-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KTMMGfrlp9HRFGIbUDzxhkjSDBu7Pe4NeJS8ota2UC11w7aKfMiQVUCj4KKTFNSP Q4O8suHbRS92zkN1XHP1Gg== 0000950124-01-502122.txt : 20010627 0000950124-01-502122.hdr.sgml : 20010627 ACCESSION NUMBER: 0000950124-01-502122 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20010626 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOLUTIONNET INTERNATIONAL INC CENTRAL INDEX KEY: 0001093468 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 954749095 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10SB12G SEC ACT: SEC FILE NUMBER: 000-27697 FILM NUMBER: 1667880 BUSINESS ADDRESS: STREET 1: 1594 CENTRE POINTE DR CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 2488517400 MAIL ADDRESS: STREET 1: 31700 WEST 13 MILE RD STREET 2: STE 201 CITY: FARMINGTON HILLS STATE: MI ZIP: 48335 10SB12G 1 k62810e10sb12g.txt FORM 10-SB PURSUANT TO RULE 12(G) 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-SB GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934 SOLUTIONNET INTERNATIONAL, INC. ---------------------------------------------- (Name of Small Business Issuer in its Charter) MINNESOTA 95-4749095 - -------------------------------------------------------------- ------------------------------------ (State or Other jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification No.) 1594 CENTRE POINTE DRIVE, MILPITAS CA 95035 ---------------------------------------- ---------- (Address of Principal Executive Offices) (Zip Code)
(408) 934-9748 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which to be so registered each class is to be registered ------------------- ------------------------------ NA NA
Securities to be registered under Section 12(g) of the Act: COMMON STOCK, PAR VALUE $0.001 - -------------------------------------------------------------------------------- (Title of class) 2 TABLE OF CONTENTS
Page No. -------- Part I Item 1. Description of Business 4 Item 2. Description of Property 12 Item 3. Directors, Executive Officers and Significant Employees 12 Item 4. Remuneration of Directors and Officers 14 Item 5. Security Ownership of Management and Certain Security Holders 16 Item 6. Interest of Management and Others in Certain Transactions 18 Item 7. Description of Securities 19 Part II Item 1. Market Price of and Dividends on the Registrant's Common Equity and Related Stockholder Matters 21 Item 2. Legal Proceedings 23 Item 3. Changes in and Disagreements with Accountants 23 Item 4. Recent Sales of Unregistered Securities 23 Item 5. Indemnification of Directors and Officers 24 Part F/S Index to Financial Statements 25 Part III Item 1. Index to Exhibits 26 Item 2. Description of Exhibits 26
2 3 WITH THE EXCEPTION OF THE STATEMENTS REGARDING HISTORICAL MATTERS AND STATEMENTS REGARDING THE COMPANY'S CURRENT STATUS, CERTAIN MATTERS DISCUSSED HEREIN ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. SUCH-FORWARD LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF THE WORDS "ANTICIPATE", "BELIEVE", "ESTIMATE", "PLAN", "EXPECT", "INTEND" AND SIMILAR EXPRESSIONS. ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH MATERIAL DIFFERENCES INCLUDE FOREIGN EXCHANGE RATES, DEPENDENCE ON SKILLED AND KEY PERSONNEL, CLIENT CONCENTRATION AND COMPETITION. 3 4 PART I ITEM 1. DESCRIPTION OF BUSINESS. OVERVIEW SolutionNet International, Inc., a Minnesota corporation (the "Company" or "SolutionNet"), is a holding company, dedicated to the development and marketing of proprietary, multi-application internet information technology ("IT") solutions. SolutionNet provides Electronic Banking and eCommerce solutions as well as Customer Relationship Management ("CRM") and eCommerce consulting services to the financial services, telecommunications and health care markets. SolutionNet focuses on three product lines and services: (1) development and marketing of proprietary front-end delivery solutions for financial services and health care markets using internet and state-of-the-art data security technologies; (2) CRM and e-commerce consulting services focusing on front-office revenue generating solutions; and (3) system integration ("SI") services on turn-key basis using either on-shore or off-shore development teams. SolutionNet owns 100% of the outstanding shares of SolutionNet Inc. - British Virgin Islands, incorporated under the laws of the British Virgin Islands in 1999 ("SolutionNet BVI"), which owns 100% of the outstanding shares of SolutionNet (Asia Pacific) Pte Ltd Singapore, incorporated under the laws of Singapore in 1994 ("SolutionNet (Asia Pacific")). SolutionNet (Asia Pacific) owns 100% of the shares of SolutionNet (Middle East) Ltd. ("SolutionNet (Middle East)"), a limited liability company formed under the laws of the United Arab Emirates. Neither holding company, SolutionNet or SolutionNet BVI, has any operations of its own. SolutionNet (Asia Pacific) is the principal operating subsidiary of SolutionNet. SolutionNet (Middle East) had no operations through December 31, 2000. COMPANY HISTORY SolutionNet was incorporated under the laws of the State of Minnesota under the name of ETG International, Inc. ("ETGI") on August 25, 1994. On October 11, 1994, an Iowa corporation (formerly Grason Industries, Inc. which was incorporated in August 1984) was merged into ETGI. Pursuant to an exchange agreement, in April 1999 ETGI (which had changed its name to SolutionNet, but was an inactive company) by way of exchange, issued (i) shares constituting a majority of its outstanding shares to Densmore Group Limited, a corporation incorporated under the laws of the British Virgin Islands ("Densmore") and (ii) acquired all of the outstanding shares of SolutionNet BVI, and thereby control of SolutionNet (Asia Pacific). Densmore had owned all of the outstanding shares of SolutionNet BVI. Suresh Venkatachari, the President of SolutionNet, owns all of the outstanding shares of Densmore. See "Part I-Item 5. Security Ownership of Management and Certain Security Holders." 4 5 SOLUTIONNET PRODUCTS AND SERVICES INTERNET APPLICATIONS SolutionNet provides a wide variety of e-business solutions and services across a wide range of industries and platforms, providing a large spectrum of custom applications, technology expertise and global execution, all on a networked basis. SolutionNet focuses on four important IT solutions: ENet Internet Banking ("ENet Banking"), Intelligent Data Mapper ("IDM"), E-Business Kits and Electronic Medical Information ("EMI"). All these products are platform independent, capable of incorporating Smart Card technology, written in Java and utilize state-of-the-art "thin client" browser technology. ENET INTERNET BANKING ENet Banking is designed to be an Internet-based, fully secured online banking solution providing banks' corporate clients with access to their accounts worldwide. ENet is designed to offer real-time interactive information solutions allowing clients to access information related to their accounts, transact and exchange information globally across the electronic delivery channel. ENet has been designed to allow banks to serve clients with heterogeneous core systems across branches and allows information sharing between those branches. ENet works with various local and international standards for communicating credit and debit instructions between parties. The standards currently supported include SWIFT, EDICFACT, XML, Local Payment Formats and Bank specific proprietary formats. INTELLIGENT DATA MAPPER IDM is a "Java"-based technology designed to allow data mapping interface between disparate operating systems, databases and networks while communicating over the Internet. IDM supports multiple platforms including UNIX, AS/400, NT and Windows 98 and provides graphical interface for data mapping configuration. IDM is designed to be used by industry where data integration is required. E-BUSINESS KITS In today's global marketplace a significant portion of business is E-business. The Internet and new technologies enable many products and services to be delivered electronically, providing companies with access to new customers, suppliers and partners. The Company believes that a company without a website is at a major disadvantage compared to competitors who have a Web presence. SolutionNet has responded to its customers' needs to remain competitive in the marketplace by developing E-Business Kits. E-Business Kits are fully integrated, ready-to-use IT solutions. The system is designed to meet any and all needs of companies looking to conduct business on the Internet. E-Business Kits feature an array of ready-to-use applications required to implement successful business-to-business and business-to-customer Web sites. With the solution, businesses can go online and offer their products and services over the Internet in a matter of a few weeks. 5 6 ELECTRONIC MEDICAL INFORMATION EMI is an electronic delivery channel that is designed to enable patients, doctors, healthcare centers and commercial organizations to interact via the Internet. EMI has been designed to ease the administrative burden, reduce errors, improve productivity, and ultimately improve healthcare quality. Procedures such as prescription writing and billing can be interactively processed online with chemists and insurance companies. Services can also extend to interaction with pharmaceutical companies allowing the ordering of laboratory tests and medications online. CONSULTING The Company operates as a full-service consulting and programming house providing end-user Internet technologies, ERP solutions, Multimedia applications, technology and systems integration, offshore resources and consultant training. MARKETING AND DISTRIBUTION The Company uses a variety of marketing programs designed to stimulate demand for its products and services. The goal of the marketing activities is to create awareness of the Company, brand, and product offerings. Marketing activities include target marketing, an interactive Internet site, participation in industry-related activities, resellers, partnerships with IT companies and an in-house marketing department to promote its products in the Asia Pacific region, the Middle East and India. The Company targets its marketing efforts towards software solutions decision makers in large organizations. The Company also markets through its own Internet site. The Company makes many of its products available for evaluation through its website at solutionnet.net. The web site is used to collect certain customer information through an automated registration process. The Company uses the customer information as a springboard for targeting its marketing of upgrades, new products, add-on products, and merchandise. The Company seeks to increase its corporate profile by participating in exhibitions, trade fairs and other industry-related activities on a local, regional and global scale. In order to more fully develop and maintain a global presence, the Company has formed relationships with three globally recognized companies. The Company currently maintains strategic technology and marketing relationships with Oracle Corporation, Sun Microsystems and the Algorithm Research unit of Cylink Corporation. To accelerate the acceptance of the products, the Company has developed a partner program and a reseller network as well as maintaining its own in-house marketing department. SolutionNet has developed a comprehensive partner program, designed to drive effective partner alliances and ensure the success of these relationships by jointly identifying and pursuing specific business objectives. The partnership program operates 6 7 within a framework of proactive business planning, revenue targeting initiatives, structured sales process and enhanced SolutionNet training as well as pre-sales engineering support. The partner program assists our partner in growing its business by incorporating our core competency and product offerings. To grow our international presence, SolutionNet uses a network of resellers to market its products and services. The Company has current marketing relationships either directly or indirectly with Compaq, CSA Holdings, Cybersign, Fujitsu, Mindtree Consulting, NCR and Tata Infotech to sell our product in the Asia Pacific region, the Middle East and India. The Company is currently attempting to expand its the reseller network in the United States, United Kingdom and Australia. COMPANY-SPONSORED PRODUCT DEVELOPMENT ACTIVITIES SolutionNet's objective is to be a leading provider of financial and ebusiness solutions. In order to achieve this objective, we are continuously investing in product development activities to enhance our core technology and incorporating industry leading application components into our products. The following is a summary of the amounts spent during each of the last two fiscal years on product development activities:
2000 1999 ---- ---- $524,630 $394,411
COMPETITION The Company believes its products are superior to those of many of its competitors. With proprietary products like E-Net Banking, EMI, IDM and E-Business Kits, the Company believes it has built a solid foundation upon which to grow and expand the size and scope of its business. The Company also believes that the price of its products may be less than many of its competitors because the Company develops most of its software in India which has lower development costs than the United States or Singapore. However, the market for software and services for intranets, extranets, and the Internet is relatively new, intensely competitive, and subject to rapid technological change. The Company expects competition to continue and increase in the future. Such competition could impair the Company's finances or business prospects. The company's primary competition currently includes: o In-house development efforts by prospective customers or partners; 7 8 o Other vendors of application software or application development platforms and tools directed at interactive and financial services, such as Broadvision, Security First, Brokat, Infosys; o Web content developers that develop custom software or integrate other application software into custom solutions and o International Business Machines Corporation. The principal competitive factors affecting the market for our products are: o Depth and breadth of functionality offered; o Ease of application development; o Reliance on industry standards; o Product reliability; o Proven track record; o Scalability; o Maintainability; o Personalization and other features; o Product quality; o Price and o Customer support. Compared to us, many of these and other current and future competitors have longer operating histories and significantly greater financial, technical, marketing and other resources. As a result, they may be able to respond more quickly to new or changing opportunities, technologies and customer requirements. Many of these companies also can use their greater name recognition and more extensive customer base to gain market share at our expense. Current and potential competitors may bundle their products to discourage users from purchasing our products. Competitive pressures may make it difficult for us to acquire and retain customers and may require us to reduce the price of our products. COMPLIANCE WITH ENVIRONMENTAL LAWS The Company believes that it is in compliance with applicable material environmental laws and regulations. GOVERNMENT REGULATION AND INTELLECTUAL PROPERTY RIGHTS The Company relies upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright and trademark laws to protect its proprietary rights and the proprietary rights of third parties from whom the Company licenses intellectual property. The Company intends to file trademark applications in the United States and Singapore. The Company does not have any patents or registered copyrights. Ownership of software and associated deliverables created for clients is generally 8 9 retained by or assigned to the client, and the Company does not retain an interest in such software and deliverables. The Company enters into confidentiality agreements with its employees, consultants and vendors and limits distribution of proprietary information. We also control access to and distribution of our software, documents and other proprietary information. Notwithstanding these precautions, there can be no assurance that the steps taken by the Company in this regard will be adequate to deter misappropriation of proprietary information or that the Company will be able to detect unauthorized use and take appropriate steps to enforce its intellectual property rights. The laws of other countries may afford us little or no effective protection of our intellectual property. A breach of the encryption technology that we use could expose the Company to liability and harm our reputation, causing a loss of customers. A significant barrier to online commerce and communication is the secure exchange of valuable and confidential information over public networks. We rely on encryption and authentication technology, including public key cryptography technology licensed from Cylink Corporation, to provide the security and authentication necessary to effect the secure exchange of confidential information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments could cause a breach of the RSA algorithm or other algorithms that we use to protect customer transaction data. The United States government regulates the export of technology, including encryption technology, which our products incorporate. Export regulations, either in their current form or as may be subsequently enacted, may limit our ability to distribute our software outside the United States. Any revocation or modification of our export authority or adoption of new laws or regulations relating to the export of software and encryption technology could limit our international operations. The unlawful export of our software could also harm our reputation. Although we take precautions against unlawful export of our software, the global nature of the Internet makes it difficult to effectively control the distribution of software. Although the Company's intellectual property has never been the subject of an infringement claim, there can be no assurance that third parties will not assert infringement claims against the Company in the future, that assertion of such claims will not result in litigation or that the Company would prevail is such litigation or be able to obtain a license for the use of any infringed intellectual property from a third party on commercially reasonable terms. Furthermore, litigation, regardless of its outcome, could result in substantial costs to, and diversion of effort by the Company. Any infringement claim or litigation against the Company could, therefore, materially and adversely affect the Company's business, operating results and financial condition. 9 10 CUSTOMERS The company derives its business and revenues from a large client base. Currently, the following customers provided more than 10% of the Company's annual revenues for the year ended December 31, 2000. Hewlett Packard 15% Deutsche Bank 14% A sample list of our customers by industry as follows: o Financial Services : ABN Amro Bank, Bank of Bahrain and Kuwait, Citibank N.A., Corporation Bank., Deutsche Bank, HDFC Bank, Indian Bank and Qatar National Bank o Manufacturing / Services: BASF, Compaq, Hewlett Packard, Siemens Components and Sun Microsystems. The volume of work performed for specific clients is likely to vary from year to year particularly since the Company is usually not the exclusive outside software service provider for its clients. Thus, a major client in one year may not provide the same level of revenues in a subsequent year. The loss of any large client could have a material adverse effect on the Company's results of operations and financial condition. Since many of the contracted projects are critical to the operations of its clients' businesses, any failure to meet client expectations could result in a cancellation or non-renewal of a contract. However, there are a number of factors other than the Company's performance that could cause the loss of a client, such as a client moving more work in-house. INTERNATIONAL SALES OPERATIONS The Company's customers and its distributors' territories are located in Bahrain, Brunei, India, Indonesia, Kuwait, Malaysia, Philippines, Qatar, Thailand and Vietnam. International sales operations expose the Company to a number of risks including the impact of recessions and/or political instability in one or more of the countries, unexpected changes in regulatory requirements, restrictions on the transfer of funds to or from foreign countries, seasonal reductions in business activities, certification requirements, trade restrictions and limited protection of intellectual property rights. In addition, international operations expose the Company to the risks of changes in foreign exchange rates. The Company's functional currency is the Singapore dollar although it transacts a major portion of its business in foreign currencies and accordingly has foreign currency exposure through its sales and purchases outside of Singapore. The Company currently does not actively hedge against exchange rate fluctuations, although it may elect to do so in the future. Accordingly, changes in exchange rates may have a material adverse effect on the Company's net sales, cost of services sold, gross margin and net income, any of which alone or in the aggregate may in turn have a material adverse effect on the Company's business, operating results and financial condition. For the year ended December 31, 2000, approximately 87% of the Company's revenues were in Singapore 10 11 dollars and 13% were in currencies other than the Singapore dollar, whereas 95% of the Company's expenses were in Singapore dollars and 5% were in currencies other than the Singapore dollar. Revenues generated in non-Singapore currencies are translated into Singapore dollars using the exchange rate prevailing on the dates revenues are recognized. Expenses of non-Singapore operations are incurred in foreign currencies and are translated into Singapore dollar at either the monthly average exchange rate or the exchange rate on the date the expense is incurred, depending on the source of payment. For U.S. GAAP reporting, the financial statements are translated into U.S. dollars using the average monthly exchange rate for revenues and expenses and the period end rate for assets and liabilities. The gains or losses from such translation are reported as "Accumulated other comprehensive income" or "Accumulated other comprehensive loss," a separate component of stockholders' equity. The Company expects that a portion of its revenues will continue to be generated in non-Singapore currencies for the foreseeable future and that most of the Company's expenses, including personnel costs as well as capital and operating expenditures, will continue to be denominated in Singapore dollars. Consequently, the Company's results of operations will be adversely affected to the extent that the Singapore dollar appreciates against the other currencies. As disclosed under "Marketing and Distribution," the Company intends to expand its customer base into the United States, the United Kingdom and Australia. In addition to expansion into these areas by marketing efforts, the Company may expand by acquisition. As of this date, however, the Company has no understanding, commitment or agreement with respect to any material future acquisition. Since the Company has not made any acquisitions in the past, there can be no assurance that the Company will be able to identify suitable acquisition candidates available for sale at reasonable prices, consummate any acquisition, or successfully integrate any acquired business into the Company's operations. Further, acquisitions may involve a number of special risks, including diversion of management's attention, failure to retain key acquired personnel and clients, unanticipated events or circumstances, legal liabilities and amortization of acquired intangible assets, some or all of which could have a material adverse effect on the assets, some or all of which could have a material adverse effect on the Company's results of operations and financial condition. EMPLOYEES As of March 31, 2001, the Company had 112 full-time employees. The Company believes its relationship with its employees is satisfactory. The Company's employees are not represented by any union. Given the Company's relatively early stage of development, the Company's success depends on the ability to attract, develop, motivate and retain highly qualified personnel. The Company's ability to execute project engagements and to obtain new clients depends, in large part, on its ability to attract, train, motivate and retain highly skilled IT professionals, particularly project managers, software engineers and other senior technical personnel. An inability to hire and retain additional qualified personnel will impair the Company's ability to bid for or obtain new projects and to continue to expand 11 12 its business. The Company believes that there is significant competition for IT professionals with the skills necessary to perform the services offered by the Company. There can be no assurance that the Company will be able to assimilate and manage new IT professionals effectively. Any increase in the attrition rates experienced by the Company, particularly the rate of attrition of experienced software engineers and project managers, would adversely affect the Company's results of operations and financial condition. There can be no assurance that the Company will be successful in recruiting and retaining a sufficient number of replacement IT professionals with the requisite skills to replace those IT professionals who leave. Further, there can be no assurance that the Company will be able to redeploy and retrain its IT professionals to keep pace with continuing changes in IT, evolving standards and changing client preferences. The Company's success depends to a significant degree upon continued contributions of members of the Company's senior management and other key research and development and sales and marketing personnel. The loss of any of such persons could have a material adverse effect on the Company's business, financial condition and results of operations. ITEM 2. DESCRIPTION OF PROPERTY. SolutionNet's principal U.S. office is located at 1594 Centre Pointe Drive, Milpitas, California 95035. The lease of this office expires in October 2001. SolutionNet's Singapore office is located at No. 1 Shenton Way, Number 22-06/09, Singapore 068803. The lease of this office, which is approximately 5,930 square feet, expires in August 2002. SolutionNet does not own any real estate properties and has no agreements to acquire any such properties at this time. ITEM 3. DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES. The following is a list of the names and ages of all directors and executive officers of the Company: 12 13 DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE POSITION HELD SINCE Suresh Venkatachari 34 Chairman of the Board, Mar 1999 President, Chief Executive Officer, Treasurer, Secretary and Director Sampath Seshadri 47 Vice-President and Director Apr 1999 Murali Natarajan 43 Vice President (Finance) April 2001 TRV Varadarajan 45 Head of Human Resources April 2001 and Administrator Karthikeyan Raman 31 Assistant Vice President June 2000 and Chief Technology Officer
SURESH VENKATACHARI has served as the Chairman of the Board, Director, President, and Chief Executive Officer of the Company since March 1999. Mr. Suresh founded SolutionNet (Asia Pacific) in 1994. Mr. Suresh is also the Director and Chief Executive Officer of SolutionNet (Asia Pacific). SAMPATH SESHADRI has served as Vice-President and Director of the Company since April 1999. Mr. Seshadri is responsible for strategy planning, financial and business operations. Since January 1996, Mr. Seshadri has also been the President and CEO of VED Software Services, Inc., a Michigan corporation (consulting and IT services). From June 1992 to December 1995, Mr. Seshadri was vice president of HTC Global Services, Inc., a Michigan corporation (formerly Hi-Tech Consultants, Inc.) (consulting and programming services). Prior to this time, Mr. Seshadri was a consultant in the IT field providing services to Fortune 1000 companies. Mr. Seshadri holds a bachelors' and masters' degree from the University of Bombay. Mr. Seshadri and Mr. Venkatachari are brothers-in-law. MURALI NATARAJAN, has been serving as the Vice President of Financial Operations of the Company (since April 2001) and of SolutionNet ((Asia Pacific)) (since February 1999). He is responsible for all of the operational aspects of SolutionNet (Asia Pacific) and is part of the core management group that is responsible for strategic management of the Company. From July 1995 to February 1999, Mr. Natarajan worked for Interactive Media Services Pte Ltd as a Finance and Administrative Manager. From December 1993 to May 1995, Mr Natarajan worked for KM Oli Mohamed Pte Ltd (jewelry company). A management accountant by profession, Mr. Natarajan is a member of the Institute of Cost and Works Accountants of India and a Certified Internal Auditor, US. Mr. Natarajan received his Bachelor of Commerce Degree from Vivekananda College, Madras University, India. 13 14 TRV VARADARAJAN, has been serving as the head of Human Resource and Administration of the Company (since April 2001) and of SolutionNet ((Asia Pacific)) (since August 1998). From June 1979 to June 1998, Mr. Varadarajan was employed by S&S Power Switchgear Ltd, Chennai, India in the areas of management control of finance and accounts, human resource management, commercial operation and general business administration. Mr. Varadarajan has obtained an Honors Degree in Commerce from Annamalai University, India. Mr. Varadarajan is also a Professional Cost Accountant and has received various certifications in Application Software Technology. KARTHIKEYAN RAMAN, has been serving the Company (since April 2001) and SolutionNet (Asia Pacific) since May 2000) as Assistant Vice President and Chief Technology Officer. In this capacity, he is responsible for strategic technology initiatives, standards, program management, and the design, development and operation of various SolutionNet products and new product research. Innovation is his top priority so that SolutionNet products incorporate state-of-the-art technology. From July 1995 to June 2000, Mr. Raman held key technical positions in the Electronic Banking Department of Deutsche Bank Regional Head office, Singapore. He has pioneered the design and development of the Electronic Banking software db-direct in both Client-Server and Web based Internet Architectures. From March 1993 to June 1995, Mr. Raman worked for Tata Consultancy Services, India as a systems analyst. Mr. Raman holds a Master's degree in Computer Science from Birla Institute of Technology and Science, Pilani, India and a Bachelor's degree in Computer Science from Bharathiyar University, India. ITEM 4. REMUNERATION OF DIRECTORS AND OFFICERS. The following table sets forth the aggregate annual remuneration of each of the three highest paid persons who are officers or directors during the Company's year ended December 31, 2000. ANNUAL COMPENSATION
CAPACITIES IN REMUNERATION 2000 AGGREGATE NAME OF INDIVIDUAL REMUNERATION WAS RECEIVED REMUNERATION - ------------------ -------------------------- -------------- Suresh Venkatachari Chairman of the Board, $100,000 President, Chief Executive Officer, Treasurer, Secretary and Director Murali Natarajan Vice President of Financial $ 38,889 Operations Karthikeyan Raman Assistant Vice President $ 25,679(1) and Chief Technology Officer Officers and Directors $191,260 As a Group (5 persons)
- ---------- (1) Started employment with SolutionNet (Asia Pacific) in May 2000. 14 15 EMPLOYMENT AGREEMENTS Mr. Suresh Venkatachari. SolutionNet and Mr. Venkatachari entered into a 2 year employment agreement which expires on May 1, 2003. The agreement provides that Mr. Venkatachari will serve as Chairman of the Board, President and Chief Executive Officer of SolutionNet at an annual salary of $100,000 (U.S.) in the first year and $150,000 (U.S.) in the second year plus, depending upon SolutionNet's performance, a minimum bonus at 50% of his annual salary and will receive options to purchase shares of common stock in numbers as determined by the Board of Directors. The employment agreement also provides that if Mr. Venkatachari's employment is terminated (with or without cause) or if he resigns because of a material change in the scope of his duties or because of a change in control of SolutionNet, he would be entitled to severance payments in an amount equal to his base salary plus his bonus for the preceding year or an imputed bonus of 50% of base salary if he is discharged or suffers a material change in his duties prior to a bonus being established for the prior year. Such severance payments shall be payable for the unexpired term of the agreement or twelve months, whichever is longer. Mr. Murali Natarajan. SolutionNet (Asia Pacific) and Murali Natarajan entered into an employment agreement dated February 1, 1999. Mr. Natarajan's annual salary is $38,889 (U.S.). Either party may terminate the contract by giving thirty (30) days' notice or equivalent salary in lieu thereof. In addition, SolutionNet (Asia Pacific) may terminate the agreement without notice if Mr. Natarajan does not perform his duties or is found guilty of any personal misconduct or of any willful breach and continues to neglect the terms of his employment or any other duties or terms that SolutionNet (Asia Pacific) may from time to time assign. Mr. Karthikeyan Raman. SolutionNet (Asia Pacific) and Karthikeyan Raman entered into a letter of employment dated May 29, 2000. Mr. Raman's salary is $45,495 (U.S.) and is reviewed annually. Either party may terminate the contract by giving 30 days' notice or equivalent salary in lieu thereof. In addition, SolutionNet (Asia Pacific) may terminate the agreement without notice if Mr. Raman does not perform his duties or is found guilty of any personal misconduct or of any willful breach and continues to neglect the terms of his employment or any other duties or terms that SolutionNet (Asia Pacific) or its clients may from time to time assign. Mr. Raman also agrees that he will not directly or indirectly solicit and/or accept an offer for employment from the clients of SolutionNet (Asia Pacific) or join a competitor's company within one year after termination of his employment. 15 16 2001 EQUITY PARTICIPATION PLAN On April 26, 2001, the Board of Directors approved SolutionNet's 2001 Equity Participation Plan (the "Equity Participation Plan"). The Equity Participation Plan reserves 1,500,000 shares of Common Stock of the Company for issuance thereunder. The Equity Participation Plan authorizes the Compensation Committee or the Board of Directors ("Committee") to grant incentive and non-statutory stock options as well as restricted stock. Officers, consultants, and other employees (including employee directors) of SolutionNet and its subsidiaries and affiliates whom the Committee believes have the potential to contribute to the future success of SolutionNet, and those non-employee directors who the Board of Directors believes have the potential to contribute to the future success of SolutionNet, are eligible to receive awards under the Equity Participation Plan. In the event of a stock dividend, stock split, reorganization, merger, or similar corporate transaction (other than a change in control), the Committee is authorized to make appropriate adjustments to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Equity Participation Plan or with respect to an outstanding award. In the event of a change in control, each option granted shall become exercisable as to all shares covered thereby immediately prior to the consummation of such change in control and the restrictions included in any restricted stock grant shall be deemed rescinded and terminated. The Equity Participation Plan may be wholly or partially amended or modified, suspended or terminated at any time from time to time by the Committee. However, without approval of SolutionNet's shareholders given within twelve months before or after the action by the Committee, no action of the Committee may, except as otherwise provided in the Equity Participation Plan, be taken that would require shareholder approval as a matter of law, regulation or rule. No amendment, suspension or termination of the Equity Participation Plan shall, without the consent of the participants, alter or impair any rights or obligations under any award therefor granted, unless the award itself expressly so provides. The Equity Participation Plan is administered by the Committee. Among other things, the Committee has the power to interpret the Equity Participation Plan, the stock option agreements issued thereunder and the agreements pursuant to which restricted stock awards are granted. Under stock option agreements entered into between SolutionNet and participants, stock options generally vest over a two and one-half year period; 33.3% six months from the date of grant, and 33.33% each year thereafter. ITEM 5. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITY HOLDERS. The following table sets forth, as of March 31, 2001, the number and percentage of outstanding shares of Company Common Stock owned of record by (i) each person 16 17 known by the Company to own more than 10.0% of its outstanding Common Stock; (ii) each of the three highest paid persons who are officers and directors of the Company; and (iii) all officers and directors as a group.
NAME AND ADDRESS AMOUNT OWNED PERCENT TITLE OF CLASS OF OWNER OF RECORD OF RECORD OF CLASS - -------------- ------------------ ------------ -------- Common Suresh Venkatachari --(1) --(1) 1594 Centre Pointe Drive Milpitas, CA 95035 Common Murali Natarajan 0 0 No. 1 Shenton Way Number 22-06/09 Singapore, 068803 Common Karthikeyan Raman 5,000 --(2) No. 1 Shenton Way Number 22-06/09 Singapore, 068803 Common Densmore Group, Ltd 7,100,000(1) 56.3% S1 Anson Road 10 55/57 Anson Center Singapore, 079904 Common Sara Hallitex Corporation(3) 1,730,000(4) 13.7% 4344 Promenade Way Suite 102P Marina del Rey, CA 90292 Officers and Directors as a Group (5 persons) --(5) --(5)
- ---------- (1) Suresh Venkatachari is the beneficial owner of all of the outstanding shares of Densmore Group, Ltd. (2) Represents less than 1.0% of the outstanding shares. (3) It is the Company's belief that Sara Hallitex Corporation changed its name to Web Capital Ventures, Inc. ("Web Capital"). The Company is also of the belief that Garrett K. Krause, the President and Chief Executive Officer of Web Capital controls a majority of the outstanding shares of Web Capital. In addition, based on an SEC filing of Web Capital in January 2000, Mr. Krause controls an additional 541,000 shares (4.1%) of SolutionNet. (4) These shares are the subject of litigation brought by SolutionNet against Web Capital, Garrett K. Krause and others. See "Part II - Item 2. Legal Proceedings." (5) Reference is made to footnote (1) above. Based thereon, the officers and directors own and/or control 7,305,000 shares of SolutionNet (57.9%). In addition, as disclosed below, officers and directors as a group hold options for 187,000 shares. 17 18 OPTIONS, WARRANTS AND RIGHTS The following table sets forth the amount of options, warrants or rights held by the persons listed as of April 26, 2001. Neither Densmore nor Garrett Krause own any outstanding options, warrants or rights. The Company terminated warrant rights previously provided to Sara Hallitex Corporation pursuant to contract, however, see "Part II - Item 2" with respect to the cross-complaint filed by Web Capital.
NAME TITLE AND AMOUNT OF DATE OF COMMON STOCK CALLED FOR BY EXERCISE OF HOLDER OPTIONS, WARRANTS OR RIGHTS PRICE EXERCISE - ------ --------------------------- -------- -------- Suresh Venkatachari 100,000(1) $0.27 (2) Murali Natarajan 25,000(1) $0.27 (2) Karthikeyan Raman 12,000(1) $0.27 (2) Officers and Directors as a Group 187,000(1) $0.27 (2) (5 persons)
- ---------- (1) Options granted under 2001 Equity Participation Plan. (2) Options vest as follows: one-third on October 27, 2001, one-third on October 27, 2002 and one-third on October 27, 2003 ITEM 6. INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS. During the year ended December 31, 2000, SolutionNet (Asia Pacific) entered into a consulting agreement (which replaced an earlier agreement entered into in April 1999) with Netsavvy Solutions PVT LTD, a corporation organized under the laws of the Commonwealth of India ("Netsavvy"), and also entered into a "recruitment" agreement with Netsavvy dated October 1, 2000. Under the consulting agreement, Netsavvy agrees to design, develop and support certain software (including Enet - Corporate Internet Banking and EMI - Electronic Medical Info) and to provide technical support for and maintenance of the software. Under the recruitment agreement, Netsavvy agrees to retain recruiters to recruit IT consultants. Suresh Venkatachari, the CEO of the Company, is a director of Netsavvy and owns 35% of the outstanding shares of NetSavvy. During the years ended December 31, 2000 and 1999, the Company provided services and/or products to Netsavvy totaling $281,718 (U.S.) and $0, respectively, and received services and/or products totaling $434,711 (U.S.) and $401,774 (U.S.), respectively. During the year ended December 31, 2000, SolutionNet (Asia Pacific) entered into a supply agreement dated August 31, 2000, with GVMS Online Pte Ltd., a corporation organized under the laws of the Republic of Singapore ("GVMS"). Under the supply agreement, SolutionNet (Asia Pacific) developed a global voice mails system for GVMS. Murali Natarajan and TRV Varadarajan are directors and each owns 50% of the 18 19 outstanding shares of GVMS. During the year ended December 31, 2000, the Company provided services to GVMS totalling $132,762 (U.S.). Management believes that the terms and conditions of the engagements are fair and comparable to those which could have been obtained from independent parties. During the year ended December 31, 2000, SolutionNet (Asia Pacific) made interest-free loans to SolutionNet (Europe), a corporation organized under the laws of the United Kingdom. The largest aggregate amount outstanding during the year ended December 31, 2000 was $97,675 (U.S.). The loan has been and is being used for working capital purposes. Suresh Venkatachari is a director and owner of 50% of the outstanding shares of SolutionNet (Europe). The Company and SolutionNet (Europe) may consider some type of business combination in the future. ITEM 7. DESCRIPTION OF SECURITIES. GENERAL MATTERS The authorized capital stock of SolutionNet consists of 20,000,000 shares of Common Stock, $0.001 par value per share, and 5,000,000 shares of Preferred Stock, $0.001 par value per share ("Preferred Stock"). As of March 31, 2001, there were 12,618,009 shares of Common Stock outstanding and 537 holders of record. No shares of Preferred Stock are outstanding. The following summary of certain provisions of the Company's capital stock describes certain material provisions of, but does not purport to be complete and is subject to, and qualified in its entirety by, the Articles of Incorporation, as amended, and the Bylaws, as amended, of SolutionNet and by the provisions of applicable law. COMMON STOCK Subject to the outcome of the litigation with respect to the shares of Common Stock disclosed in Part II, Item 2, the issued and outstanding shares of Common Stock are validly issued, fully paid and non-assessable. Subject to the prior rights of the holders of any Preferred Stock, the holders of outstanding shares of Common Stock are entitled to receive dividends out of assets legally available therefor at such times and in such amounts as the Board may from time to time determine. The shares of Common Stock are not redeemable or convertible, and the holders thereof will have no preemptive rights or subscription rights to purchase any securities of the Company. Upon liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to receive pro rata the assets of the Company which are legally available for distribution, after payment of all debts and other liabilities and subject to prior rights of any holders of Preferred Stock then outstanding. Each outstanding share of Common Stock is entitled to vote on all matters submitted to a vote of stockholders. 19 20 PREFERRED STOCK The Board may, without further action by the Company's stockholders, from time to time, direct the issuance of shares of Preferred Stock in series and may, at the time of issuance, determine the rights, preferences and limitations of each series. Satisfaction of any dividend preferences of outstanding shares of Preferred Stock would reduce the amount of funds available for the payment of dividends on shares of Common Stock. Holders of shares of Preferred Stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding up of the Company before any payment is made to the holders of shares of Common Stock. Under certain circumstances, the issuance of shares of Preferred Stock while providing desirable flexibility in connection with possible acquisitions, financing and other corporate transactions, may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of the Company's securities or the removal of incumbent management. The Board, without stockholder approval, may issue shares of Preferred Stock with voting and conversion rights which could adversely affect the holders of shares of Common Stock. 20 21 PART II ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's common stock traded on the OTC Bulletin Board ("OTCBB") under the symbol "SLNN" until November 18, 1999. On such date, the Company's common stock was delisted from the OTCBB, and the Company's common stock was reported on the Pink Sheets. The Company was de-listed from the OTCBB because only SEC-reporting companies are permitted to be listed. The Company intends to apply for listing on the OTCBB after it becomes an SEC-reporting company, and to apply for listing on Nasdaq as soon as it satisfies Nasdaq listing requirements. The following table sets forth for the periods indicated, the range of high and low bid quotations per share. The Company considers its Common Stock to be thinly traded and that any reported bid or sale prices may not be a true market-based valuation of the Common Stock. These quotations represent inter-dealer prices, without retail markups, markdowns or commissions and may not necessarily represent actual transactions. These bid quotations have not been adjusted retroactively by the 1 for 40 reverse stock split during the first quarter of the year ended December 31, 1999.
PRICE PER SHARE ------------------ HIGH LOW ------ ------ Year Ended December 31, 1999 First Quarter ............ $25.00 $ 2.50 Second Quarter ........... $24.50 $ 0.35 Third Quarter ............ $12.00 6.75 Fourth Quarter ........... 6.75 2.50
HIGH LOW ------ ------ Year Ended December 31, 2000 First Quarter ............ $11.50 $ 2.75 Second Quarter ........... 6.20 4.00 Third Quarter ............ 4.00 1.35 Fourth Quarter ........... 1.75 0.27 Year Ended December 31, 2001 First Quarter ............ $ 0.78 $ 0.09
On March 31, 2001, there were approximately 537 shareholders of record. 21 22 Penny stock regulation broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risk associated with the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer must make a written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. At the time the Registration Statement becomes effective and the Company's securities become registered, the common stock may continue to have a trading price of less than $5.00 per share. If the Company's Stock is subject to the penny stock rules, investors may find it more difficult to sell their securities, should they desire to do so. The Company has not paid, nor does it anticipate paying dividends in the foreseeable future. The Company has never declared or paid any cash dividends on the Common Stock. The Company currently intends to retain any earnings to finance operations and expansion and, therefore, does not anticipate declaring or paying any cash dividends on the Common Stock in the foreseeable future. Future cash dividends, if any, will be determined by the Board and will be based upon the Company's earnings, capital requirements, financial conditions and other factors deemed relevant by the Board. There are currently 629,750 shares of Common Stock which are subject to outstanding options to purchase the Company's Common Stock under the 2001 Equity Participation Plan. There are 12,618,009 shares of Common Stock of the Company outstanding, of which approximately 10,981,184 shares are restricted Common Stock of the Company, of which approximately 10,981,184 restricted shares are more than two years old that could be sold under Rule 144(k) under the Securities Act (except to the extent they are held by affiliates of the Company). Additionally 440,500 shares are subject to registration rights agreements which permit the holders to cause the Company to register their shares for sale pursuant to a registration statement filed by the Company under the Securities Act at any time after the Company becomes a reporting company under the Securities Exchange Act of 1934. Except with respect to those shares subject to registration rights agreements, there is currently no Common Stock that is being or is proposed to be publicly offered by the 22 23 Company, the offering of which could have a material effect on the market price of the Company's Common Stock. The Transfer Agent for the shares of common voting stock of the Company is Corporate Stock Transfer, 3200 Cherry Creek Drive, Suite 430, Denver, CO 80201. ITEM 2. LEGAL PROCEEDINGS. The Company is, from time to time, a party to litigation arising in the normal course of its business. Management believes that none of these actions, including the cross-complaint disclosed below, individually or in the aggregate, will have a material adverse effect on the financial position or result of operations of the Company. On December 4, 2000, the Company brought an action entitled SolutionNet International v. Garrett Krause et al in the Superior Court of the state of California. In this litigation, the Company has alleged that, among other things, Krause breached fiduciary duties to the Company by issuing without authority 920,000 Company shares and 1,730,000 Company shares to Web Capital (formerly Sara Hallitex Corporation) and by issuing 1,500,000 shares of stock to affiliates without authorization. The Company has stated in its pleadings that any Company stock in the possession of Krause and/or his affiliates and/or proceeds from the sale of such stock are impressed with a constructive trust for the benefit of SolutionNet. The Company is seeking the return of the stock illegally issued and/or the proceeds from all sales of the stock illegally issued plus punitive damages. Garrett Krause, Web Capital and certain of the defendants have filed an answer denying their liability, and Garrett Krause and Web Capital have filed a cross-complaint for breach of contract and mispresentation and are seeking damages in an amount to be determined and punitive damages. The Company believes such cross-complaint is without merit and intends to defend itself vigorously. ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS. None. ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES. During the past three years, the Company has sold securities which were not registered under the Securities Act of 1933 as follows: On March 4, 1999, the Company sold 44,700 shares (1,788,000 shares prior to 1 for 40 reverse stock split) to seven persons for an aggregate of $26,600.00. There were no underwriters involved in the sales, and no commissions were paid in connection with the sales. The issuer relied on the exemption from registration under Section 4(2) of the Securities Act of 1933 (the "Securities Act"). 23 24 On March 30, 1999, the Company sold 1,502,500 shares to five persons for an aggregate of $991,650.00. There were no underwriters involved in the sales, and no commissions were paid in connection with the sales. The Company has alleged that 1,500,000 of these shares were issued without justification or authority and in direct violation of SolutionNet's rights. See "Part II-Item 2. Legal Proceedings." The issuer relied on the exemption from registration under Section 4(2) of the Securities Act and Section 504 of Regulation D of the Securities Act. On March 31, 1999, the Company issued 10,500,000 shares to three persons. 7,750,000 shares were issued to Densmore, 2,650,000 (1,730,000 shares and 920,000 shares) were issued to Web Capital and 50,000 shares were issued to each of two individuals. The shares issued to Densmore were in connection with an exchange agreement resulting in Densmore obtaining control of the Company. See "Part I-Item 1 - Description of Business - Company History." The Company has alleged that the 2,650,000 shares of SolutionNet issued to Web Capital were issued without justification or authority and in direct violation of SolutionNet's rights. See "Part II-Item 2. Legal Proceedings." The issuer relied on the exemption from registration under Section 4(2) of the Securities Act. During the year ended December 31, 2000, the Company sold 440,500 shares to 5 persons for an aggregate of $1,762,000. The sales took place outside of the United States. There were no underwriters involved in the sales, however, commissions of $176,200 were paid to a non-U.S. citizen for such sales. The issuer relied on the exemption from registration under Regulation S and Section 4(2) of the Securities Act. ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS. LIMITATIONS ON LIABILITIES AND INDEMNIFICATION OF OFFICERS AND DIRECTORS The Articles of Incorporation provide that no director shall be liable to the Company or any shareholder for monetary damages for breach of fiduciary duty as a director, except: (a) for any breach of the director's duty of loyalty or its shareholders; (b) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (c) under Section 302A.559 or 80.A.23 of the Minnesota Business Corporation Act; (d) for any transaction from which the director derived an improper personal benefit; or (e) for any act or omission occurring prior to August 25, 1994. The Company's Bylaws provide, consistent with Minnesota statutory law, that the Company shall indemnify a person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of the person, against judgments, penalties, fines, including, without limitation, settlements and reasonable expenses, including attorneys' fees and disbursements, incurred by the person in connection with the proceeding, if with respect to the acts or omissions complained of in the proceeding, the person: (a) has not been indemnified by another organization with respect to the same acts or omissions; (b) acted in good faith; (c) received no improper personal benefit and Section 302A.255 of the Minnesota Business Corporation Act, if applicable, has been satisfied; (d) in the case of a criminal proceeding, had no reasonable cause to believe the 24 25 conduct was unlawful; and (e) in the case of acts or omissions occurring in the official capacity of a person, such person, depending on the capacity, must reasonably believe that the conduct was in the best interest of the Company or must reasonably believe that the conduct was not opposed to the best interest of the Company. The termination of a proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent does not, of itself, establish that the person does not meet the criteria set forth herein. If a person is made or threatened to be made a party to a proceeding, the person is entitled, upon written request to the Company, to payment or reimbursement by the Company of reasonable expenses, including attorneys' fees and disbursements, incurred by the person in advance of the final disposition of the proceeding: (a) upon receipt by the Company of a written affirmation by the person of a good faith belief that the criteria for indemnification set forth herein have been satisfied and a written undertaking by the person to repay all amounts so paid or reimbursed by the Company, if it is ultimately determined that the criteria for indemnification have not been satisfied, and (b) after making a determination that the facts then known to those making the determination would not preclude indemnification. 25 26 INDEX TO FINANCIAL STATEMENTS SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES
PAGE Independent Auditors' Report F-2 Consolidated Balance Sheets as of December 31, 2000 and March 31, 2001 (unaudited) F-3 Consolidated Statements of Operations for the years ended December 31, 1999 and 2000 and the three-month period ended March 31, 2001 (unaudited) F-5 Consolidated Statements of Stockholders' Equity and Comprehensive Loss for the years ended December 31, 1999 and 2000 and the three-month period ended March 31, 2001 (unaudited) F-6 Consolidated Statements of Cash Flows for the years ended December 31, 1999 and 2000 and the three-month period ended March 31, 2001 (unaudited) F-7 Notes to Consolidated Financial Statements F-8
F-1 27 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders SolutionNet International, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheet of SolutionNet International, Inc. and subsidiaries as of December 31, 2000, and the related consolidated statements of operations, stockholders' equity and comprehensive loss, and cash flows for each of the years in the two year period then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the 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 our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SolutionNet International, Inc. and subsidiaries as of December 31, 2000, and the results of their operations and their cash flows each of the years in the two year period then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Detroit, Michigan May 31, 2001 F-2 28 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Balance Sheet December 31, 2000
(UNAUDITED) DECEMBER 31, MARCH 31, 2000 2001 ------------ ----------- ASSETS Current assets: Cash and cash equivalents $ 521,808 $ 89,677 Accounts receivable - trade, less allowance for doubtful accounts of $212,780 at December 31, 2000 and March 31, 2001 1,418,986 1,583,232 Due from related parties (note 6) 585,318 468,344 Deposits and other assets 128,956 143,697 ------------ ----------- Total current assets 2,655,068 2,284,950 Property, plant and equipment (note 1): Computers and office equipment 205,658 198,893 Leasehold improvements 29,081 27,921 Furniture and fixtures 19,448 36,425 ------------ ----------- 254,187 263,239 Less accumulated depreciation and amortization 157,417 170,524 ------------ ----------- Net property, plant, and equipment 96,770 92,715 ------------ ----------- Software development costs, less accumulated amortization (note 3) 773,285 784,342 ------------ ----------- $ 3,525,123 3,162,007 ============ ===========
See accompanying notes to consolidated financial statements. F-3 29 SOLUTIONNET INTERNATIONAL INC. AND SUBSIDIARIES Consolidated Balance Sheet December 31, 2000
(UNAUDITED) DECEMBER 31, MARCH 31, 2000 2001 ------------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank overdraft $ 63,819 47,110 Current installments of obligations under capital leases (note 2) 34,654 33,272 Trade accounts payable 265,165 325,255 Accrued expenses 136,114 299,682 Income taxes payable (note 4) 1,843 -- Deferred revenue 114,928 87,206 Due to related parties (note 6) 492,540 123,894 ----------- ----------- Total current liabilities 1,109,063 916,419 Obligations under capital leases, excluding current installments (note 2) 23,079 13,508 Deferred income taxes (note 4) 577 554 ----------- ----------- Total liabilities 1,132,719 930,481 ----------- ----------- Stockholders' equity: Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued and outstanding -- -- Common stock, $0.001 par value, 20,000,000 shares authorized; 12,618,009 shares issued and outstanding 12,618 12,618 Paid-in capital 2,608,182 2,608,182 Accumulated deficit (230,211) (401,739) Accumulated other comprehensive income -- foreign currency translation adjustment 1,815 12,465 ----------- ----------- Total stockholders' equity 2,392,404 2,231,526 ----------- ----------- $ 3,525,123 3,162,007 =========== ===========
F-4 30 SOLUTIONNET INTERNATIONAL INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 1999 and 2000
(UNAUDITED) THREE MONTH PERIOD ENDED YEAR ENDED DECEMBER 31, MARCH 31, ----------------------------------- ------------------------- 1999 2000 2001 ----------- ----------- ------------------------- Revenues: Software and hardware sales $ 648,973 1,568,391 152,635 Services 1,604,352 2,106,115 580,576 ----------- ----------- ----------- 2,253,325 3,674,506 733,211 Operating expenses 2,430,949 3,824,659 916,648 ----------- ----------- ----------- Operating loss (177,624) (150,153) (183,437) ----------- ----------- ----------- Other income (expense): Interest income (expense), net (562) (3,805) 1,715 Other income (expense) 5,194 24,532 -- ----------- ----------- ----------- 4,632 20,727 1,715 ----------- ----------- ----------- Loss before income taxes (172,992) (129,426) (181,722) Income tax expense (benefit) (note 4) 10,676 (5,211) (10,194) ----------- ----------- ----------- Net loss $ (183,668) (124,215) (171,528) =========== =========== =========== Basic loss per share $ (0.02) (0.01) (0.01) =========== =========== ===========
See accompanying notes to consolidated financial statements. F-5 31 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Loss Years ended December 31, 1999 and 2000
PREFERRED COMMON PAID-IN STOCK SUBSCRIPTION STOCK STOCK CAPITAL RECEIVABLE ---------- ---------- ---------- ------------------ Balances at December 31, 1998 $ -- 7,880 72,751 -- Net loss -- -- -- -- Foreign currency translation loss -- -- -- -- Comprehensive loss -- -- -- -- Issuance of 1,547,200 shares, net of cash expenses of $323,881 -- 1,547 952,822 (260,000) Issuance of 2,750,000 shares in connection with ETGI merger (note 7) -- 2,750 (2,750) -- ---------- ---------- ---------- ---------- Balances at December 31, 1999 -- 12,177 1,022,823 (260,000) Net loss -- -- -- -- Foreign currency translation gain -- -- -- -- Comprehensive loss -- -- -- -- Stock subscription payment received 0 -- -- 260,000 Issuance of 440,500 shares, net of cash commission paid of $176,200 -- 441 1,585,359 -- ---------- ---------- ---------- ---------- Balances at December 31, 2000 $ -- 12,618 2,608,182 -- Net loss (unaudited) -- -- -- -- Foreign currency translation gain (unaudited) -- -- -- -- Comprehensive loss (unaudited) -- -- -- -- ---------- ---------- ---------- ---------- Balances at March 31, 2001 (unaudited) $ -- 12,618 2,608,182 -- ========== ========== ========== ==========
ACCUMULATED RETAINED OTHER EARNINGS COMPREHENSIVE TOTAL (ACCUMULATED INCOME STOCKHOLDERS' DEFICIT) (LOSS) EQUITY ------------ ------------- ------------- Balances at December 31, 1998 77,672 1,047 159,350 Net loss (183,668) -- (183,668) Foreign currency translation loss -- (2,566) (2,566) ---------- Comprehensive loss -- -- (186,234) ---------- Issuance of 1,547,200 shares, net of cash expenses of $323,881 -- -- 694,369 Issuance of 2,750,000 shares in connection with ETGI merger (note 7) -- -- -- ---------- ---------- ---------- Balances at December 31, 1999 (105,996) (1,519) 667,485 Net loss (124,215) -- (124,215) Foreign currency translation gain -- 3,334 3,334 ---------- Comprehensive loss -- -- (120,881) ---------- Stock subscription payment received -- -- 260,000 Issuance of 440,500 shares, net of cash commission paid of $176,200 -- -- 1,585,800 ---------- ---------- ---------- Balances at December 31, 2000 (230,211) 1,815 2,392,404 Net loss (unaudited) (171,528) -- (171,528) Foreign currency translation gain (unaudited) -- 10,650 10,650 ---------- Comprehensive loss (unaudited) -- -- (160,608) ---------- ---------- ---------- Balances at March 31, 2001 (unaudited) (401,739) 12,465 2,231,526 ========== ========== ==========
See accompanying notes to consolidated financial statements. F-6 32 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1999 and 2000
(UNAUDITED) YEAR ENDED THREE MONTHS ENDED --------------------------- MARCH 31, 1999 2000 2001 ---------- ---------- ------------------ Net loss (183,668) (124,215) (171,528) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 163,357 414,551 130,835 Deferred taxes 5,931 (5,211) -- Change in operating assets: Accounts receivable-trade (684,957) (573,838) (218,966) Inventories 2,213 -- -- Deposits and other current assets (56,495) (59,034) (17,769) Software development costs (394,411) (524,630) (153,843) Trade accounts payable 336,006 (1,771,363) 71,332 Accrued expenses (75,956) 90,304 171,127 Deferred revenue -- 115,321 (23,655) Income taxes payable (8,059) (7,074) (1,809) ---------- ---------- ---------- Net cash used in operating activities (896,039) (2,445,189) (214,276) ---------- ---------- ---------- Cash flows from investing activities: Purchase of equipment (54,362) (40,388) (19,615) ---------- ---------- ---------- Net cash used in investing activities (54,362) (40,388) (19,615) Cash flows from financing activities: Cash overdraft 29,160 34,641 (14,479) Principal payments of capital lease obligations (3,930) (25,882) (8,844) Borrowing from (payments to) related parties 243,954 1,141,493 (167,154) Payment received for stock subscription -- 260,000 -- Proceeds from issuance of common stock 694,369 1,585,800 -- ---------- ---------- ---------- Net cash provided by (used in) financing activities 963,553 2,996,052 (190,477) ---------- ---------- ---------- Net effect of changes in foreign currency on cash flows 173 (1,992) (7,763) ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents 13,325 508,483 (432,131) Cash and cash equivalents at beginning of period -- 13,325 521,808 ---------- ---------- ---------- Cash and cash equivalents at end of period $ 13,325 521,808 89,677 ========== ========== ========== Supplemental disclosures of cash flow information: Cash paid for interest $ 562 3,805 1,124 ========== ========== ========== Cash paid for income taxes $ 12,953 7,641 -- ========== ========== ==========
See accompanying notes to consolidated financial statements. F-7 33 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (A) DESCRIPTION OF BUSINESS SolutionNet International, Inc., a Minnesota corporation (the "Company" or "SolutionNet"), is a holding company with investee companies dedicated to the development and marketing of proprietary, multi-application internet information technology ("IT") solutions. SolutionNet owns 100% of the outstanding shares of SolutionNet Inc. - British Virgin Islands, incorporated under the laws of the British Virgin Islands in 1999 ("SolutionNet BVI"), which owns 100% of the outstanding shares of SolutionNet (Asia Pacific) Pte. Ltd. Singapore, incorporated under the laws of Singapore in 1994 ("SolutionNet (Asia Pacific)"). SolutionNet (Asia Pacific) owns 100% of the shares of SolutionNet (Middle East) Ltd. ("SolutionNet (Middle East)"), incorporated in the United Arab Emirates. Neither the holding company, SolutionNet or SolutionNet BVI, has any operations of its own. SolutionNet (Asia Pacific) is the principal operating subsidiary of SolutionNet. SolutionNet (Middle East) had no operations through December 31, 2000. (B) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The consolidated financial statements include the financial statements of SolutionNet International, Inc. and its wholly owned subsidiaries, SolutionNet BVI, and indirect wholly owned subsidiaries SolutionNet (Asia Pacific) and SolutionNet (Middle East). All significant intercompany balances and transactions have been eliminated in consolidation. The statements here are presented in United States dollars to comply with United States Securities and Exchange Commission reporting requirements. For purposes of applying Statement of Financial Accounting Standards No. 52, Foreign Currency Translation, the functional currency of the Company is the Singapore dollar. As the effect is substantially the same as using the current rate as of the dates transactions took place, a weighted average exchange rate of 0.59309 and 0.57900 United States dollars to one Singapore dollar has been used to translate the statements of cash flows and statements of operations for the years ended December 31, 1999 and 2000, respectively. The current exchange rate as of December 31, 2000 has been used to translate the assets and liabilities of the Company. The cumulative translation difference is shown as accumulated other comprehensive gain on the accompanying consolidated balance sheet. The accompanying financial statements as of March 31, 2001 and for the three-month period then ended were not audited. These unaudited financial statements includes, in the opinion of management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial statements of the period covered. (C) CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. (D) PROPERTY, PLANT, AND EQUIPMENT Property, and equipment are stated at cost. Equipment under capital leases is stated at the present value of minimum lease payments. F-8 34 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 Depreciation on equipment is calculated on the straight-line method over the estimated useful lives of the assets. Equipment held under capital leases and leasehold improvements are amortized straight line over the shorter of the lease term or estimated useful life of the asset. Useful lives of assets are as follows: Computers and office equipment 3 years Leasehold improvements 3 years Furniture and fixtures 5 years (E) IMPAIRMENT OF LONG-LIVED ASSETS The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. This Statement requires long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (F) SOFTWARE DEVELOPMENT COSTS Costs incurred internally in creating a computer software product are charged to expense when incurred as research and development until technological feasibility has been established for the product. Technological feasibility is established upon completion of a detail program design or, in its absence, completion of a working model. Thereafter, all software production costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized costs are amortized based on current and projected future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product. Amortization of capitalized software development costs was $131,005 and $343,849 in 1999 and 2000, respectively. (G) REVENUE RECOGNITION Revenue on software sold and services rendered is recognized upon completion of delivery. Revenue on long-term contracts for software development is recognized using the percentage-of- completion method. (H) ADVERTISING Advertising is expensed as incurred. Expenses relating to advertising were $22,418 and $15,242 in 1999 and 2000, respectively. (I) INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the F-9 35 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (J) FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of cash equivalents, accounts receivable, trade accounts payable, and related-party receivables/payables approximates fair value because of the short-term maturity of these instruments. The fair value of long-term debt approximate their carrying value as determined by company management using available market information. (K) EARNINGS PER SHARE In accordance with SFAS No. 128, Earnings Per Share, the calculation of basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. The Company had no dilutive options, warrants or other convertible securities outstanding as of December 31, 2000. Therefore, no dilution of earnings per share calculation is presented. (L) USE OF ESTIMATES Management of the Company has made estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. (2) LEASES The Company is obligated under various capital leases for certain computer equipment. At December 31, 2000, the gross amounts of equipment and related accumulated amortization recorded under capital leases were as follows: Computer equipment $ 92,159 Less accumulated amortization 32,880 ---------- $ 59,279 ==========
Amortization of assets held under capital leases is included with depreciation expense. The Company also has several noncancelable operating leases primarily for office space. Rental expense for operating leases (except those with lease terms of a month or less that were not renewed) during 1999 and 2000 was approximately $66,068 and $130,239, respectively. F-10 36 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, 2000 are:
CAPITAL OPERATING YEAR ENDING DECEMBER 31: LEASES LEASES --------- ----------- 2001 $ 39,305 143,715 2002 26,483 95,810 --------- ----------- Total minimum lease payments 65,788 $ 239,525 =========== Less amount representing interest 8,055 --------- Present value of net minimum capital lease payments 57,733 Less current installments of obligations under capital leases 34,654 --------- Obligations under capital leases, excluding current installments $ 23,079 =========
(3) COMPUTER SOFTWARE DEVELOPMENT COSTS The following represents costs capitalized and amortized related to software developed for sale to outside customers which has demonstrated technological feasibility:
1999 2000 ---------- ---------- Balance at beginning of year $ 353,256 617,717 Additions 394,411 524,630 Amortization expense (131,005) (343,849) Foreign currency adjustment included in other comprehensive income 1,055 (25,213) ---------- ---------- Balance at end of year $ 617,717 773,285 ========== ==========
F-11 37 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 (4) INCOME TAXES Total income tax (benefit) expense for the years ended December 31, 1999 and 2000 were allocated as follows: Income tax expense (benefit) consists of:
1999 2000 ----------- ---------- Current - foreign $ 4,666 222 Deferred - foreign 6,010 (5,433) ----------- ---------- $ 10,676 (5,211) =========== ==========
Income tax expense (benefit) was $10,676 and $(5,211) for the years ended December 31, 1999 and 2000, respectively, and differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to loss before income taxes as a result of the following:
1999 2000 ---------- ----------- o Computed "expected" tax expense (benefit) $ (58,817) (42,233) Increase (reduction) in income taxes resulting from: Permanent Differences 6,635 26,180 Increase in valuation allowance 51,492 12,490 Other 6 (1,405) Foreign tax rate differential 11,360 (243) ---------- ----------- $ 10,676 (5,211) ========== ===========
F-12 38 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2000 are presented below. Deferred tax assets: Net operating loss carryforwards $ 136,591 Less valuation allowance (136,591) ---------- Net deferred tax assets - ---------- Deferred tax liabilities: Property and equipment depreciation differences 577 ---------- Total gross deferred liabilities 577 ---------- Net deferred tax liability $ 577 ==========
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax assets, the Company will need to generate future taxable income. Utilization of net operating loss carryforwards may be limited under provisions of the Internal Revenue Code. (5) BUSINESS AND CREDIT CONCENTRATIONS During the years ended December 31, 1999 and 2000, respectively, the Company generated approximately 42% and 29% of revenues from two customers. Accounts receivable due from these customers at December 31, 2000 were $138,436 representing approximately 7.4% of the total. (6) RELATED PARTY TRANSACTIONS During the year ended December 31, 2000, SolutionNet (Asia Pacific) entered into a consulting agreement (which replaced an earlier agreement entered into in April 1999) with Netsavvy Solutions PVT LTD, a corporation organized under the laws of the Commonwealth of India ("Netsavvy"), and also entered into a "recruitment" agreement with Netsavvy dated October 1, 2000. Under the consulting agreement, Netsavvy agrees to design, develop and support certain software (including Enet - Corporate Internet Banking and EMI - Electronic Medical Info and to provide technical support for and maintenance of the software. Under the recruitment agreement, Netsavvy agrees to retain recruiters to recruit IT consultants. The CEO of the Company, is a director of Netsavvy and owns 35% of the outstanding shares of NetSavvy. In addition, the Company performs development services for and has sold software (for resale to a third party customer) to Netsavvy. F-13 39 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 During the year ended December 31, 2000, SolutionNet (Asia Pacific) entered into a supply agreement with GVMS Online Pte. Ltd., a corporation organized under the laws of the Republic of Singapore ("GVMS"). Under the supply agreement, SolutionNet (Asia Pacific) developed a global voice mail system for GVMS. Two employees of the Company are directors of GVMS and each owns 50% of the outstanding shares of GVMS. During the year ended December 31, 2000, SolutionNet (Asia Pacific) made interest-free loans to SolutionNet (Europe), a corporation organized under the laws of the United Kingdom. The CEO of the Company is a director and owner of 50% of the outstanding shares of SolutionNet (Europe). The following is a summary of related party amounts as of December 31, 2000 and for the two year period then ended:
Receivable due from SolutionNet (Europe) $ 97,675 Due from GVMS 105,496 Due from Netsavvy 273,919 Due from other affiliated companies 108,228 ----------- 585,318 =========== Due to directors 4,753 Due to Netsavvy 461,497 Other amounts payable 26,290 ----------- $ 492,540 ===========
1999 2000 ------------ ----------- Sales to Netsavvy $ -- $ 173,700 Services provided to Netsavvy -- 133,899 Services provided to GVMS -- 132,762 Product development charges and related recruiting and expenses from Netsavvy 80,317 137,711 Purchases from Netsavvy 321,457 297,000 ============ ===========
(7) MERGER WITH ETG INTERNATIONAL, INC. SolutionNet was incorporated under the laws of the State of Minnesota under the name of ETG International, Inc. ("ETGI") on August 25, 1994. Pursuant to an exchange agreement, in April 1999 ETGI (which had changed its name to SolutionNet, but was an inactive company) by way of exchange, issued (i) shares constituting a majority of its outstanding shares to Densmore Group Limited, a corporation incorporated under the laws of the British Virgin Islands ("Densmore") and (ii) acquired all of the outstanding shares of SolutionNet BVI, and thereby control of SolutionNet (Asia Pacific). Densmore had owned all of the outstanding shares of SolutionNet BVI. For financial reporting purposes, the merger with ETGI described above was considered to be a reverse acquisition involving a shell company and accordingly, the operating entity, SolutionNet BVI, was determined to be the acquiring enterprise. F-14 40 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 The historical consolidated financial statements of SolutionNet BVI are presented as the historical financial statements of the Company for the period prior to the ETGI merger. The merger combination was accounted for under the purchase method of accounting. The results of operations of SolutionNet (ETGI) are included in the accompanying consolidated financial statements only from the date of the merger. The historical equity of SolutionNet BVI is reflected as the consolidated equity of the Company prior to the merger retroactively restated to reflect the number of shares received in the business combination. (8) LITIGATION The Company is, from time to time, a party to litigation arising in the normal course of its business. Management believes none of these actions, including the cross-complaint disclosed below, individually or in the aggregate, will have a material adverse effect on the financial position or result of operations of the Company. On December 4, 2000, the Company brought an action entitled SolutionNet International, Inc. v. Garrett Krause (Krause) et al in the Superior Court of the state of California. In this litigation, the Company has alleged that, among other things, Krause breached fiduciary duties to the Company by issuing without authority 2,650,000 Company shares to Web Capital (formerly known as Sara Hallitex Corporation) and by issuing 1,500,000 shares of stock to his affiliates without authorization. The Company has stated in its pleadings any Company stock in the possession of Krause and/or his affiliates and/or proceeds from the sale of such stock are impressed with a constructive trust for the benefit of the Company. The Company is seeking the return of the stock illegally issued and/or the proceeds from all sales of the stock illegally issued plus punitive damages. Garrett Krause, Web Capital and certain of the defendants have filed an answer denying their liability, and Garrett Krause and Web Capital have filed a cross-complaint for breach of contract and misrepresentation and are seeking damages in an amount to be determined and punitive damages. The Company believes such cross-complaint is without merit and intends to defend itself vigorously. There is no estimate which can be made at this time related to potential liability arising from this litigation and therefore none is reflected on the balance sheet. The outcome of the litigation could produce a material adverse financial statement impact. (9) BASIC LOSS PER SHARE Basic loss per share ("EPS") were computed by dividing net loss by 10,186,097 and 12,183,156, the weighted-average number of shares of common stock outstanding during the years ended December 31, 1999 and 2000, respectively. Diluted EPS would not differ from basic EPS, as the Company has no securities or other contracts to issue common stock that would have a potentially dilutive effect on the EPS calculation. (10) COMMON STOCK There are 12,618,009 shares of common stock of the Company outstanding as of December 31, 2000, and which, due to their issuance more than two years ago, could be sold under Rule 144(k) under the F-15 41 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 Securities Act (except to the extent they are held by affiliates of the Company). Additionally 440,500 shares are subject to registration rights agreements which permit the holders to cause the Company to register their shares for sale pursuant to a registration statement filed by the Company under the Securities Act at any time after the Company becomes a reporting company under the Securities Exchange Act of 1934. (10) SUBSEQUENT ADOPTION OF EQUITY PARTICIPATION PLAN On April 26, 2001, the Board of Directors approved and adopted SolutionNet's 2001 Equity Participation Plan (the "Equity Participation Plan"). The Equity Participation Plan reserves 1,500,000 shares of Common Stock of the Company for issuance thereunder. The Equity Participation Plan authorizes the Compensation Committee or the Board of Directors ("Committee") to grant incentive and non-statutory stock options as well as restricted stock. Officers, consultants, and other employees (including employee directors) of SolutionNet and its subsidiaries and affiliates are eligible to receive awards under the Equity Participation Plan. In the event of a stock dividend, stock split, reorganization, merger, or similar corporate transaction (other than a change in control), the Committee is authorized to make appropriate adjustments to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Equity Participation Plan or with respect to an outstanding award. In the event of a change in control, each option granted shall become exercisable as to all shares covered thereby immediately prior to the consummation of such change in control and the restrictions included in any restricted stock grant shall be deemed rescinded and terminated. The Equity Participation Plan may be wholly or partially amended or modified, suspended or terminated at any time from time to time by the Committee, except as may be prohibited by laws or regulations governing such actions. F-16 42 PART III ITEM 1. INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBIT NAME 2.1 Articles of Incorporation, filed with the Minnesota Secretary of State on March 22, 1999 2.2 Amended Articles of Incorporation, filed with the Minnesota Secretary of State on March 22, 1999 2.3 Bylaws of SolutionNet International, Inc. 2.4 Amendments to Bylaws of SolutionNet International, Inc 3.1 Common Stock Certificate 6.1 Lease Agreement by and between SR Singapore, Pte., Ltd. and CLD Land Pte. Ltd., relating to property located at No. 1 Shenton Way, #22-06/09, Singapore 068803 6.2 2001 Equity Participation Plan 6.3 Form of Stock Option Agreement 6.4 Employment Agreement - Suresh Venkatachari 6.5 Employment Agreement - Murali Natarajan 6.6 Employment Agreement - Karthikeyan Raman 8.1 Share-Exchange Agreement dated April 2, 1999 8.2 Supplemental Agreement dated April 6, 1999 ITEM 2. DESCRIPTION OF EXHIBITS. See Item 1 above. SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. SOLUTIONNET INTERNATIONAL, INC. Date: June 22, 2001 By: /s/ Suresh Venkatachari ------------------------------------ Suresh Venkatachari, President 26 43 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 2.1 Articles of Incorporation, filed with the Minnesota Secretary of State on March 22, 1999 2.2 Amended Articles of Incorporation, filed with the Minnesota Secretary of State on March 22, 1999 2.3 Bylaws of SolutionNet International, Inc. 2.4 Amendments to Bylaws of SolutionNet International, Inc. 3.1 Common Stock Certificate 6.1 Lease Agreement by and between SR Singapore, Pte., Ltd. and CLD Land Pte. Ltd., relating to property located at No. 1 Shenton Way, #22-06/09, Singapore 068803 6.2 2001 Equity Participation Plan of SolutionNet International, Inc. 6.3 Form of Stock Option Agreement 6.4 Employment Agreement - Suresh Venkatachari 6.5 Employment Agreement - Murali Natarajan 6.6 Employment Agreement - Karthikeyan Raman 8.1 Share-Exchange Agreement dated April 2, 1999 8.2 Supplemental Agreement dated April 6, 1999
EX-2.1 2 k62810ex2-1.txt ARTICLES OF INCORPORATION 1 EXHIBIT 2.1 ARTICLES OF INCORPORATION OF ETG INTERNATIONAL, INC. KNOW ALL MEN BY THESE PRESENTS: That the undersigned incorporator being a natural person of the age of eighteen years or more and desiring to form a for-profit business corporation under Chapter 302A of the Minnesota Business Corporation Act, does hereby adopt, sign, verify and deliver to the Secretary of State of the State of Minnesota, these Articles of Incorporation: ARTICLE I NAME The name of the Corporation shall be: ETG International, Inc. ARTICLE II CAPITAL STOCK The aggregate number of shares which this Corporation shall have authority to issue is Twenty Million (20,000,000) shares of $.001 par value each, which shares shall be designated "Common Stock"; and Five Million (5,000,000) shares of $.001 par value each, which shares shall be designated "Preferred Stock" and which may be issued in one or more series at the discretion of the Board of Directors. In establishing a series of Preferred Stock, the Board of Directors shall give to it a distinctive designation so as to distinguish it from the shares of all other series and classes, shall fix the number of shares in such series, and the preferences, rights and restrictions thereof. All shares of any one series shall be alike in every particular except as otherwise provided by these Articles of Incorporation or the Minnesota Business Corporation Act. 1. Dividends. Dividends in cash, property or shares shall be paid upon the Preferred Stock for any year on a cumulative or noncumulative basis as determined by a resolution of the Board of Directors prior to the issuance of such Preferred Stock, to the extent earned surplus for each such year is available, in an amount as determined by a resolution of the Board of Directors. Such Preferred Stock dividends shall be paid pro rata to holders of Preferred Stock in any amount not less than nor more than the rate as determined by a resolution of the Board of Directors prior to the issuance of such Preferred Stock. No other dividend shall be paid on the Preferred Stock. Dividends in cash, property or shares of the Corporation may be paid upon the Common Stock, as and when declared by the Board of Directors, out of funds of the Corporation to the extent and in the manner permitted by law, except that no Common 2 Stock dividend shall be paid for any year unless the holders of Preferred Stock, if any shall receive the maximum allowable Preferred Stock dividend for such year. 2. Distribution in Liquidation. Upon any liquidation, dissolution or winding up of the Corporation, and after paying or adequately providing for the payment of all its obligations, the remainder of the assets of the Corporation shall be distributed, either in cash or in kind, first pro rata to the holders of the Preferred Stock until an amount to be determined by a resolution of the Board of Directors prior to issuance of such Preferred Stock, has been distributed per share, and, then, the remainder pro rata to the holders of the Common Stock. 3. Redemption. The Preferred Stock may be redeemed in whole or in part as determined by a resolution of the Board of Directors prior to the issuance of such Preferred Stock, upon prior notice to the holders of record of the Preferred Stock, published, mailed and given in such manner and form and on such other terms and conditions as may be prescribed by the Bylaws or by resolution of the Board of Directors, by payment in cash or Common Stock for each share of the Preferred Stock to be redeemed, as determined by a resolution of the Board of Directors prior to the issuance of such Preferred Stock. Common Stock used to redeem Preferred Stock shall be valued as determined by a resolution of the Board of Directors prior to the issuance of such Preferred Stock. Any rights to or arising from fractional shares shall be treated as rights to or arising from one share. No such purchase or retirement shall be made if the capital of the Corporation would be impaired thereby. If less than all the outstanding shares are to be redeemed, such redemption may be made by lot or pro rata as may be prescribed by resolution of the Board of Directors; provided, however, that the Board of Directors may alternatively invite from shareholders offers to the Corporation of Preferred Stock at less than an amount to be determined by a resolution of the Board of Directors prior to issuance of such Preferred Stock, and when such offers are invited, the Board of Directors shall then be required to buy at the lowest price or prices offered, up to the amount to be purchased. From and after the date fixed in any such notice as the date of redemption (unless default shall be made by the Corporation in the payment of the redemption price), all dividends on the Preferred Stock thereby called for redemption shall cease to accrue and all rights of the holders thereof as stockholders of the Corporation, except the right to receive the redemption price, shall cease and terminate. Any purchase by the Corporation of the shares of its Preferred Stock shall not be made at prices in excess of said redemption price. 4. Voting Rights; Cumulative Voting. Each outstanding share of Common Stock shall be entitled to one vote and each fractional share of Common Stock shall be entitled to a corresponding fractional vote on each matter submitted to a vote of shareholders. A majority of the shares of Common Stock entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. Except as 2 3 otherwise provided by these Articles of Incorporation or the Minnesota Business Corporation Act, if a quorum is present, the affirmative vote of a majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders. Cumulative voting shall not be allowed in the election of directors of this Corporation. Shares of Preferred Stock shall only be entitled to such vote as is determined by the Board of Directors prior to the issuance of such stock, except as required by law, in which case each share of Preferred Stock shall be entitled to one vote. 5. Denial of Preemptive Rights. No holder of any shares of the Corporation, whether now or hereafter authorized, shall have any preemptive or preferential right to acquire any shares or securities of the Corporation, including shares or securities held in the treasury of the Corporation. 6. Conversion Rights. Holders of shares of Preferred Stock may be granted the right to covert such Preferred Stock to Common Stock of the Corporation on such terms as may be determined by the Board of Directors prior to issuance of such Preferred Stock. ARTICLE III REGISTERED OFFICE The address of the initial registered office of the Corporation is 9333 Penn Avenue South, Bloomington, Minnesota 55431-2320. The registered office may be changed in the manner permitted by law. ARTICLE IV INITIAL BOARD OF DIRECTORS The number of directors of the Corporation shall be fixed by the Bylaws of the Corporation. The initial board of directors of the Corporation shall consist of four (4) directors. The names and addresses of the persons who shall serve as directors until the first annual meeting of shareholders and until their successors are elected and shall qualify as follows: Name Address ---- ------- Robert Reddall 9333 Penn Avenue South Bloomington, MN 55431-2320 Daniel J. Rogers 9333 Penn Avenue South Bloomington, MN 55431-2320 Robert Reddall 9333 Penn Avenue South Bloomington, MN 55431-2320 3 4 Thomas C. Saylor 9333 Penn Avenue South Bloomington, MN 55431-2320 Dennis D. Postma 20355 Harrow Avenue North Forest Lake, MN 55025 ARTICLE V LIMITATION OF LIABILITY OF DIRECTORS TO CORPORATIONS AND SHAREHOLDERS No director shall be liable to the Corporation or any shareholder for monetary damages for breach of fiduciary duty as a director, except: (a) for any breach of the director's duty of loyalty to the Corporation or its shareholders; (b) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (c) under Section 302A.559 or 80A.23 of the Minnesota Business Corporation Act; (d) for any transaction from which the director derived an improper personal benefit; or (e) for any act or omission occurring prior to the date when the provision in the Articles of Incorporation eliminating or limiting liability becomes effective. ARTICLE VI The name and address of the incorporator is as follows: Name Address ---- ------- Daniel J. Rogers 9333 Penn Avenue South Bloomington, MN 55431-2320 IN WITNESS WHEREOF, I, the undersigned incorporator certify that I am authorized to execute these Articles of Incorporation and that the information in these Articles of Incorporation is true and correct. I also understand that if any of this information is intentionally or knowingly misstated that criminal penalties will apply as if I had signed this Articles of Incorporation under oath. /s/ Daniel J. Rogers ----------------------------------- Daniel J. Rogers, Incorporator 4 5 The SIC Code that most accurately describes the nature of the business of this corporation is 35. The name and telephone number of the person to be contacted if there is a question about the filing of these Articles of Incorporation is as follows: Jon D. Sawyer (303) 295-2355 5 EX-2.2 3 k62810ex2-2.txt AMENDED ARTICLES OF INCORPORATION 1 EXHIBIT 2.2 ARTICLES OF AMENDMENT OF THE ARTICLES OF INCORPORATION OF ETG INTERNATIONAL, INC. ******************** The undersigned Minnesota Corporation, for the purpose of amending its Articles of Incorporation pursuant to Chapter 302A or 317A of the Minnesota Business Corporation Act, does hereby adopt the following amendments: 1. The undersigned hereby certify that on the 18th day of March, 1999; a special meeting of the Board of Directors was duly held and convened at which there was a present a quorum of the Board of Directors acting throughout all proceedings, and at which time the following resolution was duly adopted by the Board of Directors: ARTICLE I: The new name of the corporation is: SolutionNet International, Inc. ARTICLE IV: The new board of directors is as follows: NAME: ADDRESS: Garrett K. Krause PO Box 7006 Beverly Hills, CA 90212 Dan Curran 4344 Promenade Way, #102P Marina del Rey, CA 90292 This amendment has been approved pursuant to Minnesota Satiates chapter 302A or 317A. I certify that I am authorized to execute this amendment and I further certify that I understand that by signing this amendment, I am subject the penalties of perjury as set forth in section 609.48 as if I had signed this amendment under oath. BY: /s/ Garrett K. Krause ----------------------------- Garrett K. Krause, President EX-2.3 4 k62810ex2-3.txt BYLAWS OF SOLUTIONNET INTERNATIONAL, INC. 1 EXHIBIT 2.3 BYLAWS OF SOLUTIONNET INTERNATIONAL, INC. 2 TABLE OF CONTENTS ARTICLE I - OFFICES..........................................................1 1.1 Business Office............................................1 1.2 Registered Office..........................................1 ARTICLE II - SHARES AND TRANSFER THEREOF.....................................1 2.1 Regulation.................................................1 2.2 Certificates for Shares....................................1 2.3 Cancellation of Certificates...............................2 2.4 Lost, Stolen or Destroyed Certificates.....................2 2.5 Transfer of Shares.........................................2 2.6 Transfer Agent.............................................2 2.7 Close of Transfer Book and Record Date.....................3 ARTICLE III - SHAREHOLDERS AND MEETINGS THEREOF..............................3 3.1 Shareholders of Record.....................................3 3.2 Meetings...................................................3 3.3 Regular Meetings...........................................3 3.4 Special Meetings...........................................4 3.5 Notice.....................................................4 3.6 Meeting of all Shareholders................................4 3.7 Voting Record..............................................4 3.8 Quorum.....................................................5 3.9 Manner of Acting...........................................5 3.10 Proxies....................................................5 3.11 Voting of Shares...........................................5 3.12 Voting of Shares by Certain Holders........................5 3.13 Informal Action by Shareholders............................6 3.14 Voting by Ballot...........................................6 3.15 Cumulative Voting..........................................6 ARTICLE IV - DIRECTORS, POWERS AND MEETINGS..................................6 4.1 Board of Directors.........................................6 4.2 Regular Meetings...........................................6 4.3 Special Meetings...........................................7 4.4 Notice.....................................................7 4.5 Participation by Electronic Means..........................7 4.6 Quorum and Manner of Acting................................7 4.7 Organization...............................................7 4.8 Presumption of Assent......................................8 4.9 Informal Action by Directors...............................8 4.10 Vacancies..................................................8 4.11 Compensation...............................................8 4.12 Removal of Directors.......................................8 4.13 Resignations...............................................8 4.14 General Powers.............................................8 i 3 ARTICLE V - OFFICERS.........................................................9 5.1 Term and Compensation......................................9 5.2 Powers.....................................................9 5.3 Compensation..............................................11 5.4 Delegation of Duties......................................11 5.5 Bonds.....................................................11 5.6 Removal...................................................11 ARTICLE VI - INDEMNIFICATION................................................11 6.1 Mandatory Indemnification.................................11 6.2 Advances..................................................12 6.3 Official Capacity.........................................12 ARTICLE VII - FINANCE.......................................................13 7.1 Reserve Funds.............................................13 7.2 Banking...................................................13 ARTICLE VIII - DIVIDENDS....................................................13 ARTICLE IX - CONTRACTS, LOANS AND CHECKS....................................13 9.1 Execution of Contracts....................................13 9.2 Loans.....................................................13 9.3 Checks....................................................14 9.4 Deposits..................................................14 ARTICLE X - FISCAL YEAR.....................................................14 ARTICLE XI - CORPORATE SEAL.................................................14 ARTICLE XII - AMENDMENTS....................................................14 ARTICLE XIII - EXECUTIVE COMMITTEE..........................................14 13.1 Appointment...............................................14 13.2 Authority.................................................14 13.3 Tenure and Qualifications.................................15 13.4 Meetings..................................................15 13.5 Quorum....................................................15 13.6 Informal Action by Executive Committee....................15 13.7 Vacancies.................................................15 13.8 Resignations and Removals.................................15 13.9 Procedure.................................................15 CERTIFICATE ..........................................................16 ii 4 ARTICLE I OFFICES 1.1 Business Office. The principal office and place of business of the corporation shall be 9333 Penn Avenue South, Bloomington, Minnesota 55431-2320. Other offices and places of business may be established from time to time by resolution of the Board of Directors or as the business of the corporation may require. 1.2 Registered Office. The registered office of the corporation, required by the Minnesota Business Corporation Act to be maintained in the State of Minnesota, may be, but need not be, identical with the principal office in the State of Minnesota and the address of the registered office may be changed from time to time by the Board of Directors. ARTICLE II SHARES AND TRANSFER THEREOF 2.1 Regulation. The Board of Directors may make such rules and regulations as it may deem appropriate concerning the issuance, transfer and registration of certificates for shares of the corporation, including the appointment of transfer agents and registrars. 2.2 Certificates for Shares. Certificates representing shares of the corporation shall be respectively numbered serially for each class of shares, or series thereof, as they are issued, shall be impressed with the corporate seal or a facsimile thereof, and shall be signed by the Chairman or Vice Chairman of the Board of Directors or by the President or a Vice-President and by the Treasurer or an Assistant Treasurer or by the Secretary or an Assistant Secretary; provided that any or all of the signatures may be facsimile if the certificate is countersigned by a transfer agent, or registered by a registrar, other than the corporation itself or its employee. Each certificate shall state the name of the corporation, the fact that the corporation is organized or Incorporated under the laws of the State of Minnesota, the name of the person to whom issued, the date of issue, the class (or series of any class), the number of shares represented thereby and the par value of the shares represented thereby or a statement that such shares are without par value. A statement of the designations, preferences, qualifications, limitations, restrictions and special or relative rights of the shares of each class shall be set forth in full or summarized on the face or back of the certificates which the corporation shall issue, or in lieu thereof, the certificate may set forth that such a statement or summary will be furnished to any shareholder upon request without charge. Each certificate shall be otherwise in such form as may be prescribed by the Board of Directors and as shall conform to the rules of any stock exchange on which the shares may be listed. The corporation shall not issue certificates representing fractional shares and shall not be obligated to make any transfers creating a fractional interest in a share of stock. The corporation may issue scrip in lieu of any fractional shares, such scrip to have terms and conditions specified by the Board of Directors. 1 5 2.3 Cancellation of Certificates. All certificates surrendered to the corporation for transfer shall be canceled and no new certificates shall be issued in lieu thereof until the former certificate for a like number of shares shall have been surrendered and canceled, except as herein provided with respect to lost, stolen or destroyed certificates. 2.4 Lost, Stolen or Destroyed Certificates. Any shareholder claiming that his certificate for shares is lost, stolen or destroyed may make an affidavit or affirmation of the fact and lodge the same with the Secretary of the corporation, accompanied by a signed application for a new certificate. Thereupon, and upon the giving of a satisfactory bond of indemnity to the corporation not exceeding an amount double the value of the shares as represented by such certificate (the necessity for such bond and the amount required to be determined by the President and Treasurer of the corporation), a new certificate may be issued of the same tenor and representing the same number, class and series of shares as were represented by the certificate alleged to be lost, stolen or destroyed. 2.5 Transfer of Shares. Subject to the terms of any shareholder agreement relating to the transfer of shares or other transfer restrictions contained in the Articles of Incorporation or authorized therein, shares of the corporation shall be transferable on the books of the corporation by the holder thereof in person or by his duly authorized attorney, upon the surrender and cancellation of a certificate or certificates for a like number of shares. Upon presentation and surrender of a certificate for shares properly endorsed and payment of all taxes therefor, the transferee shall be entitled to a new certificate or certificates in lieu thereof. As against the corporation, a transfer of shares can be made only on the books of the corporation and in the manner hereinabove provided, and the corporation shall be entitled to treat the holder of record of any share as the owner thereof and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the statutes of the State of Minnesota. 2.6 Transfer Agent. Unless otherwise specified by the Board of Directors by resolution, the Secretary of the corporation shall act as transfer agent of the certificates representing the shares of stock of the corporation. He shall maintain a stock transfer book, the stubs in which shall set forth among other things, the names and addresses of the holders of all issued shares of the corporation, the number of shares held by each, the certificate numbers representing such shares, the date of issue of the certificates representing such shares, and whether or not such shares originate from original issue or from transfer. Subject to Section 3.7, the names and addresses of the shareholders as they appear on the stubs of the stock transfer book shall be conclusive evidence as to who are the shareholders of record and as such entitled to receive notice of the meetings of shareholders; to vote at such meetings; to examine the list of the shareholders entitled to vote at meetings; to receive dividends; and to own, enjoy and exercise any other property or rights deriving from such shares against the corporation. Each shareholder shall be responsible for notifying the Secretary in writing of any change in his name or address and failure to do so will relieve the corporation, its directors, officers and agents, from 2 6 liability for failure to direct notices or other documents, or pay over or transfer dividends or other property or rights, to a name or address other than the name and address appearing on the stub of the stock transfer book. 2.7 Close of Transfer Book and Record Date. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders, or any adjournment thereof, or entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the Board of Directors may provide that the stock transfer books shall be closed for a stated period, but not to exceed, in any case, fifty days. If the stock transfer books shall be closed for the purpose of determining shareholders entitled to notice of, or to vote at a meeting of shareholders, such books shall be closed for at least ten days immediately preceding such meeting. In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than fifty days and, in case of a meeting of shareholders, not less than ten days prior to the date on which the particular action requiring such determination of shareholders is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof. ARTICLE III SHAREHOLDERS AND MEETINGS THEREOF 3.1 Shareholders of Record. Only shareholders of record on the books of the corporation shall be entitled to be treated by the corporation as holders in fact of the shares standing in their respective names, and the corporation shall not be bound to recognize any equitable or other claim to, or interest in, any shares on the part of any other person, firm or corporation, whether or not it shall have express or other notice thereof, except as expressly provided by the laws of Minnesota. 3.2 Meetings. Meetings of shareholders shall be held at the principal office of the corporation, or at such other place as specified from time to time by the Board of Directors. If the Board of Directors shall specify another location such change in location shall be recorded on the notice calling such meeting. 3.3 Regular Meetings. In the absence of a resolution of the Board of Directors providing otherwise, regular meetings of shareholders of the corporation for the election of directors, and for the transaction of such other business as may properly come before such meetings, shall be held at such time as may be determined by Board of Directors by resolution in conformance with Minnesota law. If the election of Directors shall not be held on the day so designated for any regular meeting of the shareholders, the Board of 3 7 Directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as may be convenient. 3.4 Special Meetings. Special meetings of shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the chief executive officer, the chief financial officer, two or more directors, legal counsel of the corporation as last designated by resolution of the Board of Directors, or the holders of not less than 10 percent of all the shares entitled to vote at the meeting, except that a special meeting for the purpose of considering any action to directly or indirectly facilitate or effect a business combination, including any action to change or otherwise affect the composition of the board of directors for that purpose, may be called by the holders of 25 percent or more of the voting power of all shares entitled to vote. 3.5 Notice. Written notice stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered unless otherwise prescribed by statute not less than ten days nor more than sixty days before the date of the meeting, either personally or by mail, by or at the direction of the President, the Secretary, or the officer or person calling the meeting to each shareholder of record entitled to vote at such meeting; except that, if the authorized shares are to be increased, at least thirty days' notice shall be given, and if the sale of all or substantially all of the corporation's assets is to be voted upon, at least twenty days' notice shall be given. Any shareholder may waive notice of any meeting. Notice to shareholders of record, if mailed, shall be deemed given as to any shareholder of record, when deposited in the United States mail, addressed to the shareholder at his address as it appears on the stock transfer books of the corporation, with postage thereon prepaid, but if three successive letters mailed to the last-known address of any shareholder of record are returned as undeliverable, no further notices to such shareholder shall be necessary, until another address for such shareholder is made known to the corporation. 3.6 Meeting of All Shareholders. If all of the shareholders shall meet at any time and place, either within or without the State of Minnesota, and consent to the holding of a meeting at such time and place, such meeting shall be valid without call or notice, and at such meeting any corporate action may be taken. 3.7 Voting Record. The officer or agent having charge of the stock transfer books for shares of the corporation shall make, at least ten days before such meeting of shareholders, a complete record of the shareholders entitled to vote at each meeting of shareholders or any adjournment thereof, arranged in alphabetical order, with the address and the number of shares held by each. The record, for a period of ten days prior to such meeting, shall be kept on file either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held, whether within or without the State of Minnesota, and shall be subject to inspection by any shareholder for any purpose germane to the meeting at any time during usual business hours. Such record shall be produced and kept open at the time and place of the meeting and shall be subject to inspection of any shareholder for any purpose germane to the meeting during the whole 4 8 time of the meeting for the purpose thereof. The original stock transfer books shall be the prima facie evidence as to who are the shareholders entitled to examine the record or transfer books or to vote at any meeting of shareholders. 3.8 Quorum. A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, except as otherwise provided by the Minnesota Business Corporation Act and the Articles of Incorporation. In the absence of a quorum at any such meeting, a majority of the shares so represented may adjourn the meeting from time to time for a period not to exceed sixty days without further notice. At such adjourned meeting at which a quorum shall be presentor represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The shareholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. 3.9 Manner of Acting. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting and entitled to vote on the subject matter shall be the act of the shareholders, unless the vote of a greater proportion or number or voting by classes is otherwise required by statute or by the Articles of Incorporation or these Bylaws. 3.10 Proxies. At all meetings of shareholders a shareholder may vote in person or by proxy executed in writing by the shareholder or by his duly authorized attorney-in-fact. Such proxy shall be filed with the Secretary of the corporation before or at the time of the meeting. No proxy shall be valid after three years from the date of its execution, unless otherwise provided in the proxy. 3.11 Voting of Shares. Unless otherwise provide by these Bylaws or the Articles of Incorporation, each outstanding share entitled to vote shall be entitled to one vote upon each matter submitted to a vote at a meeting of shareholders, and each fractional share shall be entitled to a corresponding fractional vote on each such matter. 3.12 Voting of Shares by Certain Holders. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such other corporation may determine. Shares standing in the name of a deceased person, a minor ward or an incompetent person, may be voted by his administrator, executor, court appointed guardian or conservator, either in person or by proxy without a transfer of such shares into the name of such administrator, executor, court appointed guardian or conservator. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. 5 9 A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Neither shares of its own stock belonging to this corporation, nor shares of its own stock held by it in a fiduciary capacity, nor shares of its own stock held by another corporation if the majority of shares entitled to vote for the election of directors of such corporation is held by this corporation may be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time. Redeemable shares which have been called for redemption shall not be entitled to vote on any matter and shall not be deemed outstanding shares on and after the date on which written notice of redemption has been mailed to shareholders and a sum sufficient to redeem such shares has been irrevocably deposited or set aside to pay the redemption price to the holders of the shares upon surrender of certificates therefor. 3.13 Informal Action by Shareholders. Any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. 3.14 Voting by Ballot. Voting on any question or in any election may be by voice vote unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. 3.15 Cumulative Voting. No shareholder shall be permitted to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares shall equal, or by distributing such votes on the same principal among any number of candidates. ARTICLE IV DIRECTORS, POWERS AND MEETINGS 4.1 Board of Directors. The business and affairs of the corporation shall be managed by a board of directors, of which there shall be no less than three (3) nor more than five (5) directors. Directors need not be shareholders of the corporation or residents of the State of Minnesota and who shall be elected at a regular meeting of shareholders or some adjournment thereof. Directors shall hold office until the next regular meeting of shareholders and until their successors shall have been elected and shall qualify. 4.2 Regular Meetings. A regular, annual meeting of the Board of Directors shall be held at the same place as, and immediately after, a regular meeting of shareholders at which Directors are elected, and no notice shall be required in connection therewith. The annual meeting of the Board of Directors shall be for the purpose of electing officers and the transaction of such other business as may come before the meeting. The Board of Directors may provide, by resolution, the time and place, either within or without the State of Minnesota, for the holding of additional regular meetings without other notice than such resolution. 6 10 4.3 Special Meetings. Special meetings of the Board of Directors may be called by or at the request of the President or any two directors. The person or persons authorized to call special meetings of the Board of Directors may fix any place, either within or without the State of Minnesota, as the place for holding any special meeting of the Board of Directors called by them. 4.4 Notice. Written notice of any special meeting of directors shall be given as follows: (a) By mail to each director at his business address at least three days prior to the meeting; or (b) By personal delivery or telegram at least twenty-four hours prior to the meeting to the business address of each director, or in the event such notice is given on a Saturday, Sunday or holiday, to the residence address of each director. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company. Any director may waive notice of any meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. 4.5 Participation by Electronic Means. Except as may be otherwise provided by the Articles of Incorporation or Bylaws, members of the Board of Directors or any committee designated by such Board may participate in a meeting of the Board or committee by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other at the same time. Such participation shall constitute presence in person at the meeting. 4.6 Quorum and Manner of Acting. A quorum at all meetings of the Board of Directors shall consists of a majority of the number of directors then holding office, but a smaller number may adjourn from time to time without further notice, until a quorum is secured. The Board of Directors shall take action by the affirmative vote of the greater of (a) a majority of the directors present at a meeting at which a quorum is present, or (b) a majority of the minimum proportion of number of directors that would constitute a quorum for the transaction of business at such meeting. 4.7 Organization. The Board of Directors shall elect a chairman to preside at each meeting of the Board of Directors. The Board of Directors shall elect a Secretary to record the discussions and resolutions of each meeting. 7 11 4.8 Presumption of Assent. A director of the corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless the director: (a) objects at the beginning of the meeting to the transaction of business because the meeting is not lawfully called or convened and does not participate thereafter in the meeting, in which case the director shall not be considered to be present at the meeting for any purpose, (b) votes against the action at the meeting, or (c) is prohibited by Section 302A.255 of the Minnesota Business Corporation Act from voting on the action. Such right to dissent shall not apply to a director who voted in favor of such action. 4.9 Informal Action By Directors. Any action required or permitted to be taken by the Board of Directors, or a committee thereof, at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all the directors or all the committee members entitled to vote with respect to the subject matter thereof. 4.10 Vacancies. Any vacancy occurring in the Board of Directors may be filled by the affirmative vote of a majority of the remaining directors though less than a quorum of the Board of Directors. A director elected to fill a vacancy shall be elected for the unexpired term of his predecessor in office, and shall hold such office until his successor is duly elected and shall qualify. Any directorship to be filled by reason of an increase in the number of directors shall be filled by the affirmative vote of a majority of the directors then in office or by an election at an annual meeting, or at a special meeting of shareholders called for that purpose. A director chosen to fill a position resulting from an increase in the number of directors shall hold office only until the next election of directors by the shareholders. 4.11 Compensation. By resolution of the Board of Directors and irrespective of any personal interest of any of the members, each director may be paid his expenses, if any, of attendance at each meeting of the Board of Directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the Board of Directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. 4.12 Removal of Directors. Any director or directors of the corporation may be removed at any time, with or without cause, in the manner provided in the Minnesota Business Corporation Act. 4.13 Resignations. A director of the corporation may resign at any time by giving written notice to the Board of Directors, President or Secretary of the corporation. The resignation shall take effect upon the date of receipt of such notice, or at any later period of time specified therein. The acceptance of such resignation shall not be necessary to make it effective, unless the resignation requires it to be effective as such. 4.14 General Powers. The business and affairs of the corporation shall be managed by the Board of Directors which may exercise all such powers of the 8 12 corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these Bylaws directed or required to be exercised or done by the shareholders. The directors shall pass upon any and all bills or claims of officers for salaries or other compensation and, if deemed advisable, shall contract with officers, employees, directors, attorneys, accountants, and other persons to render services to the corporation. ARTICLE V OFFICERS 5.1 Term and Compensation. The elective officers of the corporation shall consist of at least a President, a Secretary and a Treasurer, each of whom shall be eighteen years or older and who shall be elected by the Board of Directors at its annual meeting. Unless removed in accordance with procedures established by law and these Bylaws, the said officers shall serve until the next succeeding annual meeting of the Board of Directors and until their respective successors are elected and shall qualify. Any number of offices may be held by the same person at the same time. The Board may elect or appoint such other officers and agents as it may deem advisable, who shall hold office during the pleasure of the Board. 5.2 Powers. The officers of the corporation shall exercise and perform the respective powers, duties and functions as are stated below, and as may be assigned to them by the Board of Directors. (a) The Chairman of the Board, if one shall be elected, shall preside at all meetings of the Board of Directors and of the shareholders and shall have such other duties as may be assigned to him from time to time by the Board of Directors. In recognition of notable and distinguished services to the Corporation, the Board of Directors may designate one of its members as honorary Chairman, who shall have such duties as the Board may, from time to time, assign to him by appropriate resolution, excluding, however, any authority or duty vested by law or these Bylaws in any other officer. (b) The responsibility of having general charge of the business, affairs and property of the corporation and control over its several officers, agents and employees and the responsibility for general and active management of the corporation and the responsibility for seeing that all orders and resolutions of the Board of Directors are carried into effect may be divided by the Board of Directors between the President and the Chief Executive Officer in such manner as they may choose to establish by resolution, subject, however, to the control of the Board of Directors. In the absence of any such stated division, the President is to be responsible for day-to-day management and for all nonofficer employees, while the Chief Executive Officer is to be responsible for all else. In the absence of a Chairman of the Board, the President shall preside at all meetings of the shareholders and Board of Directors, and in general, shall perform all duties incident to the office of President and such other duties as from time to time may 9 13 be assigned to him by the Board of Directors. The President may delegate any of his responsibilities to any Vice-President, with the approval of the Chief Executive Officer. (c) The President shall execute all deeds, conveyances, deeds of trust, bonds and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Board of Directors or the President to some officer of agent of the corporation. (d) Either the Chairman of the Board or the President may be named the Chief Executive Officer of the corporation; in the absence of designation by the Board of Directors or an employment agreement designating an individual as the Chief Executive Officer, the President shall be the Chief Executive Officer. (e) In the absence or disability of the President, the Vice-President or Vice-Presidents, if any, in order of their rank as fixed by the Board of Directors, and if not ranked, the Vice-Presidents in the order designated by the Board of Directors, shall perform all the duties of the President, and when so acting shall have all the powers of, and be subject to all the restrictions on the President. Each Vice-President shall have such other powers and perform such other duties as may from time to time be assigned to him by the President or the Board of Directors. (f) The Secretary shall keep accurate minutes of all meetings of the shareholders and the Board of Directors unless a different Secretary of such meetings is elected by the Board of Directors. He shall keep, or cause to be kept a record of the shareholders of the corporation and shall be responsible for the giving of notice of meetings of the shareholders of the Board of Directors. The Secretary shall be custodian of the records and of the seal of the corporation and shall attest the affixing of the seal of the corporation when so authorized. The Secretary or Assistant Secretary shall sign all stock certificates, as described in Section 2.2 hereof. The Secretary shall perform all duties commonly incident to his office and such other duties as may from time to time be assigned to him by the President or the Board of Directors. (g) An Assistant Secretary may, at the request of the Secretary, or in the absence or disability of the Secretary, perform all of the duties of the Secretary. He shall perform such other duties as may be assigned to him by the President or by the Secretary. (h) The Treasurer, subject to the order of the Board of Directors, shall be the Chief Financial Officer of the Corporation and shall have the care and custody of the money, funds, valuable papers and documents of the corporation. He shall keep accurate books of accounts of the corporation's transactions, which shall be the property of the corporation, and shall render financial reports and statements of condition of the corporation when so requested by the Board of Directors or President. The Treasurer shall perform all duties commonly incident to his office and such other duties as may from time to time be assigned to him by the President or the Board of Directors. In the 10 14 absence or disability of the President and Vice-President or Vice-Presidents, the Treasurer shall perform the duties of the President. (i) An Assistant Treasurer may, at the request of the Treasurer, or in the absence or disability of the Treasurer, perform all of the duties of the Treasurer. He shall perform such other duties as may be assigned to him by the President or by the Treasurer. 5.3 Compensation. All officers of the corporation may receive salaries or other compensation if so ordered and fixed by the Board of Directors. The Board of Directors shall have authority to fix salaries in advance for stated periods or render the same retroactive as the Board may deem advisable. 5.4 Delegation of Duties. In the event of absence or inability of any officer to act, the Board of Directors may delegate the powers or duties of such officer to any other officer, director or person whom it may select. 5.5 Bonds. If the Board of Directors by resolution shall so require, any officer or agent of the corporation shall give bond to the corporation in such amount and with such surety as the Board of Directors may deem sufficient, conditioned upon the faithful performance of their respective duties and offices. 5.6 Removal. Any officer or agent may be removed by the Board of Directors or by the executive committee, if any, whenever in its judgment the best interest of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not, of itself, create contract rights. ARTICLE VI INDEMNIFICATION 6.1 Mandatory Indemnification. Subject to the provisions of subsection 6.1(d) herein, the corporation shall indemnify a person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of the person against judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements and reasonable expenses, including attorneys' fees and disbursements, incurred by the person in connection with the proceeding, if, with respect to the acts or omissions of the person complained of in the proceeding, the person: (a) Has not been indemnified by another organization or employee benefit plan for the same judgments, penalties, fines, including, without limitation, excise taxes assessed against the person with respect to an employee benefit plan, settlements and reasonable expenses, including attorneys' fees and disbursements, incurred by the person in connection with the proceeding with respect to the same acts or omissions; 11 15 (b) Acted in good faith; (c) Received no improper personal benefit and Section 302A.255 of the Minnesota Business Corporation Act, if applicable, has been satisfied; (d) In the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and (e) In the case of acts or omissions occurring in the official capacity described in subsections 6.3(a) or (b) hereinbelow, reasonably believed that the conduct was in the best interests of the corporation, or in the case of acts or omissions occurring in the official capacity described in subsection 6.3(c) hereinbelow, reasonably believed that the conduct was not opposed to the best interests of the corporation. If the person's acts or omissions complained of in the proceeding relate to conduct as a director, officer, trustee, employee or agent of an employee benefit plan, the conduct is not considered to be opposed to the best interests of the corporation if the person reasonably believed that the conduct was in the best interests of the participants or beneficiaries of the employee benefit plan. The termination of a proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent does not, of itself, establish that the person did not meet the criteria set forth herein. 6.2 Advances. If a person is made or threatened to be made a party to a proceeding, the person is entitled, upon written request to the corporation, to payment or reimbursement by the corporation of reasonable expenses, including attorneys' fees and disbursements, incurred by the person in advance of the final disposition of the proceeding (a) upon receipt by the corporation of a written affirmation by the person of a good faith belief that the criteria for indemnification set forth in Section 6.1 have been satisfied and a written undertaking by the person to repay all amounts so paid or reimbursed by the corporation, if it is ultimately determined that the criteria for indemnification have not been satisfied, and (b) after making a determination that the facts then known to those making the determination would not preclude indemnification under this Article VI. The written undertaking required by subsection 6.2(a) herein is an unlimited general obligation of the person making it, but need not be secured and shall be accepted without reference to financial ability to make the repayment. 6.3 Official Capacity. "Official capacity" means (a) with respect to a director, the position of director in the corporation, (b) with respect to a person other than a director, the elective or appointive office or position held by an officer, member of a committee of the board, or the employment relationship undertaken by an employee of the corporation, and (c) with respect to a director, officer or employee of the corporation, who, while a director, officer or employee of the corporation, who while a director, officer or employee of the corporation, is or was serving at the request of the corporation or whose duties in that position involve or involved service as a director, officer, partner, trustee, employee or agent of another organization or employee benefit plan, the position 12 16 of that person as a director, officer, partner, trustee, employee or agent, as the case may be, of the other organization or employee benefit plan. ARTICLE VII FINANCE 7.1 Reserve Funds. The Board of Directors, in its uncontrolled discretion, may set aside from time to time, out of the net profits or earned surplus of the corporation, such sum or sums as it deems expedient as a reserve fund to meet contingencies, for equalizing dividends, for maintaining any property of the corporation, and for any other purpose. 7.2 Banking. The moneys of the corporation shall be deposited in the name of the corporation in such bank or banks or trust company or trust companies, as the Board of Directors shall designate, and may be drawn out only on checks signed in the name of the corporation by such person or persons as the Board of Directors, by appropriate resolution, may direct. Notes and commercial paper, when authorized by the Board, shall be signed in the name of the corporation by such officer or officers or agent or agents as shall thereunto be authorized from time to time. ARTICLE VIII DIVIDENDS Subject to the provisions of the Articles of Incorporation and the laws of the State of Minnesota, the Board of Directors may declare dividends whenever, and in such amounts, as in the Board's opinion the condition of the affairs of the corporation shall render such advisable. ARTICLE IX CONTRACTS, LOANS AND CHECKS 9.1 Execution of Contracts. Except as otherwise provided by statute or by these Bylaws, the Board of Directors may authorize any officer or agent of the corporation to enter into any contract, or execute and deliver any instrument in the name of, and on behalf of the corporation. Such authority may be general or confined to specific instances and, unless so authorized, no officer, agent or employee shall have any power to bind the corporation for any purpose, except as may be necessary to enable the corporation to carry on its normal and ordinary course of business. 9.2 Loans. No loans shall be contracted on behalf of the corporation and no negotiable paper shall be issued in its name unless authorized by the Board of Directors. When so authorized, any officer or agent of the corporation may effect loans and advances at any time for the corporation from any bank, trust company or institution, firm, corporation or individual. An agent so authorized may make and deliver promissory notes or other evidence of indebtedness of the corporation and may mortgage, pledge, hypothecate or transfer any real or personal property held by the corporation as 13 17 security for the payment of such loans. Such authority, in the Board of Directors' discretion, may be general or confined to specific instances. 9.3 Checks. Checks, notes, drafts and demands for money or other evidence of indebtedness issued in the name of the corporation shall be signed by such person or persons as designated by the Board of Directors and in the manner the Board of Directors prescribes. 9.4 Deposits. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE X FISCAL YEAR The fiscal year of the corporation shall be the year adopted by resolution of the Board of Directors. ARTICLE XI CORPORATE SEAL The Board of Directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the words "CORPORATE SEAL". ARTICLE XII AMENDMENTS These Bylaws may be altered, amended or repealed and new Bylaws may be adopted by a majority of the Directors present at any meeting of the Board of Directors of the corporation at which a quorum is present. These Bylaws may also be altered, amended or repealed by the shareholders of the corporate in conformance with the Minnesota Business Corporation Act. ARTICLE XIII EXECUTIVE COMMITTEE 13.1 Appointment. The Board of Directors by resolution adopted by a majority of the full Board, may designate two or more of its members to constitute an executive committee. The designation of such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed by law. 13.2 Authority. The executive committee, when the Board of Directors is not in session shall have and may exercise all of the authority of the Board of Directors except to the extent, if any, that such authority shall be limited by the resolution 14 18 appointing the executive committee and except also that the executive committee shall not have the authority of the Board of Directors in reference to amending the Articles of Incorporation, adopting a plan of merger or consolidation, recommending to the shareholders the sale, lease or other disposition of all or substantially all of the property and assets of the corporation otherwise than in the usual and regular course of its business, recommending to the shareholders a voluntary dissolution of the corporation or a revocation thereof, or amending the Bylaws of the corporation. 13.3 Tenure and Qualifications. Each member of the executive committee shall hold office until the next regular meeting of the Board of Directors following his designation. 13.4 Meetings. Regular meetings of the executive committee may be held without notice at such time and places as the executive committee may fix from time to time by resolution. Special meetings of the executive committee may be called by any member thereof upon not less than one day's notice stating the place, date and hour of the meeting, which notice may be written or oral, and if mailed, shall be deemed to be delivered when deposited in the United States mail addressed to the member of the executive committee at his business address. Any member of the executive committee may waive notice of any meeting and no notice of any meeting need be given to any member thereof who attends in person. The notice of a meeting of the executive committee need not state the business proposed to be transacted at the meeting. 13.5 Quorum. A majority of the members of the executive committee shall constitute a quorum for the transaction of business at any meeting thereof, and action of the executive committee must be authorized by the affirmative vote of a majority of the members present at a meeting at which a quorum is present. 13.6 Informal Action by Executive Committee. Any action required or permitted to be taken by the executive committee at a meeting may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the members of the committee entitled to vote with respect to the subject matter thereof. 13.7 Vacancies. Any vacancy in the executive committee may be filled by a resolution adopted by a majority of the full Board of Directors. 13.8 Resolutions and Removals. Any member of the executive committee may be removed at any time with or without cause by resolution adopted by a majority of the full Board of Directors. Any member of the executive committee may resign from the executive committee at any time by giving written notice to the President or Secretary of the corporation, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. 13.9 Procedure. The executive committee shall elect a presiding officer from its members and may fix its own rules of procedure which shall not be inconsistent with these Bylaws. It shall keep regular minutes of its proceedings and report the same to the 15 19 Board of Directors for its information at the meeting thereof held next after the proceedings shall have been taken. CERTIFICATE I hereby certify that the foregoing Bylaws constitute the Bylaws of ETG International, Inc. adopted by the Board of Directors of the Corporation as of the __ day of August, 1994. --------------------------- Secretary 16 EX-2.4 5 k62810ex2-4.txt AMENDMENTS TO BYLAWS OF SOLUTIONNET INTERNATIONAL 1 EXHIBIT 2.4 AMENDMENTS TO THE BYLAWS The following amendments to the Bylaws were adopted by the Board of Directors of SolutionNet International, Inc. (the "Corporation") on August 10, 2000: 1. The first sentence of Article IV, Section 4.1 of the Bylaws of the Corporation is hereby revised in its entirety as follows: "The business and affairs of the Corporation shall be managed by a board of directors, of which there shall be no less than one (1) nor more than ten (10) directors." 2. Article IV, Section 4.2 of the Bylaws of the Corporation is hereby revised in its entirety as follows: "The board of directors may provide, by resolution, the time and place, either within or without the State of Minnesota, for the holding of regular meetings without other notice than such resolution." 3. A new Section 4.15 is hereby added to Article IV of the Bylaws, as follows: "4.15. Committees. The board of directors may, by resolution passed by a majority of the total number of directors then in office, designate one or more committees, each committee to consist of one or more of the directors of the corporation, which to the extent provided in such resolution or these bylaws shall have, and may exercise, the powers of the board of directors in the management and affairs of the corporation, except as otherwise limited by law. The board of directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the board of directors. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. 2 Each committee of the board of directors may fix its own rules of procedure and shall hold its meetings as provided by such rules, except as may otherwise be provided by a resolution of the board of directors designating such committee. Unless otherwise provided in such a resolution, the presence of at least a majority of the members of the committee shall be necessary to constitute a quorum. Unless otherwise provided in such a resolution, in the event that a member and that member's alternate, if alternates are designated by the board of directors as provided above, of such committee is absent or disqualified, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in place of any such absent or disqualified member. 2 EX-3.1 6 k62810ex3-1.txt COMMON STOCK CERTIFICATE 1 EXHIBIT 3.1 SOLUTIONNET INTERNATIONAL, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA AUTHORIZED: 20,000,000 SHARES OF COMMON STOCK, $0.001 PAR VALUE SEE REVERSE FOR CERTAIN DEFINITIONS CUSIP 83437Q 10 1 THIS CERTIFIES THAT IS THE OWNER OF SPECIMEN fully paid and non-assessable shares of Common Stock, $0.001 par value of SOLUTIONNET INTERNATIONAL, INC. transferable on the books of the Company by the holder hereof in person or by duly authorized attorney upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to the provisions of the Articles of Incorporation, to all of which the holder of this Certificate by acceptance hereof assents. IN WITNESS WHEREOF, the Company has caused the facsimile signature of its duly authorized officer and the facsimile seal of the Company to be duly affixed hereto. This Certificate is not valid unless countersigned by the Transfer Agent and Registrar. Dated: SPECIMEN PRESIDENT/SECRETARY 2 SOLUTIONNET INTERNATIONAL, INC. CORPORATE STOCK TRANSFER, INC. TRANSFER FEE: $15.00 PER CERTIFICATE - ------------------------------------------------------------------------------- The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - . . . . . . . . . . . . . . . . . . Custodian for . . . . (Cust.) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors JT TEN - as joint tenants with right of Act of . . . . . . . . . . . . . . . . . . . . survivorship and not as tenants (State) in common ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THOUGH NOT IN THE ABOVE LIST. For value received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE Please print or type name and address of assignee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Shares of the Common Stock represented by the within Certificate and do hereby irrevocably constitute and appoint . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Attorney to transfer the said stock on the books of the within-named Corporation, with full power of substitution in the premises. Dated . . . . . . . . . . . . . . . . . . . . . . . 19. . . . . . . . . . . SIGNATURE GUARANTEED:X__________________________________________________ X__________________________________________________
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER. THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM. EX-6.1 7 k62810ex6-1.txt LEASE AGREEMENT ON NO. 1 SHENTON WAY, #22-05/09 1 EXHIBIT 6.1 THIS TENANCY AGREEMENT is made the ____ day of __________ Two Thousand One (2001) between CDL LAND PTE LTD, a company incorporated in Singapore and having its office at No. 36 Robinson Road, #20-01 City House, Singapore 068877 (hereinafter called "the Landlord" which expression shall where the context so admits include the person company or body for the time being entitled to the reversion immediately expectant on the term hereby created) of the one part and SR SINGAPORE PTE LTD, A COMPANY INCORPORATED IN SINGAPORE AND HAVING ITS REGISTERED OFFICE AT NO. 1 SHENTON WAY #22-06/09, SINGAPORE 068803------------------------------ (hereinafter called "the Tenant" which expression shall where the context so admits include its successors and permitted assigns) of the other part. WITNESSETH as follows: 1. In consideration of the rents, service charges, and Tenant's covenants Demise hereinafter reserved and contained, the Landlord HEREBY LETS unto the Tenant ALL that the premises more particularly described in the Schedule hereto (hereinafter referred to as "the Demised Premises") being part of the building known as "NO. 1 SHENTON WAY", situated at No. 1 Shenton Way, Singapore 068803" (hereinafter referred to as "the Building") TOGETHER WITH (but to the exclusion of all other liberties, easements, rights or advantages): (a) the right for the Tenant and others duly authorized by the Tenant but only so far as necessary and as the Landlord can lawfully grant the same of ingress to and egress from the Demised Premises in over and along all the usual entrances, landings, passenger lifts and passageways leading thereto in common with the Landlord and 2 all others so authorized by the Landlord and all other persons entitled thereto; (b) the right for the Tenant and others duly authorized by the Tenant to the user of such toilet facilities in the Building as shall be designated from time to time in writing by the Landlord but such user shall be in common with the Landlord and all others so authorized by the Landlord and all other persons so entitled thereto; (c) the right for the Tenant and all others authorized by the Tenant to the use and benefit of the air-conditioning system installed in the Budding in common with the Landlord and all others so authorized by the Landlord and all other persons entitled thereto; EXCEPTING AND RESERVING unto the Landlord the free and uninterrupted use of all water and other pipes, electric, telephone and other wires, conduits, flues and drains in through or under the Demised Premises TO HOLD the Demised Premises unto the Tenant for the term of TWO (2) YEARS SEVEN (7) MONTHS AND FIFTEEN (15) DAYS from the 17TH day of JANUARY 2000 (hereinafter referred to as "the said term") YIELDING AND PAYING THEREFOR unto the Landlord during the said term: 1.1 the monthly rent of DOLLARS FOUR THOUSAND THREE HUNDRED AND SIXTY ONLY Rent ($4,360.00)--------------------------------------------------- ---- (hereinafter referred to as "the monthly rent") 2 3 1.2 the monthly service charge of DOLLARS ONE THOUSAND SEVEN HUNDRED AND FORTY-FOUR ONLY ($1,744.00)---------------------- (hereinafter referred to as "the monthly service charge") The said monthly rent and monthly service charge in respect of the Demised Premises are payable monthly in advance clear of all deductions on the first day of each and every month the first payment or apportioned payment thereof to be made on the 17TH day of JANUARY 2000 and each subsequent payment to be made on the first day of every succeeding month. All payments due and payable by the Tenant under this Agreement (including but not limited to rent and service charge payments) shall be deducted by the Landlord or its duly authorized agents, from the Tenant's giro account. The Tenant shall open the said giro account, prior to the execution of the Lease Agreement. The Tenant shall take all necessary steps to ensure at all times that the said giro account is fully maintained throughout the period of the Lease Term and undertakes to ensure that the said giro account shall have sufficient funds to facilitate the said deduction by the Landlord or its duly authorized agents. The Tenant shall further undertake to sign any documents to facilitate the opening and/or maintenance of the said giro account. 2. The service charge shall be calculated at the rate of $1.00 per square foot ($10.764 per sq. m.) per month on the area of the Demised Premises let to the Tenant during the term hereby created and shall be subject to the following provisions: 3 4 2.1 The Landlord shall be entitled at any time and from time to time to increase the service charge by written notice in that behalf subject to the provisions hereinafter s hereinafter contained. 2.2 If there is any increase in the Outgoings of the Building, the Tenant shall be liable to pay an additional service charge in each and every month representing the apportioned extra cost as is attributable to the Demised Premises. For the purpose of ascertaining the additional service charge payable all increases in the Outgoings of the Building shall be apportioned in the proportion by which the floor area of the Demised Premises bears to the total area of the rentable floor space in the Building including any floor space occupied by the Landlord and a statement (hereinafter called "the said Certificate") by the Landlord certifying the amount of the increase in Outgoings of the Building on a per square foot basis (or its metric equivalent) and the effective date of such increase (accompanied by a certificate from a firm of auditors appointed by the Landlord verifying the said Certificate) shall be accepted by the Tenant as conclusive and binding of the matters so certified. The said Certificate shall be in the form annexed to this Agreement, as Annexe 1 or such other form as may from time to time be prescribed by the Landlord. The increase in service charge shall be chargeable and payable with effect from the date specified in the said Certificate as the effective date of the increase in Outgoings of the Building. If there shall be any additional service charge payable from a date prior to the issuance of the said Certificate the aggregate amount of such additional service charge shall be payable by the Tenant forthwith upon the issuance of the said Certificate. Additional service charge for the period after the issuance of the said Certificate shall be added to the prevailing service charge and such aggregate sum 4 5 shall be and remain the service charge until further increased by the Landlord under this Clause 2. 2.3 The term "Outgoings of the Building" where used in this Agreement shall mean the total sum of all outgoings, costs and expenses of the Landlord assessed or assessable, charged or chargeable, paid or payable or otherwise incurred in respect of the Building (including in such term for the purposes of this Clause the curtilage of the Building and all levels thereof including, but without limiting the generality of the foregoing, those levels below ground level whether used for the parking of motor vehicles or otherwise) and in the control, management, maintenance of the Building and in particular but without limiting the generality of the foregoing shall include: 2.3.1 All charges for and costs in relation to the supply of water and removal of all sewerage waste and other garbage from the Building and the land on which the Building is erected; 2.3.2 All amounts payable in respect of insurances relating to the Building and the equipment and appliances therein including without limiting the generality of the foregoing fire and public liability insurance, theft/burglary insurance of Landlord's property in the Building, and Workmen's Compensation/Common Law Liability insurance for the personnel mentioned in Clause 2.3.4 hereof; 5 6 2.3.3 All costs in relation to management, control and administration of the Building including the employment of security staff and attendants and the management fee payable from time to time by the Landlord to its management agents (if any) for the Building; 2.3.4 The cost of uniforms, salaries, wages, bonuses, allowances and other emoluments, remuneration and benefits of all personnel (whether employed by the Landlord or its management agents) engaged in the operation and maintenance of the Building as well as payroll tax and Central Provident Fund and other statutory contributions or charges in respect thereof; 2.3.5 The cost of operating and maintaining the Building and supplying all services from time to time provided by the Landlord for tenants and occupiers of the Building including without limiting the generality of the foregoing repairs and replacements, repainting and redecoration of the Building and the maintenance, repair and renovation of all lifts, air-conditioning plant, sanitary, plumbing and drainage equipment, fire-fighting equipment and other plant and equipment required in connection with any of such services; 2.3.6 All charges (including surcharges and taxes thereon) for lighting, power, air-conditioning and ventilation incurred in connection with the Building including without limiting the generality of the foregoing in connection with 6 7 the entrances, landings, lifts, lobbies, corridors, passages, car parks, stairways and water-closets and any other common areas; 2.3.7 The cost of the cleaning of the exterior of the Building (including all windows) and the common areas of the Building including without limiting the generality of the foregoing the entrances, landings, lifts, lobbies, corridors, passages, car parks, stairways and water-closets and any other common areas and the landscaping thereof; 2.3.8 The expenses of the Landlord in supplying paper, soap and other toilet requisites in the water-closets. 2.3.9 A monthly contribution towards a sinking fund for the following items: (a) lifts; (b) fire fighting systems; (c) sanitary, plumbing and drainage equipment; (d) transformer, switchboard and generator; (e) air-conditioning and mechanical ventilation the amount of such contribution to be determined by a professionally qualified appraiser. 7 8 3. The Tenant hereby covenants with the Landlord as follows: 3.1 On or before the execution of this Tenancy Agreement, there shall be paid by the Tenant to the Landlord a sum equal to the rent and service charge in respect of the Demised Premises for a three (3) month period in cash by way of a deposit and such deposit shall be held by the Landlord to secure the due performance and observance by the Tenant of all and singular the several covenants conditions stipulations and agreements on the part of the Tenant contained herein and if the Tenant shall fail to perform and observe any of the said covenants conditions and stipulations and agreements then such part of the said deposit as shall be necessary to remedy such failure to perform and observe shall be forfeited by the Landlord and applied thereto (without prejudice to the Landlord's right of action against the Tenant to the extent that the said deposit shall be insufficient for the purpose) but the Tenant shall not be entitled to deduct or set-off from any rental or service charge payments due hereunder all or any part of the said deposit PROVIDED ALWAYS that if the Tenant shall duly perform and observe all the said covenants conditions stipulations and agreements as aforesaid from the date hereof up to and including the date of expiration of the term to be created the Landlord shall within one (1) month after such expiration repay the said deposit to the Tenant free of interest and less any amounts forfeited as aforesaid. In the event that the service charge set out herein is increased from time to time in the manner provided in Clause 2 hereof the said deposit shall likewise be increased accordingly and the difference paid by the Tenant to the Landlord within seven (7) days after the date of the Landlord's written demand in that behalf. If any amount shall be forfeited by the Landlord from the said deposit in accordance herewith, the Tenant shall within seven (7) days after the date of the 8 9 Landlord's written demand in that behalf further deposit the amount so forfeited. 3.2 To pay the said monthly rent and the said service charge hereby reserved on the days and in the manner aforesaid without any deduction, withholding, set off or demand whatsoever and so that there shall be no abatement of rent or service charge by reason of any claim by the Tenant against the Landlord whether for non-performance or breach of the Landlord's obligations hereunder or otherwise. 3.2.1 The rent, service charge and other sums payable by the Tenant under this Lease (hereinafter collectively called "the Agreed Sum") shall, as between the Landlord and the Tenant, be exclusive of any applicable goods and services tax, imposition, duty and levy whatsoever (hereinafter collectively called "Taxes") which may from time to time be imposed or charged before, on or after the commencement of this Lease (including any subsequent revisions thereto) by any government, quasi-government, statutory, regulatory, revenue or tax authority (hereinafter called "the Authorities") on or calculated by reference to the amount of the Agreed Sum (or any part thereof) and the Tenant shall pay all such Taxes or reimburse the Landlord for the payment of such Taxes, as the case may be, in such manner and within such period as to comply or enable the Landlord to comply with any applicable orders or directives of the Authorities and the relevant laws and regulations. 9 10 If the Landlord or the Tenant (or any person on their behalf) is required by law to make any deduction or withholding or to make any payment, on account of such Taxes, from or calculated by reference to the Agreed Sum (or any part thereof): (a) The Tenant shall pay, without requiring any notice from the Landlord all such Taxes for its own account (if the liability to pay is imposed on the Tenant), or on behalf of and in the name of the Landlord (if the liability to pay is imposed on the Landlord) on receipt of written notice from the Landlord, and without prejudice to the foregoing, if the law requires the Landlord to collect and to account for such Taxes, the Tenant shall pay such Taxes to the Landlord (which shall be in addition to the Tenant's liability to pay the Agreed Sum) on receipt of written notice from the Landlord; and (b) the sum payable by the Tenant in respect of which the relevant deduction, withholding or payment is required on account of such Taxes, shall be increased to the extent necessary to ensure that after the making of the aforesaid deduction, withholding or payment, the Landlord or any person or persons to whom such sum is to be paid, receives on due date and retains (free from any liability in respect of any such deduction, withholding or Taxes) a net sum equal to what would have been received and retained had no such deduction, 10 11 withholding or payment been required or made. 3.2.2 In addition and without prejudice to any rights, powers or remedies of the Landlord, if the Tenant fails or delays in the payment and discharge of any such Taxes and the Landlord shall have duly paid such Taxes, then the Tenant shall pay interest thereon to the Landlord at the rate of twelve per cent (12%) per annum from the date of payment by the Landlord of such Taxes up to and including the date of receipt by the Landlord from the Tenant of payment of such Taxes. 3.2.3 The rights of the Landlord under this clause shall be in addition and without prejudice to any other rights or powers of the Landlord under any applicable order or directive of the Authorities or any relevant law or regulation, to recover from the Tenant the amount of such Taxes which may be or is to be paid or borne by the Landlord. 3.2.4 The Tenant shall indemnify and hold harmless the Landlord from any losses, damages, claims, demands, proceedings, actions, costs, expenses, interests and penalties suffered or incurred by the Landlord arising from any claim, demand, proceeding or action that may be made or instituted by the Authorities in respect of such Taxes and resulting from any failure or delay on the part of the Tenant in the payment and discharge of any such Taxes. 11 12 3.3 The Landlord shall pay the first assessment in respect of the Building. The Tenant shall pay for any increase (whether levied during or after the tenancy period) of property tax or other imposition of a like nature by whatever name called whether by way of an increase in the rate of tax or imposition or an increase in the annual value and shall pay any new imposition (including surcharge on property tax) by whatever name called which may hereafter be levied on or in respect of the Demised Premises relating to the tenancy period or any part thereof. In the event of the Demised Premises not being separately assessed but the Building being assessed as a whole then, for the purpose of ascertaining the additional or other amount payable by the Tenant under this Clause, any such increase in property tax or outgoing shall be apportioned and the Tenant shall pay such proportion thereof as the floor area of the Demised Premises bears to the total area of the rentable floor space in the Building including any floor space occupied by the Landlord Provided that the obligations of the Tenant under this sub-clause shall not be extinguished by the determination of this tenancy whether by the effluxion of time or otherwise until the said obligations shall have been fulfilled by the Tenant. 3.4 To pay all charges including any taxes now or in the future imposed in respect of water, electricity, and any other services supplied and metered separately to the Demised Premises which shall be consumed by the Tenant and charged by the Power Supply Ltd or other appropriate authority, and in the event of such water, electricity and other services not being supplied and metered separately to the Demised Premises to pay to the Landlord a proportionate part of the cost thereof, such cost to be calculated by the Landlord and notified to the Tenant by a statement in writing. In the event of the Power Supply Ltd or other 12 13 equivalent authority responsible for the supply of electricity, water and any other services supplied and used in the Building increasing the charges therefor, the Tenant shall pay to the Landlord a proportionate part of the increased cost thereof, such cost to be calculated by the Landlord and notified to the Tenant by a statement in writing which statement shall be accepted by the Tenant as conclusive and binding of the matters therein. 3.5 To install at its own cost and expense all telephones and teleprinters as the Tenant may require in such manner that the wires shall not run across and the floor or ceiling or along the walls of the Demised Premises so as to be visible in the Demised Premises but shall be concealed and if running along the floor shall be concealed in the respective ducts in the underfloor trunking provided by the Landlord for the purpose and all such works shall be carried out by workmen of or engaged by the Telecommunication Authority of Singapore or such other appropriate authority, or in the absence of such workmen, by a contractor nominated by the Landlord. 3.6 That before the Tenant applies to the Telecommunication Authority of Singapore or other appropriate authority for the installation of telephones and/or teleprinters it shall submit for the approval of the Landlord or its engineer a plan showing where the telephones and/or teleprinters are to be installed and if any extra underfloor trunking and/or accessories are required by the Tenant other than those already provided by the Landlord, the Landlord shall install such underfloor trunking and/or accessories and the Tenant shall bear the cost of such installation and that no wires shall be installed within the duct intended for the carriage of 13 14 telephone wires other than those installed by the said Telecommunication Authority of Singapore or other appropriate authority. 3.7 The Tenant shall carry out at its own expense the following works: 3.7.1 Partitioning within the Demised Premises. 3.7.2 All mechanical and electrical engineering works including: (a) Installation of all necessary electrical wiring, conduits, etc. for additional power points, light fittings and all other ceiling fixtures and fittings etc., apart from those originally supplied and installed by the Landlord. (b) All alteration works relating to the existing ceiling fixtures and fittings for lighting, air-conditioning and fire protection devices etc., originally supplied and installed by the Landlord. (c) All mechanical works of any kind whatsoever including installation of water and other pipes, apparatus, fittings, fixtures and (where water is to be supplied to the Demised Premises) all necessary plumbing. 14 15 3.7.3 Provision of other approved floor and/or wall covering or finishes of whatever kind within the Demised Premises. 3.7.4 Provision of window curtains or blinds, if required, of the type, quality and color to be approved by the Landlord for purposes of maintaining uniformity to the window facade of the Building. 3.8 To use for carrying out the works mentioned in Clause 3.7 hereof (hereinafter called "the said works") materials of such standard as to type, quality, color and size as the Landlord, its architect engineer or consultant shall approve and cause the said works to be carried out in the Demised Premises in accordance with plans and specifications that shall have received the prior written approval of the Landlord, its architect engineer or consultant and the relevant governmental and/or statutory authorities. The said works shall only be effected: 3.8.1 In the case of any mechanical, electrical, plumbing or air-conditioning works or installations, including installation of wiring, conduits, ducts, vents, pipes, appliances, apparatus, fixtures and fittings, by a nominated contractor of the Landlord appointed by the Tenant; 3.8.2 In all other cases by a contractor appointed by the Tenant and approved by the Landlord, and in accordance with approved plans and specifications and under the supervision of an architect or engineer appointed by the Landlord 15 16 and the completion thereof shall be subject to approval by the Landlord, its architect engineer or consultant and the Tenant shall not make any additions, alterations or renovations to the said works after completion thereof except with the prior approval in writing of the Landlord, such approval not to be unreasonably withheld. The fees of any architect, engineer or other consultant employed by the Landlord for the purpose of considering, approving and supervising the plans, specifications, materials and all works carried out by the Tenant and all other costs, charges and expenses incurred by the Landlord in connection therewith shall be home by the Tenant and paid by the Tenant to the Landlord on demand. No delay in carrying out and completing all or any of the said works (including installation of the telephones and teleprinters) in or at the Demised Premises, whether caused by any governmental and/or statutory authorities or otherwise, shall be a ground for postponing the commencement of the term of the said Agreement or relieve in any way the Tenant from the performance and observance of the covenants, conditions, stipulations or agreements herein contained and on its part to be performed and observed. 3.9 Not to make or permit to be made any alterations in or additions to the Demised Premises or any part thereof or the Landlord's fixtures, fittings and decorations therein and in particular not to make or permit to be made any such alterations or additions that will prevent the full and unrestricted use and benefit of the air-conditioning system to portions of the Building adjoining the Demised Premises without having first obtained the written 16 17 licence and consent of the Landlord, such consent not to be unreasonably withheld, and in the event of such licence and consent being given to carry out at the Tenant's own expense such alterations or additions with such materials and in such manner and at such time as shall be designated by the Landlord and upon the determination of the term hereby created if requested by the Landlord the Tenant shall remove all such alterations in or additions to the Demised Premises whether constructed by the Tenant or by any previous tenants so as to restore the Demised Premises to their original state and condition at the expense of the Tenant. 3.10 To keep the interior of the Demised Premises including the flooring and interior plaster or other surface material or rendering on walls and ceilings and the Landlord's fixtures therein including doors, windows, glass, locks, fastenings, electric wires and installations and fittings for light and power in a clean and good state of tenantable repair and condition (fair wear and tear excepted) and to make good to the satisfaction of the Landlord any damage to the same howsoever caused. 3.11 Not to employ or continue to employ in or about the Demised Premises any cleaners other than the cleaning contractor or contractors authorized by the Landlord to carry out the cleaning work in the Building. Any Premises cleaners so employed by the Tenant for the purpose of cleaning the Demised Premises shall be at the sole expense and responsibility of the Tenant and the Landlord shall not be liable or responsible in any way for their acts or omissions. 17 18 3.12 To allow the person or persons for the time being having the contract for the cleaning of the Building and his or their servants, workmen, employees, agents, contractors and sub- contractors, free ingress and egress to the Demised Premises for the purpose of cleaning the exterior of the windows thereof during business hours. 3.13 Without prejudice to the provisions of Clause 3.10 hereof, forthwith to give notice to the Landlord or its building supervisor of any damage that may occur to the Demised Premises and of any accident to or defects in the water pipes, electrical wiring, air- conditioning ducts or any other fittings, fixtures or other facility provided by the Landlord. 3.14 To permit the Landlord and its duly authorized agents with or without workmen and others and with or without appliances at all times (by prior appointment except in case of emergency or in case the Tenant cannot be contacted) to enter upon the Demised Premises to examine the state and condition thereof and to do such works and things as may be required for any repairs, alterations or improvements to the Demised Premises or any other part or parts of the Building and forthwith to repair mend and make good in a proper and workmanlike manner any defects for which the Tenant is liable and of which written notice shall be given to the Tenant or left on the Demised Premises and to pay the Landlord's reasonable costs of the examination or otherwise in respect of the preparation of any such notice, and if the Tenant shall not within fourteen (14) days after the date of such notice proceed diligently with the execution of such repairs or works, then the Landlord may enter upon the Demised Premises and execute such repairs or works and the cost thereof (which shall include the cost of the Landlord's representatives in supervising such repairs or works 18 19 at the rate of $50.00 per man/hour or the prevailing market rate, whichever shall be the higher) shall be a debt due from the Tenant to the Landlord and recoverable forthwith as such. 3.15 At all times to use and occupy the Demised Premises strictly as and for an office in connection with the business of the Tenant and not to leave the Demised Premises vacant and/or unoccupied for any period exceeding seven (7) days and to keep all doors and other means of access to the Demised Premises securely fastened when the Demised Premises are left unoccupied. 3.16 Not to store or bring upon the Demised Premises or any part thereof arms, ammunition or unlawful goods, gun-powders, saltpetre, chemicals, petrol, kerosene, gas or any goods or things which in the opinion of the Landlord are of an obnoxious, dangerous or hazardous nature or any explosive or combustible substance and not to place or leave in the entrance of stairways, passages or corridors, lobbies or other common parts of the Building any boxes or rubbish or otherwise encumber the same PROVIDED ALWAYS that if combustible or inflammable materials are stored in the Demised Premises or any part thereof with the consent in writing of the Landlord any increase in the premium for fire or other insurance as may have been taken out by the Landlord shall be borne by the Tenant. 3.17 Not to use the Demised Premises or any part thereof for any unlawful or immoral purpose and not to do or permit to be done any act or thing which may be or become a 19 20 nuisance to or give cause for reasonable complaint from the occupants of adjoining premises or of other parts of the Building or of other buildings adjoining the Building. 3.18 Not without the prior written consent of the Landlord to permit the vendors of food or drink or the servants or agents of such vendors to bring to or onto the Demised Premises or any part thereof or onto the Building or any part thereof food or drink for consumption by the occupiers or others in the Demised Premises save and except in the case of the contractor appointed by the Landlord to provide a food and drink service for the occupiers of the Building. 3.19 Not to use the Demised Premises or any part thereof or permit the same to be used as a laboratory or as a workshop or for the cooking or the preparation or storage of food nor to permit or suffer anyone to sleep or reside therein, and to ensure that all doors of the Demised Premises are securely fastened and locked at all times when the Demised Premises are not occupied or remain unattended. 3.20 Not to permit or cause to be permitted the placing or parking of bicycles, motor cycles or scooters, trolleys and other wheeled vehicles and/or the stocking or storage or littering of goods or things in the common parts of the Building, the corridors, passageways, pavements and the car-parking areas and to keep all such internal and external parts of the Building clear and free of all obstruction at all times. 20 21 3.21 Not to permit or carry on any auction sale upon the Demised Premises or any part of the Building. 3.22 Not to place or take into the passenger lifts any baggage, furniture, parcels, sacks, bags, heavy articles or other goods or other merchandise without the prior approval of the Landlord save only such light articles as brief-cases, attache cases and handbags. 3.23 Not to bring or allow to be brought onto the Demised Premises or any parts of the Building used in common with the Landlord and other tenants any machines or machinery save and except typewriters and such other auxiliary office equipment as are required for the purposes of the Tenant's office and not at any time to load or permit or suffer to be loaded on any part of the floors of the Building or the Demised Premises to a weight greater than fifty (50) pounds per square foot and shall when required by the Landlord distribute the load on any part of the floor of the Demised Premises in accordance with the directions and requirements of the Landlord and in the interpretation and application of the provisions of this Clause relating to loading the decision of the Surveyor, Architect or Engineer of the Landlord shall be final and binding upon the Tenant. 3.24 Not to affix, paint, or otherwise exhibit or permit to be affixed, painted or otherwise exhibited to or upon any part or on the exterior of the Demised Premises or on the windows or doors thereof or in or about any part of the Building without the prior written consent of the Landlord any signboard, announcement, placard, poster, advertisement, nameplate, flag, flagstaff, or any other notices whatsoever save and except the Tenant's nameplate or 21 22 signboard of a size form and character as shall be approved in writing by the Landlord, such consent not to be unreasonably withheld. The costs for making such nameplate or signboard shall be borne by the Tenant and placed at a spot to be indicated by the Landlord. 3.25 To keep the windows of the Demised Premises closed at all times and not to erect or install any sign, device, furnishing, ornament or object which is visible from the street or from any other building and which, in the opinion of the Landlord, is incongruous or unsightly or may detract from the general appearance of the Building. 3.26 To install and maintain at its own cost and expense for the windows of the Demised Premises curtains (if any) of the type, quality and color approved by the Landlord. 3.27 To ensure that the decor and design of the exterior of the Demised Premises are in accordance with plans and specifications previously submitted to and approved by the Landlord, and not to make any changes to such external parts without the prior written consent of the Landlord. Any unauthorized changes shall be removed by the Tenant forthwith on demand and if not so removed may be removed by the Landlord and the cost of such removal and of making good the Demised Premises as a consequence of such removal shall be home and paid by the Tenant. 3.28 Not to assign, underlet or otherwise part with the actual or legal possession or the use of the Demised Premises or any part thereof for any term whatsoever (whether by way of sub-letting, licensing, lending, sharing, or any other means) whereby any person or 22 23 persons not a party to this Agreement shall obtain the use or possession of the Demised Premises or any part thereof irrespective of whether any rental or other consideration is given or such use or possession. 3.29 Not to do or permit or suffer to be done anything whereby the policy or policies of insurance on the Building against loss or damage by fire or other risks on the Building for the time being subsisting may become void or voidable or whereby the rate of premium thereof may be increased and to make good all damage suffered by the Landlord and to repay to the Landlord all sums paid by the Landlord by way of increased premiums and all expenses incurred by the Landlord in or about any renewal of such policy or policies rendered necessary by a breach or non-observance of this covenant. 3.30 To indemnify and keep indemnify the Landlord from and against: 3.30.1 All claims, demands, writs, summonses, actions, suits, proceedings, judgements, orders, decrees, damages, costs, losses and expenses of any nature whatsoever which the Landlord may suffer or incur in connection with loss of life, personal injury and/or damage to property arising from or out of any occurrences in, upon or at the Demised Premises or the use of the Demised Premises or any part thereof by the Tenant or by any of the Tenant's employees, independent contractors, agents, invitees or licensees; 23 24 3.30.2 All loss and damage to the Demised Premises, the Building and to all property therein caused directly or indirectly by the Tenant or the Tenant's employees, independent contractors, agents, invitees or licensees and in particular but without limiting the generality of the foregoing caused directly or indirectly by the use or misuse, waste or abuse of water, or electricity or faulty fittings or fixtures of the Tenant. 3.31 At all times during the said term and during any period of holding over to keep current: 3.31.1 a public liability insurance policy (which shall be taken out for an amount deemed appropriate by the Tenant and with an insurance company approved by the Landlord) in respect of the Demised Premises; 3.31.2 an insurance policy which shall be taken out for an amount and with an insurance company as aforesaid on internal partitions and all goods belonging to or held in trust by the Tenant in the Demised Premises against loss or damage by fire; and to produce to the Landlord on demand the policies referred to above as well as the receipts for payment of premium in respect thereof. 24 25 3.32 At all times during the said term hereby created to comply with promptly and at the Tenant's expense all such requirements as may be imposed on the occupier of the Demised Premises by any statute now or hereafter in force and any orders, rules, regulations, requirements and notices thereunder. 3.33 Should the Tenant receive any notice from Government or any statutory, public or municipal authority with respect to the Demised Premises to give notice thereof forthwith in writing to the Landlord. 3.34 To observe and perform and to cause all its employees, independent contractors, agents, invitees and licensees to observe and perform all the rules and regulations made by the Landlord from time to time under Clause 5.5 hereof, Provided Always that the Landlord shall not be liable to the Tenant in any way for violation of the rules and regulations by any persons including other tenants of the Building or the employees, independent contractors, agents, visitors, invitees or licensees thereof. 3.35.1 At the expiration or sooner determination by the Landlord of the term hereby created (unless renewed in terms of Clause 5.11 hereof) to yield up the Demised Premises with the fixtures thereto (other than such Tenant's trade fixtures as shall belong to the Tenant), unless required by the Landlord to be removed, in good and tenantable repair and condition (fair wear and tear excepted) to the Landlord together with the keys (whether supplied by the Landlord or otherwise) to the Demised Premises and all doors therein, and if o required by the Landlord, to remove all letterings, internal partitions, fixtures and installations of the 25 26 Tenant or any part thereof, as are specified by the Landlord, from the Demised Premises and to reinstate all air-conditioning installations or other electrical installations to their original state to the satisfaction of the Landlord, its architect, engineer or consultant. Such removal and/or reinstatement shall be carried out: (a) in the case of any mechanical, electrical, plumbing or air conditioning works or installations (as described in Clause 3.8.1 hereof), by a nominated contractor of the Landlord appointed by the Tenant; (b) and in all other cases, by a contractor appointed by the Tenant and approved by the Landlord; under the supervision of the Landlord's architect, engineer or consultant and the Tenant shall pay for all fees and expenses of such architect, engineer or consultant. All damage done to the Demised Premises by such removal shall be made good by the Tenant on or prior to the expiration of the term hereby created and if the Tenant shall fail to do so the Landlord may make good all such damage. All costs incurred by the Landlord in such removal or disposal or in making good such damage shall be paid by the Tenant to the Landlord within seven (7) days of the Landlord notifying the Tenant of the amount thereof. 3.35.2 If the Tenant purports to yield up the Demised Premises without fulfilling its obligations as contained in Clause 3.35.1, the Landlord shall be entitled to insist on its full compliance or may reinstate the Demised Premises to its original state at the Tenant's costs, but nothing herein contained shall mean that it is obligatory on the Landlord to reinstate the 26 27 Demised Premises as aforesaid, the obligation to do so always being on the Tenant at its expense. Upon the expiration or sooner determination of this lease, if the Tenant purports to vacate or yield up the Demised Premises without reinstating the same, the Landlord shall be entitled to recover from the Tenant for such period until the Tenant has reinstated the Demised Premises to the Landlord's satisfaction or if the Landlord exercises the option to reinstate the Demised Premises until such time when the Landlord has completed reinstating the Demised Premises, such rents and other amounts which the Landlord would have been entitled to receive from the Tenant had the period for the reinstatement effected by the Tenant or Landlord (as the case may be) been added to the term of this lease hereby created (hereinafter called "default rent"). The Landlord shall be entitled to deduct the cost of reinstatement and the default rent from the rent deposit without prejudice to the Landlord's rights to recover from the Tenant the shortfall in respect thereof. 3.35.3 The Landlord's rights to recover the cost of reinstatement and the default rent as provided in Clause (2) shall not in any way prejudice, impair or affect any other remedies to which the Landlord may be entitled against the Tenant for any loss or damage incurred by the Landlord as a result of the Tenant's failure to yield up the Demised Premises duly reinstated to its original condition on the date of expiration or sooner determination of this lease. 27 28 3.36 To redecorate the Demised Premises to the satisfaction of the Landlord's architect, engineer or consultant for the time being immediately prior to the expiration or sooner determination by the Landlord of the term hereby created, and if the Tenant shall fail to redecorate the Demised Premises as aforesaid the Landlord may decorate the Demised Premises and recover from the Tenant the costs of such redecoration together with such rents and other amounts which the Landlord would have been entitled to receive from the Tenant had the period within such redecoration is effected by the Landlord been added to the term of this Agreement provided that in the event the period of redecoration and the period of reinstatement as provided in Clause (2) hereof shall coincide, the Landlord shall be entitled to receive rents and such other amounts until the reinstatement or redecoration has been completed, whichever is the later. For the purposes hereof the term "redecorate" shall include the washing of the whole of the interior of the Demised Premises, the painting with two coats of oil paint or emulsion paint or other appropriate treatment of all the internal parts of the Demised Premises previously so treated respectively, and also the replacing of all ceiling and floor tiles which in the opinion of the Landlord's architect, engineer or consultant for the time being are worn out or damaged and in need of replacement. PROVIDED ALWAYS that in the event the term hereby granted shall be renewed pursuant to Clause 5.11 hereof, the Tenant shall not be obliged to redecorate the Demised Premises until prior to the expiration of the renewed term. 3.37 To pay all legal fees (including the Landlord's solicitors' charges on a solicitor and client basis), stamp duty and all other disbursements and out-of pocket expenses incurred in the preparation and completion of this Agreement, and in connection with any surrender or 28 29 other termination thereof otherwise than by effluxion of time or with any claim or legal proceedings which may be brought by the Landlord against the Tenant in connection with or arising out of this Agreement. 3.38 The Tenant hereby agrees that the Landlord or the Landlord's agent shall be entitled to bring prospective purchasers of the demised premises to view the same by prior appointment. The Tenant further agrees that in the event the Landlord sells the demised premises the Landlord shall be entitled to transfer the deposit paid by the Tenant to the purchaser of the demised premises and upon the transfer of the deposit, the Tenant shall have no further claims whatsoever against the Landlord in respect of the same and the Landlord's obligation to repay the same to the Tenant shall be deemed to be discharged. 4. The Landlord hereby covenants with the Tenant as follows (but subject always to the provisions of Clause 5. 10 hereof): 4.1 To keep the roof and the main drains and pipes all external walls and all common parts of the Building including entrances, car parks, staircases, pavements, landings, corridors, and passages, lavatories and all sewers, soil pipes, sanitary apparatus, pipes, wires and cables and supply lines and all apparatus equipment plant and machinery serving the passenger lifts and air conditioning system in good and tenantable condition and repair (fair wear and tear and damage by fire excepted) including the repainting and decorating of the Building, or any part thereof at such times and in such manner as the Landlord shall in its absolute discretion consider such to be necessary. 29 30 4.2 To provide: 4.2.1 air-conditioning services during the hours of 8.30 a.m. to 5.00 p.m. on weekdays and 8.30 a.m. to 1.00 p.m. on Saturdays (Sundays and Gazetted Public Holidays excepted) PROVIDED ALWAYS that such services may at the request of the Tenant be extended by the Landlord (but without any obligation so to do) beyond the hours hereinbefore defined and in such an event the Tenant shall bear and pay to the Landlord on demand the additional costs and expenses to be determined by the Landlord for such extension; 4.2.2 lift services, available for use by the Tenant and the Tenant's employees and visitors, between the hours of 8.00 a.m. to 6.00 p.m. on weekdays and 8.00 a.m. to 3.00 p.m. on Saturdays (Sundays and Gazetted Public Holidays excepted) PROVIDED ALWAYS that at all other times the Landlord will endeavor to keep one or more lifts in operation but nothing contained herein shall impose on the Landlord any obligation so to do; 4.2.3 Electricity for the lighting of the passages, corridors, staircases, water-closets and other common parts of the Building; 4.2.4 Water for the common water-closets and toilet facilities in the Building. 30 31 4.3 To employ a watchman or watchmen for the protection at night of the Building and the premises therein (but not so as to render the Landlord liable for any loss sustained by the Tenant through the neglect, default, negligence or misconduct of such watchman or watchmen). 4.4 Subject to Clause 3.3 hereof to pay all present and future rates, taxes, assessments and outgoings imposed upon part thereof save and except such as are herein agreed to be paid by the Tenant. 4.5 To insure and keep insured the Building (excluding fittings and fixtures installed by the Tenant) against damage by fire and such other risks as the Landlord may deem fit. 4.6 That the Tenant paying the rent and service charge hereby reserved and performing and observing the several covenants herein contained and on its part to be performed and observed shall peaceably hold and enjoy the Demised Premises without any interruption from the Landlord or any person rightfully claiming under or in trust for it. 5. PROVIDED ALWAYS AND IT IS HEREBY AGREED AND DECLARED as follows: 5.1 If the rent and/or service charge or any other sums payable under this Agreement (or any part of such rent service charge or sums) shall at any time be unpaid for twenty-one days after the same shall have become due (whether formally demanded or not) or if any covenant 31 32 on the Tenant's part herein contained shall not to be performed or observed or if the Tenant (being a company) shall go into liquidation whether voluntarily (save for the purpose of amalgamation or re-construction) or compulsorily or a receiver shall be appointed of any part of its undertaking, property or assets, or (being an individual) shall have a receiving order or an adjudicating order made against him or if the Tenant shall make any arrangement with its creditors for settlement of its debts by composition or otherwise or if any execution or attachment shall be levied upon or issued against any of the property or assets of the Tenant and shall not be paid off or discharged within five (5) days thereof, then and in any one of the said cases it shall be lawful for the Landlord at any time thereafter to re-enter upon the Demised Premises or any part thereof in the name of the whole and thereupon the term hereby created shall forthwith and absolutely cease and determine but without prejudice to the right of action of the Landlord in respect of any arrears of rent and/or service charge or other sums due or of any antecedent breach of the Tenant's covenant herein contained. The Landlord shall not be liable or responsible for any loss of or damage to the Tenant's fixture furnishings equipment or other belongings whatsoever caused by or arising from the Landlord's re-entry of the Demised Premises and its possession thereof after such re-entry. 5.2 In addition and without prejudice to any other right, power or remedy of the Landlord if the rent and/or service charge hereby reserved or any other sums payable under this Agreement (or any part of such rent service charge or sums) shall at any time remain unpaid for fourteen (14) days after the same shall have become due (whether any formal or legal demand therefore shall have been made or not) then the Tenant shall pay to the Landlord 32 33 interest thereon at the rate of twelve per cent (12%) per annum. The Landlord shall be entitled to recover such interest from the Tenant as if such interest were rent in arrears. 5.3 The Landlord shall in all cases have the power to prescribe the weight and proper position of all iron or steel safes and other heavy machinery and equipment, articles or goods whatsoever in the Demised Premises and any or all damage caused to the Building or any part thereof by the Tenant or anyone on its behalf by taking in or moving out any safe, items of machinery and equipment, furniture, goods or other articles or during the time such are in the Building shall be made good by the Tenant or if by the Landlord at the sole expense of the Tenant. The Tenant shall compensate the Landlord for any such damage suffered by the Landlord. 5.4 The Landlord shall so far as practicable keep the main doors of the Building open so as to provide the Tenant's employees and visitors uninterrupted access subject always to the closure of the main doors of the Building at such times as the Landlord in its own discretion shall think fit as may be promulgated in the rules and regulations in respect of the maintenance and administration of the Building more particularly referred to in Clause 5.5 hereunder. 5.5 The Landlord shall have the right at any time and from time to time to make, add to, amend, cancel or suspend such rules and regulations in respect of the Building as in the judgement of the Landlord may from time to time be required for the management, safety, care or cleanliness of the Building or for the preservation of good order therein or for the 33 34 convenience of tenants and all such rules and regulations shall bind the Tenant upon and from the date on which notice in writing thereof is given to it by the Landlord. If there shall be any inconsistency between the provisions of this Agreement and the provisions of such. rules and regulations then the provisions of this Agreement shall prevail. 5.6 That if the Demised Premises or any part thereof shall be damaged or destroyed by fire, so as to render the Demised Premises unfit for occupation and use (except where such damage or destruction has been caused by the act or default of the Tenant, its servants, independent contractors, agents, visitors, invitee or licensees) the rent and service charge hereby covenanted to be paid or a fair and just proportion thereof according to the nature and extent of the damage sustained shall be suspended until the Demised Premises shall again be rendered fit for occupation and use, and any dispute concerning this Clause shall be determined by a single arbitrator to be appointed by the President for the time being of the Singapore Institute of Surveyors and Valuers in accordance with the Arbitration Act (Cap. 16) or any statutory modification or re-enactment thereof for the time being in force. PROVIDED ALWAYS that the Landlord may in its absolute discretion decide that the Demised Premises are so badly damaged that it will demolish and/or rebuild the Demised Premises instead of repairing the same and in any such event the Landlord may within ninety (90) days after such damage has been sustained give notice to the Tenant in writing of its decision and thereupon this Agreement shall terminate and the Tenant shall (if still in occupation) vacate the Demised Premises without compensation from the Landlord. 34 35 5.7 No condoning, excusing, or overlooking by the Landlord of any default, breach or non-observance, or non-performance, by the Tenant at any time or times of any of the Tenant's obligations herein contained shall operate as a waiver of the Landlord's rights hereunder in respect of any continuing, or subsequent, default, breach or non-observance or non-performance, or so as to defeat or affect in any way the rights of the Landlord herein in respect of any such continuing, or subsequent, default, breach or non-observance or non performance and no waiver by the Landlord shall be inferred from or implied by anything done or admitted by the Landlord unless expressed in writing and signed by the Landlord. Any consent given by the Landlord shall operate as a consent only for the particular matter to which it relates and shall in no way operate as a waiver or release of any of the provisions hereof, nor shall it be construed as dispensing with the necessity of obtaining the specific written consent of the Landlord in future, unless expressly so extended. 5.8 The Landlord shall not be liable or in any way responsible to the Tenant or to any of the Tenant's employees, independent contractors, agents, invitees or licensees or to any other person for any injury, loss or damage which :may be suffered or sustained to any property or by any person in the Building or on the land on which the Building is erected howsoever occurring. 5.9 Any notice or other documents or writing required to be served, delivered or given under this Agreement by one party to the other party shall be in writing and shall be sufficiently served if sent by registered post to the last known address of the other party. Any 35 36 notice shall be deemed to be received by the other party within twenty-four (24) hours of posting. 5.10 Notwithstanding anything herein contained the Landlord shall not be liable to the Tenant, nor shall the Tenant have any claim against the Landlord in respect of: 5.10.1 any failure or inability of or delay by the Landlord in fulfilling any of its obligations under this Agreement or any interruption in any of the services hereinbefore mentioned by reason of necessary repair or maintenance of any installations or apparatus or damage thereto or destruction thereof or by reason of any circumstances beyond the Landlord's control (including but not limited to fire, flood, escape of water, riot, civil commotion, curfew, emergency, shortage of manpower, fuel, materials, electricity or water of labor disputes). Without prejudice to the generality of the foregoing the Landlord may reduce or curtail the nature and extent of the services hereinbefore mentioned in compliance with any enactment regulation decree or administrative direction from any governmental department or authority or statutory board; 5.10.2 any act, omission, default, misconduct or negligence of any porter, attendant or other servant or employee, independent contractor or agent of the Landlord in or about the performance or purported performance of any duty relating to the provision of the said services or any of them; 36 37 5.10.3 any damage, injury or loss arising out of the leakage of the piping, wiring and sprinkler system in the Building and/or the structure of the Building or from whatsoever cause. 5.11 The Landlord shall at the written request of the Tenant made not less Option to than six (6) months and not more than seven (7) months before the expiration of the term hereby created and provided the Tenant shall have strictly and faithfully performed and observed all and singular the several stipulations herein contained and on its part to be performed and observed up to the termination of the Agreement hereby created, the Landlord shall at the Tenant's expense grant to the Tenant a further tenancy of the Demised Premises for a period of TWO (2) years at a rental or rentals and upon terms and conditions to be agreed. 5.12 In the event of the Tenant failing to exercise its option or the parties failing to agree upon the terms of the new tenancy as aforesaid the Landlord shall be entitled to exhibit outside the Demised Premises or on the doors thereof a notice stating that the Demised Premises are to be vacant and for letting and the Tenant shall permit all prospective tenants of the Demised Premises accompanied by a representative of the Landlord free ingress to and egress from the Demised Premises for the purpose of viewing the Demised Premises. 5.13 The Landlord shall not be bound by any oral representations or promises with respect to the Building and its appurtenances, or in respect of the Demised Premises, except as expressly set forth in this Agreement with the object and intention that the whole of the agreement between the Landlord and the Tenant shall be set forth herein, and shall in nowise 37 38 be modified by any oral discussions which may have preceded the signing of this Agreement. The Landlord does not expressly or impliedly warrant that the Demised Premises are now or will remain suitable or adequate for all or any of the purposes of the Tenant and all warranties (if any) as to suitability and adequateness of the Demised Premises implied by law are hereby expressly negatived. 5.14 The area of the Demised Premises as stated in the Schedule hereto is only an estimate and there shall be no adjustment in the rent and/or service charge if upon the measurement the actual area shall differ from the stated area. 5.15 Notwithstanding anything hereinbefore contained the obligations of the Tenant under this Agreement shall survive the determination of this Agreement whether by the effluxion of time or otherwise to the extent that such obligations shall not have been fulfilled by the Tenant prior to such determination. 5.16 In the interpretation of this Agreement except to the extent that such interpretation shall be excluded by or be repugnant to the context when used herein: 5.16.1 "the Landlord" shall include the successors and assigns of "CDL LAND PTE LTD"; 38 39 5.16.2 "the Tenant" shall include, if the Tenant is an individual, his personal representative and permitted assigns, or if the Tenant is a company, its permitted assigns and successors in title; 5.16.3 "person" shall be deemed to include a corporation; 5.16.4 words importing the singular or plural number shall be deemed to include the plural or singular number respectively and words importing the masculine gender only shall include the feminine or neuter gender and vice versa as the case may require; and 5.16.5 where two or more persons are included in the term "the Tenant" all covenants, agreements, terms, conditions and restrictions shall be binding on them jointly and each of them severally and shall also be binding on their personal representatives and permitted assigns respectively jointly and severally. 5.17 The marginal notes appearing in this Agreement are inserted only as Marginal a matter of convenience and in no way define, limit, construe or describe the Notes scope of intent of the sections or clauses of this Agreement, nor in any way affect this Agreement. 39 40 IN WITNESS WHEREOF the parties hereto have executed this Agreement the day and year first above written. THE SCHEDULE ABOVE REFERRED TO ALL that the premises on the 22ND story of the Building known as NO. 1 SHENTON WAY, situated at No. 1 Shenton Way, Singapore 068803, numbered or to be numbered UNITS #22-04/05 and containing an area of 1,744 sq. ft which said premises are for purposes of identification only more particularly described and edged red on the plan annexed hereto. SIGNED BY for and on behalf of the LANDLORD in the presence of: JEAN KOH Assistant Manager SIGNED BY for and on behalf of the TENANT in the presence of 40 EX-6.2 8 k62810ex6-2.txt 2001 EQUITY PARTICIPATION PLAN 1 EXHIBIT 6.2 THE 2001 EQUITY PARTICIPATION PLAN OF SOLUTIONNET INTERNATIONAL, INC. SolutionNet International, Inc., a Minnesota corporation, has adopted The 2001 Equity Participation Plan of SolutionNet International, Inc. (the "Plan"), effective upon shareholder approval thereof, for the benefit of its Employees (as such term is defined below), Consultants (as such term is defined below) and Non-Employee Directors (as such term is defined below). The purposes of this Plan are as follows: (1) To provide an additional incentive for Employees, Consultants and Non-Employee Directors to further the growth, development and financial success of the Company by personally benefiting through the ownership of Company stock. (2) To enable the Company to obtain and retain the services of directors, Employees, Consultants and Non-Employee Directors considered essential to the long range success of the Company by offering them an opportunity to own stock in the Company. ARTICLE I. DEFINITIONS Section 1.1. General Wherever the following terms are used in this Plan they shall have the meanings specified below, unless the context clearly indicates otherwise. Section 1.2. Definitions "Acquiring Person" means any Person other than the Company, any of the Company's Subsidiaries, any employee benefit plan of the Company or of a Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or of a Subsidiary of the Company. Section 1.3. Affiliate "Affiliate" shall mean (a) with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with, such Person, and (b) with respect to the Company, also any entity designated by the Board of Directors of the Company in which the Company or one of its Affiliates has an interest. For purposes of the Plan, "control" shall have the meaning given such term under Rule 405 of the Securities Act of 1933, as amended (the "Securities Act"). 1 2 Section 1.4. Award "Award" shall mean a grant of an Option or Restricted Stock under this Plan. Section 1.5. Board "Board" shall mean the Board of Directors of the Company. Section 1.6. Change in Control "Change in Control" means the event that is deemed to have occurred if: (a) Any Acquiring Person is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing a majority of the combined voting power of the then outstanding Voting Securities of the Company; or (b) Over a period of twenty-four months or less, members of the Incumbent Board cease for any reason to constitute at least a majority of the Board of Directors; or (c) A public announcement is made of a tender or exchange offer by any Acquiring Person for fifty percent or more of the outstanding Voting Securities of the Company, and the Board of Directors approves or fails to oppose that tender or exchange offer in its statements in Schedule 14D-9 under the Exchange Act; or its statements in Schedule 14D-9 under the Exchange Act; or (d) The stockholders of the Company approve a merger or consolidation of the Company or any Subsidiary with any other corporation or entity (or, if no such approval is required, the consummation of such a merger or consolidation of the Company), other than a merger or consolidation that would result in the Voting Securities of the Company outstanding immediately before the consummation thereof continuing to represent (either by remaining outstanding or by being converted into Voting Securities of the surviving entity or of a parent of the surviving entity) a majority of the combined voting power of the Voting Securities of the surviving entity (or its parent) outstanding immediately after that merger or consolidation; or (e) The stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or, if no such approval is required, the consummation of such a liquidation, sale, or disposition in one transaction or series of related transactions) other than a liquidation, sale or disposition of all or substantially all the Company's assets in one transaction or a series of related transactions to a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company. 2 3 Section 1.7. Code "Code" shall mean the Internal Revenue Code of 1986, as amended. Section 1.8. Committee "Committee" shall mean the Compensation Committee of the Board, or the full Board or another committee of the Board, appointed as provided in Section 7.1. Section 1.9. Common Stock "Common Stock" shall mean the common stock of the Company, par value $0.001 per share, and any equity security of the Company issued or authorized to be issued in the future, but excluding any preferred stock and any warrants, options or other rights to purchase Common Stock. Debt securities of the Company convertible into Common Stock shall be deemed equity securities of the Company. Section 1.10. Company "Company" shall mean SolutionNet International, Inc., a Minnesota corporation or its successor. Section 1.11. Consultant "Consultant" shall mean an individual who is engaged to perform services for the Company or any Subsidiary or Affiliate who is not an Employee or Non-Employee Director and who is designated as a Consultant by the Committee. Section 1.12. Director "Director" shall mean a member of the Board. Section 1.13. Employee "Employee" shall mean any officer or other employee (as defined in accordance with Section 3401(c) of the Code) and including employee directors of the Company, or of any corporation which is a Subsidiary or Affiliate. Section 1.14. Exchange Act "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended. Section 1.15. Fair Market Value "Fair Market Value" of a share of Common Stock as of a given date shall be (i) the closing price of a share of Common Stock on the Nasdaq National Market or on the principal exchange on which shares of Common Stock are then trading, if any (or as reported on any composite index which includes such principal exchange), on the trading day previous to such date, or if shares were not traded on the trading day previous to such date, then on the next 3 4 preceding date on which a trade occurred, or (ii) if Common Stock is not traded on an exchange but is quoted on the Nasdaq OTC Market, the OTC Bulletin Board or the Pink Sheets or a successor quotation system, the mean between the closing representative bid and asked prices for the Common Stock on the trading day previous to such date as reported by the Nasdaq OTC Market, the OTC Bulletin Board or the Pink Sheets or such successor quotation system; or (iii) if Common Stock is not publicly traded on the Nasdaq National Market or an exchange and not quoted on the Nasdaq OTC Market, or the OTC Bulletin Board or the Pink Sheets or a successor quotation system, the Fair Market Value of a share of Common Stock as established by the Committee (or the Board, in the case of Options granted to Non-Employee Directors) acting in good faith. Section 1.16. Group "Group" shall mean two or more Persons acting together as a partnership, limited partnership, syndicate or other group for the purpose of acquiring, holding or disposing of securities of the Company. Section 1.17. Incentive Stock Option "Incentive Stock Option" shall mean an option which conforms to the applicable provisions of Section 422 of the Code and which is designated as an Incentive Stock Option by the Committee. Section 1.18. Incumbent Board "Incumbent Board" means the individuals who, as of the date on which the Plan is approved by the stockholders of the Company, constitute the Board of Directors and any other individual who becomes a director of the Company after that date and whose election or appointment by the Board of Directors or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board. Section 1.19. Non-Employee Director "Non-Employee Director" shall mean a member of the Board who is not an Employee of the Company. Section 1.20. Non-Qualified Stock Option "Non-Qualified Stock Option" shall mean an Option which is designated as such at the time of grant or which is not designated as an Incentive Stock Option by the Committee. Section 1.21. Option "Option" shall mean a stock option granted under Article III of this Plan. An Option granted under this Plan shall, as determined by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock Option; provided, however, that Options granted to Non-Employee Directors and Consultants shall be Non-Qualified Stock Options. 4 5 Section 1.22. Optionee "Optionee" shall mean an Employee, Consultant or Non-Employee Director granted an Option under this Plan. Section 1.23. Participant "Participant" shall mean an individual who is an Optionee or Restricted Stockholder. Section 1.24. Person "Person" shall mean an individual, partnership, corporation, business trust, limited liability company, joint stock company, trust, unincorporated association, joint venture, governmental authority or other entity of whatever nature. Section 1.25. Plan "Plan" shall mean The 2001 Equity Participation Plan of SolutionNet International, Inc. Section 1.26. QDRO "QDRO" shall mean a qualified domestic relations order as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder. Section 1.27. Restricted Stock "Restricted Stock" shall mean Common Stock awarded under Article VI of this Plan. Section 1.28. Restricted Stockholder "Restricted Stockholder" shall mean an Employee, Consultant or Non-Employee Director granted an award of Restricted Stock under Article VI of this Plan. Section 1.29. Rule 16b-3 "Rule 16b-3" shall mean that certain Rule 16b-3 under the Exchange Act, as such Rule may be amended from time to time. Section 1.30. Section 162(m) Participant "Section 162(m) Participant" shall mean any Employee designated by the Committee as an Employee whose compensation for the fiscal year in which the Employee is so designated or a future fiscal year may be subject to the limit on deductible compensation imposed by Section 162(m) of the Code. Section 1.31. Stockholder's Agreement 5 6 "Stockholder's Agreement" shall mean the Stockholder's Agreement between the Company and any Participant applicable to any grant or award to such Participant. Section 1.32. Subsidiary "Subsidiary" shall mean any corporation in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain then owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. Section 1.33. Termination of Consultancy "Termination of Consultancy" shall mean the time when the engagement of a Participant as a Consultant to the Company or a Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, by resignation, discharge, death or retirement; but excluding terminations where there is a simultaneous commencement of employment with the Company or any Subsidiary. The Committee, in its sole discretion, shall determine the effect of all matters and questions relating to Termination of Consultancy, including, but not by way of limitation, the question of whether a Termination of Consultancy resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Termination of Consultancy. Notwithstanding any other provision of this Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate a Consultant's service at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. Section 1.34. Termination of Directorship "Termination of Directorship" shall mean the time when a Participant who is a Non-Employee Director ceases to be a Director for any reason, including, but not by way of limitation, a termination by resignation, failure to be elected, death or retirement. The Board, in its sole discretion, shall determine the effect of all matters and questions relating to Termination of Directorship with respect to Non-Employee Directors. Section 1.35. Termination of Employment "Termination of Employment" shall mean the time when the employee-employer relationship between a Participant and the Company or any Subsidiary is terminated for any reason, with or without cause, including, but not by way of limitation, a termination by resignation, discharge, death, disability or retirement; but excluding (i) terminations where there is a simultaneous reemployment or continuing employment of a Participant by the Company or any Subsidiary, (ii) at the discretion of the Committee, terminations which result in a temporary severance of the employee-employer relationship, and (iii) at the discretion of the Committee, terminations which are followed by the simultaneous establishment of a consulting relationship by the Company or a Subsidiary with the former employee. The Committee, in its sole discretion, shall determine the effect of all matters and questions relating to Termination of Employment, including, but not by way of limitation, the question of whether a Termination of Employment resulted from a discharge for good cause, and all questions of whether a particular leave of absence constitutes a Termination of Employment; provided, however, that, with respect to Incentive Stock Options unless otherwise determined by the Committee in its discretion, a 6 7 leave of absence, change in status from an employee to an independent contractor or other change in the employee-employer relationship shall constitute a Termination of Employment if, and to the extent that, such leave of absence, change in status or other change interrupts employment for the purposes of Section 422(a)(2) of the Code and the then applicable regulations and revenue rulings under said Section. Notwithstanding any other provision of this Plan, the Company or any Subsidiary has an absolute and unrestricted right to terminate an Employee's employment at any time for any reason whatsoever, with or without cause, except to the extent expressly provided otherwise in writing. Section 1.36. Voting Securities "Voting Securities" means any securities that are entitled to vote generally in the election of directors. ARTICLE II. SHARES SUBJECT TO PLAN Section 2.1. Shares Subject to Plan The shares of stock subject to Awards shall be Common Stock, initially shares of the Company's Common Stock, par value $0.001 per share. The aggregate number of such shares which may be issued upon the exercise of Awards under the Plan shall not exceed one million five hundred thousand (1,500,000). The shares of Common Stock issuable upon the exercise of such Awards may be either previously authorized but unissued shares or treasury shares. Section 2.2. Add-back of Options and Other Rights If any Option expires or is canceled without having been fully exercised, or is exercised in whole or in part for cash as permitted by this Plan, the number of shares subject to such Option but as to which such Option was not exercised prior to its expiration, cancellation or exercise may again be optioned, granted or awarded hereunder. Furthermore, any shares subject to Options or other awards which are adjusted pursuant to Section 10.3 and become exercisable with respect to shares of stock of another corporation shall be considered canceled and may again be optioned, granted or awarded hereunder. Shares of Common Stock which are delivered by the Optionee or withheld by the Company upon the exercise of any Option or other award under this Plan, in payment of the exercise price thereof, may again be optioned, granted or awarded hereunder. If any share of Restricted Stock is forfeited by the Grantee or repurchased by the Company pursuant to Section 6.6 hereof, such share may again be optioned, granted or awarded hereunder. Notwithstanding the provisions of this Section 2.2, no shares of Common Stock may again be optioned, granted or awarded if such action would cause an Incentive Stock Option to fail to qualify as an Incentive Stock Option under Section 422 of the Code unless the Committee determines that such Option is no longer intended to so qualify. 7 8 ARTICLE III. GRANTING OF OPTIONS Section 3.1. Eligibility Any Employee or Consultant selected by the Committee pursuant to Section 3.4(a)(i) and each Non-Employee Director selected by the Board pursuant to Section 3.4(d) shall be eligible to be granted an Option. Section 3.2. Disqualification for Stock Ownership No person may be granted an Incentive Stock Option under this Plan if such person, at the time the Incentive Stock Option is granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any then existing Subsidiary or parent corporation (within the meaning of Section 422 of the Code) unless such Incentive Stock Option conforms to the applicable provisions of Section 422 of the Code. Section 3.3. Qualification of Incentive Stock Options No Incentive Stock Option shall be granted to any person who is not an Employee. Section 3.4. Granting of Options (a) The Committee shall from time to time, in its sole discretion, and subject to applicable limitations of this Plan: (i) Select from among the Employees and Consultants (including Employees or Consultants who have previously received Options or other awards under this Plan) such of them as in its opinion should be granted Options; (ii) Determine the number of shares to be subject to such Options granted to the selected Employees or Consultants; (iii) Subject to Section 3.3, determine whether such Options are to be Incentive Stock Options or Non-Qualified Stock Options and whether such Options are to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code; and (iv) Determine the terms and conditions of such Options, consistent with this Plan; provided, however, that the terms and conditions of Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall include, but not be limited to, such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. (b) Upon the selection of an Employee or Consultant to be granted an Option, the Committee shall instruct the Secretary of the Company to issue the Option and may impose such conditions on the grant of the Option as it deems appropriate. 8 9 Without limiting the generality of the preceding sentence, the Committee may, in its discretion and on such terms as it deems appropriate, require as a condition on the grant of an Option to an Employee or Consultant that the Employee or Consultant surrender for cancellation some or all of the unexercised Options, Awards or other rights which have been previously granted to him under this Plan or otherwise. An Option, the grant of which is conditioned upon such surrender, may have an Option price lower (or higher) than the exercise price of such surrendered Option, Award or other right, may cover the same (or a lesser or greater) number of shares as such surrendered Option, Award or other right, may contain such other terms as the Committee deems appropriate, and shall be exercisable in accordance with its terms, without regard to the number of shares, price, exercise period or any other term or condition of such surrendered Option, Award or other right. (c) Any Incentive Stock Option granted under this Plan may be modified by the Committee to disqualify such Option from treatment as an "incentive stock option" under Section 422 of the Code. (d) During the term of the Plan, the Board shall from time to time, in its sole direction, and subject to applicable limitations of this Plan: (i) Select from among the Non-Employee Directors such of them as in its opinion should be granted Options; (ii) Determine the number of shares to be subject to such Options granted to the selected Non-Employee Directors; and (iii) Determine the terms and conditions of such Options. ARTICLE IV. TERMS OF OPTIONS Section 4.1. Option Agreement Each Option shall be evidenced by a written Stock Option Agreement, which shall be executed by the Optionee and an authorized officer of the Company and which shall contain such terms and conditions as the Committee (or the Board, in the case of Options granted to Non-Employee Directors) shall determine, consistent with this Plan. As deemed necessary or advisable, Stock Option Agreements evidencing Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock Options shall contain such terms and conditions as may be necessary to meet the applicable provisions of Section 422 of the Code. Section 4.2. Option Price The price per share of the shares subject to each Option shall be set by the Committee or with respect to Non-Employee Directors, by the Board; provided, however, that such price shall 9 10 be no less than the par value of a share of Common Stock, unless otherwise permitted by applicable state law, and (i) in the case of Options intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code, such price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted; (ii) in the case of Incentive Stock Options, such price shall not be less than 100% of the Fair Market Value of a share of Common Stock on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code); and (iii) in the case of Incentive Stock Options granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code) such price shall not be less than 110% of the Fair Market Value of a share of Common Stock on the date the Option is granted (or the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code). Section 4.3. Option Term The term of an Option shall be set by the Committee or by the Board in the case of Non-Employee Directors in their respective discretion; provided, however, that, in the case of Incentive Stock Options, the term shall not be more than ten (10) years from the date the Incentive Stock Option is granted, or five (5) years from such date if the Incentive Stock Option is granted to an individual then owning (within the meaning of Section 424(d) of the Code) more than 10% of the total combined voting power of all classes of stock of the Company or any Subsidiary or parent corporation thereof (within the meaning of Section 422 of the Code). Except as limited by requirements of Section 422 of the Code and regulations and rulings thereunder applicable to Incentive Stock Options, the Committee may extend the term of any outstanding Option in connection with any Termination of Employment or Termination of Consultancy of the Optionee, or amend any other term or condition of such Option relating to such a termination. Section 4.4. Option Vesting (a) The period during which the right to exercise an Option in whole or in part vests in the Optionee shall be set by the Committee or by the Board in the case of Non-Employee Directors, and the Committee or the Board, as applicable, may determine that an Option may not be exercised in whole or in part for a specified period after it is granted. At any time after grant of an Option, the Committee or the Board, as applicable, may, in their respective sole discretion, accelerate the period during which an Option vests. (b) No portion of an Option which is unexercisable at Termination of Employment, Termination of Directorship or Termination of Consultancy, as applicable, shall thereafter become exercisable, except as may be otherwise provided by the Committee or the Board, as applicable, either in the Stock Option Agreement or by action of the Committee or the Board, as applicable, following the grant of the Option. (c) To the extent that the aggregate Fair Market Value of stock with respect to which "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to Section 422(d) of the Code) are exercisable for the first time by an Optionee during any calendar year (under the Plan and all other incentive stock 10 11 option plans of the Company and any parent or subsidiary corporation (within the meaning of Section 422 of the Code of the Company) exceeds $100,000, such Options shall be treated as Non-Qualified Options to the extent required by Section 422 of the Code. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. For purposes of this Section 4.4(c), the Fair Market Value of stock shall be determined as of the time the Option with respect to such stock is granted. Section 4.5. Consideration In consideration of the granting of an Option, the Optionee shall agree, in the written Stock Option Agreement, to render faithful and efficient service to the Company or any Subsidiary. Nothing in this Plan or in any Stock Option Agreement hereunder shall confer upon any Optionee any right to continue in the employ of, or as a Consultant for, the Company or any Subsidiary, or as a director of the Company, or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Optionee at any time for any reason whatsoever, with or without good cause. ARTICLE V. EXERCISE OF OPTIONS Section 5.1. Partial Exercise An exercisable Option may be exercised in whole or in part. However, an Option shall not be exercisable with respect to fractional shares and the Committee (or the Board, in the case of Options granted to Non-Employee Directors) may require that, by the terms of the Option, a partial exercise be with respect to a minimum number of shares. Section 5.2. Manner of Exercise All or a portion of an exercisable Option shall be deemed exercised upon delivery of all of the following to the Secretary of the Company or his office: (a) A written notice complying with the applicable rules established by the Committee (or the Board, in the case of Options granted to Non-Employee Directors) stating that the Option, or a portion thereof, is exercised. The notice shall be signed by the Optionee or other person then entitled to exercise the Option or such portion of the Option; (b) Such representations and documents as the Committee (or the Board, in the case of Options granted to Non-Employee Directors), in its sole discretion, deems necessary or advisable to effect compliance with all applicable provisions of the Securities Act, and any other federal or state securities laws or regulations. The Committee or Board may, in its sole discretion, also take whatever additional actions it deems appropriate to effect such compliance including, without limitation, placing legends on share certificates and issuing stop-transfer notices to agents and registrars; 11 12 (c) In the event that the Option shall be exercised pursuant to Section 10.1 by any person or persons other than the Optionee, appropriate proof of the right of such person or persons to exercise the Option; and (d) Full cash payment to the Secretary of the Company for the shares with respect to which the Option, or portion thereof, is exercised. However, the Committee (or the Board, in the case of Options granted to Non-Employee Directors), may in its discretion (i) allow a delay in payment up to thirty (30) days from the date the Option, or portion thereof, is exercised; (ii) allow payment, in whole or in part, through the delivery of shares of Common Stock owned by the Optionee, duly endorsed for transfer to the Company with a Fair Market Value on the date of delivery equal to the aggregate exercise price of the Option or exercised portion thereof; (iii) allow payment, in whole or in part, through the surrender of shares of Common Stock then issuable upon exercise of the Option having a Fair Market Value on the date of Option exercise equal to the aggregate exercise price of the Option or exercised portion thereof; (iv) allow payment, in whole or in part, through the delivery of property of any kind which constitutes good and valuable consideration; (v) allow payment, in whole or in part, through the delivery of a full recourse promissory note bearing interest (at no less than such rate as shall then preclude the imputation of interest under the Code) and payable upon such terms as may be prescribed by the Committee or the Board; (vi) allow payment, in whole or in part, through the delivery of a notice that the Optionee has placed a market sell order with a broker with respect to shares of Common Stock then issuable upon exercise of the Option, and that the broker has been directed to pay a sufficient portion of the net proceeds of the sale to the Company in satisfaction of the Option exercise price; or (vii) allow payment through any combination of the consideration provided in the foregoing subparagraphs (ii), (iii), (iv), (v) and (vi). In the case of a promissory note, the Committee (or the Board, in the case of Options granted to Non-Employee Directors) may also prescribe the form of such note and the security to be given for such note. The Option may not be exercised, however, by delivery of a promissory note or by a loan from the Company when or where such loan or other extension of credit is prohibited by law. Section 5.3. Conditions to Issuance of Stock Certificates The Company shall not be required to issue or deliver any certificate or certificates for shares of stock purchased upon the exercise of any Option or portion thereof prior to fulfillment of all of the following conditions: (a) The admission of such shares to listing on all stock exchanges on which such class of stock is then listed; (b) The completion of any registration or other qualification of such shares under any state or federal law, or under the rulings or regulations of the Securities and Exchange Commission or any other governmental regulatory body which the Committee or Board shall, in its sole discretion, deem necessary or advisable; 12 13 (c) The obtaining of any approval or other clearance from any state or federal governmental agency which the Committee (or Board, in the case of Options granted to Non-Employee Directors) shall, in its sole discretion, determine to be necessary or advisable; (d) The lapse of such reasonable period of time following the exercise of the Option as the Committee (or Board, in the case of Options granted to Non-Employee Directors) may establish from time to time for reasons of administrative convenience; and (e) The receipt by the Company of full payment for such shares, including payment of any applicable withholding tax. (f) Any holder of any Option shall be required, as a condition to such holder's right to purchase securities with such Option, to supply the Committee at such person's expense with such evidence, representations, agreements or assurances (including, but not limited to, opinions of counsel satisfactory to the Committee (as the Committee may deem necessary or desirable) in order to establish to the satisfaction of the Committee the right of such person to exercise such Option, and of the propriety of the sale of securities by reason of such exercise under the Securities Act, and any other law or requirements of any governmental authority specified by the Committee. The Company shall not be obligated to sell any shares subject to such Option until all evidence, representations, agreements and assurances required by the Committee with respect to the foregoing or for any other reason, have been supplied. Each Option shall be subject to the condition that such Option may not be exercised if and to the extent the Committee determines that it would be illegal or inadvisable to do so. Further, an Option shall not be exercisable if the Committee or the Board determines there is non-public information material to the decision of the holder to exercise such Option which the Company can not for any reason communicate to such holder. However, if any holder makes a bona fide request to exercise any Option and the Committee determines such Option can not be exercised for a period of time and the Option expires during such period, then the term of such Option shall be extended for 30 days following the end of such period during which the Option could not be exercised. Section 5.4. Rights as Stockholders The holders of Options shall not be, nor have any of the rights or privileges of, stockholders of the Company in respect of any shares purchasable upon the exercise of any part of an Option unless and until certificates representing such shares have been issued by the Company to such holders. Section 5.5. Ownership and Transfer Restrictions The Committee (or Board, in the case of Options granted to Non-Employee Directors), in its sole discretion, may impose such restrictions on the ownership and transferability of the shares purchasable upon the exercise of an Option as it deems appropriate. Any such restriction shall be set forth in the respective Stock Option Agreement or Stockholder's Agreement or other written agreement between the Company and the Optionee and may be referred to on the certificates evidencing such shares. The Committee may require the Employee to give the Company prompt notice of any disposition of shares of Common Stock acquired by exercise of 13 14 an Incentive Stock Option within (i) two years from the date of grant (including the date the Option is modified, extended or renewed for purposes of Section 424(h) of the Code) or (ii) one year after the transfer of such shares to such Employee. The Committee may direct that the certificates evidencing shares acquired by exercise of an Option refer to such requirement. ARTICLE VI. AWARD OF RESTRICTED STOCK Section 6.1. Eligibility Restricted Stock may be awarded to any Employee or any Consultant whom the Committee determines should receive such an award. In addition, each Non-Employee Director shall be eligible to receive an award of Restricted Stock if so determined by the Board. Section 6.2. Award of Restricted Stock (a) The Committee or the Board in the case of Non-Employee Directors, may from time to time, in their respective sole discretion: (i) Select from among the Employees and Consultants or Non-Employee Directors such of them as in its opinion should be awarded Restricted Stock; and (ii) Determine the purchase price, if any, and other terms and conditions applicable to such Restricted Stock, consistent with this Plan. (b) The Committee shall establish the purchase price, if any, and form of payment for Restricted Stock; provided, however, that such purchase price shall be no less than the par value of the Common Stock to be purchased, unless otherwise permitted by applicable state law. In all cases, legal consideration shall be required for each issuance of Restricted Stock. (c) Upon the selection of a Participant to be awarded Restricted Stock, the Committee or the Board, as applicable, shall instruct the Secretary of the Company to issue such Restricted Stock and may impose such conditions on the issuance of such Restricted Stock as it deems appropriate. Section 6.3. Restricted Stock Agreement Restricted Stock shall be issued only pursuant to a written Restricted Stock Agreement, which shall be executed by the selected Employee, Consultant or Non-Employee Director and an authorized officer of the Company and which shall contain such terms and conditions as the Committee or the Board, as applicable, shall determine, consistent with this Plan. Section 6.4. Consideration 14 15 As consideration for the issuance of Restricted Stock, in addition to payment of any purchase price, the Restricted Stockholder shall agree, in the written Restricted Stock Agreement, to render faithful and efficient service to the Company or any Subsidiary. Nothing in this Plan or in any Restricted Stock Agreement hereunder shall confer on any Restricted Stockholder any right to continue in the employ of, as a Consultant for, or as a Non-Employee Director of the Company or any Subsidiary or shall interfere with or restrict in any way the rights of the Company and any Subsidiary, which are hereby expressly reserved, to discharge any Restricted Stockholder at any time for any reason whatsoever, with or without good cause. Section 6.5. Rights as Stockholders Subject to Section 6.6, upon delivery of the shares of Restricted Stock to the escrow holder pursuant to Section 6.8, the Restricted Stockholder shall have, unless otherwise provided by the Committee, all the rights of a stockholder with respect to said shares, subject to the restrictions in his Restricted Stock Agreement, including the right to receive all dividends and other distributions paid or made with respect to the shares; provided, however, that in the discretion of the Committee, any extraordinary distributions with respect to the Common Stock shall be subject to the restrictions set forth in Section 6.6. Section 6.6. Restriction All shares of Restricted Stock issued under this Plan (including any shares received by holders thereof with respect to shares of Restricted Stock as a result of stock dividends, stock splits or any other form of recapitalization) shall, in the terms of each individual Restricted Stock Agreement, be subject to such restrictions, if any, as the Committee shall provide, which restrictions may include, without limitation, restrictions concerning voting rights and transferability and restrictions based on duration of employment with the Company, Company performance and individual performance; provided, however, that, except with respect to shares of Restricted Stock granted pursuant to Section 6.10, by action taken after the Restricted Stock is issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Restricted Stock Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire; provided, however, that, except with respect to shares of Restricted Stock granted pursuant to Section 6.10, by action taken after the Restricted Stock is issued, the Committee may, on such terms and conditions as it may determine to be appropriate, remove any or all of the restrictions imposed by the terms of the Restricted Stock Agreement. Restricted Stock may not be sold or encumbered until all restrictions are terminated or expire. Section 6.7. Repurchase of Restricted Stock The Committee or the Board, as applicable, shall provide in the terms of each individual Restricted Stock Agreement that the Company shall have the right to repurchase from the Restricted Stockholder the Restricted Stock then subject to restrictions under the Restricted Stock Agreement immediately upon Termination of Employment, Termination of Consultancy or Termination of Directorship, as applicable between the Restricted Stockholder and the Company, at a cash price per share equal to the price paid by the Restricted Stockholder for such Restricted Stock; provided, however, that no such right of repurchase shall exist in the event of a Change in Control of the Company or because of the Restricted Stockholder's death or disability. 15 16 Section 6.8. Escrow The Secretary of the Company or such other escrow holder as the Committee may appoint shall retain physical custody of each certificate representing Restricted Stock until all of the restrictions that may have been imposed under the Restricted Stock Agreement with respect to the shares evidenced by such certificate expire or shall have been removed. Section 6.9. Legend In order to enforce the restrictions that may be imposed upon shares of Restricted Stock hereunder, the Committee or the Board, as applicable, shall cause a legend or legends to be placed on certificates representing all shares of Restricted Stock that are still subject to any such restrictions under Restricted Stock Agreements, which legend or legends shall make appropriate reference to the conditions imposed thereby. Section 6.10. Provisions Applicable to Section 162(m) Participants. (a) Notwithstanding anything in the Plan to the contrary, the Committee may grant Restricted Stock to a Section 162(m) Participant the restrictions with respect to which lapse upon the attainment of performance goals for the Company which are related to one or more of the following business criteria: (i) pre-tax income, (ii) operating income, (iii) cash flow, (iv) earnings per share, (v) return on equity, (vi) return on invested capital or assets, (vii) cost reductions or savings, (viii) funds from operations, (ix) appreciation in the fair market value of Common Stock and (x) earnings before any one or more of the following items: interest, taxes, depreciation or amortization. (b) To the extent deemed necessary or advisable to comply with the performance-based compensation requirements of Section 162(m)(4)(C) of the Code, with respect to Restricted Stock which may be granted to one or more Section 162(m) Participants, no later than ninety (90) days following the commencement of any fiscal year in question or any other designated fiscal period or period of service (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (i) designate one or more Section 162(m) Participants, (ii) select the performance goal or goals applicable to the fiscal year or other designated fiscal period or period of service, (iii) establish the various targets and amounts of Restricted Stock which may be earned for such fiscal year or other designated fiscal period or period of service and (iv) specify the relationship between performance goals and targets and the amounts of Restricted Stock to be earned by each Section 162(m) Participant for such fiscal year or other designated fiscal period or period of service. To the extent deemed necessary or advisable to comply with the performance-based compensation requirements of Section 162(m)(4)(C) of the Code, following the completion of each fiscal year or other designated fiscal period or period of service, and determining the amount earned by a Section 162(m) Participant, the Committee shall certify in writing whether the applicable performance targets have been achieved for such fiscal year or other designated fiscal period or period of service, and determining the amount earned by a Section 162(m) Participant, the 16 17 Committee shall have the right to reduce (but not to increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant to the assessment of individual or corporate performance for the fiscal year or other designated fiscal period or period of service. ARTICLE VII. ADMINISTRATION Section 7.1. Compensation Committee; Subcommittee (a) The Compensation Committee shall consist of one or more Directors, appointed by and holding office at the pleasure of the Board, none of whom shall be an Employee. Appointment of Committee members shall be effective upon acceptance of appointment. Committee members may resign at any time by delivering written notice to the Board. Vacancies in the Committee may be filled by the Board. (b) A Subcommittee consisting of one or more Committee members, appointed by and serving office at the pleasure of the Board, each of whom is both a "non-employee director" as defined by Rule 16b-3 and an "outside director" for purposes of Section 162(m) of the Code may be appointed at any time during which (i) one or more Board members qualify as both "non-employee directors" and "outside directors" and (ii) any other member of the Committee does not qualify as both a "non-employee director" and an "outside director." Section 7.2. Duties and Powers of Committee It shall be the duty of the Committee to conduct the general administration of this Plan in accordance with its provisions. The Committee and the Subcommittee shall have the power to interpret this Plan, the Stockholders' Agreements, the Option Agreements and the agreements pursuant to which Awards are granted and to adopt such rules for the administration, interpretation and application of this Plan as are consistent therewith and to interpret, amend or revoke any such rules. Notwithstanding the foregoing, the full Board, acting by a majority of its members in office, shall conduct the general administration of the Plan (i) with respect to Options granted to Non-Employee Directors and (ii) at any time when there is no Subcommittee as described in Section 7.1(b) and not all of the Committee members are "non-employee directors" as defined by Rule 16b-3, with respect to any person who is subject to Section 16 of the Exchange Act at the time such person is granted an Option. Any such grant or award under this Plan need not be the same with respect to each Participant. Any such interpretations and rules with respect to Incentive Stock Options shall be consistent with the provisions of Section 422 of the Code. In its sole discretion, the Board may at any time and from time to time exercise any and all rights and duties of the Committee under this Plan except with respect to matters which under Rule 16b-3 or Section 162(m) of the Code (as each may be applicable), or any regulations or rules issued thereunder, are required to be determined in the sole discretion of the Committee (or the Subcommittee, as applicable). 17 18 Section 7.3. Majority Rule The Committee and the Subcommittee shall each act by a majority of its members in attendance at a meeting where quorum is present or by a memorandum or other written instrument signed by all members of the Committee. Section 7.4. Compensation; Professional Assistance; Good Faith Actions Members of the Committee shall receive such compensation for their services as members as may be determined by the Board. All expenses and liabilities which members of the Committee incur in connection with the administration of this Plan shall be borne by the Company. The Committee and the Subcommittee may, with the approval of the Board, employ attorneys, consultants, accountants, appraisers, brokers or other persons. The Committee, the Company and the Company's officers and Directors shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all interpretations and determinations made by the Committee, the Board or the Subcommittee in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No members of the Committee or the Board shall be personally liable for any action, determination or interpretation made in good faith with respect to this Plan or any Award, and all members of the Committee and the Board shall be fully protected by the Company in respect of any such action, determination or interpretation. ARTICLE VIII. MISCELLANEOUS PROVISIONS Section 8.1. Not Transferable Awards under this Plan may not be sold, pledged, assigned, or transferred in any manner other than by will or the laws of descent and distribution or pursuant to a QDRO, unless and until such rights or awards have been exercised, or the shares underlying such rights or awards have been issued, and all restrictions applicable to such shares have lapsed. No Award or interest therein shall be liable for the debts, contracts or engagements of the Participant or his successors in interest or shall be subject to disposition by transfer, alienation, anticipation, pledge, encumbrance, assignment or any other means whether such disposition be voluntary or involuntary or by operation of law by judgment, levy, attachment, garnishment or any other legal or equitable proceedings (including bankruptcy), and any attempted disposition thereof shall be null and void and of no effect, except to the extent that such disposition is permitted by the preceding sentence. During the lifetime of the Participant, only he may exercise an Award (or any portion thereof) granted to him under the Plan, unless it has been disposed of pursuant to a QDRO. After the death of the Participant, any exercisable portion of an Award may, prior to the time when such portion becomes unexercisable under the Plan or the applicable Stock Option Agreement or other agreement, be exercised by his personal representative or by any person empowered to do so under the deceased Participant's will or under the then applicable laws of descent and distribution. 18 19 Notwithstanding the foregoing, vested options may be transferred for estate planning purposes subject to prior notice to the Company. Section 8.2. Amendment, Suspension or Termination of this Plan Except as otherwise provided in this Section 8.2, this Plan may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board or the Committee. However, without approval of the Company's stockholders given within twelve months before or after the action by the Board or the Committee, no action of the Board or the Committee may, except as provided in Section 8.3, increase the limits imposed in Section 2.1 on the maximum number of shares which may be issued under this Plan, and no action of the Board or the Committee may be taken that would otherwise require stockholder approval as a matter of applicable law, regulation or rule. No amendment, suspension or termination of this Plan shall, without the consent of the Participant alter or impair any rights or obligations under any Awards theretofore granted, unless the Award itself otherwise expressly so provides. No Award may be granted during any period of suspension or after termination of this Plan, and in no event may any Incentive Stock Option be granted under this Plan after the first to occur of the following events: (a) The expiration of ten years from the date the Plan is adopted by the Board; or (b) The expiration of ten years from the date the Plan is approved by the Company's stockholders under Section 8.4. Section 8.3. Changes in Common Stock or Assets of the Company, Acquisition or Liquidation of the Company and Other Corporate Events (a) Subject to Section 8.3(d), in the event that the Committee (or the Board, in the case of Options granted to Non-Employee Directors) determines that any of the following events (other than those constituting a Change in Control, which will be governed by Section 8.3(e)): a dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, reclassification, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, liquidation, dissolution, or sale, transfer, exchange or other disposition of all or substantially all of the assets of the Company, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event, in the Committee's sole discretion (or in the case of Options granted to Non-Employee Directors, the Board's sole discretion), affects the Common Stock such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to an Award, then the Committee (or the Board, in the case of Options granted to Non-Employee Directors) shall, in such manner as it may deem equitable, adjust any or all of: (i) The number and kind of shares of Common Stock (or other securities or property) with respect to which Awards may be granted (including, but not 19 20 limited to, adjustments of the limitations in Section 2.1 on the maximum number and kind of shares which may be issued); (ii) The number and kind of shares of Common Stock (or other securities or property) subject to outstanding Awards; and (iii) The grant or exercise price with respect to any Option. (b) Subject to Section 8.3(d) and Section 8.3(e), in the event of any transaction or event described in Section 8.3(a) or in the event of a Change in Control or any unusual or nonrecurring transactions or events affecting the Company, any affiliate of the Company, or the financial statements of the Company or any affiliate, or of changes in applicable laws, regulations, or accounting principles, the Committee (or the Board, in the case of Options granted to Non-Employee Directors) in its discretion is hereby authorized to take any one or more of the following actions whenever the Committee (or the Board, in the case of Options granted to Non-Employee Directors) determines that such action is appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan or with respect to any Option, other award under this Plan, to facilitate such transactions or events or to give effect to such changes in laws, regulations or principles: (i) In its sole discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Options granted to Non-Employee Directors) may provide, either by the terms of the agreement or by action taken prior to the occurrence of such transaction or event and either automatically or upon the request of the Participant, for either the purchase of any such Award for an amount of cash equal to the amount that could have been attained upon the exercise of such Award had such Award been currently exercisable or payable or fully vested or the replacement of such Award with other rights or property selected by the Committee (or the Board, in the case of Options granted to Non-Employee Directors) in its sole discretion; (ii) In its sole discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Options granted to Non-Employee Directors) may provide, either by the terms of such Award or by action taken prior to the occurrence of such transaction or event, that for a specified period of time prior to such transaction or event, such Award shall be exercisable as to all shares covered thereby, notwithstanding anything to the contrary in (A) Section 4.4 or (B) the provisions of such Award; (iii) In its sole discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Options granted to Non-Employee Directors) may provide, either by the terms of such Award or by action taken prior to the occurrence of such transaction or event, that upon such event, such Award be assumed by the successor or survivor corporation, or a parent or subsidiary thereof, or shall be 20 21 substituted for by similar Awards covering the stock of the successor or survivor corporation, or a parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices; and (iv) In its sole discretion, and on such terms and conditions as it deems appropriate, the Committee (or the Board, in the case of Options granted to Non-Employee Directors) may make adjustments in the number and type of shares of Common Stock (or other securities or property) subject to outstanding Awards and/or in the terms and conditions of (including the grant or exercise price), and the criteria included in, Awards which may be granted in the future. (v) In its sole discretion, and on such terms and conditions as it deems appropriate, the Committee may provide by the terms of a Restricted Stock award or by action taken prior to the occurrence of such event that, for a specified period of time prior to such event, the restrictions imposed under a Restricted Stock Agreement upon some or all shares of Restricted Stock may be terminated. (c) Subject to Section 8.3(d) and 8.8, the Committee (or the Board, in the case of Options granted to Non-Employee Directors) may, in its discretion, include such further provisions and limitations in any Award agreement or certificate, as it may deem equitable and in the best interests of the Company. (d) To the extent deemed necessary or advisable by the Committee, with respect to any Award granted to any Section 162(m) Participant that is intended to qualify as performance-based compensation under Section 162(m)(4)(C), no adjustment or action described in this Section 8.3(a)-(d) shall be authorized to the extent that such adjustment or action would cause such Award to fail to so qualify under Section 162(m)(4)(C) or any successor provision thereto. The Committee reserves the right to make an Award to the executives of the Company that may not qualify under Section 162(m) as deductible compensation. Furthermore, no such adjustment or action shall be authorized to the extent such adjustment or action would result in short-swing profits liability under Section 16 or violate the exemptive conditions of Rule 16b-3 unless the Committee (or the Board, in the case of Options granted to Non-Employee Directors) determines that the Option or other award is not to comply with such exemptive conditions. The number of shares of Common Stock subject to any Award shall always be rounded to the next whole number. (e) Notwithstanding any other provision of this Plan, in addition to whatever actions are taken by the Committee or by the Board, as applicable under Section 8.3(b) which are not inconsistent with the following, in the event of a Change in Control: (i) Except as otherwise specifically provided in a Stock Option Agreement, each Option granted or awarded hereunder shall automatically become exercisable as to all shares covered thereby simultaneously with the consummation of such Change in Control, notwithstanding anything to the contrary in Section 4.4, and 21 22 (ii) Except as otherwise specifically provided in a Restricted Stock Agreement, the Restricted Stock shall become fully vested and the restrictions included in any Restricted Stock granted or awarded hereunder shall be deemed rescinded, terminated and all of such Restricted Stock shall be immediately released without restriction, except as to applicable payment therefor, simultaneously with the consummation of such Change in Control notwithstanding anything to the contrary in Article VI. However, any Award granted to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive Rule. To the extent permitted by applicable law, an Award granted hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive Rule. Section 8.4. Approval of Plan by Stockholders This Plan will be submitted for the approval of the Company's stockholders within twelve months after the date of the Board's initial adoption of this Plan. Awards may be granted prior to such stockholder approval, provided that such Awards shall not vest or be exercisable prior to the time when this Plan is approved by the stockholders, and provided further that if such approval has not been obtained at the end of said twelve-month period all Awards previously granted under this Plan shall thereupon be canceled and become null and void. Section 8.5. Tax Withholding The Company shall be entitled to require payment in cash or deduction from other compensation payable to each Participant of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting, exercise or payment of any Award. The Committee (or the Board, in the case of Options granted to Non-Employee Directors) may in its discretion and in satisfaction of the foregoing requirement allow such Participant to elect to have the Company withhold shares of Common Stock otherwise issuable under such Award (or allow the return of shares of Common Stock) having a Fair Market Value equal to the sums required to be withheld. Section 8.6. Loans The Committee may, in its discretion, extend one or more loans to Employees in connection with the exercise or receipt of an Award granted under this Plan. The terms and conditions of any such loan shall be set by the Committee. Section 8.7. Forfeiture Provisions Pursuant to its general authority to determine the terms and conditions applicable to awards under the Plan, the Committee (or the Board, in the case of Options granted to Non-Employee Directors) shall have the right (to the extent consistent with the applicable exemptive conditions of Rule 16b-3) to provide, in the terms of Options or other awards made under the 22 23 Plan, or to require the recipient to agree by separate written instrument, that (i) any proceeds, gains or other economic benefit actually or constructively received by the recipient upon any receipt or exercise of the award, or upon the receipt or resale of any Common Stock underlying such award, must be paid to the Company, and (ii) the award shall terminate and any unexercised portion of such award (whether or not vested) shall be forfeited, if (a) a Termination of Employment, Termination of Consultancy or Termination of Directorship occurs at any time, prior to a specified date, or within a specified time period following receipt or exercise of the award, or (b) the recipient at any time, or during a specified time period, engages in any activity in competition with the Company, or which is inimical, contrary or harmful to the interests of the Company, as further defined by the Committee (or the Board, as applicable). Section 8.8. Limitations Applicable to Section 16 Persons and Performance-Based Compensation Notwithstanding any other provision of this Plan (other than Section 8.3(e)), this Plan and any Award granted to any individual who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, the Plan and Awards granted hereunder shall be deemed amended to the extent necessary to conform to such applicable exemptive rule. Furthermore, notwithstanding any other provision of this Plan (other than Section 8.3(e)), to the extent deemed necessary or advisable by the Committee, any Option or Restricted Stock which is granted to a Section 162(m) Participant and is intended to qualify as performance-based compensation as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as performance-based compensation as described in Section 162(m)(4)(C) of the Code, and this Plan shall be deemed amended to the extent necessary to conform to such requirements. Section 8.9. Effect of Plan Upon Options and Compensation Plans. The adoption of this Plan shall not affect any other compensation or incentive plans in effect for the Company or any Subsidiary. Nothing in this Plan shall be construed to limit the right of the Company (i) to establish any other forms of incentives or compensation for Employees, Directors or Consultants of the Company or any Subsidiary or (ii) to grant or assume Options or other rights or awards otherwise than under this Plan in connection with any proper corporate purpose including but not by way of limitation, the grant or assumption of Options in connection with the acquisition by purchase, lease, merger, consolidation or otherwise, of the business, stock or assets of any corporation, partnership, limited liability company, firm or association. Section 8.10. Compliance with Laws This Plan, the granting and vesting of Awards under this Plan and the issuance and delivery of shares of Common Stock and the payment of money under this Plan or under Awards granted hereunder are subject to compliance with all applicable federal and state laws, rules and regulations (including but not limited to state and federal securities law and federal margin requirements) and to such approvals by any listing, regulatory or governmental authority as may, in the opinion of counsel for the Company, be necessary or advisable in connection therewith. 23 24 Any securities delivered under this Plan shall be subject to such restrictions, and the person acquiring such securities shall, if requested by the Company, provide such assurances and representations to the Company as the Company may deem necessary or desirable to assure compliance with all applicable legal requirements. To the extent permitted by applicable law, the Plan, or Awards granted hereunder shall be deemed amended to the extent necessary to conform to such laws, rules and regulations. Section 8.11 Titles Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Plan. Section 8.12. Governing Law This Plan and any agreements hereunder shall be administered, interpreted and enforced under the internal laws of the State of Michigan without regard to conflicts of laws thereof. 24 EX-6.3 9 k62810ex6-3.txt FORM OF STOCK OPTION AGREEMENT 1 EXHIBIT 6.3 April 26, 2001 To: [Employee Name] RE: NON-QUALIFIED STOCK OPTIONS The Board of Directors (the "Board") of SolutionNet International, Inc., or, as applicable, the committee (the "Committee") designated by the Board for the purpose of administering The 2001 Equity Participation Plan of SolutionNet International, Inc. (the "Plan"), hereby grants you (the "Grantee") a non-qualified stock option (each an "Option"), pursuant to the Plan, a copy of which is attached hereto, in consideration for your rendering faithful and efficient service to the Company and/or any subsidiary. Certain capitalized terms used in this agreement (the "Agreement") are defined in paragraph 18 hereof. Certain capitalized terms used in this Agreement which are not defined herein have the meanings indicated for such terms in Article I of the Plan. As used herein references to the "Company" refer to SolutionNet International, Inc. or to SolutionNet International, Inc., any of its subsidiaries and/or any of the subsidiaries of such subsidiaries, as applicable. 1. STOCK OPTION. The Option entitles the Grantee (and such Grantee's permitted transferee as described in paragraph 3(a) below) (each such person, a "Purchaser") to purchase up to the number of shares of the Company's Common Stock, par value $.001 per share (the "Option Shares"), specified below opposite such Grantee's name, at an option price of $0.27 per share, the Fair Market Value of the Company's Common Stock (the "Option Price"), subject to the terms and conditions of this Agreement: GRANTEE NUMBER OF OPTION SHARES [Employee Name] [Option Shares] 2. ADDITIONAL TERMS. The Options are also subject to the following provisions: (a) EXERCISABILITY. Each Option may be exercised and Option Shares may be purchased at any time and from time to time after the execution of this Agreement, subject to the vesting limitations imposed by paragraph 2(b) of this Agreement. The Option Price for Option Shares and, as applicable, taxes shall be paid in full in cash or by check by the Purchaser of such Option Shares prior to the time of the delivery of Option Shares, or, at the written request of such Purchaser, the Committee may (but need not) permit payment to be made by (i) delivery to the Company of outstanding Shares, (ii) retention by the Company of one or more of such Option Shares or (iii) any combination of cash, check, such Purchaser's delivery of outstanding Shares and retention by the Company of one or more of such Option Shares. Option Shares acquired by Purchaser under this Agreement are hereinafter referred to as the "Exercise Shares." 1 2 (b) VESTING/EXERCISABILITY. (i) Purchaser may only exercise the Option to purchase Option Shares to the extent that such Option has vested and become exercisable with respect to such Option Shares. Except as otherwise provided in Paragraph 2(b)(ii) below, the Option Shares will vest and become exercisable in accordance with the following schedule, if as of each such date the Grantee is still employed by the Company: CUMULATIVE PERCENTAGE OF OPTION SHARES VESTED DATE AND EXERCISABLE October 27, 2001 33.33% October 27, 2002 33.33% October 27, 2003 33.33% Option Shares which have become vested and exercisable are referred to herein as "Vested Shares" and all other Option Shares are referred to herein as "Unvested Shares." (ii) Upon the occurrence of a Change in Control of the Company, each Option shall vest and all Unvested Shares shall become Vested Shares if, but only if, the Grantee thereof is employed by the Company on the date of such occurrence. (c) PROCEDURE FOR EXERCISE. Subject to the vesting limitations of Paragraph 2(b) above, a Purchaser may exercise all or any portion of the Option, so long as it is valid and outstanding, at any time and from time to time prior to its termination by delivering written notice to the Company as provided in Section 5.2 of the Plan and written acknowledgment substantially in the form of Exhibit A hereto that such Purchaser has read, and has been afforded an opportunity to ask questions of the Company's management regarding all financial and other information provided to Purchaser concerning the Company, together with payment of the Option Price times the number of Option Shares purchased. Subject to Section 5.2 and 5.3 of the Plan, at the time of exercise, Purchaser will be entitled to review all public financial and other information regarding the Company it believes necessary to enable such Purchaser to make an informed investment decision. 3. TRANSFERABILITY OF THE OPTIONS. (a) The Grantee shall not sell, transfer, assign, pledge or otherwise dispose of (a "Transfer") any interest in any Option with respect to any Unvested Shares. Any Option with respect to any Vested Shares of the Grantee shall not be Transferred other than for estate planning purposes and after notice of such transfer to the Company or as a result of the death of such Grantee, testate or intestate, and the restrictions herein shall apply to any Transfer by any such permitted transferee. (b) The Company may assign its rights and delegate its duties under this Agreement. 2 3 4. TRANSFERABILITY OF EXERCISE SHARES. (a) No Purchaser shall Transfer any Exercise Shares or any interest therein except in accordance with the provisions of this Agreement. (b) No holder of any Exercise Shares may Transfer any such shares (except pursuant to an effective registration statement and/or re-offer prospectus, as applicable, under the Securities Act) without first delivering to the Company an opinion of counsel (reasonably acceptable in form and substance to the Company) that neither registration nor qualification under the Securities Act and applicable state securities laws is required in connection with such transfer. 5. CONFORMITY WITH PLAN. The Options are intended to conform in all respects with, and are subject to all applicable provisions of, the Plan, which is incorporated herein by reference. Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan, except as modified by Paragraph 2(b)(ii) and Paragraph 24 of this Agreement. By executing this Agreement, the Grantee acknowledges receipt of the Plan and agrees to be bound by all of the other terms of the Plan. 6. EMPLOYMENT. If Grantee and the Company have not entered into a written employment agreement, then notwithstanding any contrary oral representations or promises made to the Grantee prior to or after the date hereof, the Grantee and the Company acknowledge that such Grantee's employment with the Company is and will continue to be subject to the willingness of each to continue such employment and nothing set forth herein or otherwise confers any right or obligation on such Grantee to continue in the employ of the Company or shall affect in any way such Grantee's right or the right of the Company to terminate such Grantee's employment at any time, for any reason, with or without cause. If Grantee and the Company have entered into a written employment agreement, however, then nothing set forth herein or otherwise modifies such employment agreement including, but not limited to, the terms of such employment or the right of the Company to terminate Grantee as provided in such employment agreement. 7. ADJUSTMENT. The Board or Committee shall make appropriate and proportionate adjustments to the terms of the Options to reflect any stock dividend, stock split, combination or exchange of shares, merger, consolidation or other change in the capitalization of the Company which the Board or Committee determines to be similar, in its substantive effect upon the Plan or the Options, to any of the changes expressly indicated in this sentence, as provided in Section 8.3 of the Plan. The Board or Committee may (but shall not be required to) make any appropriate adjustment to the terms of the Options to reflect any spin-off, spin-out or other distribution of assets to shareholders or any acquisition of the Company's stock or assets or other change which the Board or Committee determines to be similar, in its substantive effect upon the Plan or the Options, to any of the changes expressly indicated in this sentence, as provided in Section 8.3 of the Plan. In the event of any adjustments described in the preceding two sentences, any and all new, substituted, or additional securities or other property to which any Purchaser is entitled by reason of the Option shall be immediately subject to such Option and be included in the word "Option Shares" for all purposes of such Option with the same force and effect as the Option Shares presently subject to such Option. After each such event, the number of Option Shares and/or the Option Price shall be appropriately adjusted. 3 4 8. SHARE LEGEND. Unless the Exercise Shares are the subject of an effective registration statement and/or re-offer prospectus, as applicable, all certificates representing any Exercise Shares subject to the provisions of this Agreement shall have endorsed thereon the following legend: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY ISSUED AS APRIL 26, 2001, HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN AN EMPLOYEE STOCK OPTION AGREEMENT BETWEEN THE COMPANY AND CERTAIN EMPLOYEES OF THE COMPANY DATED APRIL 26, 2001. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE." 9. INVESTMENT REPRESENTATIONS. Upon the purchase of Option Shares hereunder, the Purchaser thereof shall execute and deliver to the Company a letter, substantially in the form attached hereto as Exhibit A, confirming such Purchaser's investment representations. 10. EXPIRATION. Subject to Sections 5.3 of the Plan, the Grantee's Option shall expire (a) with respect to Vested Shares, at the earlier of (i) a determination by the Committee that the Grantee has been grossly negligent in the performance of his duties to the Company,(ii) Termination for Cause of such Grantee's employment with the Company or (iii) at 5:00 p.m., Detroit time, on the tenth anniversary of the date hereof and (b) with respect to Unvested Shares, upon the termination of such Grantee's employment with the Company. Further, notwithstanding the above, with respect to Vested Shares, if the termination of Grantee's employment with the Company is due to death, disability or Termination Without Cause, then the Option shall expire on the earlier of (i) the 90th day following the termination of Grantee's employment or (ii) until 5:00 p.m., Detroit time, on the tenth anniversary of the date hereof. Further, notwithstanding the above, with respect to Vested Shares, if the Company discovers after termination of Grantee's employment, that Grantee engaged in conduct that would have justified Termination for Cause, Grantee's Option shall expire immediately on the date of such discovery and any proceeds, gains or other economic benefit actually or constructively received by Grantee upon any exercise of the Option or upon the receipt or resale of any Common Stock underlying the Option, must and shall be paid to the Company. 4 5 6 11. THE COMPANY'S INTELLECTUAL PROPERTY RIGHTS; CONFIDENTIALITY. In the course of Grantee's employment with the Company, the Grantee may have access to information or materials that are considered trade secret, confidential and/or proprietary by the Company ("Information"). Information permits the development and commercialization of competitive and unique products and services, and is protected by the Company from unauthorized use and disclosure. Information includes, but is not limited to, technical know-how, procedures, technical specifications, designs, software (both object code and source code), results of testing, programmer documentation, protocols, processes, compilations of data, strategic plans, sales and marketing plans, product plans, customer information, supplier information, financial information and proposed agreements. Information also includes all written materials identified in writing as "Confidential" or "Proprietary" or such similar proprietary legend, and oral information disclosed in connection with the Information. Information also includes "Workproduct" identified and defined in paragraph 12, below. This Information relates to the heart of the Company's operation and is protected from unauthorized use and disclosure. It is important for the Company, and for the entities with whom it has contractual relationships, that the Information be maintained in confidence and only be disclosed at the direction of the Company's officers and authorized agents. The Grantee agrees that the Grantee will keep Information of the Company confidential. The Grantee agrees that, unless otherwise directed by the Company, during and after Grantee's employment the Grantee will not: (1) take, retain or use Information or Company materials for Grantee's own benefit; (2) disclose Information to any other entity or unauthorized person without the written permission from a Company officer; (3) delete, encrypt, password protect, or retain electronic files containing Information or Company materials (including emails and attachments); or (4) take any other action that impairs, restricts, limits, or impedes the Company's ability to have full access to and use of its Information, Workproduct and materials. In addition, upon termination of Grantee's employment with the Company, the Grantee agree to return to the Company all Information, Workproduct and Company materials, and otherwise fully cooperate with and assist the Company in ensuring the Company's ability to have full access to and use of its Information or materials. Such cooperation and assistance may include, but is not limited to, removing any password protection, encryption or other proprietary format on Company Information and materials. The Grantee has no obligation to maintain as confidential any Information that is or becomes entirely in the public domain, or is known to the Grantee prior to disclosure by the Company as evidenced by written, dated records in Grantee's possession, or is received lawfully by the Grantee without the breach of any obligation of confidentiality owed to the Company. The fact that discrete elements of Company confidential information may be in the public domain does not, by itself, remove from the protections of this Agreement any Information combining such discrete elements with other information and technology. The Grantee may also have access to information that is considered confidential by third parties with whom the Company does business, such as customers, suppliers, and consultants ("Clients"). Such Client information shall be maintained as confidential in accordance with the procedures identified in this paragraph 11, all applicable laws, and any contractual confidentiality obligations imposed by the Company's Clients. The Grantee also shall 5 7 comply with any intellectual property provisions contained in any of the Company's agreements with its Clients. The Company understands that its current employees may have had access to the trade secrets and proprietary information of third parties (that is, persons or companies other than the Company) during their previous employment. These other trade secrets may be owned by the former employers or by clients with whom those former employers did business. The Company does not permit its employees to disclose, use or incorporate into the Company's products or services, the unlicensed trade secrets or proprietary information of third parties. The Grantee acknowledges the foregoing, and represents and warrants that the Grantee will not disclose to the Company, or incorporate into the Company Information, any trade secrets or proprietary information of third parties. The Grantee agrees to indemnify and hold harmless the Company and agrees to pay all damages, costs and fees (including attorneys' fees) arising out of any claims by third parties relating to a breach or alleged breach of the warranties and representations included in this paragraph 11. The confidentiality provisions of this Agreement shall survive termination of the employment relationship with the Company and shall survive for so long a period of time as the Information and/or Workproduct is maintained by the Company as confidential. 12. DISCLOSURE AND OWNERSHIP OF WORKPRODUCT AND INFORMATION. The Grantee agrees to disclose promptly to the Company all ideas, inventions (whether patentable or not), improvements, copyrightable works of original authorship (including but not limited to computer programs, compilations of information, generation of data, graphic works, audio-visual materials, technical reports and the like), trademarks, know-how, trade secrets, processes and other intellectual property, developed or discovered by the Grantee in the course of Grantee's employment relating to the business of the Company, or to the prospective business of the Company, or which utilizes the Company Information or staff services (collectively, "Workproduct"). Workproduct created by the Grantee within the scope of Grantee's employment, on Company time, or using Company resources (including but not limited to facilities, staff, Information, time and funding), belongs to the Company and is not owned by the Grantee individually. The Grantee agree that all works of original authorship created during Grantee's employment are "works made for hire" as that term is used in connection with the U.S. Copyright Act. To the extent that, by operation of law, the Grantee retains any intellectual property rights in any Workproduct, the Grantee hereby assigns to the Company all right, title and interest in all such Workproduct, including copyrights, patents, trade secrets, trademarks and know-how. The Grantee agrees to cooperate with the Company, at the Company's expense, in the protection of the Company Information and the securing of the Company's proprietary rights, including signing any documents necessary to secure such rights, whether during or after Grantee's employment with the Company, and regardless of the fact of any employment with a new company. 6 8 13. NONSOLICITATION OF COMPANY EMPLOYEES. Grantee acknowledges that the relationships between the Company and its employees are valuable assets of the Company. During Grantee's employment and for a period of one (1) year after the termination of Grantee's employment, Grantee agrees not to hire, use, or contract with (or to solicit for hire, use or to contract with) any individual(s) employed by the Company, or who left their employment at the Company within ninety (90) days after Grantee's last day of employment (collectively, "Staff"). During Grantee's employment and for a period of one (1) year after the termination of Grantee's employment, Grantee agrees not to contact Staff (or have someone else contact Staff) for the purpose of terminating their relationship with the Company or offering employment opportunities outside of the Company. 14. NONSOLICITATION OF COMPANY CUSTOMERS. Grantee acknowledges that the relationships between the Company and its customers are valuable assets of the Company. During Grantee's employment and for a period of one (1) year after the termination of Grantee's employment, Grantee agrees that Grantee will not contact (or have someone else contact) any then-current Company customer, or prospective customer with whom the Company is negotiating or preparing a proposal for products or services (collectively, "Customers") for the purposes of: (1) inducing them to terminate their business relationship with the Company, (2) discouraging them from doing business with the Company, or (3) offering products or services that are similar to or competitive with those of the Company. "Contact" with any Customer includes responding to contact initiated by the Customer. These prohibitions cover solicitations or contact by Grantee whether on Grantee's own behalf, as an employee of a third party, as an independent contractor, as a consultant, or any other status. 15. NON-COMPETITION. Grantee agrees that during Grantee's employment and for a period of one (1) year after the termination of Grantee's employment, Grantee will not provide, either directly or indirectly, any services to any individual or entity whose business includes providing any of the following Prohibited Services for others if Grantee previously provided those services to the Company and such services involve Information. This non-competition restriction is limited to individuals and entities that are located in, or provide services in, Singapore, other applicable country and/or the state or states of the United States in which Grantee worked or provided services for the Company during Grantee's employment. For the purposes of this Agreement, "Prohibited Services" shall mean the following: (1) providing e-business solutions and services (including, but not limited to, Enet Internet Banking, Intelligent Data Mapper, E-Busines kits and Electronic Medical Information; and (2) providing end-user Internet technologies, ERP solutions, Multimedia applications, technology and system integration. This non-competition restriction covers services provided by Grantee whether as an employee for a Customer, employee for a third party, independent contractor, consultant, or any other status. 16. ACKNOWLEDGMENT. Grantee acknowledges that, due to Grantee's education and job skill, Grantee's adherence to the terms of Sections 11 through 15 above will not deprive Grantee of the opportunity to obtain gainful employment with other companies serving different product or services markets or customers that are not Customers of the Company, after the termination of Grantee's employment with the Company. 17. ENFORCEMENT OF AGREEMENT; INJUNCTIVE RELIEF; ATTORNEYS' FEES AND EXPENSES. The Grantee acknowledges that violation of this Agreement will cause immediate 7 9 and irreparable damage to the Company, entitling it to injunctive relief. The Grantee specifically consents to the issuance of temporary, preliminary, and permanent injunctive relief to enforce the terms of this Agreement. In addition to injunctive relief, the Company is entitled to all money damages available under the law. If the Grantee violates this Agreement, in addition to all other remedies available to the Company at law, in equity, and under contract, the Grantee agrees that the Grantee is obligated to pay all the Company's costs of enforcement of this Agreement, including attorneys' fees and expenses, and that the Company is not obligated to issue to Grantee any shares subject to the option upon exercise of the option. 18. DEFINITIONS. "DISABILITY" means permanent and total disability as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended. "FULLY DILUTED BASIS" means, without duplication, (i) all shares of Common Stock outstanding at the time of determination plus (ii) all shares of Common Stock issuable upon conversion of any convertible securities or the exercise of any option, warrant or similar right, whether or not such conversion, right or option, warrant or similar right is then exercisable. "TERMINATION FOR CAUSE" means termination by the Company of Grantee's employment because of Grantee's personal dishonesty, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, the violation of any law, rule or regulation (other than minor traffic violations or similar offenses), or breach or threatened or attempted breach of Paragraphs 11, 12, 13, 14 or 15 hereof. "TERMINATION WITHOUT CAUSE" means any termination by the Company of Grantee's employment which is not a Termination for Cause, including, but not limited to, a voluntary quit by Grantee. 19. FURTHER ACTIONS. The parties agree to execute such further instruments and to take such further actions as may reasonably be required to carry out the intent of this Agreement. 20. SEVERABILITY. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be prohibited by or invalid under applicable law, such provision will be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 21. COUNTERPARTS. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all such counterparts taken together will constitute one and the same Agreement. 22. NOTICES. Any notices, consent, approval or other communications given pursuant to the provision of this Agreement shall be in writing and shall be (a) mailed by certified mail or registered mail, return receipt requested, postage prepaid, or (b) delivered by a nationally recognized overnight courier, U.S. Post Office Express Mail, or similar overnight courier, which delivers only upon signed receipt of the addressee, and addressed as follows: 8 10 [Employee Name] [Address 1] [City, State ZipCode] SolutionNet International, Inc. 31700 West 13 Mile Road, Suite 201 Farmington Hills, MI 48334 Attention: President and CEO The time of giving of any notice shall be the time of delivery by the applicable overnight courier or with respect to registered or certified mail, the time of receipt thereof by the addressee or any agent of the addressee, except that in the event the addressee or such agent of the addressee shall refuse to receive any notice given by registered mail or certified mail as above provided or there shall be no person available at the time of the delivery thereof to receive such notice, the time of the giving of such notice shall be the time of such refusal or the time of such delivery, as the case may be. Any party hereto may, by giving five (5) days written notice to the other party hereto, designate any other address in substitution of the foregoing address to which notice shall be given. 23. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of the Company and, subject to the restrictions on transfer herein set forth, be binding upon Grantee's heirs, executors, administrators, successors and assigns and inure to the benefit of Grantee's heirs, executors, administrators, successors and permitted assigns. 24. GOVERNING LAW; FORUM SELECTION. This Agreement and all documents contemplated hereby, and all remedies in connection therewith and all questions or transactions relating thereto, shall be construed in accordance with and governed by the laws of the State of Michigan. The parties agree that any litigation in relation to this Agreement and/or Grantee's employment shall be exclusively initiated and maintained in the Circuit Court of the County of Oakland, Michigan, or the U.S. District Court for the Eastern District of Michigan, Southern Division. The parties hereby irrevocably submit to the personal jurisdiction and venue in such courts. The parties agree that these courts are convenient forums for any such litigation. 25. ENTIRE AGREEMENT. This Agreement and the Plan constitute the entire understanding between the Grantee and the Company with respect to the Option granted hereunder. 26. TAX WITHHOLDING. The Company shall be entitled to require payment in cash or deduction from other compensation payable to Grantee of any sums required by federal, state or local tax law to be withheld with respect to the issuance, vesting, exercise or payment of the Option. The Committee or the Board may in its discretion and in satisfaction of the foregoing requirement allow Grantee to elect to have the Company withhold shares of Common Stock otherwise issuable under such Option (or allow the return of shares of Common Stock) having a Fair Market Value equal to the sums required to be withheld. 9 11 Please sign as Grantee in the space provided below to confirm your understanding and acceptance of the agreements contained in this letter. Very truly yours, SOLUTIONNET INTERNATIONAL, INC. By: --------------------------------------- Suresh Venkatachari Its: President and CEO THE UNDERSIGNED hereby acknowledges having read this Agreement, the Plan, and the other enclosures to this Agreement, and hereby agrees to be bound by all provisions set forth herein and in the Plan. GRANTEE ------------------------------------------ [Employee Name] 10 12 EXHIBIT A TO EMPLOYEE STOCK OPTION AGREEMENT INVESTMENT LETTER SolutionNet International, Inc. 1305 Stephenson Highway Troy, Michigan 48083 Attention: President and CEO Gentlemen: This is to inform you that the undersigned (the "Purchaser") hereby exercises the option granted to the Purchaser under The 2001 Equity Participation Plan of SolutionNet International, Inc. with respect to ___ shares of the Common Stock, par value $.001 per share (the "Securities") of SolutionNet International, Inc., a Minnesota corporation (the "Company"). PAYMENT ALTERNATIVES [CHECK APPLICABLE BOX AND COMPLETE ANY BLANKS]: - Enclosed is my check made payable to SolutionNet International, Inc. in the amount of $____________ in full payment of the exercise price per share, and, as applicable, taxes. - I have authorized my Broker, _______________________, to pay SolutionNet International, Inc., the exercise price per share, and, as applicable, taxes from my brokerage account. - Enclosed are ___ shares of the Securities in full payment of the exercise price per share, and, as applicable, taxes. CERTIFICATE ALTERNATIVES [CHECK APPLICABLE BOX AND COMPLETE ANY BLANKS]: - Issue the certificate in my name. - Issue the certificate in "street" name, as follows: ____________________. [Insert Name] 11 13 MAILING ALTERNATIVES [CHECK APPLICABLE BOX AND COMPLETE ANY BLANKS]: - Mail to my residence address. - Mail to: ------------------------------ [Insert Name of Broker] For the Benefit of [Employee Name] ------------------------------ ------------------------------ ATTN: ------------------------- [Insert Name and Address Above] In connection with the Purchaser's proposed purchase of the Securities, Purchaser hereby agrees, represents and warrants as follows: 1. INFORMATION CONCERNING COMPANY. The Purchaser represents and warrants that Purchaser has heretofore discussed the Company and its plans, operations and financial condition with its officers and received all such information as Purchaser deems necessary and appropriate to enable Purchaser to evaluate the financial risk inherent in making an investment in the Securities of the Company, and the Purchaser further represents and warrants that Purchaser has received satisfactory and complete information concerning the business and financial condition of the Company in response to all inquiries in respect thereof. 2. ECONOMIC RISK. The Purchaser represents and warrants that Purchaser is sophisticated in financial matters and is able to evaluate the risks and benefits of the investment in the Securities, Purchaser realizes that Purchaser's purchase of the Securities will be a highly speculative investment and that Purchaser is able, without impairing Purchaser's financial condition, to hold the Securities for an indefinite period of time and to suffer a complete loss on Purchaser's investment, should that be the case. 12 14 DATED: __________________ Very truly yours, [Employee Name] [Address 1] [City], [State] [Zip Code] Social Security Number: [Social Security] ACCEPTED AND AGREED TO: SOLUTIONNET INTERNATIONAL, INC. By:______________________________________ Its: 13 EX-6.4 10 k62810ex6-4.txt EMPLOYMENT AGREEMENT - SURESH VENKATACHARI 1 EXHIBIT 6.4 EMPLOYMENT AGREEMENT THIS AGREEMENT IS MADE AS OF THE 1ST DAY OF MAY, 2001 (THE "EFFECTIVE DATE"), BETWEEN SOLUTIONNET INTERNATIONAL, INC., A MINNESOTA CORPORATION, THE ADDRESS OF WHICH IS 1594 CENTRE POINTE DRIVE, MILPITAS, CA 95035 ("CORPORATION"), AND SURESH VENKATACHARI WHOSE ADDRESS IS NO. 1 SHENTON WAY, NUMBER 22-06/09, SINGAPORE 068803 ("EMPLOYEE"). R E C I T A L S: CORPORATION IS ENGAGED IN THE BUSINESS OF DEVELOPING AND MARKETING PROPRIETARY MULTI-APPLICATION INTERNET INFORMATION TECHNOLOGY SOLUTIONS. EMPLOYEE IS CURRENTLY SERVING AS CHAIRMAN OF THE BOARD, PRESIDENT, CHIEF EXECUTIVE OFFICER, TREASURER AND SECRETARY OF CORPORATION AND ITS SUBSIDIARIES. CORPORATION AND EMPLOYEE ARE MUTUALLY DESIROUS OF EXTENDING EMPLOYEE'S TENURE FOR A 2 YEAR PERIOD EFFECTIVE MAY 1, 2001. THE PARTIES ARE DESIROUS OF ENTERING INTO A CONTRACT OF EMPLOYMENT ON THE TERMS AND CONDITIONS SET FORTH BELOW. THEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. ENGAGEMENT OF EMPLOYEE. CORPORATION HEREBY EMPLOYS EMPLOYEE FOR THE TERM OF THIS AGREEMENT AS SET FORTH IN PARAGRAPH 4 AND, DURING THE TERM OF THIS AGREEMENT, EMPLOYEE AGREES TO PROVIDE THE FOLLOWING SERVICES TO CORPORATION ON THE TERMS CONTAINED IN THIS AGREEMENT: EMPLOYEE SHALL HOLD THE TITLE OF CHAIRMAN OF THE BOARD, PRESIDENT, CHIEF EXECUTIVE OFFICER, TREASURER AND SECRETARY AND SHALL BE RESPONSIBLE FOR PROVIDING THE SERVICES CUSTOMARILY REQUIRED OF A CHAIRMAN OF THE BOARD, PRESIDENT, CHIEF EXECUTIVE OFFICER, TREASURER AND SECRETARY, INCLUDING, BUT NOT LIMITED TO, DIRECTION OF BOTH CORPORATION'S DAY-TO-DAY OPERATIONS, FINANCIAL MATTERS AND ITS SALES AND MARKETING ACTIVITIES. EMPLOYEE SHALL DEVOTE HIS FULL TIME AND ATTENTION TO DISCHARGING THE DUTIES OF HIS POSITIONS AND SHALL REPORT TO CORPORATION'S BOARD OF DIRECTORS. FOR THE PURPOSES HEREOF, ALL REFERENCES TO THE TERM "CORPORATION" ARE UNDERSTOOD TO ENCOMPASS SOLUTIONNET INTERNATIONAL, INC., A MINNESOTA CORPORATION AND ITS VARIOUS SUBSIDIARIES; PROVIDED THAT IT IS UNDERSTOOD AND AGREED THAT EMPLOYEE WILL BE ON THE PAYROLL OF SOLUTIONNET (ASIA PACIFIC) PTE LTD SINGAPORE. 2 2. BASE COMPENSATION. A. BASE SALARY. DURING THE PERIOD OF MAY 1, 2001 TO APRIL 30, 2002, CORPORATION SHALL PAY TO EMPLOYEE A BASE SALARY OF ONE HUNDRED THOUSAND ($100,000) DOLLARS (U.S.). DURING THE PERIOD OF MAY 1, 2002 TO APRIL 30, 2003, CORPORATION SHALL PAY TO EMPLOYEE A BASE SALARY OF ONE HUNDRED FIFTY THOUSAND ($150,000) DOLLARS (U.S.). SUCH BASE SALARY SHALL BE PAID IN EQUAL BI-WEEKLY INSTALLMENTS (LESS APPROPRIATE AND NECESSARY WITHHOLDINGS FOR EMPLOYMENT TAXES), COMMENCING ON CORPORATION'S NEXT REGULAR PAY DAY AND CONTINUING ON THE SAME DAY OF EVERY OTHER WEEK THEREAFTER DURING THE TERMS OF THIS AGREEMENT. B. BONUS. PREDICATED ON CORPORATION'S PERFORMANCE, EMPLOYEE SHALL BE ENTITLED TO AN ANNUAL BONUS OF A MINIMUM OF 50% OF THE BASE SALARY SET FORTH IN SECTION 2(A) ABOVE. THE AMOUNT OF THE BONUS SHALL BE DETERMINED BY CORPORATION'S BOARD OF DIRECTORS. C. BENEFITS. EMPLOYEE SHALL HAVE THE RIGHT TO RECEIVE OR PARTICIPATE IN ANY FRINGE BENEFITS, INCLUDING, BUT NOT LIMITED TO, PERSONAL DAYS, GROUP TERM LIFE INSURANCE PROGRAMS, DISABILITY INSURANCE PROGRAMS, MEDICAL EXPENSE REIMBURSEMENT PLANS, FLEXIBLE BENEFIT PLANS, SO-CALLED QUALIFIED "PENSION OR PROFIT SHARING PLANS," AND OTHER REASONABLE AND CUSTOMARY FRINGE BENEFITS WHICH MAY FROM TIME-TO-TIME BE MADE AVAILABLE BY CORPORATION'S BOARD OF DIRECTORS (AND FURTHER SUBJECT TO ANY APPLICABLE ELIGIBILITY REQUIREMENTS OF EACH SUCH PROGRAM). FURTHER, EMPLOYEE SHALL BE ENTITLED TO AN AUTOMOBILE ALLOWANCE AND OTHER SIMILAR BENEFITS AS DETERMINED BY CORPORATION'S BOARD OF DIRECTORS. 3. STOCK OPTION. EMPLOYEE SHALL BE ELIGIBLE TO PARTICIPATE IN CORPORATION'S VARIOUS STOCK OPTION PLANS AS SAME MAY BE IN PLACE FROM TIME TO TIME, AS DETERMINED BY CORPORATION'S BOARD OF DIRECTORS. 4. TERM AND SEVERANCE. THE TERM OF THIS AGREEMENT SHALL BE FOR TWO (2) YEARS FROM AND AFTER THE EFFECTIVE DATE. IN THE EVENT THAT EMPLOYEE IS TERMINATED DURING THE TERM OF THIS AGREEMENT WITH OR WITHOUT CAUSE OR IN THE EVENT THAT HE RESIGNS BECAUSE OF A MATERIAL CHANGE IN THE SCOPE OF HIS DUTIES OR BECAUSE OF A CHANGE IN CONTROL OF CORPORATION THEN, AND IN THAT EVENT, EMPLOYEE SHALL BE ENTITLED TO 3 RECEIVE SEVERANCE PAY IN AN AMOUNT EQUAL TO HIS BASE SALARY PLUS HIS ACTUAL BONUS FOR THE PRECEDING YEAR OR AN IMPUTED BONUS OF 50% OF BASE SALARY IF HE IS DISCHARGED OR SUFFERS A MATERIAL CHANGE IN DUTY PRIOR TO A BONUS BEING ESTABLISHED FOR THE PRIOR YEAR. SUCH SEVERANCE PAY SHALL BE PAID FOR THE UNEXPIRED TERM OF THIS AGREEMENT OR 12 MONTHS, WHICHEVER IS GREATER. WHEREVER USED IN THIS AGREEMENT, THE TERM "CHANGE IN CONTROL: SHALL HAVE THE MEANING ASCRIBED TO IT IN SECTION 1.7 OF CORPORATION'S 2001 EQUITY PARTICIPATION PLAN (THE "PLAN"), WHICH PLAN IS HEREBY INCORPORATED HEREIN BY REFERENCE FOR THIS PURPOSE. 5. CONFIDENTIALITY. DURING THE TERM OF THIS AGREEMENT EMPLOYEE SHALL KEEP SECRET AND INVIOLATE AND SHALL NOT DIVULGE, COMMUNICATE, USE TO THE DETRIMENT OF CORPORATION OR FOR THE BENEFIT OF ANY OTHER PERSON OR PERSONS OR MISUSE IN ANY WAY ANY KNOWLEDGE OR INFORMATION OF A CONFIDENTIAL NATURE, INCLUDING, WITHOUT LIMITATION, ALL TRADE SECRETS, INFORMATION, COMPUTER PROGRAMS, TECHNICAL DATA, CUSTOMER LISTS AND UNPUBLISHED MATTERS RELATING TO THE BUSINESS, ASSETS, ACCOUNTS, BOOKS, RECORDS, CUSTOMERS AND CONTRACTS OF CORPORATION WHICH HE MAY OR HEREAFTER COME TO KNOW AS A RESULT OF HIS ASSOCIATION WITH AND WHICH IS UNIQUE TO CORPORATION ("CONFIDENTIAL INFORMATION"). INFORMATION SHALL NOT BE CONSIDERED CONFIDENTIAL INFORMATION IF: (I) THE INFORMATION IS KNOWN BY OR SUBSEQUENTLY BECOMES GENERALLY AVAILABLE TO THE PUBLIC THROUGH NO FAULT OR BREACH ON THE PART OF EMPLOYEE; (II) THE INFORMATION IS INDEPENDENTLY DEVELOPED BY EMPLOYEE WITHOUT THE USE OF ANY CONFIDENTIAL INFORMATION; OR (III) THE EMPLOYEE RIGHTFULLY OBTAINS THE INFORMATION AFTER THE TERM OF THIS AGREEMENT FROM A THIRD PARTY THAT HAS THE RIGHT TO DISCLOSE IT. EMPLOYEE MAY DISCLOSE CONFIDENTIAL INFORMATION IF REQUIRED BY ANY JUDICIAL OR GOVERNMENTAL REQUEST, REQUIREMENT OR ORDER; PROVIDED THAT EMPLOYEE WILL TAKE REASONABLE STEPS TO GIVE CORPORATION SUFFICIENT PRIOR NOTICE IN ORDER TO CONTEST SUCH REQUEST, REQUIREMENT OR ORDER. EMPLOYEE HAS HAD KNOWLEDGE OF THE AFFAIRS, TRADE SECRETS, CUSTOMERS, POTENTIAL CUSTOMERS AND OTHER PROPRIETARY INFORMATION OF CORPORATION, AND EMPLOYEE ACKNOWLEDGES AND AGREES THAT COMPLIANCE WITH THE COVENANTS SET FORTH IN THIS PARAGRAPH 5 IS NECESSARY FOR THE PROTECTION OF THE BUSINESS, GOODWILL AND OTHER PROPRIETARY INTERESTS OF CORPORATION AND THAT ANY VIOLATION OF THIS AGREEMENT WILL CAUSE SEVERE AND IRREPARABLE INJURY TO THE BUSINESS, GOODWILL AND PROPRIETARY INTERESTS OF CORPORATION, WHICH INJURY IS NOT COMPENSABLE BY MONEY DAMAGES. ACCORDINGLY, IN THE EVENT OF A BREACH (OR THREATENED OR ATTEMPTED BREACH) OF THIS PARAGRAPH 5, CORPORATION AND ANY SUCCESSOR SHALL, IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES, BE ENTITLED TO IMMEDIATE APPROPRIATE INJUNCTIVE RELIEF OR A DECREE OF SPECIFIC PERFORMANCE, WITHOUT THE NECESSITY OF SHOWING ANY IRREPARABLE INJURY OR SPECIAL DAMAGES. 4 IF, ANY JUDICIAL PROCEEDING, A COURT SHALL REFUSE TO ENFORCE ANY OF THE COVENANTS INCLUDED HEREIN, THEN SAID UNENFORCEABLE COVENANT(S) SHALL BE DEEMED ELIMINATED FROM THESE PROVISIONS FOR THE PURPOSE OF THOSE PROCEEDINGS TO THE EXTENT NECESSARY TO PERMIT THE REMAINING SEPARATE COVENANTS TO BE ENFORCED. IT IS THE INTENT AND AGREEMENT OF CORPORATION AND EMPLOYEE THAT THESE COVENANTS BE GIVEN THE MAXIMUM FORCE, EFFECT AND APPLICATION PERMISSIBLE UNDER LAW. THE PROVISIONS OF THIS PARAGRAPH 5 SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT. 6. MISCELLANEOUS. EMPLOYEE SHALL NOT ASSIGN HIS RIGHTS AND OBLIGATIONS HEREUNDER. CORPORATION MAY ASSIGN ITS RIGHTS AND OBLIGATIONS HEREUNDER WITH THE CONSENT OF EMPLOYEE WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD. SUBJECT TO THE FOREGOING, ALL OF THE TERMS AND CONDITIONS OF THIS AGREEMENT SHALL BE BINDING UPON AND SHALL INURE TO THE BENEFIT OF THE HEIRS, SUCCESSORS, ADMINISTRATORS, LEGAL REPRESENTATIVES AND ASSIGNS, AS THE CASE MAY BE, OF THE PARTIES HERETO. 7. PARTIAL INVALIDITY. IF ANY PROVISION OF THIS AGREEMENT IS HELD BY A COURT OF COMPETENT JURISDICTION TO BE INVALID, VOID OR UNENFORCEABLE IN ANY MANNER, THE REMAINING PROVISIONS OF THIS AGREEMENT SHALL NONETHELESS CONTINUE IN FULL FORCE AND EFFECT WITHOUT BEING IMPAIRED OR INVALIDATED IN ANY WAY. IN ADDITION, IF ANY PROVISION OF THIS AGREEMENT MAY BE MODIFIED BY A COURT OF COMPETENT JURISDICTION SUCH THAT IT MAY BE ENFORCED, THEN THAT PROVISION SHALL BE SO MODIFIED AND AS MODIFIED SHALL BE FULLY ENFORCED. 8. ENTIRE AGREEMENT. THIS AGREEMENT CONTAINS THE ENTIRE UNDERSTANDING OF THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER CONTAINED HEREIN, SUPERSEDES ALL PRIOR AND CONTEMPORANEOUS AGREEMENTS, UNDERSTANDINGS AND NEGOTIATIONS, AND ANY AND ALL EMPLOYMENT AGREEMENT(S) BETWEEN CORPORATION AND EMPLOYEE DATED PRIOR TO THE DATE HEREOF; AND NO EVIDENCE OF PRIOR OR CONTEMPORANEOUS AGREEMENTS, UNDERSTANDINGS AND NEGOTIATIONS SHALL GOVERN OR BE USED TO CONSTRUE OR MODIFY THIS AGREEMENT. EXCEPT AS PROVIDED IN THIS AGREEMENT, NO MODIFICATION OR ALTERATION HEREOF SHALL BE DEEMED EFFECTIVE UNLESS IN WRITING AND SIGNED BY THE PARTIES HERETO. NEITHER OF THIS AGREEMENT NOR ANY OF ITS PROVISIONS MAY BE CHANGED, WAIVED, OR DISCHARGED ORALLY, BUT ONLY BY AN INSTRUMENT DULY SIGNED BY THE PARTY AGAINST WHICH ENFORCEMENT OF THE CHANGE, WAIVER, OR DISCHARGE IS SOUGHT. 9. NOTICES. ALL NOTICES, DEMANDS, AND REQUESTS REQUIRED OR PERMITTED TO BE GIVEN UNDER THE PROVISIONS OF THIS AGREEMENT SHALL BE IN WRITING AND SHALL BE DEEMED GIVEN (A) WHEN PERSONALLY DELIVERED O SENT BY FACSIMILE TRANSMISSION TO THE PARTY TO BE GIVEN THE NOTICE OR OTHER COMMUNICATION OR (B) ON THE BUSINESS DAY FOLLOWING THE DAY SUCH NOTICE OR 5 OTHER COMMUNICATION IS SENT BY OVERNIGHT COURIER TO THE ADDRESSES SET FORTH ABOVE OR AT SUCH OTHER ADDRESS AS EITHER PARTY MAY DESIGNATE FROM TIME TO TIME BY APPROPRIATE NOTICE TO THE OTHER. 10. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF MICHIGAN. 11. HEADINGS. THE HEADINGS IN THIS AGREEMENT ARE FOR REFERENCE ONLY AND SHALL NOT LIMIT OR OTHERWISE AFFECT ANY OF THE TERMS OR PROVISIONS HEREOF. 12. COUNTERPARTS. THIS AGREEMENT MAY BE EXECUTED IN TWO (2) OR MORE COUNTERPARTS, EACH OF WHICH SHALL BE CONSIDERED AN ORIGINAL, BUT ALL OF WHICH TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT. THIS AGREEMENT WAS EXECUTED AS OF DATE AND YEAR FIRST SET FORTH ABOVE. "CORPORATION" SOLUTIONNET INTERNATIONAL, INC., A MINNESOTA CORPORATION BY: /S/ SAMPATH SESHADRI ----------------------------------- SAMPATH SESHADRI ITS: VICE PRESIDENT "EMPLOYEE" /S/ SURESH VENKATACHARI ----------------------------------- SURESH VENKATACHARI EX-6.5 11 k62810ex6-5.txt EMPLOYMENT AGREEMENT - MURALI NATARAJAN 1 EXHIBIT 6.5 EMPLOYMENT AGREEMENT BETWEEN SR SINGAPORE PTE LTD AND MR. MURALI NATARAJAN SR Singapore Pte Ltd (here in after called as the "Employer") and MR. MURALI NATARAJAN (hereinafter called as the "Employee") agrees to the following terms and conditions: 1. SALARY Employee is hereby appointed as "GENERAL MANAGER - FINANCE & OPERATIONS from 1st February 1999 and shall receive a consolidated salary of S$3,800/(SINGAPORE DOLLARS TWO THOUSAND ONLY) per month with applicable CPF contribution imposed by Govt. from time to time as per the law subject to attendance and leave policies as adopted from time to time by Employer. 2. DUTIES AND RESPONSIBILITIES Employee shall perform the duties assigned to him by any duly authorized officer of the employer. 3. WORKING HOURS AND PLACE 3.1 Employee shall follow the official working hours of the Employer. Employee are also required to follow any changes in the working hours as may be decided in the future. This is a position of continuous responsibility and does not entail payment of extra time or overtime. 3.2 In view of the nature of Company's business, you may be assigned to different locations both in Singapore and abroad. You will carry assignments/projects given to you from time to time with diligence and devotion and maintain the company's image as suppliers of quality software, hardware and services. Signature of the Employee 2 4. ANNUAL AND MEDICAL LEAVE 4.1 Employee shall be entitled to 12 days annual leave and 12 days of sick leave for a year. 4.2 Employee shall be eligible for sick leave on production of medical certificate but this may be revoked at the Employer's discretion without any notice. 5. MEDICAL AND HOSPITALIZATION BENEFITS Employee shall be covered for Life and Hospitalization by the Employers extensive Medical insurance. 6. PART-TIME EMPLOYMENT AND PRIVATE PRACTICE Employee should devote the whole of his time, attention and ability to the business of the company and should observe all rules and regulations applicable from time to time. Employee agrees that the duties herein shall be full time. Employee shall not engage in other business ventures or employment without the prior approval of Employer. 7. RULES AND REGULATIONS Employee shall follow the rules and regulations of the Employer on anything not expressly provided herein or necessarily implied therefore. Signature of the Employee 3 8. TERMINATION OF EMPLOYMENT 8.1 If Employee shall not perform well in his assigned duties, the Employer may terminate this agreement and employment. 8.2 During the employment period if Employee is guilty of any personal misconduct or of any willful breach and continued neglect of the terms of this agreement or any other duties or terms, the Employer may from time to time assign, terminate this agreement and employment. 8.3 Both Parties may terminate this agreement only after twelve months by giving one months (30 days) written notice or equivalent salary in lieu thereof. The Employer will entertain no premature termination of the contract. 9. OVERSEAS ASSIGNMENT 9.1 Before proceeding on an overseas assignment you will be required to give the company, a written undertaking for dedicated services to Employer, completing the work/project assigned and timely return to resume work in Singapore. 9.2 You may be selected and sponsored by the company for training assignments with the Company's associates or other institutions abroad. You will, diligently and beneficially, take part in such training and assignments. The cost of such overseas training include travel fare and related expenses will be borne by the company, subject to your signing suitable agreement with the company that you will continue to serve the company after such training, for a minimum period as may be stipulated. Signature of the Employee 4 10. SECRECY & SECURITY Employee shall not during or after termination of his employment without the prior written consent of the Employer to disclose or permit the disclosure of any confidential information obtained in the course of or as a result of this employment, concerning the affairs of the Employer, to any person or body not otherwise authorized by law to receive such information. For the purpose hereof all information is to be treated as confidential except such as is or has become public knowledge otherwise than through Employee's default or neglect. Employee shall also take all reasonable precautions in dealing with any information documents and papers provided to him by the Employer so as to prevent any unauthorized person from having access to such information documents or papers. The laws regarding the Computer Misuse Act, Chapter 50a will apply to Employee and under no circumstance employee should misuse any computer resources that belong to the Employer. Upon the termination of employment Employee shall deliver up to the Employer all documents papers or copies thereof and property belonging to it or them which are in employee's possession, custody or control. 11. BREACH OF CONTRACT In the event of any actual or threatened breach of the above clauses by the employee including with limitation of the loss or injury which the Employer suffers, the Employee agrees that the Employer shall exercise their right to specifically enforce the performance of all obligations in terms of the above undertaking as well as other injunctive relieves as may be granted by a court of competent jurisdictions without prejudice to any other relieves, monetary or otherwise as the Employer may be entitled by law as compensation for the loss damage suffered on account of breach of the terms of the contract. Signature of the Employee 5 12. GOVERNING LAW The applicable law and revenue will be that of the Republic of Singapore. We have pleasure in welcoming you and trust you will have many happy and mutually Beneficial years of service with SR SINGAPORE PTE. LTD. I have read, understood and I accept the above terms and conditions of employment Mentioned above. Agreed to on the Monday 1st February 1999. Employee Employer /s/ Murali Natarajan /s/ V. Suresh - ---------------------------------------- ------------------------------------- Accepted By : MURALI NATARAJAN Accepted By: V.SURESH NRIC No/Passport ~No.S2644312A PRESIDENT Date of Joining 01.02.99 SR SINGAPORE ~PTE LTD - ---------------------------------------- ------------------------------------- Signature and date Signature and Date EX-6.6 12 k62810ex6-6.txt EMPLOYMENT AGREEMENT - KARTHIKEYAN RAMAN 1 EXHIBIT 6.6 APPOINTMENT LETTER 29TH MAY, 2000 Mr. Karthikeyan Raman Blk 201, #04-152 Bukit Batok st 21 Singapore 650201 SUB: APPOINTMENT LETTER DEAR KARTHIK, SolutionNET (Asia Pacific) Pte Ltd is happy to inform you that you have been selected for the post of "ASST. VICE PRESIDENT - INFORMATION TECHNOLOGY" and we are extremely happy to provide you with this opportunity to become a part of the SLNN team. Your primary responsibility will be development of various Projects, Banking Products and development of Health care Products to various clients and in charge of the Product Management. We sincerely desire to help you achieve your full potential, technically, managerially or in a combination that is most meaningful to you and to SolutionNET (Asia Pacific) Pte Ltd. Right from the beginning, we will be working towards building a long-term plan. Our goal, indeed our mission, will be to provide you with an interesting, challenging and rewarding work environment. We sincerely desire to help you achieve your full potential in your primary area of responsibility, Sales and to help you grow managerially to take up more responsibilities. We will also look upon you as an emissary of the company and ask you to help us reinforcing a high standard of ethics in working with fellow SolutionNET associates and with our clients. The specific terms of your employment are as attached. Please sign and return a copy of this Appointment letter to indicate your acknowledgement and acceptance of this offer. I have pleasure in welcoming you on board and trust that we will have a happy and mutually beneficial association. Yours truly, /s/ TRV Rajan - ---------------------------------- TRV RAJAN Asst. Vice President - HR & Admin. 2 TERMS OF EMPLOYMENT NAME OF THE CONSULTANT/ STAFF MEMBER: Mr. Karthikeyan Raman DIVISION/ DEPARTMENT: INFORMATION TECHNOLOGY DESIGNATION: "ASST. VICE PRESIDENT" SALARY Your Basic salary will be S$ 82,800/-(SINGAPORE DOLLARS EIGHTY TWO THOUSAND EIGHT HUNDRED ONLY) PER ANNUM, your salary will be reviewed after twelve months based on the appraisal. EMPLOYEE STOCK OPTIONS As explained to you, SLNN is listed on NASDAQ OTC:BB and is qualified for main board listing. SLNN management is working on Employee Stock option with which you will get substantial benefits should you opt for the same. STOCK OPTION PLAN (SOLUTIONNET INTERNATIONAL INC - SLNN): 1. SIGN ON STOCK OPTION: No of Stock Options: 6,000 Vesting Period: You will be entitled to vest the 33.33% of options every year for the period of 3 years at 50% of Market Price: 2. INCENTIVE STOCK OPTION: You will be entitled for the following incentive options based on performance as per company policy: Guidelines for measuring performance: - - Build a strong project and business development team - - Expand the company products and services in to the Asia Pacific region - - Increase Revenues and Profits The assessment will be done at the end of the calendar year. OTHER BENEFITS In addition, you will be covered under the hospitalization & insurance benefits as per standard company norms as is applicable to all SLNN employees from the date of approval and issue of Policy from SLNN's official insurance company. SLNN currently does not reimburse medical expenses. 1 3 EXPENSES Business expenses like local conveyance, travel, accommodation on overseas travel, handphone/pager bills will be reimbursed on approval from your supervisor as per existing company policies from time to time. DUTIES, RESPONSIBILITIES AND ATTACHMENT It is your obligation to perform the duties assigned to you by any duly authorized officer of SLNN or the Client. You will carry assignments/projects given to you from time to time with diligence and devotion and maintain the company's image as suppliers of quality software and services. In view of the nature of Company's business, you may be assigned to different locations both in Singapore and abroad at the Client's work place. WORK HOURS AND WORK LOCATION You will follow the official working hours of SolutionNET (Asia Pacific) Pte Ltd, depending upon your place of work. PROBATION You will be on probation for a period of SIX MONTHS from the date of your joining. SLNN management reserves the right to review your performance during the probation period and the services can be terminated with One day's notice if your performance is not found to be satisfactory or if there is a material breach of any employment terms or of moral nature. LEAVE You will be entitled to 16 days of Paid leave per annum and 1 day of Sick leave (against production of Medical Certificate) for every month of service completed. The leave will be subject to management approval and should not be taken as the right to remain absent. The management reserves the right to adjust your salary subject to the days worked and leave policies as adopted from time to time by the management. PART-TIME EMPLOYMENT AND PRIVATE PRACTICE You agree that the duties herein shall be full time and you will not engage in other business ventures or employment without the prior approval from SLNN. You will devote the whole of your time, attention and ability to the business of the company and should observe all rules and regulations applicable from time to time. You will also not directly or indirectly solicit and/or accept offer for employment/employment from SLNN's clients or join the competitor's company within one year after leaving services of SLNN unless agreed in writing by the management of SLNN. 2 4 You will also need to sign the confidentiality and non-disclosure agreement after joining SLNN. INCOME TAX You will be liable to pay all your personal income tax under Singapore Law. OVERSEAS ASSIGNMENTS You will be required to give the company, a written undertaking for completing the work/project assigned and timely return to resume work in Singapore before proceeding on an overseas assignment, if you need to travel. TRAINING You may be selected and sponsored by the company for training assignments with the Company's associates or other institutions abroad. You will, diligently and beneficially, take part in such training and assignments. The cost of such overseas training include travel fare and related expenses will be borne by SLNN subject to your signing a suitable agreement with SLNN that you will continue to serve the company after such training, for a minimum period as may be stipulated before the training. TERMINATION OF EMPLOYMENT Either party may terminate the contract by giving One Month's (30 days) written notice or equivalent salary in lieu thereof. SLNN may terminate the employment without notice at any time during the period of employment, if you do not perform your assigned duties or you are found guilty of any personal misconduct or of any willful breach and have continued to neglect of the terms of employment or any other duties or terms that SLNN or its clients may from time to time assign. CONFIDENTIALITY, SECRECY & SECURITY All information acquired by you is to be treated as confidential except such as is or has become public knowledge otherwise than through your default or neglect. You will not during or after termination of his employment without the prior written consent of the SLNN or the Client, disclose or permit disclosure of any confidential information obtained in the course of or as a result of this employment, concerning the affairs of SLNN, the Client (including but not limited to departments of Government of Singapore) to any person or body not otherwise authorized by law to receive such information. You will take all reasonable precautions in dealing with any information documents and papers provided to him by SLNN or the Client (including as aforesaid) so as to prevent any unauthorized person from having access to such information documents or papers. The laws regarding the Computer Misuse Act, Chapter 50a will apply and under no circumstance you will misuse any computer resources that belong to SLNN or the Client. Upon the termination of employment you will deliver to SLNN, all documents papers or copies thereof and property belonging to it which may be in your possession, custody or control. 3 5 BREACH OF CONTRACT In the event of any actual or threatened breach of the above clauses by the employee including with limitation of the loss or injury which SLNN may suffer, you agree that SLNN shall exercise their right to specifically enforce the performance of all obligations in terms of employment as well as any other injunctive relieves as may be granted by a court of competent jurisdictions without prejudice to any other relieves, monetary or otherwise as SLNN may be entitled by law as compensation for the loss damage suffered on account of breach of the terms of the contract. GENERAL RULES AND REGULATIONS Your employment will be subject to the Rules and Regulations of SLNN on anything not expressly provided herein or necessarily implied therefore and which may be in force or amended from time to time. I have read, understood and I accept the above Terms and Conditions of employment. I confirm that I will be able to join SLNN in the Second week of June 2000. Signature: /s/ Karthikeyan Raman ------------------------- Name: Karthikeyan Raman Date: May 29, 2000 NRIC No.: S7076999I 4 EX-8.1 13 k62810ex8-1.txt SHARE-EXCHANGE AGREEMENT DATED APRIL 2, 1999 1 EXHIBIT 8.1 THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), NOR REGISTERED UNDER ANY STATE SECURITIES LAW. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY. AGREEMENT FOR THE EXCHANGE OF COMMON STOCK AGREEMENT made this 2nd day of April, 1999, by and between SOLUTIONNET INTERNATIONAL, INC., a Minnesota corporation (hereinafter, called "SHAREHOLDER"), which SHAREHOLDER own all of the issued and outstanding shares of SR SINGAPORE PTE, LTD, a Singapore corporation (hereinafter, called "SR SINGAPORE"). In consideration of the mutual promises, covenants, and representations contained herein, and other good and valuable consideration. THE PARTIES HERETO AGREE AS FOLLOWS: 1. EXCHANGE OF SECURITIES. Subject to the terms and conditions of this Agreement, the ISSUER agrees to issue to the SHAREHOLDER, 10,500,000 shares of common stock of the ISSUER, $0.01 par value (hereinafter, called the "SHARES"), in exchange for 100% of the issued and outstanding shares of SR SINGAPORE, such that SR SINGAPORE shall become a wholly owned subsidiary of the ISSUER. 2. REPRESENTATIONS AND WARRANTIES. ISSUER represents and warrants to SHAREHOLDER the following: i. Organization. ISSUER is a corporation duly organized, validly existing, and in good standing under the laws of Minnesota, and has all the necessary corporate powers to own properties and carry on a business, and is duly qualified to do business and is in good standing in Minnesota. All actions taken by the incorporators, directors and shareholders of the ISSUER have been valid and in accordance with the laws of the State of Minnesota. ii. Capital. The authorized capital stock of the ISSUER is 50,000,000 shares of common stock, $0.01 par value, of which 174,999 2 are issued and outstanding after the four to one stock split. All outstanding shares are fully paid and non-assessable, free of liens, encumbrances, options, restrictions, and legal or equitable rights of others not a party to this Agreement. At closing, there will be no outstanding subscriptions, options, rights, warrants, convertible securities, or other agreements or commitments obligating ISSUER to issue or to transfer from the treasury any additional shares of its capital stock. None of the outstanding shares of ISSUER are subject to any stock restriction agreements. All of the shareholders of the ISSUER have valid title to such shares and acquired their shares in a lawful transaction and in accordance with the laws of the State of Minnesota. iii. Financial Statement. Exhibit B to this Agreement includes the balance sheet of the ISSUER as of September 30, 1998, for the period then ended. The balance sheet has been prepared in accordance with generally accepted accounting principles consistently followed by the ISSUER throughout the period indicated, and fairly present the financial position of the ISSUER as of the date of the balance sheet, and the results of its operations for the period indicated. iv. Absence of Change. Since the date of the balance sheet, there has not been any change in the financial condition or operations of the ISSUER, except changes in the ordinary course of business, which changes have not, in the aggregate, been materially adverse. v. Liabilities. ISSUER does not have any debt, liability, or obligation of any nature, whether accrued, absolute, contingent, or otherwise, and whether due or to become due, that is not reflected on the ISSUER'S financial statement. ISSUER is not aware of any pending, threatened or asserted claims, lawsuits or contingencies involving the ISSUER or its common stock. There is no dispute of any kind between the ISSUER and any third party, and no such dispute will exist at the closing of this Agreement. At the closing, ISSUER will be free from any and all liabilities, liens, claims and/or commitments. vi. Ability to Carry out Obligation. ISSUER has the right, power, and authority to enter into and perform its obligations under this Agreement. The execution and delivery of this Agreement by ISSUER and the performance by ISSUER of its obligations hereunder will not cause, constitute, or conflict with or result in (a) any breach or violation or the provisions of, or constitute a default under any license, indenture, mortgage, charter, instrument, articles of incorporation, bylaw, or other agreement or instrument to which the ISSUER or its shareholders are a party, or by which they may be bound, nor will any consents or authorizations of any party other than those hereto be required, (b) any event that would cause the ISSUER to be liable to any party, or (c) any event that would result in the creation or imposition or any lien, charge or 3 encumbrance on any assets of the ISSUER or upon the securities of the ISSUER to be acquired by the SHAREHOLDER. vii. Full Disclosure. None of the representations and warranties made by the ISSUER, or any certificate or memorandum furnished or to be furnished by the ISSUER, contains or will contain any untrue statement of a material fact, or omit any material fact the omission of which would be misleading. viii. Contracts and Leases. ISSUER is not currently carrying on any business and is not a party to any contract, agreement, or lease. No persons holds a power of attorney from ISSUER. ix. Compliance with the Laws. ISSUER has complied with, and is not in violation of any federal, state or local statue, law, and/or regulation pertaining to ISSUER. ISSUER has complied with all federal, and state securities laws in connection with the issuance, sale and distribution of its securities. x. Litigation. ISSUER is not (and has not been) a party to any suit, action, arbitration, or legal, administrative, or other proceeding, or pending governmental investigation. To the best of the knowledge of the ISSUER, there is no basis for any such action or proceeding and no such action or proceeding is threatened against the ISSUER and ISSUER is not subject to or in default with respect to any order, writ, injunction, or decree of any federal, state, local, or foreign court, department, agency, or instrumentality. xi. Conduct of Business. Prior to the closing, the ISSUER shall conduct business in the normal course, and shall not (a) sell, pledge, or assign any assets, (b) amend its article of incorporation or By-laws, (c) declare dividends, redeem or sell stock or other securities, (d) incur any liabilities, (e) acquire or dispose of any assets, enter into any contract, guarantee obligations of any third party, or (f) enter into any other transaction. xii. Corporate Documents. Copies of each of the following documents, which are true, complete and correct in all material respects, will be attached hereto and made an integral part hereof to this Agreement: (1) Articles of Incorporation; (2) By-laws; (3) Minutes of Shareholders Meetings; (4) Minutes of Directors Meetings; (5) List of Officers and Directors; (6) Balance Sheet as described in Section 2(iii); and (7) Stock register and stock records of the ISSUER and a current, accurate list of the ISSUER'S shareholders. 4 xiii. Documents. All minutes, consents or other documents pertaining to the ISSUER to be delivered at the closing shall be valid and in accordance with the laws of the State of Minnesota. xiv. Title. The Shares to be issued to the SHAREHOLDER will be, at the closing, free and clear of all liens, security interests, pledges, charges, claims, encumbrances and restrictions of any kind. None of such Shares are or will be subject to any voting trust or agreement. No person holds or has any right to receive any proxy or similar instrument with respect to such shares, except as provided for in this Agreement, the ISSUER is not a party to any agreement which offers or grants to any person the right to purchase or acquire any of the securities to be issued to the SHAREHOLDER. There is no applicable local, state or federal law, rule or regulation, or decree which would, as a result of the issuance of the Shares to SHAREHOLDER, impair, restrict, or delay SHAREHOLDER'S voting rights with respect to the Shares. xv. Lock-Up. ISSUER will cause, to the extent requested by any underwriter, broker-dealer, market maker, or the like, of securities of ISSUER, the shareholders of ISSUER to agree not to sell or otherwise transfer of dispose of any or all of the shares of ISSUER presently outstanding, during any period of time as so requested. In order to enforce the foregoing covenant, ISSUER agrees to impose stop-transfer instructions as to such stock. xvi. Nasdaq. The common stock of the Issuer will on Closing be quoted for trading on the Nasdaq Bulletin Board. 3. SHAREHOLDER represents and warrants to the ISSUER the following: i. Organization. SR SINGAPORE is a corporation, duly organized, validly existing, and in good standing under the laws of the Republic of Singapore, and has all the necessary corporate powers to own properties and carry on a business, and is duly qualified to do business and is in good standing in the Republic of Singapore. All actions taken by the incorporators, directors and shareholders of the SR SINGAPORE have been valid and in accordance with the laws of the Country of Singapore. ii. Shareholders and Issued Stock. Exhibit A attached hereto and made an integral part hereof, sets forth the names and shareholdings of 100% of the SR SINGAPORE. iii. Counsel. SHAREHOLDER represent and warrant prior to the Closing, that they are represented by independent counsel or have had the opportunity to retain independent counsel to represent them in this transaction. 5 3. INVESTMENT INTENT. SHAREHOLDER agree that the Shares being issued pursuant to this Agreement may be sold, pledged, assigned, hypothecated or otherwise transferred, with or without consideration (hereinafter called a "TRANSFER"), only pursuant to an effective registration statement under the 1933 ACT, or pursuant to an exemption from registration under the 1933 ACT, the availability of which is to be established to the satisfaction of the ISSUER. SHAREHOLDER agree prior to any TRANSFER, to give written notice to the ISSUER expressing SHAREHOLDER'S desire to effect such TRANSFER and describing the proposed Transfer. 5. CLOSING. Subject to SHAREHOLDER being satisfied with their due diligence on the state of affairs of the ISSUER the closing of this transaction shall take place at the offices of Sara Hallitex Corporation 4344 Promenade Way, Suite 102P, Marina del Rey, CA 90292 or such other place as the parties hereto may agree in writing, upon receipt or exchange, as the case may be of the items referenced in Section 6, below. Unless the closing of this transaction takes place on or before May 10, 1999, then either party may terminate this Agreement. 6. DOCUMENTATION TO BE DELIVERED AT CLOSING. i. By the ISSUER (1) Board of Directors Minutes authorizing the issuance of a certificate or certificates for 10,500,000 Shares, registered in the names of the SHAREHOLDER. (2) The resignation of all officers of ISSUER each acknowledging in writing that his or her resignation is a free and voluntary act and that he or she has been paid all compensation and fees and has no entitlement to any deferred or unpaid salary, severance pay, compensation, royalties or any other kind of payment from the ISSUER. (3) A Board of Directors resolution appointing such persons as SHAREHOLDER designates as directors of ISSUER. (4) The resignation of all directors of ISSUER each acknowledging in writing that his or her resignation is a free and voluntary act and that he or she has been paid all compensation and fees and has no entitlement to any deferred or unpaid salary, severance pay, compensation, royalties or any other kind of payment from the ISSUER. (5) Balance Sheet of ISSUER, dated September 30, 1998 for the period then ended. (6) All the business and corporate records of ISSUER, including but not limited to, correspondence files, bank statements, checkbooks, savings account books, minutes or shareholder and directors meetings, financial statements, shareholder listings, stock transfer records, agreements and contracts. 6 (7) Such other minutes of ISSUER'S shareholders or directors as may reasonably be required by SHAREHOLDER. (8) Written confirmation in such form as the SHAREHOLDER may reasonably require of the approval of Nasdaq for the quotation of the Shares to be issued pursuant to the Closing. ii. BY SHAREHOLDER: (1) Deliver to the ISSUER, or to its Transfer Agent, of the certificates representing 100% of the issued and outstanding stock of SR SINGAPORE together with duly completed and executed transfers in favor of the ISSUER. 7. REMEDIES. i. Arbitration. Any controversy or claim arising out of, or relating to, this Agreement, or the making, performance, or interpretation thereof, shall be settled by arbitration in Los Angeles County, California in accordance with the Rules of the American Arbitration Association then existing, and judgment on the arbitration award may be entered in any court having jurisdiction over the subject matter of the controversy. 8. MISCELLANEOUS. i. Captions and Headings. The Article and paragraph headings throughout this Agreement are for convenience and reference only, and shall in no way be deemed to define, limit or add to the meaning of any provision of this Agreement. ii. No Oral Change. The Agreement and any provision hereof, may not be waived, changed, modified, or discharged orally, but only by agreement in writing signed by the party against whom enforcement of any waiver, change, modification, or discharge is sought. iii. Non Waiver. Except as otherwise expressly provided herein, no waiver of any covenant, condition, or provision of this Agreement shall be deemed to have been made unless expressly in writing and signed by the party against whom such waiver is charged; and (i) the failure of any party to insist in any one or more cases upon the performance of any of the provisions, covenants, or conditions of this Agreement or to exercise any option herein contained shall not be construed as a waiver or relinquishment for the future of any such provisions, covenants, or conditions, (ii) the acceptance of performance of anything required by this Agreement to be performed with knowledge of the breach or failure of a covenant, condition or provision hereof shall not be deemed a waiver of such breach or failure, and (iii) no waiver by any party of one breach by another party shall be construed as a waiver with respect to any other or subsequent breach. 7 iv. Non-Merger. The terms and conditions of this Agreement shall not merge with the issue and allocation of the Shares and be extinguished but shall remain in full force and effect as between the parties in so-far as the same is not fulfilled. v. Stamp Duty. The stamp duty and any other impost or levy for the transfer of the shares of SR SINGAPORE to the ISSUER shall be borne by the ISSUER. vi. Announcements. SHAREHOLDER shall at the request of ISSUER supply ISSUER such information with regards to SR SINGAPORE as may be required to enable ISSUER to comply with the laws and regulations of the NASD and the Securities and Exchange Commission regarding announcements, advertisements or documents to be issued in connection with the transactions to which this Agreement relates. The ISSUER agrees that all announcements or provision of information to any regulatory authority shall have the prior consent of the SHAREHOLDER. vii. Time of Essence. Time is of the essence of the Agreement and of each and every provision hereof. viii. Entire Agreement. This Agreement contains the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings. ix. Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed as original, but all of which together shall constitute one and the same instrument. x. Notices. All notices, requests, demands, and other communications under this Agreement shall be in writing and shall be deemed to have been duly given on the date of service if served personally on the party to whom the notice is to be given, or the third day after mailing if mailed to the party to whom notice is to be given, by first class mail, registered or certified, postage prepaid, and properly addressed, and by fax, as follows: SHAREHOLDER ISSUER Densmore Group Limited SolutionNet International, Inc. 51 Anson Road, #10-55/57 4344 Promenade Way, 102P Singapore 079904 Marina del Rey, CA 90292 Tel: 65-324-4424 Tel: 1-310-823-8088 Fax: 65-324-4425 Fax: 1-310-827-6255 8 IN WITNESS WHEREOF, the undersigned has executed this Agreement this 2nd day of April 1999. DENSMORE GROUP LIMITED SOLUTIONNET INTERNATIONAL, INC. /s/ V. Suresh /s/ Garrett K. Krause - --------------------------------------- ---------------------------------------- Mr. V. Suresh as per the approval of Garrett K. Krause as per the approval of The board of directors and shareholders The board of directors and shareholders
9 AGREEMENT FOR THE EXCHANGE OF COMMON STOCK Exhibit `A' 1) 100,000 ordinary shares of SGD1.00 par held by Densmore Group Limited being the entire issued share capital of SR Singapore Pte Ltd. Dated this 30th day of March 1999 SolutionNet International, Inc. By: /s/ Garrett Krause ----------------------------------- Garrett Krause, President SolutionNet International, Inc. Densmore Group, Ltd By: /s/ V. Suresh ----------------------------------- V. Suresh, Chairman Densmore Group, Ltd. EX-8.2 14 k62810ex8-2.txt SUPPLEMENTAL AGREEMENT DATED APRIL 6, 1999 1 EXHIBIT 8.2 THIS SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), NOR REGISTERED UNDER ANY STATE SECURITIES LAW. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1993 ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE COMPANY. SUPPLEMENTAL AGREEMENT FOR THE EXCHANGE OF COMMON STOCK A SUPPLEMENTAL AGREEMENT made between SOLUTIONNET INTERNATIONAL, INC., a Minnesota corporation (hereinafter, called "ISSUER") and DENSMORE GROUP LIMITED (hereinafter, called "SHAREHOLDER"), which SHAREHOLDER own all of the issued and outstanding shares of SR SINGAPORE PTE, LTD, a Singapore corporation (hereinafter called "SR SINGAPORE"). WHEREAS by an Agreement for the Exchange of Common Stock between the Issuer and the Shareholder (hereinafter called the "Principal Agreement") the respective parties have agreed to exchange the common stock of the Issuer for all the issued and outstanding shares of SR Singapore. AND WHEREAS by the Article 8(ii) of the Principal Agreement, the Principal Agreement may be amended by agreement in writing between the parties. THE PARTIES HERETO AGREE AS FOLLOWS: 1. Whenever reference is made in the Principal Agreement to "SR SINGAPORE", such reference shall be construed to include a reference to an intermediate holding corporation of SR SINGAPORE such intermediate holding corporation being a corporation whose assets comprise of all the issued and outstanding shares of SR SINGAPORE. 2. For the purpose of clarity only for the closing pursuant to Article 6(ii) of the Principal Agreement the same may be performed the SHAREHOLDER by delivery of - (1) all issued and outstanding shares of such intermediate holding corporation together with the duly completed and executed transfers in favor of the ISSUER; (2) all the corporate records of such intermediate holding corporation; and (3) all the issued and outstanding shares of SR SINGAPORE all such shares being registered in the name of such intermediate holding corporation. 3. This Supplemental Agreement shall be deemed to come in to effect on April 6, 1999. 2 IN WITNESS WHEREOF, the each of the undersigned has executed this Agreement: DENSMORE GROUP LIMITED SOLUTIONNET INTERNATIONAL, INC. /s/ V. Suresh /s/ Garrett K. Krause - -------------------------------------- ------------------------------------- Mr. V. Suresh as per the approval of Garrett K. Krause as per the approval The board of directors and shareholder of the board of directors and shareholders -----END PRIVACY-ENHANCED MESSAGE-----