objections to the
change in the Agreed Use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, or waste
whose presence, use, manufacture, disposal, transportation, or release,
either by itself or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety
or welfare, the environment or the Premises, (ii) regulated or monitored by
any governmental authority, or (iii) a basis for potential liability of
Lessor to any governmental agency or third party under any applicable statute
or common law theory. Hazardous Substances shall include, but not be limited
to, hydrocarbons, petroleum, gasoline, and/or crude oil or any products,
by-products or fractions thereof. Lessee shall not engage in any activity in
or on the Premises which constitutes a Reportable Use of Hazardous Substances
without the express prior written consent of Lessor and timely compliance (at
Lessee's expense) with all Applicable Requirements. "REPORTABLE USE" shall
mean (i) the installation or use of any above or below ground storage tank,
(ii) the generation, possession, storage, use, transportation, or disposal of
a Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with,
any governmental authority, and/or (iii) the presence at the Premises of a
Hazardous Substance with respect to which any Applicable Requirements
requires that a notice be given to persons, entering or occupying the
Premises or neighboring properties. Notwithstanding the foregoing, Lessee may
use any ordinary and customary materials reasonably required to be used in
the normal course of the Agreed Use, so long as such use is in compliance
with all Applicable Requirements, is not a Reportable Use, and does not
expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In
addition, Lessor may condition its consent to any Reportable Use upon
receiving such additional assurances as Lessor reasonably deems necessary to
protect itself, the public, the Premises and/or the environment against
damage, contamination, injury and/or liability, including, but not limited
to, the installation (and removal on or before Lease expiration or
termination) of protective modifications (such as concrete encasements)
and/or increasing the Security Deposit.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause
to believe, that a Hazardous Substance has come to be located in, on, under
or about the Premises, other than as previously consented to by Lessor,
Lessee shall immediately give written notice of such fact to Lessor, and
provide Lessor with a copy of any report, notice, claim or other
documentation which it has concerning the presence of such Hazardous
Substance.
(c) LESSEE REMEDIATION. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee's expense, take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any
Hazardous Substance brought onto the Premises during the term of this Lease,
by or for Lessee, or any third party.
(d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless
from and against any and all loss of rents and/or damages, liabilities,
judgments, claims, expenses, penalties, and attorneys' and consultants' fees
arising out of or involving any Hazardous Substance brought onto the Premises
by or for Lessee, or any third party (provided, however, that Lessee shall
have no liability under this Lease with respect to underground migration of
any Hazardous Substance under the Premises from areas outside of the
Project). Lessee's obligations shall include, but not be limited to, the
effects of any contamination or injury to person, property or the environment
created or suffered by Lessee, and the cost of investigation, removal,
remediation, restoration and/or abatement, and shall survive the expiration or
termination of this Lease. No termination, cancellation or release agreement
entered into by Lessor and Lessee shall release Lessee from its obligations
under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such agreement.
(e) LESSOR INDEMNIFICATION. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the
cost of remediation, which existed as a result of Hazardous Substances on the
Premises prior to the Start Date or which are caused by the gross negligence
or willful misconduct of Lessor, its agents or employees. Lessor's
obligations, as and when required by the Applicable Requirements, shall
include, but not be limited to, the cost of investigation, removal,
remediation, restoration and/or abatement, and shall survive the expiration
or termination of this Lease.
(f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures
required by governmental entities having jurisdiction with respect to the
existence of Hazardous Substances on the Premises prior to the Start Date,
unless such remediation measure is required as a result of Lessee's use
(including "Alterations", as defined in paragraph 7.3(a) below) of the
Premises, in which event Lessee shall be responsible for such payment. Lessee
shall cooperate fully in any such activities at the request of Lessor,
including allowing Lessor and Lessor's agents to have reasonable access to the
Premises at reasonable times in order to carry out Lessor's investigative and
remedial responsibilities.
(g) LESSOR TERMINATION OPTION. If a Hazardous Substance Condition
(see Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is
legally responsible therefor (in which case Lessee shall make the
investigation and remediation thereof required by the Applicable Requirements
and this Lease shall continue in full force and effect, but subject to
Lessor's rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at
Lessor's option, either (i) investigate and remediate such Hazardous
Substance Condition, if required, as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect,
or (ii) if the estimated cost to remediate such condition exceeds 12 times
the then monthly Base Rent or $100,000, whichever is greater, give written
notice to Lessee, within 30 days after receipt by Lessor of knowledge of the
occurrence of such Hazardous Substance Condition, of Lessor's desire to
terminate this Lease as of the date 60 days following the date of such
notice. In the event Lessor elects to give a termination notice, Lessee may,
within 10 days thereafter, give written notice to Lessor of Lessee's
commitment to pay the amount by which the cost of the remediation of such
Hazardous Substance Condition exceeds an amount equal to 12 times the then
monthly Base Rent or $100,000, whichever is greater. Lessee shall provide
Lessor with said funds or satisfactory assurance thereof within 30 days
following such commitment. In such event, this Lease shall continue in full
force and effect, and Lessor shall proceed to make such remediation as soon
as reasonably possible after the required funds are available. If Lessee does
not give such notice and provide the required funds or assurance thereof
within the time provided, this Lease shall terminate as of the date specified
in Lessor's notice of termination.
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6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense,
fully, diligently and in a timely manner, materially comply with all
Applicable Requirements, the requirements of any applicable fire insurance
underwriter or rating bureau, and the recommendations of Lessor's engineers
and/or consultants which relate in any manner to the Premises, without regard
to whether said requirements are now in effect or become effective after the
Start Date. Lessee shall, within 10 days after receipt of Lessor's written
request, provide Lessor with copies of all permits and other documents, and
other information evidencing Lessee's compliance with any Applicable
Requirements specified by Lessor, and shall immediately upon receipt, notify
Lessor in writing (with copies of any documents involved) of any threatened
or actual claim, notice, citation, warning, complaint or report pertaining to
or involving the failure of Lessee or the Premises to comply with any
Applicable Requirements.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's "LENDER" (as defined in
Paragraph 30) and consultants shall have the right to enter into Premises at
any time, in the case of an emergency, and otherwise at reasonable times, for
the purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease. The cost of any such inspections shall
be paid by Lessor, unless a violation of Applicable Requirements, or a
contamination is found to exist or be imminent, or the inspection is
requested or ordered by a governmental authority. In such case, Lessee shall
upon request reimburse Lessor for the cost of such inspection, so long as
such inspection is reasonably related to the violation or contamination.
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) IN GENERAL. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable
Requirements), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee's sole expense, keep the Premises,
Utility Installations (intended for Lessee's exclusive use, no matter where
located), and Alterations in good order, condition and repair (whether or not
the portion of the Premises requiring repairs, or the means of repairing the
same, are reasonably or readily accessible to Lessee, and whether or not the
need for such repairs occurs as a result of Lessee's use, any prior use, the
elements or the age of such portion of the Premises), including, but not
limited to, all equipment or facilities, such as plumbing, HVAC equipment,
electrical, lighting facilities, boilers, pressure vessels, fixtures,
interior walls, interior surfaces of exterior walls, ceilings, floors,
windows, doors, plate glass, and skylights but excluding any items which are
the responsibility of Lessor pursuant to Paragraph 7.2. Lessee, in keeping
the Premises in good order, condition and repair, shall exercise and perform
good maintenance practices, specifically including the procurement and
maintenance of the service contracts required by Paragraph 7.1(b) below.
Lessee's obligations shall include restorations, replacements or renewals
when necessary to keep the Premises and all improvements thereon or a part
thereof in good order, condition and state of repair.
(b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in the
maintenance of the following equipment and improvements, if any, if and when
installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure
vessels, (iii) clarifiers, and (iv) any other equipment, if reasonably
required by Lessor. However, Lessor reserves the right, upon notice to
Lessee, to procure and maintain any or all of such service contracts, and if
Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the cost
thereof.
(c) FAILURE TO PERFORM. If Lessee fails to perform Lessee's
obligations under this Paragraph 7.1, Lessor may enter upon the Premises after
10 days' prior written notice to Lessee (except in the case of an emergency,
in which case no notice shall be required), perform such obligations on
Lessee's behalf, and put the Premises in good order, condition and repair,
and Lessee shall promptly reimburse Lessor for the cost thereof.
(d) REPLACEMENT. Subject to Lessee's indemnification of Lessor as
set forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if an item described in Paragraph 7.1(b) cannot be repaired other
than at a cost which is in excess of 50% of the cost of replacing such item,
then such item shall be replaced by Lessor, and the cost thereof shall be
prorated between the Parties and Lessee shall only be obligated to pay, each
month during the remainder of the term of this Lease, on the date on which
Base Rent is due, an amount equal to the product of multiplying the cost of
such replacement by a fraction, the numerator of which is one, and the
denominator of which is 144 (i.e. 1/144th of the cost per month). Lessee
shall pay interest on the unamortized balance at a rate that is
commercially reasonable in the judgment of Lessor's accountants. Lessee may,
however, prepay its obligation at any time.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use),
7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation),
Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in
good order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire sprinkler system,
Common Area fire alarm and/or smoke detection systems, fire hydrants, parking
lots, walkways, parkways, driveways, landscaping, fences, signs and utility
systems serving the Common Areas and all parts thereof, as well as providing
the services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or
interior surfaces of exterior walls nor shall Lessor be obligated to
maintain, repair or replace windows, doors or plate glass of the Premises.
Lessee expressly waives the benefit of any statute now or hereafter in effect
to the extent it is inconsistent with the terms of this Lease.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS. The term "UTILITY INSTALLATIONS" refers to all
floor and window coverings, air lines, power panels, electrical distribution,
security and fire protection systems, communication systems, lighting
fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The
term "TRADE FIXTURES" shall mean Lessee's machinery and equipment that can be
removed without doing material damage to the Premises. The term "ALTERATIONS"
shall mean any modification of the improvements, other than Utility
Installations or Trade Fixtures, whether by addition or deletion. "LESSEE
OWNED ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as Alterations
and/or Utility Installations made by Lessee that are not yet owned by Lessor
pursuant to Paragraph 7.4(a).
(b) CONSENT. Lessee shall not make any Alterations or Utility
Installations to the Premises without Lessor's prior written consent. Lessee
may, however, make non-structural Utility Installations to the interior of
the Premises (excluding the roof) without such consent but upon notice to
Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof or any existing walls, and the
cumulative cost thereof during this Lease as extended does not exceed a sum
equal to 3 month's Base Rent in the aggregate or a sum equal to one month's
Base Rent in any one year. Notwithstanding the foregoing, Lessee shall not
make or permit any roof penetrations and/or install anything on the roof
without the prior written approval of Lessor. Lessor may, as a precondition
to granting such approval, require Lessee to utilize a contractor chosen
and/or approved by Lessor. Any Alterations or Utility Installations that
Lessee shall desire to make and which require the consent of the Lessor shall
be presented to Lessor in written form with detailed plans. Consent shall be
deemed conditioned upon Lessee's: (i) acquiring all applicable governmental
permits, (ii) furnishing Lessor with copies of both the permits and the plans
and specifications prior to commencement of the work, and (iii) compliance
with all conditions of said permits and other Applicable Requirements in a
prompt and expeditious manner. Any Alterations or Utility Installations shall
be performed in a workmanlike manner with good and sufficient materials.
Lessee shall promptly upon completion furnish Lessor with as-built plans and
specifications. For work which costs an amount in excess of one month's Base
Rent, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to 150% of the estimated cost of such
Alteration or Utility Installation and/or upon Lessee's posting an additional
Security Deposit with Lessor.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured by
any mechanic's or materialmen's lien against the Premises or any interest
therein. Lessee shall give Lessor not less than 10 days notice prior to the
commencement of any work in, on or about the Premises, and Lessor shall have
the right to post notices of non-responsibility. If Lessee shall contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same
and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof. If Lessor shall require, Lessee shall
furnish a surety bond in an amount equal to 150% of the amount of such
contested lien, claim or demand, indemnifying Lessor against liability for
the same. If Lessor elects to participate in any such action, Lessee shall
pay Lessor's attorneys' fees and costs.
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7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided, all Alterations and Utility Installations
made by Lessee shall be the property of Lessee, but considered a part of the
Premises. Lessor may, at any time, elect in writing to be the owner of all or
any specified part of the Lessee Owned Alterations and Utility Installations.
Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination
of this Lease, become the property of Lessor and be surrendered by Lessee
with the Premises.
(b) REMOVAL. By delivery to Lessee of written notice from Lessor not
earlier than 90 and not later than 30 days prior to the end of the term of
this Lease, Lessor may require that any or all Lessee Owned Alterations or
Utility Installations be removed by the expiration or termination of this
Lease. Lessor may require the removal at any time of all or any part of any
Lessee Owned Alterations or Utility Installations made without the required
consent.
(c) SURRENDER; RESTORATION. Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof broom clean and free of debris, and
in good operating order, condition and state of repair, ordinary wear and
tear excepted. "Ordinary wear and tear" shall not include any damage or
deterioration that would have been prevented by good maintenance practice.
Notwithstanding the foregoing, if this Lease is for 12 months or less, then
Lessee shall surrender the Premises in the same condition as delivered to
Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee
shall repair any damage occasioned by the installation, maintenance or
removal of Trade Fixtures, Lessee owned Alterations and/or Utility
Installations, furnishings, and equipment as well as the removal of any
storage tank installed by or for Lessee: Lessee shall also completely remove
from the Premises any and all Hazardous Substances brought onto the Premises
by or for Lessee, or any third party (except Hazardous Substances which were
deposited via underground migration from areas outside of the Project) even
if such removal would require Lessee to perform or pay for work that exceeds
statutory requirements. Trade Fixtures shall remain the property of Lessee
and shall be removed by Lessee. The failure by Lessee to timely vacate the
Premises pursuant to this Paragraph 7.4(c) without the express written
consent of Lessor shall constitute a holdover under the provisions of
Paragraph 26 below.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES.
(a) As used herein, the term "INSURANCE COST INCREASE" is defined as
any increase in the actual cost of the insurance applicable to the Building
and/or the Project and required to be carried by Lessor, pursuant to
Paragraphs 8.2(b), 8.3(a) and 8.3(b), ("REQUIRED INSURANCE"), over and above
the Base Premium, as hereinafter defined, calculated on an annual basis.
Insurance Cost Increase shall include, but not be limited to, requirements of
the holder of a mortgage or deed of trust covering the Premises, Building
and/or Project, increased valuation of the Premises, Building and/or Project,
and/or a general premium rate increase. The term Insurance Cost Increase
shall not, however, include any premium increases resulting from the nature
of the occupancy or any other tenant of the Building. If the parties insert a
dollar amount in Paragraph 1.9, such amount shall be considered the "BASE
PREMIUM." The Base Premium shall be the annual premium applicable to the 12
month period immediately preceding the Start Date. If, however, the Project
was not insured for the entirety of such 12 month period, then the Base
Premium shall be the lowest annual premium reasonably obtainable for the
Required Insurance as of the Start Date, assuming the most nominal use
possible of the Building. In no event, however, shall Lessee be responsible
for any portion of the premium cost attributable to liability insurance
coverage in excess of $2,000,000 procured under Paragraph 8.2(b).
(b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant
to Paragraph 4.2. Premiums for policy periods commencing prior to, or
extending beyond, the term of this Lease shall be prorated to coincide with
the corresponding Start Date or Expiration Date.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability policy of insurance protecting Lessee and Lessor
as an additional insured against claims for bodily injury, personal injury
and property damage based upon or arising out of the ownership, use,
occupancy or maintenance of the Premises and all areas appurtenant thereto.
Such insurance shall be on an occurrence basis providing single limit
coverage in an amount not less than $1,000,000 per occurrence with an annual
aggregate of not less than $2,000,000, an "Additional Insured-Managers or
Lessors of Premises Endorsement" and contain the "Amendment of the Pollution
Exclusion Endorsement" for damage caused by heat, smoke or fumes from a
hostile fire. The policy shall not contain any intra-insured exclusions as
between insured persons or organizations, but shall include coverage for
liability assumed under this Lease as an "INSURED CONTRACT" for the
performance of Lessee's indemnity obligations under this Lease. The limits of
said insurance shall not, however, limit the liability of Lessee nor relieve
Lessee of any obligation hereunder. All insurance carried by Lessee shall be
primary to and not contributory with any similar insurance carried by Lessor,
whose insurance shall be considered excess insurance only.
(b) CARRIED BY LESSOR. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named as
an additional insured therein.
8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. Lessor shall obtain and keep in force
a policy or policies of insurance in the name of Lessor, with loss payable to
Lessor, any ground-lessor, and to any Lender insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, or the
amount required by any Lender, but in no event more than the commercially
reasonable and available insurable value thereof. Lessee Owned Alterations
and Utility Installations, Trade Fixtures, and Lessee's personal property
shall be insured by Lessee under Paragraph 8.4. If the coverage is available
and commercially appropriate, such policy or policies shall insure against
all risks of direct physical loss or damage (except the perils of flood
and/or earthquake unless required by a Lender), including coverage for debris
removal and the enforcement of any Applicable Requirements requiring the
upgrading, demolition, reconstruction or replacement of any portion of the
Premises as the result of a covered loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause,
waiver of subrogation, and inflation guard protection causing an increase in
the annual property insurance coverage amount by a factor of not less than
the adjusted U.S. Department of Labor Consumer Price Index for All Urban
Consumers for the city nearest to where the Premises are located. If such
insurance coverage has a deductible clause, the deductible amount shall not
exceed $1,000 per occurrence.
(b) RENTAL VALUE. Lessor shall also obtain and keep in force a
policy or policies in the name of Lessor with loss payable to Lessor and any
Lender, insuring the loss of the full Rent for one year with an extended
period of indemnity for an additional 180 days ("RENTAL VALUE INSURANCE").
Said insurance shall contain an agreed valuation provision in lieu of any
coinsurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected Rent otherwise payable by Lessee, for the next 12 month
period.
(c) ADJACENT PREMISES. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas
or other buildings in the Project if said increase is caused by Lessee's
acts, omissions, use or occupancy of the Premises.
(d) LESSEE'S IMPROVEMENTS. Since Lessor is the Insuring Party,
Lessor shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.
8.4 LESSEE'S PROPERTY; BUSINESS INTERRUPTION INSURANCE.
(a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee
Owned Alterations and Utility Installations. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for
the replacement of personal property, Trade Fixtures and Lessee Owned
Alterations and Utility Installations. Lessee shall provide Lessor with
written evidence that such insurance is in force.
(c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.
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8.5 INSURANCE POLICIES. Insurance required herein shall be by companies
duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, as set forth in the most current
issue of "Best's Insurance Guide" or such other rating as may be required by
a Lender. Lessee shall not do or permit to be done anything which invalidates
the required insurance policies. Lessee shall, prior to the Start Date,
deliver to Lessor certified copies of policies of such insurance or
certificates evidencing the existence and amounts of the required insurance.
No such policy shall be cancelable or subject to modification except after 30
days prior written notice to Lessor. Lessee shall, at least 30 days prior to
the expiration of such policies, furnish Lessor with evidence of renewals or
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand. Such policies shall be for a term of
at least one year, or the length of the remaining term of this Lease,
whichever is less. If either Party shall fail to procure and maintain the
insurance required to be carried by it, the other Party may, but shall not be
required to, procure and maintain the same.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and
waive their entire right to recover damages against the other, for loss of or
damage to its property arising out of or incident to the perils required to
be insured against herein. The effect of such releases and waivers is not
limited by the amount of insurance carried or required, or by any deductibles
applicable hereto. The Parties agree to request to have their respective
property damage insurance carriers waive any right to subrogation that such
companies may have against Lessor or Lessee, as the case may be, so long as
the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's gross negligence or willful
misconduct, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor, partners
and Lenders, from and against any and all claims, loss of rents and/or
damages, liens, judgments, penalties, attorneys' and consultants' fees,
expenses and/or liabilities arising out of, involving, or in connection with,
the use and/or occupancy of the Premises by Lessee. If any action or
proceeding is brought against Lessor by reason of any of the foregoing
matters, Lessee shall upon notice defend the same at Lessee's expense by
counsel reasonably satisfactory to Lessor and Lessor shall cooperate with
Lessee in such defense. Lessor need not have first paid any such claim in
order to be defended or indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property
of Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by
or results from fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other
cause, whether the said injury or damage results from conditions arising upon
the Premises or upon other portions of the Building, or from other sources or
places. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant of Lessor nor from the failure of Lessor to
enforce the provisions of any other lease in the Project. Notwithstanding
Lessor's negligence or breach of this Lease, Lessor shall under no
circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.
9. DAMAGE OR DESTRUCTION
9.1 DEFINITIONS
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, which can reasonably be repaired in 3 months or less
from the date of the damage or destruction, and the cost thereof does not
exceed a sum equal to 6 month's Base Rent. Lessor shall notify Lessee in
writing within 30 days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction
to the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations and Trade Fixtures, which cannot reasonably be repaired
in 3 months or less from the date of the damage or destruction and/or the
cost thereof exceeds a sum equal to 6 month's Base Rent. Lessor shall notify
Lessee in writing within 30 days from the date of the damage or destruction
as to whether or not the damage is Partial or Total.
(c) "INSURED LOSS" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which was caused by an event required to be
covered by the insurance described in Paragraph 8.3(a), irrespective of any
deductible amounts or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.
9.2 PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage that is
an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and
Utility Installations) as soon as reasonably possible and this Lease shall
continue in full force and effect; provided, however, that Lessee shall, at
Lessor's election, make the repair of any damage or destruction the total
cost to repair of which is $5,000 or less, and, in such event, Lessor shall
make any applicable insurance proceeds available to Lessee on a reasonable
basis for that purpose. Notwithstanding the foregoing, if the required
insurance was not in force or the insurance proceeds are not sufficient to
effect such repair, the Insuring Party shall promptly contribute the shortage
in proceeds as and when required to complete said repairs. In the event,
however, such shortage was due to the fact that, by reason of the unique
nature of the improvements, full replacement cost insurance coverage was not
commercially reasonable and available, Lessor shall have no obligation to pay
for the shortage in insurance proceeds or to fully restore the unique aspects
of the Premises unless Lessee provides Lessor with the funds to cover same,
or adequate assurance thereof, within 10 days following receipt of written
notice of such shortage and request therefor. If Lessor receives said funds
or adequate assurance thereof within said 10 day period, the party
responsible for making the repairs shall complete them as soon as reasonably
possible and this Lease shall remain in full force and effect. If such funds
or assurance are not received, Lessor may nevertheless elect by written
notice to Lessee within 10 days thereafter to: (i) make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect, or
(ii) have this Lease terminate 30 days thereafter. Lessee shall not be
entitled to reimbursement of any funds contributed by Lessee to repair any
such damage or destruction. Premises Partial Damage due to flood or
earthquake shall be subject to Paragraph 9.3, notwithstanding that there may
be some insurance coverage, but the net proceeds of any such insurance shall
be made available for the repairs if made by either Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage that
is not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee
within 30 days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective 60 days following the date of
such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within 10 days after receipt of the termination notice to give
written notice to Lessor of Lessee's commitment to pay for the repair of such
damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within 30 days after making such
commitment. In such event this Lease shall continue in full force and effect,
and Lessor shall proceed to make such repairs as soon as reasonably possible
after the required funds are available. If Lessee does not make the required
commitment, this Lease shall terminate as of the date specified in the
termination notice.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate 60 days
following such Destruction. If the damage or destruction was caused by the
gross negligence or willful misconduct of Lessee, Lessor shall have the right
to recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last 6 months of
this Lease there is damage for which the cost to repair exceeds one month's
Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease
effective 60 days following the date of occurrence of such damage by giving a
written termination notice to Lessee within 30 days after the date of
occurrence of such damage. Notwithstanding the foregoing, if Lessee at that
time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option
and (b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is 10 days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon
which such option
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expires. If Lessee duly exercises such option during such period and provides
Lessor with funds (or adequate assurance thereof) to cover any shortage in
insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease
shall continue in full force and effect. If Lessee fails to exercise such
option and provide such funds or assurance during such period, then this
Lease shall terminate on the date specified in the termination notice and
Lessee's option shall be extinguished.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) ABATEMENT. In the event of Premises Partial Damage or Premises
Total Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period
required for the repair, remediation or restoration of such damage shall be
abated in proportion to the degree to which Lessee's use of the Premises is
impaired, but not to exceed the proceeds received from the Rental Value
insurance. All other obligations of Lessee hereunder shall be performed by
Lessee, and Lessor shall have no liability for any such damage, destruction,
remediation, repair or restoration except as provided herein.
(b) REMEDIES. If Lessor shall be obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such
repair or restoration within 90 days after such obligation shall accrue,
Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to any Lenders of which Lessee
has actual notice, of Lessee's election to terminate this Lease on a date not
less than 60 days following the giving of such notice. If Lessee gives such
notice and such repair or restoration is not commenced within 30 days
thereafter, this Lease shall terminate as of the date specified in said
notice. If the repair or restoration is commenced within such 30 days, this
Lease shall continue in full force and effect. "Commence" shall mean either
the unconditional authorization of the preparation of the required plans, or
the beginning of the actual work on the Premises, whichever first occurs.
9.7 TERMINATION; ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by
Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of
Lessee's Security Deposit as has not been, or is not then required to be,
used by Lessor.
9.8 WAIVE STATUTES. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the Premises with
respect to the termination of this Lease and hereby waive the provisions of
any present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 DEFINITIONS.
(a) "REAL PROPERTY TAXES." As used herein, the term "REAL PROPERTY
TAXES" shall include any form of assessment; real estate, general, special,
ordinary or extraordinary, or rental levy or tax (other than inheritance,
personal income or estate taxes); improvement bond; and/or license fee
imposed upon or levied against any legal or equitable interest of Lessor in
the Project, Lessor's right to other income therefrom, and/or Lessor's
business of leasing, by any authority having the direct or indirect power to
tax and where the funds are generated with reference to the Project address
and where the proceeds so generated are to be applied by the city, county or
other local taxing authority of a jurisdiction within which the Project is
located. The term "Real Property Taxes" shall also include any tax, fee,
levy, assessment or charge, or any increase therein, imposed by reason of
events occurring during the term of this Lease, including but not limited to,
a change in the ownership of the Project or any portion thereof or a change
in the improvements thereon.
(b) "BASE REAL PROPERTY TAXES." As used herein, the term "BASE
REAL PROPERTY TAXES" shall be the amount of Real Property Taxes, which are
assessed against the Premises, Building, Project or Common Areas in the
calendar year during which the Lease is executed. In calculating Real
Property Taxes for any calendar year, the Real Property Taxes for any real
estate tax year shall be included in the calculation of Real Property Taxes
for such calendar year based upon the number of days which such calendar year
and tax year have in common.
10.2 PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes
applicable to the Project, and except as otherwise provided in Paragraph 10.3,
any increases in such amounts over the Base Real Property Taxes shall be
included in the calculation of Common Area Operating Expenses in accordance
with the provisions of Paragraph 4.2.
10.3 ADDITIONAL IMPROVEMENTS. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Project by
other lessees or by Lessor for the exclusive enjoyment of such other lessees.
Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor
at the time Common Area Operating Expenses are payable under Paragraph 4.2,
the entirety of any increase in Real Property Taxes if assessed solely by
reason of Alterations, Trade Fixtures or Utility Installations placed upon
the Premises by Lessee or at Lessee's request.
10.4 JOINT ASSESSMENT. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of
the Real Property Taxes for all of the land and improvements included within
the tax parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable determination
thereof, in good faith, shall be conclusive.
10.5 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal
property of Lessee contained in the Premises. When possible, Lessee shall
cause its Lessee Owned Alterations and Utility Installations, Trade Fixtures,
furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
property shall be assessed with Lessor's real property, Lessee shall pay
Lessor the taxes attributable to Lessee's property within 10 days after
receipt of a written statement setting forth the taxes applicable to Lessee's
property.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. Notwithstanding the provisions of
Paragraph 4.2, if at any time in Lessor's sole judgment, Lessor determines
that Lessee is using a disproportionate amount of water, electricity or other
commonly metered utilities, or that Lessee is generating such a large volume
of trash as to require an increase in the size of the dumpster and/or an
increase in the number of times per month that the dumpster is emptied, then
Lessor may increase Lessee's Base Rent by an amount equal to such increased
costs.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "ASSIGN OR ASSIGNMENT") or
sublet all or any part of Lessee's interest in this Lease or in the Premises
without Lessor's prior written consent.
(b) A change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of 25% or
more of the voting control of Lessee shall constitute a change in control for
this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment
or hypothecation of this Lease or Lessee's assets occurs, which results or
will result in a reduction of the Net Worth of Lessee by an amount greater
than 25% of such Net Worth as it was represented at the time of the execution
of this Lease or at the time of the most recent assignment to which Lessor
has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, whichever was or is greater, shall
be considered an assignment of this Lease to which Lessor may withhold its
consent. "NET WORTH OF LESSEE" shall mean the net worth of Lessee (excluding
any guarantors) established under generally accepted accounting principles.
(d) An assignment or subletting without consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1(c), or a
noncurable Breach without the necessity of any notice and grace period. If
Lessor elects to treat such unapproved assignment or subletting as a
noncurable Breach, Lessor may either: (i) terminate this Lease, or (ii) upon
30 days written notice, increase the monthly Base Rent to 110% of the Base
Rent then in effect. Further, in the event of such Breach and rental
adjustment, (i) the purchase price of any option to purchase the Premises
held by Lessee shall be subject to similar adjustment to 110% of the price
previously in effect, and (ii) all fixed and non-fixed rental adjustments
scheduled during the remainder of the Lease term shall be increased to 110%
of the scheduled adjusted rent.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
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12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by
assignee or sublessee of the obligations of Lessee under this Lease, (ii)
release Lessee of any obligations hereunder, or (iii) after the primary
liability of Lessee for the payment of Rent or for the performance of any
other obligations to be performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such assignment
nor the acceptance of Rent or performance shall constitute a waiver or
estoppel of Lessor's right to exercise its remedies for Lessee's Default or
Breach.
(c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may
proceed directly against Lessee, any Guarantors or anyone else responsible
for the performance of Lessee's obligations under this Lease, including any
assignee or sublessees, without first exhausting Lessor's remedies against any
other person or entity responsible therefore to Lessor, or any security held
by Lessor.
(e) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor's determination
as to the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises, if any, together with a fee of
$1,000 or 10% of the current monthly Base Rent applicable to the portion of
the Premises which is the subject of the proposed assignment or sublease,
whichever is greater, as consideration for Lessor's considering and
processing said request. Lessee agrees to provide Lessor with such other or
additional information and/or documentation as may be reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be deemed
to have assumed and agreed to conform and comply with each and every term,
covenant, condition and obligation herein to be observed or performed by
Lessee during the term of said assignment or sublease, other than such
obligations as are contrary to or inconsistent with provisions of an
assignment or sublease to which Lessor has specifically consented to in
writing.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all
or any part of the Premises and shall be deemed included in all subleases
under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublease, and Lessor may collect such
Rent and apply same toward Lessee's obligations under this Lease; provided,
however, that until a Breach shall occur in the performance of Lessee's
obligations, Lessee may collect said Rent. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection
of Rent, be deemed liable to the sublessee for any failure of Lessee to
perform and comply with any of Lessee's obligations to such sublessee. Lessee
hereby irrevocably authorizes and directs any such sublessee, upon receipt of
a written notice from Lessor stating that a Breach exists in the performance
of Lessee's obligations under this Lease, to pay to Lessor all Rent due and
to become due under the sublease. Sublessee shall rely upon any such notice
from Lessor and shall pay all Rents to Lessor without any obligation or right
to inquire as to whether such Breach exists, notwithstanding any claim from
Lessee to the contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its
option, require sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from the time
of the exercise of said option to the expiration of such sublease; provided,
however, Lessor shall not be liable for any prepaid rents or security
deposit paid by such sublessee to such sublessor or for any prior Defaults or
Breaches of such sublessor.
(c) Any matter requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part
of the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or
Breach by Lessee to the sublessee, who shall have the right to cure the
Default of Lessee within the grace period, if any, specified in such notice.
The sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. A "DEFAULT" is defined as a failure by the
Lessee to comply with or perform any of the terms, covenants, conditions or
Rules and Regulations under this Lease. A "BREACH" is defined as the
occurrence of one or more of the following Defaults, and the failure of
Lessee to cure such Default within any applicable grace period:
(a) The abandonment of the Premises; or the vacating of the
Premises without providing a commercially reasonable level of security, or
where the coverage of the property insurance described in Paragraph 8.3 is
jeopardized as a result thereof, or without providing reasonable assurances
to minimize potential vandalism.
(b) The failure of Lessee to make any payment of Rent or any
Security Deposit required to be made by Lessee hereunder, whether to Lessor
or to a third party, when due, to provide reasonable evidence of insurance or
surety bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of 3
business days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written
evidence of compliance with Applicable Requirements, (ii) the service
contracts, (iii) the rescission of an unauthorized assignment or subletting,
(iv) an Estoppel Certificate, (v) a requested subordination, (vi) evidence
concerning any guaranty and/or Guarantor, (vii) any document requested under
Paragraph 41 (easements), or (viii) any other documentation or information
which Lessor may reasonably require of Lessee under the terms of this Lease,
where any such failure continues for a period of 10 days following written
notice to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of 30 days after written notice;
provided, however, that if the nature of Lessee's Default is such that more
than 30 days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said 30 day period
and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making
of any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "DEBTOR" as defined in 11 U.S.C. Section 101 or any successor
statute thereto (unless, in the case of a petition filed against Lessee, the
same is dismissed within 60 days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee's assets located
at the Premises or of Lessee's interest in this Lease, where possession is
not restored to Lessee within 30 days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at the
Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within 30 days; provided, however, in the event that any provision
of this subparagraph (e) is contrary to any applicable law, such provision
shall be of no force or effect, and not affect the validity of the remaining
provisions.
(f) The discovery that any financial statement of Lessee or of
any Guarantor given to Lessor was materially false.
(g) If the performance of Lessee's obligations under this Lease
is guaranteed: (i) the death of a Guarantor, (ii) the termination of a
Guarantor's liability with respect to this Lease other than in accordance
with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or
the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the
guaranty, or (v) a Guarantor's breach of its guaranty obligation on an
anticipatory basis, and Lessee's failure, within 60 days following written
notice of any such event, to provide written alternative assurance or
security, which, when coupled with the then existing resources of Lessee,
equals or exceeds the combined financial resources of Lessee and the
Guarantors that existed at the time of execution of this Lease.
13.2 REMEDIES. If Lessee fails to perform any of its affirmative
duties or obligations, within 10 days after written notice (or in case of an
emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining of
reasonably required bonds, insurance policies, or governmental licenses,
permits or approvals. The costs and expenses of any such performance by
Lessor shall be due and payable by Lessee upon receipt of invoice thereof. If
any check given to Lessor by Lessee shall not be honored by the bank upon
which it is drawn, Lessor, at its option, may require all future payments to
be made by Lessee to be by cashier's check. In the event of a Breach, Lessor
may, with or without further notice or demand, and without limiting Lessor in
the exercise of any right or remedy which Lessor may have by reason of such
Breach.
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(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until
the time of award exceeds the amount of such rental loss that the Lessee
proves could have been reasonably avoided; (iii) the worth at the time of
award of the amount by which the unpaid rent for the balance of the term
after the time of award exceeds the amount of such rental loss that the
Lessee proves could be reasonably avoided; and (iv) any other amount
necessary to compensate Lessor for all the detriment proximately caused by
the Lessee's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, including
but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys' fees, and that portion of any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal
Reserve Bank of the District within which the Premises are located at the
time of award plus one percent. Efforts by Lessor to mitigate damages caused
by Lessee's Breach of this Lease shall not waive Lessor's right to recover
damages under Paragraph 12. If termination of this Lease is obtained through
the provisional remedy of unlawful detainer, Lessor shall have the right to
recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof
in a separate suit. If a notice and grace period required under Paragraph
13.1 was not previously given, a notice to pay rent or quit, or to perform or
quit given to Lessee under the unlawful detainer statute shall also
constitute the notice required by Paragraph 13.1. In such case, the
applicable grace period required by Paragraph 13.1 and the unlawful detainer
statute shall run concurrently, and the failure of Lessee to cure the Default
within the greater of the two such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession and
recover the Rent as it becomes due, in which event Lessee may sublet or
assign, subject only to reasonable limitations. Acts of maintenance, efforts
to relet, and/or the appointment of a receiver to protect the Lessor's
interests, shall not constitute a termination of the Lessee's right to
possession.
(c) Pursue any other remedy now or hereafter available under the
laws or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's
right to possession shall not relieve Lessee from liability under any
indemnity provisions of this Lease as to matters occurring during the term
hereof or by reason of Lessee's occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee's entering into
this Lease, all of which concessions are hereinafter referred to as
"INDUCEMENT PROVISIONS", shall be deemed conditioned upon Lessee's full and
faithful performance of all of the terms, covenants and conditions of this
Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision
shall automatically be deemed deleted from this Lease and of no further force
or effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement
Provision shall be immediately due and payable by Lessee to Lessor,
notwithstanding any subsequent cure of said Breach by Lessee. The acceptance
by Lessor of rent or the cure of the Breach which initiated the operation of
this paragraph shall not be deemed a waiver by Lessor of the provisions of
this paragraph unless specifically so stated in writing by Lessor at the time
of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting
charges, and late charges which may be imposed upon Lessor by any Lender.
Accordingly, if any Rent shall not be received by Lessor within 5 days after
such amount shall be due, then, without any requirement for notice to Lessee,
Lessee shall pay to Lessor a one-time late charge equal to 10% of each such
overdue amount or $100, whichever is greater. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs
Lessor will incur by reason of such late payment. Acceptance of such late
charge by Lessor shall in no event constitute a waiver of Lessee's Default or
Breach with respect to such overdue amount, nor prevent the exercise of any
of the other rights and remedies granted hereunder. In the event that a late
charge is payable hereunder, whether or not collected, for 3 consecutive
installments of Base Rent, then notwithstanding any provision of this Lease
to the contrary, Base Rent shall, at Lessor's option, become due and payable
quarterly in advance.
13.5 INTEREST. Any monetary payment due Lessor hereunder, other than
late charges, not received by Lessor, when due as to scheduled payments (such
as Base Rent) or within 30 days following the date on which it was due for
non-scheduled payment, shall bear interest from the date when due, as to
scheduled payments, or the 31st day after it was due as to non-scheduled
payments. The interest ("INTEREST") charged shall be equal to the prime rate
reported in the Wall Street Journal as published closest prior to the date
when due plus 4%, but shall not exceed the maximum rate allowed by law.
Interest is payable in addition to the potential late charge provided for in
Paragraph 13.4.
13.6 BREACH BY LESSOR.
(a) NOTICE OF BREACH. Lessor shall not be deemed in breach of
this Lease unless Lessor fails within a reasonable time to perform an
obligation required to be performed by Lessor. For purposes of this
Paragraph, a reasonable time shall in no event be less than 30 days after
receipt by Lessor, and any Lender whose name and address shall have been
furnished Lessee in writing for such purpose, of written notice specifying
wherein such obligation of Lessor has not been performed; provided, however,
that if the nature of Lessor's obligation is such that more than 30 days are
reasonably required for its performance, then Lessor shall not be in breach
if performance is commenced within such 30 day period and thereafter
diligently pursued to completion.
(b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that
neither Lessor nor Lender cures said breach within 30 days after receipt of
said notice, or if having commenced said cure they do not diligently pursue
it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent an amount equal to the greater of one month's
Base Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (collectively "CONDEMNATION"), this Lease shall terminate as to the
part taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than 10% of the floor area of the Unit, or
more than 25% of Lessee's Reserved Parking Spaces, is taken by Condemnation,
Lessee may, at Lessee's option, to be exercised in writing within 10 days
after Lessor shall have given Lessee written notice of such taking (or in the
absence of such notice, within 10 days after the condemning authority shall
have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and
effect as to the portion of the Premises remaining, except that the Base Rent
shall be reduced in proportion to the reduction in utility of the Premises
caused by such Condemnation. Condemnation awards and/or payments shall be the
property of Lessor, whether such award shall be made as compensation for
diminution in value of the leasehold, the value of the part taken, or for
severance damages; provided, however, that Lessee shall be entitled to any
compensation for Lessee's relocation expenses, loss of business goodwill
and/or Trade Fixtures, without regard to whether or not this Lease is
terminated pursuant to the provisions of this Paragraph. All Alterations and
Utility Installations made to the Premises by Lessee, for purposes of
Condemnation only, shall be considered the property of the Lessee and Lessee
shall be entitled to any and all compensation which is payable therefor. In
the event that this Lease is not terminated by reason of the Condemnation,
Lessor shall repair any damage to the Premises caused by such Condemnation.
15. BROKERAGE FEES.
15.1 ADDITIONAL COMMISSION. In addition to the payments owed pursuant
to Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if
Lessee acquires from Lessor any rights to the Premises or other premises owned
by Lessor and located within the Project, (c) if Lessee remains in possession
of the Premises, with the consent of Lessor, after the expiration of this
Lease, or (d) if Base Rent is increased, whether by agreement or operation of
an escalation clause herein, then, Lessor shall pay Brokers a fee in
accordance with the schedule of the Brokers in effect at the time of the
execution of this Lease.
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15.2 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease shall be deemed to have assumed Lessor's obligation
hereunder. Brokers shall be third party beneficiaries of the provisions of
Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts
due as and for brokerage fees pertaining to this Lease when due, then such
amounts shall accrue interest. In addition, if Lessor fails to pay any amounts
to Lessee's Broker when due, Lessee's Broker may send written notice to Lessor
and Lessee of such failure and if Lessor fails to pay such amounts within 10
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee's Broker shall be deemed to be
a third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor's Broker for the limited purpose of collecting any
brokerage fee owed.
15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS. Lessee
and Lessor each represent and warrant to the other that it has had no
dealings with any person, firm, broker or finder (other than the Brokers, if
any) in connection with this Lease, and that no one other than said named
Brokers is entitled to any commission or finder's fee in connection herewith.
Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold
the other harmless from and against liability for compensation or charges
which may be claimed by any such unnamed broker, finder or other similar
party by reason of any dealings or actions of the indemnifying Party,
including any costs, expenses, attorneys' fees reasonably incurred with
respect thereto.
16. ESTOPPEL CERTIFICATES.
(a) Each Party (as "RESPONDING PARTY") shall within 10 days after
written notice from the other Party (the "REQUESTING PARTY") execute,
acknowledge and deliver to the Requesting Party a statement in writing in
form similar to the then most current "ESTOPPEL CERTIFICATE" form published
by the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.
(b) If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such 10 day period, the Requesting Party may
execute an Estoppel Certificate stating that: (i) the Lease is in full force
and effect without modification except as may be represented by the
Requesting Party, (ii) there are no uncured defaults in the Requesting Party's
performance, and (iii) if Lessor is the Requesting Party, not more than one
month's rent has been paid in advance. Prospective purchasers and
encumbrancers may rely upon the Requesting Party's Estoppel Certificate, and
the Responding Party shall be estopped from denying the truth of the facts
contained in said Certificate.
(c) If Lessor desires to finance, refinance, or sell the Premises, or
any part thereof, Lessee and all Guarantors shall deliver to any potential
lender or purchaser designated by Lessor such financial statements as may be
reasonably required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past 3 years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or,
if this is a sublease, of the Lessee's interest in the prior lease. In the
event of a transfer of Lessor's title or interest in the Premises or this
Lease, Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor. Except as provided in
Paragraph 15, upon such transfer or assignment and delivery of the Security
Deposit, as aforesaid, the prior Lessor shall be relieved of all liability
with respect to the obligations and/or covenants under this Lease thereafter
to be performed by the Lessor. Subject to the foregoing, the obligations
and/or covenants in this Lease to be performed by the Lessor shall be binding
only upon the Lessor as hereinabove defined. Notwithstanding the above, and
subject to the provisions of Paragraph 20 below, the original Lessor under
this Lease, and all subsequent holders of the Lessor's interest in this Lease
shall remain liable and responsible with regard to the potential duties and
liabilities of Lessor pertaining to Hazardous Substances as outlined in
Paragraph 6.2 above.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. DAYS. Unless otherwise specifically indicated to the contrary, the
word "DAYS" as used in this Lease shall mean and refer to calendar days.
20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute
personal obligations of Lessor, the individual partners of Lessor or its or
their individual partners, directors, officers or shareholders, and Lessee
shall look to the Premises, and to no other assets of Lessor, for the
satisfaction of any liability of Lessor with respect to this Lease, and shall
not seek recourse against the individual partners of Lessor, or its or their
individual partners, directors, officers or shareholders, or any of their
personal assets for such satisfaction.
21. TIME OF ESSENCE. Time is of the essence with respect to the performance
of all obligations to be performed or observed by the Parties under this
Lease.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains
all agreements between the Parties with respect to any matter mentioned
herein, and no other prior or contemporaneous agreement or understanding
shall be effective. Lessor and Lessee each represents and warrants to the
brokers that it has made, and is relying solely upon, its own investigation as
to the nature, quality, character and financial responsibility of the other
Party to this Lease and as to the use, nature, quality and character of the
Premises. Brokers have no responsibility with respect thereto or with respect
to any default or breach hereof by either Party. The liability (including
court costs and attorneys' fees), of any Broker with respect to negotiation,
execution, delivery or performance by either Lessor or Lessee under this
Lease or any amendment or modification hereto shall be limited to an amount
up to the fee received by such Broker pursuant to this Lease; provided,
however, that the foregoing limitation on each Broker's liability shall not
be applicable to any gross negligence or willful misconduct of such Broker.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease or applicable law shall be in writing and may be delivered in person
(by hand or by courier) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by
facsimile transmission, and shall be deemed sufficiently given if served in a
manner specified in this Paragraph 23. The addresses noted adjacent to a
Party's signature on this Lease shall be that Party's address for delivery or
mailing of notices. Either Party may by written notice to the other specify
a different address for notice, except that upon Lessee's taking possession
of the Premises, the Premises shall constitute Lessee's address for notice. A
copy of all notices to Lessor shall be concurrently transmitted to such party
or parties at such addresses as Lessor may from time to time hereafter
designate in writing.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown
on the receipt card, or if no delivery date is shown, the postmark thereon.
If sent by regular mail the notice shall be deemed given 48 hours after the
same is addressed as required herein and mailed with postage prepaid. Notices
delivered by United States Express Mail or overnight courier that guarantee
next day delivery shall be deemed given 24 hours after delivery of the same
to the Postal Service or courier. Notices transmitted by facsimile
transmission or similar means shall be deemed delivered upon telephone
confirmation of receipt (confirmation report from fax machine is sufficient),
provided a copy is also delivered via delivery or mail. If notice is received
on a Saturday, Sunday or legal holiday, it shall be deemed received on the
next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach
by Lessee of the same or of any other term, covenant or condition hereof.
Lessor's consent to, or approval of, any act shall not be deemed to render
unnecessary the obtaining of Lessor's consent to, or approval of, any
subsequent or similar act by Lessee, or be construed as the basis of an
estoppel to enforce the provision or provisions of this Lease requiring such
consent. The acceptance of Rent by Lessor shall not be a waiver of any Default
or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on
account of monies or damages due Lessor, notwithstanding any qualifying
statements or conditions made by Lessee in connection therewith, which such
statements and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to in writing by Lessor at or before the time of deposit
of such payment.
25. DISCLOSURES REGARDING THE NATURE OF A REAL ESTATE AGENCY RELATIONSHIP.
(a) When entering into a discussion with a real estate agent regarding a
real estate transaction, a Lessor or Lessee should from the outset understand
what type of agency relationship or representation it has with the agent or
agents in the transaction. Lessor and Lessee acknowledge being advised by the
Brokers in this transaction, as follows:
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(i) LESSOR'S AGENT. A Lessor's agent under a listing agreement
with the Lessor acts as the agent for the Lessor only. A Lessor's agent or
subagent has the following affirmative obligations: TO THE LESSOR: A
fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings
with the Lessor. TO THE LESSEE AND THE LESSOR: a. Diligent exercise of
reasonable skills and care in performance of the agent's duties. b. A duty of
honest and fair dealing and good faith. c. A duty to disclose all facts
known to the agent materially affecting the value or desirability of the
property that are not known to, or within the diligent attention and
observation of, the Parties. An agent is not obligated to reveal to either
Party any confidential information obtained from the other Party which does
not involve the affirmative duties set forth above.
(ii) LESSEE'S AGENT. An agent can agree to act as agent for the
Lessee only. In these situations, the agent is not the Lessor's agent, even
if by agreement the agent may receive compensation for services rendered,
either in full or in part from the Lessor. An agent acting only for a Lessee
has the following affirmative obligations. TO THE LESSEE: A fiduciary duty
of utmost care, integrity, honesty, and loyalty in dealings with the Lessee.
TO THE LESSEE AND THE LESSOR: a. Diligent exercise of reasonable skills and
care in performance of the agent's duties. b. A duty of honest and fair
dealing and good faith. c. A duty to disclose all facts known to the agent
materially affecting the value or desirability of the property that are not
known to, or within the diligent attention and observation of, the Parties.
An agent is not obligated to reveal to either Party any confidential
information obtained from the other Party which does not involve the
affirmative duties set forth above.
(iii) AGENT REPRESENTING BOTH LESSOR AND LESSEE. A real estate
agent, either acting directly or through one or more associate licenses, can
legally be the agent of both the Lessor and the Lessee in a transaction, but
only with the knowledge and consent of both the Lessor and the Lessee. In a
dual agency situation, the agent has the following affirmative obligations to
both the Lessor and the Lessee: a. A fiduciary duty of utmost care,
integrity, honesty and loyalty in the dealings with either Lessor or the
Lessee. b. Other duties to the Lessor and the Lessee as stated above in
subparagraphs (i) or (ii). In representing both Lessor and Lessee, the agent
may not without the express permission of the respective Party, disclose to the
other Party that the Lessor will accept rent in an amount less than that
indicated in the listing or that the Lessee is willing to pay a higher rent
than that offered. The above duties of the agent in a real estate transaction
do not relieve a Lessor or Lessee from the responsibility to protect their
own interests. Lessor and Lessee should carefully read all agreements to
assure that they adequately express their understanding of the transaction. A
real estate agent is a person qualified to advise about real estate. If legal
or tax advice is desired, consult a competent professional.
(b) Brokers have no responsibility with respect to any default or
breach hereof by either Party. The liability (including court costs and
attorneys' fees), of any Broker with respect to any breach of duty, error or
omission relating to this Lease shall not exceed the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing
limitation on each Broker's liability shall not be applicable to any gross
negligence or willful misconduct of such Broker.
(c) Buyer and Seller agree to identify to Brokers as "Confidential" any
communication or information given Brokers that is considered by such Party
to be confidential.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this
Lease. In the event that Lessee holds over, then the Base Rent shall be
increased to 150% of the Base Rent applicable immediately preceding the
expiration or termination. Nothing contained herein shall be construed as
consent by Lessor to any holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of
this Lease to be observed or performed by Lessee are both covenants and
conditions. In construing this Lease, all headings and titles are for the
convenience of the Parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the
plural and vice versa. This Lease shall not be construed as if prepared by one
of the Parties, but rather according to its fair meaning as a whole, as if
both Parties had prepared it.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be initiated
in the county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "SECURITY DEVICE"), now
or hereafter placed upon the Premises, to any and all advances made on the
security thereof, and to all renewals, modifications, and extensions thereof.
Lessee agrees that the holders of any such Security Devices (in this Lease
together referred to as "LENDER") shall have no liability or obligation to
perform any of the obligations of Lessor under this Lease. Any Lender may
elect to have this Lease and/or any Option granted hereby superior to the
lien of its Security Device by giving written notice thereof to Lessee,
whereupon this Lease and such Options shall be deemed prior to such Security
Device, notwithstanding the relative dates of the documentation or
recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device,
and that in the event of such foreclosure, such new owner shall not: (a)
be liable for any act or omission of any prior lessor or with respect to
events occurring prior to acquisition of ownership; (b) be subject to any
offsets or defenses which Lessee might have against any prior lessor, (c)
be bound by prepayment of more than one month's rent, or (d) be liable for
the return of any security deposit paid to any prior lessor.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "NON-DISTURBANCE AGREEMENT") from the Lender which
Non-Disturbance Agreement provides that Lessee's possession of the Premises,
and this Lease, including any options to extend the term hereof, will not be
disturbed so long as Lessee is not in Breach hereof and attorns to the record
owner of the Premises. Further, within 60 days after the execution of this
Lease, Lessor shall use its commercially reasonable efforts to obtain a
Non-Disturbance Agreement from the holder of any pre-existing Security Device
which is secured by the Premises. In the event that Lessor is unable to
provide the Non-Disturbance Agreement within said 60 days, then Lessee may, at
Lessee's option, directly contact Lender and attempt to negotiate for the
execution and delivery of a Non-Disturbance Agreement.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection
with a sale, financing or refinancing of the Premises, Lessee and Lessor shall
execute such further writings as may be reasonably required to separately
document any subordination, attornment and/or Non-Disturbance Agreement
provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or proceeding
involving the Premises whether founded in tort, contract or equity, or to
declare rights hereunder, the Prevailing Party (as hereafter defined) in any
such proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys' fees. Such fees may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to
decision or judgment. The term "PREVAILING PARTY" shall include, without
limitation, a Party or Broker who substantially obtains or defeats the relief
sought, as the case may be, whether by compromise, settlement, judgment, or
the abandonment by the other Party or Broker of its claim or defense. The
attorneys' fees award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all attorneys' fees
reasonably incurred. In addition, Lessor shall be entitled to attorneys'
fees, costs and expenses incurred in the preparation and service of notices
of Default and consultations in connection therewith, whether or not a legal
action is subsequently commenced in connection with such Default or resulting
Breach ($200 is a reasonable minimum per occurrence for such services and
consultation).
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise at reasonable times for the purpose of showing the
same to prospective purchasers, lenders, or tenants, and making such
alterations, repairs, improvements or additions to the Premises as Lessor
may deem necessary. All such activities shall be without abatement of rent or
liability to Lessee. Lessor may at any time place on the Premises any ordinary
"FOR SALE" signs and Lessor may during the last 6 months of the term hereof
place on the Premises any ordinary "FOR LEASE" signs. Lessee may at any time
place on the Premises any ordinary "FOR SUBLEASE" sign.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor
shall not be obligated to exercise any standard of reasonableness in
determining whether to permit an auction.
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34. SIGNS. Except for ordinary "For Sublease" signs which may be placed only on
the Premises, Lessee shall not place any sign upon the Project without Lessor's
prior written consent. All signs must comply with all Applicable Requirements.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within 10 days following any such event
to elect to the contrary by written notice to the holder of any such lesser
interest, shall constitute Lessor's election to have such event constitute the
termination of such interest.
36. CONSENTS. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs
and expenses (including but not limited to architects', attorneys', engineers'
and other consultants' fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent, including but not limited to consents
to an assignment, a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee upon receipt of an invoice and supporting documentation
therefor. Lessor's consent to any act, assignment or subletting shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent. The failure to specify herein any particular
condition to Lessor's consent shall not preclude the imposition by Lessor at the
time of consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within 10 business days following such request.
37. GUARANTOR.
37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty in
the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as
Lessee under this Lease.
37.2 DEFAULT. It shall constitute a Default of the Lessee if any Guarantor
fails or refuses, upon request to provide: (a) evidence of the execution
of the guaranty, including the authority of the party signing on
Guarantor's behalf to obligate Guarantor, and in the case of a corporate
Guarantor, a certified copy of a resolution of its board of directors
authorizing the making of such guaranty, (b) current financial statements,
(c) an Estoppel Certificate, or (d) written confirmation that the guaranty
is still in effect.
38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.
39. OPTIONS. If Lessee is granted an option, as defined below, then the
following provisions shall apply.
39.1 DEFINITION. "OPTION" shall mean: (a) the right to extend the term of
or renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (b) the right of first refusal or first offer to
lease either the Premises or other property of Lessor; (c) the right to
purchase or the right of first refusal to purchase the Premises or other
property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Any Option granted to Lessee in
this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the
original Lessee is in full possession of the Premises and, if requested by
Lessor, with Lessee certifying that Lessee has no intention of thereafter
assigning or subletting.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless
the prior Options have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option; (i) during the
period commencing with the giving of any notice of Default and
continuing until said Default is cured, (ii) during the period of
time any Rent is unpaid (without regard to whether notice thereof is
given Lessee), (iii) during the time Lessee is in Breach of this
Lease, or (iv) in the event that Lessee has been given 3 or more
notices of separate Default, whether or not the Defaults are cured,
during the 12 month period immediately preceding the exercise of the
Option.
(b) The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if,
after such exercise and prior to the commencement of the extended
term, (i) Lessee fails to pay Rent for a period of 30 days after such
Rent becomes due (without any necessity of Lessor to give notice
thereof), (ii) Lessor gives to Lessee 3 or more notices of separate
Default during any 12 month period, whether or not the Defaults are
cured, or (iii) if Lessee commits a Breach of this Lease.
40. SECURITY MEASURES. Lessee hereby acknowledges that the Rent payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
41. RESERVATIONS. Lessor reserves the right: (i) to grant, without the consent
or joinder of Lessee, such easements, rights and dedications that Lessor deems
necessary, (ii) to cause the recordation of parcel maps and restrictions, and
(iii) to create and/or install new utility raceways, so long as such easements,
rights, dedications, maps, restrictions, and utility raceways do not
unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate such rights.
42. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment "under protest" and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay.
43. AUTHORITY. If either Party hereto is a corporation, trust, limited liability
company, partnership, or similar entity, each individual executing this Lease on
behalf of such entity represents and warrants that he or she is duly authorized
to execute and deliver this Lease on its behalf. Each party shall, within 30
days after request, deliver to the other party satisfactory evidence of such
authority.
44. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
45. OFFER. Preparation of this Lease by either party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
46. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.
47. MULTIPLE PARTIES. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.
48. WAIVER OF JURY TRIAL. The Parties hereby waive their respective rights to
trial by jury in any action or proceeding involving the Property or arising out
of this Agreement.
49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the Mediation
and/or the Arbitration of all disputes between the Parties and/or Brokers
arising out of this Lease / / is /X/ is not attached to this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
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ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE,
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE
PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL
INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE
AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S
INTENDED USE.
WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES ARE LOCATED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Carlsbad Executed at: Carlsbad
-------------------------- --------------------------
on: 4/12/99 on: 4/12/99
----------------------------------- -----------------------------------
By LESSOR: Del Oro Gateway Partners, By LESEEE: Greenland Corporation
L.P. A Nevada Corporation
By: /s/ William A. Shirley By: /s/ Louis T. Montulli
----------------------------------- -----------------------------------
Name Printed: William A. Shirley Name Printed: Dr. Louis T. Montulli
------------------------- -------------------------
Title: General Partner Title: Chairman of the Board, CEO
-------------------------------- --------------------------------
By: By:
----------------------------------- -----------------------------------
Name Printed: Name Printed:
------------------------- -------------------------
Title: Title:
-------------------------------- --------------------------------
Address: 1847 Camino Vida Roble, Address: 1935 Avenida Del Oro,
Suite 104 Suites C & D
------------------------------ ------------------------------
Carlsbad, CA 92008 Oceanside, CA 92056
- -------------------------------------- --------------------------------------
- -------------------------------------- --------------------------------------
Telephone: (760) 431-7612 Telephone: ( )
---------------------------- ----------------------------
Facsimile: (760) 431-8968 Facsimile: ( )
---------------------------- ----------------------------
Federal ID No. Federal ID No.
------------------------ ------------------------
THESE FORMS ARE OFTEN MODIFIED TO MEET CHANGING REQUIREMENTS OF LAW AND NEEDS OF
THE INDUSTRY. ALWAYS WRITE OR CALL TO MAKE SURE YOU ARE UTILIZING THE MOST
CURRENT FORM: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 SOUTH FLOWER
STREET, SUITE 600, LOS ANGELES, CA 90017. (213) 687-8777.
-C- COPYRIGHT 1998-BY AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION.
ALL RIGHTS RESERVED.
NO PART OF THESE WORKS MAY BE REPRODUCED IN ANY FORM WITHOUT
PERMISSION IN WRITING.
<PAGE>
ADDENDUM TO LEASE DATED APRIL 9, 1999 BY AND BETWEEN DEL ORO GATEWAY PARTNERS,
L.P. AS LESSOR AND GREENLAND CORPORATION AS LESSEE FOR THE PROPERTY LOCATED AT
1935 AVENIDA DEL ORO, SUITES C & D, OCEANSIDE, CALIFORNIA.
This addendum modifies the Lease in the following particulars only. Should the
terms and conditions of this addendum conflict with the terms and conditions of
the Lease, the terms and conditions of this addendum shall prevail.
49. OPTIONS:
Provided the Lessee is not in default, Lessee shall have the right to renew
the lease under the same terms and conditions for a five (5) year lease
term. The rent in the first year of the option period shall be $.65 per
rentable square foot and will increase annually by a fixed rate of four
percent (4%). Should Lessee wish to exercise said option, Lessee shall
notify the Lessor in writing of their desire to exercise their option no
later than nine (9) months after commencement of the lease.
50. TENANT IMPROVEMENTS:
Improvements for the initial term are as follows:*
a) A door shall be added to connect the two (2) suites' warehouse space
together.
b) A wall with a door shall be added in Suite C to turn the reception
area into a conference room (see attachment).
Should the Lessee exercise the option to renew, Lessee shall have the right
to complete additional improvements, which, in turn, the cost of said
improvements shall not exceed One hundred thousand dollars and 00/100
($100,000.00) and, subject to Lessor's approval of Lessee's updated
financial statements, will be amortized over the length of the option
period at an interest rate of nine percent (9%) and added to the base rent.
51. BUILDING SERVICES / HVAC:
Individual electrical units and HVAC systems are provided for each suite
and are operated and paid for by Lessee. Janitorial services are not
provided by Lessor.
CONSULT YOUR ATTORNEY/ADVISORS - THIS DOCUMENT HAS BEEN PREPARED FOR APPROVAL
BY YOUR ATTORNEY. NO REPRESENTATION OR RECOMMENDATION IS MADE BY BUSINESS
REAL ESTATE AS TO THE LEGAL EFFECT OR TAX CONSEQUENCES OF THIS DOCUMENT OR TO
THE TRANSACTION TO WHICH IT RELATES. THESE ARE QUESTIONS FOR YOUR ATTORNEY.
AGREED AND ACCEPTED:
LESSOR: LESSEE:
DEL ORO GATEWAY GREENLAND CORPORATION,
PARTNERS, L.P. A NEVADA CORPORATION
By: /s/ William A. Shirley By: /s/ Louis T. Montulli
--------------------------------- ---------------------------------
William A. Shirley Dr. Louis T. Montulli
Date: 4/12/99 Date: 4/12/99
------------------------------- -------------------------------
* Lessor to mark six spaces in front of building for visitor parking.
<PAGE>
EXHIBIT A-1
[GRAPHIC]
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EXHIBIT A-2
[GRAPHIC]
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EXHIBIT B
[GRAPHIC]
<PAGE>
EXHIBIT B-2
DEL ORO GATEWAY COMMERCE CENTRE
SIGN CRITERIA
GENERAL
A. All proposed exterior signs shall be in accordance with the City Of
Oceanside and the Rancho Del Oro Technology Park Guidelines.
B. All typeface shall be optima and a maximum of ten inches with logos a
maximum of twelve inches in height.
C. Signage shall not be illuminated.
D. All letters and/or logos shall be individually formed plastic letters with
integral black color mounted to building face.
E. No fascia mounted or free-standing signs shall be permitted.
F. Individual tenant ground signs are not permitted.
TENANT IDENTIFICATION
A. Tenant identification signage shall be located as indicated on Exhibit A.
B. Maximum sign area, per sign, shall not exceed five square feet.
4/12/99 /s/ William A. Shirley
- --------------------- --------------------------------------
Date Tenant
/s/ Louis T. Montulli
4/1/98
<PAGE>
EXHIBIT C
DEL ORO GATEWAY COMMERCE CENTRE
TENANT RULES & REGULATIONS
1. USE OF LEASED PREMISES. The premises shall be used only for
manufacturing, processing, storage, wholesale, office, laboratory, professional,
and research and development activities or for such other uses as may be
permitted under the PD-1 zone in effect in the City of Oceanside. There shall
not be permitted any junk or salvage yard or any other use which will be
offensive to adjoining tenants or the neighborhood by reason of odor, fumes,
dust smoke, bright lights, noise, visibility or pollution or will be hazardous
by reason of danger of fire or explosions.
2. USE OF COMMON AREAS. The Common Area shall be used only for vehicular
loading, vehicular parking and vehicular and pedestrian movement within the
Property. No business is to be conducted by any tenant in any Common Area space
and no storage of any kind will be allowed except with prior written permission
of the owner. Tenant will be charged for special cleanups if required as a
result of tenant's activities.
3. PARKING. Each tenant shall be allocated 3.0 parking spaces per 1,000
square feet of leased space. All vehicles must be parked in designated parking
spaces and kept clear of all designated loading areas and fire lanes.
4. RESTRICTIONS ON CONDUCT OF BUSINESS. The permitted uses described in
Paragraph 1 above shall be conducted under the following conditions:
A. NOISE. No tenant shall produce noise at such levels as will be
offensive to adjoining tenants or to the neighborhood.
B. VIBRATION. Equipment creating earthshaking vibrations shall be
set back a sufficient distance from demising walls and shall be so mounted as to
eliminate vibration hazard or nuisance beyond tenant's demising walls.
C. SMOKE. No tenant shall discharge into the atmosphere any air
contaminant producing a public nuisance or hazard.
D. TOXIC OR NOXIOUS MATTER. No tenant shall discharge into the
sewer system or storm drain any toxic or noxious matter in such concentration as
to be detrimental to or endanger the public health, safety, welfare or cause
injury or damage to neighboring property or business.
E. ODOROUS MATTER. No tenant shall emit odorous matter in such
quantity as to be readily detectable beyond its leased premises.
F. FIRE AND EXPLOSIVE HAZARDS. Storage, utilization or
manufacture of active burning materials shall be so accomplished as to be
accessible to the automatic sprinkler system installed by owner. Materials which
produce flammable or explosive vapors or gases under ordinary weather
temperatures shall not be permitted except where required for emergency
equipment or incidental to a principal operation such as paint spraying. In such
cases, adequate protection shall be provided in conformance with the City
Building Code.
G. GLARE OR HEAT. Any operation producing intense glare or heat
shall be performed so as not to create a public nuisance or hazard.
H. AIR POLLUTION. No tenant shall discharge into the air
pollutants or contaminants sufficient to create a nuisance, and no processes
which by their nature are likely to cause air pollution shall be undertaken or
permitted unless there is available an adequate, economically feasible method of
controlling the emission of contaminants, and such controls are applied by
tenant.
I. HAZARDOUS WASTE. All hazardous waste materials must be
properly stored and promptly disposed of by tenant in accordance with all
applicable governmental regulations. Tenant is responsible for obtaining and
keeping current required governmental permits. Tenant may be required to
purchase special insurance covering owner from any liability resulting from
storage of hazardous waste materials.
5. SIGNS. No billboards or outdoor advertising of any sort will be
permitted. All signs shall be of standard design in accordance with Owner's Sign
Criteria provided tenant. All signs proposed by tenant must be approved by Owner
in writing.
6. ACCESS. Lessor reserves the right to refuse access to any persons
Lessor, in good faith, judges to be a threat to the safety, reputation, or
property of the Industrial Center and it's occupants.
7. RULES & REGULATIONS. Lessor reserves the right to make such other
reasonable rules and regulations as it may from time to time deem necessary for
the appropriate operation and safety of the Industrial Center and it's
occupants. Lessee agrees to abide by these and such other rules and
regulations.
Tenant /s/ Louis T. Montulli Date 4-12-99
--------------------------------------------- ----------------------
<PAGE>
[LOGO]
BRE
Business Real Estate Brokerage Co.
EXHIBIT D
HAZARDOUS MATERIALS WARNING AND DISCLAIMER
(SALE AND/OR LEASE OF PROPERTY)
RE: 1935 AVENIDA DEL ORO, SUITES C & D, OCEANSIDE, CA 92056
-------------------------------------------------------
Various materials utilized in the construction of any improvements to the
Property may contain materials that have been or may in the future be determined
to be toxic, hazardous or undesirable and may need to be specially treated,
specially handled and/or removed from the Property. For example, some electrical
transformers and other electrical components can contain PCBs, and asbestos has
been used in a wide variety of building components such as fire-proofing, air
duct insulation, acoustical tiles, spray-on acoustical materials, linoleum,
floor tiles and plaster. Due to current or prior uses, the Property or
improvements may contain materials such as metals, minerals, chemicals,
hydrocarbons. biological or radioactive materials and other substances which are
considered, or in the future may be determined to be, toxic wastes, hazardous
materials or undesirable substances. Such substances may be in above- and
below-ground containers on the Property or may be present on or in soils, water,
building components or other portions of the Property in areas that may or may
not be accessible or noticeable.
Current and future federal, state and local laws and regulations may require
the clean-up of such toxic, hazardous or undesirable materials at the expense
of those persons who in the past, present or future have had any interest in
the Property including, but not limited to, current, past and future owners
and users of the Property. Owners and Buyers/Lessees are advised to consult
with independent legal counsel or experts of their choice to determine their
potential liability with respect to toxic, hazardous, or undesirable
materials. Owners and Buyers/Lessees should also consult with such legal
counsel or experts to determine what provisions regarding toxic, hazardous or
undesirable materials they may wish to include in purchase and sale
agreements, leases, options and other legal documentation related to
transactions they contemplate entering into with respect to the Property.
The real estate salespersons and brokers in this transaction have no expertise
with respect to toxic wastes, hazardous materials or undesirable substances.
Proper inspections of the Property by qualified experts are an absolute
necessity to determine whether or not there are any current or potential toxic
wastes, hazardous materials or undesirable substances in or on the Property. The
real estate salespersons and brokers in this transaction have not made, nor will
they make, any representations, either express or implied, regarding the
existence or nonexistence of toxic wastes, hazardous materials, or undesirable
substances in or on the Property. Problems involving toxic wastes, hazardous
materials or undesirable substances can be extremely costly to correct. It is
the responsibility of the Owners and Buyers/Lessees to retain qualified experts
to deal with the detection and correction of such matters.
AMERICANS WITH DISABILITIES ACT DISCLOSURE
The United States Congress has enacted the Americans With Disabilities Act (the
"ADA"), a federal law codified at 42 USC Section 12101 et seq., which became
effective January 26, 1992. Owners and lessees are subject to this law which,
among other things, is intended to make business establishments equally
accessible to persons with a variety of disabilities. Under this law,
modifications to real property improvements may be required by owners and
lessees. Owners and lessees may delegate between themselves costs and
responsibilities for meeting the requirements of the law but the fact that
responsibilities have been allocated does not reduce or negate liability to an
individual with a disability who files and wins a lawsuit. Broker strongly
recommends that owners and lessees consult design professionals, architects or
attorneys to advise them with respect to the law's applicability and to prepare,
if necessary, any language in leases or other contracts. The undersigned
acknowledge that Broker is not qualified as an expert in this matter.
LEESSOR: LESSEE:
Del Oro Gateway Partners, L.P. Greenland Corporation,
A Nevada Corporation
By: /s/ William A. Shirley By: /s/ Louis T. Montulli
------------------------------------ -------------------------------
William A. Shirley Dr. Louis T. Montulli
Title: General Partner Title: Chairman of the Board, CEO
--------------------------------- ----------------------------
Date: 4/12/99 Date: 4/12/99
---------------------------------- -----------------------------
<PAGE>
EXHIBIT 10(H)
[LOGO]
No. 2539
MASTER AGREEMENT TO LEASE EQUIPMENT
THIS MASTER AGREEMENT TO LEASE EQUIPMENT (this "AGREEMENT") is entered into
as of NOVEMBER 1, 1999 by and between CISCO SYSTEMS CAPITAL CORPORATION
("LESSOR"), having its principal place of business at 170 West Tasman Drive,
Mailstop SJC2, 3rd Floor, San Jose, California 95134 and GREENLAND
CORPORATION, a _____________ Corporation ("LESSEE"), having its principal
place of business at 1935 Avenida Del Oro, Suite D, Oceanside, CA 92056.
I. THE LEASE
1.1 LEASE OF EQUIPMENT. In accordance with the terms and conditions
of this Agreement, Lessor shall lease to Lessee, and Lessee shall lease from
Lessor, the personal property described in the lease schedule(s) (each, a
"SCHEDULE") to be entered into from time to time into which this Agreement is
incorporated (each Schedule, together with this Agreement, a "LEASE"),
together with all substitutions, replacements, repairs, parts and
attachments, improvements and accessions thereto (the "EQUIPMENT").
Capitalized terms not otherwise defined in this Agreement have the meanings
specified in the applicable Schedule. Each Lease shall constitute a separate,
distinct, and independent lease and contractual obligation of Lessee. Except
as expressly set forth in any Lease, Lessor shall at all times retain the
full legal title to the Equipment, it being expressly agreed by both parties
that each Lease is an agreement of lease only.
1.2 TERM OF LEASE. The Original Term of each Lease shall begin on the
Commencement Date as specified in the applicable Schedule and, subject to
Sections 3.5 and 4.2, shall terminate on the date specified in the applicable
Schedule. If so provided in the applicable Schedule, the Original Term for any
Lease may be succeeded by one or more Extended Terms. Subject to Sections 3.5
and 4.2 and any express provisions of the Schedule, no Lease may be terminated
by Lessor or Lessee, for any reason whatsoever, prior to the end of the Original
Term or any pending Extended Term.
1.3 RENTAL PAYMENTS. Lessee shall pay Lessor Rent for the Equipment
in the amounts and at the times specified in the applicable Schedule. All
Rent and other amounts payable by Lessee to Lessor hereunder shall be paid to
Lessor at the address specified above, or at such other place as Lessor may
designate in writing to Lessee from time to time.
1.4 RETURN OF EQUIPMENT. Upon expiration of the Lease Term, Lessee
shall immediately return the Equipment to Lessor in the condition and at the
place provided in Section 3.3.
1.
<PAGE>
II. DISCLAIMERS AND WARRANTIES; INTELLECTUAL PROPERTY
2.1 DISCLAIMERS; WARRANTIES. Lessee represents and acknowledges that
the Equipment is of a size, design, capacity and manufacture selected by it,
and that it is satisfied that the Equipment is suitable for its purposes.
LESSEE LEASES THE EQUIPMENT AS IS, AND, NOT BEING THE MANUFACTURER OF THE
EQUIPMENT, THE MANUFACTURER'S AGENT OR THE SELLER'S AGENT, LESSOR MAKES NO
WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY,
FITNESS FOR ANY PARTICULAR PURPOSE, DESIGN OR CONDITION OF THE EQUIPMENT.
LESSOR SHALL NOT BE RESPONSIBLE FOR ANY LOSS OR DAMAGE RESULTING FROM THE
INSTALLATION, OPERATION OR OTHER USE, OR DEINSTALLATION OF THE EQUIPMENT,
INCLUDING ANY DIRECT, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OR LOSS.
Lessee shall look solely to the manufacturer or the supplier of the Equipment
for correction of any problems that may arise with respect thereto, and all
transferable manufacturer and supplier warranty rights are, to the extent
such rights have been transferred to Lessor, hereby assigned without
representation or warranty by Lessor to Lessee for the Lease Term, which
warranties Lessee is authorized to enforce if and when there exists no Event
of Default. Any such enforcement shall be at Lessee's sole cost and expense.
2.2 INTELLECTUAL PROPERTY. Lessee acknowledges that neither this
Agreement nor any Lease conveys any explicit or implicit license for the use
of software or other intellectual property of Cisco Systems, Inc. or its
affiliates relating to the Equipment and that such license rights, to the
extent they exist, are contained in separate documentation entered into
between Lessee and Cisco Systems, Inc. or other persons. LESSOR MAKES NO
WARRANTIES OR REPRESENTATIONS WHATSOEVER WITH RESPECT TO THE INTELLECTUAL
PROPERTY RIGHTS, INCLUDING ANY PATENT, COPYRIGHT AND TRADEMARK RIGHTS, OF ANY
THIRD PARTY WITH RESPECT TO THE EQUIPMENT, WHETHER RELATING TO INFRINGEMENT
OR OTHERWISE. Lessor shall, when reasonably requested in writing by Lessee,
provided there exists no Event of Default and an indemnity satisfactory to
Lessor is delivered by Lessee, and at Lessee's cost and expense, enforce
rights of indemnification, if any, for patent, copyright or other
intellectual property infringement obtained from the manufacturer under any
agreement for purchase of the Equipment. If notified promptly in writing of
any action brought against Lessee based on a claim that the Equipment
infringes a United States patent, copyright or other intellectual property
right, Lessor shall promptly notify the manufacturer thereof for purposes of
exercising, for the benefit of Lessee, Lessor's rights with respect to such
claim under any such agreement.
III. LESSEE OBLIGATIONS
3.1 NET LEASE; PAYMENTS UNCONDITIONAL. EACH LEASE IS A NET LEASE,
AND ALL COSTS, EXPENSES AND LIABILITIES RELATING TO THE EQUIPMENT, INCLUDING
IN RESPECT OF TAXES, INSURANCE AND MAINTENANCE, SHALL BE BORNE SOLELY BY
LESSEE. LESSEE'S OBLIGATION TO PAY ALL RENT AND OTHER SUMS THEREUNDER, AND
THE RIGHTS OF LESSOR IN AND TO SUCH PAYMENTS, SHALL BE ABSOLUTE AND
UNCONDITIONAL, AND SHALL NOT BE SUBJECT TO ANY ABATEMENT, REDUCTION, SETOFF,
DEFENSE,
2.
<PAGE>
COUNTERCLAIM, INTERRUPTION, DEFERMENT OR RECOUPMENT, FOR ANY REASON WHATSOEVER.
3.2 USE OF EQUIPMENT. Lessee shall use the Equipment solely in the
conduct of its business, in a manner and for the use contemplated by the
manufacturer thereof, and in compliance with all laws, rules and regulations
of every governmental authority having jurisdiction over the Equipment or
Lessee and with the provisions of all policies of insurance carried by
Lessee pursuant to Section 3.6.
3.3 DELIVERY; INSTALLATION; RETURN; MAINTENANCE AND REPAIR;
INSPECTION. Lessee shall be solely responsible, at its own expense, for (a)
the delivery of the Equipment to Lessee, (b) the packing, rigging and
delivery of the Equipment back to Lessor, upon expiration or termination of
the Lease Term, in good repair, condition and working order, ordinary wear
and tear excepted, at the location(s) within the continental United States
specified by Lessor, and (c) the installation, de-installation, maintenance
and repair of the Equipment. During the Lease Term, Lessee shall ensure that
the Equipment is covered by a maintenance agreement, to the extent available,
with the manufacturer of the Equipment or other party reasonably acceptable
to Lessor. Lessee shall, at its expense, keep the Equipment in good repair,
condition and working order, ordinary wear and tear excepted, and at the
expiration or termination of the Lease Term with respect to any of the
Equipment, have such Equipment inspected and certified acceptable for
maintenance service by the manufacturer. If any of the Equipment, upon its
return to Lessor, is not in good repair, condition and working order,
ordinary wear and tear excepted, and so inspected and certified, Lessee shall
be obligated to pay Lessor for the out-of-pocket expenses Lessor incurs in
bringing such Equipment up to such status, but not in excess of the Casualty
Value for such Equipment, promptly after its receipt of an invoice for such
expenses. Lessor shall be entitled to inspect the Equipment at reasonable
times.
3.4 TAXES. Lessee shall pay, and hereby indemnifies Lessor on a net,
after-tax basis. against, and shall hold it harmless from, all license fees,
assessments, and sales, use, property, excise and other taxes and charges,
other than those measured by Lessor's net income. now and hereafter imposed
by any governmental body or agency upon or with respect to any of the
Equipment, or the possession, ownership, use or operation thereof, or any
Lease, or the consummation of the transactions contemplated by any Lease.
Notwithstanding the foregoing, to the extent required of it by applicable law
and in reliance upon Lessee's disclosure of the location of such Equipment,
Lessor shall file personal property tax returns, and shall pay personal
property taxes payable with respect to the Equipment. Lessee shall pay to
Lessor the amount of all such personal property taxes within 15 days of its
receipt of an invoice for such taxes. For any Lease that is specified as an
FMV Lease in the applicable Schedule, Lessee acknowledges that it is the
intent of Lessor, and a material inducement to Lessor to enter into such
Lease, to obtain all state and Federal income tax benefits of ownership with
respect to the Equipment under such Lease, including entitlement to annual
accelerated cost recovery deductions.
3.5 LOSS OF EQUIPMENT. Lessee assumes the risk that, and shall
promptly notify Lessor in writing if, any item of Equipment becomes lost,
stolen, damaged, destroyed or otherwise unfit or unavailable for use from any
cause whatsoever (an "EVENT OF LOSS") after it has been delivered to a common
carrier for shipment to Lessee. Unless the item is damaged and is reparable
within a reasonable period of time in the judgment of Lessor (in which event
Lessee
3.
<PAGE>
shall promptly cause such item to be repaired and restored to the condition
and value it had prior to such Event of Loss, at its own cost and expense),
Lessee shall pay to Lessor on the Rent payment date following Lessor's
receipt of such notice (or, if none, 30 days after such Event of Loss), an
amount equal to the Rent payment or payments due and payable with respect to
such Equipment on or prior to such date, plus a sum equal to the Casualty
Value of such Equipment as of such date. Upon making such payment, the Rent
for such Equipment shall cease to accrue, the term of the Lease as to such
Equipment shall terminate and (except in the case of loss, unrecovered theft
or complete destruction) Lessor shall be entitled to recover possession of
such Equipment in accordance with the provisions of Section 3.3 above. If
Lessor has received the foregoing amount, Lessee shall be entitled to the
proceeds of any recovery in respect of such Equipment from insurance or
otherwise, provided that if the Equipment is subject to an FMV Lease, Lessee
shall be entitled to receive such proceeds only up to the Casualty Value
therefor, any excess amount to be paid to Lessor.
3.6 INSURANCE. Lessee shall obtain and maintain for the Lease Term
at its own expense, property damage and liability insurance and insurance
against loss or damage to the Equipment as a result of fire, explosion,
theft, vandalism and such other risks of loss as are normally maintained on
equipment of the type leased hereunder by companies carrying on the business
in which Lessee is engaged, in such amounts, in such form and with such
insurers as shall be satisfactory to Lessor. Each insurance policy shall name
Lessee as insured and Lessor and its assignees as additional insureds and
loss payees thereof as their interest may appear, and shall provide that it
may not be cancelled or altered without at least 30 days' prior written
notice thereof being given to Lessor (or 10 days', in the event of
non-payment of premium).
3.7 INDEMNITY. Except with respect to the gross negligence or
willful misconduct of Lessor, Lessee hereby indemnifies, protects, defends
and holds harmless Lessor from and against any and all claims, liabilities
(including negligence, tort and strict liability), demands, actions, suits,
and proceedings, losses, costs, expenses and damages, including reasonable
attorneys' fees and costs (collectively, "CLAIMS"), arising out of, connected
with, or resulting from any Lease or any of the Equipment, or any ancillary
or related software or other intangibles, whether arising before, during or
after the lease term (but not Claims relating to events occurring after
Lessee has returned the Equipment to Lessor in accordance with Section 3.3),
including Claim relating to the manufacture, selection, purchase, delivery,
possession, condition, use, operation, return or other disposition of the
Equipment. Each of the parties shall give the other prompt written notice of
any Claim of which it becomes aware.
3.8 PROHIBITIONS RELATED TO LEASE AND EQUIPMENT. Without the prior
written consent of Lessor, which consent as it pertains to clauses (b) and
(d) below shall not be unreasonably withheld, lessee shall not: (a) assign,
transfer, or otherwise dispose of any Equipment, the Lease or any rights or
obligations thereunder; (b) sublease any of the Equipment or permit the
Equipment to be controlled by any other person; (c) create or incur, or
permit to exist, any security interest, lien or encumbrance with respect to
any of the Equipment; (d) cause or permit any of the Equipment to be moved
from the location specified in the applicable Schedule; or (e) cause or
permit any of the Equipment to be moved outside the United States.
3.9 IDENTIFICATION. Lessee shall place and maintain permanent markings
provided by Lessor on the Equipment evidencing ownership, security and other
interests therein, as specified from time to time by Lessor.
4.
<PAGE>
3.10 ALTERATIONS AND MODIFICATIONS. Lessee shall not make any
additions, attachments, alterations or improvements to the Equipment without
the prior written consent of Lessor, not to be unreasonably withheld. Any
addition, attachment, alteration or improvement to any item of Equipment
shall belong to and become the property of Lessor unless, at the request of
Lessor, it is removed prior to the return of such item of Equipment by
Lessee. Lessee shall be responsible for all costs relating to such removal
and shall restore such item of Equipment to the condition and value otherwise
required hereunder.
3.11 PERSONAL PROPERTY. Lessee acknowledges and represents that the
Equipment shall be and remain personal property, notwithstanding the manner
by which it may be attached or affixed to realty, and Lessee shall do all
acts and enter into all agreements necessary to ensure that the Equipment
remains personal property. If requested by Lessor with respect to any item of
Equipment, Lessee shall obtain and deliver to Lessor equipment access
agreements, satisfactory to Lessor, from all persons claiming any interest in
the real property on which such item of Equipment is installed or located.
3.12 FINANCIAL STATEMENTS. Lessee shall promptly furnish to Lessor such
financial or other statements regarding the condition and operations of Lessee
and any guarantor of any Lease, and information regarding the Equipment, as
Lessor may from to time reasonably request.
3.13 LESSEE REPRESENTATIONS. Lessee hereby represents that, with
respect to this Agreement, and each Schedule, certificate evidencing
acceptance of equipment, assignment of purchase order, insurance letter,
proposal letter, UCC financing statement, or other document now or hereafter
executed by Lessee in connection with any Lease (collectively, "LEASE
DOCUMENTS"): (a) the execution, delivery and performance thereof by Lessee or
its attorney-in-fact have been duly authorized by all necessary corporate,
partnership or company action; (b) the person executing such documents is
duly authorized to do so; and (c) such documents constitute legal, valid and
binding obligations of Lessee, enforceable in accordance with their terms.
IV. DEFAULT AND REMEDIES
4.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an "EVENT OF DEFAULT" hereunder and under each Lease: (a) Lessee
fails to pay any Rent or other amount due under any Lease within five days after
it becomes due and payable; (b) any representation or warranty of Lessee made in
any Lease Document proves to have been false or misleading in any material
respect as of the date when it was made; (c) Lessee fails to maintain insurance
as required herein or breaches any of clauses (a), (b) or (e) of Section 3.8;
(d) Lessee fails to perform any other covenant, condition or agreement made by
it under any Lease, and such failure continues for 20 days; (e) bankruptcy,
receivership, insolvency, reorganization, dissolution, liquidation or other
similar proceedings are instituted by or against Lessee, any guarantor of any
Lease or any partner of a partnership Lessee or guarantor, or all or any part of
such person's property, under the Federal Bankruptcy Code or other law of the
United States or of any other competent jurisdiction, and, if such proceeding is
brought against such person, it consents thereto or fails to cause the same to
be discharged within 45 days after it is filed; (f) Lessee materially defaults
under any agreement with respect to the purchase or installation of any of the
Equipment; or (g) Lessee or any guarantor of any Lease, or any of their
respective
5.
<PAGE>
subsidiaries or other affiliates, defaults under any other instrument or
agreement with Lessor or Cisco Systems, Inc.
4.2 REMEDIES. If an Event of Default exists, Lessor may exercise any one or
more of the following remedies, in addition to those arising under applicable
law: (a) proceed, by appropriate court action, to enforce performance by Lessee
of the applicable covenants of any or all of the Leases; (b) terminate any or
all Leases by notice to Lessee and take possession of any or all of the
Equipment and, for such purpose, enter upon any premises where the Equipment is
located with or without notice or process of law and free from all claims by
Lessee or any other person, or require Lessee to assemble the Equipment and
deliver it to Lessor in accordance with Section 3.3; (c) recover any and all
direct, incidental and consequential damages, including all accrued and unpaid
Rent and other amounts owing under any Lease, and (i) for any Lease that is an
FMV Lease, the Equipment for which has not been returned to Lessor in the
condition required hereunder, an amount equal to the Casualty Value thereof, or
(ii) for any Lease that is an FMV Lease, the Equipment for which has been so
returned to Lessor, such amounts as are provided for the lessee breach of a
personal property lease under the Uniform Commercial Code of the jurisdiction
specified in Section 5.11 (the "CODE"), using the Discount Rate to calculate
present values for such purpose; or (iii) for any Lease that is not an FMV
Lease, an amount equal to the present value, discounted at the Discount Rate, of
the sum of all Rent and other payments remaining to be paid under such Lease
through the Lease Term plus the applicable purchase option amount specified in
Paragraph 7 of the Schedule; and (d) sell or re-lease any or all of the
Equipment, through public or private sale or lease transactions, and apply the
proceeds thereof to Lessee's obligations under such Leases or otherwise seek
recovery in accordance with applicable provisions of the Code. Lessee shall
remain liable for any resulting deficiency and Lessor may retain any surplus it
may realize in connection with an FMV Lease. The "DISCOUNT RATE" shall be the
rate for U.S. Treasury obligations having a constant maturity of three months,
as specified in the Federal Reserve Statistical Release H.15 (or replacement
publication) issued most recently prior to the date of termination of the Lease.
Lessee shall pay all costs and expenses (including reasonable attorneys' fees)
incurred by Lessor in retaking possession of, and removing, storing, repairing,
refurbishing and selling or leasing such Equipment and enforcing any obligations
of Lessee pursuant to any Lease.
V. MISCELLANEOUS
5.1 PERFORMANCE OF LESSEE'S OBLIGATIONS. Upon Lessee's failure to pay any
amount or perform any obligation under any Lease when due, Lessor shall have the
right, but shall not be obligated, to pay such sum or perform such obligation,
whereupon such sum or cost of such performance shall immediately become due and
payable thereunder, with interest thereon at the Default Rate from the date such
payment or performance was made.
5.2 RIGHT TO USE. So long as no Event of Default exists, neither Lessor nor
its assignee shall interfere with Lessee's right to use the Equipment under any
Lease.
5.3 ASSIGNMENT BY LESSOR. Lessor may assign or transfer any or all of
Lessor's interest in this Agreement, any Lease, any Equipment or Rents, without
notice to Lessee. Any assignee of Lessor shall have all of the rights, but none
of the obligations (unless otherwise provided in the applicable assignment), of
a "Lessor" under this Agreement and the applicable Lease, and Lessee agrees that
it will not assert against any assignee any defense, counterclaim or
6.
<PAGE>
offset that Lessee may have against Lessor or any preceding assignee, and that
upon notice of such assignment or transfer, it will pay all Rent and other sums
due under this Agreement and the applicable Lease to such assignee or
transferee. Lessee acknowledges that any assignment or transfer by Lessor shall
not materially change Lessee's duties or obligations under this Agreement or any
Lease, nor materially increase the burdens or risks imposed on Lessee.
5.4 FURTHER ASSURANCES. Upon the request of Lessor from time to time, Lessee
shall execute and deliver such further documents and do such further acts as
Lessor may reasonably request in order fully to effect the purposes of this
Agreement or any Lease. Lessee hereby appoints Lessor its attorney in fact,
coupled with an interest, authorized, without any obligation to do so, (a) to
sign on Lessee's behalf and file, record and register financing statements, and
amendments and continuations thereof, and any other documents relating to liens,
security interests or property rights of Lessor, Lessee or any third person with
respect to any Equipment and ancillary property, in accordance with any Uniform
Commercial Code or other code or statute, and (b) to enforce, in its own name or
in the name of Lessee, claims relating to any Equipment against insurers,
manufacturers or other persons, and to make, adjust, settle, compromise and
receive payments as to such claims.
5.5 RIGHTS AND REMEDIES. Each right and remedy granted to Lessor under any
Lease shall be cumulative and in addition to any other right or remedy existing
in equity, at law, by virtue of statue or otherwise, and may be exercised by
Lessor from time to time concurrently or independently and as often and in such
order as Lessor may elect. Any failure or delay on the part of Lessor in
exercising any such right or remedy shall not operate as a waiver thereof.
5.6 NOTICES. Any notice, request, demand, consent, approval or other
communication provided for or permitted in relation to any Lease shall be in
writing and shall be conclusively deemed to have been received by a party hereto
on the day it is delivered to such party at its address, or received by the
party at such facsimile number, as is set forth in such Lease (or at such other
addresses or fax numbers such party shall specify to the other party in
writing), or if sent by registered or certified mail, return receipt requested,
on the fifth day after the day on which it is mailed, postage prepaid, addressed
to such party.
5.7 SECTION HEADINGS; INTERPRETATION. Section headings are inserted for
convenience of reference only and shall not affect any construction or
interpretation of any Lease Document. In interpreting the provisions of any
Lease Document, (a) the term "including" is not limiting, (b) references to
"person" include individuals, corporations and other legal persons and
entities; (c) the singular of defined terms includes the plural and vice-versa;
and (d) section and paragraph references are to the document in which such
reference appears, unless the context otherwise requires.
5.8 ENTIRE LEASE. This Agreement, together with the other Lease Documents,
constitute the entire agreement between Lessor and Lessee with respect to the
lease of the Equipment. No waiver or amendment of, or any consent with respect
to, any provision of any Lease Document shall bind either party unless set forth
in a writing, specifying such waiver, consent, or amendment, signed by
both parties. TO THE EXTENT PERMITTED BY APPLICABLE LAW AND NOT OTHERWISE
SPECIFICALLY GRANTED TO LESSEE IN ANY LEASE DOCUMENT, LESSEE HEREBY WAIVES ANY
AND ALL RIGHTS OR REMEDIES CONFERRED UPON A LESSEE UNDER THE CODE OR
7.
<PAGE>
5.15 APPENDIX. Any lease Appendix executed by Lessor and Lessee making
reference to this Agreement is a part of and incorporated into this Agreement by
this reference.
LESSEE, BY THE SIGNATURE BELOW OF ITS AUTHORIZED REPRESENTATIVE, ACKNOWLEDGES
THAT IT HAS READ THIS AGREEMENT, UNDERSTANDS IT, AND AGREES TO BE BOUND BY ITS
TERMS AND CONDITIONS. EACH PERSON SIGNING BELOW ON BEHALF OF LESSEE REPRESENTS
THAT HE OR SHE IS AUTHORIZED TO EXECUTE AND DELIVER THIS AGREEMENT ON BEHALF OF
LESSEE.
LESSOR: LESSEE:
CISCO SYSTEMS CAPITAL GREENLAND CORPORATION
CORPORATION
By:________________________________ By:________________________________
(Authorized Signature) (Authorized Signature)
___________________________________ ___________________________________
(Name/Title) (Name/Title)
By:________________________________
(Authorized Signature)
___________________________________
(Name/Title)
9.
<PAGE>
[LOGO]
SCHEDULE NO. 001-000
MASTER AGREEMENT NO. 2539
THIS SCHEDULE NO. 001-000 (this "SCHEDULE") dated as of November 3, 1999, by
and between CISCO SYSTEMS CAPITAL CORPORATION ("LESSOR"), having its
principal place of business at 170 West Tasman Drive, Mailstop SJC2, 3rd
Floor, San Jose, California 95134, fax number 408.525.5352, and GREENLAND
CORPORATION ("LESSEE") having its principal place of business at 1935 Avenida
Del Oro, Suite D, Oceanside, CA 92056, supplements that certain Master
Agreement to Lease Equipment No. 2539 dated as of November 1, 1999 (the
"AGREEMENT," and together with this Schedule, the "LEASE") between Lessor and
Lessee, incorporated herein by this reference. Capitalized terms not
otherwise defined herein have the meanings specified in the Agreement.
1. EQUIPMENT DESCRIPTION. Quantity, manufacturer, model and serial number of
the Equipment subject to this Schedule are as specified in the Invoice(s)
referenced at Annex B hereto (collectively, the "INVOICE"). Unless otherwise
specified in the applicable Invoice, the Equipment is new.
2. EQUIPMENT LOCATION. The Equipment shall at all times be installed or located
at the location specified in Annex B or such other location as is permitted
under the Agreement.
3. EQUIPMENT COST. The "EQUIPMENT COST" for any item of Equipment is the sum of
(a) the equipment purchase price specified in the Invoice, plus (b) all
taxes, shipping, insurance, installation, cabling, maintenance, software and
related expenses to the extent paid or financed by Lessor in its discretion
(collectively, "SOFT COSTS") and as may be reflected in Annex B hereto. The
aggregate Equipment Cost for all Equipment under this Schedule is $39,120.00
4. RENTAL PAYMENT AMOUNT. Based on the aggregate Equipment Cost above and the
lease payment factor(s) set forth below, the monthly rental payment in
respect of the Equipment is $1,916.28 ("RENT"):
<TABLE>
<S> <C>
Equipment Rental Factor: 3.95%
Software Finance Factor: 4.60%
Maintenance Finance Factor: 8.75%
Integration Services Finance Factor: N/A
</TABLE>
5. LEASE TERM. The "LEASE TERM" of this Lease shall begin on the Commencement
Date and shall consist of an "ORIGINAL TERM" equal to 24 months and, if this
is an FMV Lease (as defined in Paragraph 8), the Original Term shall
automatically be extended on a month-to-month basis (each, an "EXTENDED
TERM") unless either party notifies the other not later than 30 days prior
to the end of the Lease Term or any extension thereof of its election not to
extend such lease term or extended term. If this is not an FMV Lease, the
Lease Term shall end at the end of the Original Term. The "COMMENCEMENT
DATE" of this Lease shall be the earlier to occur of (i) the execution date
specified in the certificate of acceptance, if any, delivered by Lessee
("CERTIFICATE OF ACCEPTANCE") relating to the Equipment or if the Equipment
is delivered in multiple shipments, relating to the last item of Equipment
delivered to Lessee. Notwithstanding any provision to the contrary contained
in any Lease Document, Lessee shall be deemed to have irrevocably accepted,
for purposes of the Lease, the Equipment on the Commencement Date. Lessee
agrees to complete, sign and return to Lessor any Certificate of Acceptance
sent to Lessee, promptly upon Lessee's receipt and acceptance of the
relevant Equipment.
1.
<PAGE>
6. RENT PAYMENTS. Rent for the Original Term shall be payable in 24
consecutive, equal monthly payments, on the first day of each such period,
commencing with the first day of the calendar month immediately following
the Commencement Date (unless the Commencement Date is the first day of the
month and rent is payable in advance, in which case the first Rent payment
shall be due on such date). Lessor agrees that no Rent shall be payable for
any period prior to the Commencement Date or for the period from the
Commencement Date (provided such date is not the first day of the month)
until, but not including, the first day of the calendar month immediately
following the Commencement Date. Unless otherwise agreed in writing by the
Lessor at such time, the Rent for any Extended Term shall be payable
monthly, in advance, and shall be in a daily-equivalent amount equal to that
of the original Rent, adjusted, as applicable, for Soft Costs.
7. END OF TERM PURCHASE OPTION PRICE. Lessee may or shall, as the case may be,
purchase the Equipment in accordance with the terms of Paragraph 8 for the
following amount (as checked and completed by Lessor):
/ / (a) $ 1.00
/X/ (b) Fair Market Value (as defined in Paragraph 8)
8. END OF TERM PURCHASE OPTION.
(a) If option (b) is selected at Paragraph 7, this Lease shall be deemed an
"FMV LEASE" and Lessee shall have an end of term purchase option as follows.
(If no option is selected at Paragraph 7, option (b) shall be deemed to
apply.) Provided this Lease has not been terminated earlier and there exists
no Event of Default or event which with notice, lapse of time or both, would
be an Event of Default, not earlier than 90 days and not later than 30 days
before the end of the Original Term, Lessee may deliver to Lessor an
irrevocable notice electing to purchase all (but not less than all) of the
Equipment at the end of the Original Term for amount equal to the amount
specified in the provision selected (or deemed selected) in Paragraph 7,
which amount Lessee shall pay to Lessor on the last day of the Original
Term. If no such notice is delivered by Lessee to Lessor within such period,
Lessee shall be deemed to have waived any right to purchase such Equipment.
(b) If option (a) of Paragraph 7 is selected, Lessee shall pay Lessor the
amount specified in such option on the last day of the Original Term.
(c) Upon full payment to it of the amount specified in clause (a) or (b) of
this Paragraph 8, Lessor shall transfer its right, title and interest in and
to such Equipment to Lessee without recourse or warranty, except that Lessor
shall warrant that such Equipment is free and clear of any lien or
encumbrance arising by or through Lessor.
(d) "FAIR MARKET VALUE" shall mean the value which would obtain in an
arm's-length transaction between an informed and willing buyer-user (other
than a lessee currently in possession or a used equipment dealer) under no
compulsion to buy, and an informed and willing seller under no compulsion to
sell and, in such determination, costs of removal from the location of
current use shall not be a deduction from such value. Fair Market Value
shall be determined by the mutual agreement of Lessor and Lessee in
accordance with the preceding sentence or, if Lessee and Lessor cannot agree
within 20 days after Lessee's notice of election to purchase under clause
(a) of this Paragraph 8, by a qualified independent equipment appraiser
selected by Lessor, at Lessee's cost.
9. CASUALTY VALUE. The Casualty Value of the Equipment shall be determined in
accordance with Annex A hereto.
10. TECHNOLOGY REFRESH. Upon no less than 90 days' advance written notice to
Lessor and provided the Lease is not in default, subject to Lessor's credit
approval at that time, Lessee may as of any scheduled Rent payment date,
return any or all of the Cisco Systems - manufactured Equipment under this
Schedule to Lessor and be excused from the final scheduled Rent payments
related to such Equipment, provided Lessee (a) pays the
2.
<PAGE>
ANNEX B
TO
SCHEDULE NO. 001-000
TO
MASTER AGREEMENT NO. 2539
EQUIPMENT INVOICES, COST AND LOCATION
As set forth below:
See attached for equipment invoices and location.
B-1
<PAGE>
subsidiaries or other affiliates, defaults under any other instrument or
agreement with Lessor or Cisco Systems, Inc.
4.2 REMEDIES. If an Event of Default exists, Lessor may exercise any one or
more of the following remedies, in addition to those arising under applicable
law: (a) proceed, by appropriate court action, to enforce performance by Lessee
of the applicable covenants of any or all of the Leases; (b) terminate any or
all Leases by notice to Lessee and take possession of any or all of the
Equipment and, for such purpose, enter upon any premises where the Equipment is
located with or without notice or process of law and free from all claims by
Lessee or any other person, or require Lessee to assemble the Equipment and
deliver it to Lessor in accordance with Section 3.3; (c) recover any and all
direct, incidental and consequential damages, including all accrued and unpaid
Rent and other amounts owing under any Lease, and (i) for any Lease that is an
FMV Lease, the Equipment for which has not been returned to Lessor in the
condition required hereunder, an amount equal to the Casualty Value thereof; or
(ii) for any Lease that is an FMV Lease, the Equipment for which has been so
returned to Lessor, such amounts as are provided for the lessee breach of a
personal property lease under the Uniform Commercial Code of the jurisdiction
specified in Section 5.11 (the "CODE"), using the Discount Rate to calculate
present values for such purpose; or (iii) for any Lease that is not an FMV
Lease, an amount equal to the present value, discounted at the Discount Rate, of
the sum of all Rent and other payments remaining to be paid under such Lease
through the Lease Term plus the applicable purchase option amount specified in
Paragraph 7 of the Schedule; and (d) sell or re-lease any or all of the
Equipment, through public or private sale or lease transactions, and apply the
proceeds thereof to Lessee's obligations under such Leases or otherwise seek
recovery in accordance with applicable provisions of the Code Lessee shall
remain liable for any resulting deficiency and Lessor may retain any surplus it
may realize in connection with an FMV Lease. The "DISCOUNT RATE" shall be the
rate for U.S. Treasury obligations having a constant maturity of three months,
as specified in the Federal Reserve Statistical Release H. 15 (or replacement
publication) issued most recently prior to the date of termination of the Lease.
Lessee shall pay all costs and expenses (including reasonable attorneys' fees)
incurred by Lessor in retaking possession of, and removing, storing, repairing,
refurbishing and selling or leasing such Equipment and enforcing any obligations
of Lessee pursuant to any Lease
V. MISCELLANEOUS
5.1 PERFORMANCE OF LESSEE'S OBLIGATIONS. Upon Lessee's failure to pay any
amount or perform any obligation under any Lease when due, Lessor shall have the
right, but shall not be obligated, to pay such sum or perform such obligation,
whereupon such sum or cost of such performance shall immediately become due and
payable thereunder, with interest thereon at the Default Rate from the date such
payment or performance was made.
5.2 RIGHT TO USE. So long as no Event of Default exists, neither Lessor nor
its assignee shall interfere with Lessee's right to use the Equipment under any
Lease.
5.3 ASSIGNMENT BY LESSOR. Lessor may assign or transfer any or all of
Lessor's interest in this Agreement, any Lease. any Equipment or Rents, without
notice to Lessee. Any assignee of Lessor shall have all of the rights, but none
of the obligations (unless otherwise provided in the applicable assignment), of
a "Lessor" under this Agreement and the applicable Lease, and Lessee agrees that
it will not assert against any assignee any defense, counterclaim or
6.
<PAGE>
5.15 APPENDIX. Any lease Appendix executed by Lessor and Lessee making
reference to this Agreement is a part of and incorporated into this Agreement by
this reference.
LESSEE, BY THE SIGNATURE BELOW OF ITS AUTHORIZED REPRESENTATIVE, ACKNOWLEDGES
THAT IT HAS READ THIS AGREEMENT, UNDERSTANDS IT, AND AGREES TO BE BOUND BY ITS
TERMS AND CONDITIONS. EACH PERSON SIGNING BELOW ON BEHALF OF LESSEE REPRESENTS
THAT HE OR SHE IS AUTHORIZED TO EXECUTE AND DELIVER THIS AGREEMENT ON BEHALF OF
LESSEE.
LESSOR: LESSEE:
CISCO SYSTEMS CAPITAL GREENLAND CORPORATION
CORPORATION
By:_______________________________ By:_______________________________
(Authorized Signature) (Authorized Signature)
__________________________________ __________________________________
(Name/Title) (Name/Title)
By:_______________________________
(Authorized Signature)
__________________________________
(Name/Title)
9.
<PAGE>
[LOGO]
SCHEDULE NO. 001-000
MASTER AGREEMENT NO. 2539
THIS SCHEDULE NO. 001-000 (this "SCHEDULE") dated as of November 3, 1999, by
and between CISCO SYSTEMS CAPITAL CORPORATION ("LESSOR"), having its
principal place of business at 170 West Tasman Drive, Mailstop SJC2, 3rd
Floor, San Jose, California 95134, fax number 408.525.5352, and GREENLAND
CORPORATION ("LESSEE") having its principal place of business at 1935 Avenida
Del Oro, Suite D, Oceanside, CA 92056, supplements that certain Master
Agreement to Lease Equipment No. 2539 dated as of November 1, 1999 (the
"AGREEMENT," and together with this Schedule, the "LEASE") between Lessor and
Lessee, incorporated herein by this reference. Capitalized terms not
otherwise defined herein have the meanings specified in the Agreement
1. EQUIPMENT DESCRIPTION. Quantity, manufacturer, model and serial number of
the Equipment subject to this Schedule are as specified in the Invoice(s)
referenced at Annex B hereto (collectively, the "INVOICE"). Unless otherwise
specified in the applicable Invoice, the Equipment is new.
2. EQUIPMENT LOCATION. The Equipment shall at all times be installed or located
at the location specified in Annex B or such other location as is permitted
under the Agreement
3. EQUIPMENT COST. The "EQUIPMENT COST" for any item of Equipment is the sum of
(a) the equipment purchase price specified in the Invoice, plus (b) all
taxes, shipping, insurance, installation, cabling, maintenance, software and
related expenses to the extent paid or financed by Lessor in its discretion
(collectively, "SOFT COSTS") and as may be reflected in Annex B hereto. The
aggregate Equipment Cost for all Equipment under this Schedule is
$39,120.00.
4. RENTAL PAYMENT AMOUNT. Based on the aggregate Equipment Cost above and the
lease payment factor(s) set forth below, the monthly rental payment in
respect of the Equipment is $1,916.28 ("RENT"):
<TABLE>
<S> <C>
Equipment Rental Factor: 3.95%
Software Finance Factor: 4.60%
Maintenance Finance Factor: 8.75%
Integration Services Finance Factor: N/A
</TABLE>
5. LEASE TERM. The "LEASE TERM" of this Lease shall begin on the Commencement
Date and shall consist of an "ORIGINAL TERM" equal to 24 months and, if this
is an FMV Lease (as defined in Paragraph 8), the Original Term shall
automatically be extended on a month-to-month basis (each, an "EXTENDED
TERM") unless either party notifies the other not later than 30 days prior
to the end of the Lease Term or any extension thereof of its election not to
extend such lease term or extended term. If this is not an FMV Lease, the
Lease Term shall end at the end of the Original Term. The "COMMENCEMENT
DATE" of this Lease shall be the earlier to occur of (i) the execution date
specified in the certificate of acceptance, if any, delivered by Lessee
("CERTIFICATE OF ACCEPTANCE") relating to the Equipment or if the Equipment
is delivered in multiple shipments, relating to the last item of Equipment
delivered to Lessee. Notwithstanding any provision to the contrary contained
in any Lease Document, Lessee shall be deemed to have irrevocably accepted,
for purposes of the Lease, the Equipment on the Commencement Date. Lessee
agrees to complete, sign and return to Lessor any Certificate of Acceptance
sent to Lessee, promptly upon Lessee's receipt and acceptance of the
relevant Equipment.
1.
<PAGE>
ANNEX B
TO
SCHEDULE NO. 001-000
TO
MASTER AGREEMENT NO. 2539
EQUIPMENT INVOICES, COST AND LOCATION
As set forth below:
See attached for equipment invoices and location.
B-1
<PAGE>
EXHIBIT 10(I)
No. BSG9908-210R2
Date: September 17, 1999
Page 1 of 4
[LOGO] Custom Service Agreement ("Agreement")
Customer Name: Greenland Corporation
Address: 1935 Avenida Del Oro Ste D
Oceanside, CA 92056
- --------------------------------------------------------------------------------
Sprint Communications Company L.P. ("Sprint"), a limited partnership, offers to
provide the Services in Section 2 under the terms and conditions in this
Agreement. This Agreement and any information concerning its terms and
conditions are Sprint's proprietary information and are governed by the parties'
nondisclosure agreement. The parties' nondisclosure agreement term is extended
to be coterminous with the Agreement Term. Customer agrees not to disclose this
Agreement or any information in this Agreement to any third party.
1) TERM - The Term is 27 months, including a 3 month Ramp Up Period.
2) NETWORK SERVICES - Domestic Sprint Enhanced Frame Relay.
3) MINIMUM SERVICE COMMITMENT ("MSC") - Customer's Minimum Annual
Commitment ("MAC") is $300,000. Customer may increase its MAC to the
$480,000 or $660,000 level by providing at least 30 days' written notice
to Sprint before the requested increase. Customer will receive the rates
or Discounts associated with the new MAC and the new MAC will be
effective on the first day of the second billing month after the notice
period expires. Customer may not decrease its MAC. If Customer's
increased MAC occurs after the start of a Contract Year, Customer's MAC
for the affected Contract Year will be prorated based on the number of
months at each MAC level.
MSC CONTRIBUTORY SERVICES - Domestic Sprint Enhanced Frame Relay.
4) QUALIFICATIONS - On the Commencement Date Customer must:
a) be a new Sprint customer.
5) CONDITIONS - During each billing month Customer must meet the following
Conditions:
a) Customer will have at least 1 Sprint-provided local access line for
Sprint Services in NPA-NXX 505-877 or successor NPA-NXX, NPA-NXX
305-228 or successor NPA-NXX, and NPA-NXX 412-390 or successor NPA-NXX.
b) Customer will have at least 150 Domestic Sprint Enhanced Frame Relay
Service ports.
c) Sprint must be Customer's Exclusive Interexchange Carrier.
d) Customer will award Sprint 100% of its access Service facilities.
6) ADDITIONAL PROVISIONS -
a) Any time after the 15th billing month of the Term, Customer may, with
90 days' written notice to Sprint, convert all pricing for all Network
Services under this Agreement to standard tariff rates and Discounts,
including any available promotions. After the effective date of
Customer's notice, standard tariff pricing will become effective on the
next billing month's first day.
7) SERVICES CHARGES -
a) Sprint will charge Customer a fixed monthly recurring charge
("MRC") in the applicable amount from the table below each Domestic
Sprint Enhanced Frame Relay Service port installed or in service during
the Term. Customer is not eligible for standard Tariff Term/Volume
Discounts.
<TABLE>
<CAPTION>
MAC
-----
$300,000 $ 480,000 $660,000
---------- ----------- ----------
Port Bandwidth MRC per Port MRC Per Port MRC Per Port
---------------- -------------- -------------- --------------
<S> <C> <C> <C>
56/64 Kbps $137 $122 $105
112/128 Kbps $268 $254 $236
168/192 Kbps $315 $299 $278
SPRINT PROPRIETARY INFORMATION
<PAGE>
Page 2 of 4
- -----------------------------------------------------------------------
<S> <C> <C> <C>
224/256 Kbps $359 $341 $317
280/320 Kbps $421 $400 $371
336/384 Kbps $498 $473 $439
392/448 Kbps $542 $515 $478
448/512 Kbps $598 $568 $527
504/576 Kbps $651 $618 $574
560/640 Kbps $684 $649 $603
616/704 Kbps $705 $669 $621
672/768 Kbps $737 $700 $650
784/896 Kbps $864 $820 $761
896/1,024 KBPS $938 $890 $826
1,120/1,280 Kbps $1,079 $1,024 $951
1,344/1,536 Kbps $1,125 $1,090 $1,010
3 Mbps - 2xT1 $2,899 $2,860 $2,783
6 Mbps - 4xT1 $4,281 $4,154 $3,834
9 Mbps - 6xT1 $5,636 $5,462 $5,029
12 Mbps - 8xTl $6,880 $6,665 $6,128
45 Mbps - DS3 $7,718 $7,473 $6,860
</TABLE>
b) Sprint will charge Customer a fixed monthly recurring charge
("MRC") in the applicable amount from the table below for each Domestic
Sprint Enhanced Frame Relay Service for LAN PVC installed or in service
during the Term. Customer is not eligible for standard Tariff Term/Volume
Discounts.
<TABLE>
<CAPTION>
MAC
-----
$300,000 $480,000 $660,000
---------- ---------- -----------
PVC CIR MRC per PVC MRC per PVC MRC per PVC
- --------- ------------- ------------- -------------
<S> <C> <C> <C>
0 KBPS $12 $11 $10
</TABLE>
c) Sprint will charge Customer a $107 fixed monthly recurring charge
for its Sprint-provided, Domestic Sprint Enhanced Frame Relay Service DAL
local access lines (not including ACF and COC monthly recurring charges)
at Customer's initial 44 Domestic sites at the NPA-NXXs listed in
Attachment A (incorporated into this Agreement). For all other Domestic
DAL sites, Sprint will charge Customer a $107 fixed monthly recurring
charge for its Sprint-provided, Domestic Sprint Enhanced Frame Relay
Service DAL local access lines (not including ACF and COC monthly
recurring charges) unless the site is greater than 20 miles from a Sprint
POP. If the site is greater than 20 miles from a Sprint POP and does not
qualify for the Discount in 7) d) below, Sprint will charge Customer
access charges under Sprint FCC Tariff No. 8.
d) Except as provided in Section 7) c) above, Customer will receive a
35% Discount, in lieu of all other discounts, on the monthly recurring
charge for its Sprint-provided, Domestic Sprint Enhanced Frame Relay DAL
local access lines (not including ACF, COC and other access related
charges) installed or in service for a minimum of 2 years during the Term.
e) Sprint will charge Customer a fixed monthly recurring charge
("MRC") in the applicable amount from the table below its
Sprint-provided, Domestic Sprint Enhanced Frame Relay T-1 local access
lines (excluding ACF and COC charges) at the following NPA-NXXs:
<TABLE>
<CAPTION>
NPA-NXX MRC
--------- -----
(or successor NPA-NXX)
------------------------
<S> <C>
760-414 $350
972-245 $200
</TABLE>
<PAGE>
Page 3 of 4
f) Sprint will waive 100% of the monthly recurring ACF charges and
100% of the monthly recurring COC charges on Sprint - provided, Domestic
Sprint Enhanced Frame Relay Service DAL, T-1 and T-3 local access lines
installed or in service during the Term.
g) Sprint will waive the following installation charges:
i) T-1 local access line installation charges (including
non-recurring COC and ACF charges) on Sprint-provided, Domestic
Sprint Enhanced Frame Relay Service T-1 local access lines
installed during the Term.
ii) T-3 local access line installation charges (including
non-recurring COC and ACF charges) on Sprint-provided, Domestic
Sprint Enhanced Frame Relay Service T-3 local access lines
installed during the Tem.
iii) DAL local access line installation charges (including
non-recurring COC and ACF charges) on Domestic Sprint Enhanced
Frame Relay Service DAL local access lines installed during the
Term.
iv) Domestic Sprint Enhanced Frame Relay Service port installation
(non-recurring) charges on ports installed during the Term.
v) Domestic Sprint Enhanced Frame Relay Service for LAN PVC
installation (non-recurring) charges on PVCs installed during the
Term.
Customer will use local access lines, ports, and PVCs installed
under this subsection for 30 continuous months. If Customer disconnects
any local access line, port, or PVC receiving an installation waiver
before the end of 30 months, Customer will pay Sprint a prorated portion
of the waived installation charges based on the number of remaining
months.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
Page 4 of 4
===============================================================================
STANDARD PROVISIONS
1. TARIFF APPLICABILITY. All terms and conditions in Sprint FCC Tariff
No. 12 apply to this Agreement. Capitalized terms are defined in this
Agreement or in Sprint FCC Tariff No. 12. This Agreement's rates, charges
and Discounts supersede any promotions or discounts that arc available
under Sprint's tariffs. Rates, charges and Discounts for call types,
Service elements, features, and Services not in this Agreement are in the
applicable Sprint Base Service Tariff or public price list.
2. FIXED Rates. Fixed rates will remain fixed for the Term. Percentage
Discounts will remained fixed for the Term, but Sprint may modify the
underlying tariff rate (or list price for non-tariffed Services) against
which Sprint applies Discounts.
3. TARIFF WITHDRAWAL. If Sprint withdraws any tariff that applies to
Services in this Agreement, the tariff terms and conditions then in
effect will continue to apply to this Agreement. After Sprint withdraws
any applicable tariff, this Agreement will control over any inconsistent
provision in the withdrawn tariff. But Sprint may modify any tariff rate
or list price that is not fixed by this Agreement.
4. CREDIT APPROVAL. Customer is subject to credit approval and may be required
to submit a deposit.
5. REGULATORY PROGRAMS. Sprint may impose additional charges on Customer
to recover amounts Sprint is required by regulatory or other governmental
authorities to collect on behalf of or pay to others in support of
statutory or regulatory programs. Examples of these programs include, but
are not limited to, the Universal Service Fund, the Presubscribed
Interexchange Carrier Charge, and compensation to payphone service
providers for use of their payphones to access Sprint's service.
6. NOTICE. Any notice required under this Agreement or related to a
dispute must be submitted in writing to the appropriate party's address
shown below. If a notice relates to a dispute, Customer must provide a
copy to Sprint at 8140 Ward Parkway, Kansas City, Missouri 64114,
Attention: Law Department/Marketing and Sales.
7. RELIANCE. In accepting this Agreement Customer is not relying on any
representations or promises not included in this Agreement. When signed
by the parties this Agreement, including the standard terms and
conditions for applicable Sprint Services (incorporated by this
reference), will: (a) constitute the parties' entire understanding
regarding Services; and (b) supersede all agreements or discussions,
oral or written, regarding Services.
8. DOMESTIC DEFINITION. The term "Domestic" means the 48 contiguous
states of the United States and the District of Columbia for: Sprint
Frame Relay Products and Services; Sprint Enhanced Frame Relay Products
and Services; Sprint IP Services; Sprint Managed Network Products and
Services; Sprint X.25 Products and Services; and Sprint ATM Services.
Otherwise, "Domestic" and other geographic terms are defined in the
applicable Sprint tariffs.
9. HEADINGS. Headings are for reference only and have no effect on any
provision's meaning.
10. COMMENCEMENT. To become effective this Agreement must be:
(a) signed by a Customer representative; (b) delivered to Sprint on or
before October 31, 1999; and (c) signed by a Sprint officer or
authorized designee. The Commencement Date will be the first day of the
first billing month after the parties sign this Agreement.
11. AMENDMENTS. Customer and Sprint may modify this Agreement only by
written amendment signed by both parties' officers, or authorized
designees. Alterations to this Agreement will not be valid unless
accepted in writing by a Sprint officer or authorized designee.
===============================================================================
GREENLAND CORPORATION
By: [ILLEGIBLE]
-----------------------------------
Name: [ILLEGIBLE]
---------------------------------
Title: Secretary
--------------------------------
Date: 9-30-99
--------------------------------
Address:1935 Avenida Del Oro
------------------------------
Oceanside, CA 92056
------------------------------
SPRINT COMMUNICATIONS COMPANY L.P.
By:[ILLEGIBLE]
-----------------------------------
Name: [ILLEGIBLE]
---------------------------------
Title: BRANCH MANAGER
--------------------------------
Date: 9-30-99
---------------------------------
Address: 2650 Camino Delrio N S.209.
------------------------------
SD CA 92108
------------------------------
<PAGE>
ATTACHMENT A
INITIAL DAL DOMESTIC SPRINT ENHANCED FRAME RELAY SITE NPA-NXXS.
203-366 505-877 909-343
205-733 512-419 914-965
212-349 517-882 915-857
215-425 540-265 972-241
217-351 614-291
228-467 619-582
228-863 623-846
301-942 702-252
305-228 703-750
313-843 704-569
323-293 706-232
330-869 716-235
334-479 773-287
336-841 775-746
404-233 803-788
407-291 804-762
410-254 843-767
410-263 860-523
412-390 901-274
415-292 904-247
<PAGE>
EXHIBIT 10(J)
CHECK CENTRAL, INC.
1935 AVENIDA DEL ORO
SUITE D
OCEANSIDE, CA 92056
(760) 414-9941
DISTRIBUTOR AGREEMENT
This Independent Distributor Agreement (the "Agreement") is entered
into effective as of December 1, 1999 by and between Check Central, Inc.
(hereinafter "CCI") a Nevada Corporation and, ACS Electronic Commerce Group, an
Independent Distributor (hereinafter "Distributor"), a Delaware corporation with
reference to the following recitals of essential facts.
RECITALS
A. CCI is engaged in the manufacture, assembly and sales of that certain
product more particularly described on Exhibit A attached hereto and
incorporated by reference herein (the "Product" or the "Machine") and
accessories, special parts and replacement parts and software and
programming for such Product which are used in connection with such
Product;
B. Distributor represents and warrants itself to be experienced in
marketing, sales and the management of a sales force.
C. CCI desires to retain the services of Distributor, for the duration of
this Agreement and in accordance with the following terms and
conditions, to sell, lease and place Product and Services,
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES AND CONDITIONS
REFERENCED HEREIN, THE PARTIES AGREE THAT THE FOLLOWING TERMS AND CONDITIONS
SHALL GOVERN THE RELATIONSHIP OF THE PARTIES AND THE SALE, LEASE AND PLACEMENT
OF THE PRODUCTS AS FOLLOWS:
AGREEMENT
I. CONTRACT TERM AND TERMINATION
A. This Agreement shall commence on the date executed by both
parties, shall continue thereafter in effect for a period of
two (2) years, or until terminated by either party for cause
pursuant to the terms of Paragraph B below.
B. Termination for cause shall include, but is not limited to, the
following:
1. In the event either party fails to pay all amounts due the
other in accordance with the terms of this Agreement,
2. In the event either party materially breaches the terms of
this Agreement,
Page 1 of 16
<PAGE>
3. In the event either party becomes or is declared insolvent,
becomes subject to a voluntary or involuntary bankruptcy or
similar proceeding, or makes an assignment for the benefit
of all or substantially all of its creditors; in such case
it is the responsibility of Distributor to notify CCI should
any of the aforementioned occur. Failure to notify CCI shall
constitute a material breach of this Agreement.
4. Distributor misrepresents any CCI Product or Service to third
parties.
CURE PERIOD
In the event a Party commits an act set forth above (the
"Breach") (the "Breaching Party"), the other party (the
"Non-breaching Party") may terminate this Agreement provided
that the Non-Breaching Party notifies the Breaching Party of
the Breach and the Breaching Party fails to cure the Breach
within sixty days from receipt of said notice.
II. INDEPENDENT CONTRACTOR STATUS
A. Distributor shall at times be an independent contractor under
this Agreement. Except as expressly set forth herein,
Distributor is not authorized to act on behalf of CCI, act in a
manner that would indicate or imply, or represent itself to be
an officer, agent, employee, or representative of CCI.
B. CCI is not authorized to act on behalf of Distributor, act in a
manner that would indicate or imply, or represent itself to be
an officer, agent, employee, or representative of Distributor.
C. Distributor agrees to pay all of its own expenses, such as, but
not limited to, all operating expenses including rent,
telephone, transportation, entertainment, business cards,
brochures, and other expenses necessary to operate Distributors
business.
D. Distributor concedes and recognizes the exclusive rights of CCI
in and to, and shall have no right or license in, the trade
names Check Central, Inc and the trademarks and trade name used
with or affixed to any Product, including OneCash, SmartCash
ATM and any subsequently acquired trade names and/or
trademarks. Notwithstanding the foregoing, CCI shall license
Distributor to use trademarks in advertising the Products and
Services upon receipt of prior written approval from CCI. CCI
shall provide Distributor with written instructions as to the
proper use and display of said trademarks and trade names.
E. During the term of this Agreement, Distributor and
Distributor's agents are authorized to use the phrase
"Independent CCI Distributor" in connection with the sale,
advertisement, and promotion of Products and Services and not
in connection with any other aspect of Distributors business.
Distributor shall conduct its business solely under
Distributor's own name except for purposes of complying with
the Networks' rules and requirements for Independent Sales
Organization Sponsorship. Nothing herein shall give
Distributor or wholesale customers of Distributor any Interest
or license in such phrase and the right to use such phrase
shall immediately cease upon termination or cancellation of
this
Page 2 of 16
<PAGE>
Agreement. Distributor specifically agrees to reimburse CCI
for any reasonable losses it may suffer in the event
Distributor uses the above name(s) and/or phrase in a
fraudulent or deceptive manner which in turn causes ant third
party to make a claim against CCI.
F. If Distributor has employees, Distributor shall maintain
workman's compensation insurance for its employees. In
addition, Distributor, at its sole cost and expense, shall
maintain no less than $1,000,000 in personal injury liability
and $1,000,000 property damage insurance upon any vehicle used
by Distributor and shall purchase and maintain during the term
of this Agreement comprehensive general liability insurance,
including product liability coverage, with combined single
limits of $1,000,000 or its equivalent. CCI must be named in
such policies as an additional insured and shall be furnished
with a copy of such policies or certificates of insurance.
Additionally, the policy shall contain a provision that it
cannot be canceled except upon ten- (10) day's prior written
notice to CCI.
III. APPOINTMENT NON-EXCLUSIVE
A. NON-EXCLUSIVE. Distributor shall remain, subject to the terms
and conditions of this Agreement, the non-exclusive
distributor, for a term of two years.
B. PRICE. Up to January 30, 2000 Distributor shall purchase the
Machines FOB Oceanside, California at the following prices
(the "Distributor Price"): (i) Based Model with 2 drawer cash
dispenser $27,000 (ii) Base Model with 4 drawer cash dispenser
$29,500. The services on the Base Model include, ATM , check
cashing and money order. A money receiver is not included in
the Base Model Price. Money receiver as specified by CCI is
$1,500. Distributor may resell the Machines at a price
determined by Distributor to be reasonable and appropriate to
achieve maximum market penetration. CCI recommends that a
retail price for a Machine be established at: 2 drawer
$34,000; 4 drawer $36,500 and with bill paying (money
receiver) $35,500 and $38,000. In addition, if CCI ships the
Product to anywhere within the 48 United States the charge
will be $400. Furthermore, Advertising packages are also
available (see attached). We recommend each Machine be
accompanied by a start-up advertising kit at a charge of
$500.00. CCI agrees the Distributor Price may be adjusted on a
periodic basis to reflect reasonable changes in Greenland's
costs related to the manufacture/production of the Machine;
provided however, that Distributor receive 60 days written
notice prior to any such adjustment and the Distributor Price
may only be adjusted if prices charged by CCI to other
distributors are also adjusted by similar amounts. The
Distributor Price shall always be equal to or less than the
price charged by CCI to any other level I or level II
distributor for the same product. It is anticipated that on or
about March 1, 2000 all machine model prices will be increased
by approximately $2,000 each, subject to the notice
requirements contained herein (Level 1 distributor must sell
a minimum of 12 machines a year and receives a price of
$27,000 for a base model. Level 11 distributor has no minimum
sales requirement and receieves a price of $28,500 for base
model)
In addiiton, if Distributor places orders (with deposits) for
at least 100 Machines during the first 12 months of this
Agreement, the Distributor Price shall be reduced by $1,000
for all Machines purchased in excess of 100 during said 12
Page 3 of 16
<PAGE>
month period and Distributor shall receive a rebate of $500
per machine for each of the first 100 Machines purchased
during said 12 month period (the "Rebate"). The Rebate shall
be applied against future purchases of Machines on a pro-rata
machine purchase basis.
C. EXCLUSIVE ATM PROCESSOR. Distributor may, at his option,
become the exclusive ATM processor for the Machines purchased
pursuant to this Agreement.
D. VAULT CASH. Distributor shall have the right to supply vault
cash for the Machines sold pursuant to this Agreement.
E. SERVICE & INSTALLATION. Distributor may, subject to mutually
acceptable terms and conditions, have the exclusive right to
provide delivery and maintenance service and installation for
the Machine purchased pursuant to this Agreement.
IV. COMPENSATION OF DISTRIBUTOR
A. Distributor shall be compensated for its services under this
Agreement as follows. Distributor may purchase the Machines
from CCI or place the Machines with a third party on behalf of
CCI, under the pricing arrangement set forth in Paragraph III
B above and set forth on "Schedule 1" hereto. As stated in
Paragraph III B, the Distributor Price may be amended from
time to time by CCI, upon sixty (60) day's prior written
notice to Distributor. When Machines are sold by Distributor,
Distributor shall keep the difference between Distributor
Price and the price charged by Distributor as compensation.
Pricing information is the confidential property of CCI and
shall be for the internal use of the Distributor only. At all
times for the duration of this Agreement, Distributor shall be
considered and designated by CCI as a "Distributor" for
purposes of computing prices as set forth in "Schedule 1"
B. In no event shall any other fees or expenses be paid to
Distributor except as specifically provided in "Schedule I"
hereto and/or Paragraph III B.
V. SCOPE OF AGREEMENT
Distributor's non-exclusive territory shall include the entire United
States.
VI. OBLIGATIONS OF DISTRIBUTOR AND CCI
A. Distributor agrees to use its best efforts in the promotion,
sale and placement of the Products and Services and to devote
such time as necessary to market The Products consistent with
good business ethics, and in a manner that will reflect
favorably on CCI and on the good will and reputation of CCI.
B. Distributor agrees to provide all tools, hire and/or contract
personnel, and otherwise provide whatever is necessary to
market the Products and Services.
Page 4 of 16
<PAGE>
C. Distributor agrees at all times to refrain from engaging in any
illegal, unfair or deceptive trade practices or unethical
business practices whatsoever, whether with respect to CCI or
otherwise.
D. Distributor agrees to adopt and maintain the high level of
quality and customer service that CCI has established.
E. Distributor agrees to ensure that all payments and documents
required by CCI for the sale or placement of its Products are
properly executed and forwarded to CCI.
F. Distributor shall not knowingly make any misrepresentation
regarding any of the Products and/or services provided by CCI.
G. Distributor shall acquire and maintain a valid business license,
business address and telephone for receiving inquiries about, or
fulfilling orders for the Products made available by CCI.
H. CCI shall: (i) supply a Machine that is fit for use for the
purpose intended with a one year warranty as described in
Paragraph XX. (ii) pay amount due Distributor promptly, (iii)
comply with applicable local, state and federal regulations,
(iv) maintain adequate insurance to conduct its operations
VII. COVENANT NOT TO COMPETE
In the event customer elects to evaluate alternative hardware options
and engages Distributor, Distributor has the right to pursue such
customer utilizing alternative options. CCI (including its master
distributor SmartCash ATM LTD) shall not solicit any Distributor
Corporate Accounts (Corporate Accounts are defined as accounts that own
or control 100 or more locations) covered by this covenant not to
compete, concerning the sale of the Product or other similar
self-service check cashing kiosk sold by CCI under this Agreement. In
order to prevent solicitation of CCI's Corporate Accounts by Distributor
(Corporate Accounts are defined as accounts that own or control 100 or
more locations) and solicitation of Distributor's Corporate Accounts by
CCI, CCI agrees that within 20 days of execution of this Agreement that
CCI will submit a list of any Corporate Accounts that are presently
being actively solicited by CCI (the "Solicitation List"). At such time
as Distributor desires to pursue a new Corporate Account, Distributor
shall submit a request for a 120 day covenant not to compete. If said
account is not actively being solicited by CCI (including its master
distributor SmartCash ATM LTD), then for a period of 120 days
Distributor shall have the exclusive rights to that account and if said
account is still in serious negotiations with Distributor after 120
days, the exclusivity shall continue until such time as said account
indicates a desire to cease further negotiations with Distributor or
Distributor and CCI agree that the process is unlikely to achieve
success. CCI will update the Solicitation List on a monthly basis. CCI
agrees that Greyhound Corporation, American Express and Southland
Corporation are exclusive accounts of Distributor and shall remain
exclusive clients of Distributor within their existing covenant not to
compete. Any exceptions to this Covenant Not to Compete must be attached
to this Agreement as Schedule 3 and approved by a CCI officer.
Notwithstanding the forgoing, Distributor shall be released from its
obligation not to compete in the event that CCI has been found to have
committed an act that validates this Agreement being terminated for
cause by Distributor.
VIII. INDEMNIFICATION/HOLD HARMLESS
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<PAGE>
A. Distributor shall indemnify, hold harmless, and defend, at its
sole cost and expense, CCI against and from any and all claims,
actions, proceedings, damages, liabilities, losses, fines,
penalties, expenses, attorneys fees and all other associated
costs arising out of, or related in any manner whatsoever to
Distributor's, its agent's or employee's real or alleged
wrongful, acts or omissions (whether tortuous or contractual)
in connection with the sale or placement of the Products.
B. CCI shall indemnify, hold harmless, and defend, at its sole
cost and expense, Distributor against and from any and all
claims, actions, proceedings, damages, liabilities, losses,
fines, penalties, expenses, attorneys fees and all other
associated costs arising out of, or related in any manner
whatsoever to CCI's, its agent's or employee's real or alleged
wrongful, acts or omissions (whether tortuous or contractual)
in connection with the sale or placement of the Products.
IX. COVENANT NOT TO DISCLOSE
A. Distributor, during the terms of this Agreement, shall have
access to and become familiar with various trade secrets and
confidential information of CCI including but not limited to,
customer contracts, customer lists, customer prospect lists,
invoices, customer requirements, sales procedures, research
data, design data, marketing and pricing information and data,
marketing plans, financial information of CCI and/or its
customers, and other technical, marketing and/or business
information. This information shall collectively be referred
to as the "Confidential Information" of CCI and Distributor
recognizes and acknowledges that this Confidential Information
gives CCI a competitive advantage in the industry. Distributor
agrees that it shall not use in any way or disclose to any
person or entity any of CCI's Confidential Information, either
directly or indirectly, either during the term of this
Agreement or at any time thereafter, except as required in the
course of its services under this Agreement. Distributor shall
further take reasonable precautions and act in such manner as
to ensure against unauthorized disclosure or use of the
Confidential Information. Such information shall be promptly
delivered to CCI (without Distributor retaining copies) upon
termination of this Agreement.
B. CCI, during the terms of this Agreement, shall have access to
and become familiar with various trade secrets and
confidential information of Distributor including but not
limited to, customer contracts, customer lists, customer
prospect lists, invoices, customer requirements, sales
procedures, research data, design data, marketing and pricing
information and data, marketing plans, financial information
of Distributor and/or its customers, and other technical,
marketing and/or business information. This information shall
collectively be referred to as the "Confidential Information"
of Distributor and CCI recognizes and acknowledges that this
Confidential Information gives Distributor a competitive
advantage in the industry. CCI agrees that it shall not use in
any way or disclose to any person or entity any of
Distributor's Confidential Information, either directly or
indirectly, either during the term of this Agreement or at any
time thereafter, except ad required in the course of its
services under this Agreement. CCI shall further take
reasonable precautions and act in such manner as to ensure
against unauthorized disclosure or use of the Confidential
Information. Such information
Page 6 of 16
<PAGE>
shall be promptly delivered to Distributor (without CCI
retaining copies) upon termination of this Agreement.
C. The Parties recognize and acknowledge that the remedy at law
for a breach by either party of any covenants contained in this
Section IX shall be inadequate, and each party agrees that the
other party in addition to all remedies each may have, shall
have the right to injunctive relief to enforce the provisions
of this Agreement if there is such a breach or threatened
breach.
X. NO GUARANTEES OR REPRESENTATIONS MADE BY CCI
Distributor understands and agrees that:
A. Neither CCI or any agent, employee or representative of CCI
have made any guarantees, representations, or promises
concerning the income, gross or net revenues which can or might
be realized by Distributor under this Agreement. The success of
Distributor under this Agreement is entirely dependent upon
Distributor's own business, marketing and managerial skills.
B. The Agreement does not constitute an Agreement for a joint
venture, partnership, investment interest, franchise or any
relationship other than that of Independent Contractor for CCI.
Notwithstanding the forgoing, CCI represents that it is a corporation duly
organized and validly existing under the laws of the State of Nevada and is in
good standing under such laws. CCI has all requisite corporate power and
authority to own lease and operate its properties and assets and to carry on its
business as presently conducted. CCI is qualified to do business as a foreign
corporation and is in good standing in California. CCI has all requisite
corporate right, power and authority to execute and deliver this Agreement and
all agreements related hereto and to consummate the transactions contemplated
hereby.
XI. CHOICE OF LAW/FORUM
A. This Agreement has been entered into, executed, and shall be
construed in accordance with the laws of the State of Texas.
B. In the event of a dispute concerning this Agreement, the
parties agree that any proceeding for resolving such dispute
shall occur in the County of Dallas, State of Texas.
XII. ATTORNEY FEES FOR PREVAILING PARTY
In any action at law or in equity, including an action for declaratory
relief, the prevailing party shall be entitled to an award of
reasonable attorney fees in addition to other awards resulting from
the dispute.
XIII. PURCHASE ORDERS
Page 7 of 16
<PAGE>
A. Purchase orders, which must be on a CCI approved form, from
Distributor are subject to written acceptance by CCI and must
incorporate this Agreement by reference. CCI shall have no
obligation under a purchase order placed under this Agreement
until such written acceptance is dispatched to Distributor by
CCI. All purchase orders will be deemed accepted by CCI if no
objection in writing is received within one week of submission
by DistributoR. Any change to a previously accepted purchase
order, as of the date changed, will be treated as a new
purchase order submitted for acceptance by CCI. Purchase
orders and confirmation by FAX may be accepted by both
parties.
B. Terms of purchase are as follows: 50% down submitted with
purchase order. Delivery is 45 days of purchase order and
balance is paid COD with delivery and shipment is made FOB CCI
shipping facility.
XIV. DISTRIBUTORS RIGHT TO SUBLICENSE
Distributor is authorized and has the right to enter into
sublicensing agreements and/or distribution agreements with third
parties provided that said agreements contain the essential terms and
conditions of this Agreement as they relate to the protection of the
rights of CCI, including but not limited to: confidentiality
requirements, payment terms and conditions, and obligations of
Distributor. The sublicense's and distributors shall be listed on the
Registration Form attached as Schedule 2.
XV. CANCELLATION AND RESCHEDULING OF ORDERS
CCI and Distributor recognize that the calculation of damages resulting
from cancellation or rescheduling of an order would be difficult to
determine. Accordingly, the parties agree upon the following schedule
of charges pursuant to which CCI will accept cancellation of
rescheduling of any order from Distributor.
A. CANCELLATION: Distributor may cancel in whole or in part any
order previously accepted by CCI, providing that Distributor
reimburses CCI for any expenses incurred by CCI in connection
with such order and cancellation. Notwithstanding the
foregoing, in the event cancellation by Distributor is due to
delay or defective product on the part of CCI, Distributor will
pay no fees, charges or expenses whatsoever.
B. RESCHEDULING: Distributor may reschedule the shipment date of
any order previously accepted by CCI by not more than thirty
(30) days by giving written notice to CCI received more than
five (5) business days prior to the scheduled shipment date.
CCI will accept any subsequent rescheduling of the same order
by written notice to CCI received more than five (5) business
days prior to the scheduled shipment date only if accompanied
by payment of any expenses incurred by CCI in connection with
such rescheduling.
XVI. DELIVERY
Page 8 of 16
<PAGE>
A. Delivery for all Products will be F.O.B. from CCI's staging
warehouse or the manufacturer, as appropriate ("Delivery"). CCI
shall not be liable for any delay in Delivery unless such delay
is due to the acts or omissions of CCI. Shipping charges shall
be paid by purchaser through Distributor.
B. Prices are F.0 B.. and are exclusive of all taxes and duties.
Distributor shall pay all taxes and duties associated with the
sale of Products and Services, including sales, use, but
exclusive of taxes based on CCI's net income. Any tax or duty
CCI may be required to collect or pay upon the sale or delivery
of Products shall be paid by the Distributor and such sums
shall be due and payable to CCI upon delivery,
XVII. PRODUCT SPECIFICATION CHANGES
CCI reserves the right to make changes in design or improvements to
the Product. CCI agrees that it will consult with Distributor
regarding any such changes and agrees to coordinate the timing of
implementing any such changes with Distributor and will provide 30
days written notice prior to implementation of any change to design
and/or Product. CCI is not obligated to make any such changes to the
Product previously delivered to Distributor.
XVIII. SOFTWARE PRODUCT LICENSE
Unless otherwise stated, CCI grants Distributor a nontransferable,
non-exclusive license to use its operational software programs for the
purpose of the operation of the Product with customers only. The
software provided by CCI is subject to the following provisions:
A. CCI retains title to all software and/or firmware programs
B. Distributor agrees not to copy, duplicate or otherwise
reproduce, disclose sub-license or sell any CCI-supplied
software and/or firmware program.
XIX. TITLE AND RISK OF LOSS
Each accepted purchase order constitutes separate sales contract based
on the prices; terms and conditions set forth in this Agreement or as
amended from time to time in accordance with this Agreement. Title to
the Product, parts and components sold under each purchase order and the
risk of loss or damages to the Product will pass from CCI to Distributor
at the time that the Product is properly loaded on a carrier for
shipment.
XX. PRODUCTS WARRANTY
A. Up to February 28, 2000, the Product sold by CCI and purchased
by Distributor under this Agreement is covered by CCI's
standard warranty, one year parts and labor (copy to be
supplied)("CCI Warranty"). CCI reserves the right to modify
such warranty on prior written notice to Distributor. After
February 28, 2000, warranty periods may be limited to 90 days
full parts and labor and one year on parts.
Page 9 of 16
<PAGE>
B. In addition to the CCI Warranty, CCI will use reasonable
efforts to obtain and pass through to Distributor's customers
all available warranties obtained from manufacturers of the
Products and/or the components of the Products.
C. EXCEPT AS SPECIFICALLY PROVIDED HEREIN. NO WARRANTIES,
EXPRESSED OR IMPLIED, INCLUDING WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE ARE BEING MADE HEREIN. CCI
NEITHER ASSUMES NOR AUTHORIZES ANY OTHER PERSON TO ASSUME FOR
IT ANY OTHER LIABILITY IN CONNECTION WITH THE SALE,
INSTALLATION OR USE OF THE PRODUCTS. NO REPRESENTATION OR OTHER
AFFIRMATION OF FACT INCLUDING BUT NOT LIMITED TO STATEMENTS
REGARDING CAPACITY, SUITABILITY FOR USE OR PERFORMANCE OF
PRODUCTS, WHETHER MADE BY CCI EMPLOYEES OR OTHERWISE, WHICH IS
NOT CONTAINED HEREIN, SHALL BE DEEMED TO BE A WARRANTY BY CCI
FOR ANY PURPOSE, OR GIVE RISE TO ANY LIABILITY OF CCI
WHATSOEVER.
D. CCI SHALL HAVE NO LIABILITY FOR SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES.
E. Distributor shall not make any other direct or indirect
representations or warranties, expressed or implied on behalf
of CCI. In the event Distributor does make any such
unauthorized representation or warranties, expressed or
implied, in connection with the sale, distribution or handling
of the Product, Distributor shall hold harmless and indemnify
CCI for any expenses (including counsel fees), claims, damages,
settlements or liability of any nature whatsoever arising out
of such unauthorized representation of Distributor.
XXI. LIMITATION OF LIABILITY
A. EXCEPT AS EXPRESSLY PROVIDED HEREIN, CCI SHALL NOT BE LIABLE
FOR ANY LOSS OR DAMAGE CLAIMED TO HAVE RESULTED FROM USE,
OPERATION OR PERFORMANCE OF THE PRODUCT AND REGARDLESS OF THE
FORM OF ACTION IN ANY AMOUNT ABOVE THE FEE PAID FOR SAID
PRODUCT [EXCEPT FOR LOSS OR DAMAGE CAUSED BY THE SOLE
NEGLIGENCE OF CCI.]
B. IN NO EVENT SHALL CCI BE LIABLE TO DISTRIBUTOR OR ITS END-USER
CUSTOMERS FOR (1) ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES (ii) ANY DAMAGES RESULTING FROM LOSS OF
USE, DATA OR PROFITS, OR (iii) ANY CLAIM, WHETHER IN CONTRACT
OR TORT, THAT AROSE MORE THAN ONE YEAR PRIOR TO INSTITUTION OF
SUIT THEREON, EVEN IF CCI WAS ADVISED, KNEW, OR SHOULD HAVE
KNOWN OF THE POSSIBILITY THEREOF.
C. THE FOREGOING LIMITATIONS ON LIABILITY SHALL BE EFFECTIVE,
EVEN IF THE REMEDIES PROVIDED HEREIN FAIL IN THEIR ESSENTIAL
PURPOSE--[CCI LIABILITY SHALL IN NO EVENT EXCEED THE PURCHASE
PRICE OF THE PRODUCTS PURCHASED.]
XXII. INSERTION OF SOFTWARE SERVICES
Page 10 of 16
<PAGE>
CCI shall have the exclusive right to determine services
provided by the Machine and the exclusive right to add or
delete services from the software menu and Distributor shall
have no right to add services or utilize the soft ware of CCI
for any reason whatsoever, without the prior consent of CCI
which may be withheld for any reason or for no reason;
provided, however, in the event CCI determines in its sole and
absolute discretion to utilize a software and/or a service
introduced by Distributor, CCI will negotiate in good faith a
licensing arrangement providing for the utilization of said
software and/or services at that terms such as ownership,
retention, licensing fees, royalties etc.
XXIII. GENERAL PROVISIONS
A. The parties agree to execute any further documents and
Instruments, which are necessary to effect the substance and
intent of this Agreement.
B. If any part of this Agreement is construed as unconstitutional,
illegal or otherwise invalid by a court of competent
jurisdiction, the invalid part shall in no way invalidate the
effectiveness of the remainder of this Agreement.
C. This Agreement contains all of the Agreements, representations
and conditions made by and between the parties. None of the
parties shall be liable as a result of reliance upon any
statements or representations not contained in this Agreement,
or which contradict the expressed contractual language of this
Agreement.
D. Each party to this Agreement shall have sole responsibility for
fulfilling its respective commitments and obligations to the
appropriate local, state and federal taxing authorities, as a
result of this Agreement and any payments made or received
hereunder.
E. Notice shall be deemed given (i) when received, if hand
delivered and a receipt is executed or (ii) when receipt is
executed, if given in writing and actually delivered or
deposited in the United States Mail in registered or certified
form with return receipt requested postage paid (iii) or
received on CCI's Corporate Office facsimile machine given
below, All notices shall be given to the notified party at the
address given below. The address for notice may be changed by
notice.
CHECK CENTRAL, INC.
1935 Avenida Del Oro, Suite D
Oceanside, CA 92056
PH#:760-414-9941 FAX#:760-414-9943
H. Each party to this Agreement shall execute all instruments and
documents and take all actions as may be reasonably required to
effectuate this Agreement.
I. For purposes of venue and jurisdiction, this Agreement shall be
deemed made and to be performed in the City of Dallas, State of
Texas.
J. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall
constitute one document, The facsimile signatures of the parties
shall be deemed to constitute original signatures, and
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<PAGE>
facsimile copies hereof shall be deemed to constitute duplicate
original counterparts.
K. Whenever the context so requires in this Agreement all words
used In the singular shall be construed to have been used in the
plural (and vice versa), each gender shall be construed to
include any other genders, and the word "person" shall be
construed to include a natural person, a corporation, a firm, a
partnership, a joint venture, a trust, an estate, or any other
entity.
L. The provisions of this Agreement shall be valid and enforceable
to the fullest extent permitted by law. If any provision of this
Agreement or the application of such provision to any person or
circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Agreement, or the application of such
provision to persons or circumstances other than those as to
which it is held invalid or unenforceable, shall not be affected
by such invalidity or unenforceability, unless such provision or
the application of such provision is essential to the Agreement.
M. This Agreement may be modified only by an agreement in writing
executed by the parties to this Agreement, against whom
enforcement of such modification is sought.
N. This Agreement contains the entire Agreement between the parties
to this Agreement with respect to the subject matter herein and
supersedes all prior understandings, agreements, representations
and warranties, if any, whether oral or written, express or
implied, with respect to said subject matter.
0. Any waiver of default under this Agreement must be in writing
and shall not be a waiver of any other default concerning the
same or any other provision of this Agreement. No delay or
omission in the exercise OF any rights or remedies shall impair
its right of remedy or be construed as a waiver. A consent to or
approval of any act shall not be deemed to waive or render
unnecessary consent to or approval of any other or subsequent
act.
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<PAGE>
P. Each party to this Agreement and its counsel have reviewed and
revised this Agreement. The rule of construction that any
ambiguities are to be resolved against the drafting parties shall
not be employed in the interpretation of this Agreement or of any
amendments or exhibits to this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on
the day and year set forth herein below.
CHECK CENTRAL, INC. ACS ELECTRONIC COMMERCE GROUP
By:___________________________ By:_________________________
Signature Signature
Name:_________________________ Name:_______________________
(Please print) (Please print)
Title:________________________ Title:______________________
Date:_________________________ Date:_______________________
AGREED, ADOPTED AND APPROVED AND AGREEING TO BE BOUND THEREBY GREENLAND
CORPORATION HEREBY AFFIXES ITS DULY AUTHORIZED SIGNATURE
GREENLAND CORPORATION
By: ___________________________
Louis T. Montulli
Chairman and CEO
Date: _________________________
ATTACHMENTS:
Exhibit A - Product
Schedule 1- Pricing
Schedule 2- Registration Form
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<PAGE>
EXHIBIT A
PRODUCT
Page 14 of 16
<PAGE>
SCHEDULE 1
PRICING
The pricing for the SmartCash ATM paid by Distributor is as set forth in
Paragraph III unless subsequently adjusted by Greenalnd as per the terms of
this Agreement.
Page 15 of 16
<PAGE>
SCHEDULE 2
REGISTRATION FORM
Name of Company/Person:
Address of Company/Person:
Name and title of Contact person:
Copy of Sub License Agreement (attached hereto)
Page 16 of 16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 235,574
<SECURITIES> 0
<RECEIVABLES> 120,720
<ALLOWANCES> 120,300
<INVENTORY> 299,116
<CURRENT-ASSETS> 792,530
<PP&E> 190,004
<DEPRECIATION> 31,417
<TOTAL-ASSETS> 4,752,937
<CURRENT-LIABILITIES> 1,367,976
<BONDS> 0
0
0
<COMMON> 35,298
<OTHER-SE> 3,349,663
<TOTAL-LIABILITY-AND-EQUITY> 4,752,937
<SALES> 267,990
<TOTAL-REVENUES> 272,042
<CGS> 282,499
<TOTAL-COSTS> 545,835
<OTHER-EXPENSES> 5,219,526
<LOSS-PROVISION> 2,020,300
<INTEREST-EXPENSE> 43,353
<INCOME-PRETAX> (7,534,689)
<INCOME-TAX> 800
<INCOME-CONTINUING> (7,535,489)
<DISCONTINUED> 713,277
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,822,212)
<EPS-BASIC> (.27)
<EPS-DILUTED> (.27)
</TABLE>
