-----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, Nf8/HnGYCpfSWvsyAF6GuiC9+ZzHpLYcJd1vRdU1EwlP/Bqxi8IHkvEczBKdA1oZ yAu44jnXzktEvuocZeNrOA== 0001019687-99-000649.txt : 19991019 0001019687-99-000649.hdr.sgml : 19991019 ACCESSION NUMBER: 0001019687-99-000649 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 19991018 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOLUTIONNET INTERNATIONAL INC CENTRAL INDEX KEY: 0001093468 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 954749095 STATE OF INCORPORATION: MN FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10SB12G SEC ACT: SEC FILE NUMBER: 000-27697 FILM NUMBER: 99729845 BUSINESS ADDRESS: STREET 1: 4344 PROMENADE WAY STREET 2: #102P CITY: MARINA DEL REY STATE: CA ZIP: 90292 BUSINESS PHONE: 3108238088 MAIL ADDRESS: STREET 1: 4344 PROMENADE WAY STREET 2: #102P CITY: MARINA DEL REY STATE: CA ZIP: 90292 10SB12G 1 SOLUTIONNET INTERNATIONAL, INC. 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. ------------------------------------------------------ (Exact Name of Registrant as Specified in Its Charter) Minnesota 95-4749095 - ------------------------------------------------- -------------------- (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 4344 Promenade Way, Suite 102P, Marina del Rey, CA 90292 ------------------------------------------------------------ (Address of principal executive offices, including zip code) (310) 823-8088 ------------------------------- (Registrant's telephone number) Securities to be registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which to be so registered: each class it to be registered: (N/A) (N/A) Securities to be registered pursuant to Section 12(g) of the Act: Title of each class Name of each exchange on which to be so registered: each class is to be registered: Common Stock (N/A) par value $0.001 1 TABLE OF CONTENTS
Item 1. Business......................................................................... 3 Item 2. Financial Information ........................................................... 15 Management Discussion and Analysis of Financial Condition and Results of Operations ...................................................................... 15 Item 3. Description of Property.......................................................... 16 Item 4. Security Ownership of Certain Beneficial Owners and Management................... 17 Item 5. Directors and Executive Officers................................................. 18 Item 6. Executive Compensation........................................................... 19 Item 7. Certain Relationships and Related Transactions................................... 20 Item 8. Legal Proceedings................................................................ 21 Item 9. Market for Common Equity and Related Stockholder Matters......................... 21 Item 10. Recent Sales of Unregistered Securities.......................................... 22 Item 11. Description of Registrant's Securities to be Registered.......................... 22 Item 12. Indemnification of Directors and Officers........................................ 24 Item 13. Financial Statements and Supplementary Data...................................... 24 Item 14. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ........................................................ 24 Item 15. Financial Statements and Exhibits................................................ 25
2 ITEM 1 - BUSINESS This Registration Statement on Form 10 includes forward-looking statements within the meaning of the Securities Exchange Act of 1934 (the "Exchange Act"). These statements are based on management's current beliefs and assumptions about the Registrant and the industry in which the Registrant competes in, and on information currently available to management. Forward-looking statements include, but are not limited to, the information concerning possible or assumed future results of operations of the Registrant set forth under the headings "Management's Discussion" and "Business." Forward-looking statements also include statements in which words such as "expect," "anticipate," "intend," "plan," "believe," "estimate," "consider," or similar expressions are used. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions. The Registrant's future results and shareholder values may differ materially from those expressed or implied in these forward-looking statements. Readers are cautioned not to put undue reliance on any forward-looking statements. In addition, the Registrant does not undertake to update forward-looking statements after the effectiveness of this Registration Statement, even if new information, future events or other circumstances have made them incorrect or misleading. History of the Company SolutionNet International, Inc. ("SolutionNet" or the "Company") is a holding company, dedicated to the development and marketing of proprietary, multi-application Internet Gateway Information Technology (IT) solutions. The Company also operates as a full-service consulting and programming house providing end-user Internet technologies, ERT solutions, Y2K conversion solutions, multimedia applications, technology and systems integration, offshore resources and consultant training. SolutionNet and all of its operating subsidiaries, are internationally renowned for their high quality IT solutions, focusing on the integration of the Internet with the banking, medical, finance and telecommunications industries. The Company was originally incorporated under the laws of the State of Iowa on August 1, 1984, under the name of Grason Industries, Inc. On April 28, 1994, Grason Industries, Inc. changed its name to ETG International, Inc.("ETGI"). On October 11, 1994, ETGI changed its corporate domicile from Iowa to Minnesota. On March 22, 1999, ETGI changed its corporate name to SolutionNet, International, Inc. From April 27, 1994 to April 6, 1999, the Company's common stock was traded on the NASD OTC Bulletin Board under the symbol "ETGI." The Company's common stock began trading on the NASD OTC Bulletin Board under the symbol "SLNN" on April 6, 1999 and currently trades under the same name. Share Exchange Agreement By an agreement dated April 2, 1999, and a supplemental agreement dated April 6, 1999, the Company entered into an agreement for the exchange of common stock (the "share-exchange agreement") with Densmore Group Limited ("Densmore Group"). Densmore Group owned a majority controlling interest in all of the issued and outstanding shares of SolutionNet Inc., which in turn, held all of the issued and outstanding shares of SR Singapore, Pte., Ltd. ("SR Singapore"). As part of the share-exchange agreement, an intermediate holding company was incorporated on April 14, 1999. SolutionNet Inc. was incorporated under the laws of the British Virgin Islands for the purpose of holding all of the Company's global marketing subsidiaries and for managing the international sales of Company's products and services outside North America. 3 Pursuant to the share-exchange agreement, the Company acquired 100% of the issued and outstanding stock of SolutionNet Inc. (and thereby SR Singapore) in exchange for 10,500,000 shares, $0.001 par value, of the Company's common stock. SR Singapore is a private limited corporation that was incorporated on January 25, 1994 under the laws of the Republic of Singapore. SR Singapore was incorporated for the purpose of providing independent consulting services offering numerous Information Technology solutions. Although inactive during 1994, SR Singapore became an active operational organization during the first fiscal quarter of 1995. Currently, SR Singapore, through SolutionNet Inc. is a wholly owned operating subsidiary of the Company. Immediately prior to the share-exchange agreement, the Company had 7,000,003 shares issued and outstanding. After a 10-to-1 and a 4-to-1 reverse stock split, the Company had a total of 175,000 shares that were issued and outstanding. As part of the share exchange agreement of April 2, 1999, the Company issued 10,500,000 shares of common stock to shareholders of SolutionNet Inc. in exchange for 100% of SolutionNet Inc.'s common stock. Currently, the Company has a total of 12,177,509 shares of common stock that are issued and outstanding. Bankruptcies On April 4, 1995, Electronic Technology, Inc., ("Subsidiary") a subsidiary of ETG International, Inc. (ETGI) filed for Chapter 11 in the United States Bankruptcy Court in the District of Minnesota. On January 31, 1996, the Subsidiary converted its Chapter 11 case to a Chapter 7. In March 1999, the Chapter 7 trustee submitted his final report and claims for the parties' accountants and attorneys filed final payments. The Chapter 7 trustee confirmed that a final distribution to the claimants would take place within 30 days and that the Chapter 7 case would be officially closed within approximately six months from the date of this filing. NARRATIVE DESCRIPTION OF BUSINESS Business of Company The Company, including all of its subsidiaries, SolutionNet Inc. and conducts its operations as a Internet software development company, specializing in the design, implementation, integration, and management of state-of-the-art Internet/Intranet Solutions ("IT") and other network related activities. Initially started with a main focus on providing valued-added Internet Technology services, SolutionNet has now grown and is active in many diverse areas of Internet Technology, serving clients in many countries around the world. The Company has just recently launched its first proprietary software called E-Net-Electronic Banking, which provides fully integrated Internet based transactions and banking technology use in some of the top world banks. Industry Overview and Market People and business are increasingly relying on the Internet to access and share information as well as to purchase and sell products and services. International Data Corporation has estimated that by the end of 1998, more than 142 million people would be using the Internet to communicate, participate in discussion forums and to obtain information about goods and services. IDC has projected that the number of users will grow to approximately 502 million people 4 by the end of the year 2003. A rapidly growing number of businesses are using the Internet to market and sell their products and to streamline their business operations. The substantial growth of the Internet has created tremendous market opportunities for companies connecting buyers and sellers and for companies that are creating system applications for traditional businesses that want to engage in e-commerce. Historically, e-commerce has occurred through electronic data interchange over proprietary networks. Such networks are costly and available only to a limited number of participants. The Internet provides an "open platform" with common communication protocols to build efficient, cost-effective networks that facilitate e-commerce. As Internet-based network reliability, speed and security have improver in recent years and as more businesses have connected to the Internet, traditional businesses are beginning to use the Internet to conduct e-commerce and exchange information with customers, suppliers and distributors. Consumers and businesses alike can expect continued growth in the Web-services market. International Data Corporation has estimated that the global market for Internet services has grown approximately 71%, with revenues of $7.8 billion for the year 1998. Moreover, corporate investment in Web-enabling technology will continue to grow both in the United States and abroad. A recent analysis from International Data Corporation estimates domestic spending to be approximately $174 billion, expected to reach $305 billion in the year 1999. By the year 2003, it is estimated that companies will spend approximately $1.5 trillion worldwide. Principal products and services The Company's products include E-Net, an internet banking solution, EMI, a medical records management solution, the Intelligent Data Mapper tool (IDM) and e-business kits, a Web-based business-to-business and business-to-consumer e-commerce solution. The company also operates as a full-service consulting and programming house providing end-user Internet technologies, ERP solutions, Y2K Conversion solutions, Multimedia applications, technology and systems integration, offshore resources and consultant training. These services are offered directly to the company's customers. There is no requirement that the governments of either the United States or of Singapore approve this company's products and services. Marketing and Distribution The Company uses a variety of marketing programs designed to stimulate demand for its products and services and to support their direct and indirect sales channels. The company focuses direct marketing efforts on decision makers in large organizations. The goal is to identify potential buyers of the company's proprietary enterprise software solutions and services and create awareness of the company, brand, and product offerings (including clients, servers, applications, and services). The company maintains an ongoing dialogue with its existing customers to ensure customer satisfaction, request references, and make follow-on sales. The Company makes many of its products available for evaluation through its website at www.solutionnet.net. Certain customer information is collected electronically through an automated registration process, creating the basis for ongoing marketing of upgrades, new products, add-on products, and merchandise. The company currently retains the services of its own in-house marketing department in marketing its products in Singapore. Elsewhere, the company handles the marketing and selling of its products through a network of resellers: India- Tata Infosys, Kashyap Radiants and Linkquest, Ltd.; Pakistan, Bangladesh, the Middle East, including Suadi Arabia- Kashyap Radiants and Linkquest, Ltd; the U.K. and Europe; the U.S. and North America. The reresellers work on a commission-only basis with a minimum commitment to turnover and to a fixed geographical location. 5 The company believes it is important to have an international presence and intends to continue to conduct business in markets around the world through a combination of subsidiaries and distributors. The company conducts business internationally through a variety of distribution and service partners. In addition, the company continually seeks to increase it corporate profile by participating in exhibitions, trade fairs and other industry-related activities on a local, regional and global scale. These marketing activities serve to increase the visibility of both the company and its proprietary product line. The company currently maintains strategic technology and marketing relationships with three globally recognized IT companies including Oracle Corporation, Sun Microsystems and the Algorithm Research unit of Cylink Corporation. In retaining such strategic relations with globally recognized industry leaders, the company serves a complementary role rather than a competitive role. Dependence on Major Customers The company has a large client base from which it derives its business and revenues. Currently, the company does not have a single customer that accounts for more than 10% of its annual revenues. Competition The company develops, markets, and sells proprietary Web-based e-commerce infrastructure and e-commerce application software products and services. For both types of software and related services, the company believes the principal competitive factors are core technology, breadth of product features, product quality, marketing and distribution resources, pricing, and customer service and support. The company believes it competes well with respect to many of these factors. The company holds cutting edge technology it believes is superior to its competitors, and has established the necessary infrastructure to launch successfully on the global markets. With proprietary products like E-Net Internet banking solution, EMI Electronic Medi Info medical records management software, Intelligent Data Mapper (IDM) data mapping interface technology, and E-Business Kits business-to-business and business-to-consumer e-commerce solution, the company believes it has built a solid foundation upon which to grow and expand the size and scope of its business. The company believes it has a staff and management team committed to the long-term success of the company as evidenced by its ability to attract and retain highly skilled and respected employees creating one of the lowest employee turnover ratios in the industry. The company also believes the creation and implementation of an Employee Stock Option Program (ESOP) will further spur employee loyalty, motivation and participation. Selling products like its Web-based e-commerce infrastructure and application products requires a significant amount of customer service and support. The company feels that its overall lack of corporate branding and relatively short operating history presents a significant challenge when facing many of the company's current and potential competitors who have longer operating histories, larger overall installed customer bases, related products that inter-operate with e-commerce infrastructure and application software products, more employees, greater brand recognition, and greater financial, technical, marketing, public relations, and distribution resources than the company does. Competition could result in price reductions for company products and services, loss of market share, or other material adverse effects on the company's finances or business prospects. Additionally, the product lead time for the marketing of the company's E-Net Internet banking and EMI Electronic Medi Info solutions can be quite lengthy requiring continuous and highly-focused marketing and sales of up to nine months with a prospective customer, and hence, could hinder the company's ability in selling and implementing its related services and products in a concise timetable. 6 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. Competition in the e-commerce application market is also intense. The company offers a family of Web-based products and services that facilitate the creation and maintenance of Web sites for online commerce. Companies currently offering products that compete with the company's family of products include International Business Machines (IBM), General Electric Information Systems, Microsoft, enterprise resource planning vendors (such as PeopleSoft, Inc. and SAP), Open Market, Inc., Ariba Technologies, CommerceOne, Sterling Commerce, Inc., BroadVision, Inc., and a wide variety of smaller competitors. Companies offering e-commerce application software that can be bundled with operating systems or other software or hardware are particularly formidable in this market. In particular, IBM is investing heavily in marketing, research, and development for e-commerce applications. IBM has a large customer base using legacy systems and will likely be willing to provide e-commerce application software to large customers at nearly no charge as a way to win hardware and services business. Unlike IBM and other banking software sellers, the company does not have entire product lines to build virtual integrated marketing. Competition in this market could impair the company's finances and business prospects. There is also no guarantee that the market will accept Web-based e-commerce solutions over PC-based solutions as an industry standard. For example, with E-Net Internet banking, the company offers a Web-based portal solution connecting customers and banks real-time back end. The possible reluctance of banks to integrate their existing real-time back-end accounting information architecture with any other system, thereby increasing product lead time could hinder the company's ability to market and sell its particular product line. Additionally, any changes in central banking regulations in Singapore, the U.S. and abroad could also create delays in the decision-making process of prospective customers, thereby possibly adversely affecting the company's ability to market and sell its particular product line. Companies offering server and client products that are or can be bundled with operating systems or other software or hardware are particularly formidable competition in the market for server software. For example, Microsoft's server products operate on its Windows NT server operating system ("Windows NT" or "NT"), Oracle's server products operate with its large installed base of database software, Sun's server products operate on its Solaris server operating system, and BEA's server products operate with its installed base of software that monitors transaction processing. IBM has a large customer base using legacy systems and is, in many cases, willing to provide server software to large customers at nearly no charge as a way to win hardware and services business. 7 In recognition of this competitive environment, the company is in the process of implementing a global strategy to increase the presence and brand recognition of not only its product line, but also the company itself. The company believes it is important to have an international presence and intends to continue to conduct business in markets around the world through a combination of subsidiaries and distributors. The company conducts business internationally through a variety of distribution and service partners. In addition, the company continually seeks to increase its corporate profile by participating in exhibitions, trade fairs and other industry-related activities on a local, regional and global scale. These marketing activities serve to increase the visibility of both the Company and its proprietary product line. Additionally, the company understands and has begun implementing the dynamic processes involved in switching to a product-based operating entity from a service-based company. The company is also actively engaged in using its relationships with companies such as Oracle Corporation and Sun Microsystems in increasing its global marketing reach. Research and Development The company continues to place an emphasis on the capitalization of its research and development efforts in continually improving its existing product line while simultaneously focusing on the creation of new technologies and applications. Additionally, the company fastidiously implements a cost/benefit analytical model with budgetary controls and tight development schedules to ensure optimal time/cost-based development cycles. The following is an estimate of the amount spent during each of the last two fiscal years on research and development activities: Year Amount (SGD/Singapore dollars)* ---- ------------------------------- 1998 612,000 SGD 1999 741,000 SGD *$1.00 USD (US Dollars) = $1.70 SGD (Singapore dollars) as of 9/1999. Fluctuations in Quarterly Results As a result of its relatively limited operating history, the company does not have relevant historical financial data for a significant number of periods on which to base planned operating expenses. Accordingly, the company's expense levels, which are to a large extent fixed, are based in part on expectations as to future revenues. In addition, the company typically operates with a minimal backlog of product orders. Therefore, the company's quarterly sales and operating results generally depend on the volume, timing, and fulfillment of orders received within the quarter, which are difficult to forecast. For the Enterprise business segment, the company typically recognizes the majority of its revenues toward the end of each quarter. Accordingly, it may not be able to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. Any significant shortfall of demand for the company's products and services in relation to its expectations would immediately impair its finances and business prospects. Moreover, the company may increase its operating expenses to exploit a market opportunity for its products and services, fund greater levels of research and development, increase its sales and marketing operations, develop new distribution channels, improve its operational and financial systems, and broaden its customer support capabilities. To the extent that such expenses precede or are not subsequently followed by increased revenues, the company's finances and business prospects will be impaired. 8 The company expects to experience fluctuations in operating results that may be caused by a variety of factors, including: - - Varying demand for company products and services; - - Increasing complexity of products with higher prices and longer sales cycles; - - The timing of the introduction or enhancement of company products and services or those of its competitors; - - Market acceptance of new products and services; - - The timing and size of individual license transactions (particularly to enterprise customers who may attempt to delay closing transactions until the end of a fiscal quarter as a negotiating tactic); - - Company price changes or those of its competitors; - - The timing, size, and number of Website transactions; - - Seasonal trends in Internet usage and advertising placements; - - The amount and timing of capital expenditures and other costs relating to the expansion of the company's operations; - - The mix of distribution channels through which products are sold; - - The mix of products and services sold; - - The mix of international and North American revenues; - - Litigation-related costs; and - - General economic conditions. Quarterly operating results may fluctuate due to the timing of revenue from large sales of enterprise software products, including E-Net Internet banking, EMI Medi Info, Intelligent Data Mapper and E-Business Kits family of products. While the company intends to pursue multiple sales opportunities with respect to these enterprise products, the loss or deferral of one or more significant sales could impair the company's finances or business prospects. In addition, as a strategic response to changes in the competitive environment, the company may from time to time make certain pricing or marketing decisions or enter into business combinations that could impair its finances or business prospects. As a result, the company believes that period-to-period comparisons of our results of operations are not necessarily meaningful and may not predict future performance. Proprietary Rights The company's success and ability to compete partly depends on its technology, including primarily its internally developed technology and, in the future, technology that the company might license from third parties. Others may develop technologies that are similar or superior to the company's, which could impair its ability to compete. For the technology the company develops internally, it relies on the technological and creative skills of its employees. To establish and maintain a technology leadership position, new product developments, frequent product enhancements, name recognition, and reliable product maintenance are essential. If the company were unable to develop new technology and deliver new products and enhancements, its finances and business prospects would be impaired. In the future, the company may also rely on technology licensed from third parties, including software integrated with internally developed software and used in its products to perform key functions. If implemented as a component of the company's business, these third-party technology licenses may not continue to be available to the company on commercially reasonable terms. The loss of any technology licenses could delay or reduce product shipments until equivalent technology could be identified, licensed, and integrated. Any such delays or reductions in product shipments could impair the company's finances and business prospects. 9 To protect its technology, the company relies on patent, trademark, trade secret, and copyright law and generally enters into confidentiality or license agreements with its employees, consultants, and vendors. The company generally controls access to and distribution of its software, documentation, and other proprietary information. Despite these precautions, it may be possible for unauthorized third parties to copy or otherwise obtain and use the company's products, technology, or proprietary information. In addition, effective patent, trademark, trade secret, and copyright protection may be unavailable or limited in certain foreign countries. The company is currently in the process of filing patent and trademark applications for company products and services in the United States and Singapore. To license its products, the company relies in part on "shrink wrap" licenses that are not signed by the end-user and, therefore, may be unenforceable under the laws of certain jurisdictions. Policing unauthorized use of company products is difficult and the steps taken may not prevent the misappropriation of company technology. In addition, litigation may be necessary in the future to enforce the company's intellectual property rights, to defend the validity of its patents, to protect its trade secrets, or to determine the validity and scope of the proprietary rights of others. Such misappropriation or litigation could result in substantial costs and diversion of resources and the potential loss of intellectual property rights, which could impair the company's finances or business prospects. Although not currently engaged in any form of litigation proceedings, in the future, the company may receive notice of claims of infringement of other parties' proprietary rights. Such claims may involve internally developed technology or technology and enhancements that the company may license from third parties. Moreover, although the company sometimes will be indemnified by third parties against claims that licensed third-party technology infringes the proprietary rights of others, indemnity may be limited, unavailable, or, where the third party lacks sufficient assets or insurance, ineffectual. Any such claims could require the company to spend time and money defending against them, and, if they were decided adversely to the company, could cause the company to pay damages, to be subject to injunctions, or to halt distribution of its products while the company re-engineers them or seeks licenses to necessary technology (which might not be available on reasonable terms). Moreover, the company could also be subject to claims for indemnification resulting from infringement claims made against company customers, which could increase defense costs and potential damages. The company does not currently have liability insurance to protect against the risk that its technology or licensed third-party technology infringes the proprietary rights of others. Any of these factors could impair company finances or business prospects. Government Regulation and Legal Uncertainties The Company is not currently subject to direct government regulation in either Singapore, the British Virgin Islands or the U.S. other than the laws and the regulations that generally apply to publicly owned companies and to businesses generally. Few laws or regulations specifically apply to access to or commerce on the Internet. However, due to the increasing popularity and use of the Internet, it is likely that a number of laws and regulations may be adopted with respect to the Internet, covering certain content (such as pornography and gaming) and issues such as user privacy and expression, pricing of products and services, e-commerce liability, taxation, advertising, intellectual property rights, information security, and the convergence of traditional communication services with Internet communications. Other countries and various political organizations are likely to favor more and different regulation than what has been proposed in the U.S., thus further increasing the complexity of regulation. 10 The adoption of such laws or regulations, possibly including the taxation of Internet services and transactions, may decrease the growth of intranets, extranets, and the Internet, which could in turn decrease the demand for the company's products, increase the cost of doing business, or otherwise impair the company's finances and business prospects. In addition, it is not clear how existing laws governing issues such as property ownership, copyrights and other intellectual property issues, taxation, libel, and personal privacy apply to the Internet. The vast majority of such laws was adopted prior to the advent of the Internet and related technologies and, as a result, do not contemplate or address the unique issues of the Internet and related technologies. Changes to such laws intended to address these issues, including some recently proposed changes, could create uncertainty in the marketplace that could reduce demand for the company's products, increase the cost of doing business, including as a result of costs of litigation or increased product development costs, or otherwise impair the company's finances or business prospects. The encryption technology contained in the company's products is subject to U.S. import/export controls. Such import/export controls, either in their current form or as may be subsequently revised, may limit the company's ability to distribute certain encrypted products on a global basis. While the company takes precautions against unlawful importation and exportation, such importation and exportation may inadvertently occur from time to time, subjecting the company to potential liability and adverse consequences. In addition, future legislation or regulation may further limit levels of encryption or authentication technology that can be included in the company's products. For example, recent proposals at the federal level call for domestic controls on encryption products and related services. Such new regulation would alter the design, production, distribution, and use of the company's products, and could reduce demand for the company's products as well as general demand for Internet software and for electronic commerce products and services. In addition, foreign governments have import and domestic use laws and regulations already in place that may restrict the type of encryption software that is permitted for distribution in their countries. As a consequence of such export, import, and use controls, the company must develop and market both domestic and international versions of its products that contain encryption software, with the version for import/export into the U.S. market having a stronger level of encryption than the version for export to international markets. Along with the additional costs associated with the duplication of effort and expense in research, development, manufacturing, and distribution of different versions of products, the company may lose sales from customers who wish to have the same level of encryption security throughout their organization. The company may also encounter difficulties competing with non-U.S. producers of strong encryption products, who may both import and export their products into and out of the United States and sell products overseas. Additionally, some countries have enacted import laws requiring the alteration of the company's products in order for the government of such countries to maintain a level of control over the content of products entering such countries. In addition to the costs the company incurs in complying with varying international regulations, alteration of its products may cause such products to perform at a level below their intended level and thereby subject the company to potential liability and other adverse consequences. Any such export restrictions, import restrictions, legislation, regulation, or unlawful exportation or importation could impair the company's finances or business prospects. 11 Dependence on Key Personnel The company's performance depends substantially on the performance of its executive officers and key employees. Given the company's relatively early stage of development, the company depends on the ability to retain and motivate highly qualified personnel, especially the management and highly skilled development teams. The company does not have "key person" life insurance policies on any of its employees. The loss of the services of any of its executive officers or other key employees could impair the company's finances or business prospects. The company's future success also depends on its continuing ability to identify, hire, train, and retain other highly qualified technical and managerial personnel, especially software developers. Competition for such personnel is intense, and the company may not be able to attract, assimilate, or retain other highly qualified technical and managerial personnel in the future. The inability to attract and retain the necessary technical and managerial personnel could impair the company's finances or business prospects. Risks Associated with International Operations Within the company's Enterprise software operating segment, the company is currently incurring, and expects to continue to incur, costs in developing, marketing, and distributing a variety of localized versions of our products. If international revenues are not adequate to offset the expense of maintaining foreign operations and the costs of localizing our products, the company's finances and business prospects could be impaired. For example, in the ten months ended October 31, 1998, the company experienced a decline in international revenue growth rates in part due to the economic crisis in the Asia/Pacific region. The company may not be able to successfully market, sell, and deliver its products in foreign markets. In addition to the uncertainty as to the company's ability to maintain and generate new revenues from its foreign operations and expand its international presence, there are certain risks inherent in doing business on an international level, such as unexpected changes in regulatory requirements, export and import restrictions, export and import controls relating to encryption technology, tariffs and other trade barriers, difficulties in staffing and managing foreign operations, longer payment cycles, problems in collecting accounts receivable, political instability, fluctuations in currency exchange rates, software piracy, seasonal reductions in business activity during the summer months in Europe and elsewhere, and potentially adverse tax consequences, which could adversely impact the success of the company's international operations. One or more of such factors may impair the company's future international operations and its overall finances and business prospects. Compliance with Environmental Laws Since the company is a software development and distribution company with an emphasis on Internet applications, the company does not come under any environmental regulations. Year 2000 Compliance The "Year 2000 Issue" refers generally to the problems that some software may have in determining the correct century for the year. For example, software with date-sensitive functions that are not Year 2000 compliant may not be able to distinguish whether "00" means 1900 or 2000, which may result in failures or the creation of erroneous results. The company has developed a phased Year 2000 readiness plan for the current versions of our products. The plan includes development of corporate awareness, assessment, implementation (including remediation, upgrading, and replacement of certain product versions), validation testing, and contingency planning. The company continues to respond to customer concerns about prior versions of our products on a case-by-case basis. 12 The company has largely completed all phases of our plan, except for contingency planning, with respect to the current versions of all of our products. The company has made Year 2000 readiness disclosures stating that the current versions of all of the products that the company currently ships are "Year 2000 Compliant," as defined below, when configured and used in accordance with the related documentation, and provided that the underlying operating system of the host machine and any other software used with or in the host machine or the company's products are also Year 2000 Compliant. These disclosures note that, in some cases, the company's products require a patch that the company provides with the product in order to be Year 2000 Compliant. The company, its customers, and vendors continue to test our software for compliance and may find additional errors or defects associated with Year 2000 date functions. The company has defined "Year 2000 Compliant" to mean that the product will accurately receive, process, and provide date data from, into, and between the twentieth and twenty-first centuries, including the years 1999 and 2000, and make leap year calculations, provided that all other products (whether hardware, software, or firmware) used in or in combination with the product properly exchange data with it. The company has not tested its products on all platforms or all versions of operating systems that the company currently supports and has advised its customers to verify that their platforms and operating systems support the transition to the year 2000. The company has not specifically tested software obtained from third parties (licensed software, shareware, and freeware) that is incorporated into its products, but the company is seeking assurances from its vendors that licensed software is Year 2000 Compliant. Despite the company's testing, testing by the company's current and potential customers, and whatever assurances the company may receive from developers of products incorporated into our products, the company's products may contain undetected errors or defects associated with Year 2000 date functions. Current versions of Netscape ECXpert, Netscape BuyerXpert, Netscape SellerXpert, and Netscape MerchantXpert include third-party Java components that may not be Year 2000 Compliant in all respects. Netscape provides no warranty to the company's customers with respect to the Year 2000 compliance of third-party components embedded in the company's software. Also, certain prior versions of the company's products are not fully Year 2000 Compliant, and the company is working to address these issues. Known or unknown errors or defects in the company's products could result in delay or loss of revenue, diversion of development resources, damage to the company's reputation, or increased service and warranty costs, any of which could impair the company's finances or business prospects. Some commentators have predicted significant litigation regarding Year 2000 compliance issues, and we are aware of such lawsuits against other software vendors. Because of the unprecedented nature of such litigation, it is uncertain whether or to what extent the company may be affected by it. The company's internal systems include both our information technology ("IT") and non-IT systems. The company has completed a baseline assessment of our material internal IT systems (including both the company's own software products and third-party software and hardware technology) and the company's non-IT systems (such as the company's security system, building equipment, and embedded microcontrollers) and is beginning implementation (including remediation, upgrading, and replacement). The company has retained an outside contractor to provide assistance with validation testing and contingency planning. The company expects to complete all project phases by August 31, 1999. 13 To the extent that the company is not able to test the technology provided by third-party vendors, it is seeking assurances from such vendors that their systems are Year 2000 compliant. The worst-case scenario would involve the unavailability of the company's major internal systems to its employees and the unavailability of Netcenter to its users. In the event of this worst case scenario, the company may incur expenses to repair its systems, face interruptions in the work of its employees, lose advertising revenue, not be able to deliver minimum guaranteed levels of traffic, not be able to deliver downloads of our browser product, and suffer damage to its reputation. The company estimates total costs for all internal systems project phases to be approximately $8 million, with approximately $5 million of this representing the company's internal cost of the work its own employees have done on this project. Costs to be capitalized in connection with purchased computer hardware are expected to approximate $1.5 million, with the remaining costs to be expensed when incurred. In addition to the specific problems and costs we've described, the company may experience material unanticipated problems and costs caused by undetected errors or defects in the technology used in our internal IT and non-IT systems. The company does not currently have any information concerning the Year 2000 compliance status of its customers. As is the case with other similarly situated software companies, if the company's current or future customers fail to achieve Year 2000 compliance or if they divert technology expenditures (especially technology expenditures that were reserved for enterprise software) to address Year 2000 compliance problems, the company's own finances or business prospects could be impaired. The company has funded our Year 2000 plan from operating cash flows. The company estimates that costs incurred through October 31, 1998 in connection with Year 2000 compliance projects have not been material. The company will incur additional amounts related to the Year 2000 plan for administrative personnel to manage the project, outside contractor assistance, technical support for its products, product engineering and customer satisfaction. The company may experience material problems and costs with Year 2000 compliance that could impair the company's finances and business prospects. The company has not yet fully developed a comprehensive contingency plan to address situations that may result if it will not be able to achieve Year 2000 readiness of its critical operations. The cost of developing and implementing such a plan may itself be material. Finally, the company is also subject to external forces that might generally affect industry and commerce, such as utility or transportation company Year 2000 compliance failures and related service interruptions. Current Number of Employees At October 15, 1999, the Company had 75 full time employees. Reports to Security Holders The Company has voluntarily elected to file this Form 10-SB registration statement in order to become a reporting company under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Following the effective date of this registration statement, we will be required to comply with the reporting requirements of the Exchange Act. We will file annual, quarterly and other reports with the Securities and Exchange Commission. The Company intends to furnish holders of its common stock annual reports containing audited financial statements. 14 The public may read and copy any materials this Company has filed with the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by contacting the SEC at 1-800-SEC-0330. Alternatively, the public may obtain information on the Company by accessing the Company's website at www.SolutionNet.net ITEM 2 - FINANCIAL INFORMATION Selected Financial Information The following table contains selected financial data of the Company and is qualified by the more detailed financial statements and the notes thereto provided in this Registration Statement. The financial data as of and for the period ended June 30, 1999, have been derived from the Company's financial statements, which statements were audited by Mr. Clyde Bailey, Certified, Public Accountant. Selected Financial Data June 30, 1999 - ------------------------------------------------ Total Revenues $ 987,946 Net Income $ 95,078 Total Assets $ 12,754,710 Total Liabilities $ 1,166,490 Total Stockholders' Equity $ 11,588,220 - ------------------------------------------------ Management's Discussion and Analysis of Financial Conditions and Results of Operations After SolutionNet's business combination with SR Singapore, as previously discussed, the Company implemented SR Singapore's products and operations into its current business plan to develop and market proprietary, multi-application Internet Gateway Information Technology (IT) solutions and to become one of the premier web applications solutions provided in the world. Therefore, this discussion and analysis will focus on the Company's current business plan and operations. Liquidity On April 6, 1999, the Company raised approximately $980,000 through the sale of 1,500,000 shares of its common stock at a price of $.66 per share. The Company also plans to raise approximately $5,000,000 through a private placement offering. The Company plans to use these funds in its expansion efforts of marketing and sales organization and development activities on a global level. 15 The Company believes that its existing capital resources together with ongoing fund raising efforts will be sufficient to meet its operating expenses and capital requirements. However, the Company's long-term capital requirements will depend upon many factors, including but not limited to, the rate of market acceptance of the Company's web applications solutions, the Company's ability to develop, maintain, and expand its customer base, the level of resources required to expand the Company's marketing and sales organization, information systems and development activities and other factors, some of which are beyond the Company's control. Furthermore, any additional equity financing could be dilutive to our then-exiting shareholders and any debt financing could involve restrictive covenants with respect to future capital raising activities and other financial and operation matters. Capital Expenditures Capital expenditures for the remainder of the fiscal year consist primarily of opening up business offices in London, England and San Jose, California and costs associated with ongoing expansion efforts of marketing and sales of the Company's products and services on a global level. Results of Operations For the period ending June 30, 1999, the Company reported net earnings of $95,078 or $0.027 earnings per share and total revenues of $987,946. This reflects financial data covering a 3-month period, from the April 2, 1999 business combination of the companies and up to and including June 30th 1999 (the Company's fiscal year end). SR Singapore reported revenues of 3,535,017 SGD ($2,091,107 USD) for fiscal year 1999, an increase of 39% over fiscal year 1998 revenues of 2,547,654 SGD ($1,507,041 USD). The company also reported net earnings of 549,577 Singapore Dollars SGD ($323,280.50 USD) or $0.03 USD Earnings Per Share), for the period ended June 30, 1999, a 1,084% increase over fiscal year 1998 results of 50,736 USD (all conversion rates based upon on 1USD = 1.70 SGD). SR Singapore management attributes the sharp rise in revenues and net income to the increased global demand for the company's software and web-based internet products. Moreover, as research and development costs decrease for the company's internet-based products, the company foresees exponential increases in revenues over the next four year. As people and businesses are increasingly relying on the Internet to access and share information and to purchase and sell products and services, the Company believes that its business model of developing and marketing IT solutions will enable it to become a leading provider of web based applications solutions around the world. For example, the Company's marketing efforts which are designed to increase awareness and generate leads for the Company's products and services, will increase the visibility of the Company and its proprietary product line. International Data Corporation estimated that in 1998, the global market for Internet services reached $7.8 billion in revenues, a 71% increase in growth from the year before. ITEM 3 - DESCRIPTION OF PROPERTY Location of Principal Properties The Company is using a part of the office space that is currently being leased by Sara Hallitex Corporation ("Sara Hallitex"), located at 4344 Promenade Way, Suite 102P, Marina del Rey, CA 90292. The Company is paying $2,000 per month to Sara Hallitex for the use of said office space. Sara Hallitex is currently leasing two suites from Marina City Club Towers for a total monthly rental rate of $5,750. Each suite is approximately 1,500 square feet. 16 SR Singapore is currently leasing 4,186 square feet of office space in Singapore, located at No. 1 Shenton Way, number 22-06/09, Singapore 068803. The current monthly rental rate is $14,651 (Singapore dollars). The lease expires in August 2002. Investment Policies The Registrant does not have a policy of acquiring assets primarily for possible capital gain or for income. Moreover, the Registrant does not have a policy of making investments in real estate, real estate mortgages, and does not have securities of or interests in persons primarily engaged in real estate activities. Description of Real Estate and Operating Data The Registrant does not own any real estate properties and has no agreements to acquire any such properties at this time. ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT The following table sets certain information with respect to the number of shares of Common Stock of the Company beneficially owned by (i) each officer and director of the Company; (ii) each person known to beneficially own more than 5% of the Company's Common Stock; and (iii) all directors and executive officers as a group. The Company has no other class of stock outstanding. The table sets forth the information based on 12,177,509 shares issued and outstanding as of June 30,1999.
Name and Address of Number of Percent of all shares Beneficial Owner and Management Shares of Common Stock Densmore Group, LTD 7,750,000(1) 63.64% S1 Anson Road 10 55/57 Anson Center Singapore, 079904 Sara Hallitex Corporation 1,730,000 14.21% 4344 Promenade Way, Suite102P Marina del Rey, CA 90292 Garrett K. Krause 541,000(2) 4% Vice-President and Director
(1) Suresh Venkatachari is the beneficial owner of 7,100,000 of the 7,750,000 total shares owned by Densmore Group, LTD. (2) Amount represents a portion of the 920,000 shares of common stock which was distributed as a dividend to the shareholders of Sara Hallitex Corporation. The dividends were issued to Garrett K. Krause controlled entities. 17 The Company believes that the beneficial owners of securities listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. None of the foregoing has any right to acquire other or additional shares of the Company. Moreover, there is no existing arrangement that may result in a change of control of the Company. ITEM 5 - DIRECTORS AND EXECUTIVE OFFICERS The following table sets forth the names and ages of the executive officers and directors of the Company and its subsidiaries, the principal offices and positions held by each person and the date such person became an executive officer or a director. The executive officers are elected annually by the Board of Directors and serve at the discretion of the Board of Directors. The directors serve one-year terms and until their successors are elected.
TABLE Directors and Executive Officers -------------------------------- Name Age Position(s) Held Since ---- --- ----------- ---------- Suresh Venkatachari 32 Chairman of the Board, March 1999 Director, President, and Chief Executive Officer Sampath Seshadri 45 Vice President and Director April 1999 Garrett K. Krause 32 Vice-President and Director March 1999
SURESH VENKATACHARI has served as the Chairman of the Board, Director, President, and Chief Executive Officer of the Company since March 1999. Mr. Suresh is also the founder, Director and Chief Executive Officer of SR Singapore, Pte., Ltd. Mr. Suresh obtained his bachelor's degree in Electronics and Instrumentation. Mr. Suresh is also the Chief Executive Officer and Director of SR Singapore. Mr. Suresh began his career in the IT industry amassing practical experience in a variety of industrial sectors becoming proficient in IT languages, systems and databases. In 1994, Mr. Suresh founded SR Singapore, an independent consulting services company offering numerous IT solutions, all based on his personal strengths in industry-specific knowledge, creativity and flexibility. Under Mr. Suresh's leadership, SR Singapore has enjoyed rapid growth and expansion worldwide with its leading-edge product line, world-class engineering staff and commitment to total quality management. Mr. Suresh's work experience has taken him to projects in India, Singapore, the U.S., U.K., Hong Kong and numerous other countries around the world. He has over ten years of experience in the areas of consulting, development, implementation and maintenance of Electronic Banking solutions, Internet Gateway applications and corporate IT management, working for such globally leaders as Deutsche Bank, Singapore Airlines and Systime. 18 SAMPATH SESHADRI has served as the Vice President and Director of the Company since April 1999. Mr. Seshadri is responsible for developing e-commerce business and marketing SR Singapore products in North America. Mr. Seshadri is also the President and Chief Executive Officer of VED Software Services, a company operating in Michigan. VED Software Services specializes in contract programming and is aimed at serving major banking and car companies based in North America. Mr. Seshadri has more than 15 years of experience in software development, marketing and managing. GARRETT K. KRAUSE has served as the Vice-President and Director of the Company since March 1999. Mr. Krause studied finance at the University of Calgary, Canada. He began his business career in 1986 by developing a Point of Sale/Inventory Control Software company. Within two years and after reaching sales in excess of $3 million U.S., he sold the company to a large competitor. Mr. Krause has an extensive background in the investment banking industry: specializing in taking small emerging-growth companies public, mergers and acquisitions, in addition to corporate mergers and joint ventures. Over the years, Mr. Krause has honed his entrepreneurial skills with brokers and investors alike, making him both an able, no-nonsense negotiator and an approachable leader. His successful ten-year track record in the mergers and acquisitions, developmental and managerial support arenas of public and private companies provides the Company with an invaluable asset as the it forges ahead towards the 21st Century and is set on becoming a leader in the field of Internet software development. Family Relationships With the exception of Mr. Seshadri being married to Mr. Venkatachari's sister, there are no other family relationships between any of the directors and executive officers of the Company and any person beneficially owning or controlling more than 5% of its outstanding shares. Legal Proceedings To the knowledge of the Company, no present or former director, executive officer or person nominated to become a director or executive of the Company has ever: (1) filed a bankruptcy petition by or against any business of which such person was a general partner or executive officer at the time of the bankruptcy or within two years prior to that time; (2) had any conviction in a criminal proceeding or is being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, or any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending, or otherwise limiting his involvement in any type of business, securities or banking activities; or (4) been found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Future Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated. ITEM 6 - EXECUTIVE COMPENSATION Summary Compensation Table The Summary Compensation Table lists certain compensation information for services rendered by executive officers while serving in all capacities for the period ended June 30, 1999. Other than as set forth herein, no executive officer's salary and bonus exceeded $100,000 in any of the applicable years. All listed executive officers have not received any stock options or similar incentive plans. 19
SUMMARY COMPENSATION TABLE Annual Compensation Long-Term Compensation ------------------- ---------------------- Awards Payouts ------ ------- Name and Year Salary Bonus Other Restricted Securities LTIP All Principal Annual Stock Underlying Payouts Other Position Com- Awards Options ($) Com- pensation ($) SARs(#) pensation Suresh 1999 $100,000 - - - - - - Venkatachari Chairman of the Board, Director, President, and Chief Executive Officer Sampath Seshadri 1999 $50,000 - - - - - - Vice-President Director Garrett K. Krause 1999 $50,000 - - - - - - Vice-President Director
Compensation of Directors Directors are receiving no compensation for their services in those capacities. ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS With the exception of the following, there are no other relationships or related transactions between the Company and any promoters: (1) Sara Hallitex Corporation ("Sara Hallitex") holds an approximate 15% equity interest in the Company (1,730,000 shares) and 1,000,000 warrants, exercisable @ $5.00 per warrant. Sara Hallitex is a publicly traded company (OTC BB "SHAL"). (2) Garrett K. Krause, the Vice-President and Director of SolutionNet is also the President and Chief Executive Officer of Sara Hallitex. Moreover, Mr. Krause is a shareholder of Sara Hallitex and is the beneficial owner either directly or through the following entities a. Garrett Krause Trust 1,500,000 shares b. Krause Family Trust 250,000 shares d. Garrett K. Krause 160,000 shares e. WorldVest Holding Corporation 3,500,000 shares ---------------- 5,410,000 shares 20 ITEM 8 - LEGAL PROCEEDINGS The Company may from time to time be involved in various claims, lawsuits, and disputes with third parties, or actions incidental to the operation of its business. Currently, there is no litigation pending or threatened by or against the Company. ITEM 9 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market Information The following table sets forth the high and low bid prices for shares of the Company Common Stock for the periods noted, as reported by the National Daily Quotation Service and the NASD Bulletin Board. Quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not represent actual transactions. The Company's Common Stock was traded under the symbol "ETGI" from April 27, 1994 until April 6, 1999. Beginning on April 6, 1999, the Company's Common Stock has been traded under the symbol "SLNN." Calendar Quarter Ending Closing Bid Closing Ask - ----------------------- ----------- ----------- September 30, 1997 n/a n/a December 31, 1997 n/a n/a March 31, 1998 n/a n/a June 30, 1998 n/a n/a September 30, 1998 n/a n/a December 31, 1998 0.0625 0.4688 March 31, 1999 0.2000 0.3500 June 30, 1999 12 12.375 - ---------------------------------------------------------------- (1) Data for periods of September 30, 1997 through March 31, 1999 reflects per share prices of ETGI common stock prior to Company's name change (ETG International, Inc. to SolutionNet, International, Inc.), prior to Company's change of its symbol (ETGI to SLNN) and prior to Company's business combination with SR Singapore and subsequent to the 10-1 and 4-1 reverse stock splits. (2) n/a = information not available; for periods ending September 30, 1997, December 31, 1997, March 31, 1998, June 30, 1998, and September 30, 1998, there is no available record of closing bid and ask prices due to very marginal trading of the stock, as reported in NASD report. Pursuant to NASD Eligibility Rule 6530 (the "Rule") issued on January 4, 1999, issuers who do not make current filings pursuant to Sections 13 and 15(d) of the Securities Act of 1934 are ineligible for listing on the NASDAQ Over-the-Counter Bulletin Board ("OTCBB"). Pursuant to the Rule, issuers who are not current with such filing are subject to having the quotation of their securities removed from the OTCBB pursuant to a phase-in schedule depending on each issuer's trading symbol as reported on January 4, 1999. Such issuers may 21 thereafter quote their Common Stock on the National Quotation Bureaus "Pink Sheets" (the "Pink Sheets"). As previously discussed, the Company's trading symbol on January 4, 1999 was "ETGI". Therefore, pursuant to the phase-in schedule, the Company is subject to having the quotation of its securities removed from the OTCBB on November 17, 1999, until the Company becomes compliant with the Rule. One month prior to having the quotation of their securities removed from the OTCBB, non-complying issuers will have their trading symbol appended with an "E". The Company is not currently in compliance with the Rule, and in the past, has not made filings pursuant to Sections 13 and 15(d) of the Securities Act of 1934. The Company has filed this Registration Statement on Form 10 in order to become a "reporting" company and therefore comply with the Rule. However, the Company will remain subject to having quotation of its securities removed from the OTCBB on November 12, 1999, and trading of its securities thereafter on the Pink Sheets, until such time as the Securities and Exchange Commission (the "SEC") has reviewed the Company's Form 10 and has stated that it has no further comments. Should the SEC fail to clear all comments prior to November 12, 1999, quotation of the Company's securities will be removed from the OTCBB and thereafter traded on the Pink Sheets until such time as the SEC clears this Registration Statement. Once the Company has complied with the Rule, it will be once again become eligible for listing on the OTCBB and will seek to be reinstated on the OTCBB or other appropriate exchange. Number of Shareholders The number of holders of record of the Common Stock of the Company as of June 30, 1999 was 119. Dividend Policy To date, the Company has declared no cash dividends on its Common Stock, and does not expect to pay cash dividends in the foreseeable future. There are no restrictions that limit the ability to pay dividends on this common stock and there are no such restrictions anticipated in the future. ITEM 10 - RECENT SALES OF UNREGISTERED SECURITIES On April 2, 1999, the Company issued an aggregate of 1,502,500 shares of common stock, par value $0.001, at an offering price of $0.66, to five "accredited" investors, pursuant to Rule 504 of Regulation D promulgated under the Securities Act of 1933, resulting in net proceeds to the Company in the amount of approximately $980,000. 2,500 shares of the total 1,502,500 were issued for legal services. ITEM 11 - DESCRIPTION OF SECURITIES Common Stock The Company' s Articles of Incorporation authorize the issuance of 20,000,000 shares of Common Stock, $0.001 par value per shares, of which 12,177,509 were outstanding as of June 30, 1999. Holders of shares of Common Stock are entitled to one vote and each fractional share of Common Stock is 22 entitled to a corresponding fractional vote on each matter submitted to a vote of shareholders. Holders of Common Stock have no cumulative voting rights. Holders of shares of Common Stock are entitled to share ratably in dividends, if any, as may be declared, from time to time by the Board of Directors, in its discretion, from funds legally available therefore. To the extent that additional shares of the Company's Common Stock are issued, the relative interests of the existing stockholders may be diluted. Holders of common stock do not have any preemptive or preferential rights to acquire any shares or securities of the Company, including shares or securities held in the treasury of the Company. In the event of a liquidation, dissolution, or winding up of the Company, the holders of shares of Common Stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. Holders of Common Stock have no preemptive rights or purchase the Company's common stock. There are no conversion rights or redemption or sinking fund provisions with respect to the common stock. All of the outstanding shares of Common Stock are fully paid and non-assessable. Preferred Stock The Company's Articles of Incorporation authorizes the issuance of 5,000,000 of Preferred Stock, $0.001 par value. As of June 30, 1999 there were no issued and outstanding shares of Preferred Stock. The Company's Board of Directors has authority, without action by the shareholders, to issue all or any portion of the authorized but unissued preferred stock in one or more series and to determine the voting rights, preferences as to dividends and liquidation, conversion rights, and other rights of such series. 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 resolution by the Board of Directors prior to the issuance of such Preferred Stock. No other dividend shall be paid on the Preferred Stock. 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 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 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 Company would be impaired thereby. Holders of shares of Preferred Stock may be granted the right to convert such Preferred Stock to Common Stock of the Company on such terms as may be determined by the Board of Directors prior to the issuance of such Preferred Stock. The Registrant does not have any debt securities and the Registrant does not anticipate or intend to register any other securities at this time. 23 Transfer Agent The transfer agent is Corporate Stock Transfer, 3200 Cherry Creek Drive South, Suite 430, Denver, Colorado, 80209, Telephone (303) 282-4800. Shares Eligible for Resale Of the presently outstanding shares of Common Stock (12,177,509 as of September 22, 1999), 10,500,000 are "restricted securities" as that term is defined under the Securities Act (the "Act") of 1933. Said shares may be resold pursuant to the provisions of Rule 144 under the Act or other exemptions, as described below. In general, under Rule 144, a person (or persons whose shares are aggregated) who has beneficially owned restricted securities of the Company for at least one year, including any person who may be deemed to be an "affiliate" of the Company (as the term "affiliate" is defined under the Act), is entitled to sell, within any three-month period, a number of shares that does not exceed the greater of (i) the average weekly trading volumes in the Company's Common Stock during the four calendar weeks preceding such sale or (ii) 1 % of the shares of Common Stock then outstanding. A person who is not deemed to be an "affiliate" of the Company and who has held restricted shares for at least two years, would be entitled to sell such shares without regard to the resale limitations of Rule 144. ITEM 12 - INDEMNIFICATION OF DIRECTORS AND OFFICERS The Corporation Laws of the State of Minnesota and the Company's Bylaws provide for indemnification of the Company's Officers and Directors for liabilities and expenses that they may incur in such capacities. In general, Directors and Officers are indemnified with respect to actions taken in good faith in a manner reasonably believed to be in, or not opposed to, the best interests of the Company, and with respect to any criminal action or proceeding, actions that the indemnitee had no reasonable cause to believe were unlawful. ITEM 13 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Reference is made to the Consolidated Financial Statements, together with the notes thereto and the reports thereon appearing on pages F-1 through F-5 of this Form 10. ITEM 14 - CHANGES IN ACCOUNTANTS SolutionNet International, Inc. has utilized the firm Stirtz, Bernards, Boyden, Surdel & Larter, Certified Public Accountants & Management Consultants as its principal accountants to audit the Company's financial statements. Subsequent to the business combination between the Company and SR Singapore on April 2, 1999, the Company employed Mr. Clyde Bailey, Certified Public Accountant, who has been responsible for auditing the financial statements of Sara Hallitex Corporation since 1996. Mr. Bailey conducted the audits for the Company's fiscal year ended June 30, 1999. The Company intends to continue using the services of Mr. Bailey in the future in conducting the audits of its financial statements. SR Singapore has utilized the services of the Singapore firm Wee Koon San & Company as its Certified Public Accountants since 1994 and intends to use the firm's services in the future. 24 There have been no disagreements between any of the above-mentioned accountants of the type required to be reported under item 14 since the date of their engagement. ITEM 15 - FINANCIAL STATEMENTS AND EXHIBITS a) INDEX TO FINANCIAL STATEMENTS Audited Financial Statements for SolutionNet International, Inc. for the last 3 fiscal years............................................... F-1 - F-5 Audited Financial Statements for SR Singapore, Pte., Ltd.for the the last 3 fiscal years............................................... F-6 - F-9 b) INDEX TO EXHIBITS EXHIBIT NUMBER 2.1 Share-Exchange Agreement dated April 2, 1999 2.2 Supplemental Agreement dated April 6, 1999 3.1 Articles of Incorporation, filed with the Minnesota Secretary of State on August 25, 1994 3.2 Amended Articles of Incorporation, filed with the Minnesota Secretary of State on March 22, 1999 3.3 Bylaws of SolutionNet International, Inc. 10.1 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. 10.2 Lease agreement by and between Sara Hallitex Corporation and Marina City Club Towers, relating to property located at 4344 Promenade Way, Suite 102P, Marina del Rey, CA 90292. 10.3 Executive management agreement by and between SolutionNet International, Inc. and Sara Hallitex Corporation, relating to the use of office space of property located at No. 1 Shenton Way, #22-06/09, Singapore 068803. 10.4 Executive employment agreement by and between SolutionNet International, Inc. and Suresh Venkatachari dated March 1, 1999. 10.5 Executive employment agreement by and between SolutionNet International, Inc. and Garrett K. Krause, dated March 1, 1999. 10.6 Executive employment agreement by and between SolutionNet International, Inc. and Sampath Seshadri, dated April 1, 1999. 11.1 Statement regarding computation of Per-Share Earnings 21.1 Subsidiaries of Registrant 27.1 Financial Data Schedule 25 SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. SOLUTIONNET, INTERNATIONAL, INC. Date: October 15, 1999 By: /s/ Suresh Venkatachari -------------------------------- Suresh Venkatachari, President 26 CLYDE BAILEY P.C. - -------------------------------------------------------------------------------- Certified Public Accountants 10924 Vance Jackson #404 San Antonio, Texas 78230 (210) 699-1287(ofc.) (888) 699-1287 (210) 691-2911 (fax) Member: American Institute of CPA's Texas Society of CPA's Report of Independent Certified Public Accountant To the Board of Directors and Shareholders SolutionNet International Inc. We have audited the accompanying consolidated balance sheets of SolutionNet International Inc. and subsidiaries (Company) as of June 30 1999 and 1998 and the related consolidated statements of operations, changes in stockholders' equity, and cash flows for the periods ended June 30, 1999, 1998, and 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audit. The financial statements of the Company's subsidiary, as of June 30, 1999, were audited by other auditors whose report dated September 3, 1999 expressed an unqualified opinion on those statements. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company and subsidiaries as of June 30, 1999, and the consolidated results of their operations and their cash flows for the periods presented in conformity with generally accepted accounting principles. /s/ Clyde Bailey Clyde Bailey Certified Public Accountant October 12, 1999 F-1 SOLUTIONNET INTERNATIONAL INC. BALANCE SHEETS
As of June 30 ------------------------------------------ 1999 1998 ---------------- ---------------- A S S E T S Current Assets: Cash in Bank $ 214,341 $ - Accounts Receivable 1,176,664 Notes Receivable 490,000 - ---------------- ---------------- Total Current Assets 1,881,005 - Fixed Assets Fixed Assets 87,054 Less: Accumulated Depreciation (67,898) ---------------- Total Fixed Assets 19,156 Other Assets Deferred Tax Credit - Research & Development, net 404,254 Technology 8,850,295 Goodwill 1,500,000 Organization Expenses 100,000 ---------------- ---------------- Total Other Assets 10,854,549 Total Assets 12,754,710 - ================ ================
L I A B I L I T I E S Current Liabilities Accounts Payable 415,604 - Accrued Expenses 575,381 Accrued Federal Income Tax Payable 33,329 Accrued Taxes 142,176 7,458 ---------------- ---------------- Total Current Liabilities 1,166,490 7,458 STOCKHOLDERS' EQUITY Preferred Stock, .001 par value, 5,000,000 shares - - authorized with no shares issues and outstanding Common Stock, .001 par value, 20,000,000 shares 12,178 555 authorized with 12,177,509 shares issued and outstanding Additional paid in capital 13,827,111 2,338,134 Retained Earnings (2,251,069) (2,346,147) ---------------- ---------------- Total Stockholders' Equity 11,588,220 (7,458) Total Liabilities and Stockholders' Equity $ 12,754,710 $ - ================ ================
F-2 SOLUTIONNET INTERNATIONAL INC. STATEMENT OF STOCKHOLDERS' EQUITY
Additional Common Stock Paid-in Accumulated Shares $0.001 Par Value Capital Deficit Total --------------- --------------- --------------- --------------- --------------- Balance July 1, 1996 4,412,003 $ 4,412 $ 2,305,777 $ (2,350,968) $ (40,779) Net Income (Loss) (3,855) (3,855) --------------------------------------------------------------------------------------- Balance, June 30, 1997 4,412,003 4,412 2,305,777 (2,354,823) (44,634) Sale of Stock 1,140,000 1,140 27,360 - 28,500 Reverse Stock Split (10 to 1) (4,996,803) (4,997) 4,997 Net Income (Loss) 8,676 8,676 --------------------------------------------------------------------------------------- Balance, June 30, 1998 555,200 555 2,338,134 (2,346,147) (7,458) Stock Issued 144,800 146 20,454 20,600 Reverse Stock Split (4 to 1) (524,991) (525) 525 0 Stock Issue 1,502,500 1,503 978,498 980,000 Stock Merger - April 2, 1999 10,500,000 10,500 10,489,500 10,500,000 Net Income (Loss) 95,078 95,078 --------------------------------------------------------------------------------------- Balance June 30, 1999 12,177,509 12,178 13,827,111 ($2,251,069) 11,588,220 =======================================================================================
F-3 SOLUTIONNET INTERNATIONAL INC. STATEMENT OF OPERATIONS
For the Years Ended June 30 ----------------------------------------------------------------- 1999 1998 1997 --------------- --------------- --------------- Revenues: - --------- Revenues $ 987,946 $ - $ - --------------- --------------- --------------- Total Revenues 987,946 - - Cost of Revenues: - ----------------- Cost of Revenues 17,781 Wages 258,849 Other Cost of Revenues 5,616 --------------- Total Cost of Revenues 282,246 Gross Profit 705,700 General & Administrative Expenses: Consulting Expenses 359,339 - - Amortization Expense 32,483 Salaries 44,830 Management Expenses 30,000 - - Legal & Professional Expenses 28,587 6,393 Other Expenses 82,054 (15,069) 3,855 --------------- --------------- --------------- Total Expenses 577,293 (8,676) 3,855 --------------- --------------- --------------- Net Income (Loss) Before Tax 128,407 8,676 (3,855) Income Tax Benefit (Expense) (33,329) - - --------------- --------------- --------------- Net Income (Loss) $ 95,078 $ 8,676 $ (3,855) =============== =============== =============== Net Loss per share $0.027 $0.016 ($0.007) Weighted Average Number of Shares Outstanding 3,558,049 555,200 555,200 (Retroactively Restated)
F-4 SOLUTIONNET INTERNATIONAL INC.
For the Years Ended June 30 --------------------------------------------- 1999 1998 1997 -------------- ------------ ----------- Cash Flows from Operating Activities - ------------------------------------ Net Income per Income Statement $ 95,078 $ 8,676 $ (3,855) Adjustments: ------------ Amortization of R & D Expenses 32,483 - - Organization Expense (100,000) - - Loan Receivable (490,000) - - Goodwill (1,500,000) Research & Development (436,737) Technology (8,850,295) Accrued Expenses 575,381 Accrued Taxes 134,718 Accounts Payable 415,604 (37,176) 3,771 Accrued Federal Income Tax Payable 33,329 - - Accounts Receivable (1,176,664) - - -------------- ------------ ----------- Net Cash (used for) Operating Activities (11,267,103) (28,500) (84) -------------- ------------ ----------- Cash Flows from Investing Activities - ------------------------------------ Fixed Assets (19,156) - - -------------- ------------ ----------- Net Cash (used for) provided by Investing Activities (19,156) - - -------------- ------------ ----------- Cash Flows from Financing Activities - ------------------------------------ Stock Issued 11,500,600 28,500 - Note Payable - - - -------------- ------------ ----------- Total from Financing Activities 11,500,600 28,500 - -------------- ------------ ----------- Increase in Cash 214,341 (974) (84) Cash Balance, Begin of Year - 974 1,058 -------------- ------------ ----------- Cash Balance, End of Year $ 214,341 $ - $ 974 ============== ============ =========== Supplement Disclosure: Cash paid during year for: Interest - - - Income Taxes - - -
F-5 SolutionNet International, Inc. And Subsidiary Notes to Financial Statements 1. STOCKHOLDERS' EQUITY Common Stock The Company's Articles of Incorporation authorize the issuance of 20,000,000 shares of Common Stock, $0.001 par value per shares, of which 12,177,509 were outstanding as of June 30, 1999. Holders of shares of Common Stock are entitled to one vote and each fractional share of Common Stock is entitled to a corresponding fractional vote on each matter submitted to a vote of shareholders. Holders of Common Stock have no cumulative voting rights. Holders of shares of Common Stock are entitled to share ratably in dividends, if any, as may be declared, from time to time by the Board of Directors, in its discretion, from funds legally available therefore. To the extent that additional shares of the Company's Common Stock are issued, the relative interests of the existing stockholders may be diluted. Holders of common stock do not have any preemptive or preferential rights to acquire any shares or securities of the Company, including shares or securities held in the treasury of the Company. Immediately prior to the share-exchange agreement, the Company had 7,000,003 shares issued and outstanding. After a 10-to-1 and a 4-to-1 reverse stock split, the Company had a total of 175,000 shares that were issued and outstanding. As part of the share exchange agreement of April 2, 1999, the Company issued 10,500,000 shares of common stock to shareholders of SR Singapore in exchange for 100% of SR Singapore's common stock. Currently, the Company has a total of 12,177,509 shares of common stock that are issued and outstanding On April 2, 1999, the Company issued an aggregate of 1,502,500 shares of common stock, par value $0.001, at an offering price of $0.66, to five "accredited" investors, pursuant to Rule 504 of Regulation D promulgated under the Securities Act of 1933, resulting in net proceeds to the Company in the amount of approximately $980,000. 2,500 shares of the total 1,502,500 were issued for legal services. On April 6, 1999, the Company raised approximately $980,000 through the sale of 1,500,000 shares of it's common stock at a price of $.66 per share. Preferred Stock The Company's Articles of Incorporation authorizes the issuance of 5,000,000 of Preferred Stock, $0.001 par value. As of June 30, 1999 there were no issued and outstanding shares of Preferred Stock. The Company's Board of Directors has authority, without action by the shareholders, to issue all or any portion of the authorized but unissued preferred stock in one or more series and to determine the voting rights, preferences as to dividends and liquidation, conversion rights, and other rights of such series. 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 resolution by the Board of Directors prior to the issuance of such Preferred Stock. No other dividend shall be paid on the Preferred Stock. Holders of shares of Preferred Stock may be granted the right to convert such Preferred Stock to Common Stock of the Company on such terms as may be determined by the Board of Directors prior to the issuance of such Preferred Stock. The Company does not have any debt securities and the Registrant does not anticipate or intend to register any other securities at this time. 2. STOCK BASED COMPENSATION At June 30, 1999, the Company did not have any stock based compensation plans in effect. In the event that the Company does adopt a stock based compensation plan they will use FASB Statement 123, Accounting for Stock-Based Compensation, which requires the company to provide pro forma information regarding net income per share as if compensation cost for the Company's options had been determined in accordance with the fair value based method prescribed in FASB Statement 123. The Company will estimate the fair value of each stock option at the grant date by using the Black-Scholes option-pricing model There is also no stock option outstanding at the present time. 3. INCOME TAXES The components of the provision for income taxes are as follows: Year ended June 30, 1999 1998 - -------------------------------------------------------------------------------- Current: Federal $ 33,329 $ -0- State -0- -0- - -------------------------------------------------------------------------------- $ 33,329 $ -0- - -------------------------------------------------------------------------------- Such income taxes are included in the accompanying consolidated financial statements as follows: - -------------------------------------------------------------------------------- Income from operations $ 33,329 $ -0- Extraordinary Items --- --- - -------------------------------------------------------------------------------- $ 33,329 $ -0- - -------------------------------------------------------------------------------- The above provision has been calculated based on Federal and State statutory rates. 4. RELATED PARTY TRANSACTIONS There were no major related party transactions during the periods presented. 5. NOTE PAYABLE AND FINANCING TRANSACTIONS There are no long-term debt for the period ended June 30, 1999 or 1998. The only long-term debt is loans and advances from officers and directors of the Company. The Company's intent is fund future growth and research and development through issuance of equity funding. 6. EARNINGS PER SHARE The following reconciles the components of the earnings per share (EPS) computation:
June 30 1999 1998 Earning per common Income Shares Per-Share Income Shares Per-Share Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount - -------------------------------------------------------------------------------------------------------------- Net Income $ 95,078 3,558,049 $.027 $ 8,676 555,200 $ .016 Effect of Dilative Securities: Stock options ============================================================================================================== Income from $ 95,078 3,558,049 $.027 $ 8,676 555,200 $ .016 continuing operations available to common shareholders plus assumed conversions ==============================================================================================================
The number of shares are a weighted-average number of shares outstanding of the periods presents. 7. SUBSEQUENT EVENTS No other material subsequent events have occurred that warrants disclosure since the balance sheet date. SolutionNet International, Inc. And Subsidiary Summary of Accounting Policies NATURE OF BUSINESS The Company was originally incorporated under the laws of the State of Iowa on August 1, 1984, under the name of Grason Industries, Inc. On April 28, 1994, Grason Industries, Inc. changed its name to ETG International, Inc.("Company or ETGI"). On October 11, 1994, ETGI changed its corporate domicile from Iowa to Minnesota. On March 22, 1999, ETGI changed its corporate name to SolutionNet, International, Inc. The Company has been primarily inactive for the past several years. The Company has 20, 000,000 in authorized common stock with a par value of $.001 and as of June 30, 1999 a total of 12,177,509 shares were issued and outstanding. The Company also has authorized preferred stock of 5,000,000 with a par value of $.001. As of June 30, 1999 there were no shares of preferred stock outstanding. PRINCIPLES OF CONSOLIDATION The Company's financial statements include the effect of the merger agreement signed on April 2, 1999 between the Company and SR Singapore. The Company acquired 100% of the outstanding stock of SolutionNet, Inc. (a British Virgin Islands corporation), which held 100% of SR Singapore, Pte., Ltd., a Singapore corporation, in exchange for 10,500,000 shares of the Company's stock. Investments in which the Company does not have a majority voting or financial controlling interest are accounted for under the equity method of accounting unless its ownership constitutes less than a 20% interest in such entity for which such investment would then be included in the consolidated financial statements on the cost method. All significant inter-company transactions and balances have been eliminated in consolidation. MARKETABLE SECURITIES In accordance with Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," (SFAS 115), the Company classifies its investment portfolio according to the provisions of SFAS 115 as either held to maturity, trading, or available for sale. At June 30, 1999, the Company classified its investment portfolio as available for sale and held to maturity. Securities available for sale are carried at fair value with unrealized gains and losses included in stockholders' equity. Gain or losses from the sale or redemption of the investments are determined using the specific identification method. INCOME TAXES The Company accounts for income taxes pursuant to the provisions of the Financial Accounting Standards Board Statement No. 109, "Accounting for Income Taxes", which requires an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. EARNINGS PER COMMON SHARE The Company has adopted Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," which simplifies the computation of earnings per share requiring the restatement of all prior periods. Basic earnings per share are computed on the basis of the weighted average number of common shares outstanding during each year. Diluted earnings per share are computed on the basis of the weighted average number of common shares and dilutive securities outstanding. Dilutive securities having an anti-dilutive effect on diluted earnings per share are excluded from the calculation. UNINSURED CASH BALANCES The Company maintains its cash balances at several financial institutions. Accounts at the institutions are secured by the Federal Deposit Insurance Corporation up to $100,000. Periodically, balances may exceed this amount. The Company's cash position is held by its operating subsidiary, SR Singapore, with holds its cash balances in a Singapore bank. At June 30, 1999, uninsured balances aggregated $214,341. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure on contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. YEAR 2000 CONCERNS The Company has addressed the concerns of potential year 2000 computing problems, both internally and with external parties and believes that significant additional costs will not be incurred because of this circumstance. The Company has performed an evaluation of its computer hardware and software and has determined that recent enhancements and upgrades have brought it's systems significantly into compliance with the year 2000 phenomenon and that existing support agreements are adequate to cope with any remaining issues. Based upon equipment evaluations and analysis by consulting parties, management does not believe that significant operational equipment modifications are necessary. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying value of financial instruments including marketable securities, notes and loans receivables, accounts payable and notes payable approximate their fair values at June 30, 1999. LONG-LIVED ASSETS Statement of Financial Accounting Standards No. 121 "Accounting for Impairment of Long-Lived Assets to be Disposed of " requires, among other things, impairment loss of assets to be held and gains or losses from assets that are expected to be disposed of be included as a component of income from continuing operations before taxes on income. STOCK BASED COMPENSATION Statement of Financial Accounting Standards No. 123, "Accounting for Stock Based Compensation" SFAS No. 123 established a fair value method for accounting for stock-based compensation plans either through recognition or disclosure. The Company did not adopt the fair value based method but instead discloses the effects of the calculation required by the statement. FOREIGN CURRENCY Assets and liabilities of the Company's foreign subsidiary are translated at year-end exchange rates, and revenue and expenses are translated at average exchange rates prevailing during the year. Translation adjustments are recorded as a separate component of stockholders' equity. COMPREHENSIVE INCOME Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income," establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, SFAS No.130 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and Related Information, supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise." SFAS 131 establishes standards for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS 131 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No. 133, "Accounting and Derivative Instruments and Hedging Activities" The statement establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. The statement requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. The FASB has delayed the effective date of this statement by one year with the issuance of SFAS No. 137. The standard is now effective for fiscal years beginning after June 15, 2000. The Company is in now in the process of evaluating this statement and whether it will have any effect on its financial statements. ACQUISITIONS By an agreement dated April 2, 1999, and a supplemental agreement dated April 6, 1999, the Company entered into an agreement with Densmore Group Limited ("Densmore Group") for the exchange of common stock (the "share-exchange agreement"). Densmore Group owned a majority controlling interest in all of the issued and outstanding shares of SolutionNet Inc., which in turn, held all of the issued and outstanding shares of SR Singapore, Pte., Ltd. ("SR Singapore"). As part of the share-exchange agreement, an intermediate holding company was incorporated on April 14, 1999. SolutionNet Inc. was incorporated under the laws of the British Virgin Islands for the purpose of becoming the holding company for the Company's operating subsidiaries. The company is also responsible for managing the international sales of Company's products and services outside North America. Pursuant to the share-exchange agreement, the Company acquired 100% of the issued and outstanding stock of SolutionNet Inc.(and thereby SR Singapore) in exchange for 10,500,000 shares, $0.001 par value, of the Company's common stock. SR Singapore is a private limited corporation that was incorporated on January 25, 1994 under the laws of the Republic of Singapore. SR Singapore was incorporated for the purpose of providing independent consulting services offering numerous Information Technology solutions. Although inactive during 1994, SR Singapore became an active operational organization during the first fiscal quarter of 1995. Currently, SR Singapore is the wholly owned operating subsidiary of the Company. The results on the `Statement Of Operations' for the year ended June 30, 1999 includes only the result of operations after the consolidation as of April 2, 1999 and runs to June 30, 1999. The consolidated `Statement Of Operations' does not include any pre-April 2, 1999 operating activity for SR Singapore, Pte., Ltd.("SR Singapore"). Immediately prior to the share-exchange agreement, the Company had 7,000,003 shares issued and outstanding. After a 10-to-1 and a 4-to-1 reverse stock split, the Company had a total of 175,000 shares that were issued and outstanding. As part of the share exchange agreement of April 2, 1999, the Company issued 10,500,000 shares of common stock to shareholders of SolutionNet, Inc. in exchange for 100% of SolutionNet, Inc. common stock. The purchase price and related acquisition costs exceeded the fair values assigned to assets by $1,500,000. This amount has been recorded as goodwill and will be amortized over 15 years. Details of the transaction are as follows: Accounts Receivable 761,399 Fixed Assets 19,155 Technology 8,850,295 Goodwill 1,500,000 Debts ( 630,849) ----------- Total 10,500,000 =========== FISCAL YEAR END The Board of Directors elected to change the fiscal year-end to June 30. Previously, the Company has reported its financial results on September 30. The Company's subsidiary, SR Singapore reported its financial results on March 31. These financial statements have been restated to reflect the new fiscal year-end. RECLASSIFICATIONS Certain reclassifications have been made to the prior year's financial statements in order to conform to the current presentation. Audited Financial Statements for SR Singapore, Pte., Ltd. for period ended June 30th 1999, December 31st, 1998, March 31st, 1998, and March 31st 1997. F-6 AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION SR SINGAPORE PTE LTD 30TH JUNE 1999 AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION SR SINGAPORE PTE LTD 30TH JUNE 1999 C O N T E N T S PAGE -------- Report of the directors 1 Statement by directors 6 Report of the auditors to the members 7 Profit and loss account 8 Balance Sheet 9 Notes on the accounts 10 SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) REPORT OF THE DIRECTORS The directors present their report to the members together with the audited accounts of the company for the financial period from 1st January 1999 to 30th June 1999. DIRECTORS The directors in office at the date of this report are: Venkatachari Suresh PRINCIPAL ACTIVITIES The principal activities of the company are to carry on the businesses in maintenance and development of computer hardware and software and to act as consultants and advisers in the information technology industries. On April 2, 1999 SR Singapore entered into a share-exchange agreement with SolutionNet International, Inc. wherein SolutionNet International, Inc. acquired 100% of the total shares outstanding of SR Singapore. ACQUISITION AND DISPOSAL OF SUBSIDIARIES There were no acquisition and disposal of subsidiaries during the financial period. RESULTS FOR THE FINANCIAL PERIOD $ Net profit for the period after taxation 325,473 Revenue reserve brought forward 130,087 --------------- Revenue reserve carried forward 455,560 =============== TRANSFER TO/(FROM) RESERVES OR PROVISIONS There were no material transfers to or from reserves or provisions other than normal amounts set aside for depreciation of fixed assets and provision for current income tax as disclosed in the accounts. ISSUE OF SHARES AND DEBENTURES During the financial period, the company did not issue any shares or debentures. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES Neither at the end of nor at any time during the financial period was the company a party to any arrangement whose object is to enable the directors of the company to acquire benefits by means of the acquisitions of shares or debentures of the company or any other body corporate. DIRECTORS' INTEREST IN SHARES OR DEBENTURES The Directors holding office at the end of the financial period and their interests in the share capital of the company as recroded in the register of directors' shareholdings were as follows: Name of directors At beginning At end In which interests of period of period are held (ordinary shares of $1 each) Venkatachari Suresh 99,000 *100,000 Vijaya Lachimi d/oS Govindsamy 1,000 - * By virtue of Section 7 of the Companies Act, Mr. Venkatachari Suresh is deemed to have an interest of 100,000 shares of the company. DIVIDENDS No dividends has been paid or declared or recommended since the end of the previous financial period. BAD AND DOUBTFUL DEBTS Before the profit and loss account and the balance sheet were made out, the directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and have satisfied themselves that there were no known bad debts and that no provision for doubtful debts was necessary. At the date of this report, the directors are not aware of any circumstances which would render it necessary to write off any debts or to make a provision for doubtful debts in respect of these accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) CURRENT ASSETS Before the profit and loss account and the balance sheet were made out, the directors took reasonable steps to ascertain that current assets which were unlikely to realise in the ordinary course of business their book values have been written down to their estimated realisable values or that adequate provisions have been made for the diminution in value of such current assets. At the date of this report, the directors are not aware of any circumstances which would render the values attributable to current assets in the accounts misleading. CHARGES AND CONTINGENT LIABILITIES Since the end of the financial period: (a) no charge on the assets of the company has arisen which secures the liability of any other person, and (b) no contingent liability of the company has arisen. ABILITY TO MEET OBLIGATIONS No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial period which, in the opinion of the directors, will or may substantially affect the ability of the company to meet its obligations as and when they fall due. OTHER CIRCUMSTANCES AFFECTING ACCOUNTS As at the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or accounts which would render any amount stated in the accounts misleading. UNUSUAL ITEMS In the opinion of the directors the results of the operations of the company have not been substantially affected by any item, transaction or event of a material and unusual nature during the financial period. UNUSUAL ITEMS AFTER PERIOD END DATE In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial period and the date of this report which would affect substantially the results of the operations of the company for the financial period in which this report is made. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) DIRECTORS' CONTRACTUAL BENEFITS Since the end of the previous financial period, no director has received or become entitled to receive a benefit by reason of a contract made by the company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest. OPTIONS GRANTED No option to take up unissued share of the company was granted during the financial period. OPTIONS EXERCISED During the financial period, no shares were issued by virtue of the exercise of an option to take up unissued shares. OPTION OUTSTANDING There were no unissued shares of the company under option as at the end of the financial period. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) AUDITORS Wee Koon San & Co have expressed their willingness to accept reappointment as auditors. ON BEHALF OF THE DIRECTORS, /s/ Venkatachari Suresh --------------------------- VENKATACHARI SURESH DIRECTOR SINGAPORE, SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) STATEMENT BY DIRECTORS In the opinion of the directors, the accompanying profit and loss account and balance sheet together with the notes thereon are drawn up so as to give a true and fair view of the state of affairs of the company for the financial period from 1st January 1999 to 30th June 1999 and of the results of the business of the company for the financial period then ended and, at the date of this statement, there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due. ON BEHALF OF THE DIRECTORS, /s/ Venkatachari Suresh --------------------------- VENKATACHARI SURESH DIRECTOR SINGAPORE, REPORT OF THE AUDITORS TO THE MEMBERS OF SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) We have audited the accompanying financial statements of SR SINGAPORE PTE LTD for the financial period from 1st January 1999 to 30th June 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan to perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, (a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act and Statements of Accounting Standard and so as to give a true and fair view of: i) the state of affairs of the company for the financial period from 1st January 1999 to 30th June 1999 and of the results and cash flows of the company for the financial period then ended on that date; and ii) the other matters required by section 201 of the Act to be dealt with in the accounts; (b) accounting and other records, and the registers required by the Act to be kept by the company have been properly kept in accordance with the provisions of the Act. WEE KOON SAN & CO CERTIFIED PUBLIC ACCOUNTANTS, SINGAPORE SINGAPORE, SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 1ST JANUARY 1999 TO 30TH JUNE 1999
01/01/99 01/04/98 TO TO NOTE 30/06/99 31/12/98 $ $ TURNOVER 2,250,189 1,935,500 ============== ============== Operating profit for the period 549,577 37,597 After charging :- Amortisation of research and development 110,442 - Auditors' remuneration 2,000 2,800 Depreciation of fixed assets 1.2 & 4 19,280 26,569 Director's fee - 80,000 Directors' remuneration 57,600 82,080 ============== ============== Less : Taxation 1.5 & 9 (224,104) (13,071) -------------- -------------- Net profit for the period after taxation 325,473 24,526 Revenue reserve brought forward 130,087 105,561 -------------- -------------- Revenue reserve carried forward 455,560 130,087 ============== ==============
The notes on pages 10 to 13 form an integral part of the accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) BALANCE SHEET AS AT 30TH JUNE 1999
30TH 31ST JUNE DECEMBER NOTE 1999 1998 $ $ CAPITAL EMPLOYED Share capital 4 100,000 100,000 Revenue reserve 455,560 130,087 -------------- -------------- 555,560 230,087 ============== ============== EMPLOYMENT OF CAPITAL FIXED ASSETS 5 32,563 31,570 RESEARCH AND DEVELOPMENT COST 6 687,233 583,760 CURRENT ASSET Stocks - 3,732 Trade debtors 1,454,116 325,113 Other debtors, deposits and prepayments 121,213 25,915 Cash and bank balances 364,379 - -------------- -------------- 1,939,708 354,760 -------------- -------------- LESS : CURRENT LIABILITIES Trade creditor 34,097 23,842 Other creditor and accruals 302,937 207,753 Amount owing to Holding company 6 1,027,500 - Amounts owing to directors 7 278,920 438,014 Amount owing to a related company 8 218,790 39,790 Bank overdraft (unsecured) - 1,604 Provision for taxation 11 241,700 29,000 -------------- -------------- 2,103,944 740,003 NET CURRENT (LIABILITIES) (164,236) (385,243) -------------- -------------- 555,560 230,087 ============== ==============
The notes on pages 10 to 13 form an integral part of the accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) NOTES ON THE ACCOUNTS 30TH JUNE 1999 These notes form an integral part of and should be read in conjunction with the accompanying accounts :- 1. GENERAL 1.1 Change of Shareholders On 24th May 1999, the entire shareholding of the company was transferred to Solutionnet, Inc, a company incorporated in the British Virgin Islands. Solutionnet, Inc, hence becomes the holding company of the company with effect from this date. 2. SIGNIFICANT ACCOUNTING POLICIES 2.1 Basis of Accounting The accounts of the company expressed in Singapore dollars are prepared in accordance with the historical cost convention. 2.2 Depreciation Depreciation is calculated on a straight line method to write off the cost of fixed assets over their estimated useful lives as follows:- No. of years Furniture and fittings 5 Computer 3 Office equipment 3 Renovation 3 2.3 Amortisation of Research and Development Costs The research and development is stated at cost and is amortised over a period of 3 years upon launching of the project. 2.4 Income Tax The tax expense is determined on the basis of tax effect accounting, using the liability method and it is applied to all significant timing differences. Deferred tax benefits are not recognised unless there is reasonable expectation of their realisation. 3. PRINCIPAL ACTIVITIES AND TURNOVER The principal activities of the company are to carry on the businesses in maintenance and development of computer hardware and software and to act as consultants and advisers in the information technology industries. Turnover represents invoiced services rendered to customers. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) 4. SHARE CAPITAL
01/01/99 01/04/98 TO TO 30/06/99 31/12/98 $ $ Ordinary shares of $1.00 each Authorised : 1,000,000 shares 1,000,000 1,000,000 ============== ============== Issued and fully paid : 100,000 shares 100,000 100,000 ============== ==============
5. FIXED ASSETS
Depreciation Accumulated Net Book charged for 1999 Cost Depreciation Value the period $ $ $ $ Furniture and fittings 26,034 13,920 12,114 2,265 Office equipment 19,822 11,554 8,268 1,936 Computer 94,400 89,309 5,091 14,434 Renovation 7,735 645 7,090 645 -------------- -------------- -------------- -------------- 147,991 115,428 32,563 19,280 ============== ============== ============== ============== Depreciation Accumulated Net Book charged for 1998 Cost Depreciation Value the period $ $ $ $ Furniture and fittings 23,104 11,654 11,450 3,179 Office equipment 10,213 9,618 595 1,739 Computer 94,400 74,875 19,525 21,651 -------------- -------------- -------------- -------------- 127,717 96,147 31,570 26,569 ============== ============== ============== ==============
6. RESEARCH AND DEVLOPMENT This comprise of the research and development cost for net banking and electronic medi infor, which consist of cost of materials, wages and production overheads. 7. AMOUNT OWING TO HOLDING COMPANY The amount owing to holding company is interest-free, unsecured and has no fixed term of repayment. 8. AMOUNTS OWING TO DIRECTORS The amounts owing to directors are interest-free, unsecured and have no fixed term of repayment. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) 9. AMOUNT OWING TO A RELATED COMPANY The amount owing to a related company is interest-free, unsecured and has no fixed term of repayment. 10. RELATED PARTY TRANSACTIONS Significant related party transactions entered with company in which certain directors of the company have substantial financial interest were as follows:
01/01/99 01/04/98 To To 30/06/99 31/12/98 $ $ IT consultancy fees services paid 185,000 - ============== ==============
11. TAXATION
01/01/99 01/04/98 To To 30/06/99 31/12/98 $ $ Tax charged for the period 212,700 9,000 Under provision of income tax in respect of previous year 11,404 4,071 -------------- -------------- 224,104 13,071 ============== ============== The income tax expense derived from the amount of income tax expense determined by applying the Singapore tax rate of 26% to profit before income tax as a result of the following timing differences :- 01/01/99 01/04/98 To To 30/06/99 31/12/98 $ $ Income tax expense at statutory rate 142,890 20,580 Non-allowable items 73,213 7,141 Other items (3,403) (18,721) Underprovision in respect of previous year 11,404 4,071 ============== ============== 224,104 13,071 ============== ==============
SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) 12. OPERATING LEASE COMMITMENT Rental and lease commitment for all operating leases for the period amounted to $50,011 (1998 : $56,668). As at the balance sheet, the company is committed to making the following payment in respect of operating leases within a term of more than one year.
01/01/99 01/04/98 to To 30/06/99 31/12/98 $ $ Within 1 year 175,812 22,374 Within 2 to 3 year 351,624 - ============== ==============
13. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform with current period's presentation. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) TRADING AND PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 1ST JANUARY 1999 TO 30TH JUNE 1999
01/01/99 01/04/98 TO TO 30/06/99 31/12/98 $ $ TURNOVER 2,250,189 1,935,500 LESS : COST OF SALES Opening stocks 3,732 - Purchases 69,970 339,930 Commission 5,017 200 Consultancy fee 185,000 - Implementation expenses 150,000 - Insurance 5,719 - Staff accommodation - 10,973 Wages 791,225 795,561 -------------- -------------- 1,210,663 1,146,664 Less : Closing stocks - 3,732 -------------- -------------- 395,844 1,142,932 -------------- -------------- GROSS PROFIT 1,039,526 792,568 LESS : EXPENDITURE (as per schedule) (489,949) (754,971) -------------- -------------- OPERATING PROFIT FOR THE PERIOD 549,577 37,597 ============== ==============
This schedule does not form part of the audited statutory accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE)
01/01/99 01/04/98 TO TO 30/06/99 31/12/98 $ $ EXPENDITURE Advertisement 8,975 8,148 Amortisation of research and development 110,442 - Auditors' remuneration 2,000 2,800 Bank charges and interest 470 151 Depreciation of fixed assets 19,280 26,569 Directors' fees - 80,000 Directors' remuneration 57,600 82,080 Entertainment and refreshment 789 6,380 Exhibition 21,828 - General expenses 6,266 3,484 Insurance - 17,706 Leasing charges for computers 2,845 - Legal and professional fee 1,940 9,955 Office repairs and maintenance 1,716 2,068 Printing, postages and stationery 3,742 5,799 Rental of office 50,011 58,467 Research and development written off - 36,995 Salaries and CPF 157,612 355,159 Secretarial fee 643 - Staff welfare 1,386 - Subscriptions 410 2,625 Telephone 18,398 3,883 Transport 9,604 19,016 Travelling 12,686 31,276 Water and electricity 1,306 2,410 -------------- -------------- 489,949 754,971 ============== ==============
This schedule does not form part of the audited statutory accounts. F-7 AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION SR SINGAPORE PTE LTD 31ST DECEMBER 1998 AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION SR SINGAPORE PTE LTD 31ST DECEMBER 1998 C O N T E N T S PAGE -------- Report of the directors 1 Statement by directors 6 Report of the auditors to the members 7 Profit and loss account 8 Balance Sheet 9 Notes on the accounts 10 SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) REPORT OF THE DIRECTORS The directors present their report to the members together with the audited accounts of the company for the financial period from 1st April 1998 to 31st December 1998. DIRECTORS The directors in office at the date of this report are: Vijaya Lachimi d/o S Govindasamy Venkatachari Suresh PRINCIPAL ACTIVITIES The principal activities of the company are to carry on the businesses in maintenance and development of computer hardware and software and to act as consultants and advisers in the information technology industries. There have been no significant changes in the nature of these activities during the financial period. ACQUISITION AND DISPOSAL OF SUBSIDIARIES There were no acquisition and disposal of subsidiaries during the financial period. RESULTS FOR THE FINANCIAL PERIOD $ Net profit for the period after taxation 24,526 Revenue reserve brought forward 105,561 -------------- Revenue reserve carried forward 130,087 ============== TRANSFER TO/(FROM) RESERVES OR PROVISIONS There were no material transfers to or from reserves or provisions other than normal amounts set aside for depreciation of fixed assets and provision for current income tax as disclosed in the accounts. ISSUE OF SHARES AND DEBENTURES During the financial period, the company did not issue any shares or debentures. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES Neither at the end of nor at any time during the financial period was the company a party to any arrangement whose object is to enable the directors of the company to acquire benefits by means of the acquisitions of shares or debentures of the company or any other body corporate. DIRECTORS' INTEREST IN SHARES OR DEBENTURES The directors holding office at the end of the financial period and their interests in the share capital of the company as recorded in the register of directors' shareholdings were as follows:- Name of directors in which interest At beginning At end are held of period of period - --------------------- ------------ ------------ (Ordinary shares of $1 each) Venkatachjari Suresh 60,000 99,000 Vijaya Lachimi d/o S Govindasamy 20,000 1,000 Saraspadi d/o Tangaveloo 20,000 - Ms Sarasapadi d/o Tangaveloo, who was appointed to the Board on 25th January 1994, resigned on 1st April 1998. DIVIDENDS No dividends has been paid or declared or recommended since the end of the previous financial year. BAD AND DOUBTFUL DEBTS Before the profit and loss account and the balance sheet were made out, the directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and have satisfied themselves that there were no known bad debts and that no provision for doubtful debts was necessary. At the date of this report, the directors are not aware of any circumstances which would render it necessary to write off any debts or to make a provision for doubtful debts, in respect of these accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) CURRENT ASSETS Before the profit and loss account and the balance sheet were made out, the directors took reasonable steps to ascertain that current assets which were unlikely to realise in the ordinary course of business their book values have been written down to their estimated realisable values or that adequate provisions have been made for the diminution in value of such current assets. At the date of this report, the directors are not aware of any circumstances which would render the values attributable to current assets in the accounts misleading. CHARGES AND CONTINGENT LIABILITIES Since the end of the financial period: (a) no charge on the assets of the company has arisen which secures the liability of any other person, and (b) no contingent liability of the company has arisen. ABILITY TO MEET OBLIGATIONS No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial period which, in the opinion of the directors, will or may substantially affect the ability of the company to meet its obligations as and when they fall due. OTHER CIRCUMSTANCES AFFECTING ACCOUNTS As at the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or accounts which would render any amount stated in the accounts misleading. UNUSUAL ITEMS In the opinion of the directors, the results of the operations of the company have not been substantially affected by any item, transaction or event of a material and unusual nature during the financial period. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) UNUSUAL ITEMS AFTER PERIOD END DATE In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial period and the date of this report which would affect substantially the results of the operations of the company for the financial period in which this report is made. DIRECTORS' CONTRACTUAL BENEFITS Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest. OPTIONS GRANTED No option to take up unissued share of the company was granted during the financial period. OPTIONS EXERCISED During the financial period, no shares were issued by virtue of the exercise of an option to take up unissued shares. OPTION OUTSTANDING There were no unissued shares of the company under option as at the end of the financial period. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) AUDITORS Wee Koon San & Co have expressed their willingness to accept reappointment as auditors. ON BEHALF OF THE DIRECTORS, /s/ Vijaya Lachimi --------------------------- VIJAYA LACHIMI D/O S GOVINDASAMY DIRECTOR /s/ Venkatachari Suresh --------------------------- VENKATACHARI SURESH DIRECTOR SINGAPORE, SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) STATEMENT BY DIRECTORS In the opinion of the directors, the accompanying profit and loss account and balance sheet together with the notes thereon are drawn up so as to give a true and fair view of the state of affairs of the company for the financial period from 1st April 1998 to 31st December 1998 and of the results of the business of the company for the financial period then ended and, at the date of this statement, there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due. ON BEHALF OF THE DIRECTORS, /s/ Vijaya Lachimi --------------------------- VIJAYA LACHIMI D/O S GOVINDASAMY DIRECTOR /s/ Venkatachari Suresh --------------------------- VENKATACHARI SURESH DIRECTOR SINGAPORE, REPORT OF THE AUDITORS TO THE MEMBERS OF SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) We have audited the accompanying financial statements of SR SINGAPORE PTE LTD for the financial period from 1st April 1998 to 31st December 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan to perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, (a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act and Statements of Accounting Standard and so as to give a true and fair view of : i) the state of affairs of the company for the financial period from 1st April 1998 to 31st December 1998 and of the results of the company for the financial period then ended on that date; and ii) the other matters required by section 201 of the Act to be dealt with in the accounts; (b) the accounting and other records, and the registers required by the Act to be kept by the company have been properly kept in accordance with the provisions of the Act. /s/ Wee Koon San & Co WEE KOON SAN & CO CERTIFIED PUBLIC ACCOUNTANTS, SINGAPORE SINGAPORE, SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) PROFIT AND LOSS ACCOUNT FOR THE PERIOD FROM 1ST APRIL 1998 TO 31ST DECEMBER 1998
01/04/98 01/04/97 TO TO NOTE 31/12/98 31/03/98 $ $ TURNOVER 1,935,500 2,536,650 ============== ============== Operating profit for the period/year 37,597 50,938 After charging :- Auditors' remuneration 2,800 2,500 Depreciation of fixed assets 1.2 & 4 26,569 32,859 Director's fee 80,000 20,000 Directors' remuneration 82,080 84,590 ============== ============== Less : Taxation 1.5 & 10 (13,071) (25,500) -------------- -------------- Net profit for the period/year after taxation 24,526 25,438 Revenue reserve brought forward 105,561 80,123 -------------- -------------- Revenue reserve carried forward 130,087 105,561 ============== ==============
The notes from pages 10 to 13 form an integral part of the accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) BALANCE SHEET AS AT 31ST DECEMBER 1998
01/04/98 01/04/97 TO TO NOTE 31/12/98 31/03/98 $ $ CAPITAL EMPLOYED Share capital 3 100,000 100,000 Revenue reserve 130,087 105,561 -------------- -------------- 230,087 205,561 ============== ============== EMPLOYMENT OF CAPITAL FIXED ASSETS 4 31,570 37,474 RESEARCH AND DEVELOPMENT COST 5 583,760 - CURRENT ASSETS Stocks 3,732 - Trade debtors 325,113 406,088 Other debtors, deposits and prepayments 25,915 29,386 Cash balances - 1,085 -------------- -------------- 354,760 436,559 -------------- -------------- LESS : CURRENT LIABILITIES Trade creditor 23,842 12,002 Other creditor and accruals 207,753 106,774 Amounts owing to directors 6 438,014 112,032 Amount owing to a related company 7 39,790 - Bank overdraft (unsecured) 9 1,604 17,664 Provision for taxation 10 29,000 20,000 -------------- -------------- 740,003 268,472 NET CURRENT (LIABILITIES)/ASSETS (385,243) 168,087 -------------- -------------- 230,087 205,561 ============== ==============
The notes from pages 10 to 13 form an integral part of the accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) NOTES ON THE ACCOUNTS 31ST DECEMBER 1998 These notes form an integral part of and should be read in conjunction with the accompanying accounts :- 1. SIGNIFICANT ACCOUNTING POLICIES 1.1 Basis of Accounting The accounts expressed in Singapore dollars are prepared in accordance with the historical cost convention. 1.2 Depreciation Depreciation is calculated on a straight line method to write off the cost of the fixed assets over their estimated useful lives. The estimated useful lives have been taken as follows:- No. of years Furniture and fittings 5 Computer 3 Office equipment 3 1.3 Amortisation of research and development costs The research and development is stated at cost and is amortised over a period of 3 years upon launching of project. 1.4 Stocks Stocks are stated at lower of cost (first-in first-out method) and net realisable value. In estimating the net realisable value, due allowance was made for costs of realisation and age or marketability of items. 1.5 Income Tax The tax expense is determined on the basis of tax effect accounting using the liability method and is applied to all significant timing differences. Deferred tax benefits are not recognised unless there is reasonable expectation of their realisation. 2. PRINCIPAL ACTIVITIES AND TURNOVER The principal activities of the company are to carry on the businesses in maintenance and development of computer hardware and software and to act s consultants and advisers in the information technology industries. Turnover represents invoiced services rendered to customers. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) 3. SHARE CAPITAL
01/04/98 01/04/97 TO TO 31/12/98 31/03/98 $ $ Ordinary shares of $1.00 each Authorised : 1,000,000 shares 1,000,000 1,000,000 ============== ============== Issued and fully paid : 100,000 shares 100,000 100,000 ============== ==============
4. FIXED ASSETS
Depreciation Accumulated Net Book charged for 1998 Cost depreciation Value the period $ $ $ $ Furniture and fittings 23,104 11,654 11,450 3,179 Office equipment 10,213 9,618 595 1,739 Computer 94,400 74,875 19,525 21,651 -------------- -------------- -------------- -------------- 127,717 96,147 31,570 26,569 ============== ============== ============== ============== Depreciation Accumulated Net Book charged for 1997 Cost depreciation Value the year $ $ $ $ Furniture and fittings 75,649 53,223 22,426 25,216 Office equipment 10,213 7,879 2,334 3,405 Computer 21,190 8,476 12,714 4,238 -------------- -------------- -------------- -------------- 107,052 69,578 37,474 32,859 ============== ============== ============== ==============
5. RESEARCH AND DEVELOPMENT This comprise of the research and development cost for net banking and electronic medi infor, which consist of cost of materials, wages and production overhead. 6. AMOUNTS OWING TO DIRECTORS The amounts owing to directors are unsecured, interest-free and have no fixed term of repayment. 7. AMOUNT OWING TO A RELATED COMPANY The amount owing to a related company is unsecured, interest-free and has no fixed term of repayment. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) 8. RELATED PARTY TRANSACTIONS Significant related party transactions entered with company is which certain directors of the company have substantial financial interest were as follows :-
01/04/98 01/04/97 to to 31/12/98 31/03/98 $ $ IT Consultancy fees services 39,790 - ============== ==============
9. BANK OVERDRAFT (UNSECURED) The bank overdraft is due to unpresented cheques as at the financial period end. 10. TAXATION
01/04/98 01/04/97 to to 31/12/98 31/03/98 $ $ Tax charged for the period/year 9,000 20,000 Underprovision in respect if previous year 4,071 5,500 -------------- -------------- 13,071 25,500 ============== ==============
The income tax expense derived from the amount of income tax expense determined by applying the Singapore tax rate of 26% to profit before income tax as a result of the following timing differences :-
01/04/98 01/04/97 to to 31/12/98 31/03/98 $ $ Income tax expense at statutory rate 20,580 13,244 Non-allowable items 7,141 8,718 Other items (14,650) 3,538 -------------- -------------- 13,071 25,500 ============== ==============
11. OPERATING LEASE COMMITMENT Rental and lease commitment for all operation leases for the period amounted to $58,467 (1998 : $56,668). As at the balance sheet, the company is committed to making the following payment in respect of operating leases within a term of more than one year.
01/04/98 01/04/97 to to 31/12/98 31/03/98 $ $ Within 1 year 22,374 67,993 ============== ==============
SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) 12. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform with the current period's presentation. 13. CHANGE OF FINANCIAL YEAR END The company changed its financial year end from 31st March 1998 to 31st December 1998. The accounts of the financial period covered a period of 9 months from 1st April 1998 to 31st December 1998. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) TRADING AND PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED FROM 1ST APRIL 1998 TO 31ST DECEMBER 1998
01/04/98 01/04/97 TO TO 31/12/98 31/03/98 $ $ TURNOVER 1,935,500 2,536,650 LESS : COST OF SALES Purchases 339,930 411,659 Commission 200 2,766 Insurance - 5,980 Staff accommodation 10,973 31,817 Wages 795,561 1,169,701 -------------- -------------- 1,146,664 1,621,923 Less : Closing stocks 3,732 - -------------- -------------- 1,142,932 1,621,923 -------------- -------------- GROSS PROFIT 792,568 914,727 Add : Other income - 52,880 -------------- -------------- 792,568 967,607 LESS : EXPENDITURE (as per schedule) 754,971 916,669 -------------- -------------- OPERATING PROFIT FOR THE PERIOD/YEAR 37,597 50,938 ============== ==============
This schedule does not form part of the audited statutory accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE)
01/04/98 01/04/97 TO TO 31/12/98 31/03/98 $ $ EXPENDITURE Advertisement 8,148 11,509 Auditors' remuneration 2,800 2,500 Bank charges and interest 151 822 Delivery and distribution - 3,283 Depreciation of fixed assets 26,569 32,859 Directors' fees 80,000 20,000 Directors' remuneration 82,080 84,590 Donation - 501 Entertainment and refreshment 6,380 9,551 Exhibition - 5,160 General expenses 3,484 6,462 Insurance 17,706 15,506 Internet charges - 2,420 Legal and professional fee 9,955 11,437 Office repairs and maintenance 2,068 2,980 Printing, postages and stationery 5,799 9,707 Rental of office 58,467 56,668 Research and development written off 36,995 354,972 Salaries and CPF 355,159 232,549 Secretarial fee - 600 Subscriptions 2,625 700 Telephone 3,883 13,516 Transport 19,016 7,712 Travelling 31,276 28,790 Water and electricity 2,410 1,875 -------------- -------------- 754,971 916,669 ============== ==============
This schedule does not form part of the audited statutory accounts. F-8 AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION SR SINGAPORE PTE LTD 31ST MARCH 1998 AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION SR SINGAPORE PTE LTD 31ST MARCH 1998 C O N T E N T S PAGE -------- Report of the directors 1 Statement by directors 6 Report of the auditors to the members 7 Profit and loss account 8 Balance Sheet 9 Notes on the accounts 10 SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) REPORT OF THE DIRECTORS The directors present their report to the members together with the audited accounts of the company for the financial period ended 31st March 1998. DIRECTORS The directors in office at the date of this report are: Vijaya Lachimi d/o S Govindsamy Venkatachari Suresh PRINCIPAL ACTIVITIES The principal activities of the company are to carry on the businesses in maintenance and development of computer hardware and software and to act as consultants and advisers in the information technology industries. There have been no significant changes in the nature of these activities during the financial period. ACQUISITION AND DISPOSAL OF SUBSIDIARIES There were no acquisition and disposal of subsidiaries during the financial period. RESULTS FOR THE FINANCIAL PERIOD $ Net profit for the period after taxation 25,438 Revenue reserve brought forward 80,123 --------------- Revenue reserve carried forward 105,561 =============== TRANSFER TO/(FROM) RESERVES OR PROVISIONS There were no material transfers to or from reserves or provisions other than normal amounts set aside for depreciation of fixed assets and provision for current income tax as disclosed in the accounts. ISSUE OF SHARES AND DEBENTURES During the financial period, the company did not issue any shares or debentures. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES Neither at the end of nor at any time during the financial period was the company a party to any arrangement whose object is to enable the directors of the company to acquire benefits by means of the acquisitions of shares or debentures of the company or any other body corporate. DIRECTORS' INTEREST IN SHARES OR DEBENTURES The directors holding office at the end of the financial period and their interests in the share capital of the company as recorded in the register of directors' shareholdings were as follows :- Name of directors in which interest At beginning At end are held of period of period - --------------------- ------------ ------------ (Ordinary shares of $1 each) Venkatachari Suresh 60,000 60,000 Vijaya Lachimi d/o S Govindsamy 20,000 20,000 Saraspadi D/o Tangaveloo 20,000 20,000 Ms. Saraspadi D/o Tangaveloo, who was appointed to the Board on the 25th of January 1994, resigned on 1st April, 1998. DIVIDENDS No dividends has been paid or declared or recommended since the end of the previous financial period. BAD AND DOUBTFUL DEBTS Before the profit and loss account and the balance sheet were made out, the directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and have satisfied themselves that there were no known bad debts and that no provision for doubtful debts was necessary. At the date of this report, the directors are not aware of any circumstances which would render it necessary to write off any debts or to make a provision for doubtful debts in respect of these accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) CURRENT ASSETS Before the profit and loss account and the balance sheet were made out, the directors took reasonable steps to ascertain that current assets which were unlikely to realise in the ordinary course of business their book values have been written down to their estimated realisable values or that adequate provisions have been made for the diminution in value of such current assets. At the date of this report, the directors are not aware of any circumstances which would render the values attributable to current assets in the accounts misleading. CHARGES AND CONTINGENT LIABILITIES Since the end of the financial period: (a) no charge on the assets of the company has arisen which secures the liability of any other person, and (b) no contingent liability of the company has arisen. ABILITY TO MEET OBLIGATIONS No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial period which, in the opinion of the directors, will or may substantially affect the ability of the company to meet its obligations as and when they fall due. OTHER CIRCUMSTANCES AFFECTING ACCOUNTS As at the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or accounts which would render any amount stated in the accounts misleading. UNUSUAL ITEMS In the opinion of the directors the results of the operations of the company have not been substantially affected by any item, transaction or event of a material and unusual nature during the financial period. UNUSUAL ITEMS AFTER PERIOD END DATE In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial period and the date of this report which would affect substantially the results of the operations of the company for the financial period in which this report is made. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) DIRECTORS' CONTRACTUAL BENEFITS Since the end of the previous financial period, no director has received or become entitled to receive a benefit by reason of a contract made by the company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest. OPTIONS GRANTED No option to take up unissued share of the company was granted during the financial period. OPTIONS EXERCISED During the financial period, no shares were issued by virtue of the exercise of an option to take up unissued shares. OPTION OUTSTANDING There were no unissued shares of the company under option as at the end of the financial period. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) AUDITORS Wee Koon San & Co have expressed their willingness to accept reappointment as auditors. ON BEHALF OF THE DIRECTORS, /s/ Vijaya Lachimi --------------------------- VIJAYA LACHIMI D/O S GOVINDASAMY DIRECTOR /s/ Venkatachari Suresh --------------------------- VENKATACHARI SURESH DIRECTOR SINGAPORE, SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) STATEMENT BY DIRECTORS In the opinion of the directors, the accompanying profit and loss account and balance sheet together with the notes thereon are drawn up so as to give a true and fair view of the state of affairs of the company as of 31st of March 1998 and of the results of the business of the company for the financial period then ended and, at the date of this statement, there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due. ON BEHALF OF THE DIRECTORS, /s/ Vijaya Lachimi --------------------------- VIJAYA LACHIMI D/O S GOVINDASAMY DIRECTOR /s/ Venkatachari Suresh --------------------------- VENKATACHARI SURESH DIRECTOR SINGAPORE, REPORT OF THE AUDITORS TO THE MEMBERS OF SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) We have audited the accompanying financial statements of SR SINGAPORE PTE LTD as of 31st of March 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statement based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan to perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, (b) the financial statements are properly drawn up in accordance with the provisions of the Companies Act and Statements of Accounting Standard and so as to give a true and fair view of: i) the state of affairs of the company for the financial period as of 31st of March 1998 and of the results and cash flows of the company for the financial period then ended on that date; and ii) the other matters required by section 201 of the Act to be dealt with in the accounts; (b) accounting and other records, and the registers required by the Act to be kept by the company have been properly kept in accordance with the provisions of the Act. WEE KOON SAN & CO CERTIFIED PUBLIC ACCOUNTANTS, SINGAPORE SINGAPORE, SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST OF MARCH 1998
NOTE 1998 1997 $ $ TURNOVER 2,536,650 1,222,950 ============== ============== Operating profit for the period 50,938 106,560 After charging :- Auditors' remuneration 2,500 2,000 Depreciation of fixed assets 1.2 & 4 32,859 31,774 Director's fee 20,000 20,000 Directors' remuneration 84,590 - Preliminary expenses written off - 2,200 Preoperating expenses written off - 6,368 ============== ============== Add : Taxation 1.3 & 7 25,500 12,700 -------------- -------------- Net profit for the year after taxation 25,438 93,860 Revenue reserve/ accumulated (losses) brought forward 80,123 (13,737) -------------- -------------- Revenue reserve carried forward 105,561 80,123 ============== ==============
The notes on pages 10 to 12 form an integral part of the accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) BALANCE SHEET AS OF 31ST OF MARCH 1998
NOTE 1998 1997 $ $ CAPITAL EMPLOYED Share capital 3 100,000 100,000 Revenue reserve 105,561 80,123 -------------- -------------- 205,561 180,123 ============== ============== EMPLOYMENT OF CAPITAL FIXED ASSETS 4 37,474 67,079 CURRENT ASSET Trade debtors 406,088 284,045 Other debtors, deposits and prepayments 29,386 36,789 Cash balances 1,085 30,666 -------------- -------------- 436,559 351,500 LESS : CURRENT LIABILITIES Trade creditor 12,002 13,431 Other creditor and accruals 106,774 135,563 Amounts owing to directors 5 112,032 76,762 Bank overdraft (unsecured) 6 17,664 - Provision for taxation 7 20,000 12,700 -------------- -------------- 268,472 238,456 -------------- -------------- NET CURRENT ASSETS 168,087 113,044 -------------- -------------- 205,561 180,123 ============== ==============
The notes on pages 10 to 12 form an integral part of the accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) NOTES ON THE ACCOUNTS 31ST MARCH 1998 These notes form an integral part of and should be read in conjunction with the accompanying accounts :- 1. SIGNIFICANT ACCOUNTING POLICIES 1.1 Basis of Accounting The accounts expressed in Singapore dollars are prepared in accordance with the historical cost convention. 1.2 Depreciation Depreciation is calculated on a straight line method to write off the cost of the fixed assets over their estimated useful lives. The estimated useful lives have been taken as follows: No. of years Furniture and fittings 5 Computer 3 Office Equipment 3 1.3 Income Tax The tax expense is determined on the basis of tax effect accounting, using the liability method and it is applied to all significant timing differences. Deferred tax benefits are not recognized unless there is reasonable expectation of their realization. 2. PRINCIPAL ACTIVITIES AND TURNOVER The principal activities of the company are to carry on the businesses in maintenance and development of computer hardware and software and to act as consultants and advisers in the information technology industries. Turnover represents invoiced services rendered to customers. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) 3. SHARE CAPITAL
1998 1997 $ $ Ordinary shares of $1.00 each Authorized : 1,000,000 shares 1,000,000 1,000,000 ============== ============== Issued and fully paid : 100,000 shares 100,000 100,000 ============== ==============
4. FIXED ASSETS
Depreciation Accumulated Net Book charged for 1998 Cost Depreciation Value the period $ $ $ $ Furniture and fittings 75,649 53,223 22,426 25,216 Office equipment 10,213 7,879 2,334 3,405 Computer 21,190 8,476 12,714 4,238 -------------- -------------- -------------- -------------- 107,052 69,578 37,474 32,859 ============== ============== ============== ============== Depreciation Accumulated Net Book charged for 1997 Cost Depreciation Value the period $ $ $ $ Furniture and fittings 21,190 4,238 16,952 4,238 Office equipment 6,959 4,475 2,485 2,320 Computer 75,649 28,007 47,642 25,216 -------------- -------------- -------------- -------------- 103,798 36,720 67,079 31,774 ============== ============== ============== ==============
5. AMOUNTS OWING TO DIRECTORS The amounts owing to directors are interest-free, unsecured and have no fixed term of repayment. 6. BANK OVERDRAFT (UNSECURED) The bank overdraft is due to unpresented cheques as of the financial year end. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) 7. TAXATION
1998 1997 $ $ Tax charged for the year 20,000 12,700 Under provision in respect of previous year 5,500 - -------------- -------------- 25,500 12,700 ============== ==============
The income tax expense derived from the amount of income tax expense determined by applying the Singapore tax rate of 26% to profit before income tax as a result of the following timing differences :-
1998 1997 $ $ Income tax expense at statutory rate 13,244 27,706 Non-allowable items 8,718 9,380 Other items 3,538 (24,386) ============== ============== 25,500 12,700 ============== ==============
SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) 8. OPERATING LEASE COMMITMENT Rental and lease commitment for all operating leases for the year amounted to $56,668 (1997 : $66,339). As at the balance sheet, the company is committed to making the following payment in respect of operating leases within a term of more than one year.
1998 1997 $ $ Within 1 year 67,993 53,139 Within 2 to 3 year - 117,197 ============== ============== 67,993 170,336
9. RESEARCH AND DEVELOPMENT During the financial year, the research and development stated at cost of $354,972 for the development of net banking and electronic medi infor was written off in the year in which it is incurred. 10. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform with current year's presentation. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 1998
1998 1997 $ $ TURNOVER 2,536,650 1,222,950 LESS : COST OF SALES Purchases 411,659 126,640 Commission 2,766 2,753 Insurance 5,980 6,117 Staff accommodation 31,817 5,579 Wages 1,169,701 688,772 -------------- -------------- 1,621,923 829,861 GROSS PROFIT 914,727 393,089 Add: Other Income 52,880 13,580 967,607 406,669 LESS : EXPENDITURE (as per schedule) 916,669 300,109 -------------- -------------- OPERATING PROFIT FOR YEAR/ PERIOD 50,938 106,560 ============== ==============
This schedule does not form part of the audited statutory accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE)
1998 1997 $ $ LESS: EXPENSES Advertisement 11,509 4,589 Auditors' remuneration 2,500 2,000 Bank charges and interest 822 1,300 CPF 38,758 19,140 Delivery and Distribution 3,283 - Depreciation of fixed assets 32,859 31,774 Directors' fees 20,000 20,000 Directors' remuneration 84,590 - Donation 501 - Entertainment and refreshment 9,551 4,992 Exhibition 5,160 - General expenses 6,462 7,276 Insurance 15,506 - Internet charges 2,420 - Legal and professional fee 11,437 2,204 Office repairs and maintenance 2,980 823 Preliminary expenses written off - 2,200 Printing, postages and stationery 9,707 6,487 Rental 56,668 66,339 Research and development 354,972 - Salaries 193.791 95,878 Secretarial fees 600 100 Subscriptions 700 - Telephone 13,516 9,757 Transport 7,712 5,086 Travelling 28,790 7,637 Water and electricity 1,875 1,245 -------------- -------------- 916,669 300,109 ============== ==============
This schedule does not form part of the audited statutory accounts. F-9 AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION SR SINGAPORE PTE LTD 31ST MARCH 1997 AUDITED FINANCIAL STATEMENTS AND OTHER FINANCIAL INFORMATION SR SINGAPORE PTE LTD 31ST MARCH 1997 C O N T E N T S PAGE -------- Report of the directors 1 Statement by directors 6 Report of the auditors to the members 7 Profit and loss account 8 Balance Sheet 9 Notes on the accounts 10 SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) REPORT OF THE DIRECTORS The directors present their report to the members together with the audited accounts of the company for the financial year ended 31st March 1997. DIRECTORS The directors in office at the date of this report are: Vijaya Lachimi d/o S Govindasamy Venkatachari Suresh PRINCIPAL ACTIVITIES The principal activities of the company are to carry on the businesses in maintenance and development of computer hardware and software and to act as consultants and advisers in the information technology industries. There have been no significant changes in the nature of these activities during the financial period. ACQUISITION AND DISPOSAL OF SUBSIDIARIES There were no acquisition and disposal of subsidiaries during the financial period. RESULTS FOR THE FINANCIAL PERIOD $ Net profit for the period after taxation 93,860 Accumulated (losses) brought forward (13,737) -------------- Revenue reserve carried forward 80,123 ============== TRANSFER TO/(FROM) RESERVES OR PROVISIONS There were no material transfers to or from reserves or provisions other than normal amounts set aside for depreciation of fixed assets and provision for current income tax as disclosed in the accounts. ISSUE OF SHARES AND DEBENTURES During the financial year, the company increase its authorized share capital from 100,000 shares of S$1.00 each to 1,000,000 shares of S$1.00 each by the creation of 900,000 new ordinary shares of S$1.00 each. On 30th April 1996, the issued share capital was increased by 50,000 ordinary shares of S$1.00 each fully paid for cash at par to provide additional working capital. During the financial period, the company did not issue any shares or debentures. ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE SHARES OR DEBENTURES Neither at the end of nor at any time during the financial period was the company a party to any arrangement whose object is to enable the directors of the company to acquire benefits by means of the acquisitions of shares or debentures of the company or any other body corporate. DIRECTORS' INTEREST IN SHARES OR DEBENTURES The directors holding office at the end of the financial period and their interests in the share capital of the company as recorded in the register of directors' shareholdings were as follows:- Name of directors in which interest At beginning At end are held of period of period - --------------------- ------------ ------------ (Ordinary shares of $1 each) Venkatachjari Suresh - 60,000 Vijaya Lachimi d/o S Govindasamy 25,000 20,000 Saraspadi d/o Tangaveloo 25,000 20,000 Mr Venkatachari Suresh was appointed to the Board on 30th April 1997. DIVIDENDS No dividends has been paid or declared or recommended since the end of the previous financial year. BAD AND DOUBTFUL DEBTS Before the profit and loss account and the balance sheet were made out, the directors took reasonable steps to ascertain that proper action had been taken in relation to the writing off of bad debts and have satisfied themselves that there were no known bad debts and that no provision for doubtful debts was necessary. At the date of this report, the directors are not aware of any circumstances which would render it necessary to write off any debts or to make a provision for doubtful debts, in respect of these accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) CURRENT ASSETS Before the profit and loss account and the balance sheet were made out, the directors took reasonable steps to ascertain that current assets which were unlikely to realise in the ordinary course of business their book values have been written down to their estimated realisable values or that adequate provisions have been made for the diminution in value of such current assets. At the date of this report, the directors are not aware of any circumstances which would render the values attributable to current assets in the accounts misleading. SUBSEQUENT EVENTS Since the end of the financial period: (a) no charge on the assets of the company has arisen which secures the liability of any other person, and (b) no contingent liability of the company has arisen. CONTINGENT OF OTHER LIABILITY No contingent or other liability has become enforceable or is likely to become enforceable within the period of twelve months after the end of the financial period which, in the opinion of the directors, will or may substantially affect the ability of the company to meet its obligations as and when they fall due. OTHER CIRCUMSTANCES AFFECTING ACCOUNTS As at the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or accounts which would render any amount stated in the accounts misleading. MATERIAL AND UNUSUAL ITEMS DURING THE FINANCIAL YEAR In the opinion of the directors, the results of the operations of the company have not been substantially affected by any item, transaction or event of a material and unusual nature during the financial period. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) MATERIAL AND UNUSUAL ITEMS SINCE THE END OF THE FINANCIAL YEAR In the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between the end of the financial period and the date of this report which would affect substantially the results of the operations of the company for the financial period in which this report is made. DIRECTORS' CONTRACTUAL BENEFITS Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the company or a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest. OPTIONS GRANTED No option to take up unissued share of the company was granted during the financial period. OPTIONS EXERCISED During the financial period, no shares were issued by virtue of the exercise of an option to take up unissued shares. OPTION OUTSTANDING There were no unissued shares of the company under option as at the end of the financial period. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) AUDITORS Wee Koon San & Co have expressed their willingness to accept reappointment as auditors. ON BEHALF OF THE DIRECTORS, /s/ Vijaya Lachimi --------------------------- VIJAYA LACHIMI D/O S GOVINDASAMY DIRECTOR /s/ Venkatachari Suresh --------------------------- VENKATACHARI SURESH DIRECTOR SINGAPORE, SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) STATEMENT BY DIRECTORS In the opinion of the directors, the accompanying profit and loss account and balance sheet together with the notes thereon are drawn up so as to give a true and fair view of the state of affairs of the company for the financial period from 1st April 1998 to 31st December 1998 and of the results of the business of the company for the financial period then ended and, at the date of this statement, there are reasonable grounds to believe that the company will be able to pay its debts as and when they fall due. ON BEHALF OF THE DIRECTORS, /s/ Vijaya Lachimi --------------------------- VIJAYA LACHIMI D/O S GOVINDASAMY DIRECTOR /s/ Venkatachari Suresh --------------------------- VENKATACHARI SURESH DIRECTOR SINGAPORE, REPORT OF THE AUDITORS TO THE MEMBERS OF SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) We have audited the accounts set out on pages 8 to 12 in accordance with Singapore Standards on Auditing and Statements of Auditing Practice and, accordingly, included such test of the accounting records and such other audit procedures as we considered appropriate in the circumstances. In our opinion, (a) the financial statements are properly drawn up in accordance with the provisions of the Companies Act and Statements of Accounting Standard and so as to give a true and fair view of : i) the state of affairs of the company as at 31st March 1997 and of the results of the company for the financial period then ended on that date; and ii) the other matters required by section 201 of the Act to be dealt with in the accounts; (b) the accounting and other records, and the registers required by the Act to be kept by the company have been properly kept in accordance with the provisions of the Act. WEE KOON SAN & CO CERTIFIED PUBLIC ACCOUNTANTS, SINGAPORE SINGAPORE, SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 1997
01/04/97 01/04/96 TO TO NOTE 31/12/97 31/03/97 $ $ ============== ============== Operating profit for the period/year 106,560 (13,737) After charging :- Auditors' remuneration 2,000 1,200 Depreciation of fixed assets 1.2 & 4 31,774 3,510 Director's fee 20,000 - Preoperating expenses written off 8,568 ============== ============== Less : Taxation 1.3 & 6 12,700 - -------------- -------------- Net profit/ (loss) for the year after taxation 93,860 (13,737) Accumulated ( losses) brought forward (13,737) - -------------- -------------- Revenue reserve carried forward 80,123 (13,737) ============== ==============
The notes from pages 10 to 12 form an integral part of the accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) BALANCE SHEET AS AT 31ST MARCH 1997
01/04/97 01/04/96 TO TO NOTE 31/12/97 31/03/97 $ $ CAPITAL EMPLOYED Share capital 3 100,000 50,000 Revenue reserve 80,123 (13,737) -------------- -------------- 180,123 36,263 ============== ============== EMPLOYMENT OF CAPITAL FIXED ASSETS 4 67,079 5,583 CURRENT ASSETS Trade debtors 284,045 30,395 Other debtors, deposits and prepayments 36,789 15,998 Cash balances 30,666 5,660 -------------- -------------- 351,500 52,052 -------------- -------------- LESS : CURRENT LIABILITIES Trade creditors 13,431 - Other creditor and accruals 135,563 1,200 Amounts owing to directors 5 76,762 28,740 Provision for taxation 6 12,700 - -------------- -------------- 238,456 29,940 NET CURRENT (LIABILITIES)/ASSETS 113,044 22,112 Preliminary and pre-operating expenses - 8,568 -------------- -------------- 180,123 36,263 ============== ==============
The notes from pages 10 to 12 form an integral part of the accounts. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) NOTES ON THE ACCOUNTS 31ST MARCH 1997 These notes form an integral part of and should be read in conjunction with the accompanying accounts :- 1. SIGNIFICANT ACCOUNTING POLICIES 1.1 Basis of Accounting The accounts expressed in Singapore dollars are prepared in accordance with the historical cost convention. 1.2 Depreciation Depreciation is calculated on a straight line method to write off the cost of the fixed assets over their estimated useful lives. The estimated useful lives have been taken as follows:- No. of years Furniture and fittings 5 Computer 3 Office equipment 3 1.3 Amotisation of research and development costs The research and development is stated at cost and is amortised over a period of 3 years upon launching of project. 2. PRINCIPAL ACTIVITIES AND TURNOVER The principal activities of the company are to carry on the businesses in maintenance and development of computer hardware and software and to act s consultants and advisers in the information technology industries. Turnover represents invoiced services rendered to customers. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE)
3. SHARE CAPITAL 01/04/97 01/04/96 TO TO 31/12/97 31/03/97 $ $ Ordinary shares of $1.00 each Authorised : 1,000,000 shares 1,000,000 100,000 ================== ============= Issued and fully paid : 100,000 shares 100,000 50,000 ================== ============= (1996: 50,000 shares)
During the financial year, the company issued its authorized share capital from 100,000 shares to 1,000,000 shares by the creation of 900,000 new ordinary shares of S$1.00 each. On 12th April 1996, the issued share capital was increased by 50,000 ordinary shares of S$1.00 each at par for cash to provide additional working capital.
4. FIXED ASSETS Depreciation Accumulated Net Book charged for 1997 Cost depreciation Value the period S$ S$ S$ S$ 21,190 4,238 16,952 4,238 Office equipment 6,959 4,475 2,485 2,320 Computer 75,649 28,007 47,642 25,216 --------------------------------------------------------------------------- 103,798 36,720 67,079 31,774 ===========================================================================
Depreciation Accumulated Net Book charged for 1996 Cost depreciation Value the year S$ S$ S$ S$ Office equipment 4,076 2,155 1,921 1,359 Computer 6,453 2,791 3,662 2,151 --------------------------------------------------------------------------- 10,529 4,946 5,583 3,510 ===========================================================================
5. AMOUNTS OWING TO DIRECTORS The amounts owing to directors are unsecured, interest-free and have no fixed term of repayment. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) 6. TAXATION 1997 S$ Current income tax 12,700 The income tax expense derived from the amount of income tax expense determined by applying the Singapore tax rate of 26% to profit before income tax as a result of the following timing differences :- 1997 S$ Income tax expense of statutory rate 27,706 Non-allowable items 9,380 Other items (24,386) -------- 12,700 7. OPERATING LEASE COMMITMENT Rental and lease commitment for all operation leases for the period amounted to S$66,339 (1995 : S$15,912). As at the balance sheet, the company is committed to making the following payment in respect of operating leases within a term of more than one year. 1997 1996 S$ S$ Within 1 year 53,139 15,912 Within 2 to 3 years 117,197 28,964 170,336 44,876 =========== =========== 8. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform with the current period's resentation. SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE) TRADING AND PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 1997 01/04/97 01/04/96 TO TO 31/12/97 31/03/97 S$ S$ TURNOVER 1,222,950 51,992 LESS : COST OF SALES Purchases 126,640 - Commission 2,753 - Insurance 6,117 - Staff accommodation 5,579 - Wages 688,772 36,739 ------------- ------------- 829,861 36,739 ------------- ------------- GROSS PROFIT 393,089 15,253 Add : Other income 13,580 11,832 ------------- ------------- 406,669 27,085 SR SINGAPORE PTE LTD (INCORPORATED IN SINGAPORE)
01/04/97 01/04/96 TO TO 31/12/97 31/03/97 $ $ EXPENDITURE Advertisement 4,589 4,315 Auditors' remuneration 2,000 1,200 Bank charges and interest 1,300 - CPF 19,140 - Depreciation of fixed assets 31,774 3,510 Directors'fees 20,000 - Entertainment and refreshment 4,992 267 General expenses 7,276 2,700 Insurance 4,914 453 Interview charges - 1,209 Legal and professional fee 2,204 - Office repairs and maintenance 823 1,700 Printing, postages and stationery 6,487 - Preliminary expenses written off 2,200 2,503 Preoperating expenses written off 6,368 - Rental of office 66,339 15,912 Repairs and maintenance - 126 Salaries 95,878 - Secretarial fee 100 600 Telephone 9,757 1,445 Transport 5,086 624 Travelling 7,637 3,874 Water and electricity 1,245 384 ------------- -------------- 300,109 40,822 ============= ============== NET PROFIT/(LOSS) FOR THE YEAR 106,560 (13,737)
This schedule does not form part of the audited statutory accounts. EX-2.1 2 AGREEMENT FOR THE EXCHANGE OF COMMON STOCK EX-2.1 Agreement For The Exchange Of Common Stock Dated April 2, 1999 Between SolutionNet International, Inc. And SR Singapore, Pte., Ltd 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 "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"). 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 SHAREHOLDERS, 10,500,000 shares of common stock of the ISSUER, $0.001 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 SHAREHOLDERS and SR SINGAPORE 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 20,000,000 shares of common stock, $0.01 par value, of which 174,999 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 the 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 December 31, 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 encumbrance on any assets of the ISSUER or upon the securities of the ISSUER to be acquired by the SHAREHOLDERS. 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 person 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. 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 SHAREHOLDERS 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 SHAREHOLDERS. 'Mere 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 SHAREHOLDERS, impair, restrict, or delay SHAREHOLDERS' 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 or 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. 3. SHAREHOLDERS AND SR SINGAPORE REPRESENT AND WARRANT 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 Country 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 Country 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 SHAREHOLDERS. In addition to the shareholdings so listed, SR SINGAPORE has commitments to issue additional shares in future as follows: a. To Densmore Corporation, or its successors, shares in an amount based on increases in net income of the business acquired by SR SINGAPORE over the next three (3) years. iii. COUNSEL. SHAREHOLDERS and SR SINGAPORE 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. 4. INVESTMENT INTENT. SHAREHOLDERS 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. SHAREHOLDERS 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. 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, 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 March 8, 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 SHAREHOLDERS, equal to their pro-rata holdings in SR SINGAPORE. (2) The resignation of all officers of ISSUER. (3) A Board of Directors resolution appointing such person as SHAREHOLDERS designate as a director(s) of ISSUER. (4) The resignation of all directors of ISSUER, except that of SHAREHOLDER's designee(s), dated subsequent to the resolution described in 3, above and Mr. Garrett K. Krause who will remain current President and CEO of the company (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 of shareholder and directors meetings, financial statements, shareholder listings, stock transfer records, agreements and contracts. (7) Such other minutes of ISSUER's shareholders or directors as may reasonably be required by SHAREHOLDERS. ii. BY SHAREHOLDERS AND SR SINGAPORE: (1) Delivery to the ISSUER, or to its Transfer Agent, of the certificates representing 100% of the issued and outstanding stock of SR SINGAPORE. (2) Consents signed by a majority of SHAREHOLDERS of SR SINGAPORE consenting to the terms of this Agreement. 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, changes, 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. iv. TIME OF ESSENCE. Time is of the essence of the Agreement and of each and every provision hereof. V. ENTIRE AGREEMENT. This Agreement contains the entire agreement and understanding between the parties hereto, and supersedes all prior agreements and understandings. vi. 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. vii.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 address, and by fax, as follows: SR SINGAPORE : ISSUER: -------------- ------- SR Singapore Pte, Ltd SOLUTIONNETINTERNATIONAL, INC. 51 Anson Road, #10 55/57 4344 Promenade Way, 102P Singapore 079904 Marina del Rey, CA 90292 IN WITNESS WHEREOF, the undersigned has executed this Agreement this 28th day of March, 1999. SR SINGAPORE Pte, Ltd. SOLUTIONNET INTERNATIONAL, INC. - ---------------------------------- ---------------------------------- Suresh Venkatachari, as per the Garrett K. Krause, as per the approval ofthe board of directors approval of the board of directors and shareholders and shareholders EX-2.2 3 SUPPLEMENTAL AGREEMENT FOR THE EXCHANGE OF STOCK EX-2.2 Supplemental Agreement For The Exchange Of Common Stock Dated April 6, 1999 Between SolutionNet International, Inc. And SR Singapore, Pte., Ltd 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. SUPPLEMENTAL AGREEMENT FOR THE EXCHANGE OF COMMON STOCK A SUPPLEMENTAL AGREEMENT made this 6th day of April, 1999 by and 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 WEHREAS 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 a. All issued and outstanding shares of such intermediate holding corporation together with the duly completed and executed transfers in favor of the ISSUER; b. All the corporate records of such intermediate holding corporation; and c. 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 into effect on April 6, 1999. IN WITNESS WHEREOF, the each of the undersigned has executed this Agreement: DENSMORE GROUP LIMITED SOLUTIONNET INTERNATIONAL, INC. - -------------------------------- ---------------------------------------- Mr. V. Suresh as per approval of Garrett K. Krause as per the approval of the board of directors and the board of directors and shareholders shareholders EX-3.1 4 ARTICLES OF INCORP. OF ETG INTERNATIONAL, INC. EX-3.1 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 1 --------- NAME ---- The name of the Corporation shall be: ETG International, Inc. ARTICLE 2 --------- CAPITAL STOCK ------------- The aggregate number of shares which this Corporation shall have authority to issue is Twenty Million (20,000,000) shares of $0.001 par value each, which shares shall be designated "Common Stock" and Five Million (5,000,000) share of $0.001 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 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 the 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 of 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 the 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. 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 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 convert such Preferred Stock to Common Stock of the Corporation on such terms as may be determined by the Board of Directors prior to the issuance of such Preferred Stock. ARTICLE 3 --------- 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 4 --------- 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 is 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 Thomas C. Saylor 9333 Penn Avenue South Bloomington, MN 55431-2320 Dennis D. Postma 20355 Harrow Avenue North Forest Lake, MN 55025 ARTICLE 5 --------- 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 302A559 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 6 --------- INCORPORATOR ------------ 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 these Articles of Incorporation under oath. By: /s/ Daniel J. Rogers ------------------------ Daniel J. Rogers Incorporator EX-3.2 5 AMENDMENT OF ARTICLES OF INCORP. OF ETG EX-3.2 [Filed Mar 22 1999 Minnesota Secretary of State] 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 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 1. The new name of the Corporation is: "SolutionNet International, Inc." Article 2. The new board of directors is as follows: NAME ADDRESS ---- ------- Garrett K. Krause P.O. 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 executive this amendment and I further certify that I understand that by signing this amendment, I am subject to 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-3.3 6 BYLAWS OF SOLUTIONNET INTERNATIONAL, INC. EX-3.3 Bylaws of SolutionNet International, Inc. ARTICLE I - --------- OFFICES - ------- 1.1 BUSINESS OFFICE. The principal office and place of business of the corporation shall be 4344 Promenade Way Suite 102P Marina Del Rey, CA. 90292. 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, may require 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 Board of Directors may change the address of the registered office from time to time. ARTICLE II - ---------- SHARES AND TRANSFER THEREOF - --------------------------- 2.1 REGULATION. The Board of Directors may make such rules and regulations as they deem appropriate concerning the issuance, transfer and registration of certificates f0or 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 respectfully numbered serially for each class of shares 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 facsimiles 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. 2.3 CANCELLATIONS OF CERTIFICATES. All Certificates surrender to the corporation for transfer shall be cancelled 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 cancelled, 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 for a like number of shares. Upon presentation and surrender of a certificate for shares properly endorsed and payment of all taxes therefore, the transferee shall be entitled to a new certificate 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 so to do will receive the corporation its directors, officers and agents, from liability for failure to direct notices or other documents, or pay over or transfer dividends or other property 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 to receive payment of any dividend, or in order to make a determination of shareholders for any other purpose, the Board of Directors may provide that the stock transfer books shall be closed for stated period, but not to exceed, in any cas4e 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 day 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 not be 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 shareholders entitled 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 - ----------- SHAREHOLDER 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 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 by 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 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 corporations assets is to be voted on 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 ALL SHAREHOLDERS; If all 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 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 the inspection of any shareholder for any purpose germane to the meeting during the whole time of the meeting for the purposes therein. The original stock transfer books shall be in the prima facie evidence as to who are the shareholders entitled to examine the record or transfer the 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 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, not withstanding 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 at entitled to vote on the subject matter shall be the act of the shareholders , unless the vote of a greater portion or number or voting by classes is otherwise required by statute or by Articles of Incorporation or these Bylaws. 3.10 VOTING ON SHARES; Unless otherwise provided 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 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 and shares held by or under the control of a receiver may be voted on 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. 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 in a fiduciary capacity, nor shares of its own stock held by another corporation. If the corporation holds the majority of shares entitled to vote for the election of directors of such 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 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 therefore. 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 the shareholders entitled to vote with respect to the subject matter thereof. 3.14 VOTING BY BALLET; Voting on any question or in any election may be by voice unless the presiding officer shall order or any shareholder 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 candidates. ARTICLE IV - ---------- DIRECTORS POWERS AND MEETINGS - ----------------------------- 4.1 BOARD OF DIRECTORS; The business and affairs of the corporation shall be managed by the 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 hold of additional regular meetings without other notice than such resolution. 4.3 SPECIAL MEETING; 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 Director 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) 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 pre-paid . 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 of 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 communication 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 MANOR OF ACTING; A quorum of all meetings of the Board of Directors shall consist 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. 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 take 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. 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, 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 by the Board of Directors and irrespective of any personal interest 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 therefore. 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 RESIGNATION: A Director of the Corporation may resign at anytime 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 affective, unless the resignation requires it be affective 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 for the corporation and do all such lawful acts and things as are not by statute or by the Articles of Corporation or by these Bylaws directed or required to be exercised of 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 TERMS AND COMPENSATION: The elective officers of the corporation shall consist of at least a President, 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 they're respective successors are elected and shall qualify. The same person may hold any number of offices 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 function 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 over 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 officer, agents and employees and the responsibility for general and active management of the corporation and the responsibility for seeing 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 responsible for day to day management and for all on officer 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 the President and such other duties as from time to time may 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 thee 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 or age4nt 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-President's if any in order of their ranks 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 Voce 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 the Board of Directors/ elects a different Secretary of such meetings. 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 a 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. f) 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. j) 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 conditions 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 to be assigned to him by the President for the Board of Directors. In the absence or disability of the President and Vice President or Vice President's, the Treasurer shall perform the duties of the President. k) 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 it advisable. 5.4 DELEGATION OF DUTIES: In the event of absent 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 an 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 fee's and disbursement, incurred by the person in connection with the proceeding, if, with respect to the acts or admissions 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 attorney's fees and disbursements incurred by the person in connection with proceeding with respect to the same acts or admissions: 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 the subsections 6.3 A or B herein below, reasonably believed that the conduct was in the best interest of the corporation, or in the case of acts or omissions occurring in the official capacity described in subsection 6.3c Herein below, reasonably believed that the conduct was not opposed to the best interest of the corporation. If the persons acts or omissions complained of in the proceeding relate to condition as a director, Officer, Trustee, Employee, or Agent of an employee Benefit Plan, the conduct is not considered to be opposed to the best interest of the corporation if the person responsibly believed that the conduct was in the best interest of the participants or beneficiaries of the employee benefit plan.The termination of the proceeding by judgment , order, settlement, conviction or upon a plea of nolo contendere or its equivalent does not, of itself, establish that 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 entitles, upon written request to the corporation, to payment or reimbursement by the corporation of reasonable expenses, including attorney's fees and disbursements, incurred by the person in advance of the final deposition 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 of 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 appointed officer or position held by an officer, member of the 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 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 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 monies 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 there unto 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 Boards opinion the condition of the affairs of the corporation shall render such advisable. ARTICLE IX - ---------- CONTRACTS, LOANS & 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 he general or confined to specific instances and, unless so authorized, no officer, agent or employee shall have any power to bind 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 main mortgage, pledge, hypothecate or transfer any real or personal property held by the corporation as 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 appealed and new Bylaws may be adopted by a majority of the Directors present at any meeting of the Board of Directors of the corporations 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 appointing the executive committee and except also the fact that the executive committee shall not have the authority of the Board of Directors in reference to amending the Articles of Corporation, adopting a plan of merger or a 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, and amending the Bylaws of the corporation.\ 13.3 TENURE AND QUALIFICATIONS: Each member of the executive committee shall hold office until the next regular annual 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 days 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 purposed 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 the majority of the members present at the 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: RESIGNATIONS AND REMOVAL: Any member of the executive committee may be removed at anytime with or without cause by resolution adopted by the 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 be necessary to make it affective. 13.9 PROCEDURE: The executive committee shall elect a presiding officer from its members and fix its own rules of procedure which shall not be inconsistent with these Bylaws. It shall keep regular meetings of its proceedings and report the same to the Board of Directors for its information and the meeting thereof held next after the proceedings shall have been taken. Certificate I hereby certify that the foregoing Bylaws constitute the Bylaws of SolutionNet International,Inc. adopted by the Board of Directors of the corporation as of the _____day of ______19__ -------------------------------- Secretary EX-10.1 7 TENANCY AGREEMENT BETWEEN LANDLORD & SR SINGAPORE EX-10.1 Tenancy Agreement Between CDL Land Pte. Ltd. (Landlord) And SR Singapore Pte. Ltd. (Tenant) SR Singapore Pte Ltd 51 Anson Road #10-55 Anson Centre Singapore 079904 Dear Sirs, 1 SHENTON WAY #22-06/09 1. We refer to the Tenancy Agreement dated 29 day of July 1999 between CDL Land Pte Ltd (the Landlord) and SR Singapore Pte Ltd (the Tenant). 2. We hereby confirm that the Landlord has agreed as an indulgence to the Tenant to grant to Tenant a rent-free period of their months in the months of August 2001 and August 2002. Except for the above, all other terms and conditions as contained in the said Tenancy Agreement shall remain unchanged. Dated this 29 day of July 1999. Yours faithfully CDL LAND PTE LTD CHIA NGIANG HONG Group General Manager - -------------------------------------------------------------------------------- ACCEPTANCE I/We ____________________________for and on behalf of SR Singapore Pte Ltd hereby confirm our unconditional acceptance of the aforesaid variation to the Tenancy Agreement. SR Singapore Pte Ltd No 1 Shenton Way #22-06/09 Singapore 068803 Dear Sirs LEASE AGREEMENT NO. 1 SHENTON WAY # 22-06/09 We enclose herewith original copy of the Lease Agreement duly stamped and dated together with side letter duly dated for your retention. Kindly acknowledge receipt by signing and returning to the duplicate copy of this letter as soon as possible. Yours faithfully, CDL LAND PTE LTD JEAN KOH For Group General Manager Enc. THIS TENANCY AGREEMENT is made the 29 day of July One Thousand Nine Hundred and Ninety (1999) 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 51 Anson Road #10-55 Anson Center Singapore 079904------------------------------(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 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 with all of the usual entrances, landings, passenger lifts and passageways leading thereto in common with the Landlord and 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 other 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 Building in common and 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 Three (3) years from the 1st day of September 1999 (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 Ten Thousand Four Hundred Sixty-Five Only ($10,465.00) ---------------------------------------------- (hereinafter referred to as "the monthly rent") 1.2 the monthly service charge of Dollars Four Thousand One Hundred Service Eighty-Six Only ($4,186.00)---------------------------- (hereinafter referred to as "the monthly service charge") The said monthly rent and monthly service charge in respect of the Demised Premises are payable in advance clear of all deductions on the first day of each and every month the first payment or apportioned payments thereof to be made on the 1st day of September 1999 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: 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 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 rent able 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 the Landlord may from time to time prescribe Annexed 1 or such other form as. 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 shall be added to the prevailing service charge and such aggregate sum 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 Outgoings 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 Bu9ilding 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 sewage waste and other garbage from the Building and the land on which the Building is erected; 2.3.2 All amount 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; 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) of 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, 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 the entrances, landings, lifts, lobbies, corridors, passages, car parks, stairways and water-closest and any other common areas and the landscaping thereof; 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. 3. The Tenant hereby covenants with the Landlord as follows: 3.3.1 One 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 stipulations and agreements then such part of the Tenant shall fail to perform and observe any of the said covenants 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 deposit PROVIDED ALWAYS that if the Tenant shall duly perform and observe all of the said covenants, conditions, stipulations and agreements as aforesaid from the data 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 further deposit the amount so forfeited. 3.3.2 To pay the said monthly rent and the said service charge hereby Rent 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 serve charge by reason of any claim by the Tenant against the Landlord whether for non-performance or breach of the Landlord's obligation hereunder or otherwise. 3.3.2.1 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 "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. 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 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 the 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, withholding or payment been required or made. 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. 3.3.2.2. 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 of 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. 3.3.2.3. 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 resulting from any failure or delay in the part of the Tenant in the payment and discharge of such Taxes. 3.3.3 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 party 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 rent able 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 efflux ion of time or otherwise until the said obligations hall have been fulfilled by the Tenant. 3.3.4 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 equivalent authority responsible for the supply of electricity, water and any other services supplied and used in the Building increasing the charges therefore, 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. 3.4 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 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 under floor trucking provided by the Landlord for the purpose and all such works shall be carried out by workmen of or engaged by the Singapore Telecommunications Limited or such other appropriate authority, or in the absence of such workmen, by a contractor nominated by the Landlord. 3.5 That before the Tenant applies to the Singapore Telecommunications Limited 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 successors are required by the Tenant other than those already provided by the Landlord, the Landlord shall install such under floor trucking and/or accessories are required by the Tenant other those already provided by the Landlord, the Landlord shall install such under floor 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 telephone wires other than those installed by the said Singapore Telecommunications Limited or other appropriate authority. 3.6 The Tenant shall carry out at its own expense the following works 3.6.1 Portioning within the Demised Premises. 3.6.2 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. 3.6.3 Provision of other approved floor and/or wall covering or finishes of whatever kind within the Demised Premises. 3.6.4 Provisions of window curtains or blinds, if required, of the type, quality and co lour to be approved by the Landlord for purposes of maintaining uniformity to the window facade of the Building. 3.7 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, co lour 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: - 3.7.1 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; 3.7.2 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 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 borne 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. 3.8 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 fixture, 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 license and consent of the Landlord, such consent not to be unreasonably withheld, and in the event of such license 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. 3.9 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. 3.10 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 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. 3.11 Not 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 the business hours. 3.12 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. 3.13 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 of 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 at the rate of $50/- 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. 3.14 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. 3.15 Not to store or bring jupon the Demised Premises or any part thereof arms, ammunition or unlawful goods, gun-powders, saltpeter, 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 ant 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 premises for fire or other insurance as may have been taken out by the Landlord shall be borne by the Tenant. 3.16 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 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. 3.17 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. 3.18 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 of 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. 3.19 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. 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. 3.21 Not to permit or carry on any auction sale upon the Demised Premises of any part of the Building. 3.22 Not to place or take into the passenger lifts any baggage, furniture, parcels, sacks, gags, 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 too 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 other notices whatsoever save and except the Tenant's nameplate or signboard of a size form and character as hall 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 to 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 co lour 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 borne 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 persons not a party to this Agreement shall obtain the use of possession of the Demised Premises or any part thereof irrespective of whether any rental or other consideration is given for 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 void able or whereby the rate of premium hereof may be increased and to make good all damage suffered 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, judgment, orders, decrees, damages, costs, loses 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 occurrence 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: 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 the times during the said term and during the said term and during any period of holding over to keep current: 3.31.1. public liability insurance policy (which shall be taken out for an amount deemed appropriate by the Tenant and with an insurance company 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 damaged by fire: 3.31.3 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 and 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 hereunder. 3.31.4 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. 3.31.5 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. 5.5 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 contactors, agents, visitors, invitees or licensee thereof. 3.31.6 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 so required by the landlord, to remove all letterings, internal partitions, fixtures and installations of the 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 m 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. The tenant shall pay all costs incurred by the landlord in such removal or disposal or in making good such damage to the landlord within seven (7) days of the landlord notifying the tenant of the amount thereof. 3.32 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 of the tenant's costs, but nothing herein contained shall mean that it is obligatory on the landlord to reinstate of the 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, such rents and other amounts which the landlord w2ould have 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. 3.33.1 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. 3.34 To decorate 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 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 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 is 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. 3.35 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 other termination thereof otherwise than by defluxion 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. 3.36 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 jupon 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 classes 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 repairing 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. 4.2 To provide: 4.2.1 Air conditioning services during the hours of 8:30 am to 5:00pm on weekdays and 8:30am to 1:00pm on Saturdays (Sundays and Gazette Public Holidays excepted) PROVIDED ALWAYS that such services may at the request of the Tenant be extended by the Landlord (but without any obligation to do so) 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 an visitors, between the hours of 8:00 am to 6:00 pm on weekdays and 8:00am to 3:00 on Saturdays (Sundays and Gazette 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 to do so; 4.2.3 Electricity for the lighting of the passages, corridors, staircases, water-closets and other common part of the Building; 4.2.4 Water for the common water closets and toilet facilities in the building. 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 DECLRARED 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 on the Tenant's part herein contained shall not 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 compulsory 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 of 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, than and in any 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 Tenants' covenant herein contained. The Landlord shall not be a liable or responsible for any loss or of damage to the Tenant's fixture furnishings equipment or other belonging whatsoever caused by or arising from the Landlords' re-enter 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 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 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 judgment 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 convenience of the 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, invitees, or licensees) the rent and service charge herby 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 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 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 nonperformance 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 singed 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 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 employee, 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 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, 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; 5.10.3 Any damage, injury or loss arisen out of the leakage of the piping, wiring, and sprinkler system in eh 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 than six (6) months and not more than seven (7) months before the expiration of the term herby 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 Three (3) 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 the that 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 that while of the agreement between the Landlord and the Tenant shall be set forth herein, and shall in no way be modified 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 negative. 5.14 The area of the Demised Premises as stated in 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 efflux ion of time or otherwise to the extent that the Tenant prior to such determination shall not have fulfilled such obligations. 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"; 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 nature gender and vice versa as the case may require; and 5.16.5 where two or more persons are include din 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. 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 22th story of the Building known as No.1 Shenton Way, situated at NO. 1 Shenton Way, Singapore 068803, numbered or to be numbered Units #22-06/09 and containing an area of 4,186 square feet 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 /s/: SIGNED BY For and on behalf of the TENANT EX-10.2 8 STANDARD LEASE AGREEMENT - SARA HALLITEX CORP. EX-10.2 Standard Lease Agreement Between Marina City Club Towers (Landlord) And Sara Hallitex Corporation (Tenant) THIS LEASE is executed at Marina del Rey, California, this 18th day of August 1998, by and between M.C.C. L.P. as "Lessor" and Sara Hallitex Corporation as "Lessee". 1. DESCRIPTION OF PREMISES Lessor leases to Lessee and Lessee leases from Lessor, upon the covenants and conditions set forth in this lease agreement, premises known as Apartment 102P of the building located at 4344 Promenade Way, Marina del Rey, California (the "Premises"). Said building is part of the apartment complex known as the Marina City Club Towers. 2. TERM Except as otherwise provided in this Section, the term of this lease shall commence on September 1, 1998 (the "Anticipated Lease Commencement Date"), or upon occupancy of the Premises by Lessee, whichever is sooner, and shall expire on August 31, 1999. If Lessor for any reason whatsoever cannot deliver possession of the Premises to Lessee by the Anticipated Lease Commencement Date, neither Lessor nor its employees or agents shall be liable for any damages caused Lessee thereby. If Lessor's inability to deliver possession of the Premises to Lessee is caused by Lessee, the lease term and Lessee's obligation to pay rent shall nevertheless commence on the Anticipated Lease Commencement Date. If Lessor's inability to deliver possession of the Premises is not caused by Lessee, the lease term and Lessee's obligation to pay rent shall not commence until ten (10) days after Lessor has given Lessee notice that the Premises are ready for delivery to Lessee or upon occupancy of the Premises by Lessee, whichever is sooner, and the lease term shall be extended by the number of days elapsed between the Anticipated Lease Commencement Date and the expiration of said ten-day period or the date of occupancy by Lessee; whichever is sooner; provided, however, that if Lessor is unable to deliver possession of the Premises within thirty (30) days after the Anticipated Lease Commencement Date through no fault of Lessee, Lessee shall have the right to cancel this lease by giving Lessor written notice to that effect at any time prior to the time Lessor gives Lessee notice that the Premises are ready for Lessee's possession. If Lessee so cancels, Lessor shall promptly refund to Lessee, without interests, any rental and security deposit previously paid by Lessee, and neither party shall have any further rights against, or obligations or liabilities to, the other party under or pursuant to this lease or by reason of its cancellation. 3. RENT Lessee agrees to pay monthly installments of rent in the amount of Two Thousand, Seven Hundred and Fifty Dollars ($2,750), payable in advance in lawful money of the United States on the first day of each calendar month during the term of this lease, with no prior notice or demand and free of all claims or set offs against Lessor; provided, however that if the term commences on other than the first calendar day of the month, the rent for that month and for any fractional part of the month at the end of the term shall be a proportionate part of the monthly rent then in effect. The sum of $2,750 dollars shall be paid to Lessor upon execution of this lease by Lessee, of which $2,750 dollars shall be applied to rent for the September 1998 first month of the term. Lessee hereby acknowledges that the late payment by Lessee to Lessor of rent will cause Lessor to incur costs not contemplated by this lease, the exact amount of which will be impracticable or extremely difficult to ascertain. Such costs include, without limitation, processing and accounting charges and administrative expenses. Accordingly, if any installment of rent is not received by Lessor in full within five (5) days after its due date, Lessee shall pay to Lessor a late charge equal to six percent (6%) of such overdue amount or five dollars ($5) whichever is greater. Lessee and Lessor hereby agree that such late charge represents a fair and reasonable estimate of the cost Lessor will incur by reason of late payment by Lessee and that the late charge is in addition to and not in lieu of any interest charges Lessor may be entitled to under this lease or at law. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee's default with respect to such overdue amount, nor prevent Lessor from exercising any of its other rights and remedies under this lease or at law. 4. SECURITY DEPOSIT In addition to the sums set forth in Section 3 above, Lessee shall deposit with Lessor upon the execution of this lease by Lessee the sum of $2,750, to be held by Lessor, without interest, as a security deposit. Lessor may claim of (withhold from) the security deposit such amounts as are reasonably necessary to remedy Lessee's defaults in the payment of rent, to repair damages to the Prices caused by Lessee, exclusive of ordinary wear and tear, or to clean the Premises, if necessary, upon termination of Lessee's tenancy. If during the lease term, all or any portion of the security deposit is claimed by Lessor to remedy Lessee's defaults in the payment of rent or to repair damages, Lessee, immediately upon Lessor's written notice, shall pay to Lessor an amount sufficient to restore the security deposit to the sum set forth above and Lessee's failure to do so within five (5) days thereafter shall constitute a material breach of this lease. The security deposit, less any portion thereof claimed by Lessor pursuant to this Section, shall be returned to Lessee within fourteen (14) days after expiration or termination of Lessee's tenancy, provided that Lessee has vacated the Premises, and Lessor will furnish to Lessee an itemized written statement of the basis for, and the amount of, any security received and the disposition of such security and shall return any remaining portion of such security to Lessee. 5. HOLDING OVER If Lessee remains in possession of the Premises after the expiration of the term hereof with the consent of the Lessor, such holding over shall not operate as a renewal of this lease but shall create a month-to-month tenancy, terminable by either party upon thirty (30) days, written notice to the other, on the same terms and conditions as contained herein, except that the monthly rental for each month shall be Lessor's list rate in effect for the Premises as of the first calendar day of said month. 6. RESTRICTIONS ON USE OF PROPERTY Lessee hereby agrees: (a) to use the Premises as a private residence only and not to conduct any business or commercial enterprise of any kind therein or therefrom; (b) that only Lessee and Lessee's immediate family may reside in the Premises, provided, however, that not more than the number of persons hereinafter specified may reside therein; (c) if Lessee permits temporary guests to occupy the Premises from time to time, (i) the total number of person occupying or using the Premises at any one time shall not exceed the number of persons hereafter specified, (ii) Lessee will notify Lessor of any guests permitted to occupy the Premises in Lessee's absence, and (iii) any conduct by a guest of Lessee which constitutes a breach or violation of the terms of this lease shall be deemed to be a breach by Lessee of this lease; (d) not to engage in or permit any act or neglect that would increase the cost of insurance of the Premises or the complex in which the Premises are located; (e) not to permit more than a total of two people to reside in the Premises at any time if it is a one bedroom apartment, or four people if it is a two bedroom apartment, or six people if it is a three bedroom apartment or penthouse, and none of whom may be a sublessee, assignee, or renter (except Lessee). RULES AND REGULATIONS GOVERNING TENANCY IN THE MARINA CITY CLUB TOWERS (the "Rules and Regulations") are attached hereto and made a part hereof. Lessee agrees to comply with the Rules and Regulations, as they may from time to time be amended or promulgated by Lessor, and any violation thereof shall constitute a material breach of this lease. Nothing contained herein shall be deemed to impose any liability upon Lessor for any violation of the Rules and Regulations, or breach of any covenant or condition of any lease, by any tenant or occupant of the Marina City Club Towers complex. 7. NOTICE OF MOVE-IN DATE; MOVE-OUT Lessee shall comply with Lessor's move0in and move-out policy as in effect at the time of move. Lessor reserves the right from time to time to change its move-in and move-out policy. Lessor's present move-in and move-out policy prohibits moves on Saturdays, Sundays, or holidays or at times other than between the hours of 8:00am and 6:30pm, and requires advance notice and arrangements fro a specific move-in and move-out date. Lessee shall assume full responsibility for any damage to property or persons caused by Lessee or Lessee's agents during the move-in or move-out process. 8. CARE OF PREMISES; LIABILITY; LIMITATION OF LIABILITY (a) By taking possession of or occupying the Premises, Lessee acknowledges that Lessee has carefully examined the Premises and the fixtures and equipment contained herein and that same are in good order and repair, except only to the extent that Lessor otherwise agrees in writing. Except as provided by law, Lessee (i) shall maintain the Premises and the fixtures and equipment in good condition and repair at Lessee's expense, and upon expiration or termination of this lease shall surrender the Premises and fixtures and equipment in clean condition and in as good condition as reasonable and careful use will permit; (ii) shall not alter, remodel or redecorate the Premises without the prior written consent of Lessor and any required consent of the Department of Beaches and Harbors and the California Coastal Zone Conservation Commission, and without first obtaining all other approvals and permits required by any governmental agency, including the County Department of Building and Safety. Any such approved work must be performed by a California licensed contractor and must comply with all applicable laws, rules and regulations. Lessee shall notify Lessor prior to commencing any such approved work, shall indemnify and hold harmless Lessor from and against all liens for labor and materials and against any damage to property or persons caused by or resulting in any way from such work. (b) Lessee shall not commit or suffer any waste to be committed on the Premises. Prior to the expiration or termination of this lease, Lessee, unless Lessor otherwise agrees in writing, shall remove at Lessee's expense all wall, floor or ceiling covering installed by or for the account of Lessee, and Lessee shall pay for any damage to the walls, floors, ceiling or other portions of the Premises caused thereby. (c) Lessor shall not be liable for any loss of or damage to any property of Lessee or of Lessee's family members, guests, invitees, servants or agents caused by (i) the malfunctioning, nonfunctioning, or leaking of any plumbing, air conditioning, heating, gas, water, steam, electrical or other system, piping, equipment or fixtures located in the Premises or the building in which the Premises are located; or (ii) water or moisture coming through the roof, ceilings, floors, walls, windows, doors, skylights, or otherwise - unless such loss or damage is caused by Lessor's willful injury or sole gross or active negligence or breach of any duty imposed by law. (d) Lessor shall have no liability whatsoever to Lessee , or Lessee's family members, guests, invitees, servants or agents for any loss, damage or injury (including death) to their person or property caused by theft, vandalism or other acts or neglect of third persons, including without limitation, co-tenants or other occupants of the Marina City Club Towers complex or the building in which the Premises are located, unless Lessor is made responsible therefore by specific provisions of the law. (e) As part of the consideration to Lessor for entering into this lease and establishing the amount of the monthly rental to be paid by Lessee, Lessee agrees that the Lessor's ability shall be limited as set forth in this Section 8 and that Lessee shall assume or look to such insurance as Lessee may wish to carry for, any such loss, damage or injury (including death); provided, however, that nothing herein contained is intended to create any third party beneficiary right. 9. INDEMNIFICATION OF LESSOR BY LESSEE Lessee shall indemnify and hold Lessor harmless from and against all claims, costs, expenses (including reasonable attorney's fees), actions and liabilities for personal injury to, or death of, any person or persons, including, without limitation, Lessee or Lessee's family members, and damage to or loss or destruction of property belonging to Lessee or any other person or entity, including that belonging to or under the care, custody or control of Lessor, caused by or resulting in any way from the acts or omissions of Lessee or Lessee's family members, guests, invitees, servants or agents. The provisions of this Section 9 does not waive any duty of Lessor to prevent personal injury, death or property damage where the duty is imposed by law. 10. SUBLETTING AND ASSIGNMENT Lessee shall not sublet the Premises or any part thereof or assign Lessee's interest under this Lease whether such assignment be in whole or in part or voluntarily or by operation of law. Any such subletting or assignment shall be void and shall constitute a material breach and default under this lease. Lessee hereby specifically acknowledges notice of Lessor's policy against subletting or assignment. The acceptance of rent by Lessor from any person shall not constitute and shall not be deemed to constitute a waiver by Lessor of the provisions of this Section or of any other provision of this lease, not shall it give any such person, other than Lessee, the right to possession or occupancy of the Premises. Lessor shall have the right to assign, hypothecate or otherwise dispose of all or any part of its rights and interests in, to and under this lease to any person, firm, corporation or other entity. 11. UTILITIES AND SERVICE Lessor shall provide Lessee with reasonable quantities of running water at Lessor's expense. Electricity, telephone service and other utilities are the responsibility of and shall be provided and paid for by the Lessee. Any interruption or curtailment in any utility service, or in any services furnished by Lessor, shall not entitle Lessee to any claim against Lessor, or to any reduction in rent or delay in the payment thereof, nor shall the same constitute a constructive or partial eviction, unless, with respect to services furnished by Lessor, Lessor shall fail to take reasonable measures to restore such service. Lessee acknowledges that it is Lessee's responsibility to have the electric meter connected for the Premises prior to Lessee's move-in, and, in addition it is Lessee's responsibility to have any phones installed. Arrangements for cable for cable TV hookup and service, if desired by Lessee, as well as billing and payment therefore, shall be handled by Lessee directly with the cable TV company, Lessor shall have no liability whatsoever to Lessee with respect to the cable TV service. 12. PARKING PRIVILEGES Lessor, at no additional charge to Lessee, hereby grants to Lessee a license during the term of this lease to park a motor vehicle within the parking space or spaces designated by Lessor. Lessor reserves the right to change the location of such space(s) from time to time, but will not do so arbitrarily. Not more than one vehicle shall be parked in any space, the space(s) shall be used solely for the parking of motor vehicles and shall not be for repairing vehicles, no recreational vehicle may be parked therein and excessive grease/oil drippings must be cleaned up immediately at Lessee's expense or the vehicle must be parked off premises. Lessor's determination as to whether a vehicle is a recreational-type shall be final. Lessee shall not sublet, assign, rent or make any charge to others for any parking space designated for Lessee's use. Lessee and Lessee's family members, guests, invitees, servants and agents assume the risk of damage or loss of any motor vehicle (or portion thereof of anything therein or thereon) parked by them within said space(s) or parked elsewhere on Lessor's property either with or without Lessor's approval. Lessee and Lessee's family members, guests, invitees, servants and agents shall be liable for all towing and other related expenses in the event any such person uses parking space(s) or areas other than those designated by Lessor. The number of parking spaces assigned to Lessee is________________(____________). 13. LESSOR RIGHT OF ENTRY Lessor and its agents and employees may enter the Premises in case of emergencies; to make necessary or agreed repairs, decorations, alterations or improvements or supply necessary or agreed services; to exhibit the Premises to prospective or actual tenants, purchasers, mortgagers, workman or contractors; when Lessee has abandoned or surrendered the Premises; or pursuant to a court order. Except in case of an emergency, when Lessee has abandoned or surrendered the Premises, or if it is impractical to do so, Lessor shall give Lessee reasonable notice of Lessor's intent to enter and, except in case of emergency or when Lessee has abandoned or surrendered the Premises, will enter only during normal business hours unless Lessee otherwise consents at the time of entry. Twenty-Four hours shall be presumed to be reasonable notice in absence of evidence to the contrary. Lessee shall not change locks on the entry door to the Premises or add additional locks without the prior written approval of Lessor and if such approval is granted, Lessee shall provide Lessor with keys, at Lessee's expense, to open such new or additional locks. 14. DAMAGE OR DESTRUCTION OF PREMISES If the Premises are destroyed or rendered unlivable by fire or other casualty not caused by the negligent or willful act or omission of Lessee, or Lessee's family members, guests, invitees, servants or agents, this lease shall terminate effective as of the date of such casualties except for the purpose of enforcing the rights that then may have accrued hereunder. If only a part of the Premises is destroyed or rendered unlivable by fire or other casualty not caused by the negligent or willful act or omission of Lessee, or Lessee's fami8ly members, guests, invitees, servants or agents, and the remainder of the Premises are tenantable, Lessor shall with reasonable dispatch proceed to repair such damage or destruction, and this lease shall remain in full force and effect; provided, however, that rent attributable to the period of repair shall be abated in the proportion which the damaged or destroyed part bears to the whole of the Premises. Lessee shall not be entitled to any other compensation by reason of such damage or destruction or the repairs required thereby. 15. EMINENT DOMAIN If the Premises shall be taken by eminent domain, this lease shall terminate effective as of the date possession of the Premises is taken by the condemning authority and the rent shall be a portion as of said date. No portion of any judgment or award rendered in any eminent domain proceedings shall belong to Lessee. 16. DEFAULT The occurrence of either or both of the following events shall constitute a default and breach by Lessee hereunder; (a) the failure by Lessee to make any payment of rent or any other payment required to made by Lessee hereunder, has in when due, where such failure shall continue for a period of (3) days after writt4en notice thereof from Lessor to Lessee; or (b) The failure by Lessee to observe or perform covenant, agreement or obligation of this lease, express or implied, to be observed or performed by Lessee, other than as described in sub paragraph (a) above. 17. REMEDIES In the event of any such default or breach of Lessee, Lessor may at any time thereafter, in addition to pursing any other remedy now or hereafter available to Lessor under the laws or judicial decisions: Terminate Lessee's right to possession of the Premises by any lawful means, in which case this lease shall terminate and Lessee shall immediately surrender possession to the Lessor. In such event, Lessor shall be entitled to recover from Lessee all damages accrued by Lessor by reason of Lessee default including, but not limited to the cost of recovering possession of the Premises, expenses of reletting, any real estate commissions actually paid, and, in accordance with section 1951.2 of the California Civil Code, the worth at the time of award of : (I) the unpaid rent which had been earned at the time oft termination, (II) Then amount by which the unpaid rent which would have been earned after termination until the time e of award exceeds the amount of such rental loss that Lessee proves could have been reasonably avoided, and (III) the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that Lessee proves could be reasonably avoided together with any other amount necessary to compensate Lessor for all the detriment approximately caused by Lessee's failure to perform Lessee's obligation to be hereunder or which in the ordinary course of things would be likely to be therefrom. 18. INTEREST CHARGES Any amount due from Lessee pursuant to this lease which is not paid when due shall bear interest at the rate of ten percent (10%) per annum from the date due until paid in full. Payment of, or the right of Lessor to collect such interest shall not excuse or cure any default by Lessee hereunder. 19. EXPENSE OF LITIGATION If either party incurs any expense, including reasonable attorneys' fees, in connection with any action or proceeding instituted by either party by reason of any default or alleged default of the other party hereunder, the party prevailing in such action or proceeding shall be entitled to recover its reasonable expenses and attorneys' fees from the other party in an amount determined by the court, whether or not such action goes to final judgment. In the event of settlement or final judgment in which neither party is awarded all of the relief prayed for, the prevailing party as determined by the court shall be entitled to recover from the other party reasonable expenses and attorneys' fees in the amount determined by the court. 20. SUBORDINATION This lease, at Lessor's option, shall be subordinate to any ground lease, facilities lease. mortgage, deed of trust, or any other hypothecation for security now or hereafter placed upon the real property of which the Premises are apart. Lessee shall execute any documents required to effectuate such subordination and a failure to do so within (10) days after written demand shall thereby make, constitute, an irrevocably appoint Lessor as Lessee's attorney-in-fact and in Lessee's place and stead, to do so. 21. NOTICES Any notice required or permitted hereunder shall be in writing and may be served personally or by mail. If served by mail it shall be addressed, if directed to Lessor, to Lessor at: ________________________________________________________________________________ ________________________________________________________ (Attention: Leasing Department) or such other address as Lessor may from time to time designate in writing to Lessee; or, if directed to Lessee, to Lessee at the Premises, except that notice is given by Lessor pursuant to Section 2 hereof shall be sent to Lessee either at Lessee's residential or business address as shown on Lessee's lease application. Any notice given by mail shall be deemed effective forty-eight (48) hours after deposit in the United States mail registered or certified, postage pre-paid and addressed as specified above. 23. MISCELLANEOUS (a) Lessor's consent to or approval of any act of Lessee requiring Lessor'[s consent or approval shall not be deemed to render unnecessary the obtaining of Lessor's consent to or approval of any subsequent act by Lessee, whether or not similar to the act so consented to or approved. The waiver by Lessor of any breach of any term covenant, or condition of this lease shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach of the same term or any other term, covenant or condition of this lease. The subsequent acceptance of rent by Lessor shall not be deemed to be a waiver of any preceding default or breach by Lessee under any term, covenant, or condition of this lease other than the failure of Lessee to pay the particular rental so accepted, regardless of Lessor's knowledge of such proceeding default or breach at the time of acceptance of such rent. (b) The provisions of this lease shall be deemed independent and severable, and the invalidity or partial invalidity or enforceability of any provision, clause, sentence, or phrase hereof shall not affect the validity of remaining provisions. (c) Time is of the essence of this lease. (d) Each provision of this lease to be performed by Lessee shall be deemed both a covenant and a condition. (e) Each and all of the terms, covenants and agreements contained herein shall be binding upon and shall inure to the benefit of the respective heirs, executors, administrators and successors of each of the parties hereto and the assignees of Lessor. If there be more than one Lessee hereunder, the obligations of each shall be joint and several. (f) This lease, together with any Riders attached hereto and bearing even date herewith and signed by Lessee and Lessor, constitutes the entire agreement between the parties with respect to the subject t matter hereof. Lessee has not relied on any statement or representation of Lessor, its agents, officers, or employees, except as herein specifically contained. This agreement may not be modified except by aw written instrument duly executed by the parties hereto or by their authorized agents or officers. (g) The Premises are part of certain property that is leased from the county of Los Angeles (the " County Lease"), and the within Standard Apartment Lease Agreement, although not specifically so designated herein is a sublease under the County Lease. Lessor is the managing agent for the Lessee under the County Lease of the premises and the property of which it forms apart. The County has approved a plan pursuant to which specific residential units including the Premises may be subleased for periods in excess of one year. However, the County Lease requires that any such sublease (including the within Standard Apartment Lease Agreement if it is for a term in excess of one year) shall specifically provide that the County shall have the absolute power as its sole election to cancel such sublease at any time. Therefore, The County shall have the absolute power at its sole election to cancel the within Standard Apartment Lease Agreement at any time if it is for a term in excess of one year. Neither the Lessee under the County Lease nor Lessor, nor their respective successors, assignees, officers, directors or employees shall have any responsibility or liability whatsoever to Lessee for any loss, costs, expenses or damages which are incurred or sustained by Lessee as a result or consequence of any such cancellation by the County. (h) This lease may be executed in several original counterparts, all of which shall be deemed to be one original, including any riders attached thereto. Lessee's attention is directed to Section 5 of this lease for provisions relating to the terms and conditions, including rent, hat will be applicable in the event Lessee remains in possession of the Premises after the expiation of the term hereof with Lessor's consent. Lessor: Lessee: By:/s/ MCC L.P. By:/s/ Sara Hallitex Corporation Sara Hallitex Corporation Rent Checks to: 5757 Wilshire Blvd. Suite 5 Los Angeles, CA 90036 EX-10.3 9 EXECUTIVE MANAGEMENT AGREEMENT EX-10.3 Executive Mangement Agreement Between SolutionNet International, Inc. And Sara Hallitex Corporation This Executive Mangement Agreement ("Agreement") is executed at Marina del Rey, California, this 1st of April 1999, by and between SolutionNet International, Inc. ("SolutionNet") and Sara Hallitex Corporation ("Sara Hallitex"). Terms and Conditions 1. Sara Hallitex is currently subject to a Standard Lease Agreement with Marina City Club Towers relating to the property located at 4344 Promenade Way, Suite 102P, Marina del Rey, California, 90292. 2. Sara Hallitex agrees that SolutionNet shall be permitted to use a portion of the premises located at 4344 Promenade Way, Suite 102P, Marina Del Rey, California for the following business purposes: (i) administrative and secretarial services, accounting and legal services, public relations, and web-site hosting. 3. SolutionNet agrees to make monthly installments in the amount of Two Thousand and 00/100 Dollars ( $2,000.00), payable in advance on the first day of each calendar month. 4. The term of this Agreement shall commence on April 1st, 1999 and shall continue for an indefinite amount of time, on a month-to-month basis. By: /s/ By: /s/ Sara Hallitex Corporation SolutionNet International, Inc. EX-10.4 10 SOLUTIONNET EMPLOYMENT AGMT. - SURESH VENKATACHARI EX-10.4 SolutionNet International, Inc. Executive Employment Agreement This Executive Employment Agreement ("the Agreement") is made and entered into this 1st day of March 1999, by and between Suresh Venkatachari (hereinafter referred to as "Employee"), and SolutionNet International, Inc., a Minnesota corporation, (hereinafter referred to as "Company") with reference to the following facts and objectives: Recitals A. Employee has been providing services as the Chief Executive Officer and Director and related activities as an Employee of the Company. B. Company is a corporation organized and in good standing under the laws of the State Minnesota and desires to employ Employee under the terms and conditions of this Agreement. Now, therefore, in reliance on the foregoing Recitals, and in consideration of the mutual promises and covenants contained herein, Company and Employee hereby agree as follows: 1. Employment. During the term hereof, Company hereby employs Employee and Employee hereby accepts and agrees to furnish Company with all the Employee's skills and abilities under the designation as Chairman of the Board, President, and Chief Executive Officer of the Company. 2. Duties. During the term of the Agreement, Employee shall devote all of Employee's services, best efforts, and all reasonable work time (excluding vacation and personal time) toward his employment with the Company, to further Company's interests and to perform diligently and in good faith such duties as are or may be, from time to time, required by Company in connection with his employment hereunder. The Employee shall, at all times, comply with the policies and procedures promulgated by the Company. The making of passive and personal investments and conducting private business affairs not inconsistent with the Agreement by the Employee shall not be prohibited under this Agreement. 3. Company's Authority. Employee shall perform in proper form orders, directions, and policies by the Company to the Employee periodically not inconsistent with the provisions of this Agreement. Employee agrees to accept the decisions of the Company in the establishment and amendment of working facilities, conditions, not otherwise agreed upon herein. 4. Term. The term of this Agreement shall begin on March 1, 1999 (the "Effective Date") and shall be for a period of five (5) years, with automatic renewal terms of equal length subject to the Company's prior written notification of 30 days before the expiration of the original term of its decision not to renew this Agreement, beginning on the Effective Date of this Agreement. 5. Compensation. (a) Base Salary. In consideration of the faithful performance of the above duties and responsibilities to and on behalf of the Company, the Company agrees to pay the Employee during the period of Employee's employment with Company a base annual salary of $100,000 (the "Base Salary"). The Base Salary shall be due and payable semi-monthly or on a more frequent basis and reviewed at the Employee's anniversary date by the Board of Directors of Company; provided, however, that such Base Salary shall in any event be increased as of _________ of each calendar year at a rate greater than the percentage increase in the National Consumer Price Index, as reported by the United States Department of Labor for the immediately preceding calendar year, or as otherwise determined by the Board of Directors (or Compensation Committee, if any) of the Company. (b) Bonus. As further compensation, the Company may pay Employee such bonus or bonuses and stock options as may, from time to time, be awarded or granted to the Employee by the Company exercising its sole and absolute discretion. (c) Employment Taxes. Unless otherwise provided by law, all compensation paid to the Employee shall be subject to the customary withholding tax, other employment taxes and withholding amounts as required with respect to compensation paid by the Company to the Employee. 6. Health Insurance. The Company shall provide, at its expense, complete family health insurance coverage for the Employee and his family. The Employee will be eligible to participate in any other benefit program or plan offered to similarly situated employees, subject to any limitations or restrictions associated with said program or plan (such as waiting periods, vesting schedules, and pre-existing condition limitations). 7. Business Expense. Business Expense of the Employee incurred in the performance of his duties, including the costs of attending meetings, promotion, and entertainment expenses shall be borne by the Company and reimbursable to Employee upon presentation of appropriate documentation by the Employee to the Company and compliance with Company's established practices and procedures. 8. Other Company Benefits. Employee shall be entitled to participate in all employee benefit programs made available to Company's executives or salaried employees generally, as such programs may be offered from time to time. 9. Absences. The Employee shall be entitled to 2 weeks away from work for paid vacation. Company may, from time to time, allow Employee additional time away from employment in the Company's sole discretion. The parties acknowledge that such exercise of discretion in one event shall not create a right to also be permitted reasonable numbers of days away from work for sick days or leaves of absences. 10. Death of Disability. Except as otherwise provided in this paragraph 10, in the event of Employee's death or "Disability" (as hereinafter defined) occurring during the term of this Agreement, Employee or his estate, as the case may be, shall be entitled to: (i) that portion of any unpaid salary together with the benefits accrued and earned by Employee hereunder up to and including the last day of the month in which the death or disability occurs, as the case may be, (ii) any death or disability-related benefits pursuant to the insurance program set forth above and any employee benefit plan to which Employee or his beneficiary may be entitled hereunder; (iii) any unpaid Bonus Amount earned by the Employee for the prior fiscal year of the Company and approved by Company if such approval is required hereunder shall be prorated based upon the length of Employee's service during the applicable year over 365 days; and (iv) a payment equal to one year's Base Salary then in effect for Employee if the remaining term of this Agreement is less than one year, or, if more than one year remains under the Agreement, the Estate may elect to continue to receive the payments due under the Agreement specified as salary. A "Disability" shall be deemed to have occurred if Employee shall have been unable to discharge his normal duties and job description under this Agreement for a period of ninety (90) days in the aggregate during any consecutive four (4) month period, his employment shall thereupon terminate at the end of the calendar month in which such period ends. 11. Termination. Employee's employment with the Company shall be terminated if any of the following occur: (a) At the expiration of the term of this Agreement if Company gives written notice of its intention not to renew this Agreement one hundred eighty (180) days prior to the expiration of the term; (a) On the death of the Employee; (b) Whenever the Employee shall fail to cure or rectify a material breach of any of the terms, covenants and conditions of this Agreement within thirty (30) days after Employee receives written notice from the Company to cure such default (except when terminated for those causes that allow immediate termination as described in Section 12(b)); (c) For "Cause" as defined in Paragraph 14 below; or (d) Upon the Disability of the Employee as set forth in Paragraph 12 above. 12. Definition of "Cause" (a) For purposes of this Agreement, the term "Cause" shall include: (i) incompetence, failure, inability, or refusal to perform assigned duties; (ii) gross negligence, willful misconduct or breach of fiduciary duty; (iii) being under the influence of, or use, sale, distribution, or possession of unauthorized or illegal drugs or intoxicating beverages while on duty or on the Company's or a subsidiary's premises; (iv) willful destruction or defacement of Company's or a subsidiary's, a customer's, or an employee's property; (v) unauthorized disclosure of confidential information; and (vi) continued and unexplained absences from work. (b) For the purposes of this Agreement, Employee shall be immediately terminated without notice for the following Causes: (i) unauthorized entry into Company's secured non-public areas; (ii) falsifying or altering the Company's or subsidiary's records; (iii) theft, embezzlement, fraud or forgery (iv) any act which results or was intended to result in significant gain or personal enrichment to the Employee at the Company's expense. 13. Confidential and Secret Information/Company Property. Employee acknowledges that he will have access to items used in the Company's business which the Company deems to be secret, confidential, unique and valuable; were developed by Company at a great cost and over a long period of time; and that disclosure of any of these items to anyone other than Company's officers, directors, agents or authorized employees will cause Company irreparable injury. Employee agrees that upon termination of this Agreement, he will return any and all documentary information or written documents to Company. Such items and information shall be held in strict confidence by the Employee and shall not be revealed to any third party unless otherwise required by law. All other material and property that may be furnished to employee during the course of his employment with the Company such as customer lists, customer tracking, automobiles, books and records shall be and remain the Company's property and shall be returned to the Company at any time upon demand. 14. Severance Pay. In the event Company terminates Employee's employment hereunder, Company shall pay to Employee a sum equivalent to the balance of the salary due to be paid under this Agreement or 300% of the Base Salary (excluding bonuses and other compensation), whichever is greater. 15. Change of Control. Immediately upon a Change of Control, if Executive's employment with the Company is terminated within twenty-four (24) months following such Change of Control, either without cause or pursuant to this Agreement, in addition to any other compensation or benefits payable pursuant to this Agreement, Executive shall be entitled to: Payment in cash equal to four times his Base Salary, plus immediate vesting of 100% of all Employee's stock; stock options or other awards to the Executive under any of the Company's incentive plans. The Executive's rights upon a Change of Control to benefit under programs, plans and policies of the Company shall be determined according to the terms and provisions of such programs, plans and policies. 16. Arbitration. Any and all disputes, controversies or claims arising under or in conjunction with this Agreement other than the right to injunctive relief as set forth in Paragraph 12 above, including without limitation, the general validity or enforceability of this Agreement, shall be governed by the laws of the State of California, without giving effect to its conflict of law provisions and shall be submitted to binding arbitration rules of the American Arbitration Association conducted in Los Angeles County, California. All expenses of any arbitration shall be borne equally by the parties. The award to the arbitrator, including any award of attorney's fees, shall be final and enforceable in the courts of California. All costs of enforcing a judgment following the arbitration are to be borne by the losing party. In reaching his or her decision, the arbitrator shall have no authority to change or modify any provision of this Agreement. Each party shall have the right to discovery in accordance with the California Rules of Civil Procedure. 17. Modification. This Agreement shall not be modified, amended, supplemented, or extended except by written consent executed by both the Company and Employee, except as expressly provided herein to the contrary. 18. Assignment. Neither the Employee nor the Company shall voluntarily subcontract or assign any of their respective rights, duties, or obligations hereunder without first obtaining the other party's written consent. 19. Notice. Except as expressly provided to the contrary herein, any notices or other communications required, permitted, or made necessary by the terms of this Agreement may be given to the respective representatives of the Company and the employee designated herein by written communication. Written notices shall be personally delivered to the Company's representatives or the Employee as appropriate or sent by the United States registered or certified mail, postage prepaid, return receipt requested, addressed to the Company to its principal corporate office and to the Employee at the Employee's residential address. Notices sent by mail shall be deemed made, delivered, and received on the date of the United States' postmark thereon. Upon receipt of notice Employee shall have thirty (30) days to cure or rectify all items described in the Notice. Federal Express and similar services shall be considered personal service or delivery. Personal delivery of written notice hereunder may also be given by facsimile or other electronic transmission (provided that the sender of a telephone facsimile or other electronic transmission has received a facsimile confirmation report showing the number to which the facsimile was transmitted). Either party may change its address for notice by giving notice of such change to the other party in the manner specified in this section. 20. No Waiver. No waiver of any breach or default in any of the terms and provisions of this Agreement shall be deemed to constitute or be construed as a waiver of the subsequent breach of default of the same, similar, or dissimilar nature. 21. Choice of Law and Invalidity. The validity, construction, performance and effect of this Agreement shall be governed by the laws of the State of California. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions contained herein shall, for any reason, be held to be excessively broad to time, duration, geographical scope, activity or subject, said provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the then applicable law, it being the intent of the parties hereto to give the maximum permitted effect to the restrictions set forth herein. 22. Interpretation. If necessary to give effect to the terms and provisions hereof, the masculine, feminine, and neuter gender in the singular and plural number shall each be deemed to include the other whenever the context to indicates. To the unenforceable, it is agreed that the essential terms of this Agreement shall be and remain enforceable against the parties. 23. Headings. Headings to this Agreement are inserted for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent, or intent of this Agreement or any provision hereof. 24. Counterparts. This Agreement may be executed in any number of counterparts, any of which may be constituted in the agreement between the parties hereto. 25. Time. Time is of the essence for all obligations contemplated in this Agreement. 26. Entire Agreement. This Agreement, and any schedules and exhibits attached thereto contain and set forth the entire Agreement between the parties with respect to the subject matter hereof. All prior negotiations and agreements between the parties with respect to the scope of this Agreement are mutually rescinded, replaced, and superseded hereby. 27. Authority. The Company warrants and represents that it is a corporation organized and existing under the laws of the State of Minnesota, that the undersigned is authorized to execute this Agreement on behalf of the Company; that the employment of the Employee under the terms of this Agreement has been duly authorized by the Company. 28. Inurement. Each covenant and condition in this Agreement shall be binding on, and shall inure solely to the benefit of the parties to it, their respective heirs, legal representatives, successors, and assigns. 32. Presumption. This Agreement or any section of this Agreement shall not be construed against any party due to the fact that the Agreement or any section of it was drafted by said party. In Witness Whereof, the parties to this Employment Agreement have duly executed it on the day and year first above written. Employee: Company: /s/Suresh Venkatachari - ---------------------- Suresh Venkatachari SolutionNet International, Inc., a Minnesota Corporation EX-10.5 11 SOLUTIONNET EMPLOYMENT AGMT. - GARRETT KRAUSE EX-10.5 SolutionNet International, Inc. Executive Employment Agreement This Executive Employment Agreement ("the Agreement") is made and entered into this 1st day of March 1999, by and between Garrett K. Krause (hereinafter referred to as "Employee"), and SolutionNet International, Inc., a Minnesota corporation, (hereinafter referred to as "Company") with reference to the following facts and objectives: Recitals A. Employee has been providing services as the Director of the Board and Vice-President and related activities as an Employee of the Company. B. Company is a corporation organized and in good standing under the laws of the State Minnesota and desires to employ Employee under the terms and conditions of this Agreement. Now, therefore, in reliance on the foregoing Recitals, and in consideration of the mutual promises and covenants contained herein, Company and Employee hereby agree as follows: 1. Employment. During the term hereof, Company hereby employs Employee and Employee hereby accepts and agrees to furnish Company with all the Employee's skills and abilities under the designation as Chairman of the Board, President, and Chief Executive Officer of the Company. 2. Duties. During the term of the Agreement, Employee shall devote all of Employee's services, best efforts, and all reasonable work time (excluding vacation and personal time) toward his employment with the Company, to further Company's interests and to perform diligently and in good faith such duties as are or may be, from time to time, required by Company in connection with his employment hereunder. The Employee shall, at all times, comply with the policies and procedures promulgated by the Company. The making of passive and personal investments and conducting private business affairs not inconsistent with the Agreement by the Employee shall not be prohibited under this Agreement. 3. Company's Authority. Employee shall perform in proper form orders, directions, and policies by the Company to the Employee periodically not inconsistent with the provisions of this Agreement. Employee agrees to accept the decisions of the Company in the establishment and amendment of working facilities, conditions, not otherwise agreed upon herein. 4. Term. The term of this Agreement shall begin on March 1, 1999 (the "Effective Date") and shall be for a period of five (5) years, with automatic renewal terms of equal length subject to the Company's prior written notification of 30 days before the expiration of the original term of its decision not to renew this Agreement, beginning on the Effective Date of this Agreement. 5. Compensation. (a) Base Salary. In consideration of the faithful performance of the above duties and responsibilities to and on behalf of the Company, the Company agrees to pay the Employee during the period of Employee's employment with Company a base annual salary of $ 50,000, (the "Base Salary"). The Base Salary shall be due and payable semi-monthly or on a more frequent basis and reviewed at the Employee's anniversary date by the Board of Directors of Company; provided, however, that such Base Salary shall in any event be increased as of ________ of each calendar year at a rate greater than the percentage increase in the National Consumer Price Index, as reported by the United States Department of Labor for the immediately preceding calendar year, or as otherwise determined by the Board of Directors (or Compensation Committee, if any) of the Company. (b) Bonus. As further compensation, the Company may pay Employee such bonus or bonuses and stock options as may, from time to time, be awarded or granted to the Employee by the Company exercising its sole and absolute discretion. (c) Employment Taxes. Unless otherwise provided by law, all compensation paid to the Employee shall be subject to the customary withholding tax, other employment taxes and withholding amounts as required with respect to compensation paid by the Company to the Employee. 6. Health Insurance. The Company shall provide, at its expense, complete family health insurance coverage for the Employee and his family. The Employee will be eligible to participate in any other benefit program or plan offered to similarly situated employees, subject to any limitations or restrictions associated with said program or plan (such as waiting periods, vesting schedules, and pre-existing condition limitations). 7. Business Expense. Business Expense of the Employee incurred in the performance of his duties, including the costs of attending meetings, promotion, and entertainment expenses shall be borne by the Company and reimbursable to Employee upon presentation of appropriate documentation by the Employee to the Company and compliance with Company's established practices and procedures. 8. Other Company Benefits. Employee shall be entitled to participate in all employee benefit programs made available to Company's executives or salaried employees generally, as such programs may be offered from time to time. 9. Absences. The Employee shall be entitled to 2 weeks away from work for paid vacation. Company may, from time to time, allow Employee additional time away from employment in the Company's sole discretion. The parties acknowledge that such exercise of discretion in one event shall not create a right to also be permitted reasonable numbers of days away from work for sick days or leaves of absences. 10. Death of Disability. Except as otherwise provided in this paragraph 10, in the event of Employee's death or "Disability" (as hereinafter defined) occurring during the term of this Agreement, Employee or his estate, as the case may be, shall be entitled to: (i) that portion of any unpaid salary together with the benefits accrued and earned by Employee hereunder up to and including the last day of the month in which the death or disability occurs, as the case may be, (ii) any death or disability-related benefits pursuant to the insurance program set forth above and any employee benefit plan to which Employee or his beneficiary may be entitled hereunder; (iii) any unpaid Bonus Amount earned by the Employee for the prior fiscal year of the Company and approved by Company if such approval is required hereunder shall be prorated based upon the length of Employee's service during the applicable year over 365 days; and (iv) a payment equal to one year's Base Salary then in effect for Employee if the remaining term of this Agreement is less than one year, or, if more than one year remains under the Agreement, the Estate may elect to continue to receive the payments due under the Agreement specified as salary. A "Disability" shall be deemed to have occurred if Employee shall have been unable to discharge his normal duties and job description under this Agreement for a period of ninety (90) days in the aggregate during any consecutive four (4) month period, his employment shall thereupon terminate at the end of the calendar month in which such period ends. 11. Termination. Employee's employment with the Company shall be terminated if any of the following occur: (a) At the expiration of the term of this Agreement if Company gives written notice of its intention not to renew this Agreement one hundred eighty (180) days prior to the expiration of the term; (e) On the death of the Employee; (f) Whenever the Employee shall fail to cure or rectify a material breach of any of the terms, covenants and conditions of this Agreement within thirty (30) days after Employee receives written notice from the Company to cure such default (except when terminated for those causes that allow immediate termination as described in Section 12(b)); (g) For "Cause" as defined in Paragraph 14 below; or (h) Upon the Disability of the Employee as set forth in Paragraph 12 above. 12. Definition of "Cause" (c) For purposes of this Agreement, the term "Cause" shall include: (i) incompetence, failure, inability, or refusal to perform assigned duties; (ii) gross negligence, willful misconduct or breach of fiduciary duty; (iii) being under the influence of, or use, sale, distribution, or possession of unauthorized or illegal drugs or intoxicating beverages while on duty or on the Company's or a subsidiary's premises; (iv) willful destruction or defacement of Company's or a subsidiary's, a customer's, or an employee's property; (v) unauthorized disclosure of confidential information; and (vi) continued and unexplained absences from work. (d) For the purposes of this Agreement, Employee shall be immediately terminated without notice for the following Causes: (v) unauthorized entry into Company's secured non-public areas; (vi) falsifying or altering the Company's or subsidiary's records; (vii) theft, embezzlement, fraud or forgery (viii) any act which results or was intended to result in significant gain or personal enrichment to the Employee at the Company's expense. 13. Confidential and Secret Information/Company Property. Employee acknowledges that he will have access to items used in the Company's business which the Company deems to be secret, confidential, unique and valuable; were developed by Company at a great cost and over a long period of time; and that disclosure of any of these items to anyone other than Company's officers, directors, agents or authorized employees will cause Company irreparable injury. Employee agrees that upon termination of this Agreement, he will return any and all documentary information or written documents to Company. Such items and information shall be held in strict confidence by the Employee and shall not be revealed to any third party unless otherwise required by law. All other material and property that may be furnished to employee during the course of his employment with the Company such as customer lists, customer tracking, automobiles, books and records shall be and remain the Company's property and shall be returned to the Company at any time upon demand. 14. Severance Pay. In the event Company terminates Employee's employment hereunder, Company shall pay to Employee a sum equivalent to the balance of the salary due to be paid under this Agreement or 300% of the Base Salary (excluding bonuses and other compensation), whichever is greater. 15. Change of Control. Immediately upon a Change of Control, if Executive's employment with the Company is terminated within twenty-four (24) months following such Change of Control, either without cause or pursuant to this Agreement, in addition to any other compensation or benefits payable pursuant to this Agreement, Executive shall be entitled to: Payment in cash equal to four times his Base Salary, plus immediate vesting of 100% of all Employee's stock; stock options or other awards to the Executive under any of the Company's incentive plans. The Executive's rights upon a Change of Control to benefit under programs, plans and policies of the Company shall be determined according to the terms and provisions of such programs, plans and policies. 16. Arbitration. Any and all disputes, controversies or claims arising under or in conjunction with this Agreement other than the right to injunctive relief as set forth in Paragraph 12 above, including without limitation, the general validity or enforceability of this Agreement, shall be governed by the laws of the State of California, without giving effect to its conflict of law provisions and shall be submitted to binding arbitration rules of the American Arbitration Association conducted in Los Angeles County, California. All expenses of any arbitration shall be borne equally by the parties. The award to the arbitrator, including any award of attorney's fees, shall be final and enforceable in the courts of California. All costs of enforcing a judgment following the arbitration are to be borne by the losing party. In reaching his or her decision, the arbitrator shall have no authority to change or modify any provision of this Agreement. Each party shall have the right to discovery in accordance with the California Rules of Civil Procedure. 17. Modification. This Agreement shall not be modified, amended, supplemented, or extended except by written consent executed by both the Company and Employee, except as expressly provided herein to the contrary. 18. Assignment. Neither the Employee nor the Company shall voluntarily subcontract or assign any of their respective rights, duties, or obligations hereunder without first obtaining the other party's written consent. 19. Notice. Except as expressly provided to the contrary herein, any notices or other communications required, permitted, or made necessary by the terms of this Agreement may be given to the respective representatives of the Company and the employee designated herein by written communication. Written notices shall be personally delivered to the Company's representatives or the Employee as appropriate or sent by the United States registered or certified mail, postage prepaid, return receipt requested, addressed to the Company to its principal corporate office and to the Employee at the Employee's residential address. Notices sent by mail shall be deemed made, delivered, and received on the date of the United States' postmark thereon. Upon receipt of notice Employee shall have thirty (30) days to cure or rectify all items described in the Notice. Federal Express and similar services shall be considered personal service or delivery. Personal delivery of written notice hereunder may also be given by facsimile or other electronic transmission (provided that the sender of a telephone facsimile or other electronic transmission has received a facsimile confirmation report showing the number to which the facsimile was transmitted). Either party may change its address for notice by giving notice of such change to the other party in the manner specified in this section. 20. No Waiver. No waiver of any breach or default in any of the terms and provisions of this Agreement shall be deemed to constitute or be construed as a waiver of the subsequent breach of default of the same, similar, or dissimilar nature. 21. Choice of Law and Invalidity. The validity, construction, performance and effect of this Agreement shall be governed by the laws of the State of California. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions contained herein shall, for any reason, be held to be excessively broad to time, duration, geographical scope, activity or subject, said provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the then applicable law, it being the intent of the parties hereto to give the maximum permitted effect to the restrictions set forth herein. 22. Interpretation. If necessary to give effect to the terms and provisions hereof, the masculine, feminine, and neuter gender in the singular and plural number shall each be deemed to include the other whenever the context to indicates. To the unenforceable, it is agreed that the essential terms of this Agreement shall be and remain enforceable against the parties. 23. Headings. Headings to this Agreement are inserted for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent, or intent of this Agreement or any provision hereof. 24. Counterparts. This Agreement may be executed in any number of counterparts, any of which may be constituted in the agreement between the parties hereto. 25. Time. Time is of the essence for all obligations contemplated in this Agreement. 26. Entire Agreement. This Agreement, and any schedules and exhibits attached thereto contain and set forth the entire Agreement between the parties with respect to the subject matter hereof. All prior negotiations and agreements between the parties with respect to the scope of this Agreement are mutually rescinded, replaced, and superseded hereby. 27. Authority. The Company warrants and represents that it is a corporation organized and existing under the laws of the State of Minnesota, that the undersigned is authorized to execute this Agreement on behalf of the Company; that the employment of the Employee under the terms of this Agreement has been duly authorized by the Company. 28. Inurement. Each covenant and condition in this Agreement shall be binding on, and shall inure solely to the benefit of the parties to it, their respective heirs, legal representatives, successors, and assigns. 32. Presumption. This Agreement or any section of this Agreement shall not be construed against any party due to the fact that the Agreement or any section of it was drafted by said party. In Witness Whereof, the parties to this Employment Agreement have duly executed it on the day and year first above written. Employee: Company: /s/ Garrett K. Krause - --------------------- Garrett K. Krause SolutionNet International, Inc., a Minnesota Corporation EX-10.6 12 SOLUTIONNET EMPLOYMENT AGMT. - SAMPATH SESHADRI EX-10.6 SolutionNet International, Inc. Executive Employment Agreement This Executive Employment Agreement ("the Agreement") is made and entered into this 1st day of April 1999, by and between Sampath Seshadri (hereinafter referred to as "Employee"), and SolutionNet International, Inc., a Minnesota corporation, (hereinafter referred to as "Company") with reference to the following facts and objectives: Recitals A. Employee has been providing services as the Director of the Board and Vice-President and related activities as an Employee of the Company. B. Company is a corporation organized and in good standing under the laws of the State Minnesota and desires to employ Employee under the terms and conditions of this Agreement. Now, therefore, in reliance on the foregoing Recitals, and in consideration of the mutual promises and covenants contained herein, Company and Employee hereby agree as follows: 1. Employment. During the term hereof, Company hereby employs Employee and Employee hereby accepts and agrees to furnish Company with all the Employee's skills and abilities under the designation as Chairman of the Board, President, and Chief Executive Officer of the Company. 2. Duties. During the term of the Agreement, Employee shall devote all of Employee's services, best efforts, and all reasonable work time (excluding vacation and personal time) toward his employment with the Company, to further Company's interests and to perform diligently and in good faith such duties as are or may be, from time to time, required by Company in connection with his employment hereunder. The Employee shall, at all times, comply with the policies and procedures promulgated by the Company. The making of passive and personal investments and conducting private business affairs not inconsistent with the Agreement by the Employee shall not be prohibited under this Agreement. 3. Company's Authority. Employee shall perform in proper form orders, directions, and policies by the Company to the Employee periodically not inconsistent with the provisions of this Agreement. Employee agrees to accept the decisions of the Company in the establishment and amendment of working facilities, conditions, not otherwise agreed upon herein. 4. Term. The term of this Agreement shall begin on April 1, 1999 (the "Effective Date") and shall be for a period of five (5) years, with automatic renewal terms of equal length subject to the Company's prior written notification of 30 days before the expiration of the original term of its decision not to renew this Agreement, beginning on the Effective Date of this Agreement. 5. Compensation. (a) Base Salary. In consideration of the faithful performance of the above duties and responsibilities to and on behalf of the Company, the Company agrees to pay the Employee during the period of Employee's employment with Company a base annual salary of $50,000, (the "Base Salary The Base Salary shall be due and payable semi-monthly or on a more frequent basis and reviewed at the Employee's anniversary date by the Board of Directors of Company; provided, however, that such Base Salary shall in any event be increased as of _______ of each calendar year at a rate greater than the percentage increase in the National Consumer Price Index, as reported by the United States Department of Labor for the immediately preceding calendar year, or as otherwise determined by the Board of Directors (or Compensation Committee, if any) of the Company. (b) Bonus. As further compensation, the Company may pay Employee such bonus or bonuses and stock options as may, from time to time, be awarded or granted to the Employee by the Company exercising its sole and absolute discretion. (c) Employment Taxes. Unless otherwise provided by law, all compensation paid to the Employee shall be subject to the customary withholding tax, other employment taxes and withholding amounts as required with respect to compensation paid by the Company to the Employee. 6. Health Insurance. The Company shall provide, at its expense, complete family health insurance coverage for the Employee and his family. The Employee will be eligible to participate in any other benefit program or plan offered to similarly situated employees, subject to any limitations or restrictions associated with said program or plan (such as waiting periods, vesting schedules, and pre-existing condition limitations). 7. Business Expense. Business Expense of the Employee incurred in the performance of his duties, including the costs of attending meetings, promotion, and entertainment expenses shall be borne by the Company and reimbursable to Employee upon presentation of appropriate documentation by the Employee to the Company and compliance with Company's established practices and procedures. 8. Other Company Benefits. Employee shall be entitled to participate in all employee benefit programs made available to Company's executives or salaried employees generally, as such programs may be offered from time to time. 9. Absences. The Employee shall be entitled to 2 weeks away from work for paid vacation. Company may, from time to time, allow Employee additional time away from employment in the Company's sole discretion. The parties acknowledge that such exercise of discretion in one event shall not create a right to also be permitted reasonable numbers of days away from work for sick days or leaves of absences. 10. Death of Disability. Except as otherwise provided in this paragraph 10, in the event of Employee's death or "Disability" (as hereinafter defined) occurring during the term of this Agreement, Employee or his estate, as the case may be, shall be entitled to: (i) that portion of any unpaid salary together with the benefits accrued and earned by Employee hereunder up to and including the last day of the month in which the death or disability occurs, as the case may be, (ii) any death or disability-related benefits pursuant to the insurance program set forth above and any employee benefit plan to which Employee or his beneficiary may be entitled hereunder; (iii) any unpaid Bonus Amount earned by the Employee for the prior fiscal year of the Company and approved by Company if such approval is required hereunder shall be prorated based upon the length of Employee's service during the applicable year over 365 days; and (iv) a payment equal to one year's Base Salary then in effect for Employee if the remaining term of this Agreement is less than one year, or, if more than one year remains under the Agreement, the Estate may elect to continue to receive the payments due under the Agreement specified as salary. A "Disability" shall be deemed to have occurred if Employee shall have been unable to discharge his normal duties and job description under this Agreement for a period of ninety (90) days in the aggregate during any consecutive four (4) month period, his employment shall thereupon terminate at the end of the calendar month in which such period ends. 11. Termination. Employee's employment with the Company shall be terminated if any of the following occur: (a) At the expiration of the term of this Agreement if Company gives written notice of its intention not to renew this Agreement one hundred eighty (180) days prior to the expiration of the term; (i) On the death of the Employee; (j) Whenever the Employee shall fail to cure or rectify a material breach of any of the terms, covenants and conditions of this Agreement within thirty (30) days after Employee receives written notice from the Company to cure such default (except when terminated for those causes that allow immediate termination as described in Section 12(b)); (k) For "Cause" as defined in Paragraph 14 below; or (l) Upon the Disability of the Employee as set forth in Paragraph 12 above. 12. Definition of "Cause" (e) For purposes of this Agreement, the term "Cause" shall include: (i) incompetence, failure, inability, or refusal to perform assigned duties; (ii) gross negligence, willful misconduct or breach of fiduciary duty; (iii) being under the influence of, or use, sale, distribution, or possession of unauthorized or illegal drugs or intoxicating beverages while on duty or on the Company's or a subsidiary's premises; (iv) willful destruction or defacement of Company's or a subsidiary's, a customer's, or an employee's property; (v) unauthorized disclosure of confidential information; and (vi) continued and unexplained absences from work. (f) For the purposes of this Agreement, Employee shall be immediately terminated without notice for the following Causes: (ix) unauthorized entry into Company's secured non-public areas; (x) falsifying or altering the Company's or subsidiary's records; (xi) theft, embezzlement, fraud or forgery (xii) any act which results or was intended to result in significant gain or personal enrichment to the Employee at the Company's expense. 13. Confidential and Secret Information/Company Property. Employee acknowledges that he will have access to items used in the Company's business which the Company deems to be secret, confidential, unique and valuable; were developed by Company at a great cost and over a long period of time; and that disclosure of any of these items to anyone other than Company's officers, directors, agents or authorized employees will cause Company irreparable injury. Employee agrees that upon termination of this Agreement, he will return any and all documentary information or written documents to Company. Such items and information shall be held in strict confidence by the Employee and shall not be revealed to any third party unless otherwise required by law. All other material and property that may be furnished to employee during the course of his employment with the Company such as customer lists, customer tracking, automobiles, books and records shall be and remain the Company's property and shall be returned to the Company at any time upon demand. 14. Severance Pay. In the event Company terminates Employee's employment hereunder, Company shall pay to Employee a sum equivalent to the balance of the salary due to be paid under this Agreement or 300% of the Base Salary (excluding bonuses and other compensation), whichever is greater. 15. Change of Control. Immediately upon a Change of Control, if Executive's employment with the Company is terminated within twenty-four (24) months following such Change of Control, either without cause or pursuant to this Agreement, in addition to any other compensation or benefits payable pursuant to this Agreement, Executive shall be entitled to: Payment in cash equal to four times his Base Salary, plus immediate vesting of 100% of all Employee's stock; stock options or other awards to the Executive under any of the Company's incentive plans. The Executive's rights upon a Change of Control to benefit under programs, plans and policies of the Company shall be determined according to the terms and provisions of such programs, plans and policies. 16. Arbitration. Any and all disputes, controversies or claims arising under or in conjunction with this Agreement other than the right to injunctive relief as set forth in Paragraph 12 above, including without limitation, the general validity or enforceability of this Agreement, shall be governed by the laws of the State of California, without giving effect to its conflict of law provisions and shall be submitted to binding arbitration rules of the American Arbitration Association conducted in Los Angeles County, California. All expenses of any arbitration shall be borne equally by the parties. The award to the arbitrator, including any award of attorney's fees, shall be final and enforceable in the courts of California. All costs of enforcing a judgment following the arbitration are to be borne by the losing party. In reaching his or her decision, the arbitrator shall have no authority to change or modify any provision of this Agreement. Each party shall have the right to discovery in accordance with the California Rules of Civil Procedure. 17. Modification. This Agreement shall not be modified, amended, supplemented, or extended except by written consent executed by both the Company and Employee, except as expressly provided herein to the contrary. 18. Assignment. Neither the Employee nor the Company shall voluntarily subcontract or assign any of their respective rights, duties, or obligations hereunder without first obtaining the other party's written consent. 19. Notice. Except as expressly provided to the contrary herein, any notices or other communications required, permitted, or made necessary by the terms of this Agreement may be given to the respective representatives of the Company and the employee designated herein by written communication. Written notices shall be personally delivered to the Company's representatives or the Employee as appropriate or sent by the United States registered or certified mail, postage prepaid, return receipt requested, addressed to the Company to its principal corporate office and to the Employee at the Employee's residential address. Notices sent by mail shall be deemed made, delivered, and received on the date of the United States' postmark thereon. Upon receipt of notice Employee shall have thirty (30) days to cure or rectify all items described in the Notice. Federal Express and similar services shall be considered personal service or delivery. Personal delivery of written notice hereunder may also be given by facsimile or other electronic transmission (provided that the sender of a telephone facsimile or other electronic transmission has received a facsimile confirmation report showing the number to which the facsimile was transmitted). Either party may change its address for notice by giving notice of such change to the other party in the manner specified in this section. 20. No Waiver. No waiver of any breach or default in any of the terms and provisions of this Agreement shall be deemed to constitute or be construed as a waiver of the subsequent breach of default of the same, similar, or dissimilar nature. 21. Choice of Law and Invalidity. The validity, construction, performance and effect of this Agreement shall be governed by the laws of the State of California. In case any one or more of the provisions contained herein shall for any reason be held to be invalid, illegal, or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provisions of this Agreement, but this Agreement shall be construed as if such invalid, illegal, or unenforceable provisions contained herein shall, for any reason, be held to be excessively broad to time, duration, geographical scope, activity or subject, said provision shall be construed by limiting and reducing it so as to be enforceable to the extent compatible with the then applicable law, it being the intent of the parties hereto to give the maximum permitted effect to the restrictions set forth herein. 22. Interpretation. If necessary to give effect to the terms and provisions hereof, the masculine, feminine, and neuter gender in the singular and plural number shall each be deemed to include the other whenever the context to indicates. To the unenforceable, it is agreed that the essential terms of this Agreement shall be and remain enforceable against the parties. 23. Headings. Headings to this Agreement are inserted for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent, or intent of this Agreement or any provision hereof. 24. Counterparts. This Agreement may be executed in any number of counterparts, any of which may be constituted in the agreement between the parties hereto. 25. Time. Time is of the essence for all obligations contemplated in this Agreement. 26. Entire Agreement. This Agreement, and any schedules and exhibits attached thereto contain and set forth the entire Agreement between the parties with respect to the subject matter hereof. All prior negotiations and agreements between the parties with respect to the scope of this Agreement are mutually rescinded, replaced, and superseded hereby. 27. Authority. The Company warrants and represents that it is a corporation organized and existing under the laws of the State of Minnesota, that the undersigned is authorized to execute this Agreement on behalf of the Company; that the employment of the Employee under the terms of this Agreement has been duly authorized by the Company. 28. Inurement. Each covenant and condition in this Agreement shall be binding on, and shall inure solely to the benefit of the parties to it, their respective heirs, legal representatives, successors, and assigns. 32. Presumption. This Agreement or any section of this Agreement shall not be construed against any party due to the fact that the Agreement or any section of it was drafted by said party. In Witness Whereof, the parties to this Employment Agreement have duly executed it on the day and year first above written. Employee: Company: /s/ Sampath Seshadri - -------------------- Sampath Seshadri SolutionNet International, Inc., a Minnesota Corporation EX-11.1 13 COMPUTATION OF PER SHARE EARNINGS EX-11.1 Statement Regarding Computation of Per Share Earnings For the period ended June 30, 1999, the Company reported net earnings of $95,078 and $0.027 earnings per share. EX-21.1 14 SUBSIDIARIES OF REGISTRANT EX-21.1 Subsidiaries of Registrant The Company currently has two (2) subsidiaries: SR Singapore, Pte. Ltd. is the Company's wholly-owned and operating subsidiary. SR Singapore was incorporated on January 25, 1994, under the laws of the Republic of Singapore and is currently conducting its operations under the name SR Singapore, Pte. Ltd. SR Singapore maintains its executive office at No. 1 Shenton Way, number 22-06/09, Singapore 068803. The Company's other subsidiary is SolutionNet Inc. SolutionNet Inc. was incorporated on April 14, 1999 under the laws of the British Virgin Islands. SolutionNet Inc. is a holding company that was incorporated for the purpose of holding operating subsidiaries of the Company. SolutionNet Inc. is responsible for managing the international sales of the Company's products and services outside North America. SolutionNet Inc.'s registered address is at P.O. Box 957, Offshore Incorporations Centre, Road Town, British Virgin Islands. EX-27 15 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the accompanying financial statements of SolutionNet International, Inc. for the period ended June 30, 1999 and is qualified in its entirety by reference to such financial statements. 1 YEAR JUN-30-1999 JUL-01-1998 JUN-30-1999 214,341 0 1,176,664 0 0 1,881,005 87,054 67,898 12,754,710 1,166,490 0 0 0 12,178 11,576,042 12,754,710 987,946 987,946 282,246 859,539 0 0 0 128,407 33,329 95,078 0 0 0 99,078 0.027 0.027
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