AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 24, 1998
REGISTRATION STATEMENT NO. 333-65319
WASHINGTON, D. C. 20549
FORM SB-2 AMENDMENT NO.1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
THE MURDOCK GROUP CAREER SATISFACTION CORPORATION
(Name of small business issuer in its charter)
UTAH 736104
(State or other jurisdiction of (Primary Standard
incorporation or organization) Industrial ID number)
87-0562244
(IRS Employer Classification Code Number)
5295 SOUTH COMMERCE DRIVE, SUITE 300,SALT LAKE CITY,UTAH 84107 / (801) 268-3232
(Address and telephone number of principal executive
offices and principal place of business)
KC HOLMES, CEO, 5295 SOUTH COMMERCE DRIVE, SUITE 300,
SALT LAKE CITY, UTAH 84107 / TEL (801) 268-3232
(Name, address, and telephone number of agent for service)
Copies to:
STANFORD SMITH, GENERAL COUNSEL
5295 SOUTH COMMERCE DRIVE, SUITE 300,
SALT LAKE CITY, UTAH 84107 / TEL (801) 263-5103
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
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If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the follow ing box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of each class of Amount to be Proposed maximum Proposed maximum Amount of
securities to be registered offering price per share aggregate offering price Registration
registered Fee
<S> <C> <C> <C> <C>
Shares (1) 2,500,000 $5 $12,500,000 $3,788
Shares (2) 181,500 $5 $907,500 $275
Bonds (3) $3,000,000 In increments of $1,000 $ 3,000,000 $909
---------- ----------
Total $16,407,500 $4,972
</TABLE>
(1) Offered by the registrant.
(2) Offered for immediate sale by shareholders of the registrant.
(3) Offered by the registrant in increments of $1,000.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effec tive date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registra tion statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The registrant will apply for listing of the Shares on the Nasdaq SmallCap
Market, if and when it meets applicable requirements. If we fail to meet these
standards, we plan to apply for a listing of our shares on the NASD OTC Bulletin
Board. Copies of the reports, proxy and information statements and other
information which the company may file can be inspected and copied at the public
reference facilities maintained by the Nasdaq Stock Market at 1735 K Street,
N.W., Washington, D.C. 20006.
The company intends to distribute to its shareholders annual reports containing
financial statements audited by its independent accountant approximately five
months after the close of each fiscal year, and will distribute such other
periodic reports to its shareholders as the company may deem to be appropriate,
or as may be required by law. The company's fiscal year ends on December 31 of
each year.
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Prospectus
2,681,500 Common Shares at $5 Per Share
[THE MURDOCK GROUP letterhead]
$3,000,000 of Bonds in $1,000 Increments
Minimum Investment - $1,000
The Murdock Group Career Satisfaction Corporation
We provide employment-related services to two types of clients:
Individual clients seeking to advance their careers by finding "the fastest
way to a better job"(TM) through counseling, training, and comprehensive job
search resources; and
Business clients seeking assistance with employee recruiting, hiring,
training, and outplacement.
This is our initial public offering, consisting of 2,500,000 shares at $5 per
share for $12,500,000 and $3 million of bonds. The Company will repay the bonds
at the end of 4 years by returning invested principal and accumulated interest
compounded a 15% annually In addition, four shareholders seek to sell 181,500 of
their shares.
There is currently no public market for our shares or bonds. We do not now meet
the requirements to list our shares for trading on the Nasdaq SmallCap Market,
but believe that we will meet them if the offering is successful. We Plan to
apply for such listing if and when we meet the requirements. If we fail to meet
these standards, we plan to apply for a listing of our shares on the NASD OTC
Bulletin Board. Investing in our shares and bonds involves a high degree of
risk; you should purchase only if you can afford a complete loss of your
investment. See "Risk Factors" beginning on page 8.
Item Explanation Total
Public offering price of shares $5 per share $ 12,500,000
Public offering price of bonds $1,000 increments $ 3,000,000
Less sales commissions 10% of sales price;
$.50 per share $ 1,550,000
Net Proceeds to the company $ 13,750,000
To be sold by shareholders 181,500 shares $ 907,500
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
We are making this offering through our own officers, and seeking the
participation of NASD-licensed selling agents on a "best efforts" basis. These
agents are not required to sell any specific number of shares or bonds. This
offering will continue until subscriptions for all shares and bonds are
received, until 9 months from the effective date of the offering (November
1999), or until we terminate the offering, whichever first occurs. We reserve
the right to reject any subscription in full or in part for any reason.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
Prospectus dated __________
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Notices About This Offering
This prospectus contains the important facts about these securities. You should
not rely on any other information or claims.
In addition to registering with the Commission, we have filed registration
materials in the following states: Arizona, California, Colorado, Florida,
Idaho, Illinois, Nevada, New Mexico, Oregon, Texas, Utah, Washington, West
Virginia, Wyoming.
If you live in another state, you may not purchase these securities during this
offering. You may, however, be able to purchase the shares from your stockbroker
if the shares are listed for public trading after the offering is complete.
Because the shares have not been publicly traded before this offering, we have
arbitrarily determined the offering price. We cannot guarantee that any active
trading market will exist after the offering.
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Table Of Contents
Offering Overview ....................................................6
Risk Factors .........................................................8
Use of Proceeds .....................................................18
Capitalization ......................................................20
Management's Discussion and Analysis of
Financial Condition and Results of Operations .......................21
The Company..........................................................26
Business Operations..................................................27
Management...........................................................34
The Shares...........................................................39
The Bonds............................................................42
Plan of Distribution.................................................43
Experts ............................................................46
Additional Information...............................................46
Financial Statements.................................................47
Subscription Agreement...............................................
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Offering Overview
The table below contains a very brief outline of the information contained in
this prospectus. Please read the entire prospectus before you decide whether and
how much to invest in our shares.
The Company The Murdock Group Career Satisfaction
Corporation is a Utah corporation. We plan to
expand rapidly, establishing offices
coast-to-coast over the next two decades. See
"The Company."
Our Business We provide employment-related services to
individuals and companies. We "popularize"
career advancement through radio and newspaper
advertising, target mid-level professionals, and
offer financing to our clients. See "Business
Operations."
Shares We offer 2,500,000 shares at $5 per share. The
shares offered are Class A common voting shares,
the only class of shares currently outstanding.
See "The Shares."
Bonds We offer $3 million in bonds in increments of
$1,000. Bonds mature in 4 years, when the
principal plus interest at 15% compounded
annually will be paid. The bonds are unsecured,
and may be prepaid by the company at any time.
No sinking fund will be established for
repayment of the bonds. See "The Bonds."
Selling Shareholders Four of our current shareholders (KC Holmes,
CEO; Heather Stone, President; Brad Stewart,
Chief Financial Officer; and Stanford Smith,
in-house General Counsel) are offering 181,500
of their own shares for sale as part of this
offering. If all of these shares are sold, these
officers will receive $726,000 907,500, (less a
pro rata share of sales commissions and offering
expenses). These shares will be sold pro rata
with the company's shares until such time as
1,000,000 company shares have been sold,
whereupon all unsold shares of selling
shareholders will be sold before sale of company
shares recommences. See "Plan of Distribution."
Sales of Shares & Bonds We are making this offering through our own
officers, and seeking the participation of
NASD-licensed selling agents, on a "best
efforts" basis. There will be no stabilizing
transactions. See "Plan of Distribution."
Risks of Investment There are substantial risks involved in an
investment in the company. These risks are
related to our business operations, our
financial condition, our management, and our
shares and bonds. See "Risk Factors."
Voting control Our officers and directors currently own 83.83
86.32% of total outstanding shares, (not
including treasury shares). If all offered
shares are sold, this percentage will be reduced
to 63.12 66.29%, but our officers and directors
will still be able to control company policy and
perpetuate themselves in management. See
"Management."
Dividends We plan to reinvest all profits, if any, in the
company for a period of at least 5 years. No
dividends will be paid during this period.
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Dilution The book value per share on the date of this
prospectus is (.5652). Investors in the shares
will pay $5 per share for 22.75% of company
ownership, (if all shares are sold),
experiencing dilution of 88.6%. See "The
Shares."
Use of Proceeds We will spend the proceeds of this offering to
open several offices in the Western States over
the next 12 months, retire and restructure debt,
and meet normal operating expenses. There is no
minimum amount which must be raised before we
will begin spending the proceeds. See "Use of
Offering Proceeds."
Trading Market Our shares are not currently listed for trading
on any exchange. If this offering is successful,
we will apply to list our shares on the Nasdaq
SmallCap Market, subject to meeting applicable
requirements, but cannot guarantee that our
application will be approved. If we fail to meet
these standards, we plan to apply for a listing
of our shares on the NASD OTC Bulletin Board.
Our proposed trading symbol is "JOBS." We will
not seek to list the bonds for trading. See "The
Shares."
Financial Condition Detailed audited financial statements are set
forth in the section "Financial Statements."
They include a "going concern" footnote because
we have incurred substantial operating losses
since inception. We believe we are overcoming
losses by moving Salt Lake City staff to other
offices, allocating infrastructure investment
across multiple locations, reducing charge-off
expense, and reducing interest expense. Our
ratio of earnings to fixed charges is (3.5):1.
See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
Annual Report We will send purchasers of our shares and bonds
an annual report containing audited financial
statements approximately five months after the
close of each fiscal year.
Reporting Company We will file quarterly, annual, and other
reports with the Securities and Exchange
Commission as required by the Securities laws.
These reports will be available on our web site,
www.themurdockgroup.com.
Offering Period This offering will continue until subscriptions
for all shares and bonds are received, until 9
months from the effective date of the offering,
or until we terminate the offering, whichever
event first occurs. See "Plan of Distribution."
Transfer Agent and The transfer agent and registrar for our shares
Registrar is Interwest Transfer Company, Inc., at 1981
East Murray Holladay Road, Suite 100, Salt Lake
City, Utah 84117, phone (801) 272-9294, fax
(801) 277-3147. We will act as registrar for the
bonds.
How to Invest in Send us your check and a completed subscription
Our Shares or Bonds agreement (which you will find Our Shares or
Bonds at the back of this prospectus), or give
your funds and subscription agreement to a
broker participating in this offering. We will
mail your shares or bonds to you or your broker
as requested.
How to Contact Us We are located at 5295 South Commerce Drive,
Suite 300, Salt Lake City, Utah 84107. Our
telephone numbers are (801) 268-3232 and
1-888-888-0892, the fax number is (801)
268-3289, and our web site is www.
Themurdockgroup.com
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Risk Factors
An investment in our shares or bonds involves a high degree of risk; you should
purchase these securities only if you can afford to lose your entire investment.
Before making a decision to invest, consider carefully the following risk
factors, in addition to the other information in this prospectus.
Risks Related to Our Business Operations
Because We Are a Relatively New Company, We Have an Extremely Limited Operating
History Upon Which You Can Evaluate Our Prospects
Since we commenced operations in August, 1996, we have been engaged principally
in the development of our career-related services and refinement of our
marketing approach, in addition to capital raising activities. As a result, we
have an extremely limited operating history upon which you can evaluate our
prospects. To invest, you must be willing to assume virtually all the risks of a
"startup" company. We have not experienced any months of profitability. See
"Financial Statements." Until we achieve profitability, we are dependent on
raising capital by sales of shares or borrowing to continue operations. You must
consider our prospects in light of the risks, expenses, and difficulties
frequently encountered in the establishment of a new business in an emerging
industry, and in the development and commercialization of a new service. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
We Must Compete Against Firms With Far Greater Resources, Experience, and Market
Share Than We Have
The employment industry is highly competitive, and most of our competitors are
established companies having far more financial resources, experience, and
market share than we do. Most companies in the employment industry are temporary
employment agencies and recruitment firms. We work for the job seeker, who pays
us an up-front flat fee, which may be financed. We believe we have developed a
unique market niche by using broad-based media to promote our career advancement
and job search training services to people in the middle income range. We cannot
guarantee that this business concept will prove successful. Any of our
competitors, most of whom have far greater resources than we, might
independently develop services that are substantially equivalent or superior to
ours. Such competitors potentially include the nationwide firms of Bernard
Haldane and Cornell Business Associates (CBA). Although we have taken steps to
protect our intellectual property rights, and continually develop innovative
services, we believe our future success will depend primarily on our ability to
expand rapidly throughout the United States, deterring potential competition by
establishing widespread name recognition for "The Murdock Group."
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Managing Rapid Expansion May Severely Strain Our Resources
We plan to further expand our operations following the offering, which could
place a significant strain on our limited managerial, operational, and financial
resources. Specifically, we anticipate the opening of several new offices in
major cities in the Western United States within the year following the date of
this prospectus.
We cannot be sure that we will be able to manage this expansion effectively,
that new employees required to staff these offices will work together
effectively, that we can attract and retain qualified personnel, or that our
systems, procedures, and controls will be adequate to support business
operations.
We estimate that each office will require expenditures of approximately $500,000
before it can cover its own operating costs, but since our first branch office
in Seattle has been opened for such a short period, we cannot be sure of these
estimates.
Delays, budget overruns, failure to attract customers in the new market,
inability to produce sales or successfully deliver our services, and numerous
other factors could keep us from generating a profit. See "Business Operations."
We May Not Be Able To Protect Our Proprietary Method of Doing Business
We rely primarily on copyright laws to protect the intellectual property used in
our products and services, but we do not register copyrights in any of our
materials. We could be damaged by a significant amount of unauthorized copying
of our products and services.
Although we are not aware that any of our products and services are materially
infringing the rights of others, it is possible they are. If so, we could be
forced to modify our products and services, possibly at substantial cost. We
might be subject to lawsuits alleging that we are infringing on the property
rights of others.
We have applied for trademark protection for our name, the names of our
principal current services, and the phrase "The Fastest Way to a Better Job." It
is possible, however, that third parties will infringe or misappropriate our
registered trademarks or similar proprietary rights.
Competitors may employ a strategy of non-meritorious litigation as a method of
direct competition, and our limited financial resources could prove insufficient
to mount a successful defense against such tactics.
Our Computer Systems May Fail to Work in the Year 2000
Some early mainframes and computer programs used only the final two digits for
the year in the date field while maintaining the first two digits of each year
constant. As a result, some computer applications may be unable to interpret the
change from the year 1999 to the year 2000, commonly referred to as the "Year
2000 Problem."
Our computer needs are met by a network of desktop personal computers, and to
the best of our knowledge after substantial testing, none of our software
applications will experience year 2000 problems.
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We Have had Substantial Losses in the Past, and Could Again in the Future
We lost $139,780 in 1996, $1,728,372 in 1997, and $3,271,394 during the first 9
months of 1998. Although we had net revenues during each of these
periods $27,456, $551,830 and $1,428,308 respectively, we spent more than we
made primarily to cover the costs of research and development associated with
new intellectual property and delivery of our services. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
While we believe that we can operate profitably if each of our offices can
generate the same relative revenue our Salt Lake City office has produced in
1998 to date, we cannot be sure that our operastions will be profitable.
Our audited financial statements include a "going concern" footnote because we
have incurred substantial operating losses since inception. We believe that a
major contribution of losses to date were incurred while developing our
proprietary job-search technology into a training system capable of servicing a
larger volume of customers. This system is now operating.
Our comments on operating results are set forth in the prospectus section
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations."
We are Deeply in Debt and have No Certain Way of Meeting These Obligations
We have financed our operations to date primarily by borrowing money, often at
above normal rates of interest. As of September 30, such debt totals
approximately $5,968,983. These obligations will mature over the next 60 months
beginning in May 31, 1999. See "Financial Statements."
Unless we can meet these obligations, possibly by improving net earnings,
raising capital through this or other offerings, refinancing, or otherwise, we
may become insolvent and lose all invested capital.
Depending upon the amount of capital raised pursuant to this prospectus, we plan
to substantially reduce or eliminate these liabilities, along with the interest
payment burdens they impose. See "Use of Proceeds."
On September 30, we had an accumulated deficit of approximately $4,797,473 and a
working capital deficit of approximately $3,669,405.
We have incurred losses ever since we began business. Such losses have resulted
principally from limited operations revenue and costs associated with the
design, development and implementation of our services, including general and
administrative expenses and marketing activities.
We plan to increase our level of operating expenses significantly to continue to
enhance services and finance expansion to additional cities. See "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Our Clients May Be Unable or Unwilling to Make Payments They Owe To Us
A majority of our clients agree to pay the fees due to us by executing a
promissory note. To generate cash to meet our operating expenses, we generally
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borrow against these notes at an average discount of 4%. (See " Business
Operations.") These notes are for a term of 2 years, and bear interest at 19.9%
compounded annually.
We May Not Be Able To Obtain Necessary Capital in the Future
Based on current plans and assumptions relating to our operations, we estimate
that the net proceeds of this offering, together with anticipated revenue from
operations, should be sufficient to fund our contemplated cash requirements for
approximately 12 months.
If our plans change, our assumptions prove to be inaccurate, or our funds from
operations prove to be insufficient, we could be required to seek additional
financing before this 12-month period is over.
Because of our plans for rapid expansion, we expect that we will need additional
capital at the end of this 12-month period. We have no commitments from any
third parties for any future funding and cannot be sure that we will be able to
obtain financing in the future.
We cannot guarantee that sufficient funding will be available from this offering
to fund all our development, debt retirement, and operational needs. If we
require additional financing, we may seek such financing through bank borrowing,
debt, additional equity financing, or otherwise.
Any additional equity financing may be dilutive to our shareholders. Debt
financing, if available, may involve restrictive covenants with respect to
dividends, raising future capital and other financial and operational matters.
If we cannot obtain additional financing as needed, we may be required to
curtail growth plans, significantly reduce operating costs, or cease operations
completely. See "Use of Proceeds."
Risks Related to Our Management
We Are Controlled by Two Major Shareholders
Even if all of the shares offered by this prospectus are sold, KC Holmes and
Heather Stone, brother and sister, will own over 54% of the voting stock. They
can elect all Directors, perpetuate themselves in office, and otherwise exercise
control of the company. There are no cumulative voting rights for directors. See
"Management."
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Our Management Is Subject To Conflicts of Interest
Our management is subject to various conflicts of interest arising out of their
relationship with the company. All agreements and arrangements between our
management and us are not the result of arms' length negotiations.
This prospectus was prepared, and an opinion of counsel rendered, by our
in-house General Counsel Stanford Smith. He is also a shareholder.
We May Not Be Able To Successfully Manage Rapid Expansion
Managing rapid expansion will pose many challenges to our business. We will face
greater overhead, increased marketing and support costs, exposure to legal risk,
and exposure to other general hazards associated with entry into new markets.
In order to manage this growth, we must improve and expand our operating
systems, augment financial and management systems, and hire, train, and manage
new employees. We may not be able to manage these changes effectively, which
could result in significant losses.
We cannot be certain that our expansion plans will succeed, and even if we do
open more offices they may not be profitable.
Our Success Will Depend Heavily Upon the Performance of Our President and CEO
Our success depends primarily on the expertise and know-how of our management,
none of whom has managed a company in the employment business. See "Management."
In particular, our CEO, KC Holmes, and our President, Heather Stone, have played
a substantial role in the development and management of our business. Their
services will be crucial for the successful management of our expansion plans.
If they leave us, or if they are unable to perform their duties, our chances for
success could be significantly reduced. We do not have employment agreements
with them, but we believe that their ownership stake in the company will
motivate them to remain with us. If this offering is successful, they will own
54% of our outstanding shares.
The Company Will Indemnify Our Officers and Directors to the Maximum Extent
Permitted By Law
Our bylaws say we will indemnify our officers and directors against all claims
arising out of our business operations to the maximum extent permitted by law,
so long as there is no intentional wrongdoing. The Securities and Exchange
Commission and state securities regulators believe that this provision violates
public policy and should not be enforced.
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Risks Related to the Shares and Bonds
The Price of Our Shares Was Arbitrarily Determined By Our Board of Directors
Our share price was arbitrarily determined by our Board of Directors based upon
its estimate of future operating results, and bears no relationship to our
current operating results, book value, net worth, or financial statements.
The Board considered several factors, including an evaluation by management of
the history of and prospects for the industry in which we compete, and our
prospects for earning. These factors are largely subjective, and we make no
representation as to any objectively determinable value of the shares. We cannot
be sure that any subsequent purchaser of shares will be willing to pay this
price or more for shares.
We Plan to Retain Any Earnings and Pay No Dividends
We have never declared a dividend and do not presently intend to pay any
dividends. Future dividends, if any, will depend on our profitability, financial
condition, capital requirements and other considerations determined by the Board
of Directors. Any future agreements with lenders may also restrict our ability
to pay dividends.
We presently intend to retain earnings, if any, for use in the operation and
expansion of the business, and therefore do not anticipate paying any cash
dividends in the foreseeable future. No dividends will be paid until the bonds
are repaid, and other future debt or other covenants may restrict the payment of
dividends.
Investors In Our Shares Will Experience Immediate and Substantial Dilution
The book value of one of our shares is ($.5652) per share as of September 30,
1998. This figure is calculated by subtracting our liabilities from our assets,
and dividing the difference by the number of shares outstanding. This due in
part to the fact that current shareholders paid much less than $5 for their
shares. If all shares offered by this prospectus are sold, the book value will
increase to $.5690 per share.
We are asking you to pay $5 for each share you buy. The percentage difference
between your $5 before the purchase of a share, and the book value of your share
immediately after purchase, is called "dilution." If all shares offered by this
prospectus are sold, you will experience dilution of 88.6%; your $ 5 will
decline in value by $ 4.4310.
This means you will bear a disproportionately larger share of any company loss,
and receive a disproportionately smaller share of any company gain. In addition,
your proportionate ownership of the company can be further diluted by the
issuance of more shares at prices below what you will have paid.
We have granted options to certain people to acquire shares at less than the
public trading price, if in fact the shares become publicly tradeable. See "The
Shares." Exercise of these options will further dilute your shares.
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We Will Sell Shares to Our Employees at a Discount
We will allow our employees and their immediate families to purchase as many
shares offered by this prospectus as they wish at a discount of 10% from the
sales price. They will pay 4.50 per share rather than the $5 per share paid by
other investors. Since we will not pay any sales commissions on these shares,
the net proceeds to the company will be the same as with shares sold to other
investors.
Our Shares Will Be Sold Primarily By Our Officers
This offering will be sold by company officers. We will attempt to recruit
members of the National Association of Security Dealers to participate in the
offering on a "best efforts" basis, but may not succeed. Even if we are able to
recruit brokers, they may not be able to sell any of the shares or bonds. See
"Plan of Distribution."
We Will Not Seek to Reduce Share Trading Price Fluctuations Through Stabilizing
Transactions
We have not engaged anyone to stabilize, maintain or otherwise affect the price
of shares including generating stabilizing bids.
In general, purchases of shares for the purposes of stabilization could cause
the share price to be higher than it might be if no such purchases were made. In
the absence of transactions that stabilize the price, our share price could be
hurt by adverse market conditions. (See "Plan of Distribution.")
If Our Trading Price Drops to Less than $5 Per Share, Market Liquidity Could Be
Reduced
If the shares become subject to the "penny stock rules" adopted pursuant to
Section 15(g) of the Securities Exchange Act of 1934, our shares would probably
experience reduced levels of trading activity. The "penny stock rules" apply to
companies whose shares trade at less than $5 per share or whose tangible net
worth is less than $5,000,000, or ($2,000,000 if the company has been operating
for three or more years).
These rules require, among other things, that brokers who trade penny stock to
persons other than established customers must complete certain documents before
any penny-stock transaction can occur. Specifically, the broker must determine
whether the investor can bear the potential financial loss and must provide the
investors with SEC documentation about the risks associated with penny stocks.
Additionally, a broker-dealer must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker-dealer and
its salesperson in the transaction, and monthly account statements showing the
market value of each penny stock held in the customer's account.
Many broker-dealers deem these precautions burdensome and choose not to trade
penny stocks. This could result in reduced trading activity in the secondary
market, which might make the shares difficult or impossible to sell.
If we sell most of the shares offered by this prospectus, we believe we can
qualify our shares for listing on the Nasdaq SmallCap Market. If we succeed, our
shares will not be subject to the penny stock rules.
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You Must View an Investment In Our Shares or Bonds as a Long-Term Investment
At present there is no public market for our shares or bonds. Holders of these
securities may be unable to liquidate their investment in the event of emergency
or for any other reason. These securities may not be acceptable as collateral
for loans. Consequently, you must consider the shares and bonds to be a
long-term investment.
If we fail to arrange for public trading of the shares, or sell the company for
cash or merge with a non-public company, your investment may be illiquid
indefinitely.
While we do not currently meet the requirements) to have our shares listed on
the Nasdaq SmallCap Market, we hope to qualify if this offering is successful.
If we fail to meet these standards, we plan to apply for a listing of our shares
on the NASD OTC Bulletin Board. Until any listing, we believe we can arrange
with an NASD broker-dealer to provide a matching service for persons wishing to
buy or sell shares when this offering has ended.
Persons interested in buying or selling our shares would provide such
broker-dealer with information about the number of shares and desired price, and
the broker-dealer would notify both sides if and when there was a match and
would assist in closing the transaction.
At present, however, there is no agreement between us and a registered
securities broker-dealer. The price of the shares after the completion of this
offering can vary due to general economic conditions and forecasts, the
company's general business condition, the release of our financial reports, and
sales of shares that were outstanding prior to this offering. See "The Shares."
Earlier Investors Might Sell Shares, Possibly Reducing the Trading Price
Whenever any shares are sold, it could cause the price of your shares to keep
from rising, or to go down.
As of September 30, 1998, 10,488,740 shares were outstanding. We sold these
shares in private transactions relying on exemptions from registration under the
Securities Act. Of these shares, 2,000,000 were repurchased by the company and
are held as treasury shares.
These shares are all "restricted securities" within the meaning of Rule 144
(adopted pursuant to the Securities Act of 1933), and can be resold only after
registration, or compliance with this rule or another exemption from
registration. Rule 144 permits the sale of these restricted shares, but only if
all the following qualifications are met:
They have been held for at least 1 year;
They are sold a little at a time (no more than the greater of 1% of
the outstanding shares, or the average weekly trading volume of the
shares during the 4 weeks preceding the sale, within a 3 month
period);
We have made current information about the company publicly available;
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The shares are sold through a broker-dealer; and
The seller files a Form 144 with the Securities and Exchange
Commission if more than 500 shares or $10,000 of shares are sold.
Rule 144 has many other provisions, and we suggest that you discuss it with your
attorney if you have any questions. The 1-year holding period has expired for
most of the currently outstanding shares, and the owners of these shares could
begin selling immediately, potentially depressing the market price. See "The
Shares."
We May Be Unsuccessful In Our Attempts to List Our Shares for Public Trading
There has been no public market for the shares prior to this offering, and we
have not yet applied to list our shares for trading on the Nasdaq SmallCap
Market because we do not yet meet any of the listing requirements set forth
below.
Although we will apply for listing of the shares on the Nasdaq SmallCap Market
at the conclusion of this offering, there can be no assurance that we will be
able to qualify for this listing or that an active public market for our shares
will develop or be sustained. Listing standards include (with other
requirements) the following:
$4 million in net tangible assets
A public float of 1 million shares, with a minimum market value of $5
million
A number of qualitative corporate governance requirements
If the company fails to be listed on, (or maintain qualification for its shares
to trade on,) the Nasdaq SmallCap Market, the shares could be subject to certain
rules of the Securities and Exchange Commission relating to "penny stocks." Such
rules require broker-dealers to make a suitability determination for purchasers
and to receive the purchaser's prior written consent for a purchase transaction,
thus restricting the ability of purchasers and broker-dealers to sell the stock
in the open market.
Nasdaq has reserved for us the ticker symbol "JOBS." This reservation will
expire on April 6, 1999, unless we are successful in listing our shares by that
date.
The Trading Price of Our Shares May Be Highly Volatile
If the company's operating results are below the expectations of public market
analysts and investors, it is probable that the price of the shares will
decline.
The stock market has recently experienced significant price and volume
fluctuations. These have affected the market prices of stocks of many companies,
and have often been unrelated to the operating performance of such companies.
General market fluctuations may also adversely affect the market price of our
shares.
Our shares may well fall below the initial public offering price. Factors such
as quarterly fluctuations in financial results, announcements of new products
and services by us or our competitors, and changes in financial estimates by
securities analysts, may cause the market price of our shares to fluctuate,
perhaps substantially.
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Our Shares May Be Delisted from the SmallCap Market
Even if our shares initially qualify for trading on the Nasdaq SmallCap Market,
we will have to maintain certain minimum financial requirements for continued
listing. Continued inclusion requires that we meet the following minimum
requirements:
$2 million in net tangible assets, a $35 million market
capitalization, or net income of $500,000 in two of the three prior
years;
500,000 shares in the public float valued at $1 million or more; Two
active market makers for the shares;
At least 300 shareholders; and
Other qualitative requirements.
If we are unable to meet Nasdaq's maintenance requirements, our shares may be
delisted from Nasdaq. If so, we would seek to conduct trading in the
over-the-counter markets in the so-called "pink sheets" or the NASD's
"Electronic Bulletin Board."
As a result, the liquidity of the shares could be impaired, not only in the
number of securities which could be bought and sold, but also through delays in
the timing of the transactions, reductions in security analysts' and the news
media's coverage of the company, and lower prices for the company's securities
than might otherwise be reached.
We May Not Be Able To Repay the Bonds
We must retire the bonds, together with interest compounded annually at 15%, 4
years from the date of sale. This will create an additional liability on our
balance sheet and impose a burden on our cash flow as the maturity date nears.
Since we are not establishing a sinking fund to finance repayment of the bonds,
it is possible that we will not have enough income, or the ability to raise or
borrow enough money, to repay the principal and interest as the bonds become
due.
No Trading Market Will Exist for Our Bonds
We will not seek to list the bonds for trading in any public market. Bonds are
an illiquid investment which you must hold for 4 years, receiving no interest or
principal until the maturity date.
Conclusion
For all the reasons described above, this is a highly speculative investment. We
strongly urge you to consult your own business and investment advisors, tax
advisors, attorneys, and accountants before investing in our shares or bonds.
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Use Of Proceeds
(This section has been moved from its previous position after the MD&A section)
The table below shows how we plan to spend the proceeds of this offering if all
shares and bonds are sold (maximum), if an intermediate number of shares and
bonds are sold (intermediate), and if a minimum number of shares and bonds are
sold (minimum). There is no minimum amount which must be raised before we begin
spending the proceeds, and no escrow account will be established.
<TABLE>
<CAPTION>
Item Maximum Intermediate Minimum
---- ------- ------------ -------
<S> <C> <C> <C>
Offering Proceeds
Proceeds from Sale of Company Shares (1) $ 12,500,000 $ 8,500,000 $ 4,500,000
------------ ----------- -----------
Proceeds from Sale of Shareholders Shares (2) 907,500 617,100 326,700
------------ ----------- -----------
Proceeds from Sale of Bonds (3) 3,000,000 2,000,000 1,000,000
------------ ----------- -----------
Total Gross Proceeds 16,407,500 11,117,100 5,826,700
------------ ----------- -----------
Less Sales Commissions (4) 1,640,750 1,111,710 582,670
------------ ----------- -----------
Less Expenses of Offering (5) 200,000 200,000 200,000
------------ ----------- -----------
Less Proceeds to Selling Shareholders (6) 816,750 555,390 294,030
------------ ----------- -----------
Net Proceeds to Company 13,750,000 9,250,000 4,750,000
------------ ----------- -----------
Use of Proceeds:
Opening Additional Offices (7) 5,000,000 4,000,000 2,500,000
------------ ----------- -----------
Debt Retirement (8) 5,000,000 5,000,000 2,250,000
------------ ----------- -----------
Working Capital (9 ) 3,750,000 250,000 0
------------ ----------- -----------
Total Application of Net Proceeds $ 13,750,000 $ 9,250,000 $ 4,750,000
------------ ----------- -----------
</TABLE>
Footnotes:
1. We are offering 2,000,000 2,500,000 million shares at $5 per share for
a total of $12,500,000.
2. Four of our shareholders are selling some of their own stock in the
company at $5 per share, paying a proportionate share of sales
commissions and offering expenses. KC Holmes, CEO, will sell 75,000
shares; Heather Stone, President, will sell 75,000 shares; Brad
Stewart, CFO, will sell 14,000 shares; and Stanford Smith, in-house
General Counsel, will sell 17,500 shares, for a total of 181,500
shares. See "Plan of Distribution."
3. We are offering $3 million in bonds, to be sold in increments of $1,000.
Bonds mature 4 years from the date of purchase, when we will repay the
principal plus interest at 15% compounded annually. See "The Bonds."
4. We will seek to contract with certain broker-dealer members of the
National Association of Securities Dealers to market shares and bonds in
exchange for a cash sales commission of 10% of the proceeds raised by
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<PAGE>
them. See "Plan of Distribution." Several company officers will also
sell shares and bonds. No sales commissions will be paid on sales made
by them. Because we cannot predict how many shares will be sold by the
broker-dealers and how many by our officers, we have deducted 10% from
all sales illustrated in the table. Actual commissions paid may be less
and proceeds to the company may consequently be more.
5. This amount represents the estimated expenses we will pay for
registration fees, accounting fees, costs of printing, fees associated
with listing the shares for trading, fees to the transfer agent,
postage, and other offering costs. The legal work for this offering is
being performed by in-house General Counsel, Stanford Smith, who will
receive no compensation beyond his salary.
6. This is the amount to be paid to our four selling shareholders after
they have borne their pro rata share of sales commissions. See "The
Shares."
7. The Company plans to open offices in several major cities in the Western
United States over the next 24 months, with estimated cash needs of
$500,000 per office. The number of offices opened will depend on the
total proceeds raised in this offering. These funds will be used to
cover the costs of leasing office space and for lease deposits of
approximately $70,000. Cash for the purchase and lease of furniture and
equipment of approximately $50,000. Cash for advertising and up-front
marketing of approximately $20,000. Cash for employment fees and
training of approximately $40,000. Payroll cash for 12-15 people for
approximately 6 months during start-up of approximately $300,000 and for
various deposits and miscellaneous expenses of $20,000. See " Business
Operations."
8. As of September 30, 1998, we have incurred more than $5 million in debt.
Substantially all of this debt has been used for working capital to fund
operating needs since inception of the Company. The interest rate and
maturity of these obligations is set forth in "Financial Statements."
After covering the costs of opening additional offices, we plan to
retire as much of this debt as possible, giving priority to obligations
bearing the highest interest.
9. We will use these funds to cover our normal operating expenses if income
is inadequate.
Future conditions may prompt us to change these proposed uses of proceeds if
unanticipated events or opportunities arise. We may use a portion of the
proceeds to acquire other businesses or products which will help us expand
operations more effectively.
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Capitalization
The following table sets forth the capitalization of the Company as of September
30, 1998, and on a pro forma as adjusted basis after giving effect to the sale
by the Company of 2,500,000 of common stock offered hereby and the application
of the net proceeds therefrom. This table should be read in conjunction with the
historical Financial Statements of the Company and the Notes thereto, and the
other financial information appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
As of September 30, 1998
--------------------------------
Actual Pro Forma
----------- As Adjusted
-----------
<S> <C> <C>
Short-term debt including current portion of long-term debt $ 3,858,662 $ -0-
----------- -----------
Long-term debt (1) 2,110,321 3,000,000
----------- -----------
Shareholders' Equity:
Common Stock - Class A, no par value; 8,488,740 shares issued and outstanding
actual; 10,988,740 shares issued and outstanding
pro forma as adjusted (1) 502,118 11,552,118
----------- -----------
Common Stock - Class B, no par value; no shares issued or outstanding
-0- -0-
Treasury Stock - Class A, 2,000,000 shares (45) -0-
----------- -----------
Subscription Receivable - Common Stock - Class A (160,000) (160,000)
----------- -----------
Accumulated deficit (5,139,546) (5,139,546)
----------- -----------
Total Shareholders' Equity (4,797,473) 6,252,572
----------- -----------
Total Capitalization $ 1,171,510 $ 9,252,572
----------- -----------
</TABLE>
Footnotes:
(1) Assumes sales of maximum amount of offering.
(2) Assumes stock sales commissions of $1,250,000 and offering expenses of
$200,000 netted against proceeds.
20
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
General
The Murdock Group Career Satisfaction Corporation is a career advancement and
employment consulting company with offices in Salt Lake City, Utah and Seattle,
Washington. We provide services to professionals with several years of
experience who are seeking to clarify their career direction or their current
job situation.
Our system utilizes job-search training workshops, consultants, and access to a
comprehensive job-search resource center. We also provide full-service hiring
assistance to corporations, which includes training, and outplacement.
Losses to date were incurred while we developed our proprietary job-search
technology into a training system that can service a larger volume of customers.
We have completed development on this system and believe that we now have a
product that can be marketed profitably.
On September 14, 1998, we relocated 14 employees from the Salt Lake City office
to open an office in Seattle. We plan to open additional offices in 1999.
We plan to allocate administrative costs across multiple locations, thereby
reducing the financial impact of our investment to date in infrastructure items
such as computer technology and human resources, accounting, and operations
staff. We anticipate a reduction in charge-off expense with the new product, and
expect that completion of the public offering will enable us to restructure or
pay off most of our high-interest debts, thereby reducing monthly interest
expense.
In summary, our plan for overcoming losses includes moving Salt Lake City staff
to offices, allocating infrastructure investment across multiple locations,
reducing charge-off expense, and reducing interest expense.
21
<PAGE>
Results of Operations
September 30, 1998 Compared to September 30, 1997
Net service revenues increased to $1,428,308 for the nine months ended September
30, 1998, compared to $262,212 for the corresponding period of the prior fiscal
year. The increase in revenues was primarily a result of enhanced service
products from new research and development efforts, new sales techniques,
increased marketing through radio and newspaper campaigns, new proprietary
systems that enable the products and services to be delivered in volume and
Company recognition in the market place.
Contract cancellations and discounts increased to $920,112 for the nine months
ended September 30, 1998, compared to $80,000 for the corresponding period of
the prior fiscal year. The cancellations and write-offs were the result of
concessions made to customers while pilot testing and implementing the Company's
new intellectual property. The cancellations and discounts have decreased as a
result of the new product.
Direct cost of services increased to $1,396,448 for the nine months ended
September 30, 1998, compared to $338,798 for the corresponding period of the
prior fiscal year. Gross profit as a percentage of service revenues improved to
2.2% for the nine months ended September 30, 1998, compared to a negative gross
profit of (29.2%) for the corresponding period of the prior fiscal year. The
improvement in gross profit as a percent of sales was primarily a result of
increased sales, which served to reduce the per-sale overhead.
General and administrative expenses, which include selling expense, increased to
$1,409,067 for the nine months ended September 30, 1998, compared to $360,817
for the corresponding period of the prior fiscal year. General and
administrative expenses, as a percentage of sales, decreased to 99% for the nine
months ended September 30, 1998, compared to 138% for the corresponding period
of the prior fiscal year. General and administrative expenses should continue to
decrease as a percentage of sales during fiscal 1998 and thereafter as a result
of increased sales and a reduction in G & A expenses.
New products research and development expenses increased to $718,701 for the
nine months ended September 30, 1998, compared to $274,667 for the corresponding
period of the prior fiscal year. The increase in research and development
expenses for the nine months ended September 30, 1998 was a result of expenses
22
<PAGE>
related to the development of new intellectual property and training systems
that allow the mainstream professional to access previously elitist job-search
concepts and techniques. This systematization also enables the Company to
efficiently service a larger volume of customers with fewer costs than could be
serviced in the year.
Interest expense increased to $702,864 for the nine months ended September 30,
1998, compared to $138,252 for the corresponding period of the prior fiscal
year. The increase in interest expense is a result of higher outstanding debt
balances and increased rates on monies borrowed for the nine months ended
September 30, 1998, compared to the corresponding period of the prior fiscal
year.
December 31, 1997 Compared to December 31, 1996
The Company began operations August 5, 1996 as a startup and development-stage
entity. Operating results for the five-month period ended December 31, 1996 are
not representative of or comparable to the first full year of operations, which
ended December 31, 1997.
Financial Condition
Liquidity and Capital Resources
The Company has suffered recurring losses from operations since its inception in
1996, and as of September 30, 1998, had an accumulated deficit of $5,139,546.
The accumulated deficit reflects losses associated with the development and
start-up of operations and significant costs for research and development for
the Company's proprietary job-search technology and training system. This
technology will enable the Company to effectively service a large volume of
customers in each office and provide a model to expand the operations into other
locations.
At September 30, 1998, the Company had a working capital deficit of
approximately $3,669,405. This working capital deficit is a result of the
Company's need to fund its operating losses primarily through short-term
borrowings. The interest rates associated with these short-term borrowings are
significantly higher than prime interest rates.
23
<PAGE>
The Company sells a majority of its products in exchange for contracts
receivable which typically are due in monthly installments over twenty four
months. During late fiscal 1997 and early fiscal 1998, the Company provided a
product whereby, the customer was guaranteed to secure employment upon
completion of services by the Company. Total revenues associated with the
guarantee service for the nine months ended September 30, 1998 were $730,000 or
approximately 33% of revenues.
While the sales impact associated with the guaranteed service was positive, the
ability to provide the service of securing employment for the client was
extremely difficult, and resulted in approximately $553,000 in cancellations and
$85,000 in discounts related to the above guarantee-type revenues. The
guaranteed services were discontinued in July 1998. At September 30, 1998 the
Company has $36,000 in accounts receivable from the guaranteed service. The
entire $36,000 has been reserved at September 30, 1998.
The Company has experienced a significant reduction in the amount of contract
cancellations and write-offs subsequent to the guaranteed service. The Company
believes that the new technology and service product described above, compared
to the guaranteed service, will result in a significant improvement in the
Company's cancellation and collection rate.
As contained in the Company's Independent Auditor's Report, dated September 16,
1998, which audit covered the five months ended May 31, 1998 and prior two
fiscal years ended December 31, 1997 and 1996, there is substantial doubt of the
Company's ability to continue as a going concern.
Current portion of amounts due from related parties increased at September 30,
1998, compared to December 31, 1997 as a result of certain financing
transactions.
Property and equipment increased at September 30, 1998, compared to December 31,
1997 as a result of expenditures related to expanding offices to accommodate
growth. In September 1998, the Company opened an office in Seattle, Washington,
which required approximately $150,000 in new property and equipment. In addition
the Company has continued to develop its infrastructure for computer networking
and communications to accommodate growth into other locations.
Accounts payable increased at September 30, 1998, compared to December 31, 1997
as a result of Company growth and as a result of the Company extending the
payment terms on payables.
Current portion of amounts due from related parties increased at September 30,
1998, compared to December 31, 1997 as a result of certain financing
transactions. Such amounts were repaid to the Company subsequent to September
30, 1998.
Property and equipment increased at September 30, 1998, compared to December 31,
1997 as a result of expenditures related to expanding offices to accommodate
growth. In September 1998, the Company opened an office in Seattle, Washington,
which required approximately $150,000 in new property and equipment. In addition
the Company has continued to develop its infrastructure for computer networking
and communications to accommodate growth into other locations.
Short-term and long-term debt increased as a result of working capital needs
related to the Company's current operating losses experienced through September
30, 1998.
Capital Expenditures
Capital expenditures amounted to approximately $344,000 through September 30,
1998 compared to $359,968 in 1997. The majority of these expenditures were
related to expanding our offices and staff to accommodate our rapid growth.
The Company incurred capital expenditures of approximately $344,000 for the nine
month period ended September 31, 1998, compared to $360,000 for the
corresponding period of the prior fiscal year. The majority of these
expenditures were related to expanding offices to accommodate growth.
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<PAGE>
Research and Development
Research and Development expenditures amounted to $718,701 from January 1, 1998,
through September 30, 1998, compared to $274,667 for the same period in 1997.
The majority of the R & D expenses were incurred while developing our
proprietary job-search technology into a training system that serviced a larger
volume of customers. The Company incurred costs amounting to approximately
$718,701 for the nine month period ended September 30, 1998, compared to
$274,667 for the corresponding period of the prior fiscal year. The majority of
these costs were incurred for the development of the Company's proprietary
job-search technology to enable a training system to effectively service a
larger volume of customers. The Company believes that most of its significant R
& D projects are now completed and that the R & D projects in the future will be
smaller and require less expenditures.
Other
Inflation has not had and is not expected to have a significant impact on our
operations.
We have evaluated our information technology for Year 2000 issues and do not
anticipate any material disruption in our operations.
(The "Use of Proceeds" section has been moved and now appears before
the MD&A section)
25
<PAGE>
The Company
History
We are The Murdock Group Career Satisfaction Corporation, a Utah corporation
organized November 5, 1997, to carry on an existing business concept.
In 1983, Denis Murdock formed a sole proprietorship called "The Murdock Group"
in Virginia to provide job search assistance to senior executives. He moved the
business to Salt Lake City, Utah, in 1987.
The assets of this business, including all intellectual property rights, were
purchased in June 1996 by Envision Career Services, L.L.C., a company formed by
our founders KC Holmes and Heather Stone. Envision conducted its operations
under the name "The Murdock Group." The company purchased all membership
interests of Envision by the issuance of 8,205,800 shares on May 31, 1998, and
Envision was dissolved.
Our Approach to the Career Consulting Business
We have built our business on three major approaches:
Bypassing the competitive top-level corporate executive market and
targeting instead mid-range business professionals with several years
of experience;
Popularizing career services through broad-based media including radio
and newspaper advertising; and
Pricing career consulting services affordably, and making financing
available.
Our mission statement is - "The Murdock Group will be the finest and largest job
search and employment consulting service in the world--helping millions make
better money doing something they care about."
Expansion Plans
Our headquarters and primary business office are located in Salt Lake City,
Utah. The combined offices occupy 30,000 square feet of office space. We opened
our Seattle office on September 18, 1998, with 5,700 square feet of office space
Headquarters employs 17 people; the Salt Lake City office, 16; and the Seattle
office, 13.
We plan to open additional offices across the United States, beginning in the
West. We also plan to create and market over the internet a number of products
and services related to the employment industry.
26
<PAGE>
Business Operations
The information below summarizes our current business operations; future
operations may differ.
Types of Service
We provide our clients with two major types of service:
Career Satisfaction. These services target individuals, providing the
TMG Job Search System and CareerChoice System to train clients how to
make wise career choices and find a great job. The core purpose is to
help individuals achieve tangible improvement in their work situations
by choosing the right career and finding employment quickly in that
field.
Corporate Productivity. These service target companies, providing
hiring training, outplacement and other services that improve the
employment and termination processes. The core purpose of these
services is to help companies improve productivity by teaching them how
to hire the right people doing the right jobs.
We have spent two years developing a comprehensive job search system that is
deliverable to mainstream professionals on a large scale. At a cost of $37,904
in 1996, $556,854 in 1997, and $718,701 for 9 months of 1998, we have conducted
extensive research and development, and field-tested multiple products to
develop a sales and delivery system that is duplicable on a national level. The
product offering is now ready for delivery.
Products
Each of our offices currently offers four employment-related products:
1. TMG Job Search System
The TMG Job Search System accounts nearly all of our revenue. It sells for
$2,995 - $3,495 and can be financed over 2 years. It includes a full-service job
search training, career advancement, and motivation system taught in small
groups. The package also includes access to a fully staffed resource center
containing job leads, computer workstations, publications, and other job search
tools.
The Job Search system includes the following features:
30 days of access to Career Insight Sessions which enable clients to
learn and practice key aspects of the system including networking,
interviewing, and negotiating.
4 months of access to one-on-one coaching from our job search
professionals, including interview coaches, marketing specialists, and
others.
4 months of access to career counseling from experienced career
consultants who provide personalized attention to each client's
specific needs.
4 months of access to 1-hour follow-up sessions to reinforce skills,
troubleshoot problems, or ask specific questions.
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4 months of access to our extensive Resource Center, which includes
on-call specialists to assist clients with job search advice, job board
postings, contact databases, business databases, and job search
publications as well as a computer center -(for on-line research,
database access, and job search document creation),-phone/fax center,
and training center.
We invite clients and their spouses or partners to attend an orientation Launch
meeting that provides an overview of the TMG Job Search System. Clients are also
introduced to the Resource Center and its databases, internet recruiter lists,
job postings board, and career library. We explain to clients that their efforts
will directly impact the success of their search, and require them to dedicate
productive time each week to their program.
The Career Insight Sessions noted above are small seminars of 5-12 participants,
which cover the following topics:
Launch (2 hours). Provides an introduction to career management and an
overview of the entire Job Search System, which will form the
foundation of the client's job search.
Defining the Target (4 hours). Helps clients clarify their career
objectives.
Creating a Powerful Resume (4 hours). Produces resumes and provides
techniques for getting results.
Making the Right Connections (4 hours). Enables clients to access the
unadvertised job market by connecting with decision makers.
Direct Approaches that Get Interviews (4 hours). Teaches methods for
turning more of a client's contacts and leads into interviews.
Interviews that Get Job Offers (4 hours). Improves the client's ability
to convert interviews into job offers.
Negotiating a Better Job Offer (4 hours). Hones a client's ability to
negotiate better terms in a job offer.
2. CareerChoice System
The CareerChoice System sells for $1,395 (which can be financed). It targets
customers who typically have been working in the same position for several
years, and now feel stuck in a job, a company, or an entire line of work that is
not fulfilling. These individuals often cannot afford to start over in their
careers, and wonder if they are qualified to do anything else. The CareerChoice
System also helps people just entering the workforce and seeking direction.
CareerChoice clients spend 8-10 hours with a personal career consultant who
administers a variety of tests and helps clients understand their career options
and plan specific, tangible career change. Activities include the following:
Diagnosing career situation, concerns, needs, expectations, goals, and
objectives.
Analyzing Meyers-Briggs Type Indicator, Strong-Campbell Interest
Inventory, Entrepreneurial Test, and personality assessments.
Assessing qualifications: education, experience, strengths, weaknesses,
skills, interests, financial requirements, geographical preferences,
and overall marketability.
Determining long-term career direction.
Determining short-term job market positioning-job functions, level of
income, responsibility and authority; and target industries.
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<PAGE>
Developing a career mission statement that incorporates long-term
direction and short-term job market positioning.
Understanding salary data and job availability.
3. Outplacement Services
We offer full and partial outplacement services to companies who lay off
employees and wish to limit their liability by helping employees find new jobs
as quickly as possible. Outplaced employees are provided with selected training
and resources from the TMG Job Search system. We quote prices based upon the
number of employees serviced and the type of services to be performed.
We offer employers a variety of programs to train laid-off workers in job search
skills:
The Full-Service Program costs $2,995 per person and includes four
months of personal coaching, workshops, resume preparation, and access
to our Resource Center.
The Quick Start Program costs $1,195 per person and includes the above
services for one month.
A 3-day Training Program on the employer's site costs $4,500 per group
of up to 15 people, and includes our workshops.
A 3-day Training Program in our offices costs $395 per person and
includes our workshops.
4. Hiring Training
We teach a series of "Hiring Basics" courses to the companies who wish to
upgrade the hiring skills of their management team. There are four separate
half-day courses, taught for $125 each. Courses rotate weekly and are taught
either at our offices or the client's site. These seminars cover topics such as
Hiring Secrets, Finding Great Candidates, Successful Interviewing, and
Negotiating the Offer.
Marketing
The Market
We believe that the market for career-related services will continue to grow as
job insecurity and changes in the employment market compel individuals to take
control of their own careers. We believe that this desire for individuals to
seek satisfaction in their employment has created a significant market for the
types of products and services we provide.
29
<PAGE>
Target Customer
The target customers for Career Satisfaction products are individual
employees-whether they are currently working for themselves or others, preparing
to work, or searching for work. The typical customer works full time and has
some college or professional training. Usually, customers have at least 5 years
of experience in the work force and are not top executives in an organization.
The target customers for the Corporate Productivity products are companies
requiring assistance with employment issues.
Advertising
We attract clients through a variety of advertising methods. Approximately 25%
of individuals who come in to the office for a sales appointment purchase the
service
Direct mail. We have experimented with direct mail for the Career
Satisfaction products in the Salt Lake City area.
Internet World Wide Web Site- (www.themurdockgroup.com): We use the
website to advertise our products and services.
Radio. We use 60-second radio spots to advertise our services.
Newspaper. We advertise in the classified section of the local
newspapers weekly.
Referrals from Satisfied Job Seekers. Our current customers are one of
our best referral sources. As we acquire more customers, we increase
our potential for profitability.
Referrals from Satisfied Employers. Leads for the Corporate
Productivity services are generated from companies who are satisfied
with the job applicants we have sent to them. We offer employers a free
Job Postings Membership which gives them access to our database of
qualified professionals. Companies who subscribe receive discounts on
recruiting, hiring training, and outplacement.
Steps in the Sales Process
Individuals who respond to our Career Satisfaction advertising are handled as
follows:
Pre-Qualification of Callers. We interview callers, explain our
approach and fee structure, and set an appointment with a career
advisor. Callers are pre-qualified over the phone to verify that they
have a college degree or marketable work experience and financial
resources to pay our fees.
Meeting with Career Advisor. The client visits our offices for the
scheduled appointment, and spends an hour with a career advisor. The
advisor explains our services and takes the client on a tour of the
facility to meet various specialists and examine resources (such as the
training rooms, job postings board, computerized databases, and career
library). The advisor emphasizes that we are working for the client,
not for any potential employer and that we charge a flat fee. We do not
charge based upon future wages, as do many employment agencies.
Our Corporate Productivity sales representatives visit companies who respond
affirmatively to our direct mailings or telephone calls.
30
<PAGE>
Financing
Clients unable to pay in cash or by credit card are given the opportunity to pay
a deposit and execute a promissory note to the company. We perform credit checks
on each. Currently, approximately 90% of our clients execute a note.
Competition
In our view, the job acquisition industry is large and fragmented into many
niches with some competitors being successful only in certain niches, and with
no company having acquired dominance in the industry.
Many competitors have products and services that are marketed as being similar
to ours, but we believe that our customers can quickly distinguish the
difference between our products and services and those of our competitors.
We compete primarily with a large number of privately-owned companies. Some of
our competitors have greater financial, marketing, distribution, technical and
other resources than we do.
Our two major competitors for career consulting services are well established
nationally. Both were founded by career industry experts who still run the
company:
Bernard Haldane was founded in 1945 after World War II to assist returning
veterans in the job market. Bernard Haldane primarily services executives
who earn over $100,000 per year, and charges a fee of 8% of the executive's
salary, (generally more than twice our fee).
Cornell Business Associates was founded in the 1980's and also primarily
services executives. It too charges an 8% fee. CBA has sales offices around
the country, but flies customers to a California location for 1-2 days of
consulting.
In addition, Robert Half offers staffing, permanent placement, recruiting, and
consulting services. Right Management Consulting is involved in career
development/management and consulting. Provant provides training, career
development, and product sales.
The principal competitive factors in obtaining customers appear to be a strong
sales and marketing program, life-changing and unique principles, competitive
pricing, and good customer service. We believe our strong emphasis on providing
these factors will be an important competitive advantage.
Operations
Property
We lease class A office space for all our operations, believing that a
professional appearance is important when providing services to professionals.
Our headquarters and Salt Lake City office are located at 5295 So. Commerce
Drive, Suite 400, Salt Lake City, Utah 84107. we occupy 30,000 square feet, for
which we pay $41,000 per month. The lease term expires on roughly 2/3 of this
space in June, 1999, at which time we plan to renegotiate. The lease term for
the balance of the space expires in 5 years.
The Seattle office located at 10900 NE 8th Street, Suite 810, Bellevue,
Washington 98004-4405 has 5,700 square feet for which we currently pay $13,000
per month. The lease term expires on September 30, 2003.
31
<PAGE>
Employees
As of September 30, 1998, we had 58 full-time employees. Our employees are not
represented by a labor union and are not subject to any collective bargaining
arrangement. We have never experienced a work stoppage and believe that we have
good relations with our employees.
Our headquarters operations, located in the same building as the Salt Lake City
office, employs 17 people. The Salt Lake City office employs 16 people, and the
Seattle office employs 13 people.
Government Regulation
Our business is subject to regulation under the Telemarketing and Consumer Fraud
and Abuse Prevention Act and state laws applicable to telemarketing activities.
We believe that we are in substantial compliance with these laws and their
regulations. Any claim that we were not in compliance could result in judgments
or consent agreements that might require us to modify our marketing program. In
the worst cases, enforcement of fraud laws can result in forcing a business to
close and subject the business, and its management and employees, to criminal
prosecution and civil damage actions.
Intellectual Property and Proprietary Rights
We rely on a combination of copyright and trademark laws and contractual
provisions to protect our proprietary rights.
We have applied for trademark registration for "The Murdock Group," "The Murdock
Group Career Satisfaction Corporation," and "The Fastest Way to a Better Job."
We will continue to evaluate the registration of additional service marks and
trademarks, as appropriate.
Litigation may be necessary to protect our proprietary technology. Any such
litigation may be time-consuming and costly. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
services or to obtain and use information that we regard as proprietary.
In addition, there are few barriers to entry into the market for our services.
It is possible that one or more of our competitors, most of whom have far
greater resources than we do, will independently develop technologies that are
substantially equivalent or superior to ours.
Litigation
As of the date of this prospectus there is no litigation pending or threatened
against us.
Information Available to You
You can copy the full securities registration statement, of which this
prospectus is a part, at the public reference facilities maintained by the
Securities and Exchange Commission at 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates. This information is also available on the
Commission's World Wide Web site at www.sec.gov.
You may also request such documents, free of charge, from us at our headquarters
located at 5295 South Commerce Drive, Salt Lake City, Utah 84117. Our telephone
number is (801) 268-3232, our fax number is (801) 268-3289, and our web site
address is www.themurdockgroup.com.
32
<PAGE>
Although we are do not currently file reports with the Securities and Exchange
Commission, once this offering is concluded the Securities Exchange Act of 1934
requires us to file reports, proxy statements and other information with the
Securities and Exchange Commission at least quarterly. This information is also
available to you at the Commission's reference library and web site, and at the
company. Our company is changing rapidly and the information in this prospectus
will soon be out of date.
33
<PAGE>
Management
The following table sets forth the names, ages, and current positions of our
officers and directors. Brief biographies for each are set forth after the
table.
<TABLE>
<CAPTION>
Name Age Company Office Board of Directors
<S> <C> <C>
KC Holmes 31 Chief Executive Officer Director
Heather J. Stone 29 President, Secretary Chairman of the
Board, Director
Richard O. Flack 54 VP of Operations
Steven W. Anderson 40 VP Sales & Marketing
Chris L. Kenney 36 General Manager, SLC Office
Christopher E. Leonard 25 Chief Information Systems Officer
Brad L. Stewart 41 Financial Officer*
Stanford S. Smith 53 In-House General Counsel
</TABLE>
*Mr. Stewart began work at the company on October 16, 1998, and will assume the
responsibility of the company's principal financial officer on January 1, 1998.
Directors
Our current directors are:
KC Thane Holmes, Director, Chief Executive Officer, age 31. Mr. Holmes received
a B.A. degree from Brigham Young University in Psychology with a minor in
Business and Accounting in 1992.
Prior to founding Envision Career Services, L.L.C. and acquiring The Murdock
Group in 1996, he served as a technical sales representative for Provider
Solutions, an Elk Ridge, Utah based software developer from 1995 to 1996, and an
account executive and technical engineer for Ameritech Library Services of
Provo, Utah, a creator of custom software for America's largest libraries, from
1991 to 1995.
He is an owner of Open Seas Trading company, a marketing business, a former
owner of a Provo-based real estate investment firm, and a former owner of
Classic Coupons, a Provo-based coupon business. He is a licensed real estate
agent and certified Oracle Database Developer.
Heather J. Stone, Director, President, age 29. Ms. Stone received an M.B.A. from
the University of Phoenix with a focus on marketing and strategic planning in
1992, and a B.A. in English from Brigham Young University in 1990.
She served as Director of Product Management for ViewSoft, Inc., a Provo-based
software firm, from 1994 to 1996, and a Product Line Manager for Novell, Inc., a
networking software firm, for several years. She was a technical writer for
Clyde Digital Systems (RAXCO), an Orem, Utah-based software company, from 1987
to 1991. She has contributed articles to technical journals and won several
writing awards.
Mr. Holmes and Ms. Stone are brother and sister.
We plan to add additional members to our Board of Directors to meet the Nasdaq
SmallCap Market requirement for two outside directors. We are working to obtain
insurance coverage for our directors and officers, and will add these directors
when coverage is available. Directors are elected annually.
34
<PAGE>
Officers
The backgrounds of our CEO KC Holmes and our President Heather Stone appear in
"Directors" above. Additional officers include the following:
O. Richard Flack, Vice President of Operations, age 54. Prior to joining The
Murdock Group, Mr. Flack received a B.A. in Marketing in 1966 from the
University of Utah, and served as General Manager of Valley Fair Mall from 1968
to 1997. He served as the president of the West Valley Area Chamber of Commerce.
Mr. Flack joined The Murdock Group in June, 1997, after going through The
Murdock Group program as a client.
Steven W. Anderson, Vice President of Sales and Marketing, age 40. Mr.
Anderson joined The Murdock Group in October 1997 to assume sales and marketing
functions from KC Holmes, the founder. He earned a B.A. in Organizational
Communications from Brigham Young University in 1984 and an M.B.A. from
Pepperdine in 1990. He worked as a Director of Marketing for Dunn Edwards
Corporation from 1995 to 1997, and as Director of Marketing for Sinclair-Glidden
from 1988 to 1995.
Chris L. Kenney, General Manager of Salt Lake City Office, age 36. Mr. Kenney
earned degrees in Data Processing from Utah Technical College in 1984, and
Information Management from Brigham Young University in 1987. He managed
operations in customer support and third-party sales for Clyde Digital Systems
from 1987 to 1990, in sales for Fresh Technology Group from 1990 to 1991, in
product management for Raxco/Axent Technologies from 1993 to 1995, and in
product line management and network engineering for Ameritech Library Services
from 1995 to 1998.
Brad L. Stewart, Financial Officer, age 41. From 1996 to 1998 he served as
Executive Vice President and Chief Operating Officer of Marker International, a
public company. He directed Marker's initial public offering and a secondary
offering while serving as its Vice President and Chief Financial Officer from
1991 to 1996. From 1986 to 1991 he was a manager of the audit department in the
Phoenix, Arizona, office of Arthur Anderson, after serving as a senior
accountant in its Atlanta, Georgia, office from 1983 to 1986. He received a B.S.
in accounting from Brigham Young University in 1983.
Christopher E. Leonard, Chief Information Systems Officer, age 25. Mr. Leonard
received a B.S. in English with a minor in Philosophy from the University of
Puget Sound in Tacoma, Washington in 1995. He co-founded Coastlink Corporation,
a corporate Internet Service Provider in Salt Lake City, Utah, in 1996. Later
that year he began Coastlink Consulting, a network consulting company. He
specializes in the use of technology to gather, organize, store and distribute
all types of information.
Stanford S. Smith, In-house General Counsel, age 53. Mr. Smith obtained his J.D.
degree from the University of Utah College of Law in 1971, and has practiced
corporate law in the Salt Lake City, Utah area since that time, with an emphasis
in the legal issues related to high-growth companies. He has served as a
lecturer in strategic planning for the international consulting firms Shipley
Associates and James A. Bent & Associates. Mr. Smith is a former member of the
Utah House of Representatives, and a former adjunct professor of business law at
the University of Utah College of Business.
Executive Compensation
Our Chief Executive Officer, KC Holmes, and our President, Heather Stone, each
received total compensation of $72,000 during our last fiscal year, which ended
on December 31, 1997. No officer or director received compensation in excess of
$100,000 during 1997.
We have not paid bonuses or granted perquisites to our executive officers. Brad
Stewart, our financial officer, is the only employee who has been granted stock
options. See "Management." All our employees, including the officers and
directors, receive medical, dental, and disability insurance paid by the
company.
35
<PAGE>
Director Compensation
Our Board of Directors consists of two members, KC Holmes and Heather Stone, who
serve without special compensation. During the next 90 days we plan to add two
outside directors, and one officer, to our Board. We plan to hold board meetings
quarterly, paying outside directors approximately $2,500 per meeting.
Standing Committees of Directors
After we have added two outside directors to the Board, we plan to establish an
Audit Committee and Compensation Committee, each to be composed of one inside
director and two outside directors.
The Audit Committee will make annual recommendations to the Board of Directors
respecting the appointment of our independent public accountants, discuss and
review the scope and the fees of the prospective annual audit and review the
results thereof with the independent public accountants.
It will also review and approve non-audit services of the independent public
accountants, review compliance with existing major accounting and financial
policies, review the adequacy of our financial organization and review
management's procedures and policies relative to the adequacy of our internal
accounting controls.
The Compensation Committee will review and approve annual salary and bonus
ranges for all executive officers, and recommend to the Board of Directors the
terms and conditions of employee benefit plans.
Principal Shareholders
The following table shows certain information known to us regarding the
beneficial ownership of the shares as of September 30, 1998. It illustrates
share ownership as adjusted to reflect the sale of the shares being offered, for
(i) each Shareholder known by us to own beneficially 5% or more of the
outstanding shares of its shares; (ii) each director; and (iii) all directors
and executive officers as a group. We believe that these beneficial owners,
based on information they have furnished, have sole investment and voting power
with respect to their shares, subject to community property laws where
applicable.
<TABLE>
<CAPTION>
Directors, Executive Shares Owned Percentage of Shares Owned Percentage of
Officers, and Owners of 5% or Before Offering Shares Before the After Offering (3) Shares After
More of the Shares (1) Offering (2) the Offering (4)
<S> <C> <C> <C> <C>
KC Holmes* 3,038,842 35.80% 2,963,842 26.97%
------ ------
Heather Stone* 3,038,842 35.80% 2,963,842 26.97%
------ ------
Richard Flack 12,000 0.14% 12,000 0.11%
----- -----
Steven Anderson 12,000 0.14% 12,000 0.11%
----- -----
Chris Kenney 5,000 0.06% 5,000 0.05%
----- -----
Christopher Leonard 12,800 0.15% 12,800 0.12%
----- -----
Lance Heaton 300,000 3.53% 300,000 2.73%
----- -----
Brad Stewart* 84,000 .99% 70,000 .64%
---- ----
Stanford S. Smith* 612,718 7.22% 595,218 5.42%
------- ----- ------- -----
All Directors and Officers 7,116,202 83.83% 6,934,702 63.12%
as a Group ------ ------
</TABLE>
36
<PAGE>
* Selling Shareholders
Footnotes:
(1) The business address of each person named is 5295 South Commerce Drive,
Suite 300, Salt Lake City, Utah 84107.
(2) This does not include 2,000,000 shares held in the company treasury.
(3) Assumes sale of all 2,681,500 shares, consisting of 2,000,000 treasury
shares, 500,000 shares to be issued, and 181,500 from selling shareholders.
(4) Purchasers of the company shares will receive treasury shares and
500,000 newly issued shares. There will be no treasury shares outstanding
after the offering if all shares are sold.
Related Party Transactions
The Company regularly purchases computer hardware, software, and services from
Coastlink Consulting, which is a sole proprietorship registered in the State of
Utah. The owner of Coastlink Consulting is also an officer and employee of the
Company. The Company has a consulting agreement with an owner and employee of
The Pinebrook Group, which is a sole proprietorship registered in the State of
Utah. The owner employee of Pinebrook was also a shareholder in The Murdock
Group Career Satisfaction Corporation until the Company repurchased all of the
shares owned by the individual (see note 21).
During January of 1998, the Company sold $375,000 of Promissory notes and issued
150,000 Class A shares to related parties pursuant to a private placement
memorandum. The Company is paying interest of 16% to 18% on these notes (See
note 18).
Interest paid to related parties at December 31, 1997 and 1996 was approximately
, $23,670 and $3,521 respectively.
The Company made advances and short-term loans to employees and other related
parties amounting to $284,334, $30,646, and $0 as of September 30, 1998,
December 31, 1997, and December 31, 1996, respectively.
Officers, directors and majortiy shareholders owed the Company $331,494,
$86,095, and $9,440 as of September 30, 1998 December 31, 1997 and December 31,
1996, respectively.
The Company has provided an allowance for these receivable amounts. The Company
was indebted to employees $340,000, $0, and $0 as of September 30, 1998,
December 31, 1997 and December 31, 1996, respectively, relating to a private
placement offering, and owed the parents of an employee $49,089 for funds
advanced to the Company under a line of credit arrangement as of September 30,
1998.
Indemnification of Officers and Directors
As allowed by the Utah Business Corporations Act, our Bylaws provide that the
liability of the officers and directors of the company for monetary damages
shall be eliminated to the fullest extent permissible under Utah law.
37
<PAGE>
We did this to eliminate the personal liability of an officer or director for
monetary damages in an action brought by, or in the right of the company for,
breach of duty to the company or its shareholders. It does not, however,
indemnify directors for intentional wrongdoing.
This provision does not limit or eliminate the rights of the company or any
shareholder to seek non-monetary relief such as an injunction or rescission in
the event of a breach of a director's duty of care.
We understand that the Securities and Exchange Commission takes the position
that insofar as the foregoing provision may be invoked to disclaim liability for
damages arising under the Securities Act, the provision is against public policy
as expressed in the Securities Act and is therefore unenforceable. Such
limitation of liability also does not affect the availability of equitable
remedies such as injunctive relief or rescission.
We are now working to obtain directors' and officers' liability insurance. When
this is in place, we will add two outside directors.
Legal Proceedings
We are not aware of any legal proceedings within the last 5 years against any
director, officer, significant employee, or candidate for any such position,
which involve a petition under the Bankruptcy Act or any State insolvency law or
of any receiver, fiscal agent or similar officer appointed by a court -
For the business or property of such person or any partnership in
which he was general partner or within 2 years before the time of such
filing, or
For any corporation or business association of which he was an
executive officer within 2 years before the time of such filing.
Nor are we aware of any of any officer or director being convicted in a criminal
proceeding.
38
<PAGE>
The Shares
Shares
The authorized capital stock of the company consists of 100,000,000 shares Class
A Common Stock at no par value. Our Articles of Incorporation also authorize us
to issue 100,000,000 shares of Class B Non-Voting Common Stock, but we have not
issued any of these shares.
As of September 30, 1998, we had 30 shareholders, holding a total of 8,488,740
shares.
The Class A shares have the following characteristics:
Holders are entitled to one vote per share on all matters submitted to
a vote of our shareholders and may not cumulate votes for the election
of directors.
Holders have the right to receive dividends when, as, and if declared
by the Board of Directors from funds legally available for this
purpose.
Upon liquidation of the company, holders are entitled to share pro
rata in any assets available for distribution to shareholders after
payment of all company obligations, including the bonds.
Holders have no preemptive rights, i.e., the (first rights to acquire
any additional shares issued by the company), and have no rights to
convert their shares into any other securities.
All shares now outstanding are fully paid for and nonassessable.
Shares are not redeemable.
Determination of Offering Price
Prior to this offering there has been no market for our shares. The offering
price has been determined by our Board of Directors based upon its estimate of
future earnings prospects, and not upon any determination of current value. (See
"Plan of Distribution.")
Dilution
On the date of this prospectus, we had a book value of ($4,797,473, or ($.5652)
per share. The net book value per share is equal to a company's total assets,
less its total liabilities and divided by its total number of shares of shares
outstanding.
If we sell all 2,500,000 shares we are offering, our net book value at the
conclusion of the offering will be approximately $6,252,527 or $.569 per share.
This represents an immediate increase in book value of $1.1342 per share to
existing shareholders and an immediate dilution of $4.431 per share to new
investors purchasing shares in this offering.
The following table illustrates the per share dilution in book value per share
to new investors and other information about the shares:
39
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Initial offering price per share $ 5.00
Net book value before offering ($ 4,797,473)
Net book value per share before the offering $ (.5652)
Increase in net book value per share attributable to the cash payment by new investors $11,050,000
Net book value per share after offering $ .57
Dilution per share to new investors $ 4.431
Total number of shares outstanding before the offering 8,488,740
Total consideration for outstanding shares paid by existing shareholders $ 502,118
Average consideration paid per share by existing shareholders $ 0.06
</TABLE>
Trading Market
The shares are not currently listed for trading on any exchange. We will apply
to list our shares for trading on the Nasdaq SmallCap Market at the conclusion
of this offering, (subject to selling the 2.5 million shares we are offering by
this prospectus), but cannot guarantee that our application will be approved. If
we fail to meet these standards, we plan to apply for a listing of our shares on
the NASD OTC Bulletin Board. Our proposed trading symbol is "JOBS."
Selling Shareholders
As shown on the table below, four of our current shareholders are offering
181,500 of their own shares for sale as part of this offering. If all of these
shares are sold, these officers will receive $907,500, less a pro rata share of
sales commissions and offering expenses. These shares will be sold pro rata with
our shares until such time as 1,000,000 company shares have been sold, whereupon
all unsold shares of selling shareholders will be sold before sale of company
shares recommences.
<TABLE>
<CAPTION>
Name No. of Shares Proceeds of Sale %of Shares Owned After
to be Sold Completion of Offering
<S> <C> <C> <C>
KC Holmes, CEO 75,000 $ 375,000 26.97%
Heather Stone, President 75,000 $ 375,000 26.97%
Brad Stewart, Financial Officer 14,000 $ 70,000 .64%
Stanford Smith, General Counsel 17,500 $ 87,500 5.42%
Total 181,500 $ 907,500 60.0%
</TABLE>
40
<PAGE>
Shares Eligible For Future Resale
Upon completion of this offering, assuming the sale of all shares, we will have
outstanding 10,988,740 shares.
Of these shares, the 2,681,500 shares sold in this offering will be freely
tradable without restriction or further registration under the Securities Act.
This rule does not apply to any shares owned by an "affiliate" of the company,
which will be subject to the resale limitations of Rule 144 adopted under the
Securities Act.
In general, under Rule 144 a person who has beneficially owned shares for at
least one year, including "affiliates" as that term is defined under the
Securities Act, is entitled to sell, within any 3-month period, a number of
shares that does not exceed the greater of (i) one percent (1%) of the then
outstanding shares of the shares or (ii) the average weekly trading volume in
the shares during the four calendar weeks immediately preceding the date on
which the notice of sale is filed with the Commission.
Sales under Rule 144 are subject to certain requirements relating to manner of
sale, notice and availability of certain current public information about the
company. A person who is not deemed to have been an "affiliate" of the company
at any time during the 90 days immediately preceding the sale and who has
beneficially owned shares for at least three years is entitled to sell such
shares under Rule 144(k) without regard to these limitations.
The postoffering fair value of our shares, whether or not any secondary trading
market develops, is variable and may be impacted by the business and financial
condition of the company, as well as factors beyond our control.
Sales of substantial amounts of shares in any public market could cause lower
market prices and even make it difficult for us to raise capital through a
future offering of equity securities.
Stock Options
As of September 30, 1998, options to acquire our shares were held by four five
individuals and trusts.
Martin Collins, a former employee and founder of the company, has an
option to acquire 800,000. He may acquire these shares at a discount
of 20% from the market trading price, if any, during 1998, and a
discount of 15% during 1999.
Reta Fawson, B&S Family Trust, and Argentum Family Trust, none of
which are affiliated with us, purchased our convertible bonds for an
aggregate price of $240,000 in May of 1998. This gave them the option
of acquiring shares at a discount of 20% from the public offering
price if our shares were registered with the SEC, but only during the
offering period. During a 6-month period following such the listing of
shares on a public exchange, these bonds may be converted to shares at
a discount of 20% from the average share trading price during the
30-day period prior to exercise of the option. During the period from
7 to 18 months after the listing date, these bonds may be converted to
shares at a discount of 10% similarly calculated.
Brad Stewart, a Financial Officer, has an option to acquire 100,000
shares at $4 5 per share, vesting at the rate of 25,000 per year for
four years.
Transfer Agent and Registrar
The transfer agent and registrar for our shares is Interwest Transfer Company,
Inc., at 1981 East Murray Holladay Road, Suite 100, Salt Lake City, Utah 84117,
phone (801) 272-9294, fax (801) 277-3147.
41
<PAGE>
The Bonds
Bond Characteristics
We are offering $3,000,000 in company bonds to be sold in increments of $1,000,
with a minimum investment of $1,000. The bonds have a 4-year term, and will bear
interest at 15% per annum compounded annually and paid with the principal at
maturity.
We may prepay and retire the bonds at any time upon 30-day's written notice to a
bond holder. All principal and accrued interest with respect to a called bond
must be paid within 15 days of the call date.
Payment of the principal and interest on the bonds is secured solely by company
assets. We will not establish a sinking fund) for retirement of the bonds. A
sinking fund is an accumulating pool of capital intended to repay bond principal
and interest. Bond holders will be dependent upon our ability to generate
income, or otherwise obtain sufficient capital, to pay the principal and
interest of the bonds at the time of maturity.
No master indenture has been adopted in connection with the bonds and no trustee
has been appointed to protect the rights of bond holders. If we default upon
payment to any bond holder, such holder must proceed individually, or join with
other unpaid bond holders, to collect any damages from us. We have not obligated
ourselves to cover the expenses of such collection efforts.
We will not seek to list the bonds for trading in any public market. Bonds are
an illiquid investment which you must hold for 4 years, receiving no interest or
principal until the maturity date.
We will not pay any dividends to our shareholders until all these bonds have
been retired.
Rights in Liquidation
There are no voting rights associated with the bonds. If you purchase bonds, you
will be a general unsecured creditor, not an owner, of the company.
In the event we dissolve, company creditors, (including the bond holders), must
be fully paid before any liquidating distributions are made to Shareholders.
42
<PAGE>
Plan Of Distribution
Offering of Securities
We are offering the shares and bonds at the offering price set forth on the
cover page of this prospectus, with a minimum investment of $1,000 required for
either shares or bonds.
We plan to seek the support of NASD member firms which are recognized market
makers with the intention of obtaining their assistance in the creation of a
viable market in the shares for the benefit of our shareholders.
Our Board of Directors has arbitrarily set the price at which the shares are
offered. The price has no relationship to our book value per share, our current
earnings, or other generally accepted measurement of value.
Agreement with a Broker-Dealer
We plan to enter agreements with registered securities broker-dealers, in which
they will agree to use their best effort to sell our shares and bonds in
exchange for a cash sales commission of 10% of the proceeds they raise.
We will agree to indemnify these firms against liabilities incurred as a result
of any untrue statement of a material fact contained in the prospectus, or as a
result of the omission of a material fact necessary in order to make the
statements in the prospectus, in light of the circumstances, not misleading.
Based on the number of unsold shares and bonds, we will periodically allocate
our securities among these participating broker-dealers.
There are no plans, proposals, arrangements or understandings with any potential
sales agent, other than company officers, with respect to participating in the
distribution of the company's securities. If such participation develops in the
future, we will amend this prospectus to identify such persons.
No Stabilizing Transactions
We have not engaged anyone to stabilize, maintain or otherwise affect the price
of shares including generating stabilizing bids.
In general, purchasing shares for the purposes of stabilization or to reduce a
short position could cause the share price to be higher than it might be if no
such purchases were made. In the absence of transactions that stabilize the
price, our share price could be hurt by market conditions.
Sales by Our Officers
Some of our officers will also sell shares and bonds. These officers are KC
Holmes, Heather Stone, Lance Heaton, Steven Anderson, and Randy Burnham.
They believe they qualify to participate in the marketing of our shares and
bonds under the terms of Rule 3a4-1 (a) of the Securities Exchange Act of 1934
because they -
43
<PAGE>
Are not subject to any statutory disqualification;
Will not be compensated for sales services;
Are not associated persons of broker dealers;
Perform substantial duties for the issuer otherwise than in connection
with securities transactions;
Were not associated with a broker or dealer with the 12-month period
prior to this offering; and
Will not participate in selling a securities offering for any issuer
more than once every 12 months.
Shares to be Sold to Employees at a Discount
We will allow our employees and their immediate families to purchase as many
shares offered by this prospectus as they wish at a discount of 10% from the
sales price. They will pay ($3.60 4.50 per share rather than the $4 5 per share
paid by other investors). Since we will not pay any sales commissions on these
shares, the net proceeds to the company will be the same as with shares sold to
other investors by participating brokers.
Shares to be Sold by Shareholders
Four of our current shareholders are selling a total of 181,500 shares for their
own account, representing 6.8% of the total shares to be sold in this offering.
The company will not receive any proceeds from the sale of their shares. KC
Holmes, CEO, will sell 75,000 shares; Heather Stone, President and Chairman of
the Board, 75,000, Brad Stewart, CFO Financial Officer, 14,000; and Stanford
Smith, In-house General Counsel, 17,500.
These shares will be sold pro rata with the company's shares until such time as
1,000,000 company shares have been sold, whereupon all unsold shares of selling
shareholders will be sold before sale of company shares recommences. To ensure
that sales of shares of selling shareholders do not exceed 6.8% of the total
shares sold in this offering until 1,000,000 company shares have been sold, the
company will adopt the following procedure:
No shares of selling shareholders will be sold during the calendar
month in which the offering commences.
Sales of shares in the next calendar month equal to 6.8% of the
company-owned shares sold during the immediately previous calendar
month will be allocated to the selling shareholders. They will
allocate such sales among themselves pro rata.
This procedure will be followed in all succeeding calendar months
until the Company has sold 1,000,000 of its shares, whereupon all
unsold shares of selling shareholders shall be sold before sale of
company shares recommences.
Shares of selling shareholders will be sold only in the manner the company's
shares will be sold as described in this offering. They will not be sold through
any specially negotiated transactions, block sales, or other means.
Offering Period
The offering will continue until subscriptions for all shares and bonds are
received, until 9 months from the effective date of the offering, or until we
terminate the offering, whichever event first occurs.
44
<PAGE>
Indemnification of Officers, Directors, and Selling Agents
Our Bylaws provide that we shall indemnify any officer, director or former
officer or director, to the full extent permitted by law. The Securities and
Exchange Commission has advised us that in its opinion such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
How to Subscribe
Please mail your check or money order payable only to "The Murdock Group,"
together with a completed subscription agreement, directly to us at 5295 South
Commerce Drive, Suite 300, Salt Lake City, Utah 84107, attention: share
purchase.
We will deposit the proceeds from the sale of shares and bonds to our bank
account by noon of the business day following receipt.
We reserve the right to reject any subscription in whole or in part, or to
accept subscriptions in any order, for any or no reason. If we accept your
subscription, we will mail you your share or bond certificate within 30 days of
the day we receive your subscription.
45
<PAGE>
Experts
The audited consolidated balance sheets of The Murdock Group Career Satisfaction
Corporation and Envision Career Services, L.L.C. as of September 30, 1998
(unaudited), and December 31, 1997 and 1996, and the related statements of
operations, stockholders' deficit and cash flows for each of these years,
included in this prospectus, have been included herein in reliance on the report
of David Thomson, independent certified public accountant, given on the
authority of that firm as experts in accounting and auditing.
All legal matters in connection with this prospectus have been passed upon by
Stanford Smith, a shareholder and our In-house General Counsel.
Additional Information
A registration statement on Form SB-2 relating to these shares and bonds has
been filed with the Securities and Exchange Commission. This prospectus does not
contain all of the information set forth in the Registration Statement and its
exhibits and schedules. You are welcome to examine the full registration
statement, and all reports we file with the Commission as required by the
Securities Exchange Act of 1934. These materials may be copied at the
Commission's principal office located at 450 Fifth Street, N.W., Washington,
D.C. 20549 upon payment of a reasonable fee. The Commission also maintains a
site on the internet at www.sec.gov that contains this information. *Mr. Stewart
began work at the company on October 16, 1998.
46
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(UNAUDITED)
AND
DECEMBER 31, 1997 AND 1996
WITH
INDEPENDENT AUDITOR'S REPORT
47
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
Table of Contents
Page
----
Independent Auditor's Report 49
Consolidated Balance Sheets 50-51
Consolidated Statements of Operations 52
Consolidated Statement of Stockholders' Equity 53
Consolidated Statements of Cash Flows 54
Notes to Consolidated Financial Statements 55-76
48
<PAGE>
[letterhead]
David T. Thompson P.C. Certified Public Accountant
- --------------------------------------------------------------------------------
Independent Auditor's Report
- ----------------------------
Board of Directors
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
I have audited the consolidated balance sheets of The Murdock Group Career
Satisfaction Corporation as of May 31, 1998 and December 31, 1997 and 1996 and
the related consolidated statements of operations, stockholders' equity and cash
flows for the five months ended May 31, 1998, for the year ended December 31,
1997 and from inception (August 5, 1996) to December 31, 1996. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on the financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of The Murdock Group
Career Satisfaction Corporation, as of May 31, 1998 and December 31, 1997 and
1996, and the consolidated results of their operations and their cash flows for
the periods indicated, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As shown in the consolidated
financial statements, the Company has experienced a consolidated net loss of
$1,444,726 for the five month period ended May 31, 1998 and has incurred
substantial net losses since its inception. At May 31, 1998, current liabilities
exceed current assets by $1,616,280 and total liabilities exceed total assets by
$3,310,768. These factors, and the others discussed in Note 8, raise substantial
doubt about the Company's ability to continue as a going concern. The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
/s/ David T. Thompson P.C.
--------------------------
David T. Thompson P.C.
Salt Lake City, Utah
September 16, 1998
49
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONSOLIDATED BALANCE SHEETS
As of May 31, 1998 and December 31, 1997 and 1996
<TABLE>
<CAPTION>
ASSETS
September 30
1998 1997 1996
--------------- --------------- ---------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,968 $ 1,604 $ 5,994
Current portion of contracts receivable - Note 3 557,678 381,955 25,768
Current portion of contracts receivable - related parties 5,423 5,273 --
Prepaid expenses and other 72,414 23,402 6,929
Current portion of amounts due from related parties - Note 9 449,949 1,800 --
Deferred offering costs 94,658 -- --
--------------- --------------- ---------------
Total current assets 1,182,090 414,034 38,691
--------------- --------------- ---------------
PROPERTY AND EQUIPMENT, at cost
Computer equipment 168,823 83,291 1,240
Equipment, furniture and fixtures 195,088 88,915 9,815
Leasehold improvements and other 69,274 4,195 2,035
Property and equipment held under capital leases 346,858 259,642 5,521
--------------- --------------- ---------------
780,043 436,043 18,611
Less: accumulated depreciation and amortization (120,030) (39,875) (59)
--------------- --------------- ---------------
Total property and equipment, net 660,013 396,168 17,752
--------------- --------------- ---------------
OTHER ASSETS
Contracts receivable - less current portion - Note 3 250,378 427,917 35,677
Contracts receivable - related party - less current portion 3,267 7,033 2,245
Intangible assets, net - Note 2 57,596 59,294 65,278
Deposits and other assets 247,670 36,618 5,030
Investments and other assets 25,000 25,000 --
Amounts due from related parties, net - Note 9 1,834 28,846 9,440
--------------- --------------- ---------------
Total Other Assets 585,745 586,708 117,670
--------------- --------------- ---------------
TOTAL ASSETS $ 2,427,848 $1,396,910 $ 174,113
=============== =============== ===============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
50
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONSOLIDATED BALANCE SHEETS
As of September 30, 1998 (Unaudited) and December 31, 1997 and 1996
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY
September 30,
1998 1997 1996
--------------- -------------- --------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 342,708 $ 249,346 23,977
Accrued payroll costs and wages payable 161,828 201,620 7,497
Short-term debt - Note 15 2,710,000 113,000 130,353
Short-term debt - related parties - Note 16 282,500 128,571 64,326
Current portion of long-term debt - Note 17 595,562 18,307 --
Current portion of long-term debt - related parties - Note 18 270,600 -- --
Current portion of obligation under capital leases - Note 7 90,681 59,066 4,559
Other accrued liabilities 150,442 40,144 6,135
Unearned revenue - Note 2 247,174 744,314 77,046
--------------- -------------- --------------
Total current liabilities 4,851,495 1,554,368 313,893
--------------- -------------- --------------
LONG-TERM LIABILITIES
Long-term debt - Note 17 1,751,832 1,563,420 --
Long-term debt-related parties - Note 18 118,489 -- --
Convertible debenture - Note 13 240,000 -- --
Obligations under capital leases - Note 7 263,505 147,274 --
--------------- -------------- --------------
Total long-term liabilities 2,373,826 1,710,694 --
--------------- -------------- --------------
COMMITMENTS AND CONTINGENCIES - Note 6
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock - Class A, no par value, 100,000,000 shares authorized;
8,488,740 (Unaudited),9,880,000 and 9,880,000 shares
issued and outstanding respectively 502,118 988 988
Common Stock - Class B, no par value, no shares issued and
outstanding -- -- --
Treasury Stock Class A-Common 2,000,000 Shares (45) -- --
Subscriptios Receivable-Common Stock-Class A (160,000) -- --
Accumulated Deficit (5,139,546) (1,869,140) (140,768)
--------------- -------------- --------------
Total stockholders' equity (deficit) (4,797,473) (1,868,152) (139,780)
--------------- -------------- --------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,427,848 $1,396,910 $ 174,113
=============== ============== ==============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
51
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1998 and 1997
(Unaudited) , For the Year Ended December 31, 1997, and From August
5, 1996 (Inception) to December 31, 1996
<TABLE>
<CAPTION>
September 30,
--------------------------
1998 1997 1997 1996
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
SERVICE REVENUES, inclusive of interest charged $ 2,348,420 $ 342,396 $ 694,093 $ 33,662
Less: Contract cancellations (646,042) (47,671) (101,543) (3,665)
Contract discounts (274,070) (32,513) (40,720) (2,541)
----------- ----------- ----------- -----------
Total, net 1,428,308 262,212 551,830 27,456
DIRECT COST OF SERVICES 1,396,448 338,798 667,402 46,163
----------- ----------- ----------- -----------
Gross profit (loss) 31,860 (76,586) (115,572) (18,707)
----------- ----------- ----------- -----------
OPERATING EXPENSES
Selling, General and administrative 1,409,067 360,817 704,566 70,810
New products research and development 718,701 274,667 556,854 37,904
Depreciation and amortization 76,074 17,574 32,796 2,578
----------- ----------- ----------- -----------
Total operating expenses 2,203,842 653,058 1,294,216 111,292
----------- ----------- ----------- -----------
INCOME (LOSS) FROM OPERATIONS (2,171,982) (729,644) (1,409,788) (129,999)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest expense (702,864) (138,252) (248,387) (9,893)
Interest income 22,800 -- 126 112
Non-trade receivables write-off and other, net (419,348) (66,836) (70,323) --
----------- ----------- ----------- -----------
Total, net (1,099,412) (205,088) (318,584) (9,781)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $(3,271,394) $ (934,732) $(1,728,372) $ (139,780)
=========== =========== =========== ===========
EARNINGS PER SHARE $ (0.36) $ (0.09) $ (0.17) $ (0.01)
=========== =========== =========== ===========
WEIGHTED AVERAGE CLASS A SHARES (9,184,370) 9,880,000 9,880,000 9,880,000
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
52
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended September 30, 1998 (Unaudited), For the Year Ended December 31, 1997,
and From August 5, 1996 (Inception) to December 31, 1996
Common Stock - Class A
----------------------------------------------
Number of Number of Stock
shares Amount shares held in Amount Subscription Amount
outstanding treasury Receivable Deficit
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, August 5, 1996 (Inception) - $ - - $ - $ - $ -
* Shares issued to initial stockholders at incorporation 9,880,000 988 - - - (988)
Net loss - - - - - (139,780)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1996 9,880,000 988 - - - (140,768)
Net loss - - - - - (1,728,372)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1997 9,880,000 988 - - - (1,869,140)
* Shares issued pursuant to offering of promissory notes at a
value of $.01 per share during January 1998 (Unaudited) 150,000 1,500 - - - -
* Cancellation of treasury shares, February 1998 at $.0001
per share (Unaudited) (29,200) (3) - - - -
* Shares issued to two individuals for services rendered at
$.01 per share (Unaudited) 48,000 200 - - - -
* Cancellation of treasury shares, March 1998 at $.0001
per share (Unaudited) (20,000) (2) - - - -
* Shares issued to trusts at $.01 per share (Unaudited) 25,000 250 - - - -
* Cancellation of treasury shares at $.0001
per share (Unaudited) (25,000) (2) - - - -
* Issuance of shares in exchange for members
interest in LLC (Unaudited) 8,205,800 - - - - -
* Cancellation of shares received and dissolution
of LLC (Unaudited) (8,205,800) (821) - - - 988
Repurchase of shares from initial stockholder at $.0001
per share (Unaudited) (800,000) - 800,000 (80) - -
Shares issued to an induvidual at $.0001
per share (Unaudited) 300,000 - (300,000) 30 - -
Shares issued to employees as bonus at $.0001
per share (Unaudited) 49,500 - (49,500) 5 - -
Shares issued to an individual for cash and subscription
agreement at $1.33 per share (Unaudited) 375,940 500,000 - - (160,000) -
Shares issued to an individual pursuant to employment
agreement at $.0001 per share (Unaudited) 84,000 8 - - - -
Shares contributed to treasury by (1,549,500) - 1,549,500 - - -
initial stockholders (Unaudited)
Net Loss (Unaudited) - - - - - (3,271,394)
----------- ----------- ----------- ----------- ----------- -----------
BALANCE, September 30, 1998 (Unaudited) 8,488,740 $502,118 2,000,000 $ (45) $ (160,000) $(5,139,546)
=========== =========== =========== =========== =========== ===========
</TABLE>
* After the effect of recapitalization
The accompanying notes are an integral part of these
consolidated financial statements.
53
<PAGE>
<TABLE>
<CAPTION>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS For the Nine Months
Ended September 30, 1998 and 1997
(Unaudited), For the Year Ended December 31, 1997, and From August
5, 1996 (Inception) to December 31, 1996
September 30,
------------------------------
1998 1997 1997 1996
----------- --------- ----------- ---------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(3,271,394) $ (934,732) $ (1,728,372) $ (139,780)
Adjustments to reconcile net loss to net cash used
in operating activities
Nonmonetary stock transactions for expenses and other 2,073 - - -
Depreciation and amortization 93,376 24,408 45,550 3,581
Change in operating assets and liabilities
Contracts receivable 1,816 (528,906) (748,427) (161,445)
Contracts receivable - related party 3,616 (2,695) (10,061) (2,245)
Prepaid expenses and other (49,012) (8,506) (16,473) (6,929)
Amounts due from related parties - current (448,149) - (1,800) -
Deferred Offering Costs (94,658)
Intangible assets (11,523) - (550) (68,000)
Deposits and other assets (209,052) (24,101) (33,588) (5,030)
Amounts due from related parties 27,012 (59,475) (19,406) (9,440)
Accounts payable 93,362 113,569 225,369 23,977
Accrued payroll costs and wages (39,792) 76,833 194,123 7,497
Other accrued liabilities 110,298 19,623 34,009 6,135
Unearned revenue (497,140) 481,334 667,268 77,046
----------- --------- ----------- ---------
Net cash used in operating activities (4,289,167) (842,648) (1,392,358) (274,633)
----------- --------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (344,000) (359,968) (417,432) (18,611)
Investments in securities and investment trust - (25,000) (25,000) -
-- -------- -------- -
Net cash used in investing activities (344,000) (384,968) (442,432) (18,611)
----------- --------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt 8,025,978 1,617,271 2,028,402 284,521
Principle payments on debt (3,732,447) (345,883) (198,002) (85,283)
Proceeds from sale of stock 340,000 - - -
----------- --------- ----------- ---------
Net cash provided by financing activities 4,633,531 1,271,388 1,830,400 199,238
----------- --------- ----------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 364 43,772 (4,390) (94,006)
CASH AND CASH EQUIVALENTS - BEG OF PERIOD 1,604 5,994 5,994 -
----------- --------- ----------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,968 $ 49,766 $ 1,604 $ (94,006)
----------- --------- ----------- ---------
SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the year for:
Interest $ 603,547 $ 123,009 $ 218,506 $ 26,632
----------- --------- ----------- ---------
Income taxes $ - $ - $ - $ -
----------- --------- ----------- ---------
SUPPLEMENTAL DISCLOSURES OF NONCASH
INVESTING AND FINANCING ACTIVITIES
Stock issued as compensation $ 213
-----------
Stock issued as debt issue cost $ 1,500
-----------
Debt exchange for corporate promissory notes $ 150,000
-----------
</TABLE>
The accompanying notes are an integral part of these
financial statements
54
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF OPERATIONS
The Murdock Group Career Satisfaction Corporation (Company) is a
job-search and employment consulting company. The Company services
professionals with five or more years of experience who are
dissatisfied with their career direction or current job situation. The
Company offers job-search training workshops, consultants and coaches,
and access to a job-search resource center. The Company also provides
full-service hiring assistance, including training, recruiting, and
outplacement, to corporations. The Company's main office is located in
Salt Lake City, Utah. The Company has signed a lease for office space
in Seattle, Washington and an office was opened there. Substantially
all of the Company's revenue is from the services described above. At
its inception, the Company purchased assets, a copyright, rights to the
business name and miscellaneous intangible assets from an individual
operating as a sole proprietorship DBA The Murdock Group.
Envision Career Services LLC. DBA The Murdock Group (Envision), owned a
majority share of the corporation prior to the business combination
with the Company and its dissolution. Envision originally conducted the
business activities explained above which now continue in the surviving
corporate entity.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported periods.
Actual results could differ from those estimates.
Consolidation principles - The accompanying consolidated financial
statements include the accounts of the Companies as outlined in the
business combination as explained in note 4. Intercompany transactions
and balances have been eliminated in consolidation.
Net income per share - The computation of net income (loss) per share
of common stock is based on the weighted average number of shares
outstanding during the period presented.
Revenue Recognition - The Company provides most of its services under
various types of contracts for services to be rendered. Revenue for
these services is recognized as service is rendered, and the
recognition is based on contract type. One year contract revenue is
amortized evenly by month over a 12 month period. The portion of
revenue that is unrecognized remains as unearned revenue until services
have been rendered. A flex contract is amortized evenly by month over a
4-month period, and the unrecognized portion of revenue remains as
unearned revenue until it has been earned. Revenue for 60-day guarantee
and 90-day guarantee contracts is not recognized until the guarantee is
fulfilled. When the guarantee has been fulfilled, the entire portion of
revenue is recognized. Prior to fulfillment of the guarantee, it
remains as unearned revenue. Unearned revenue is all unrecognized
revenue for the above contract types, and is $247,174 (Unaudited),
$744,314, and $77,046 for the periods ending September 30, 1998,
(unaudited) December 31, 1997 and 1996, respectively. Revenue is
recognized completely in the month it is earned for those services
requiring less than one month to complete. Cash discounts,
cancellations, and write-offs are recognized based on certain criteria
such as time since last payment made, cancellation requests negotiated
and granted, and contract price reduction due to early cash payment.
55
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Cash and Cash Equivalents - The Company considers highly liquid
investments with an original maturity of three months or less to be
cash and cash equivalents. Cash and cash equivalents are recorded at
cost, which approximates market value.
Property and Equipment - Property and equipment are stated at cost and
depreciated using the straight-line method over their estimated useful
lives. Leasehold improvements are amortized over the terms of the
respective leases or the estimated economic lives of the assets,
whichever is shorter. The depreciation and amortization periods are as
follows:
Computer equipment and software 3-5 years
Office equipment 5 years
Art, furniture and fixtures 7 years
Leasehold improvements and other 5 years
Certain art works are artist originals and may or may not be
depreciated.
Upon retirement or other disposition of property and equipment, the
cost and related accumulated depreciation and amortization are removed
from the accounts. The resulting gain or loss is reflected in income.
Major renewals and betterments are capitalized while minor expenditures
for maintenance and repairs are charged to expense as incurred.
Intangible Assets - Intangible assets consist of the following amounts
as of September 30, 1998 (Unaudited) and December 31, 1997 and 1996:
1998 1997 1996
---- ---- ----
(Unaudited)
Miscellaneous intangibles ............ $ 15,000 $ 15,000 $ 15,000
Copyright ............................ 53,000 53,000 53,000
Organization costs ................... 550 550 --
Debt issue costs ..................... 11,523 -- --
-------- -------- --------
Total ................................ 80,073 68,550 68,000
Less accumulated amortization ........ (22,477) (9,256) (2,722)
-------- -------- --------
$ 57,596 $ 59,294 $ 65,278
======== ======== ========
Goodwill and organization costs are amortized using the straight-line
method over 5 years. The copyright is amortized using the straight-line
method over 15 years. Debt issue costs are amortized using the
straight-line method over 2 years.
Accounting for the Impairment of Long-Lived Assets - The Company
accounts for impairment of long-lived assets in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of long-lived Assets and for long-lived
Assets to be Disposed of." SFAS 121 requires that long-lived assets be
reviewed for impairment whenever events of changes in circumstances
indicate that the book value of the asset may not be recoverable. The
Company evaluates at each balance sheet date whether events and
circumstances have occurred that indicate possible impairment. In
accordance with SFAS No. 121, the Company uses an estimate of the
future undiscounted net cash flows of the related assets over the
remaining life in measuring whether the assets are recoverable.
56
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED
Income Taxes - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due plus deferred income taxes related primarily to the
difference between the corporation reporting income on the cash basis
for tax purposes and the reporting of income on the accrual basis of
accounting for financial statement purposes. Deferred income taxes
represent the future income tax consequence of those timing
differences, which will in the future be taxable or deductible when the
assets or liabilities are recovered or settled.
Concentrations of Credit Risk - The Company's financial instruments
that potentially subject the Company to concentrations of credit risk
consist principally of cash, contracts receivable, and loans to related
parties. In the normal course of business, the Company provides credit
terms to its customers. The Company's contracts receivable are mainly
with individuals residing across the Wasatch Front of Utah. The Company
performs on going credit evaluations of its customers and maintains
allowances for possible losses, but typically does not require
collateral. Total contracts receivable net of allowances were $816,746,
(unaudited) $822,178 and $63,690 at September 30, 1998 (Unaudited) and
December 31, 1997 and 1996 respectively.
Unaudited and Audited Interim Information - In the opinion of
management, the unaudited financial statements reflect all adjustments,
consisting only of normal adjustments, necessary to present fairly the
results of operations and cash flows for the nine months ended
September 30, 1998 and 1997. The results of operations and cash flows
for the nine months ended September 30, 1998 and 1997 should not
necessarily be taken as indicative of the results of operations and
cash flows for the entire year ending December 31, 1998, and 1997.
Research and Development Costs - Research and Development costs are
expensed as incurred.
Reclassification - Certain accounts have been reclassified to conform
with current presentations.
NOTE 3 - CONTRACTS RECEIVABLE - NON RELATED
Contracts receivable consists of the following:
September 30, December 31, December 31,
CURRENT 1998 1997 1996
------- ---- ---- ----
(Unaudited)
Contracts Receivable $ 685,356 $ 457,732 $ 25,768
Write-Off Allowance (127,678) (75,777) --
--------- --------- ---------
Net $ 557,678 $ 381,955 $ 25,768
========= ========= =========
September 30, December 31, December 31,
NON-CURRNET 1998 1997 1996
----------- ---- ---- ----
(Unaudited)
Contracts Receivable $ 307,700 $ 516,009 $ 35,677
Write-Off Allowance (57,322) (88,092) --
--------- --------- ---------
Net $ 250,378 $ 427,917 $ 35,677
========= ========= =========
57
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - CONTRACTS RECEIVABLE - NON RELATED - CONTINUED
September 30, December 31, December 31,
TOTAL 1998 1997 1996
--------- ---- ---- ----
(Unaudited)
Contracts Receivable $ 993,056 $ 973,741 $ 61,445
Write-Off Allowance (185,000) (163,869) --
--------- --------- ---------
Net $ 808,056 $ 809,872 $ 61,445
========= ========= =========
NOTE 4 - BUSINESS COMBINATION
Effective May 31, 1998, the members of the limited liability company
(Envision) exchanged their membership interest for shares of stock in
The Murdock Group Career Satisfaction Corporation (Murdock), a Utah
Corporation. Envision's members conveyed all of their membership
interest to Murdock in exchange for 8,205,800 shares of Murdock stock.
As a result of the transaction, Envision's membership interests in
Envision were terminated and Envision was dissolved. As a result of the
exchange, a majority of Murdock stock was owned by Envision members and
they assumed the operating control of the combined entity, Murdock.
Where the ownership and operating control in the combined entity reside
in shareholders of the acquired corporation, generally accepted
accounting principles require that Envision be treated as the purchaser
for accounting presentation. The business combination of Murdock with
Envision was accounted for as a combination of entities under common
control, similar to a pooling of interests. No acquired assets or
liabilities were adjusted to fair value. Murdock had no operating or
material assets or liabilities prior to May 31, 1998, and the financial
statements are essentially the historical financial statements of
Envision. Envision's equity has been adjusted to reflect the above
accounting treatment, therefore, consolidated historical data of
Envision from inception has been combined and shown in these financial
statements until the liquidation of Envision.
NOTE 5 - INVESTMENTS AND OTHER ASSETS
The securities investments held by the Company have been classified as
available-for-sale securities. Securities are recorded at fair value
and are recorded in the investments and other assets section on the
balance sheet. Any change in the fair value of the securities during
the periods shown is excluded from earnings and is recorded as a
separate component of equity. The Company paid nothing for the
securities held and it is believed that the fair value of the
securities at the periods shown was also zero, so no change in value
has been recorded in the financial statements and there are no
unrealized holding gains or losses.
The Company has a 10% interest in a trust that engages in investing
activities. It paid $25,000 for its ownership interest. Investments in
companies or entities in which the Company has less than a 20% interest
are carried at cost. Dividends received from those companies are
included in other income.
NOTE 6 - NONCANCELABLE OPERATING LEASES
The Company leases office facilities under noncancelable operating
leases. Management expects that, in the normal course of business,
leases that expire will be renewed or replaced by other leases.
58
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 6 - NONCANCELABLE OPERATING LEASES - CONTINUED
Future minimum lease payments under noncancelable operating leases are
as follows:
Calendar Year Ending September 30, Amount
---------------------------------- ------------
(Unaudited)
1998 $ 399,068
1999 493,450
2000 352,107
2001 369,982
2002 386,407
Thereafter 202,885
------------
$ 2,203,899
============
Fiscal Year Ending December 31, Amount
------------------------------ ------------
1998 $ 361,823
1999 343,036
2000 195,960
2001 208,108
2002 218,800
Thereafter 73,960
-------------
$ 1,401,687
=============
Facility rental expense for the periods ending September 30, 1998
(Unaudited), December 31, 1997 and 1996 totaled approximately $307,761
(Unaudited), $135,146, and $7,735 respectively.
NOTE 7 - CAPITAL LEASES
The Company is the lessee of computer software, hardware, and office
furniture and fixtures under capital leases expiring in various years
through the year 2002 and thereafter. The assets and liabilities under
capital leases are recorded at the lower of the present value of the
minimum lease payments or the fair value of the asset. The assets are
amortized (or depreciated) over the lower of their related lease terms
or their estimated productive lives. Amortization (or depreciation) of
assets under capital leases is included in depreciation expense for
September 30, 1998 (Unaudited), December 31, 1997 and 1996.
Following is a summary of property held under capital leases:
September 30, December 31 December 31,
1998 1997 1996
--------- --------- ---------
(Unaudited)
Computer equipment $ 92,617 $140,256 $ 5,521
Equipment, furniture and fixtures 205,811 70,956 --
Leasehold improvements and other 48,430 48,430 --
--------- --------- ---------
346,858 259,642 5,521
Less: accumulated amortization
(or depreciation) (53,373) (20,295) (184)
--------- --------- ---------
$ 293,485 $239,347 $ 5,337
========= ========= =========
59
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - CAPITAL LEASES - CONTINUED
Minimum future lease payments under capital leases for each of the next
five years and in the aggregate at September 30, 1998 (Unaudited) and
December 31, 1997 are:
Fiscal Year Ending December 31, Amount
------------------------------- ------
1998 $ 38,724
1999 150,618
2000 128,559
2001 51,863
2002 28,321
Thereafter 11,374
Total Minimum Lease Payments 409,459
Less: Executory costs --
---------
Net minimum lease payments 409,459
Less: Amount representing interest (55,273)
---------
Present value of net minimum lease payment 354,186
Less current portion (90,681)
---------
Long-term portion $ 263,505
=========
Fiscal year ending December 31, 1997 Amount
------------------------------------ ------
1998 $ 97,938
1999 70,674
2000 61,050
2001 39,106
2002 28,484
2003 --
---------
Total minimum lease payments 297,252
Less: Executory costs --
---------
Net minimum lease payment 297,252
Less: Amount representing interest (90,912)
---------
Present value of net minimum lease payments 206,340
Less current portion (59,066)
---------
Long-term portion $ 147,274
=========
Interest rates on capitalized leases average 28% to 32% and are imputed
based on the lower of Company's incremental borrowing rate at the
inception of each lease or the lessor's implicit rate of return.
60
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 - GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. However, the Company
has sustained substantial operating losses since inception. In
addition, the Company has used substantial amounts of working capital
in its operations. Further, at September 30, 1998 (Unaudited) and
December 31, 1997, current liabilities exceed current assets by
$3,669,405 (Unaudited) and $1,140,334 respectively, and total
liabilities exceed total assets by $4,797,473 (Unaudited) and
$1,868,152, respectively.
In view of these matters, realization of a major portion of the assets
in the accompanying balance sheet is dependent upon continued
operations of the Company, which in turn is dependent upon the
Company's ability to meet its financing requirements, and the success
of its future operations.
Management believes that a major contribution of losses to date were
incurred while developing the Company's proprietary job-search
technology into a training system that serviced a larger volume of
customers. The Company has completed development on the training system
and anticipates that it now has a product that can be serviced
profitably. In September 1998, the Company moved 13 employees out of
the Salt Lake City office to open a satellite office in Seattle because
that additional staff was no longer needed to service the newer, more
efficient product. Other satellite offices are planned for first
quarter 1999.
The Company intends to allocate administrative costs across multiple
locations, thereby reducing the financial impact of the Company's
investment to date in infrastructure items such as computer technology
and human resources, accounting, and operations staff. Management also
anticipates a reduction in charge-off expense with the new product.
Management expects that completion of the public offering described in
Note 11 will enable the Company to restructure or pay off the majority
of its high-interest debts, thereby reducing monthly interest expense.
To summarize, management's plan for overcoming losses includes moving
staff to satellite offices, allocating infrastructure investment across
multiple locations, reducing charge-off expense, and reducing interest
expense.
NOTE 9 - DUE FROM RELATED PARTIES
<TABLE>
<CAPTION>
Amounts due from related parties consists of the following:
September 30, December 31, December 31,
1998 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Loans to officers, directors and LLC
members. The loans are unsecured
with interest at 8% $ 331,494 $ 86,095 $ 9,440
Less allowance for uncollectibility
due to personal guarantees on other
Company debts (331,494) (86,095) -
</TABLE>
61
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - DUE FROM RELATED PARTIES - CONTINUED
September 30, December 31, December 31,
1998 1997 1996
---- ---- ----
(Unaudited)
Advance due from relative of stockholder,
director, and LLC member, repaid in
October, 1998 (Unaudited) $ 75,000 $ -- $ --
Loan due from employee at 6% interest,
due July 14, 2000, unsecured 4,000 -- --
Loan to an affiliated company through a revolving line of credit dated November
30, 1996, loans carry interest at 10%, loan
balance is unsecured 298,024 28,846 --
Loan to employee, repaid in
October, 1998 (Unaudited) 67,000 -- --
Employee advances, no interest and
unsecured, paid by payroll deductions 7,759 1,800 --
--------- --------- ---------
Total 451,783 30,646 9,440
Less current portion (449,949) (1,800) --
--------- --------- ---------
Long-term portion $ 1,834 $ 28,846 $ 9,440
========= ========= =========
NOTE 10 - RELATED PARTY TRANSACTIONS
The Company regularly purchases computer hardware, software, and
services from Coastlink Consulting, which is a sole proprietorship
registered in the State of Utah. The owner of Coastlink Consulting is
also an officer and employee of the Company.
The Company has a consulting agreement with an owner and employee of
The Pinebrook Group, which is a sole proprietorship registered in the
State of Utah. The owner employee of Pinebrook was also a shareholder
in The Murdock Group Career Satisfaction Corporation until the Company
repurchased all of the shares owned by the individual (see note 21).
During January of 1998, the Company sold $375,000 of Promissory notes
and issued 150,000 Class A shares to related parties pursuant to a
private placement memorandum. The Company is paying interest of 16% to
18% on these notes (See note 18).
Interest paid to related parties at December 31, 1997 and 1996 was
approximately , $23,670 and $3,521 respectively.
The Company made advances and short-term loans to employees and other
related parties amounting to $284,334, $30,646, and $0 as of September
30, 1998, December 31, 1997, and December 31, 1996, respectively.
62
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 - RELATED PARTY TRANSACTIONS - CONTINUED
Officers, directors and majority shareholders owed the Company
$331,494, $86,095, and $9,440 as of September 30, 1998 December 31,
1997 and December 31, 1996, respectively. The Company has provided an
allowance for these receivable amounts.
The Company was indebted to employees $340,000, $0, and $0 as of
September 30, 1998, December 31, 1997 and December 31, 1996,
respectively, relating to a private placement offering, and owed the
parents of an employee $49,089 for funds advanced to the Company under
a line of credit arrangement as of September 30, 1998.
NOTE 11 - PROPOSED PUBLIC OFFERING
The Company is preparing a prospectus for an initial public offering,
consisting of the sale of Company shares and the issuance of bonds
(repaying principal and 15% interest compounded annually at the end of
4 years). In addition, four of the corporations stockholders are
seeking to sell shares. The Company is planning to pay a sales
commission on the sale of its shares and its bonds. Direct costs of the
offering are estimated to be $200,000. The shares and bonds issued will
be those of the corporation remaining after the business combination
(See Note 4).
NOTE 12 - EMPLOYEE LEASING COMPANY
The Company is not the employer of record for the employees of the
Company. The Company uses an employee leasing company named Employers
Solutions Group (ESG). ESG is the official employer of record and all
benefits are administered on its plans. This includes, but is not
limited to, medical and dental insurance, flex days off, 401k plan,
cafeteria plan, and all applicable payroll taxes, filings and
notifications. ESG bills the Company for the services it provides.
NOTE 13 - CONVERTIBLE BONDS
The Company has sold $240,000 of Convertible Bonds, ($140,000 of which
is unaudited), to various trusts pursuant to a Regulation D Offering
utilizing a Disclosure Memorandum dated April 29, 1998. The bonds are
convertible to Class A common shares of the Company (the "Shares") upon
the terms set forth below.
If and when a public offering of Shares is approved by an appropriate
securities regulatory agency, and upon Company receipt of the Bond
holders' notice(s) of intent to convert, the Bonds may be converted to
Shares at a discount of 20% from the offering price, but only until
such date, if any, that the Shares are listed for trading on a public
exchange.
After the Listing Date, and upon Company receipt of a conversion notice
from the bondholder(s), the Bond(s) may be converted into Shares only
upon the following terms:
During a 6-month period commencing on the Listing Date, the
Bonds may be converted to Shares at a discount of 20% from the average
Share trading price during the 30-day period prior to Company receipt
of the conversion notice.
During the period from 7 to 18 months after the Listing Date, the Bonds
may be converted to Shares at a discount of 10% from the average Share
trading price during the 30-day period prior to Company receipt of the
conversion notice.
63
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - CONVERTIBLE BONDS - CONTINUED
During a 6-month period commencing on the Listing Date, the
Bonds may be converted to Shares at a discount of 20% from the
average Share trading price during the 30-day period prior to
Company receipt of the conversion notice.
During the period from 7 to 18 months after the Listing Date,
the Bonds may be converted to Shares at a discount of 10% from
the average Share trading price during the 30-day period prior
to Company receipt of the conversion notice.
The Bonds may be converted to Shares only in increments of $1,000. No
fractional Shares will be issued. Converted Bonds will be canceled upon
issuance of Shares to the converting Bond holder(s).
The Bonds are callable by the Company at any time upon 30-day written
notice (the "Exercise Period") to the Bond holder(s). During the
Exercise Period such Bond holder(s) may elect to convert the Bonds to
Shares upon the discount terms set forth above. If the Company does not
receive a conversion notice from such Bond holder(s) within the
Exercise Period, the Company shall pay to such holders all principal
and accrued interest with respect to such Bond(s) within 30 days of the
end of the Exercise Period.
As of the present date, the Company's shares have not been approved for
public sale. Accordingly, no conversion notices have been received.
NOTE 14 - INCOME TAXES
Income tax provision consists of the following:
Current income taxes payable $ -
Deferred tax benefit (20,702)
Allowance for realization 20,702
-----------
$ -
===========
Deferred income tax liability or benefit results from timing
differences in the recognition of revenues and expenses for tax and
financial purposes. The source of the timing differences is using the
cash basis of accounting for income tax and accrual accounting for the
basis of financial income. The Company has set up an $20,702 allowance
for the tax benefit at September 30, 1998 (Unaudited).
Losses prior to the business combination can not be carried forward or
back. At September 30, 1998 (Unaudited) the company had $1,291,373 of
losses which could be carried forward. The company has also set up an
allowance for this tax benefit at September 30, 1998 (Unaudited).
64
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NOTE 15 - SHORT-TERM DEBT
Sept 30, Dec. 31, Dec. 31,
Short-term debt consists of the following: 1998 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Note for purchase of Copyright, dated August 1, 1996, with no stated interest rate,
due April 1, 1997. Unsecured. $ - $ - $ 53,000
Note with an Individual on September 6, 1996 with 22% interest. Due June 1,
1997. Secured by personal guarantee of officer, director and LLC member. - - 20,000
Note with an individual dated October 18, 1996 with 20% interest. Due November
18, 1996, with option to extend for additional 30-day increments, secured by
personal guarantee of officer, director and LLC member. - - 5,000
Note with an individual on November 1, 1996 with 18% interest. Due October
31, 1997. Secured by personal property and personal guarantee of officer,
director and LLC member. - - 52,353
Note with an individual dated December 31, 1997 with interest of $1,000 per
week outstanding. Due January 5, 1998. Secured by a personal guarantee
of officer, director and LLC member. - 11,000 -
Note with a company dated December 20, 1997 with 8% interest. Due date
February 20, 1998. Unsecured. - 25,000 -
Note with an investment group dated December 30, 1997 with no
interest rate or due date stated. Unsecured. - 12,000 -
Note with a trust dated November 28, 1997 with 48% interest, due
January 30, 1998. Unsecured. - 15,000 -
Note with Trust dated June 10, 1997, 24% interest. Interest only payments of
$1,000 per month for 12 months. Payment of $50,000 due June 10, 1998. Secured by
$50,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. - 50,000 -
Note with two individuals dated May 20, 1998 with 24% interest. Interest only
payments of $10,000 per month for 6 months. Payment of $500,000 due December 31,
1998. Secured by $500,000 in accounts receivable and a personal guarantee by
majority owners and members. New accounts receivable must be substituted every 4
to 6 weeks as accounts receivable which originally secured the loan become paid
off, paid down, canceled, renegotiated, or
written off. 500,000 - -
Note with a Trust, dated April 28, 1998, 36% interest. Interest only payments of
$4,500 per month for 12 months. Payment of $150,000 due April 28, 1999. Secured
by $150,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renogotiated,
or written off since the loan inception. 150,000 - -
</TABLE>
65
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - SHORT-TERM DEBT - CONTINUED
<TABLE>
<CAPTION>
Sept 30, Dec. 31, Dec. 31,
Short-term debt consists of the following: 1998 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Note with a Trust dated January 19, 1998, 36% interest. Interest only payments of
$1,500 per month for 12 months. Payment of $50,000 due January 19, 1999.
Secured by $70,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. $ 50,000 $ - $ -
Note with a Trust dated April 28, 1998, 24% interest. Interest only payments of
$800 per month for 12 months. Payment of $40,000 due April 28, 1999. Secured by
$40,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. 40,000 - -
Note with a Trust dated May 8, 1998, 24% interest. Interest only payment of
$1,000 per month for 12 months. Payment of $50,000 due May 8,1999. Secured by
$50,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. 50,000 - -
Note with a Trust dated May 8, 1998, 24% interest. Interest only payments of
$1,000 per month for 12 months and payment of $25,000 due May 8, 1999. Secured
by $25,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. 25,000 - -
Note with a Trust dated May 13, 1998, 24% interest. Interest only payments of
$500 per month for 12 months. Payment of $25,000 due May 13, 1999 Secured by
$25,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. 25,000 - -
Note with a Trust dated April 3, 1998, 36% interest. Interest only payments of
$4,500 per month for 12 months. Payment of $150,000 due April 3,1999. Secured by
$150,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. 150,000 - -
Note with a Trust dated April 3, 1998, 36% interest. Interest only payments of
$4,500 per month for 12 months. Payment of $150,000 due April 3, 1999. Secured
by $150,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. 150,000 - -
Note with two individuals dated August 24, 1998 with 24% interest. Interest only
payments of $1,000 per month for 12 months. Payment of $50,000 due August 24,
1999. Secured by $50,000 in accounts receivable and a personal guarantee by
majority owners and members. New accounts receivable must be substituted every 4
to 6 weeks as accounts receivable which originally secured the loan become paid
off, paid down, canceled, renegotiated, or
written off. 50,000 - -
Note with an Individual dated September 14, 1998 with principal and interest
payment of $44,000 due on October 14, 1998 . Unsecured. 40,000 - -
</TABLE>
66
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - SHORT-TERM DEBT - CONTINUED
<TABLE>
<CAPTION>
Sept 30, Dec. 31, Dec. 31,
Short-term debt consists of the following: 1998 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Note with a Company on September 11, 1998 with principal and interest payments
of $210,000 due on October 1, 1998. Unsecured. $ 200,000 $ - $ -
Note with an Individual dated August 27, 1998 with 36% interest. Due October 27,
1998. Secured by $50,000 in accounts receivable contracts. Accounts receivable which 50,000 - -
originally secured this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception.
Note with a Company dated September 21, 1998 with 36% interest. Due December 21,
1998. Unsecured. 300,000 - -
Note with an Individual dated September 14, 1998 with 30% interest. Due March 14,
1999. Unsecured. 10,000 - -
Note with a Trust dated August 26 with 1998, 36% interest. Interest only
payments of $6,000 per month for 4 months. Payment of $200,000 due December 26,
1998 Secured by $200,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down, renegotiated, or
written off, since the loan inception. Personally guaranteed by an officer,
director
and major shareholder of the Company. 200,000 - -
Note with a Trust dated May 13, 1998 with 24% interest. Interest only payments
of $3,000 per month for 3 months. Payment of $100,000 due December 9, 1998
Secured by $100,000 in accounts receivable. Accounts receivable which originally
secured this loan may have been paid off, paid down, renegotiated, or written
off, since the loan inception. Personally guaranteed by an officer, director
and major shareholder of the Company. 100,000 - -
Note with a Company dated September 28, 1998 with 36% interest. Due September
28, 1998. Interest only payments of $2,100 per month for 12 months. Secured by
$70,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. 70,000 - -
Note with an Individual dated August 11, 1998 with 30% interest. Due August 11,
1999. Interest only payments of $2,100 per month for 12 months. Secured by
$22,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. 22,000 - -
Note with an Individual dated August 24, 1998 with 24% interest. Interest only
payments of $1,000 per month for 12 months. Payment of $50,000 due August 24,
1999. Secured by $50,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down, renegotiated, or
written off, since the loan inception. Personally guaranteed by officers,
directors
and major shareholders of the Company. 50,000 - -
Note with an individual dated September 21, 1998 with 24% interest. Interest
only payments of $1,200 per month for 12 months. Payment of $60,000 due
September 21, 1999. Secured by $60,000 in accounts receivable. Accounts
receivable which originally secured this loan may have been paid off, paid down,
renegotiated, or written off, since the loan inception. Personally guaranteed by
officers, directors,
and major shareholders of the Company. 60,000 - -
Note with an Individual dated September 25, 1998 with 30% interest. Due March 25,
1999. Unsecured. 10,000 - -
</TABLE>
67
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 15 - SHORT-TERM DEBT - CONTINUED
<TABLE>
<CAPTION>
Sept 30, Dec. 31, Dec. 31,
Short-term debt consists of the following: 1998 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Note with an individual dated September 22, 1998 with 24% interest. Interest only payments
of $300 per month for 12 months. Payment of $15,000 due September 22, 1999
Secured by $15,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. Personally guaranteed by officers, directors,
and major shareholders of the Company. $ 15,000 $ - $ -
Note with an Individual dated September 9, 1998 with 30% interest. Due March 9,
1999. Unsecured. 16,000 - -
Note with a Trust dated June 1, 1998, 36% interest. Interest only payments of
$3,000 per month for 12 months. Payment of $100,000 due June 1, 1999 Secured by
$100,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, renegotiated, or written off, since
the loan inception. Personally guaranteed by officers, directors
and major shareholders of the Company. 100,000 - -
Advance from Trusts dated September 10, 1998, No stated interest.
Principal payment due within 30 days. Unsecured 37,000
Advance from Individuals dated September 30, 1998 with no stated interest.
Due within 30 days. Unsecured. 40,000
Note with a Trust dated July 29, 1998 with 30% Interest. Interest payments of $2,000
due monthly and principal payment due September 29, 1998. Unsecured. 100,000
Note with a Trust dated September 14, 1998 with 30% interest. Interest plus
principal payment due June 1, 1999. Unsecured 100,000 - -
------------ ---------- ---------
Total short-term debt $ 2,710,000 $ 113,000 $ 130,353
============ ========== =========
</TABLE>
68
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION COPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NOTE 16 - SHORT TERM DEBT WITH RELATED PARTIES
Related party short-term debt consists of the following: Sept 30, Dec. 31, Dec. 31,
1998 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Note with LLC Members' personal relation dated August 1, 1996 $ - $ - $ 10,000
with 10% interest. Due February 7, 1997. Unsecured.
Note with LLC Members' personal relation dated August 1, 1996 - - 5,000
with 10% interest. Due July 30, 1997. Unsecured.
Loan with individual, no stated interest rate or due date, secured by - - 15,000
personal guarantee by officer, director and LLC member.
Loan with a corporate officer and LLC member, with interest of 8%, - - 13,090
Unsecured.
Note with an individual on August 1, 1996 with 20% interest. Due March 1997, - - 20,000
Unsecured.
Revolving line of credit with an affiliated company, with 12% interest on - - 1,236
month end balance. Unsecured.
Note with an employee dated November 28, 1997 with interest at 25%, - 20,000 -
and no due date stated. Unsecured.
Note with an employee dated November 20, 1997, no interest rate or due - 15,101 -
date stated. Unsecured.
Note with an employee dated October 16, 1997 with no interest rate or - 5,655 -
due date stated. Unsecured.
Note with an employee dated December 31, 1997, no interest rate or due - 19,000 -
date stated. Unsecured.
Note with LLC Member's personal relation dated November 3, 1997 with - 5,000 -
10% interest, no due date stated. Unsecured.
Note with LLC Member's personal relation dated November 20, 1997, - 10,000 -
with 10% interest, no due date stated. Unsecured.
Short-term line of credit with an employee's parents, with 10 1/2% interest, - 36,683 -
due December 30, 1998. Unsecured.
Short-term note with employee and employee's parents, dated May 21, 1997.
with 22% interest. Per agreement, interest is reinvested monthly. - 17,132 -
Payment of principal and interest due at end of agreement.
Note with an employee dated July 16, 1998, no interest rate or due 25,000 - -
date stated. Unsecured.
Note with an employee dated July 28, 1998, with 24% interest rate 16,500 - -
Due May 13, 1999. Unsecured.
</TABLE>
69
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION COPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NOTE 16 - SHORT TERM DEBT WITH RELATED PARTIES - CONTINUED
Sept 30, Dec. 31, Dec. 31,
Related party short-term debt consists of the following: 1998 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Note with an employee dated September 1, 1998, no interest rate or due
date stated. Unsecured. $ 25,000 $ - $ -
Note with personal relation of officer, director, and shareholder
dated July 29, 1998 with no interest rate or due date stated. 19,000 - -
Advance from related parties dated September 22-30, 1998
with no stated interest, due in less than 30 days 197,000 - -
---------- --------- --------
Total short-term debt with related parties $ 238,500 $ 128,571 $ 64,326
========== ========== ========
</TABLE>
70
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION COPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NOTE 17 - LONG-TERM DEBT
Long-term debt consists of the following:
Sept 30, Dec. 31, Dec. 31,
1998 1997 1996
---- ---- ----
Unaudited)
<S> <C> <C> <C>
Note with a Trust dated June 1, 1997 ,18% interest. Interest only payments of
$900 per month for 36 months. Payment of $60,000 due June 1, 2000. Secured by
$60,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off, paid down, cancelled,
renegotiated, or written off, since the loan inception. $ 60,000 $ 60,000 $ -
Note with a Trust dated July 28, 1997, 18% interest. Interest only payments of
$5,625 per month for 24 months. Payment of $375,000 due
August 1, 1999. Secured by $375,000 in accounts receivable.
Accounts receivable which originally secured this loan may have been paid
off, paid down, cancelled, renegotiated, or written off since the loan inception. 375,000 375,000 -
Note with a finance group dated December 24, 1997, 30% interest. Interest only
payments of $1,250 per month for 24 months. Payment of
$50,000 due December 24, 1999. Secured by personal guarantee of
majority owner and LLC members. 50,000 50,000 -
Note with a finance group dated December 22, 1997, 30% interest. Interest
only payments of $1,250 per month for 24 months. Payment of
$50,000 due December 22, 1999. Secured by personal guarantee of
majority owner and LLC members. 50,000 50,000 -
Note with a Trust, dated February 1, 1997, 24% interest. Interest only payments
of $2,000 per month for 36 months. Payment of $100,000 due
February 1, 2000. Secured by $100,000 in accounts receivable.
Accounts receivable which originally secured this loan may have been paid off,
paid down, cancelled, renegotiated, or written off since the loan inception. 100,000 100,000 -
Note with a Trust, dated March 1, 1997, 24% interest. Interest only payments
of $2,000 per month for 36 months. Payment of $100,000 due
March 1, 2000. Secured by $100,000 in accounts receivable.
Accounts receivable which originally secured this loan may have been paid off,
paid down, cancelled, renegotiated, or written off since the loan inception. 100,000 100,000 -
Note with a Trust, dated March 1, 1997, 24% interest. Interest only payments
of $2,000 per month for 36 months. Payment of $100,000 due
April 1, 2000. Secured by $100,000 in accounts receivable.
Accounts receivable which originally secured this loan may have been paid off,
paid down, cancelled, renegotiated, or written off since the loan inception. 100,000 100,000 -
</TABLE>
71
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION COPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NOTE 17 - LONG-TERM DEBT - CONTINUED
Sept 30, Dec. 31, Dec. 31,
1998 1997 1996
---- ---- ----
(Unaudited)
<S> > <C> <C>
Note with a Trust dated April 10, 1997, 30% interest. Interest only payments of
$2,500 per month for 36 months. Payment of $100,000 due May 1, 2000. Secured by
$100,000 in accounts receivable. Accounts receivable which originally secured
this loan may have been paid off,
paid down, cancelled, renegotiated, or written off since the loan inception. $100,000 $ 100,000 $ -
Note with a Trust dated July 15, 1997, 18% interest. Interest only payments
of $975 per month for 36 months. Payment of $65,000 due July 15, 2000.
Secured by $65,000 in accounts receivable. Accounts receivable which
originally secured this loan may have been paid off, paid down, renegotiated,
or written off since the loan inception. 65,000 65,000 -
Note with a Trust dated August 15, 1997, 18% interest. Interest only payments
of $1,350 per month for 36 months. Payment of $90,000 due
August 15, 2000. Secured by $90,000 in accounts receivable. Accounts
receivable which originally secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception. 90,000 90,000 -
Note with Trust dated September 25, 1997, 18% interest. Interest only payments
of $2,625 per month for 24 months. Payment of $175,000 due
September 25, 1999. Secured by $175,000 in accounts receivable.
Accounts receivable which originally secured this loan may have
been paid off, paid down, renegotiated, or written off since the loan inception. 175,000 175,000 -
Note with Trust dated October 21, 1997, 18% interest. Interest only payments
of $2,475 per month for 24 months. Payment of $165,000
due October 21, 1999. Secured by $165,000 in accounts receivable. Accounts
receivable which originally secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception. 165,000 165,000 -
Note with an individual dated February 26, 1997, 18% interest. Monthly principal
and interest payments of $362 per month for 36 months with a maturity date of
February 26, 2000. Secured by $20,000 in accounts receivable and by personal
guarantees of majority owners and members. Accounts receivable which originally
secured this loan may have been paid off, paid down,
renegotiated, or written off since the loan inception. 5,387 7,736 -
</TABLE>
72
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION COPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NOTE 17 - LONG-TERM DEBT - CONTINUED
Sept 30, Dec. 31, Dec. 31,
1998 1997 1996
------------------------------------------
(Unaudited)
<S> <C> <C> <C>
Note with a Trust dated July 21, 1997, 24% interest. Interest only payments of
$720 per month for 24 months. Payment of $36,000 due August 1, 1999. Secured by
$36,000 in accounts receivable. Accounts receivable which secured this loan may
have been paid off, paid down, renegotiated, or written
off since the loan inception. $ 31,000 $ 36,000 $ -
Note with a finance group, dated February 13, 1998, 30% interest. Interest only
payments of $1,250 per month for 24 months. Payment of $50,000
due February 13, 2000. Secured by personal guarantees of majority owners
and LLC members. 50,000 - -
Note with a finance group , dated February 5, 1998, 30% interest. Interest only
payments of $2,500 per month for 24 months. Payment of $100,000
due February 5, 2000. Secured by personal guarantees of majority owners and
LLC members. 100,000 - -
Note with a finance group, dated March 23, 1998, 30% interest. Interest only
payments of $3,750 per month for 24 months. Payment of $150,000
due March 23, 2000. Secured by personal guarantees of majority
owners and LLC members. 150,000 - -
Note with a finance group, dated April 17, 1998, 30% interest. Interest only payments
of $5,250 per month for 24 months. Payment of $210,000 due April 17,
2000. Secured by personal guarantees of majority owners and LLC members. 210,000 - -
Note with a finance group, dated August 15, 1997. No stated interest rate. Monthly
princpal and interest payments of $999 per month for 60 months. Secured by
various furniture and computer equipment. - 30,012 -
Note with a finance group, dated October 1, 1997. No stated interest rate. Monthly
principal and interest payments of $1,987 per month for 60 months. Secured by
various computer equipment. - 77,979 -
Note with a finance group, dated May 8, 1998. 18% interest. Monthly principal and
interest payments of $667 per month for 72 months. Secured by computer
software. 27,476 - -
Note with a finance group, dated May 26, 1998. 18% interest. Monthly principal and
interest payments of $690 per month for 72 months. Secured by artwork. 28,650 - -
</TABLE>
73
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION COPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NOTE 17 - LONG-TERM DEBT - CONTINUED
Sept 30, Dec. 31, Dec. 31,
1998 1997 1996
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Note with a finance group dated May 1, 1998. 18% interest. Monthly principal and
interest payments of $6,662 per month ($948 of which is applied to capital
leases payable) for 72 months. Secured by various furniture, computer
equipment, software, and artwork. $ 247,013 $ - $ -
Note with a finance group, dated July 15, 1998, 18% interest. Interest plus principal
payments of $475 per month for 68 months. Secured by various
furniture items and artwork. 19,470 - -
Note with a finance group, dated August 15, 1998, 18% interest. Interest plus principal
payments of $1188 per month for 67 months. Secured by various
furniture items and artwork. 48,398 - -
----------- ----------- -------
TOTAL LONG TERM DEBT 2,347,394 1,581,727 -
LESS CURRENT PORTION (595,562) (18,307) -
-
LONG TERM DEBT NON CURRENT PORTION $ 1,751,832 $ 1,563,420 $ -
============ ============ =======
</TABLE>
Following are maturities of long-term debt for each of the five years
ending December 31,
Amount
1998 $ 10,679
1999 893,144
2000 1,177,742
2001 62,514
2002 75,109
Thereafter 128,206
-----------
Total long term debt $ 2,347,394
===========
74
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 - LONG-TERM DEBT WITH RELATED PARTIES
Pursuant to a private offering, the Company sold 375 units to related
parties. Each unit consisted of a promissory note and 400 shares of the
Company's Class A common stock. The promissory note has an interest of
16% and matures 1 year from the date of issuance. The holder has an
option to extend the maturity date for an additional year. If the
option is exercised, the Company is obligated to pay the holder
interest of 18% for the two-year period. As of September 30, 1998
(Unaudited), the Company's long term obligations with related parties
are as follow:
Promissory note issued in conjunction with offering $ 375,000
Less repayment during 1998 (Unaudited) (35,000)
Line of credit with an employee's parents, with
101/2% interest, no specified due date - Unsecured 49,089
----------
Total 389,089
Less current portion (270,600)
Long-term debt to related parties $ 118,489
=========
NOTE 19 - ASSETS USED AS COLLATERAL
At September 30, 1998 (Unaudited) and December 31, 1997 and 1996
$345,375, $68,375 and $0 respectively of fixed assets not held under
capital leases were collateral for debt. At September 30, 1998
(Unaudited) and December 31, 1997 $0.00, $377,275 respectively of
contracts receivable were not used as collateral for debt. The
remainder were used as collateral for debt. At December 31, 1996 $0 of
contracts receivable were used as collateral for debt.
NOTE 20 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The book value of the Company's financial instruments approximates fair
value. The estimated fair values of financial instruments have been
determined using appropriate market information and valuation
methodologies.
NOTE 21 - COMMON STOCK TRANSACTIONS - UNAUDITED
The Company purchased 800,000 shares of Class A common stock from an
individual who is a former employee and founder at the founder's price
of $80 that he originally paid for those shares. In conjunction with
this purchase, the Company has granted him an option to acquire up to
800,000 Company shares of Class A Common Stock as follows:
During 1998, The option may be exercised to acquire shares from
the Company at a discount of 20% from the market trading price, if
any.
During 1999, The option may be exercised to acquire shares from
the Company at a discount of 15% from the market trading price, if
any.
The Company has issued 349,500 shares of Class A common stock out of
treasury stock as a bonus. After this transaction, 450,500 shares
remained in treasury.
75
<PAGE>
THE MURDOCK GROUP
CAREER SATISFACTION CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 21 - COMMON STOCK TRANSACTIONS - UNAUDITED - CONTINUED
and founders stock to employees and related parties. The shares are
coming out of the 800,000 shares described above at the price the
company paid for the shares.
Existing shareholders are contributing up to 1,545,900 shares of their
Class A common stock to the Company. These shares along with the
450,500 shares mentioned above will be sold by the Company in its
initial public offering.
The company has issued 375,940 shares of its Class A common stock in a
private placement in exchange for $500,000 of existing corporate debt
and cash. $160,000 has yet to be received and is being shown as a
charge to the equity section under the heading, "Stock Subscription
Receivable - Common A", in the balance sheet.
The Chief Financial Officer, has been issued 84,000 shares of Class A
common stock at the same price as the other insiders at .0001 per share
and has been granted an option to acquire 100,000 shares at $4 per
share vesting at the rate of 25,000 per year for four years.
76
<PAGE>
77
<PAGE>
Subscription Agreement
Please issue shares and/or bonds in the amount(s) and name(s) shown below. My
signature acknowledges that I have received and had an opportunity to read the
prospectus by which the shares are offered, that I am purchasing for investment,
and that the amount of my investment is not more than 10% of my net worth.
Date: ____________________________ Signature: _________________________
Enclosed please find payment for
$__________ for shares at $5 per share (minimum investment, $1,000), and/or
$__________ in bonds (sold in increments of $1,000).
Please register the shares and/or bonds in the following name(s) and amount(s):
As (check one):
__ Individual
__ Joint Tenants
__ Trust
__ Tenants in Common
__ Corporation
__ Other
For each person who will be a registered share or bond holder, we require the
following information: Name (printed):
Mailing Address:
City, State, and Zip Code:
Telephone Number, including area code:
Social Security or Taxpayer ID Number:
Please attach any special mailing instructions other than shown above. No
subscription is effective until we accept it. We will mail you a signed copy of
this agreement for your records.
Subscription accepted on the ___ day of
___________, 199__ By The Murdock Group
Career Satisfaction Corporation
--------------------------------------------
KC Holmes, Chief Executive Officer
78
<PAGE>
(Back Cover)
Until _____, 1999 (90 days after the date of this prospectus), all dealers
effecting transactions in these securities, whether or not participating in this
offering, may be required to deliver a prospectus. This is in addition to the
obligation of dealers to deliver a prospectus when acting as underwriters and
with respect to their unsold allotments or subscriptions.
79
<PAGE>
Part II. Information Not Required In Prospectus
Item 24. indemnification of directors and officers.
The registrant's Bylaws provide that the registrant shall indemnify any officer,
director or former officer or director, to the full extent permitted by law.
Insofar as indemnification for liabilities arising under the Securities Act,
indemnification may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing section, the registrant has been
informed that, in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
Item 25. Other expenses of issuance and distribution.
Expenses of the registrant in connection with the issuance and distribution of
the securities being registered are estimated as follows, assuming all offered
securities are sold:
Item Cost
SEC filing fee 4,972
Blue sky fees and expenses 25,000
Accountant's fees and expenses 75,000
Transfer agent's fees 1,000
Printing & mailing expenses 25,000
Nasdaq SmallCap listing fee 10,000
Marketing expenses 30,000
Miscellaneous 29,028
Total $ 200,000
The registrant will bear all expenses shown above.
80
<PAGE>
Item 26. Recent sales of unregistered securities.
The following information is given for all securities that the registrant sold
within the past three years without registering the securities under the
Securities Act. All shares referenced are Class A Common Voting Shares.
Shareholder / Date of No. Shares; Registration Exemption Claimed
Price per Share Issue Price/Share
Envision Career 11/5/97 8,280,000 These shares were issued to Envision
Services, L.L.C. $0.0001 as a founder of the registrant at per
share the time of incorporation, in a
transaction exempt from registration
under Section 4(2) of the Securities
Act of 1933 (the "Act"). Envision sold
all its membership interests to
registrant, and dissolved, on May 31,
1998. It distributed its shares (in
amounts adjusted to reflect prior
sales to the registrant's treasury) to
KC Holmes - registrant's CEO, Heather
Stone - registrant's president, Peanut
Holdings - a non-affiliated trust, and
Minimum Holdings, a non-affiliated
trust. No underwriter was involved in
this transaction and no sales
commissions were paid. All members of
Envision had access to information on
the company necessary to make an
informed investment decision
Marty Collins 11/5/97 800,000 These shares were issued to Mr.
$0.0001 per Collins as a founder of the registrant
share at the time of incorporation, in a
transaction exempt from registration
under Section 4(2) of the Act. No
underwriter was involved in this
transaction and no sales commissions
were paid. He is a sophisticated
investor and company officer who had
access to information on the company
necessary to make an informed
investment decision.
Stanford Smith 11/5/97 800,000 These shares were issued to Mr. Smith
$0.0001 per as a founder of the registrant at the
share time of incorporation, in a
transaction exempt from registration
under Section 4(2) of the Act. No
underwriter was involved in this
transaction and no sales commissions
were paid. He is a sophisticated
investor and company officer who had
access to information on the company
necessary to make an informed
investment decision.
Rachel Peterson 1/6/98 2,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
8/31/98 transaction, the employee loaned money
2,500 to the registrant for 1 year at 16%
Employee interest, and received, in addition to
Grant a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. She had access to
information on the company necessary
to make an informed investment
decision. The granted shares were
issued to the named employee as a
Grant for outstanding performance. No
consideration was paid.
Daryl Guiver 1/7/98 4,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
8/31/98 to the registrant for 1 year at 16%
2,500 interest, and received, in addition to
Employee a promissory note, 400 shares for each
Grant $1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. He had access to
information on the company necessary
to make an informed investment
decision. The granted shares were
issued to the named employee as a
Grant for outstanding performance. No
consideration was paid.
81
<PAGE>
These shares were issued to the named
David Cannon 1/7/98 8,400 employee of registrant pursuant to a
and John F. Grant in transaction exempt from registration
Cannon connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Dick Flack 1/7/98 2,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
8/31/98 to the registrant for 1 year at 16%
10,000 interest, and received, in addition to
Employee a promissory note, 400 shares for each
Grant $1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision. The granted shares were
issued to the named employee as a
Grant for outstanding performance. No
consideration was paid. He is a
sophisticated investor and company
executive officer.
Dominic Ingo 1/7/98 2,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Dominic Militello 1/7/98 2,000 These shares were issued to the named
employee of registrant pursuant to
Grant in a transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Paul Benincosa 1/7/98 24,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
82
<PAGE>
Steve Richter 1/7/98 22,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision. He is a sophisticated
investor and company executive
officer.
Chris Leonard 1/8/98 2,800 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
8/31/98 to the registrant for 1 year at 16%
10,000 interest, and received, in addition to
Employee a promissory note, 400 shares for each
Grant $1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision. The granted shares were
issued to the named employee as a
Grant for outstanding performance. No
consideration was paid. He is a
sophisticated investor and company
executive officer.
Bev-Anne Frost 1/12/98 6,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Cameron 1/12/98 2,000 These shares were issued to the named
Jaccard employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Cameron Lewis 1/12/98 8,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Daren Gates 1/12/98 2,000 These shares were issued to the named
83
<PAGE>
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Dave Atkinson 1/12/98 2,400 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Marty Lloyd 1/12/98 8,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Mike Burnett 1/12/98 2,800 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Randy Burnham 1/12/98 13,200 These shares were issued to the named
Grant in employee of registrant pursuant to a
connection transaction exempt from registration
with loan under the Act under the terms of
Regulation D, Rule 506. In this
3/6/98 10,000 transaction, the employee loaned money
Emp. Grant to the registrant for 1 year at 16%
interest, and received, in addition to
5,000 a promissory note, 400 shares for each
8/31/98 Emp. Grant $1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision. The granted shares were
issued to the named employee as a
Grant for outstanding performance. No
consideration was paid.
Rhett Kasparian 1/12/98 2,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
to the registrant for 1 year at 16%
84
<PAGE>
interest, and received, in addition to
a promissory note, 400 shares for each
$1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision.
Scott & Christine 1/12/98 28,000 These shares were issued to the named
Holmes officer of a limited liability company
Grant in affiliated with registrant, and his
connection employee wife, in a transaction exempt
with loan from registration under the Act
pursuant to Regulation D, Rule 506. In
this transaction, the officer loaned
money to the registrant for 1 year at
16% interest, and received, in
addition to a promissory note, 400
shares for each $1,000 loaned. This
officer is a brother of the
registrant's CEO; he received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. This individual had access
to information on the company
necessary to make an informed
investment decision.
Steve Anderson 1/12/98 2,000 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
3/6/98 to the registrant for 1 year at 16%
10,000 interest, and received, in addition to
Employee a promissory note, 400 shares for each
Grant $1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision. The granted shares were
issued to the named employee as a
Grant for outstanding performance. No
consideration was paid. He is a
sophisticated investor and company
executive officer.
Wade Hyatt 1/12/98 4,400 These shares were issued to the named
employee of registrant pursuant to a
Grant in transaction exempt from registration
connection under the Act under the terms of
with loan Regulation D, Rule 506. In this
transaction, the employee loaned money
8/31/98 to the registrant for 1 year at 16%
2,500 interest, and received, in addition to
Employee a promissory note, 400 shares for each
Grant $1,000 loaned. The employee received a
Disclosure Memorandum dated January 2,
1998, which contained audited
financial statements. A filing with
the SEC was made on Form D. No
underwriter was involved in this
transaction and no sales commissions
were paid. The Employee had access to
information on the company necessary
to make an informed investment
decision. The granted shares were
issued to the named employee as a
Grant for outstanding performance. No
consideration was paid. He is a
sophisticated investor and company
executive officer.
Serenity Trust 4/3/98 12,500 These shares were issued to a trust as
inducement to make a $100,000 loan
10/2/98 12,500 made to the registrant. The trustee
was a sophisticated businessman and
Grant in sophisticated investor who was given
connection the opportunity to meet with all the
with loan registrants officers and examine all
books and records, including audited
financial statements. The registrant
believes this is a transaction exempt
from registration under Section 4(2)
of the Act. No underwriter was
involved in this transaction and no
sales commissions were paid.
Dogbreath Trust 4/3/98 12,500 These shares were issued to a trust as
inducement to make a $100,000 loan
10/2/98 12,500 made to the registrant. The trustee
Grant in was a sophisticated businessman and
connection sophisticated investor who was given
with loan the opportunity to meet with all the
registrants officers and examine all
books and records, including audited
financial statements. The registrant
believes this is a transaction exempt
from registration under Section 4(2)
85
<PAGE>
of the Act. No underwriter was
involved in this transaction and no
sales commissions were paid. He had
access to information on the company
necessary to make an informed
investment decision.
Lance Heaton 8/31/98 300,000 These shares were issued to an officer
of registrant for consideration per of
$0.0001 1/10 mill per share. He is a
share sophisticated businessman and
sophisticated investor who was
familiar with all books and records,
including audited financial
statements, and is an employee. The
registrant believes this is a
transaction exempt from registration
under Section 4(2) of the Act. No
underwriter was involved in this
transaction and no sales commissions
were paid. He had access to
information on the company necessary
to make an informed investment
decision. He is a sophisticated
investor and company executive
officer.
Jon Davis 8/31/98 1,000 These shares were issued to the named
Employee employee as a Grant for outstanding
Grant performance. No consideration was
paid.
Dawn Davis 8/31/98 1,000 These shares were issued to the named
Employee employee as a Grant for outstanding
Grant performance. No consideration was
paid.
Chris Kenney 8/31/98 5,000 These shares were issued to the named
Employee employee as a Grant for outstanding
Grant performance. No consideration was
paid. He is a sophisticated investor
and company executive officer.
Larry Solomon 8/31/98 2,500 These shares were issued to the named
Employee employee as a Grant for outstanding
Grant performance. No consideration was
paid.
Darla Wenger 8/31/98 1,000 These shares were issued to the named
Vendor vendor of services as a Grant for
Grant outstanding performance. No
consideration was paid.
Robert & Donna 8/31/98 1,000 These shares were issued to the named
Joy Stone Vendor vendor of services as a Grant for
Grant outstanding performance. No
consideration was paid.
Wayne Ross 9/21/98 375,940 These shares were issued pursuant to a
transaction exempt from registration
$1.33 per under the Act under the terms of
share Regulation D, Rule 506. In this
transaction, an accredited investor
paid $1.33 per share. He has a net
worth in excess of $1 million. He
received a Disclosure Memorandum dated
September 21, 1998, which contained
audited financial statements. No
underwriter was involved in this
transaction and no sales commissions
were paid. He had access to
information on the company necessary
to make an informed investment
decision.
Brad Stewart 9/23/98 84,000 These shares were issued to an officer
of registrant for no charge at the
Grant time he was hired as CFO. He is a
sophisticated businessman and
sophisticated investor who was
familiar with all books and records,
including audited financial
statements. The registrant believes
this is a transaction exempt from
registration under Section 4(2) of the
Act. No underwriter was involved in
this transaction and no sales
commissions were paid. He had access
to information on the company
necessary to make an informed
investment decision. He is a
sophisticated investor and company
executive officer.
Buckeneer Family 10/2/98 2,500 These shares were issued to a trust as
Trust inducement to make a $100,000 loan
Grant in made to the registrant. The trustee
connection was a sophisticated businessman and
with loan sophisticated investor who was given
the opportunity to meet with all the
registrants officers and examine all
books and records, including audited
financial statements. The registrant
believes this is a transaction exempt
from registration under Section 4(2)
of the Act. No underwriter was
involved in this transaction and no
sales commissions were paid. He had
access to information on the company
necessary to make an informed
investment decision.
86
<PAGE>
Item 27. Exhibits
The exhibits listed below are filed as part of this Registration Statement
pursuant to Item 601 of Regulation SB.
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
1 Selected Dealer Agreement
3.1 Articles of Incorporation dated November 5, 1997
3.2 Bylaws dated November 5, 1997
4.1 Stock certificate
4.2 Bond certificate
5 Opinion of Stanford Smith regarding legality of shares and bonds
10.1 Purchase of The Murdock Group by Envision Career Services,
L.L.C. dated July 26, 1996
10.2 Exchange Agreement between The Murdock Group and Envision dated
May 31, 1998
10.3 Lease of Office Space by Corporate Headquarters
---- -----------------------------------------------
23.1 Consent of David Thomson, C.P.A.
23.2 Consent of Stanford Smith, legal counsel
23.3 Updated Consent of David Thomson, C.P.A., independent auditor
---- -------------------------------------------------------------
99.1 Subscription Agreement (appears in prospectus)
99.2 Form of Convertible Bond dated April 29, 1998
99.3 Opinion of Counsel Respecting Broker-Dealer Status of Company
---- Officers Selling Shares on Behalf of
----------------------------------------------------------------
Selling Shareholders
99.4 Calculation of Ratio of Earnings to Fixed Charges
</TABLE>
Item 28. Undertakings.
(a) The registrant hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and
(iii) Include any additional or changed material information on the plan of
distribution.
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
87
<PAGE>
(d) Provide to broker-dealers participating in this offering certificates in
such denominations and registered in such names as required by such participants
to permit prompt delivery to each purchaser.
(e) Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that claims for indemnification
against such liability (other than the payment by the company of the expenses
incurred or paid by a Director, Officer or controlling person of the company in
the successful defense of any such action, suit or proceeding) is asserted by
such Director, Officer or controlling person in connection with the securities
being registered, the company, unless in the opinion of its counsel the matter
has been settled by controlling precedent, will submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1993 Act and will be governed by the final
adjudication of such issue.
88
<PAGE>
Signatures
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Amendment No. 1
to its registration statement to be signed on its behalf by the undersigned, in
the Salt Lake City, Utah.
The Murdock Group Career Satisfaction Corporation November 24, 1998
/s/ KC Holmes
- ------------------------------------------------
KC Holmes, Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities
indicated.
/s/ KC Holmes
- ------------------------------------------------
KC Holmes, Director, Chief Executive Officer,
November 24, 1998
/s/ Heather J. Stone
- ------------------------------------------------
Heather J. Stone, Director, Chairman, President,
Secretary, Principal Financial Officer November 24, 1998
<PAGE>
<TABLE>
<CAPTION>
Index of Exhibits
<S> <C>
Exhibit No. Description Page No.
1 Selected Dealer Agreement 107
- ------------------------- ---
3.1 Articles of Incorporation dated November 5, 1997 Previously Filed
3.2 Bylaws dated November 5, 1997 Previously Filed
4.1 Stock certificate Previously Filed
4.2 Bond certificate Previously Filed
5 Opinion of Stanford Smith regarding legality of shares and bonds Previously Filed
10.1 Purchase of The Murdock Group by Envision Career Services, LLC dated July 26, 1996. Previously Filed
10.2 Exchange Agreement between The Murdock Group and Envision dated May 31, 1998. Previously Filed
10.3 Lease of Office Space by Corporate Headquarters 113
---- ----------------------------------------------- ---
23.1 Consent of David Thomson, C.P.A., independent auditor Previously Filed
23.2 Consent of Stanford Smith, legal counsel Previously Filed
23.3 Updated Consent of David Thomson, C.P.A., independent auditor 139
---- ------------------------------------------------------------- ---
99.1 Subscription Agreement (appears in prospectus) Previously Filed
99.2 Form of Convertible Bond dated April 29, 1998 Previously Filed
99.3 Opinion of Counsel Respecting Broker-Dealer Status of Company Officers Selling Shares 136
---- -------------------------------------------------------------------------------------- ---
on Behalf of Selling Shareholders
---------------------------------
99.4 Calculation of Ratio of Earnings to Fixed Charges 138
---- ------------------------------------------------- ---
</TABLE>
90
Exhibit 1
Selected Dealers Agreement
Dear Ladies and Gentlemen:
Section 1. Introduction.
The Murdock Group Career Satisfaction Corporation ("Company"), a Utah
corporation, proposes to issue and sell 2,500,000 of its class A common voting
shares, and certain stockholders of the Company (collectively referred to as the
"Selling Stockholders") propose to sell 181,500 shares of the Company's issued
and outstanding Common Stock, to the general public at the price of $5 per share
through selected dealers named in Schedule A (the "Dealers"), who are acting
severally and not jointly.
Collectively, such total of 2,681,500 shares of Common Stock proposed to be sold
by the Company and the Selling Stockholders is hereinafter referred to as the
"Shares." The Company and each of the Selling Stockholders hereby confirm their
agreements with the Dealers as follows:
Section 2. Representations and Warranties of the Company.
The Company represents and warrants to the several Dealers that:
(a) A registration statement on Form SB-2 (File No. 333-65319) has been
prepared and filed with the Securities and Exchange Commission
("Commission") by the Company in conformity with the requirements of
the Securities Act of 1933, as amended, and the rules and regulations
of the Commission thereunder (collectively, the "1933 Act;" unless
indicated to the contrary, all references herein to specific rules are
rules promulgated under the 1933 Act); and the Company has so prepared
and has filed such amendments thereto, if any, and such amended
preliminary prospectuses as may have been required to the date hereof
and will file such additional amendments thereto and such amended
prospectuses as may hereafter be required. There has been or will
promptly be delivered to you a signed copy of such registration
statement and amendments, complete with exhibits.
(b) The Commission has not issued any order preventing or suspending the
use of any preliminary prospectus, and each preliminary prospectus has
conformed in all material respects with the requirements of the 1933
Act and, as of its date, has not included any untrue statement of a
material fact or omitted to state a material fact necessary to make the
statements therein not misleading; and when the Registration Statement
became or becomes effective, and at all times subsequent thereto.
(c) The Company has been duly incorporated and are validly existing as
corporations in good standing, with corporate power and authority to
own their properties and conduct its business as described in the
Prospectus; the Company is duly qualified to do business as a foreign
corporation under the corporation law of, and are in good standing as
such in, each jurisdiction in which it owns or leases substantial
properties, has an office, or in which substantial business is
conducted and such qualification is required.
107
<PAGE>
(d) The issued and outstanding shares of capital stock of the Company as
set forth in the Prospectus have been duly authorized and validly
issued, are fully paid and nonassessable, and conform to the
description thereof contained in the Prospectus.
(e) The making and performance by the Company of this Agreement have been
duly authorized by all necessary corporate action and will not violate
any provision of the Company's charter or bylaws and will not result in
the breach, or be in contravention, of any provision of any agreement,
franchise, license, indenture, mortgage, deed of trust, or other
instrument to which the Company is a party or by which the Company may
be bound or affected, or any order, rule or regulation applicable to
the Company of any court or regulatory body, administrative agency or
other governmental body having jurisdiction over the Company or any of
its properties, or any order of any court or governmental agency or
authority entered in any proceeding to which the Company was or is now
a party or by which it is bound. No consent, approval, authorization or
other order of any court, regulatory body, administrative agency or
other governmental body is required for the execution and delivery of
this Agreement or the consummation of the transactions contemplated
herein or therein, except for compliance with the 1933 Act and blue sky
laws applicable to the public offering of the Shares by the several
Dealers and clearance of such offering with the National Association of
Securities Dealers, Inc. ("NASD"). This Agreement has been duly
executed and delivered by the Company.
(f) The accountants who have expressed their opinions with respect to
certain of the financial statements and schedules included in the
Registration Statement are independent accountants as required by the
1933 Act.
(g) The consolidated financial statements and schedules of the Company
included in the Registration Statement present fairly the consolidated
financial position of the Company as of the respective dates of such
financial statements, and the consolidated results of operations and
cash flows of the Company for the respective periods covered thereby,
all in conformity with generally accepted accounting principles
consistently applied throughout the periods involved, except as
disclosed in the Prospectus and the supporting schedules included in
the Registration Statement present fairly the information required to
be stated therein.
(h) The Company is not in violation of its charter or in default under any
consent decree, or in default with respect to any material provision of
any lease, loan agreement, franchise, license, permit or other contract
obligation to which it is a party; and there does not exist any state
of facts which constitutes an event of default as defined in such
documents or which, with notice or lapse of time or both, would
constitute such an event of default, in each case, except for defaults
which immaterial.
(i) There are no material legal or governmental proceedings pending, or to
the Company's knowledge, threatened to which the Company is or may be a
party or of which material property owned or leased by the Company or
any subsidiary is or may be the subject, or related to environmental or
discrimination matters which are not disclosed in the Prospectus, or
which question the validity of this Agreement or any action taken or to
be taken pursuant hereto or thereto.
(j) The Company and each of its subsidiaries have good and marketable title
to all the properties and assets reflected as owned in the financial
statements hereinabove described (or elsewhere in the Prospectus),
subject to no lien, mortgage, pledge, charge or encumbrance of any kind
except those, if any, reflected in such financial statements (or
elsewhere in the Prospectus) or which are not material to the Company.
The Company holds its leased properties which are material to the
Company under valid and binding leases.
(k) The Company has not taken and will not take, directly or indirectly,
any action designed to or which has constituted or which might
108
<PAGE>
reasonably be expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares.
(l) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, and except as contemplated
by the Prospectus, the Company has not incurred any material
liabilities or obligations, direct or contingent, nor entered into any
material transactions not in the ordinary course of business and there
has not been any material adverse change in its condition (financial or
otherwise) or results of operations nor any material change in its
capital stock, short-term debt or long-term debt.
(m) There is no material document of a character required to be described
in the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement which is not described or filed
as required.
(n) The Company owns and possesses all right, title and interest in and to,
or has duly licensed from third parties, all patents, patent rights,
trade secrets, inventions, know-how, trademarks, trade names,
copyrights, service marks and other proprietary rights ("Trade Rights")
material to the business of the Company. The Company has not received
any notice of infringement, misappropriation or conflict from any third
party as to such material Trade Rights which has not been resolved or
disposed of, and the Company has not infringed, misappropriated or
otherwise conflicted with material Trade Rights of any third parties,
which infringement, misappropriation or conflict would have a material
adverse effect upon the condition (financial or otherwise) or results
of operations of the Company.
(o) The conduct of the business of the Company is in compliance in all
respects with applicable federal, state, local and foreign laws and
regulations, except where the failure to be in compliance would not
have a material adverse effect upon the condition (financial or
otherwise) or results of operations of the Company.
(p) All offers and sales of the Company's capital stock prior to the date
hereof were at all relevant times exempt from the registration
requirements of the 1933 Act and were duly registered with or the
subject of an available exemption from the registration requirements of
the applicable state securities or blue sky laws.
(q) The Company has filed all necessary federal and state income and
franchise tax returns and has paid all taxes shown as due thereon, and
there is no tax deficiency that has been, or to the knowledge of the
Company might be, asserted against the Company or any of its properties
or assets that would or could be expected to have a material adverse
affect upon the condition (financial or otherwise) or results of
operations of the Company.
(r) Upon successful completion of this offering, the Company will file an
application to list the Shares on the Nasdaq SmallCap Market. If we
fail to meet these standards, we plan to apply for a listing of our
shares on the NASD OTC Bulletin Board. The Company has received
notification that Nasdaq has reserved for the Company the ticker symbol
"JOBS."
Section 3. Representations, Warranties and Covenants of the Selling Stockholders
Each Selling Stockholder severally represents and warrants to, and agrees with,
the Company and the Dealers that:
(a) Such Selling Stockholder has and will have, valid marketable title to
the Shares proposed to be sold by such Selling Stockholder hereunder on
such date and full right, power and authority to enter into this
Agreement and to sell, assign, transfer and deliver such Shares
hereunder, free and clear of all voting trust arrangements, liens,
encumbrances, equities, claims and community property rights; and upon
delivery of and payment for such Shares hereunder, the Dealers will
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<PAGE>
acquire valid marketable title thereto, free and clear of all voting
trust arrangements, liens, encumbrances, equities, claims and community
property rights.
(b) Such Selling Stockholder has not taken and will not take, directly or
indirectly, any action designed to or which might be reasonably
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the
Company to facilitate the sale or resale of the Shares.
(c) Each preliminary prospectus, insofar as it has related to such Selling
Stockholder and, to the knowledge of such Selling Stockholder in all
other respects, as of its date, has conformed in all material respects
with the requirements of the 1933 Act and, as of its date, has not
included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein not misleading.
Section 4. Purchase, Sale and Delivery of Shares
On the basis of the representations, warranties and agreements herein contained,
but subject to the terms and conditions herein set forth, the Company and the
Selling Stockholders, severally and not jointly, agree to sell to the Dealers
named in Schedule A hereto, and the Dealers agree, severally and not jointly, to
devote their "best efforts" to sell Shares on the terms set forth in the
prospectus, receiving as compensation therefore 10% of the price of the Shares
sold by each such Dealer.
Section 5. Expenses
Each party shall pay all expenses of performing the duties allocated to it under
this Agreement.
Section 6. Covenants of the Company
The Company covenants and agrees that:
(a) The Company will advise you and the Selling Stockholders promptly of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of
any proceedings for that purpose, or of any notification of the
suspension of qualification of the Shares for sale in any jurisdiction
or the initiation or threatening of any proceedings for that purpose,
and will also advise you and the Selling Stockholders promptly of any
request of the Commission for amendment or supplement of the
Registration Statement, of any preliminary prospectus or of the
Prospectus, or for additional information.
(b) The Company will give you and the Selling Stockholders notice of its
intention to file or prepare any amendment to the Registration
Statement (including any post-effective amendment) or any Rule 462(b)
Registration Statement or any amendment or supplement to the Prospectus
(including any revised prospectus which the Company proposes for use by
the Dealers in connection with the offering of the Shares which differs
from the prospectus on file at the Commission at the time the
Registration Statement became or becomes effective, whether or not such
revised prospectus is required to be filed pursuant to Rule 424(b) and
any term sheet as contemplated by Rule 434) and will furnish you and
the Selling Stockholders with copies of any such amendment or
supplement a reasonable amount of time prior to such proposed filing or
use, as the case may be, and will not file any such amendment or
supplement or use any such prospectus to which you or counsel for the
Dealers shall reasonably object.
(c) If at any time when a prospectus relating to the Shares is required to
be delivered under the 1933 Act any event occurs as a result of which
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the Prospectus, including any amendments or supplements, would include
an untrue statement of a material fact, or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading, or if it is necessary at any time to amend the
Prospectus, including any amendments or supplements thereto and
including any revised prospectus which the Company proposes for use by
the Dealers in connection with the offering of the Shares which differs
from the prospectus on file with the Commission at the time of
effectiveness of the Registration Statement, whether or not such
revised prospectus is required to be filed pursuant to Rule 424(b) to
comply with the 1933 Act, the Company promptly will advise you thereof
and will promptly prepare and file with the Commission an amendment or
supplement which will correct such statement or omission or an
amendment which will effect such compliance; and, in case any Dealer is
required to deliver a prospectus nine months or more after the
effective date of the Registration Statement, the Company upon request,
but at the expense of such Dealer, will prepare promptly such
prospectus or prospectuses as may be necessary to permit compliance
with the requirements of Section 10(a)(3) of the 1933 Act.
(d) The Company will not incur any liability or obligation, direct or
contingent, or enter into any material transaction, other than in the
ordinary course of business, except as contemplated by the Prospectus.
(e) During such period as a prospectus is required by law to be delivered
in connection with offers and sales of the Shares by an Dealer or
dealer, the Company will furnish to you at its expense, subject to the
provisions of subsection (d) hereof, copies of the Registration
Statement, the Prospectus, each preliminary prospectus and all
amendments and supplements to any such documents in each case as soon
as available and in such quantities as you may reasonably request, for
the purposes contemplated by the 1933 Act.
(f) The Company will cooperate with the Dealers in qualifying or
registering the Shares for sale under the blue sky laws of such
jurisdictions as the Company and the Dealer may agree, and will
continue such qualifications in effect so long as reasonably required
for the distribution of the Shares.
(g) The Company will use the net proceeds received by it from the sale of
the Shares being sold by it in the manner specified in the Prospectus.
(h) The Company will comply with all applicable registration, filing and
reporting requirements of the Exchange Act and the Nasdaq SmallCap
Market and will file with the Commission in a timely manner all reports
on Form SR required by Rule 463 and will furnish you copies of any such
reports you may request as soon as practicable after the filing
thereof.
Section 7. Indemnification
The Company and Selling Shareholders agree to indemnify and hold harmless each
Dealer, and each Dealer agrees to indemnify the Company and the Selling
Shareholders, against any losses, claims, damages or liabilities, joint or
several, to which such party may become subject under the 1933 Act, the Exchange
Act or other federal or state statutory law or regulation, at common law or
otherwise, arising out of such party's own conduct with respect to this
offering. The provisions of this Section shall survive any termination of this
Agreement.
Section 8. Termination
Without limiting the right to terminate this Agreement pursuant to any other
provision hereof, this agreement may be terminated by any party at any time for
any reason. The respective indemnities, agreements, representations, warranties
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and other statements of the Company, of its officers, of the Selling
Stockholders and of the several Dealers set forth in or made pursuant to this
Agreement will remain in full force and effect, and will survive delivery of and
payment for the Shares sold hereunder.
Section 9. Applicable Law
This Agreement shall be governed by and construed in accordance with the laws of
the State of Utah.
Section 10. Signatures
If the foregoing is in accordance with your understanding of our agreement,
kindly sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement among the Company, the Selling Stockholders and the
several Dealers including you, all in accordance with its terms.
Very truly yours,
The Murdock Group Career Satisfaction Corporation
By /s/ KC Holmes
----------------------------------
KC Holmes, Chief Executive Officer
Selling Stockholders
By /s/ KC Holmes
----------------------------------
KC Homes, Agent and Attorney-in-Fact
Selected Dealer Agreement
112
Exhibit 10.3
ORIGINAL LEASE AGREEMENT
between
5300 SOUTH Associates, LLC as "Landlord"
and THE MURDOCK GROUP as "Tenant"
BASIC LEASE INFORMATION
Lease Date: For identification purposes only, the date of this Lease is dated
January 8, 1998.
Landlord: 5300 South Associates, LLC, a California limited liability company
Tenant: Envision Career Services, LLC dba The Murdock Group
Project: The US West Dex Center
Building Address: 5295 South 300 West, Murray, Utah 84107
Rentable Area of Building: Approximately 136,608 square feet
Premises: Floor: 4th Floor; Suite & Rentable Area; Suite #475 = Approximately
2,174 square feet ("Existing Premises"); Suite #450 = Approximately 7,071 square
feet ("Additional Premises")
Term: 60 full calendar months (plus any partial month at the beginning of the
Term)
Commencement Date: May 1, 1998
Expiration Date: The last day of the 60th lull calendar month in the Term
Base Rent per month:
<TABLE>
<CAPTION>
Period Suite 475 (2174 RSF) Suite 450 (7,071 RSF) Total (9,254 RSF)
<S> <C> <C> <C>
5/1/98 - 4/30/99 $3,261.00 ($18.00/yr) $11,785.00 ($20.00/yr) $15,046.00/mo
5/1/99 - 4/30/00 $3,442.17 ($19.00/yr) $12,374.25 ($21.00/yr) $15,816.42/mo
5/1/00 - 4/30/01 $3,623.34 ($20.00/yr) $12,963.50 ($22.00/yr) $16,586.84/mo
5/1/01 - 4/30/02 $4,166.83 ($23.00/yr) $13,552.75 ($23.00/yr) $17,719.58/mo
5/1/02 - 4/30/03 $4,348.00 ($24.00/yr) $14,142.00 ($24.00/yr) $18,490.00/mo
</TABLE>
Base Year: Existing Premises = 1994 Calendar Year; Additional Premises = 1998
Calendar Year
Tenant's Share: Existing Premises = 1.59%; Additional Premises = 5.18%
Security Deposit: None - Personally guaranteed by principals
Landlord's Address for Payment: 5300 South Associates, LLC, File73 224, P.O. Box
60000, San Francisco, CA 94160-3224
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Business Hours: 8:00 am to 6:00 p.m., Monday through Friday (excluding holidays)
Saturday 8:00 am to 2:00 p.m. (excluding holidays)
Landlord's Address for Notices: 5300 South Associates, LLC do William Wilson &
Associates 2929 Campus Drive, Suite 450 San Mateo, CA 94403, Attn: General
Counsel; with a copy to: 5300 South Associates, LLC do William Wilson &
Associates 5295 South 300 West Murray, UT 84107; Attn: Building Management
Office
Tenant's Address for Notices: The Murdock Group, 5295 South 300 West, Suite 300,
Murray, UT 84107
Access Card Deposit: $5.00 per card
Broker(s): None
Guarantor(s): K.C. Holmes and Heather Stone
Property Manager: William Wilson & Associates
Exhibit A: The Premises
Exhibit B: Construction Rider
Exhibit C: Building Rules
Exhibit D: Additional Provisions (Parking)
Exhibit E: Guaranty (personally guaranteed by principals)
The Basic Lease Information set forth above is part of the Lease. In the event
of any conflict between any provision in the Basic Lease Information and the
Lease, the Lease shall control.
THIS LEASE is made as of the Lease Date set forth in the Basic Lease
Information, by and between the Landlord identified in the Basic Lease
Information ("Landlord"), and the Tenant identified in the Basic Lease
Information ("Tenant"). Landlord and Tenant hereby agree as follows:
1. PREMISES. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, upon the terms and subject to the conditions of this Lease, the office
space identified in the Basic Lease Information as the Premises (the
"Premises"), in the Building located at the address specified in the Basic Lease
Information (the "Building"). The approximate configuration and location of the
Premises is shown on Exhibit A. Landlord and Tenant agree that the rentable area
of the Premises for all purposes under this Lease shall be the Rentable Area
specified in the Basic Lease Information. The Building, together with the
parking facilities serving the Building (the "Parking Facility"), and the
parcel(s) of land on which the Building and the Parking Facility are situated
(collectively, the "Property"), is part of the Project identified in the Basic
Lease Information (the "Project").
2. TERM; POSSESSION; AND EARLY TERMINATION OF
EXISTING LEASE; AND EARLY TERMINATION OF EXISTING LEASE.
(a) The term of this Lease (the "Term") shall commence on the Commencement Date
as described below and, unless sooner terminated, shall expire on the Expiration
Date set forth in the Basic Lease Information (the "Expiration Date"). The
"Commencement Date" shall be January 1, 1998.
(b) Reference is herein made to that certain Office Building Lease dated
November 1, 1993, as amended by a First Amendment to Lease dated October 4, 1996
(together, the "Existing Lease") by and between Busch Forum Limited Partnership
(the "Original Landlord") and Denis R. Murdock (the "Original Tenant") for
approximately 2,174 rentable square feet of space in the Building. Landlord is
successor in interest to Original Landlord. Tenant is successor in interest to
Original Tenant. Notwithstanding the terms and conditions contained in the
Existing Lease, the Term of the Existing Lease shall terminate upon the
Commencement Date of this Lease. Tenant shall remain liable for all obligations
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of Tenant accruing through the termination date of the Existing Lease, including
the payment of Basic Rental, Operating Expenses and taxes.
3. RENT.
3.1 Base Rent. Tenant agrees to pay to Landlord the Base Rent set forth in the
Basic Lease Information, without prior notice or demand, on the first day of
each and every calendar month during the Term, except that Base Rent for the
first lull calendar month in which Base Rent is payable shall be paid upon
Tenant's execution of this Lease and Base Rent for any partial month at the
beginning of the Term shall be paid on the Commencement Date. Base Rent for any
partial month at the beginning or end of the Term shall be prorated based on the
actual number of days in the month.
If the Basic Lease Information provides for any change in Base Rent by reference
to years or months (without specifying particular dates), the change will take
effect on the applicable annual or monthly anniversary of the Commencement Date
(which won't necessarily be the first day of a calendar month).
3.2 Additional Rent: Increases in Operating Costs and Taxes.
(a) Definitions.
(1) "Base Operating Costs" means Operating Costs for the calendar year specified
as the Base Year in the Basic Lease Information (excluding therefrom, however,
any Operating Costs of a nature that would not ordinarily be incurred on an
annual, recurring basis).
(2) "Base Taxes" means Taxes for the calendar year specified as the Base Year in
the Basic Lease Information.
(3) "Operating Costs" means all costs of managing, operating, maintaining and
repairing the Property, including all costs, expenditures, fees and charges for:
(A) Operation, maintenance and repair of the Property (including maintenance,
repair and replacement of glass, the roof covering or membrane, and
landscaping); (13)utilities and services (including telecommunications
facilities and equipment, recycling programs and trash removal), and associated
supplies and materials; (C) compensation (including employment taxes and fringe
benefits) for persons who perform duties in connection with the operation,
management, maintenance and repair of the Building, such compensation to be
appropriately allocated for persons who also perform duties unrelated to the
Building; (D) property (including coverage for earthquake and flood if carried
by Landlord), liability, rental income and other insurance relating to the
Property, and expenditures for deductible amounts paid under such insurance; (E)
licenses, permits and inspections; (F) complying with the requirements of any
law, statute, ordinance or governmental rule or regulation or any orders
pursuant thereto (collectively "Laws"); (G) amortization of capital improvements
required to comply with Laws, or which are intended to reduce Operating Costs or
improve the utility, efficiency or capacity of any Building System, with
interest on the unamortized balance at the rate paid by Landlord on funds
borrowed to finance such capital improvements (or, if Landlord finances such
improvements out of Landlord's funds without borrowing, the rate that Landlord
would have paid to borrow such funds, as reasonably determined by Landlord),
over such useful life as Landlord shall reasonably determine; (H) an office in
the Project for the management of the Property, including expenses of furnishing
and equipping such office and the rental value of any space occupied for such
purposes; (I) property management fees; (J) accounting, legal and other
professional services incurred in connection with the operation of the Property
and the calculation of Operating Costs and Taxes; (K) a reasonable allowance for
depreciation on machinery and equipment used to maintain the Property and on
other personal property owned by Landlord in the Property (including window
coverings and carpeting in common areas); (L) contesting the validity or
applicability of any Laws that may affect the Property; (M) the Building's share
of any shared or common area maintenance fees and expenses (including costs and
expenses of operating, managing, owning and maintaining the Parking Facility and
the common areas of the Project and any fitness center or conference center in
the Project); and (N) any other cost, expenditure, fee or charge, whether or not
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hereinbefore described, which in accordance with generally accepted property
management practices would be considered an expense of managing, operating,
maintaining and repairing the Property. Operating Costs for any calendar year
during which average occupancy of the Building is less than one hundred percent
(100%) shall be calculated based upon the Operating Costs that would have been
incurred if the Building had an average occupancy of one hundred percent (100%)
during the entire calendar year.
Operating Costs shall not include (i) capital improvements (except as otherwise
provided above); (ii) costs of special services rendered to individual tenants
(including Tenant) for which a special charge is made; (iii) interest and
principal payments on loans or indebtedness secured by the Building; (iv) costs
of improvements for Tenant or other tenants of the Building; (v) costs of
services or other benefits of a type which are not available to Tenant but which
are available to other tenants or occupants, and costs for which Landlord is
reimbursed by other tenants of the Building other than through payment of
tenants' shares of increases in Operating Costs and Taxes; (vi) leasing
commissions, attorneys' fees and other expenses incurred in connection with
leasing space in the Building or enforcing such leases; (vii) depreciation or
amortization, other than as specifically enumerated in the definition of
Operating Costs above; and (vi ii) costs, fines or penalties incurred due to
Landlord's violation of any Law.
(4) "Taxes" means: all real property taxes and general, special or district
assessments or other governmental impositions, of whatever kind, nature or
origin, imposed on or by reason of the ownership or use of the Property;
governmental charges, fees or assessments for transit or traffic mitigation
(including area-wide traffic improvement assessments and transportation system
management fees), housing, police, fire or other governmental service or
purported benefits to the Property; personal property taxe assessed on the
personal property of Landlord used in the operation of the Property; service
payments in lieu of taxes and taxes and assessments of every kind and nature
whatsoever levied or assessed in addition to, in lieu of or in substitution for
existing or additional real or personal property taxes on the Property or the
personal property described above; any increases in the foregoing caused by
changes in assessed valuation, tax rate or other factors or circumstances; and
the reasonable cost of contesting by appropriate proceedings the amount or
validity of any taxes, assessments or charges described above. To the extent
paid by Tenant or other tenants as "Tenant's Taxes" (as defined in Section 8
Tenant's Taxes), "Tenant's Taxes" shall be excluded from Taxes.
(5) "Tenant's Share" means the Rentable Area of the Premises divided by the
total Rentable Area of the Building, as set forth in the Basic Lease
Information. If the Rentable Area of the Building is changed or the Rentable
Area of the Premises is changed by Tenant's leasing of additional space
hereunder or for any other reason, Tenant's Share shall be adjusted accordingly.
(b) Additional Rent.
(1) Tenant shall pay Landlord as "Additional Rent" for each calendar year or
portion thereof during the Term Tenant's Share of the sum of (x) the amount (if
any) by which Operating Costs for such period exceed Base Operating Costs, and
(y) the amount (if any) by which Taxes for such period exceed Base Taxes.
(2) Prior to the end of the Base Year and each calendar year thereafter,
Landlord shall notify' Tenant of Landlord's estimate of Operating Costs, Taxes
and Tenant's Additional Rent for the following calendar year. Commencing on the
first day of January of each calendar year and continuing on the first day of
every month thereafter in such year, Tenant shall pay to Landlord one-twelfth
(1/12th) of the estimated Additional Rent. If Landlord thereafter estimates that
Operating Costs or Taxes for such year will vary from Landlord's prior estimate,
Landlord may, by notice to Tenant, revise the estimate for such year (and
Additional Rent shall thereafter be payable based on the revised estimate).
(3) As soon as reasonably practicable after the end of the Base Year and each
calendar year thereafter, Landlord shall furnish Tenant a statement with respect
to such year, showing Operating Costs, Taxes and Additional Rent for the year,
and the total payments made by Tenant with respect thereto. Unless Tenant raises
any objections to Landlord's statement within ninety (90) days after receipt of
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<PAGE>
the same, such statement shall conclusively be deemed correct and Tenant shall
have no right thereafter to dispute such statement or any item therein or the
computation of Additional Rent based thereon. If Tenant does object to such
statement, then Landlord shall provide Tenant with reasonable verification of
the figures shown on the statement and the parties shall negotiate in good faith
to resolve any disputes. Any objection of Tenant to Landlord's statement and
resolution of any dispute shall not postpone the time for payment of any amounts
due Tenant or Landlord based on Landlord's statement, nor shall any failure of
Landlord to deliver Landlord's statement in a timely manner relieve Tenant of
Tenant's obligation to pay any amounts due Landlord based on Landlord's
statement.
(4) If Tenant's Additional Rent as finally determined for any calendar year
exceeds the total payments made by Tenant on account thereof, Tenant shall pay
Landlord the deficiency within ten (10) days of Tenant's receipt of Landlord's
statement. If the total payments made by Tenant on account thereof exceed
Tenant's Additional Rent as finally determined for such year, Tenant's excess
payment shall be credited toward the rent next due from Tenant under this Lease.
For any partial calendar year at the beginning or end of the Term, Additional
Rent shall be prorated on the basis of a 365-day year by computing Tenant's
Share of the increases in Operating Costs and Taxes for the entire year and then
prorating such amount for the number of days during such year included in the
Term. Notwithstanding the termination of this Lease, Landlord shall pay to
Tenant or Tenant shall pay to Landlord, as the case may be, within ten (10) days
after Tenant's receipt of Landlord's final statement for the calendar year in
which this Lease terminates, the difference between Tenant's Additional Rent for
that year, as finally determined by Landlord, and the total amount previously
paid by Tenant on account thereof
If for any reason Base Taxes or Taxes for any year during the Term are reduced,
refunded or otherwise changed, Tenant's Additional Rent shall be adjusted
accordingly. If Taxes are temporarily reduced as a result of space in the
Building being leased to a tenant that is entitled to an exemption from property
taxes or other taxes, then for purposes of determining Additional Rent for each
year in which Taxes are reduced by any such exemption, Taxes for such year shall
be calculated on the basis of the amount the Taxes for the year would have been
in the absence of the exemption. The obligations of Landlord to refund any
overpayment of Additional Rent and of Tenant to pay any Additional Rent not
previously paid shall survive the expiration of the Term. Notwithstanding
anything to the contrary in this Lease, if there is at any time a decrease in
Taxes below the amount of the Taxes for the Base Year, then for purposes of
calculating Additional Rent for the year in which such decrease occurs and all
subsequent periods, Base Taxes shall be reduced to equal the Taxes for the year
in which the decrease occurs.
3.3 Payment of Rent. All amounts payable or reimbursable by Tenant under this
Lease, including late charges and interest (collectively, "Rent"), shall
constitute rent and shall be payable and recoverable as rent in the manner
provided in this Lease. All sums payable to Landlord on demand under the terms
of this Lease shall be payable within ten (10) days after notice from Landlord
of the amounts due. All rent shall be paid without offset, recoupment or
deduction in lawful money of the United States of America to Landlord at
Landlord's Address for Payment of Rent as set forth in the Basic Lease
Information, or to such other person or at such other place as Landlord may from
time to time designate.
4. SECURITY DEPOSIT. On execution of this Lease, Tenant shall deposit with
Landlord the amount specified in the Basic Lease Information as the Security
Deposit, if any (the "Security Deposit"), as security for the performance of
Tenant's obligations under this Lease. Landlord may (but shall have no
obligation to) use the Security Deposit or any portion thereof to cure any Event
of Default under this Lease or to compensate Landlord for any damage Landlord
incurs as a result of Tenant's failure to perform any of Tenant's obligations
hereunder. In such event Tenant shall pay to Landlord on demand an amount
sufficient to replenish the Security Deposit. If Tenant is not in default at the
expiration or termination of this Lease, Landlord shall return to Tenant the
Security Deposit or the balance thereof then held by Landlord and not applied as
provided above. Landlord may commingle the Security Deposit with Landlord's
general and other funds. Landlord shall not be required to pay interest on the
Security Deposit to Tenant.
5. USE AND COMPLIANCE WITH LAWS.
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5.1 Use. The Premises shall be used and occupied for general business office
purposes and for no other use or purpose. Tenant shall comply with all present
and future Laws relating to Tenant's use or occupancy of the Premises (and make
any repairs, alterations or improvements as required to comply with all such
Laws), and shall observe the "Building Rules" (as defined in Section 27 - Rules
and Regulations). Tenant shall not do, bring, keep or sell anything in or about
the Premises that is prohibited by, o that will cause a cancellation of or an
increase in the existing premium for, any insurance policy covering the Property
or any part thereof. Tenant shall not permit the Premises to be occupied or used
in any manner that will constitute waste or a nuisance, or disturb the quiet
enjoyment of or otherwise annoy other tenants in the Building. Without limiting
the foregoing, the Premises shall not be used for educational activities,
practice of medicine or any of the healing arts, providing social services, for
any governmental use (including embassy or consulate use), or for personnel
agency, customer service office, studios for radio, television or other media,
travel agency or reservation center operations or uses. Tenant shall not,
without the prior consent of Landlord, (i) bring into the Building or the
Premises anything that may cause substantial noise, odor or vibration, overload
the floors in the Premises or the Building or any of the heating, ventilating
and air-conditioning ("HVAC"), mechanical, elevator, plumbing, electrical, fire
protection, life safety, security or other Systems in the Building ("Building
Systems"), or jeopardize the structural integrity of the Building or any part
thereof; (ii) connect to the utility systems of the Building any apparatus,
machinery or other equipment other than typical office equipment; or (iii)
connect to any electrical circuit in the Premises any equipment or other load
with aggregate electrical power requirements in excess of 80% of the rated
capacity of the circuit.
5.2 Hazardous Materials.
(a) Definitions.
(1) "Hazardous Materials" shall mean any substance: (A) that now or in the
future is regulated or governed by, requires investigation or remediation under,
or is defined as a hazardous waste, hazardous substance, pollutant or
contaminant under any governmental statute, code, ordinance, regulation, rule or
order, and any amendment thereto, including the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C. ss.9601 et seq., and the
Resource Conservation and Recovery Act, 42 U.S.C. ss.69 et seq., or (B) that is
toxic, explosive, corrosive, flammable, radioactive, carcinogenic, dangerous or
otherwise hazardous, including gasoline, diesel fuel, petroleum hydrocarbons,
polychlorinated biphenyls (?CBs), asbestos, radon and urea formaldehyde foam
insulation.
(2) "Environmental Requirements" shall mean all present and future Laws, orders,
permits, licenses, approvals, authorizations and other requirements of any kind
applicable to Hazardous Materials
(3) "Handled by Tenant" and "Handling by Tenant" shall mean and refer to any
installation, handling, generation, storage, use, disposal, discharge, release,
abatement, removal, transportation, or any other activity of any type by Tenant
or its agents, employees, contractors, licensees, assignees, sublessees,
transferees or representatives (collectively, "Representatives") or its guests,
customers, invitees, or visitors (collectively, "Visitors"), at or about the
Premises in connection with or involving Hazardous
Materials.
(4) "Environmental Losses" shall mean all costs and expenses of any kind,
damages, including foreseeable and unforeseeable consequential damages, fines
and penalties incurred in connection with any violation of and compliance with
Environmental Requirements and all losses of any kind attributable to the
diminution of value, loss of use or adverse effects on marketability or use of
any portion of the Premises or Property.
(b) Tenant's Covenants. No Hazardous Materials shall be Handled by Tenant at or
about the Premises or Property without Landlord's prior written consent, which
consent may be granted, denied, or conditioned upon compliance with Landlord's
requirements, all in Landlord's absolute discretion. Notwithstanding the
foregoing, normal quantities and use of those Hazardous Materials customarily
used in the conduct of general office activities, such as copier fluids and
cleaning supplies ("Permitted Hazardous Materials"), may be used and stored at
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the Premises without Landlord's prior written consent, provided that Tenant's
activities at or about the Premises and Property and the Handling by Tenant of
all Hazardous Materials shall comply at all times with all Environmental
Requirements. At the expiration or termination of the Lease, Tenant shall
promptly remove from the Premises and Property all Hazardous Materials Handled
by Tenant at the Premises or the Property. Tenant shall keep Landlord frilly and
promptl informed of all Handling by Tenant of Hazardous Materials other than
Permitted Hazardous Materials. Tenant shall be responsible and liable for the
compliance with all of the provisions of this Section by all of Tenant's
Representatives and Visitors, and all of Tenant's obligations under this Section
(including its indemnification obligations under paragraph (e) below) shall
survive the expiration or termination of this Lease.
(c) Compliance. Tenant shall at Tenant's expense promptly take all actions
required by any governmental agency or entity in connection with or as a result
of the Handling by Tenant of Hazardous Materials at or about the Premises or
Property, including inspection and testing, performing all cleanup, removal and
remediation work required with respect to those Hazardous Materials, complying
with all closure requirements and post-closure monitoring, and filing all
required reports or plans. All of the foregoing work and all Handling by Tenant
of all Hazardous Materials shall be performed in a good, safe and workmanlike
manner by consultants qualified and licensed to undertake such work and in a
manner that will not interfere with any other tenant's quiet enjoyment of the
Property or Landlord's use, operation, leasing and sale of the Property. Tenant
shall deliver to Landlord prior to delivery to any governmental agency, or
promptly after receipt from any such agency, copies of all permits, manifests,
closure or remedial action plans, notices, and all other documents relating to
the Handling by Tenant of Hazardous Materials at or about the Premises or
Property. If any lien attaches to the Premises or the Property in connection
with or as a result of the Handling by Tenant of Hazardous Materials, and Tenant
does not cause the same to be released, by payment, bonding or otherwise, within
ten (10) days after the attachment thereof, Landlord shall have the right but
not the obligation to cause the same to be released and any sums expended by
Landlord (plus Landlord's administrative costs) in connection therewith shall be
payable by Tenant on demand.
(d) Landlord's Rights. Landlord shall have the right, but not the obligation, to
enter the Premises at any reasonable time (i) to confirm Tenant's compliance
with the provisions of this Section 5.2, and (ii) to perform Tenant's
obligations under this Section if Tenant has failed to do so after reasonable
notice to Tenant. Landlord shall also have the right to engage qualified
Hazardous Materials consultants to inspect the Premises and review the Handling
by Tenant of Hazardous Materials, including review of all permits, reports,
plans, and other documents regarding same. Tenant shall pay to Landlord on
demand the costs of Landlord's consultants' fees and all costs incurred by
Landlord in performing Tenant's obligations under this Section. Landlord shall
use reasonable efforts to minimize any interference with Tenant's business
caused by Landlord's entry into the Premises, but Landlord shall not be
responsible for any interference caused thereby.
(e) Tenant's Indemnification. Tenant agrees to indemnify, defend, protect and
hold harmless Landlord and its partners or members and its or their partners,
members, directors, officers, shareholders, employees and agents from all
Environmental Losses and all other claims, actions, losses, damages,
liabilities, costs and expenses of every kind, including reasonable attorneys',
experts' and consultants' fees and costs, incurred at any time and arising from
or in connection with the Handling by Tenant of Hazardous Materials at or about
the Property or Tenant's failure to comply in frill with all Environmental
Requirements with respect to the Premises.
6. TENANT IMPROVEMENTS & ALTERATIONS.
6.1 Landlord and Tenant shall perform their respective obligations with respect
to design and construction of any improvements to be constructed and installed
in the Premises (the "Tenant Improvements"), as provided in the Construction
Rider. Except for any Tenant Improvements to be constructed by Tenant as
provided in the Construction Rider, Tenant shall not make any alterations,
improvements or changes to the Premises, including installation of any security
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system or telephone or data communication wiring, ("Alterations"), without
Landlord's prior written consent. Any such Alterations shall be completed by
Tenant at Tenant's sole cost and expense: (i) with due diligence, in a good and
workmanlike manner, using new materials; (ii) in compliance with plans and
specifications approved by Landlord; (iii) in compliance with the construction
rules and regulations promulgated by Landlord from time to time; (iv) in
accordance with all applicable Laws (including all work, whether structural or
non-structural inside or outside the Premises, required to comply frilly with
all applicable Laws and necessitated by Tenant's work); and (v) subject to all
conditions which Landlord may in Landlord's discretion impose. such conditions
may include requirements for Tenant to: (i) provide payment or performance bonds
or additional insurance (from Tenant or Tenant's contractors, subcontractors or
design professionals); (ii) use contractors or subcontractors designated by
Landlord; and (iii) remove all or part of the Alterations prior to or upon
expiration or termination of the Term, as designated by Landlord. If any work
outside the Premises, or any work on or adjustment to any of the Building
Systems, is required in connection with or as a result of Tenant's work, such
work shall be performed at Tenant's expense by contractors designated by
Landlord. Landlord's right to review and approve (or withhold approval of)
Tenant's plans, drawings, specifications, contractor(s) and other aspects of
construction work proposed by Tenant is intended solely to protect Landlord, the
Property and Landlord's interests. No approval or consent by Landlord shall be
deemed or construed to be a representation or warranty by Landlord as to the
adequacy, sufficiency, fitness or suitability thereof or compliance thereof with
applicable Laws or other requirements. Except as otherwise provided in
Landlord's consent, all Alterations shall upon installation become part of the
realty and be the property of Landlord.
6.2 Before making any Alterations, Tenant shall submit to Landlord for
Landlord's prior approval reasonably detailed final plans and specifications
prepared by a licensed architect or engineer, a copy of the construction
contract, including the name of the contractor and all subcontractors proposed
by Tenant to make the Alterations and a copy of the contractor's license. Tenant
shall reimburse Landlord upon demand for any expenses incurred by Landlord in
connection with any Alterations made by Tenant, including reasonable fees
charged by Landlord's contractors or consultants to review plans and
specifications prepared by Tenant and to update the existing as-built plans and
specifications of the Building to reflect the Alterations. Tenant shall obtain
all applicable permits, authorizations and governmental approvals and deliver
copies of the same to Landlord before commencement of any Alterations.
6.3 Tenant shall keep the Premises and the Property free and clear of all liens
arising out of any work performed, materials furnished or obligations incurred
by Tenant. If any such lien attaches to the Premises or the Property, and Tenant
does not cause the same to be released by payment, bonding or otherwise within
ten (10) days after the attachment thereof; Landlord shall have the right but
not the obligation to cause the same to be released, and any sums expended by
Landlord (plus Landlord's administrative costs) in connection therewith shall be
payable by Tenant on demand with interest thereon from the date of expenditure
by Landlord at the Interest Rate (as defined in Section 16.2 - Interest). Tenant
shall give Landlord at least ten (10) days' notice prior to the commencement of
any Alterations and cooperate with Landlord in posting and maintaining notices
of non-responsibility in connection therewith.
6.4 Subject to the provisions of Section 5 - Use and Compliance with Laws and
the foregoing provisions of this Section, Tenant may install and maintain
furnishings, equipment, movable partitions, business equipment and other trade
fixtures ("Trade Fixtures") in the Premises, provided that the Trade Fixtures do
not become an integral part of the Premises or the Building. Tenant shall
promptly repair any damage to the Premises or the Building caused by any
installation or removal of such Trade Fixtures.
7. MAINTENANCE AND REPAIRS
7.1 By taking possession of the Premises
Tenant agrees that the Premises are then in a good and tenantable condition.
During the Term, Tenant at Tenant's expense but under the direction of Landlord,
shall repair and maintain the Premises, including the interior walls, floor
coverings, ceiling (ceiling tiles and grid), Tenant Improvements, Alterations,
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fire extinguishers, outlets and fixtures, and any appliances (including
dishwashers, hot water heaters and garbage disposers) in the Premises, in a
first class condition, and keep the Premises in a clean, safe and orderly
condition.
7.2 Landlord shall maintain or cause to be maintained in reasonably good order,
condition and repair, the structural portions of the roof, foundations, floors
and exterior walls of the Building, the Building Systems, and the public and
common areas of the Property, such as elevators, stairs, corridors and
restrooms; provided, however, that Tenant shall pay the cost of repairs for any
damage occasioned by Tenant's use of the Premises or the Property or any act or
omission of Tenant or Tenant's Representatives or Visitors, to the extent (if
any) not covered by Landlord's property insurance. Landlord shall be under no
obligation to inspect the Premises. Tenant shall promptly report in writing to
Landlord any defective condition known to Tenant which Landlord is required to
repair. As a material part of the consideration for this Lease, Tenant hereby
waives any benefits of any applicable existing or future Law that allows a
tenant to make repairs at its landlord's expense.
7.3 Landlord hereby reserves the right, at any time and from time to time,
without liability to Tenant, and without constituting an eviction, constructive
or otherwise, or entitling Tenant to any abatement of rent or to terminate this
Lease or otherwise releasing Tenant from any of Tenant's obligations under this
Lease:
(a) To make alterations, additions, repairs, improvements to or in or to
decrease the size of area of all or any part of the Building, the fixtures and
equipment therein, and the Building Systems;
(b) To change the Building's name or street address;
(c) To install and maintain any and all signs on the exterior and interior of
the Building;
(d) To reduce, increase, enclose or otherwise change at any time and from time
to time the size, number, location, lay-out and nature of the common areas
(including the Parking Facility) and other tenancies and premises in the
Property and to create additional rentable areas through use or enclosure of
common areas; and
(e) If any governmental authority promulgates or revises any Law or imposes
mandatory or voluntary controls or guidelines on Landlord or the Property
relating to the use or conservation of energy or utilities or the reduction of
automobile or other emissions or reduction or management of traffic or parking
on the Property (collectively "Controls"), to comply with such Controls, whether
mandatory or voluntary, or make any alterations to the Property related thereto.
8. TENANT'S TAXES. "Tenant's Taxes" shall mean (a) all taxes, assessments,
license fees and other governmental charges or impositions levied or assessed
against or with respect to Tenant's personal property or Trade Fixtures in the
Premises, whether any such imposition is levied directly against Tenant or
levied against Landlord or the Property, (b) all rental, excise, sales or
transaction privilege taxes arising Out of this Lease (excluding, however, state
and federal personal or corporate income taxes measured by the income of
Landlord from all sources) imposed by any taxing authority upon Landlord or upon
Landlord's receipt of any rent payable by Tenant pursuant to the terms of this
Lease ("Rental Tax"), and (c) any increase in Taxes attributable to inclusion of
a value placed on Tenant's personal property, Trade Fixtures or Alterations.
Tenant shall pay any Rental Tax to Landlord in addition to and at the same time
as Base Rent is payable under this Lease, and shall pay all other Tenant's Taxes
befor delinquency (and, at Landlord's request, shall furnish Landlord
satisfactory evidence thereof). If Landlord pays Tenant's Taxes or any portion
thereof, Tenant shall reimburse Landlord upon demand for the amount of such
payment, together with interest at the Interest Rate from the date of Landlord's
payment to the date of Tenant's reimbursement.
9. UTILITIES AND SERVICES.
9.1 Description of Services. Landlord shall furnish to the Premises: reasonable
amounts of heat, ventilation and air-conditioning during the Business Hours
specified in the Basic Lease Information ("Business Hours") on weekdays except
public holidays ("Business Days"); reasonable amounts of electricity; and
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janitorial services five days a week (except public holidays). Landlord shall
also provide the Building with normal fluorescent tube replacement, window
washing, elevator service, and common area toile room supplies. Any additional
utilities or services that Landlord may agree to provide (including lamp or tube
replacement for other than Building Standard lighting fixtures) shall be at
Tenant's sole expense.
9.2 Payment for Additional Utilities and
Services.
(a) Upon request by Tenant in accordance with the procedures established by
Landlord from time to time for furnishing HVAC service at times other than
Business Hours on Business Days, Landlord shall furnish such service to Tenant
and Tenant shall pay for such services on an hourly basis at the then prevailing
rate established for the Building by Landlord.
(b) If the temperature otherwise maintained in any portion of the Premises by
the HVAC systems of the Building is affected as a result of (i) any lights,
machines or equipment used by Tenant in the Premises, or (ii) the occupancy of
the Premises by more than one person per 150 square feet of rentable area, then
Landlord shall have the right to install any machinery or equipment reasonably
necessary to restore the temperature, including modifications to the standard
air-conditioning equipment. The cost of any such equipment and modifications,
including the cost of installation and any additional cost of operation and
maintenance of the same, shall be paid by Tenant to Landlord upon demand.
(c) If Tenant's usage of electricity, water or any other utility service exceeds
the use of such utility Landlord determines to be typical, normal and customary
for the Building, Landlord may determine the amount of such excess use by any
reasonable means (including the installation at Landlord's request but at
Tenant's expense of a separate meter or other measuring device) and charge
Tenant for the cost of such excess usage. In addition, Landlord may impose a
reasonable charge for the use of any additional or unusual janitorial services
required by Tenant because of any unusual Tenant Improvements or Alterations,
the carelessness of Tenant or the nature of Tenant's business (including hours
of operation).
9.3 Interruption of Services. In the event of an interruption in or failure or
inability to provide any services or utilities to the Premises or Building for
any reason (a "Service Failure"), such Service Failure shall not, regardless of
its duration, impose upon Landlord any liability whatsoever, constitute an
eviction of Tenant, constructive or otherwise, entitle Tenant to an abatement of
rent or to terminate this Lease or otherwise release Tenant from any of Tenant's
obligations under this Lease. Tenan hereby waives any benefits of any applicable
existing or future Law permitting the termination of this Lease due to such
interruption, failure or inability.
10. EXCULPATION AND INDEMNIFICATION
10.1 Landlord's Indemnification of Tenant. Landlord shall indemnify, protect,
defend and hold Tenant harmless from and against any claims, actions,
liabilities, damages, costs or expenses, including reasonable attorneys' fees
and costs incurred in defending against the same ("Claims") asserted by any
third party against Tenant for loss, injury or damage, to the extent such loss,
injury or damage is caused by the willful misconduct or negligent acts or
omissions of Landlord or its authorized representatives.
10.2 Tenant's Indemnification of Landlord. Tenant shall indemnify, protect,
defend and hold Landlord and Landlord's authorized representatives harmless from
and against Claims arising from (a) the acts or omissions of Tenant or Tenant's
Representatives or Visitors in or about the Property, or (b) any construction or
other work undertaken by Tenant on the Premises (including any design defects),
or (c) any breach or default under this Lease by Tenant, or (d) any loss, injury
or damage, howsoever and by whomsoever caused, to any person or property,
occurring in or about the Premises during the Term, excepting only Claims
described in this clause (d) to the extent they are caused by the willful
misconduct or negligent acts or omissions of Landlord or its authorized
representatives.
10.3 Damage to Tenant and Tenant's Property. Landlord shall not be liable to
Tenant for any loss, injury or other damage to Tenant or to Tenant's property in
or about the Premises or the Property from any cause (including defects in the
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Property or in any equipment in the Property; fire, explosion or other casualty;
bursting, rupture, leakage or overflow of any plumbing or other pipes or lines,
sprinklers, tanks, drains, drinking fountains or washstands in, above, or about
the Premises or the Property; or acts of other tenants in the Property). Tenant
hereby waives all claims against Landlord for any such loss, injury or damage
and the cost and expense of defending against claims relating thereto, including
any loss, injury or damage caused by Landlord's negligence (active or passive)
or willful misconduct. Notwithstanding any other provision of this Lease to the
contrary, in no event shall Landlord be liable to Tenant for any punitive or
consequential damages or damages for loss of business by Tenant.
10.4 Survival. The obligations of the parties under this Section 10 shall
survive the expiration or termination of this Lease.
11 INSURANCE. 11.1 Tenant's Insurance.
(a) Liability Insurance. Tenant shall maintain in frill force throughout the
Term, commercial general liability insurance providing coverage on an occurrence
form basis with limits of not less than Two Million Dollars ($2,000,000.00) each
occurrence for bodily injury and property damage combined, Two Million Dollars
($2,000,000.00) annual general aggregate, and Two Million Dollars
($2,000,000.00) products and completed operations annual aggregate. Tenant's
liability insurance policy or policies shall: (i) include premises and
operations liability coverage, products and completed operations liability
coverage, broad form property damage coverage including completed operations,
blanket contractual liability coverage including, to the maximum extent
possible, coverage for the indemnification obligations of Tenant under this
Lease, and personal and advertising injury coverage; (ii) provide that the
insurance company has the duty to defend all insureds under the policy; (iii)
provide that defense costs are paid in addition to and do not deplete any of the
policy limits; (iv) cover liabilities arising Out of or incurred in connection
with Tenant's use or occupancy of the Premises or the Property; (v) extend
coverage to cover liability for the actions of Tenant's Representatives and
Visitors; and (iv) designate separate limits for the Property. Each policy of
liability insurance required by this Section shall:
(i) contain a cross liability endorsement or separation of insureds clause; (ii)
provide that any waiver of subrogation rights or release prior to a loss does
not void coverage; (iii) provide that it is primary to and not contributing
with, any policy of insurance carried by Landlord covering the same loss; (iv)
provide that any failure to comply with the reporting provisions shall not
affect coverage provided to Landlord, its partners, property managers and
Mortgagees; and (v) name Landlord, its partners the Property Manager identified
in the Basic Lease Information (the "Property Manager"), and such other parties
in interest as Landlord may from time to time reasonably designate to Tenant in
writing, as additional insureds. Such additional insureds shall be provided at
least the same extent of coverage as is provided to Tenant under such policies.
All endorsements effecting such additional insured status shall be at least as
broad as additional insured endorsement form number CG 20 11 ii 85 promulgated b
the Insurance Services Office.
(b) Property Insurance. Tenant shall at all times maintain in effect with
respect to any Alterations and Tenant's Trade Fixtures and personal property,
commercial property insurance providing coverage, on an "all risk" or "special
form" basis, in an amount equal to at least 90% of the full replacement cost of
the covered property. Tenant may carry such insurance under a blanket policy,
provided that such policy provides coverage equivalent to a separate policy.
During the Term, the proceeds from any such policies of insurance shall be used
for the repair or replacement of the Alterations, Trade Fixtures and personal
property so insured. Landlord shall be provided coverage under such insurance to
the extent of its insurable interest and, if requested by Landlord, both
Landlord and Tenant shall sign all documents reasonably necessary or proper in
connection with the settlement of any claim or loss under such insurance.
Landlord will have no obligation to carry insurance on any Alterations or on
Tenant's Trade Fixtures or personal property.
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(c) Requirements For All Policies. Each policy of insurance required under this
Section 1 shall: (i) be in a form, and written by an insurer, reasonably
acceptable to Landlord, (ii) be maintained at Tenant's sole cost and expense,
and (iii) require at least thirty (30) days' written notice to Landlord prior to
any cancellation, nonrenewable or modification of insurance coverage. Insurance
companies issuing such policies shall have rating classifications of "A" or
better and financial size category ratings of "VII" or better according to the
latest edition of the A.M. Best Key Rating Guide. All insurance companies
issuing such policies shall be admitted carriers licensed to do business in the
state where the Property is located. Any deductible amount under such insurance
shall not exceed $5,000. Tenant shall provide to Landlord, upon request,
evidence that the insurance required to be carried by Tenant pursuant to this
Section, including any endorsement effecting the additional insured status, is
in lull force and effect and that premiums therefor have been paid.
(d) Updating Coverage. Tenant shall increase the amounts of insurance as
required by any Mortgagee, and, not more frequently than once every three (3)
years, as recommended by Landlord's insurance broker, if, in the opinion of
either of them, the amount of insurance then required under this Lease is not
adequate. Any limits set forth in this Lease on the amount or type of coverage
required by Tenant's insurance shall not limit the liability of Tenant under
this Lease.
(e) Certificates of Insurance. Prior to occupancy of the Premises by Tenant, and
not less than thirty (30) days prior to expiration of any policy thereafter,
Tenant shall furnish to Landlord a certificate of insurance reflecting that the
insurance required by this Section is in force, accompanied by an endorsement
showing the required additional insureds satisfactory to Landlord in substance
and form. Notwithstanding the requirements of this paragraph, Tenant shall at
Landlord's request provide to Landlor a certified copy of each insurance policy
required to be in force at any time pursuant to the requirements of this Lease
or its Exhibits.
11.2 Landlord's Insurance. During the Term, to the extent such coverage's are
available at a commercially reasonable cost, Landlord shall maintain in effect
insurance on the Building with responsible insurers, on an "all risk" or
"special form" basis, insuring the Building and the Tenant Improvements in an
amount equal to at least 90% of the replacement cost thereof, excluding land,
foundations, footings and underground installations. Landlord may, but shall not
be obligated to, carry insurance against additional perils and/or in greater
amounts.
11.3 Mutual Waiver of Right of Recovery & Waiver of Subrogation. Landlord and
Tenant each hereby waive any right of recovery against each other and the
partners, managers, members, shareholders, officers, directors and authorized
representatives of each other for any loss or damage that is covered by any
policy of property insurance maintained by either party (or required by this
Lease to be maintained) with respect to the Premises or the Property or any
operation therein, regardless of cause, including negligence (active or passive)
of the party benefiting from the waiver. If any such policy of insurance
relating to this Lease or to the Premises or the Property does not permit the
foregoing waiver or if the coverage under any such policy would be invalidated
as a result of such waiver, the party maintaining such policy shall obtain from
the insurer under such policy a waiver of all right of recovery by way of
subrogation against either party in connection with any claim, loss or damage
covered by such policy.
12. DAMAGE OR DESTRUCTION.
12.1 Landlord's Duty to repair.
(a) If all or a substantial part of the Premises are rendered untenantable or
inaccessible by damage to all or any part of the Property from fire or other
casualty then, unless either party is entitled to and elects to terminate this
Lease pursuant to Sections 12.2 - Landlord's Right to Terminate and 12.3 -
Tenant's Right to Terminate, Landlord shall, at its expense, use reasonable
efforts to repair and restore the Premises and/or the Property, as the case may
be, to substantially their former condition t the extent permitted by then
applicable Laws; provided, however, that in no event shall Landlord have any
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obligation for repair or restoration beyond the extent of insurance proceeds
received by Landlord for such repair or restoration, or for any of Tenant's
personal property, Trade Fixtures or Alterations.
(b) If Landlord is required or elects to repair damage to the Premises and/or
the Property, this Lease shall continue in effect, but Tenant's Base Rent and
Additional Rent shall be abated with regard to any portion of the Premises that
Tenant is prevented from using by reason of such damage or its repair from the
date of the casualty until substantial completion of Landlord's repair of the
affected portion of the Premises as required under this Lease. In no event shall
Landlord be liable to Tenant by reason of any injury to or interference with
Tenant's business or property arising from fire or other casualty or by reason
of any repairs to any part of the Property necessitated by such casualty.
12.2 Landlord's Right to Terminate. Landlord may elect to terminate this Lease
following damage by fire or other casualty under the following circumstances:
(a) If, in the reasonable judgment of Landlord, the Premises and the Property
cannot be substantially repaired and restored under applicable Laws within one
(1) year from the date of the casualty;
(b) If, in the reasonable judgment of Landlord, adequate proceeds are not, for
any reason, made available to Landlord from Landlord's insurance policies
(and/or from Landlord's funds made available for such purpose, at Landlord's
sole option) to make the required repairs;
(c) If the Building is damaged or destroyed to the extent that, in the
reasonable judgment of Landlord, the cost to repair and restore the Building
would exceed twenty-five percent (25%) of the frill replacement cost of the
Building, whether or not the Premises are at all damaged or destroyed; or
(d) If the fire or other casualty occurs during the last year of the Term.
If any of the circumstances described in subparagraphs (a), (b), (c) or (d) of
this Section 12.2 occur or arise, Landlord shall give Tenant notice within one
hundred and twenty (120) days after the date of the casualty, specifying whether
Landlord elects to terminate this Lease as provided above and, if not,
Landlord's estimate of the time required to complete Landlord's repair
obligations under this Lease.
12.3 Tenant's Right to Terminate. If all or a substantial part of the Premises
are rendered untenantable or inaccessible by damage to all or any part of the
Property from fire or other casualty, and Landlord does not elect to terminate
as provided above, then Tenant may elect to terminate this Lease if Landlord's
estimate of the time required to complete Landlord's repair obligations under
this Lease is greater than one (1) year, in which event Tenant may elect to
terminate this Lease by giving Landlord notice of such election to terminate
within thirty (30) days after Landlord's notice to Tenant pursuant to Section
12.2 - Landlord's Right to Terminate.
12.4 Waiver. Landlord and Tenant each hereby waive the provisions of any
applicable existing or future Law permitting the termination of a lease
agreement in the event of damage or destruction under any circumstances other
than as provided in Sections 12.2 - Landlord's Right to Terminate and 12.3 -
Tenant's Right to Terminate.
13. CONDEMNATION.
13.1 Definitions.
(a) "Award" shall mean all compensation, sums, or anything of value awarded,
paid or received on a total or partial Condemnation.
(b) "Condemnation" shall mean (i) a permanent taking (or a temporary taking for
a period extending beyond the end of the Term) pursuant to the exercise of the
power of condemnation or eminent domain by any public or quasi-public authority,
private corporation or individual having such power ("Condemnor"), whether by
legal proceedings or otherwise, or (ii) a voluntary sale or transfer by Landlord
to any such authority, either under threat of condemnation or while legal
proceedings for condemnation are pending.
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(c) "Date of Condemnation" shall mean the earlier of the date that title to the
property taken is vested in the Condemnor or the date the Condemnor has the
right to possession of the property being condemned.
13.2 Effect on Lease.
(a) If the Premises are totally taken by Condemnation, this Lease shall
terminate as of the Date of Condemnation. If a portion but not all of the
Premises is taken by Condemnation, this Lease shall remain in effect; provided,
however, that if the portion of the Premises remaining after the Condemnation
will be unsuitable for Tenant's continued use, then upon notice to Landlord
within thirty (30) days after Landlord notifies Tenant of the Condemnation,
Tenant may terminate this Lease effective as of the Date of
Condemnation.
(b) If twenty-five percent (25%) or more of the Project or of the parcel(s) of
land on which the Building is situated or of the Parking Facility or of the
floor area in the Building is taken by Condemnation, or if as a result of any
Condemnation the Building is no longer reasonably suitable for use as an office
building, whether or not any portion of the Premises is taken, Landlord may
elect to terminate this Lease, effective as of the Date of Condemnation, by
notice to Tenant within thirty (30) days afte the Date of
Condemnation.
(c) If all or a portion of the Premises is temporarily taken by a Condemnor for
a period not extending beyond the end of the Term, this Lease shall remain in
lull force and effect.
13.3 Restoration. If this Lease is not terminated as provided in Section 13.2 -
Effect on Lease, Landlord, at its expense, shall diligently proceed to repair
and restore the Premises to substantially its former condition (to the extent
permitted by then applicable Laws) and/or repair and restore the Building to an
architecturally complete office building; provided, however, that Landlord's
obligations to so repair and restore shall be limited to the amount of any Award
received by Landlord and not require to be paid to any Mortgagee (as defined in
Section 20.2 below). In no event shall Landlord have any obligation to repair or
replace any improvements in the Premises beyond the amount of any Award received
by Landlord for such repair or to repair or replace any of Tenant's personal
property, Trade Fixtures, or Alterations.
13.4 Abatement and Reduction of Rent. If any portion of the Premises is taken in
a Condemnation or is rendered permanently untenantable by repairs necessitated
by the Condemnation, and this Lease is not terminated, the Base Rent and
Additional Rent payable under this Lease shall be proportionally reduced as of
the Date of Condemnation based upon the percentage of rentable square feet in
the Premises so taken or rendered permanently untenantable. In addition, if this
Lease remains in effect following a Condemnation and Landlord proceeds to repair
and restore the Premises, the Base Rent and Additional Rent payable under this
Lease shall be abated during the period of such repair or restoration to the
extent such repairs prevent Tenant's use of the Premises.
13.5 Awards. Any Award made shall be paid to Landlord, and Tenant hereby assigns
to Landlord, and waives all interest in or claim to, any such Award, including
any claim for the value of the unexpired Term; provided, however, that Tenant
shall be entitled to receive, or to prosecute a separate claim for, an Award for
a temporary taking of the Premises or a portion thereof by a Condemnor where
this Lease is not terminated (to the extent such Award relates to the unexpired
Term), or an Award or portion thereof separately designated for relocation
expenses or the interruption of or damage to Tenant's business or as
compensation for Tenant's personal property, Trade Fixtures or Alterations.
13.6 Waiver. Landlord and Tenant each hereby waive the provisions of any
applicable existing or future Law allowing either party to petition for a
termination of this Lease upon a partial taking of the Premises and/or the
Property.
14. ASSIGNMENT AND SUBLETTING.
14.1 Landlord's Consent Required. Tenant shall not assign this Lease or any
interest therein, or sublet or license or permit the use or occupancy of the
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Premises or any part thereof by or for the benefit of anyone other than Tenant,
or in any other manner transfer all or any part of Tenant's interest under this
Lease (each and all a "Transfer"), without the prior written consent of
Landlord, which consent (subject to the other provisions of this Section (4)
shall not be unreasonably withheld. If Tenant is a business entity, any direct
or indirect transfer of fifty percent (50%) or more of the ownership interest of
the entity (whether in a single transaction or in the aggregate through more
than one transaction) shall be deemed a Transfer. Notwithstanding any provision
in this Lease to the contrary, Tenant shall not mortgage, pledge, hypothecate or
otherwise encumber this Lease or all or any part of Tenant's interest under this
Lease.
14.2 Reasonable Consent.
(a) Prior to any proposed Transfer, Tenant shall submit in writing to Landlord
(i) the name and legal composition of the proposed assignee, subtenant, user or
other transferee (each a "Proposed Transferee"); (ii) the nature of the business
proposed to be carried on in the Premises; (iii) a current balance sheet, income
statements for the last two years and such other reasonable financial and other
information concerning the Proposed Transferee as Landlord may request; and (iv)
a copy of the proposed assignment, sublease or other agreement governing the
proposed Transfer. Within fifteen (15) Business Days after Landlord receives all
such information it shall notify Tenant whether it approves or disapproves such
Transfer or if it elects to proceed under Section 14.7 - Landlord's Right to
Space.
(b) Tenant acknowledges and agrees that, among other circumstances for which
Landlord could reasonably withhold consent to a proposed Transfer, it shall be
reasonable for Landlord to withhold consent where (i) the Proposed Transferee
does not intend itself to occupy the entire portion of the Premises assigned or
sublet, (ii) Landlord reasonably disapproves of the Proposed Transferee's
business operating ability or history, reputation or creditworthiness or the
character of the business to be conducted by the Proposed Transferee at the
Premises, (iii) the Proposed Transferee is a governmental agency or unit or an
existing tenant in the Project, (iv) the proposed Transfer would violate any
"exclusive" rights of any tenants in the Project, (v) Landlord or Landlord's
agent has shown space in the Building to the Proposed Transferee or responded to
any inquiries from the Proposed Transferee or the Proposed Transferee's agent
concerning availability of space in the Building, at any time within the
preceding nine months, or (vi) Landlord otherwise determines that the proposed
Transfer would have the effect of decreasing the value of the Building or
increasing the expenses associated with operating, maintaining and repairing the
Property. In no event may Tenant publicly offer or advertise all or any portion
of the Premises for assignment or sublease at a rental less than that then
sought by Landlord for a direct lease (non-sublease) of comparable space in the
Project.
14.3 Excess Consideration. If Landlord consents to the Transfer, Tenant shall
pay to Landlord as additional rent, within ten (10) days after receipt by
Tenant, any consideration paid by any transferee (the "Transferee") for the
Transfer, including, in the case of a sublease, the excess of the rent and other
consideration payable by the subtenant over the amount of Base Rent and
Additional Rent payable hereunder applicable to the subleased space.
14.4 No Release Of Tenant. No consent by Landlord to any Transfer shall relieve
Tenant of any obligation to be performed by Tenant under this Lease, whether
occurring before or after such consent, assignment, subletting or other
Transfer. Each Transferee shall be jointly and severally liable with Tenant (and
Tenant shall be jointly and severally liable with each Transferee) for the
payment of rent (or, in the case of a sublease, rent in the amount set forth in
the sublease) and for the performance of all other terms and provisions of this
Lease. The consent by Landlord to any Transfer shall not relieve Tenant or any
such Transferee from the obligation to obtain Landlord's express prior written
consent to any subsequent Transfer by Tenant or any Transferee. The acceptance
of rent by Landlord from any other person (whether or not such person is an
occupant of the Premises) shall not be deemed to be a waiver by Landlord of any
provision of this Lease or to be a consent to any Transfer.
14.5 Expenses and Attorneys' Fees. Tenant shall pay to Landlord on demand all
costs and expenses (including reasonable attorneys' fees) incurred by Landlord
in connection with
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reviewing or consenting to any proposed Transfer (including any request for
consent to, or any waiver of Landlord's rights in connection with, any security
interest in any of Tenant's property at the Premises).
14.6 Effectiveness of Transfer. Prior to the date on which any permitted
Transfer (whether or not requiring Landlord's consent) becomes effective, Tenant
shall deliver to Landlord a counterpart of the frilly executed Transfer document
and Landlord's standard form of Consent to Assignment or Consent to Sublease
executed by Tenant and the Transferee in which each of Tenant and the Transferee
confirms its obligations pursuant to this Lease. Failure or refusal of a
Transferee to execute any such instrument shall not release or discharge the
Transferee from liability as provided herein. The voluntary, involuntary or
other surrender of this Lease by Tenant, or a mutual cancellation by Landlord
and Tenant, shall not work a merger, and any such surrender or cancellation
shall, at the option of Landlord, either terminate all or any existing subleases
or operate as an assignment to Landlord of any or all of such subleases.
14.7 Landlord's Right to Space. Notwithstanding any of the above provisions of
this Section to the contrary, if Tenant notifies Landlord that it desires to
enter into a Transfer, Landlord, in lieu of consenting to such Transfer, may
elect (x) in the case of an assignment or a sublease of the entire Premises, to
terminate this Lease, or (y) in the case of a sublease of less than the entire
Premises, to terminate this Lease as it relates to the space proposed to be
subleased by Tenant. In such event, this Lease will terminate (or the space
proposed to be subleased will be removed from the Premises subject to this Lease
and the Base Rent and Tenant's Share under this Lease shall be proportionately
reduced) on the date the Transfer was proposed to be effective, and Landlord may
lease such space to any party, including the prospective Transferee identified
by Tenant.
14.8 Assignment of Sublease Rents. Tenant hereby absolutely and irrevocably
assigns to Landlord any and all rights to receive rent and other consideration
from any sublease and agrees that Landlord, as assignee or as attorney-in-fact
for Tenant for purposes hereof, or a receiver for Tenant appointed on Landlord's
application may (but shall not be obligated to) collect such rents and other
consideration and apply the same toward Tenant's obligations to Landlord under
this Lease; provided, however, that Landlord grants to Tenant at all times prior
to occurrence of any breach or default by Tenant a revocable license to collect
such rents (which license shall automatically and without notice be and be
deemed to have been revoked and terminated immediately upon any Event of
Default).
15. DEFAULT AND REMEDIES.
15.1 Events of Default. The occurrence of any of the following shall constitute
an "Event of Default" by Tenant:
(a) Tenant fails to make any payment of rent when due, or any amount required to
replenish the security deposit as provided in Section 4 above, if payment in
frill is not received by Landlord within three (3) days after written notice
that it is due.
(b) Tenant abandons the Premises.
(c) Tenant fails timely to deliver any subordination document, estoppel
certificate or financial statement requested by Landlord within the applicable
time period specified in Sections 20 - Encumbrances - and 21 - Estoppel
Certificates and Financial Statements -below.
(d) Tenant violates the restrictions on Transfer set forth in Section 14
- -Assignment and Subletting.
(e) Tenant ceases doing business as a going concern; makes an assignment for the
benefit of creditors; is adjudicated an insolvent, files a petition (or files an
answer admitting the material allegations of a petition) seeking relief under
any under any state or federal bankruptcy or other statute, law or regulation
affecting creditors' rights; all or substantially all of Tenant's assets are
subject to judicial seizure or attachment and are not released within 30 days,
or Tenant consents to or acquiesces in the appointment of a trustee, receiver or
liquidator for Tenant or for all or any substantial part of Tenant's assets.
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(f) Tenant fails, within ninety (90) days after the commencement of any
proceedings against Tenant seeking relief under any state or federal bankruptcy
or other statute, law or regulation affecting creditors' rights, to have such
proceedings dismissed, or Tenant fails, within ninety (90) days after an
appointment, without Tenant's consent or acquiescence, of any trustee, receiver
or liquidator for Tenant or for all or any substantial part of Tenant's assets,
to have such appointment vacated.
(g) Tenant fails to perform or comply with any provision of this Lease other
than those described in (a) through (f) above, and does not fully cure such
failure within fifteen (15) days after notice to Tenant or, if such failure
cannot be cured within such fifteen (15)-day period, Tenant fails within such
fifteen (15)-day period to commence, and thereafter diligently proceed with, all
actions necessary to cure such failure as soon as reasonably possible but in all
events within ninety (90) days of such notice; provided, however, that if
Landlord in Landlord's reasonable judgment determines that such failure cannot
or will not be cured by Tenant within such ninety (90) days, then such failure
shall constitute an Event of Default immediately upon such notice to Tenant.
15.2 Remedies. Upon the occurrence of an Event of Default, Landlord shall have
the following remedies, which shall not be exclusive but shall be cumulative and
shall be in addition to any other remedies now or hereafter allowed by law.
(a) Landlord may terminate Tenant's right to possession of the Premises at any
time by written notice to Tenant. Tenant expressly acknowledges that in the
absence of such written notice from Landlord, no other act of Landlord,
including re-entry into the Premises, efforts to relet the Premises, reletting
of the Premises for Tenant's account, storage of Tenant's personal property and
Trade Fixtures, acceptance of keys to the Premises from Tenant or exercise of
any other rights and remedies under this Section, shall constitute an acceptance
of Tenant's surrender of the Premises or constitute a termination of this Lease
or of Tenant's right to possession of the Premises. Upon such termination in
writing of Tenant's right to possession of the Premises, as herein provided,
this Lease shall terminate and Landlord shall be entitled to recover damages
from Tenant as provided in any applicable existing or future Law providing for
recovery of damages for such breach, including the worth at the time of award of
the amount by which the rent which would be payable by Tenant hereunder for the
remainder of the Term after the date of the award of damages, including
Additional Rent as reasonably estimated by Landlord, exceeds the amount of such
rental loss as Tenant proves could have been reasonably avoided, discounted at
the discount rate published by the Federal Reserve Bank of San Francisco for
member banks at the time of the award plus one percent (1%).
(b) Landlord shall have the remedy described in applicable law Landlord may
continue this Lease in effect after Tenant's breach and abandonment and recover
rent as it becomes due, if Tenant has the right to sublet or assign, subject
only to reasonable limitations).
(c) Landlord may cure the Event of Default at Tenant's expense. If Landlord pays
any sum or incurs any expense in curing the Event of Default, Tenant shall
reimburse Landlord upon demand for the amount of such payment or expense with
interest at the Interest Rate from the date the sum is paid or the expense is
incurred until Landlord is reimbursed by Tenant.
(d) Landlord may remove all Tenant's property from the Premises, and such
property may be stored by Landlord in a public warehouse or elsewhere at the
sole cost and for the account of Tenant. If Landlord does not elect to store any
or all of Tenant's property left in the Premises, Landlord may consider such
property to be abandoned by Tenant, and Landlord may thereupon dispose of such
property in any manner deemed appropriate by Landlord. Any proceeds realized by
Landlord on the disposal of any such property shall be applied first to offset
all expenses of storage and sale, then credited against Tenant's outstanding
obligations to Landlord under this Lease, and any balance remaining after
satisfaction of all obligations of Tenant under this Lease shall be delivered to
Tenant.
16. LATE CHARGE AND INTEREST.
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16.1 Late Charge. If any payment of rent is not received by Landlord when due,
Tenant shall pay to Landlord on demand as a late charge an additional amount
equal to four percent (4%) of the overdue payment. A late charge shall not be
imposed more than once on any particular installment not paid when due, but
imposition of a late charge on any payment not made when due does not eliminate
or supersede late charges imposed on other (prior) payments not made when due or
preclude imposition of a late charge on other installments or payments not made
when due.
16.2 Interest. In addition to the late charges referred to above, which are
intended to defray Landlord's costs resulting from late payments, any payment
from Tenant to Landlord not paid when due shall at Landlord's option bear
interest from the date due until paid to Landlord by Tenant at the rate of
fifteen percent (15%) per annum or the maximum lawful rate that Landlord may
charge to Tenant under applicable laws, whichever is less (the "Interest Rate").
Acceptance of any late charge and/or interest shall not constitute a waiver of
Tenant's default with respect to the overdue sum or prevent Landlord from
exercising any of its other rights and remedies under this Lease.
17. WAIVER. No provisions of this Lease shall be deemed waived by Landlord
unless such waiver is in a writing signed by Landlord. The waiver by Landlord of
any breach of any provision of this Lease shall not be deemed a waiver of such
provision or of any subsequent breach of the same or any other provision of this
Lease. No delay or omission in the exercise of any right or remedy of Landlord
upon any default by Tenant shall impair such right or remedy or be construed as
a waiver. Landlord's acceptance of any payments of rent due under this Lease
shall not be deemed a waiver of any default by Tenant under this Lease
(including Tenant's recurrent failure to timely pay rent) other than Tenant's
nonpayment of the accepted sums, and no endorsement or statement on any check or
payment or in any letter or document accompanying any check or payment shall be
deemed an accord and satisfaction. Landlord's consent to or approval of any act
by Tenant requiring Landlord's consent or approval shall not be deemed to waiv
or render unnecessary Landlord's consent to or approval of any subsequent act by
Tenant.
18. ENTRY, INSPECTION AND CLOSURE. Upon reasonable oral or written notice to
Tenant (and without notice in emergencies), Landlord and its authorized
representatives may enter the Premises at all reasonable times to: (a) determine
whether the Premises are in good condition, (b) determine whether Tenant is
complying with its obligations under this Lease, (c) perform any maintenance or
repair of the Premises or the Building that Landlord has the right or obligation
to perform, (d) install or repair improvements for other tenants where access to
the Premises is required for such installation or repair, (e) serve, post or
keep posted any notices required or allowed under the provisions of this Lease,
(D show the Premises to prospective brokers, agents, buyers, transferees,
Mortgagees or tenants, or (g) do any other act or thing necessary for the safety
or preservation of the Premises or the Building. When reasonably necessary
Landlord may temporarily close entrances, doors, corridors, elevators or other
facilities in the Building without liability to Tenant by reason of such
closure. Landlord shall conduct its activities under this Section in a manner
that will minimize inconvenience to Tenant without incurring additional expense
to Landlord. In no event shall Tenant be entitled to an abatement of rent on
account of any entry by Landlord, and Landlord shall not be liable in any manner
for any inconvenience, loss of business or other damage to Tenant or other
persons arising Out of Landlord's entry on the Premises in accordance with this
Section. No action by Landlord pursuant to this paragraph shall constitute an
eviction of Tenant, constructive or otherwise, entitle Tenant to an abatement of
rent or to terminate this Lease or otherwise release Tenant from any of Tenant's
obligations under this Lease.
19 SURRENDER AND HOLDING OVER.
19.1 Surrender. Upon the expiration or termination of this Lease, Tenant shall
surrender the Premises and all Tenant Improvements and Alterations to Landlord
broom-clean and in their original condition, except for reasonable wear and
tear, damage from casualty or condemnation and any changes resulting from
approved Alterations; provided, however, that prior to the expiration or
termination of this Lease Tenant shall remove all telephone and other cabling
installed in the Building by Tenant and remove from the Premises all Tenant's
personal property and any Trade Fixtures and all Alterations that Landlord has
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elected to require Tenant to remove as provided in Section 6.1 - Tenant
Improvements & Alterations, and repair any damage caused by such removal. If
such removal is not completed before the expiration or termination of the Term,
Landlord shall have the right (but no obligation) to remove the same, and Tenant
shall pay Landlord on demand for all costs of removal and storage thereof and
for the rental value of the Premises for the period from the end of the Term
through the end of the time reasonably required for such removal. Landlord shall
also have the right to retain or dispose of all or any portion of such property
if Tenant does not pay all such costs and retrieve the property within ten (10)
days after notice from Landlord (in which event title to all such property
described in Landlord's notice shall be transferred to and vest in Landlord).
Tenant waives all Claims against Landlord for any damage or loss to Tenant
resulting from Landlord's removal, storage, retention, or disposition of any
such property. Upon expiration or termination of this Lease or of Tenant's
possession, whichever is earliest, Tenant shall surrender all keys to the
Premises or any other part of the Building and shall deliver to Landlord all
keys for or make known to Landlord the combination of locks on all safes,
cabinets and vaults that may be located in the Premises. Tenant's obligations
under this Section shall survive the expiration or termination of this Lease.
19.2 Holding Over. If Tenant (directly or through any Transferee or other
successor-in-interest of Tenant) remains in possession of the Premises after the
expiration or termination of this Lease, Tenant's continued possession shall be
on the basis of a tenancy at the sufferance of Landlord. No act or omission by
Landlord, other than its specific written consent, shall constitute permission
for Tenant to continue in possession of the Premises, and if such consent is
given or declared to have been given by court judgment, Landlord may terminate
Tenant's holdover tenancy at any time upon seven (7) days written notice. In
such event, Tenant shall continue to comply with or perform all the terms and
obligations of Tenant under this Lease, except that the monthly Base Rent during
Tenant's holding over shall be twice the Base Rent payable in the last frill
month prior to the termination hereof Acceptance by Landlord of rent after such
termination shall not constitute a renewal or extension of this Lease; and
nothing contained in this provision shall be deemed to waive Landlord's right of
re-entry or any other right hereunder or at law. Tenant shall indemnify, defend
and hold Landlord harmless from and against all Claims arising or resulting
directly or indirectly from Tenant's failure to timely surrender the Premises,
including (i) any rent payable by or any loss, cost, or damages claimed by any
prospective tenant of the Premises, and (ii) Landlord's damages as a result of
such prospective tenant rescinding o refusing to enter into the prospective
lease of the Premises by reason of such failure to timely surrender the
Premises.
20 ENCUMBRANCES
20.1 Subordination. This Lease is expressly made subject and subordinate to any
mortgage, deed of trust, ground lease, underlying lease or like encumbrance
affecting any part of the Property or any interest of Landlord therein which is
now existing or hereafter executed or recorded ("Encumbr3nce"); provided,
however, that such subordination shall only be effective, as to future
Encumbrances, if the holder of the Encumbrance agrees that this Lease shall
survive the termination of the Encumbrance by lapse o time, foreclosure or
otherwise so long as Tenant is not in default under this Lease. Provided the
conditions of the preceding sentence are satisfied, Tenant shall execute and
deliver to Landlord, within ten (10) days after written request therefor by
Landlord and in a form reasonably requested by Landlord, any additional
documents evidencing the subordination of this Lease with respect to any such
Encumbrance and the nondisturbance agreement of the holder of any such
Encumbrance. If the interest of Landlord in the Property is transferred pursuant
to or in lieu of proceedings for enforcement of any Encumbrance, Tenant shall
immediately and automatically attorn to the new owner, and this Lease shall
continue in full force and effect as a direct lease between the transferee and
Tenant on the terms and conditions set forth in this Lease.
20.2 Mortgagee Protection. Tenant agrees to give any holder of any Encumbrance
covering any part of the Property ("Mortgagee"), by registered mail, a copy of
any notice of default served upon Landlord, provided that prior to such notice
Tenant has been notified in writing (by way of notice of assignment of rents and
leases, or otherwise) of the address of such Mortgagee. If Landlord shall have
failed to cure such default within thirty (30) days from the effective date of
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such notice of default, then the Mortgagee shall have an additional thirty (30)
days within which to cure such default or if such default cannot be cured within
that time, then such additional time as may be necessary to cure such default
(including the time necessary to foreclose or otherwise terminate its
Encumbrance, if necessary to effect such cure), and this Lease shall not be
terminated so long as such remedies are being diligently pursued.
21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.
21.1 Estoppel Certificates. Within ten (10) days after written request therefor,
Tenant shall execute and deliver to Landlord, in a form provided by or
satisfactory to Landlord, a certificate stating that this Lease is in ill force
and effect, describing any amendments or modifications hereto, acknowledging
that this Lease is subordinate or prior, as the case may be, to any Encumbrance
and stating any other information Landlord may reasonably request, including the
Term, the monthly Base Rent, the date to which Rent has been paid, the amount of
any security deposit or prepaid rent, whether either party hereto is in default
under the terms of the Lease, and whether Landlord has completed its
construction obligations hereunder (if any). Tenant irrevocably constitutes,
appoints and authorizes Landlord as Tenant's special attorney-in-fact for such
purpose to complete, execute and deliver such certificate if Tenant fails timely
to execute and deliver such certificate as provided above. Any person or entity
purchasing, acquiring an interest in or extending financing with respect to the
Property shall be entitled to rely upon any such certificate. If Tenant fails to
deliver such certificate within ten (10) days after Landlord's second written
request therefor, Tenant shall be liable to Landlord for any damages incurred by
Landlord including any profits or other benefits from any financing of the
Property or any interest therein which are lost or made unavailable as a result,
directly or indirectly, of Tenant' failure or refusal to timely execute or
deliver such estoppel certificate.
21.2 Financial Statements. Within ten (10) days after written request therefor,
but not more than once a year, Tenant shall deliver to Landlord a copy of the
financial statements (including at least a year end balance sheet and a
statement of profit and loss) of Tenant (and of each guarantor of Tenant's
obligations under this Lease) for each of the three most recently completed
years, prepared in accordance with generally accepted accounting principles
(and, if such is Tenant's normal practice, audited by an independent certified
public accountant), all then available subsequent interim statements, and such
other financial information as may reasonably be requested by Landlord or
required by any Mortgagee.
22. NOTICES. Any notice, demand, request, consent or approval that either party
desires or is required to give to the other party under this Lease shall be in
writing and shall be served personally, delivered by messenger or courier
service, or sent by U.S. certified mail, return receipt requested, postage
prepaid, addressed to the other party at the party's address for notices set
forth in the Basic Lease Information. Any notice required pursuant to any Laws
may be incorporated into, given concurrently with or given separately from any
notice required under this Lease. Notices shall be deemed to have been given and
be effective on the earlier of (a) receipt (or refusal of delivery or receipt);
or (b) one (1) day after acceptance by the independent service for delivery, if
sent by independent messenger or courier service, or three (3) days after
mailing if sent by mail in accordance with this Section. Either party may change
its address for notices hereunder, effective fifteen (15) days after notice to
the other party complying with this Section. If Tenant sublets the Premises,
notices from Landlord shall be effective on the subtenant when given to Tenant
pursuant to this Section.
23. ATTORNEYS' FEES. In the event of any dispute between Landlord and Tenant in
any way related to this Lease, the non-prevailing party shall pay to the
prevailing party all reasonable attorneys' fees and costs and expenses of any
type incurred by the prevailing party in connection with any action or
proceeding (including any appeal and the enforcement of any judgment or award),
whether or not the dispute is litigated or prosecuted to final judgment. The
"prevailing party" shall be determined based upon a assessment of which party's
major arguments or positions taken in the action or proceeding could fairly be
said to have prevailed (whether by compromise, settlement, abandonment by the
other party of its claim or defense, final decision, after any appeals, or
otherwise) over the other party's major arguments or positions on major disputed
issues.
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24. QUIET POSSESSION. Subject to Tenant's full and timely performance of all of
Tenant's obligations under this Lease and subject to the terms of this Lease,
including Section 20 -Encumbrances, Tenant shall have the quiet possession of
the Premises throughout the Term as against any persons or entities lawfully
claiming by, through or under Landlord.
25. SECURITY MEASURES. Landlord may, but shall be under no obligation to,
implement security measures for the Property, such as the registration or search
of all persons entering or leaving the Building, requiring identification for
access to the Building, evacuation of the Building for cause, suspected cause,
or for drill purposes, the issuance of magnetic pass cards or keys for Building
or elevator access and other actions that Landlord deems necessary or
appropriate to prevent any threat of property loss or damage, bodily injury or
business interruption; provided, however, that such measures shall be
implemented in a way as not to inconvenience tenants of the Building
unreasonably. If Landlord uses an access card system, Landlord may require
Tenant to pay Landlord a deposit for each after-hours Building access card
issued to Tenant, in the amount specified in the Basic Lease Information. Tenant
shall be responsible for any loss, theft or breakage of any such cards, which
must be returned by Tenant to Landlord upon expiration or earlier termination of
the Lease. Landlord may retain the deposit for any card not so returned.
Landlord shall at all times have the right to change, alter or reduce any such
security services or measures. Tenant shall cooperate and comply with, and cause
Tenant's Representatives and Visitors to cooperate and comply with, such
security measures. Landlord, its agents and employees shall have no liability to
Tenant or its Representatives or Visitors for the implementation or exercise of,
or the failure to implement or exercise, any such security measures or for any
resulting disturbance of Tenant's use or enjoyment of the Premises.
26. FORCE MAJEURE. If Landlord is delayed, interrupted or prevented from
performing any of its obligations under this Lease, including its obligations
under the Construction Rider (if any), and such delay, interruption or
prevention is due to fire, act of God, governmental act or failure to act, labor
dispute, unavailability of materials or any cause outside the reasonable control
of Landlord, then the time for performance of the affected obligations of
Landlord shall be extended for a period equivalent t the period of such delay,
interruption or prevention.
27. RULES AND REGULATIONS. Tenant shall be bound by and shall comply with the
rules and regulations attached to and made a part of this Lease as Exhibit C to
the extent those rules and regulations are not in conflict with the terms of
this Lease, as well as any reasonable rules and regulations hereafter adopted by
Landlord for all tenants of the Building, upon notice to Tenant thereof
(collectively, the "Building Rules"). Landlord shall not be responsible to
Tenant or to any other person for any violation of, or failure to observe, the
Building Rules by any other tenant or other person.
28. LANDLORD'S LIABILITY. The term "Landlord," as used in this Lease, shall mean
only the owner or owners of the Building at the time in question. In the event
of any conveyance of title to the Building, then from and after the date of such
conveyance, the transferor Landlord shall be relieved of all liability with
respect to Landlord's obligations to be performed under this Lease after the
date of such conveyance. Notwithstanding any other term or provision of this
Lease, the liability of Landlord for it obligations under this Lease is limited
solely to Landlord's interest in the Building as the same may from time to time
be encumbered, and no personal liability shall at any time be asserted or
enforceable against any other assets of Landlord or against Landlord's partners
or members or its or their respective partners, shareholders, members,
directors, officers or managers on account of any of Landlord's obligations or
actions under this Lease.
29. CONSENTS AND APPROVALS.
29.1 Determination in Good Faith. Wherever the consent, approval, judgment or
determination of Landlord is required or permitted under this Lease, Landlord
may exercise its good faith business judgment in granting or withholding such
consent or approval or in making such judgment or determination without
reference to any extrinsic standard of reasonableness, unless the specific
provision contained in this Lease providing for such consent, approval, judgment
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or determination specifies that Landlord's consent or approval is not to be
unreasonably withheld, or that such judgment or determination is to be
reasonable, or otherwise specifies the standards under which Landlord may
withhold its consent. If it is determined that Landlord failed to give its
consent where it was required to do so under this Lease, Tenant shall be
entitled to injunctive relief but shall not to be entitled to monetary damages
or to terminate this Lease for such failure.
29.2 No Liability Imposed on Landlord. The review and/or approval by Landlord of
any item or matter to be reviewed or approved by Landlord under the terms of
this Lease or any Exhibits or Addenda hereto shall not impose upon Landlord any
liability for the accuracy or sufficiency of any such item or matter or the
quality or suitability of such item for its intended use. Any such review or
approval is for the sole purpose of protecting Landlord's interest in the
Property, and no third parties, including Tenant or the Representatives and
Visitors of Tenant or any person or entity claiming by, through or under Tenant,
shall have any rights as a consequence thereof
30. BROKERS. Landlord shall pay the fee or commission of the broker or brokers
identified in the Basic Lease Information (the "Broker") in accordance with
Landlord's separate written agreement with the Broker, if any. Tenant warrants
and represents to Landlord that in the negotiating or making of this Lease
neither Tenant nor anyone acting on Tenant's behalf has dealt with any broker or
finder who might be entitled to a fee or commission for this Lease other than
the Broker. Tenant shall indemnify and hol Landlord harmless from any claim or
claims, including costs, expenses and attorney's fees incurred by Landlord
asserted by any other broker or finder for a fee or commission based upon any
dealings with or statements made by Tenant or Tenant's Representatives.
31. RELOCATION OF PREMISES. For the purpose of maintaining an economical and
proper distribution of tenants acceptable to Landlord throughout the Project,
Landlord shall have the right from time to time during the Term to relocate the
Premises within the Project, provided that (a) the rentable and usable area of
the new Premises is of equivalent size to the existing Premises, subject to a
variation of up to ten percent (10%), (b) Landlord shall pay the cost of
providing tenant improvements in the new Premises, which shall be substantially
comparable in layout to those in the existing Premises, and (c) Landlord shall
pay reasonable costs (to the extent such costs are submitted in writing to
Landlord and approved in writing by Landlord prior to such move) of moving
Tenant's Trade Fixtures and personal property to the new Premises. Landlord
shall deliver to Tenant written notice of Landlord's election to relocate the
Premises, specifying the new location and the amount of rent payable therefor,
at least sixty (60) days prior to the date the relocation is to be effective.
32. ENTIRE AGREEMENT. This Lease, including the Exhibits and any Addenda
attached hereto, and the documents referred to herein, if any, constitute the
entire agreement between Landlord and Tenant with respect to the leasing of
space by Tenant in the Building, and supersede all prior or contemporaneous
agreements, understandings, proposals and other representations by or between
Landlord and Tenant, whether written or oral, all of which are merged herein.
Neither Landlord nor Landlord's agents have made an representations or
warranties with respect to the Premises, the Building, the Project or this Lease
except as expressly set forth herein, and no rights, easements or licenses shall
be acquired by Tenant by implication or otherwise unless expressly set forth
herein. The submission of this Lease for examination does not constitute an
option for the Premises and this Lease shall become effective as a binding
agreement only upon execution and delivery thereof by Landlord to Tenant.
33. MISCELLANEOUS. This Lease may not be amended or modified except by a writing
signed by Landlord and Tenant. Subject to Section 14 - Assignment and Subletting
and Section 28 - Landlord's Liability, this Lease shall be binding on and shall
inure to the benefit of the parties and their respective successors, assigns and
legal representatives. The determination that any provisions hereof may be void,
invalid, illegal or unenforceable shall not impair any other provisions hereof
and all such other provisions of this Lease shall remain in full force and
effect. The unenforceability, invalidity or illegality of any provision of this
Lease under particular circumstances shall not render unenforceable, invalid or
134
<PAGE>
illegal other provisions of this Lease, or the same provisions under other
circumstances. This Lease shall be construed and interpreted in accordance with
the laws (excluding conflict of laws principles) of the State in which the
Building is located. The provisions of this Lease shall be construed in
accordance with the fair meaning of the language used and shall not be strictly
construed against either party, even if such party drafted the provision in
question. When required by the context of this Lease, the singular includes the
plural. Wherever the term "including" is used in this Lease, it shall be
interpreted as meaning "including, but not limited to" the matter or matters
thereafter enumerated. The captions contained in this Lease are for purposes of
convenience only and are not to be used to interpret or construe this Lease. If
more than one person or entity is identified as Tenant hereunder, the
obligations of each and all of them under this Lease shall be joint and several.
Time is of the essence with respect to this Lease, except as to the conditions
relating to the delivery of possession of the Premises to Tenant. Neither
Landlord nor Tenant shall record this Lease.
34. AUTHORITY. If Tenant is a corporation, partnership, limited liability
company or other form of business entity, each of the persons executing this
Lease on behalf of Tenant warrants and represents that Tenant is a duly
organized and validly existing entity, that Tenant has full right and authority
to enter into this Lease and that the persons signing on behalf of Tenant are
authorized to do so and have the power to bind Tenant to this Lease. Tenant
shall provide Landlord upon request with evidence reasonably satisfactory to
Landlord confirming the foregoing representations.
IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as of the
date first above written.
TENANT:
Envision Career Services, LLC dba The Murdock Group
By: /s/KC Holmes; Title: CEO
By: /s/Heather Stone; Title: President
LANDLORD
5300 South Associates, LLC, a California limited liability company
By: Opportunity Capital Partners HI, LLC, a California limited liability company
By: /s/ Authorized Signatory
135
Exhibit 99.3
Stanford Stoddard Smith
1893 Maple View Drive
Bountiful, Utah 84010
(801) 295-1444
November 23, 1998
Board of Directors
The Murdock Group Career Satisfaction Corporation
5295 South Commerce Drive, Suite 400
Salt Lake City, Utah 84107
Re: Opinion of Counsel Respecting Broker-Dealer Status of Company Officers
Selling Shares on Behalf of Selling Shareholders
Dear Directors:
You have requested my opinion as to whether officers and directors of The
Murdock Group Career Satisfaction Corporation (the "company") who sell shares of
the company on behalf of selling security holders in the company's proposed
public offering of shares, are broker or dealers as defined in the Securities
Exchange Act of 1934 (the "Exchange Act").
For the reasons set forth below, and based upon my investigation of such law and
fact as I deemed necessary to render the following opinion, I conclude that they
are not.
Sec. 3(a) of the Exchange Act defines "broker" and "dealer" as follows:
(4) The term "broker" means any person engaged in the business of effecting
transactions in securities for the account of others, but does not include a
bank.
(5) The term "dealer" means any person engaged in the business of buying and
selling securities for his own account, through a broker or otherwise, but does
not include a bank, or any person insofar as he buys or sells securities for his
own account, either individually or in some fiduciary capacity, but not as a
part of a regular business. (Emphasis added.)
"The phrase 'engaged in the business' of effecting transactions in securities
contained in the definition of 'broker' and 'dealer' connotes a certain
regularity of participation in purchasing and selling securities...." (CCH-ANNO,
FSLR P. 21,151.26, citing UFITEC, S. A. v. Carter (Cal. Sup. Ct. 1977), 142 Cal
Rptr 279, '77-'78 CCH Dec. P. 96,252.)
Based upon the facts you have provided to me, it appears that company officers
who will sell the shares owned by selling shareholders are not "engaged in the
business of effecting transactions in securities for the account of others" and
are therefore beyond the ambit of the statutory definitions of "broker and
dealer." Each has substantial duties for the issuer otherwise than in connection
with transactions in securities.
Each officer complies with the requirements of Rule 3a4-1 (a) adopted pursuant
to the Exchange Act. While it can be argued that this rule's phrase "An
associated person of an issuer of securities shall not be deemed to be a broker
136
<PAGE>
solely by reason of his participation in the sale of the ecurities of such
issuer" does not explicitly embrace securities of the issuer which are owned by
selling shareholders, this rule is a non-exclusive safe harbor.
The definitions of "broker" and "dealer" appear to be well settled, and
are used by Congress in both the 1940 Investment Company and Investment Advisors
Acts. Efforts to expand the plain meaning of the statutory definitions of
"broker" and "dealer" in the Exchange Act have been rejected. (US. CT. APP. DC,
86-87 CCH Dec., FSLR P. 92,975, American Bankers Association v. Securities and
Exchange Commission, Nov. 4, 1986)
Accordingly, in my view company officers will not be acting as broker-dealers
solely by reason of selling shares of the company on behalf of selling security
holder in these circumstances.
Kind regards,
/s/ Stanford S. Smith
---------------------
Stanford S. Smith
137
Exhibit 99.4
Calculation of Ratio of Earnings to Fixed Charges
30-Sep-98
Description Amount
Fixed Charges:
Interest Expensed 702,864
Interest Capitalized
Premiums, discounts etc. for debt.
Interest within rental expense
Total Fixed Charges 702,864
Earnings:
Pretax income from Cont. Operations (3,371,294)
Fixed Charges 702,864
Amortization of Capitalized Interest
Less:
Interest Capitalized
Net Earnings (2,457,649)
Net Earnings/Fixed Charges (3.50):1
138
Exhibit 23.3
David T. Thomson, P.C.
Certified Public Accountant
CONSENT OF INDEPENDENT ACCOUNTANT
To the Board of Directors
The Murdock Group Career Satisfaction Corporation
I have issued my report dated September 16, 1998, accompanying the financial
statements of The Murdock Group Career Satisfaction Corporation included in the
Registration Statement Form SB-2 and the related prospectus.
I consent to the use of my report, as stated above in the Registration
Statement. I also consent to the use of my name in the statement with respect to
me as appearing under the heading "Experts" in the Registration Statement.
David T. Thomson P.C.
/s/David T. Thomson P.C.
------------------------
Salt Lake City, Utah
November 24, 1998
P.O. Box 57l605, Murray, Utah 84157 / (801)966-9481
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