<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1999
REGISTRATION STATEMENT NO. 333-63909
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
PRE-EFFECTIVE AMENDMENT NO. 3 TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
IT STAFFING LTD.
(Name of small business issuer as specified in its charter)
------------------------------
<TABLE>
<S> <C> <C>
ONTARIO 7370 52-209027
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer I.D. No.)
incorporation or organization) Classification Code Number)
</TABLE>
------------------------
55 UNIVERSITY AVENUE
TORONTO, ONTARIO, CANADA M5J 2H7
(416) 364-8800
(Address and telephone number of principal executive offices and principal place
of business)
------------------------------
<TABLE>
<S> <C>
JAY M. KAPLOWITZ, ESQ. DECLAN A. FRENCH, PRESIDENT
ARTHUR S. MARCUS, ESQ. IT STAFFING LTD.
GERSTEN, SAVAGE, KAPLOWITZ & FREDERICKS, 55 UNIVERSITY AVENUE
LLP TORONTO, ONTARIO, CANADA M5J 2H7
101 EAST 52ND STREET, 9TH FLOOR (416) 364-8800
NEW YORK, NEW YORK 10022
(212) 752-9700
(212) 752-9713 (FAX)
(Name, address and telephone number of agents for service)
</TABLE>
------------------------
COPIES TO:
<TABLE>
<S> <C>
JAY M. KAPLOWITZ, ESQ. JAMES R. TANENBAUM, ESQ.
ARTHUR S. MARCUS, ESQ. STROOCK & STROOCK & LAVAN LLP
GERSTEN, SAVAGE, KAPLOWITZ 180 MAIDEN LANE
& FREDERICKS, LLP NEW YORK, NEW YORK 10038
101 EAST 52ND STREET, 9TH FLOOR (212) 806-5400
NEW YORK, NEW YORK 10022 (212) 806-6006 (FAX)
(212) 752-9700
(212) 752-9713 (FAX)
</TABLE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this registration statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
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/
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE 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 REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT BEING OFFERING PRICE OFFERING REGISTRATION
SECURITIES BEING REGISTERED REGISTERED PER SECURITY PRICE FEE
<S> <C> <C> <C> <C>
Common Shares, no par value...................... 1,150,000(1) $5.00 $5,750,000 $1,581.25
Representative's Warrants........................ 100,000 $.001 $100 -- (2)
Common Shares, no par value, issuable on Exercise
of Representative's Warrants(3)................ 100,000 $8.25 $825,000 226.875
Total Registration Fee........................... $6,575,100 $1,808.15
</TABLE>
(1) Includes up to 150,000 Common Shares, no par value issuable upon exercise of
the Underwriters' over- allotment option.
(2) No fee due pursuant to Rule 457(g).
(3) To be acquired by the Representative.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 11, 1999
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
IT STAFFING LTD.
1,000,000 COMMON SHARES
IT Staffing Ltd., an Ontario, Canada corporation (the "Company"), hereby
offers 1,000,000 Common Shares (the "Shares"), no par value (the "Common
Shares").
Prior to this offering, there has been no market for the Common Shares, and
there can be no assurance that a market will develop for the Company's
securities in the future or that, if developed, it will be sustained.
Application has been made for the quotation of the Common Shares on the Nasdaq
SmallCap-Registered Trademark-Market under the symbol "ITSTF" and application
has been made for the listing of the Common Shares on the Boston Stock Exchange
under the symbol "ITS."
The initial public offering price of the Shares will be determined by
negotiation between the Company and the Representative and will not necessarily
bear any direct relationship to the Company's assets, earnings, book value per
share or other generally accepted indicia of value. See "Underwriting." It is
currently contemplated that the initial public offering price per Share will be
$5.00.
SEE "RISK FACTORS" COMMENCING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS. INVESTORS WILL EXPERIENCE
IMMEDIATE AND SUBSTANTIAL DILUTION. SEE "DILUTION."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
DISCOUNTS AND PROCEEDS TO
PRICE TO PUBLIC COMMISSIONS (1) COMPANY(2)
<S> <C> <C> <C>
Per Share....................................... $5.00 $.50 $4.50
Total(3)........................................ $5,000,000 $500,000 $4,500,000
</TABLE>
(1) Does not include additional consideration to be received by Strasbourger
Pearson Tulcin Wolff Incorporated, as the representative (the
"Representative") of the several underwriters (the "Underwriters"),
consisting of: (i) a non-accountable expense allowance; (ii) warrants (the
"Representative's Warrants") to purchase an aggregate of 100,000 Common
Shares (the "Warrant Shares"); and (iii) a 24-month consulting agreement. In
addition, the Company has agreed to indemnify the Underwriters against
certain liabilities, including liabilities under the Securities Act of 1933,
as amended (the "Securities Act"). See "Underwriting."
(2) Before deducting expenses of this offering payable by the Company, including
the Representative's non-accountable expense allowance (estimated to be
$660,000), and assuming no exercise of the Underwriters' over-allotment
option.
(3) The Company has granted the Underwriters a 45-day option to purchase up to
an additional 150,000 Common Shares, on the same conditions as set forth
above, solely to cover over-allotments, if any (the "Over-Allotment
Option"). If the Underwriters exercise such option in full, the total Price
to Public, Underwriting Discounts and Commissions and Proceeds to Company
will be $5,750,000, $575,000 and $5,175,000, respectively. See
"Underwriting."
------------------------------
The Shares are being offered by the several Underwriters, subject to prior
sale, when, as and if delivered to, and accepted by, them and subject to their
right to reject orders in whole or in part and to certain other conditions. It
is expected that delivery of the certificates representing the Shares will be
made against payment therefor at the offices of Strasbourger Pearson Tulcin
Wolff Incorporated, New York, New York on or about , 1999.
STRASBOURGER PEARSON TULCIN WOLFF INCORPORATED
THE DATE OF THIS PROSPECTUS IS , 1999
<PAGE>
THE COMPANY INTENDS TO FURNISH TO ITS SHAREHOLDERS ANNUAL REPORTS CONTAINING
AUDITED FINANCIAL STATEMENTS AND TO MAKE AVAILABLE QUARTERLY REPORTS FOR THE
FIRST THREE QUARTERS OF EACH FISCAL YEAR CONTAINING UNAUDITED INTERIM FINANCIAL
STATEMENTS.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON SHARES,
INCLUDING PURCHASES OF COMMON SHARES TO STABILIZE THEIR MARKET PRICE, PURCHASES
OF COMMON SHARES TO COVER SOME OR ALL OF A SHORT POSITION IN COMMON SHARES
MAINTAINED BY THE UNDERWRITERS AND THE IMPOSITION OF PENALTY BIDS. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN, AND WILL NOT BE, QUALIFIED FOR
SALE UNDER THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA.
THE SECURITIES ARE NOT BEING OFFERED FOR SALE AND MAY NOT BE OFFERED OR SOLD,
DIRECTLY OR INDIRECTLY, IN CANADA, OR TO ANY RESIDENT THEREOF, IN VIOLATION OF
THE SECURITIES LAWS OF CANADA OR ANY PROVINCE OR TERRITORY OF CANADA.
ENFORCEABILITY OF CIVIL LIABILITIES
The Company's headquarters are located in, and its officers, directors and
auditors are residents of, Canada and a substantial portion of the Company's
assets are, or may be, located outside the United States. Accordingly, it may be
difficult for investors to effect service of process within the United States
upon non-resident officers and directors, or to enforce against them judgments
obtained in the United States courts predicated upon the civil liability
provision of the Securities Act or state securities laws. The Company has been
advised by its Canadian legal counsel, McMillan Binch, that there is doubt as to
the enforceability in Canada against the Company or against any of its
directors, controlling persons, officers or the experts named herein, who are
not residents of the United States, in original actions or in actions for
enforcement of judgments of U.S. courts, of liabilities predicated solely upon
U.S. federal securities laws. Service of process may be effected, however, upon
the Company's duly appointed agent for service of process, Gersten, Savage,
Kaplowitz & Fredericks, LLP, New York, New York. If investors have questions
with regard to these issues, they should seek the advice of their individual
counsel. The Company has also been informed by its legal counsel, McMillan
Binch, that pursuant to the Currency Act (Canada), a judgment by a court in any
Province of Canada may only be awarded in Canadian currency. Pursuant to the
provision of the Courts of Justice Act (Ontario), however, a court in the
Province of Ontario shall give effect to the manner of conversion to Canadian
currency of an amount in a foreign currency, where such manner of conversion is
provided for in an obligation enforceable in Ontario.
2
<PAGE>
EXCHANGE RATE DATA
The Company maintains its books of account in Canadian dollars ("CND$"), but
has provided the financial data in this Prospectus in United States dollars
("US$" or "$") and on the basis of generally accepted accounting principles as
applied in the United States, and its audit has been conducted in accordance
with generally accepted auditing standards in the United States. All references
to dollar amounts in this Prospectus, unless otherwise indicated, are to United
States dollars.
The following table sets forth, for the periods indicated, certain exchange
rates based on the noon buying rate in New York City for cable transfers in
Canadian dollars. Such rates are the number of United States dollars per one
Canadian dollar and are the inverse of the rates quoted by the Federal Reserve
Bank of New York for Canadian dollars per US$1.00. The average exchange rate is
based on the average of the exchange rates on the last day of each month during
such periods. On December 31, 1998, the exchange rate was CDN$1.00 per
US$0.6346.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------- --------------------
<S> <C> <C> <C> <C> <C>
1995 1996 1997 1997 1998
--------- --------- --------- --------- ---------
Rate at end of period.................. $ 0.7323 $ 0.7301 $ 0.6999 $ 0.7241 $ 0.6531
Average rate during period............. 0.7305 0.7332 0.7220 0.7265 0.6832
High................................... 0.7527 0.7513 0.7487 0.7487 0.7043
Low.................................... 0.7023 0.6945 0.6945 0.7145 0.6376
</TABLE>
3
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS
OTHERWISE INDICATED HEREIN, THE INFORMATION IN THIS PROSPECTUS DOES NOT GIVE
EFFECT TO (I) THE REPRESENTATIVE'S WARRANTS OR THE EXERCISE THEREOF; (II) THE
UNDERWRITERS' OVER-ALLOTMENT OPTION OR THE EXERCISE THEREOF; (III) UP TO 435,000
COMMON SHARES RESERVED FOR ISSUANCE UPON THE EXERCISE OF OPTIONS WHICH MAY BE
GRANTED PURSUANT TO THE COMPANY'S 1998 STOCK OPTION PLAN (THE "PLAN"), INCLUDING
OPTIONS EXERCISABLE FOR 50,000 COMMON SHARES OF WHICH HAVE BEEN GRANTED TO DATE;
(IV) 40,000 SHARES TO BE ISSUED TO THE SELLER OF CERTAIN ASSETS OF SOUTHPORT
CONSULTING CO. IN CONNECTION WITH THE ACQUISITION THEREOF AND (V) UP TO 222,125
COMMON SHARES ISSUABLE UPON THE EXERCISE OF OPTIONS AND WARRANTS OUTSTANDING ON
THE DATE OF THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED HEREIN, THE
INFORMATION HEREIN REFLECTS A 1.31 FOR ONE STOCK SPLIT EFFECTED PRIOR TO THE
DATE OF THIS PROSPECTUS. UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERM
"COMPANY" REFERS TO IT STAFFING LTD., AN ONTARIO CORPORATION, AND ITS WHOLLY
OWNED SUBSIDIARIES SYSTEMSEARCH CONSULTING SERVICES INC., AN ONTARIO CORPORATION
("SCI"), SYSTEMS PS INC., AN ONTARIO CORPORATION ("SPSI" AND COLLECTIVELY WITH
SCI, "SYSTEMS"), AND INTERNATIONAL CAREER SPECIALISTS LTD., AN ONTARIO
CORPORATION ("ICS"). THE OPERATIONS OF THE COMPANY EXCLUSIVE OF ICS AND SYSTEMS
SHALL BE REFERRED TO AS THE "IT STAFFING DIVISION."
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE
CERTAIN RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT
OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND
ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
The Company is a provider of information technology ("IT") staffing
services, primarily in Toronto, Ontario, Canada, supplying qualified IT
professionals to its customers as independent contractors for short and long
term assignments and for permanent placement within such enterprises. The
Company's customers include financial service companies, software and other
technology companies, Canadian governmental entities and large multinational
companies, including Merrill Lynch Canada Inc., Bank of Montreal, Bell Sygma
Inc., Revlon Canada Inc., IBM Corporation and American Express Company. The
Company has recently expanded its operations into the United States and intends
to develop a network of offices to provide IT staffing services throughout North
America.
The Company has focused on the recruitment of highly qualified IT
professionals and utilizes established testing methods to ensure that its IT
professionals satisfy the Company's internal criteria. The Company also reviews
candidates' technical backgrounds and conducts preliminary interviews prior to
referring candidates to its customers. By attracting the most qualified IT
professionals, the Company believes that it will be able to attract high quality
customers who require the services of such professionals.
Since inception, the Company has pursued a strategy of developing and
utilizing technology that it believes will provide it with a competitive
advantage. As a result, the Company believes that one of its primary competitive
strengths is its utilization of technology. The Company maintains a database of
over 35,000 IT professionals and advertises on the Internet to attract both
candidates and customers. The Company uses HR Workbench, software developed by
the Company in conjunction with Great Lakes Research and Development ("Great
Lakes"), an unaffiliated entity, to locate the IT professionals in the Company's
database with the technical skills and job interests that best satisfy the
requirements of the position that the Company is attempting to staff. The
database allows all of the Company's recruiters immediate access to active
candidates. Candidates can register themselves directly into the database
through the Internet or be entered into the system by the Company's recruiters.
The Company and Great Lakes have developed, and are in the process of
testing, an additional software product called AppTracker, which the Company,
through a joint venture with Great Lakes, intends to market to human resource
departments during the year ending December 31, 1999. The
4
<PAGE>
software is designed to aid human resources departments in performing numerous
recruitment tasks, such as scheduling interviews and evaluating candidates.
Statistics about the recruitment process, including the costs and expenses, are
tabulated in various databases. The Company believes that it will have an
advantage in marketing its staffing services to companies using AppTracker
because of the Company's familiarity with the software and the ease of
electronic data interchange ("EDI") with the Company.
According to the STAFFING INDUSTRY REPORT, a leading industry publication,
revenue for the year ended December 31, 1997 for IT staffing services (which
includes fees earned for permanent placement services and revenues generated by
supplying contract services) in the United States is estimated to have been
approximately $14.8 billion, an increase of 27% over such revenues for the year
ended December 31, 1996. According to a 1998 IDC Canada survey, an independent
Canadian industry publication, the Canadian Information Technology services
industry grew by more than 11% in 1997, reaching CDN$11.5 billion in revenues,
an increase of 11.5% over such revenues for the year ended December 31, 1996,
and is expected to grow at a compounded annual rate of 12.1% through 2001.
Although there can be no assurance that growth in the industry will continue at
such rates, or at all, the Company believes that such growth will continue as a
result of the following factors: (i) the hiring of the proper IT professional
for a particular project may require technical knowledge that many human
resource departments do not possess; (ii) there exists a shortage of IT
professionals in the United States and Canada and many companies lack the time
and resources to conduct a proper search; (iii) increased specialization and
sophistication of IT requirements; (iv) costs associated with termination of
employees, as compared to independent contractors, following the completion of a
project; and (v) the costs associated with the benefits received by employees,
as compared to independent contractors.
The Company's business objectives are to increase its share of the IT
staffing services market in Canada and the United States, as well as to
establish a network of offices throughout such countries which, when linked by
means of the Internet, will allow the Company to provide its customers with an
array of IT staffing services. The primary components of the Company's strategy
to achieve such objectives are as follows:
- LEVERAGE CLIENT BASE TO ATTRACT AND RETAIN HIGHLY QUALIFIED IT
PROFESSIONALS;
- FOCUS ON NICHE MARKETS;
- EXPAND INTO NEW REGIONAL MARKETS BY OPENING NEW OFFICES OR ACQUIRING
COMPETITIVE OR COMPLEMENTARY COMPANIES;
- CONTINUE TO UTILIZE THE INTERNET AND INFORMATION TECHNOLOGY TO PROVIDE A
COMPETITIVE ADVANTAGE;
- DEVELOP AND PROMOTE A MANAGED SERVICES PRACTICE; AND
- CAPITALIZE ON THE YEAR 2000 AND OTHER OPPORTUNITIES.
The Company's headquarters are located at 55 University Avenue, Suite 505,
Toronto, Ontario, Canada M5J 2H7. The Company also maintains offices in New
York, New York; Tampa, Florida; Etobicoke, Ontario; Scarborough, Ontario; Indian
Wells, California and Ottawa, Ontario. The Company was incorporated under the
laws of the Province of Ontario, Canada in February 1994. The Company maintains
its Web site at http://www.itstaff.com and has registered the Internet domain
name of itstaff.org and itstaff.net. Information contained on the Company's Web
site is not a part of this Prospectus and must not be relied upon in evaluating
an investment in the Common Shares offered hereby. This Prospectus contains
trade names, service marks and trademarks of the Company and others, all of
which are the property of their respective owners.
5
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities offered by the Company............ 1,000,000 Common Shares
Common Shares outstanding prior to this
offering................................... 1,677,875
Common Shares outstanding immediately
following this offering.................... 2,677,875
Use of Proceeds.............................. To expand into new regional markets by
opening new offices and acquiring
complementary or competitive companies, to
capitalize a joint venture to develop and
market the AppTracker software, and for
general corporate and working capital
purposes. See "Use of Proceeds."
Proposed Nasdaq
SmallCap-Registered Trademark- Market
Trading Symbol(1).......................... ITSTF
Proposed Boston Stock Exchange trading
symbol(1).................................. ITS
</TABLE>
- ------------------------
(1) The proposed symbols do not imply that a liquid and active market will
develop or be sustained for the Shares upon completion of this offering.
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following financial information is qualified in its entirety by the more
detailed information in the financial statements appearing elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED, DECEMBER
31, SEPTEMBER 30,
-------------------- --------------------
1996 1997 1997 1998
--------- --------- --------- ---------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Revenue...................................................... $ 764 $ 4,704 $ 3,419 $ 8,756
Gross profit................................................. 505 1,816 1,303 3,745
Operating Expenses........................................... 469 1,622 1,102 3,201
Income from operations....................................... 36 194 201 544
Net income................................................... 30 138 135 326
Earnings per share........................................... .03 .11 .10 .20
Weighted Average Number of Shares Outstanding................ 1,021 1,309 1,309 1,650
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
--------------------------
ACTUAL AS ADJUSTED(1)
--------- ---------------
<S> <C> <C>
BALANCE SHEET DATA
Working capital........................................................................... 609 4,099
Total assets.............................................................................. 3,493 7,333
Long-term debt............................................................................ 382 382
Total liabilities......................................................................... 1,904 1,904
Shareholders' equity...................................................................... 1,589 5,429
</TABLE>
- ------------------------
(1) As adjusted to reflect the sale by the Company of the 1,000,000 Shares
offered hereby at an assumed initial public offering price $5.00 per Share
and the initial application of the net proceeds therefrom. See "Use of
Proceeds."
7
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON SHARES OFFERED HEREBY IS HIGHLY SPECULATIVE,
INVOLVES A HIGH DEGREE OF RISK, AND SHOULD BE MADE ONLY BY INVESTORS WHO CAN
AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. PROSPECTIVE INVESTORS, PRIOR TO
MAKING AN INVESTMENT DECISION, SHOULD CAREFULLY CONSIDER, TOGETHER WITH THE
OTHER MATTERS REFERRED TO HEREIN, INCLUDING THE CONSOLIDATED FINANCIAL
STATEMENTS AND THE NOTES THERETO, THE FOLLOWING RISK FACTORS. PROSPECTIVE
INVESTORS SHOULD BE IN A POSITION TO RISK THE LOSS OF THEIR ENTIRE INVESTMENT.
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE CERTAIN
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
THOSE ANTICIPATED IN SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN
FACTORS, INCLUDING THOSE SET FORTH IN THE FOLLOWING RISK FACTORS AND ELSEWHERE
IN THIS PROSPECTUS.
POSSIBLE INABILITY TO ATTRACT AND RETAIN QUALIFIED IT PROFESSIONALS. The
Company's future success will depend on its ability to attract qualified IT
professionals with the technical skills and experience necessary to meet its
customers' requirements for technical personnel and to retain a sufficient
number of professionals to fulfill its customers needs for contract workers.
Competition for individuals with proven technical skills, particularly in the
Windows, UNIX, computer aided design, distributed computing and other technology
environments for which the Company provides services, is intense, and the
Company expects that competition for IT professionals will increase in the
future. Furthermore, IT professionals typically provide services on an
assignment-by-assignment basis and can terminate an assignment with the Company
at any time. The Company competes for such individuals with other providers of
IT staffing services, systems integrators, providers of outsourcing services,
computer consultants, employment listing services and temporary personnel
agencies. There is a possible shortage of IT professionals proficient in the
most current computer languages and applications. Many of the IT professionals
who have been placed by the Company accept assignments from the Company's
competitors, and there can be no assurance that such IT professionals will not
choose to work for competitors on future assignments. There also can be no
assurance that the Company will be able to attract and retain qualified IT
professionals in sufficient numbers in the future. The Company's revenue in any
period is a function of, among other things, the number of IT professionals it
has on staff and engaged on assignments. In the event that the Company is unable
to attract or retain such personnel when required and on terms acceptable to the
Company, the Company's business, prospects, financial condition and results of
operations would be materially adversely affected. See "Business--Business
Strategy" and "Business--Competition."
HIGHLY COMPETITIVE MARKET. The IT staffing industry is highly competitive
and fragmented and is characterized by low barriers to entry. The Company
competes for potential customers with other providers of IT staffing services,
systems integrators, providers of outsourcing services, computer consultants,
employment listing services, and temporary personnel agencies. The Company does
not have long-term contracts with most of its customers. Many of the Company's
current and potential competitors have longer operating histories, significantly
greater financial, marketing and human resources, greater name recognition and a
larger base of IT professionals and customers than the Company, which may give
such competitors a competitive advantage when compared to the Company. In
addition, many of these competitors, including numerous smaller privately held
companies, may be able to respond more quickly to customer requirements and to
devote greater resources to the marketing of services than the Company. Because
there are relatively low barriers to entry in the staffing industry, the Company
expects that competition will increase in the future. Increased competition
could result in price reductions, reduced margins or loss of market share, any
of which could materially adversely affect the Company's business, prospects,
financial condition and results of operations. Further, there can be no
assurance that the Company will be able to compete successfully against current
and future competitors or that competitive pressures faced by the Company will
not have a material adverse effect on its business, prospects, financial
condition and results of operations. See "Business--Competition."
RISKS INHERENT IN EXPANSION INTO NEW MARKETS AND OPERATIONS. The Company's
expansion plans depend on its ability to enter new regional markets,
successfully expand existing operations and add
8
<PAGE>
additional areas of expertise within its existing regional markets. This
expansion is dependent on a number of factors, including the Company's ability
to: attract, hire, integrate and retain qualified employees, such as experienced
recruiters; develop, recruit and maintain a base of qualified IT professionals
within each regional market in which the Company conducts or commences to
conduct operations; accurately assess the level of demand for the Company's
services in such markets; and initiate, develop and sustain corporate client
relationships in each new regional market. There can be no assurance that the
addition of qualified employees and entrance into new regional markets will
occur on a timely basis or achieve anticipated financial results. The addition
of qualified employees and entrance into new regional markets typically results
in increases in operating expenses, primarily as a result of increased salaries
and related expenses. Expenses are incurred in advance of forecasted revenue,
and there is typically a delay before the Company's newly hired recruiters and
sales employees reach full productivity. If the Company is unable to hire
additional qualified employees or enter new regional markets in a cost-effective
manner or if those employees and offices in regional markets do not achieve
anticipated financial results, the Company's business, prospects, financial
condition and results of operations could be materially adversely affected.
Failure to expand into new markets could hinder the Company's ability to attract
multinational and other large corporations which could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Business Strategy."
RISK OF PAYROLL TAX LIABILITY; INCREASED COSTS FOR CONTRACT WORKERS. The
Company has determined to classify its IT professionals providing contract
services in the United States as independent contractors rather than employees.
Accordingly, the Company has not withheld payroll taxes, social security taxes,
unemployment taxes and workers compensation insurance, with respect to such IT
professionals or recorded a reserve on its financial statements for such taxes
and payments. Although such determination is based upon the Internal Revenue
Code of 1986, as amended (the "Code"), the rules and regulations thereunder, and
the publicly available interpretations of the United States Internal Revenue
Service (the "IRS"), such determination is not free from doubt. In the event
that the Code, such rules and regulations or such interpretations should be
amended or otherwise require the Company to classify such IT professionals as
employees, the Company would be subject to a material liability for failure to
withhold and pay such taxes and insurance, which could have a material adverse
effect on the business, prospects, financial condition and results of operation
of the Company. In addition, in such event, the Company's costs of revenues
would increase materially, which would have a material adverse effect on the
business, prospects, financial condition and results of operations of the
Company.
Similarly, the Company has determined to classify its IT professionals
providing contract services in Canada as independent contractors rather than
employees. Accordingly, the Company has not withheld or remitted to Canadian
revenue authorities, with respect to such IT professionals, any amounts on
account of employee payroll taxes and other payroll obligations including income
taxes, employment insurance premiums, Canada Pension Plan contributions,
employer health tax and worker's compensation contributions, nor has it created
a reserve on its financial statements for such taxes and obligations. Although
the Company has made its determination respecting the classification of such IT
professionals based upon its understanding of the existing Canadian law and is
not aware of any proposed changes to such law which would alter its
determination, the proper classification of such IT professionals is not free
from doubt. In the event the applicable law requires the Company to classify its
Canadian IT professionals as employees, the Company could be subject to a
significant liability for failure to withhold and remit required employee
payroll taxes and other obligations. The classification of its Canadian IT
professionals as employees would increase the Company's cost of revenues which
would have a material adverse effect on the business, prospects, financial
condition and results of operations of the Company.
BROAD DISCRETION BY MANAGEMENT IN APPLICATION OF PROCEEDS; UNSPECIFIED
ACQUISITIONS. Approximately $290,000, or 7.6%, of the estimated net proceeds of
this offering will be allocated to general corporate and working capital
purposes. Additionally, $3,200,000, or 83.3%, of the net proceeds of this
offering have been
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allocated to the Company's proposed expansion into new markets. The foregoing
represents the Company's best estimate of its allocation of the net proceeds of
the sale of the Shares based upon the Company's currently contemplated
operations, the Company's business plan and current economic and industry
conditions and is subject to reapportionment among the categories listed above
in response to, among other things, changes in its plans, regulations, industry
conditions and future revenues and expenditures. The amount and timing of
expenditures will vary depending on a number of factors, including changes in
the Company's contemplated operations or business plan and changes in economic
and industry conditions. Those proceeds may be utilized to open new offices or
to acquire existing companies in such markets. Accordingly, management of the
Company will have broad discretion over the application of such net proceeds.
Although the Company may utilize a portion of the net proceeds for potential
investments in, or acquisitions of, complementary or competitive companies, as
of the date hereof, the Company has no agreements, plans or arrangements with
respect to any such investment or acquisition. Depending upon, among other
things, the structure of the acquisition or investment, the Shareholders of the
Company may have no opportunity to approve specified acquisitions or to review
the financial condition of any potential acquisition or investment candidate.
See "Use of Proceeds."
FLUCTUATIONS IN QUARTERLY RESULTS. The Company's quarterly operating
results have in the past, and may in the future, fluctuate significantly
depending on a number of factors, including, but not limited to, the rate of
hiring and the productivity of revenue-generating personnel; the availability of
qualified IT professionals; changes in the Company's relative mix of contract
services and permanent placement services; changes in the pricing of the
Company's services; the timing and rate of commencement of operations in new
regional markets; departures or temporary absences of key sales people or
recruiters; the structure and timing of acquisitions; changes in the demand for
IT professionals; and general economic and industry conditions. In addition,
because the Company often provides services on an assignment-by-assignment
basis, which customers can terminate at any time, there can be no assurance that
existing customers will continue to use the Company's services at historical
levels. As a result, the Company believes that period-to-period comparisons of
its results of operations are not necessarily meaningful and should not be
relied upon as any indication of future performance. In the event the Company's
operating results fall below the expectations of public market analysts and
investors, the market price of the Common Shares would likely be materially
adversely affected. Although the Company has experienced substantial revenue
growth in recent years, there can be no assurance that, in the future, the
Company will be able to sustain revenue growth or profitability on a quarterly
or annual basis at historical levels. See "Selected Consolidated Financial Data"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations."
RISKS OF ACQUISITIONS. A component of the Company's expansion strategy is
the acquisition of complementary or competitive companies. The successful
implementation of this strategy is dependent upon the Company's ability to
identify suitable acquisition candidates, obtain requisite financing, acquire
such companies on suitable terms and integrate their operations successfully
with those of the Company. This strategy will entail reviewing and potentially
reorganizing acquired business operations, corporate infrastructure and systems
and financial controls. Unforseen expenses, difficulties, complications and
delays frequently encountered with acquisitions could inhibit the Company's
growth and have a material adverse effect on the business, prospects, financial
condition and results of operation of the Company.
To date, the Company has completed three acquisitions. There can be no
assurance that the Company will be able to identify additional suitable
acquisition candidates or that the Company will be able to acquire such
candidates on favorable terms. Moreover, other providers of IT professional
services are also competing for acquisition candidates, which could result in an
increase in the price of acquisition targets and a diminished pool of companies
available for acquisition. Acquisitions also involve a number of other risks,
including adverse effects on the Company's reported operating results from
increases in amortized goodwill and interest expense, the diversion of
management attention and the subsequent integration of acquired companies.
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To the extent the Company seeks to acquire complementary or competitive
companies for cash, the Company may be required to obtain additional financing,
and there can be no assurance such financing will be available when required, on
favorable terms or at all. In addition, if the Company issues Common Shares to
complete any future acquisitions, existing shareholders will experience further
dilution in ownership. As a result of the foregoing, acquisitions may have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. See "Business--Business Strategy."
INTEGRATION OF ICS, SYSTEMS AND SOUTHPORT. In May 1998, the Company
completed the acquisition of ICS, in April 1998, the Company completed the
acquisition of Systems and in November 1998 the Company completed the
acquisition of certain assets of Southport Consulting Inc. ("Southport") ICS and
Systems now operate as separate divisions within the Company. The integration of
ICS, and Systems, their respective customers, IT professionals and employees has
required a substantial portion of management's time and attention, and has
resulted in integration related expenses. The Company anticipates that the
integration of the assets from Southport will also require a substantial portion
of management's time and attention and will result in certain integration
related expenses. The Company expects that it may incur additional integration
related expenses in future periods, and there can be no assurance that the
integration of ICS, Systems and Southport will not involve disruptions or
difficulties, such as departures of customers, IT professionals or employees,
any of which may have a material adverse effect on the Company's business,
prospects, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
RISK OF IT SYSTEM CAPACITY CONSTRAINTS; RISK OF SYSTEM FAILURE. A key
element of the Company's expansion strategy is to utilize the Internet (i) to
link its regional offices to its central database, (ii) to offer its staffing
services to existing and potential customers, (iii) to attract and recruit
qualified technical personnel, and (iv) to promote the Company. The Company
anticipates that its expansion will require a high volume of traffic on, and use
of, its Web site. Accordingly, the satisfactory performance, reliability and
availability of the Company's Web site and network infrastructure are and will
be critical to the Company's reputation and its ability to attract and retain
customers and technical personnel and to maintain adequate customer service
levels. Any system interruptions that result in the reduced availability of the
Company's Web site or reduced performance of such site would interfere
substantially with the communications between the Company's offices and would
materially adversely affect the ability of the Company to attract new customers
and technical personnel. While the Company has not experienced any system
interruptions, it believes that such interruptions may occur from time to time.
Any substantial increase in the volume of traffic on the Company's Web site will
require the Company to expand and further upgrade its network infrastructure,
including the purchase or development of additional computer hardware and
software. There can be no assurance that the Company will be able to accurately
project the rate or timing of increases, if any, in the use of its Web site or
timely expand and upgrade its systems and infrastructure to accommodate such
increases. The Company's inability to add required additional software and
hardware or to develop and upgrade its technology or network infrastructure to
accommodate increased traffic on its Web site may cause unanticipated system
disruptions, slower response times, impediments to attracting additional
customers and delays in locating required technical personnel. In addition,
although the Company takes safeguards, including data encryption and firewalls,
to prevent unauthorized access to Company data, it is impossible to completely
eliminate this risk. Any of the foregoing events could have a material adverse
effect on the Company's business, prospects, financial condition and results of
operations. See "Business--Business Strategy."
DEPENDENCE ON HR WORKBENCH. The Company is substantially dependent on HR
Workbench, a software product recently developed in conjunction with Great
Lakes, for the day to day operation of its business, including the operation and
maintenance of its database. Although the Company has operated and tested such
software extensively, there can be no assurance that such software will function
as intended or that it will provide the Company with any competitive advantage.
In the event that such software does not function as intended, the business,
prospects, financial condition and results of operations of the
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Company could be materially, adversely affected. The Company and Great Lakes
jointly own the HR Workbench software product. See "Business--Information
Technology and the Internet."
RISKS ASSOCIATED WITH THE APPTRACKER SOFTWARE. The Company, through a joint
venture with Great Lakes, has developed AppTracker and intends to market such
software to the human resources markets. AppTracker is still in the testing
stage, and there can be no assurance that the Company and Great Lakes will be
able to produce a fully functioning product or that such software will function
as intended. The AppTracker development program was launched as a result of the
positive response observed during its first test-marketing session. A working
prototype was demonstrated at the annual Human Resources Professional
Association Conference in Toronto in February 1998. The Company performed more
than 40 one-on-one demo sessions with companies and received a positive
response. The first customer for the AppTracker is the Toronto Stock Exchange.
Neither the Company nor Great Lakes has any experience in marketing software
products and, even if the product is fully developed, there can be no assurance
that there will be a market for such a product. The success of AppTracker is
substantially dependent on the Company's relationship with Great Lakes and
subject to the risk that the parties may disagree on strategy or other issues,
causing delays in the project. There can be no assurance that AppTracker will
ever be completed, will ever provide the Company with revenue, or that the joint
venture regarding AppTracker will ever be profitable. Furthermore, there can be
no assurance that AppTracker will create opportunities for the Company to
promote the Company's IT staffing services, that the use of AppTracker by the
Company's customers will not result in a reduction in the use of the Company's
services, or that the Company's competitors will not be able to utilize EDI and
other benefits of AppTracker to also provide enhanced services to customers.
Other companies may have similar software products. See "Business-- Information
Technology and the Internet."
LIABILITY RISKS. Although the Company's customer agreements disclaim
responsibility for the conduct of IT professionals provided by the Company, the
Company may be exposed to liability with respect to actions taken by its IT
professionals while on assignment, such as damages caused by errors of IT
professionals, misuse of client proprietary information or theft of client
property. Although the Company maintains insurance coverage, due to the nature
of the Company's assignments, and in particular the access by IT professionals
to client information systems and confidential information and the potential
liability with respect thereto, there can be no assurance that such insurance
coverage will continue to be available on reasonable terms, or at all, or that
it will be adequate to cover any such liability. Although the IT professionals
providing the Company's contract services are independent contractors, the
Company employs recruiters, sales personnel and others and is therefore exposed
to possible claims of wrongful discharge and violations of immigration laws.
Employment related claims may result in negative publicity, litigation and
liability for money damages and fines.
The staffing industry in Ontario is subject to the provisions of the
provincial EMPLOYMENT AGENCIES ACT. Administered by the Ministry of Labour, the
EMPLOYMENT AGENCIES ACT requires that all employment agencies operating in the
province must be licenced by the supervisor of employment agencies. The Company
currently holds a Class A licence under the provisions of the Act. In addition
to this specific provincial regulatory regime, federal and provincial laws of
general application relating to employment standards, labor relations,
immigration and taxation apply to employed personnel of staffing companies in
the same manner as other employers. The Company believes that it complies in all
material respects with such regulations.
DEPENDENCE ON KEY PERSONNEL. The Company's future success will depend to a
significant extent on the efforts of its key management personnel, particularly
Declan French, the Company's Chairman of the Board of Directors, President and
Chief Executive Officer; John A. Irwin, President of ICS; and John R. Wilson,
President of Systems. The loss or unavailability of any of these key employees
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations. The Company has entered into
employment agreements with each of Messrs. French, Irwin and Wilson.
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Mr. French's employment agreement expires two years from the date of this
Prospectus. Mr. Irwin's employment agreement is for a term of three years
expiring on January 1, 2001. Mr Wilson's employment agreement is for a term of
three years expiring on February 11, 2001. The Company maintains key-man life
insurance on the life of Declan French with a death benefit payment of $200,000.
Additionally, the Company believes that its future success will depend in large
part upon its continued ability to attract and retain highly qualified
recruiters, who often serve as the contact person for the Company's customers.
There can be no assurance that the Company will be able to attract and retain
the qualified personnel necessary for its business. See "Risk Factors--Possible
Inability to Attract and Retain Qualified IT Professionals" and "Management."
CONTROL BY EXISTING MANAGEMENT. Upon the completion of this offering, the
current directors and executive officers of the Company will, in the aggregate,
beneficially own approximately 1,396,413 Common Shares, or 52.1% of the
outstanding Common Shares, or approximately 49.4% of such outstanding Common
Shares if the Underwriters' over-allotment option is exercised in full. As a
result, the current executive officers and directors of the Company will have
the ability to substantially control the outcome of all matters on which
shareholders are entitled to vote, including the elections of the Company's
directors and the approval of significant corporate transactions. See "Principal
Shareholders."
POTENTIAL ANTI-TAKEOVER EFFECT OF PREFERRED SHARES. The Company's
Certificate of Incorporation, as amended, authorizes the Board of Directors to
issue up to 1,000,000 preferred shares, which may be issued in one or more
series, the terms of which may be determined at the time of issuance by the
Board of Directors, without further action by shareholders, and may include
voting rights (including the right to vote as a series on particular matters),
preferences as to dividends and liquidation, conversion and redemption rights
and sinking fund provisions. No preferred shares are currently outstanding, and
the Company has no present plans for the issuance of any preferred shares.
However, the issuance of any such preferred shares could materially adversely
affect the rights of holders of Common Shares and, therefore, could reduce the
value of the Common Shares. In addition, specific rights granted to future
holders of preferred shares could be used to restrict the Company's ability to
merge with, or sell its assets to, a third party. The ability of the Board of
Directors to issue preferred shares could discourage, delay or prevent a
takeover of the Company, thereby preserving control of the Company by the
current shareholders. See "Description of Securities--Preferred Shares."
INDUSTRY AND GEOGRAPHIC CONCENTRATION. The Company's business is dependent
on the trends prevalent in, and the continued growth and rate of change of, the
high technology industry. Furthermore, for the year ended December 31, 1997 and
nine months ended September 30, 1998, 96% and 99% of the Company's revenue,
respectively, was derived by providing services to customers in the metropolitan
Toronto region. A substantial deterioration in general economic conditions in
such region or in the high technology industry as a whole would have a material
adverse affect on the Company's business, prospects, financial condition and
results of operations. See "Business--Customers."
INTELLECTUAL PROPERTY; ABSENCE OF PATENT PROTECTION. The Company's ability
to compete effectively will depend on its ability to maintain the proprietary
nature of its technology, including its proprietary software developed in
conjunction with Great Lakes. The Company holds no patents and relies on a
combination of trade secrets and copyright laws, non-disclosure and other
contractual agreements and technical measures to protect its rights in its
technological know-how and proprietary services. The Company currently has no
registered trademarks or service marks for the HR Workbench and AppTracker names
and may not be able to obtain such protection due to the familiarity of the
names in the IT industry. If possible, the Company hopes to secure copyright
protection on the content of the HR Workbench and AppTracker by December 31,
1999.
The Company depends upon confidentiality agreements executed by its
officers, employees, consultants and customers to maintain the proprietary
nature of its technology. These measures may not afford the Company sufficient
or complete protection, and there can be no assurance that others will not
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independently develop technologies similar to those of the Company, otherwise
avoid the confidentiality agreements of the Company or produce patents and
copyrights that would materially adversely affect the Company's business,
prospects, financial condition and results of operations.
The Company believes that its know-how and technologies do not infringe upon
the patents or copyrights of any third parties; however, there can be no
assurance that the Company's know-how and technology will not be found to
infringe upon the rights of third parties. The Company is aware of another
company in its industry that uses a name which may be deemed to be confusingly
similar to the Company. Others may assert infringement claims against the
Company, and if the Company should be found to infringe upon the patents or
copyrights, or otherwise impermissibly utilize the intellectual property, of
others, the Company's ability to utilize the technology referred to herein could
be materially restricted or prohibited. If such an event occurs, the Company may
be required to obtain licenses from such third parties, enter into royalty
agreements or redesign its products so as not to utilize such intellectual
property, each of which may prove to be uneconomical or otherwise impossible.
There can be no assurance that any licenses or royalty agreements required with
respect to any such proprietary rights could be obtained on terms acceptable to
the Company or such third party, or at all. Such claims could result in
litigation, which could materially adversely affect the Company's business,
prospects, financial condition and result of operations. See
"Business--Information Technology and the Internet."
UNTESTED MARKETING STRATEGY. To date, the Company has engaged in limited
marketing efforts in the United States. The Company currently only generates
approximately $100,000 of its revenues from operating in the United States.
Achieving market penetration will require significant efforts by the Company to
create awareness of, and demand for, the Company's staffing services. The
Company intends to upgrade its marketing efforts to include advertising on the
Internet, e-mail and an expanded sales and recruiting staff. Internet and e-mail
marketing efforts have been largely untested in the marketplace, and there can
be no assurance that such efforts will result in the increased provision by the
Company of staffing services. The failure of the Company to develop its
marketing capabilities or successfully market its staffing services would have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. See "Use of Proceeds," "Business--Business
Strategy," and "Business-- Customers."
LACK OF MAJOR CUSTOMER CONTRACTS AND/OR WRITTEN AGREEMENTS. As is common in
the staffing industry, the Company does not have long-term written contracts
with most of its clients. There can be no assurance that such customers will
generate significant revenues for the Company in the future. The loss of any
significant customers would have a material adverse affect on the Company's
business, prospects, financial condition and results of operations.
FOREIGN EXCHANGE RISK. During the years ended December 31, 1996 and 1997,
and the nine months ended September 30, 1998, approximately 100%, 96% and 99%,
respectively, of the Company's revenue was in Canadian dollars. Accordingly, the
relationship of the Canadian dollar to the value of the United States dollar may
materially affect the Company's operating results. Since 1995, the value of the
Canadian dollar, expressed in U.S. dollars, has declined by approximately 7%. In
the event that the Canadian dollar were materially devalued against the United
States dollar, the Company's financial condition and results of operations could
be materially adversely affected. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
CONTINUING INFLUENCE OF UNDERWRITERS. The Underwriters may be able to exert
continuing influence on the Company in light of the fact that they have the
right to (i) appoint a board member or advisor for a three year period following
the date of this Prospectus; (ii) receive the Representative's Warrants to
purchase up to 100,000 shares; (iii) exercise their registration rights and (iv)
act as financial consultant to the Company for a two year period whereby it will
receive aggregate fees of $150,000 and shall provide advisory services related
to mergers and acquisitions, corporate finance and other matters and will be
entitled to a finder's fee if it acts as an investment banker on certain
transactions. In addition, the
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Company has agreed, for a period of two years from the date of this Prospectus,
not to issue any Common Shares, warrants, options or other rights to purchase
Common Shares, without the prior consent of the Representative, subject to
certain exceptions. As a result of the above rights and/or restrictions, the
Underwriters may have significant influence over certain activities of the
Company.
ABSENCE OF PUBLIC MARKET; ARBITRARY DETERMINATION OF OFFERING PRICE;
VOLATILITY. Prior to this offering, there has been no public market for the
Shares, and there can be no assurance that any active trading market will
develop or, if any such market develops, that it will be sustained. Accordingly,
unless and until a public market develops, purchasers of the Shares may
experience difficulty selling or otherwise disposing of such securities.
The initial public offering price of the Shares was arbitrarily determined
by negotiations between the Company and the Representative, and does not
necessarily bear any relationship to the Company's assets, book value, results
of operations, or any other generally accepted indicia of value. See
"Underwriting." From time to time after this offering, there may be significant
volatility in the market price of the Common Shares. Quarterly operating results
of the Company or other developments affecting the Company, such as
announcements by the Company or its competitors regarding acquisitions or
dispositions, new procedures or technology, changes in general conditions in the
economy and general market conditions could cause the market price of the Common
Shares to fluctuate substantially. The equity markets have, on occasion,
experienced significant price and volume fluctuations that have affected the
market prices for many companies' securities and have often been unrelated to
the operating performance of these companies.
NASDAQ MAINTENANCE REQUIREMENTS. Under the currently effective criteria for
listing of securities on the Nasdaq SmallCap-Registered Trademark- Market, for
initial listing, a company must have at least $4,000,000 in net tangible assets,
a minimum bid price of $4.00 per share, and a public float of at least
$5,000,000. For continued listing, a company must maintain $2,000,000 in net
tangible assets, a minimum bid price of $1.00, and a public float of at least
$1,000,000. In the event that the Company should be unable to maintain the
standards for continued listing, the Common Shares could be subject to delisting
from the Nasdaq SmallCap-Registered Trademark- Market. Trading, if any, in the
Common Shares would thereafter be conducted in the over-the-counter market on
the OTC Bulletin Board established for securities that do not meet the Nasdaq
SmallCap-Registered Trademark- Market listing requirements or in what are
commonly referred to as the "pink sheets." As a result, investors, in the Common
Shares may find it more difficult to dispose of, or to obtain accurate
quotations as to the price of, the Shares.
RISK OF LOW PRICED STOCKS; PENNY STOCKS. In the event that the Company is
unable to satisfy the maintenance requirements for the Nasdaq SmallCap Market
and the bid price of the Common Shares falls below $5.00 per share for the
initial quotation, trading would be conducted in the "pink sheets" or the OTC
Bulletin Board. In the absence of the Common Shares being quoted in Nasdaq, or
listed on an exchange, trading in the Common Shares would be covered by Rule
15g-9 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), if the Common Stock is a "penny stock." Under such rule,
broker-dealers who recommend such securities to persons other than established
customers and accredited investors (generally defined as investors with net
worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000
together with a spouse) must make a special written suitability determination
for the purchaser and receive the purchaser's written agreement to a transaction
prior to sale. Securities are exempt from this rule if the market price is at
least $5.00 per share.
The Commission adopted regulations that generally define a penny stock to be
any equity security that has a market price of less than $5.00 per share,
subject to certain exceptions. Such exceptions include an equity security listed
on the Nasdaq Stock Market, and an equity security issued by an issuer that has
(i) net tangible assets of at least $2,000,000, if such issuer has been in
continuous operation for three years (ii) net tangible assets of at least
$5,000,000, if such issuer has been in continuous operation for less than three
years, or (iii) average revenue of at least $6,000,000 for the preceding three
years. Unless an exception is available, the regulations require the delivery,
prior to any transaction involving a penny stock,
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of a disclosure schedule explaining the penny stock market and the risks
associated therewith. Consequently, such delisting, if it were to occur, could
materially adversely affect the ability of broker-dealers to sell the Common
Shares and the ability of purchasers in this offering to sell their Shares in
the secondary market.
IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of the Common Shares offered
hereby will experience immediate and substantial dilution of $3.43 per share,
assuming an initial public offering price of $5.00 per Share, or approximately
69%, in the net tangible book value of the Shares purchased thereby. Additional
dilution to future net tangible book value per share may occur upon exercise of
outstanding stock options and warrants (including the Representative's Warrants)
and may occur, in addition, if the Company issues additional equity securities
in the future. See "Dilution."
NEED FOR ADDITIONAL FINANCING. Based on the Company's operating plan, the
Company believes that the net proceeds of this offering, together with available
cash and anticipated revenues from operations, will be sufficient to finance the
Company's working capital requirements for a period of at least 18 months
following the completion of this offering. This belief is based on certain
assumptions, which may prove to be incorrect. In addition, the Company's
expansion strategy contemplates acquisitions of, and investments in,
complementary and competitive companies and use of such companies by the Company
to expand into new markets, although the Company presently has no agreements,
plans or arrangements with respect to any such investment or acquisition.
Accordingly, there can be no assurance that the Company's financial resources
will be sufficient to satisfy the Company's capital requirements for such
period. If the Company's financial resources are insufficient and, in any case,
after such 18 month period, the Company will require additional financing in
order to meet its plans for expansion. Additional financing may take the form of
the issuance of common or preferred equity securities or debt securities, or may
involve bank financings. There can be no assurance that the Company will be able
to obtain the necessary additional capital on a timely basis or on acceptable
terms, if at all. In any of such events, the Company may be unable to implement
its current plans for expansion or to repay its debt obligations as they become
due. In the event that any such financing should take the form of equity
securities, the holders of the Common Shares may experience additional dilution.
See "Risk Factors--Immediate and Substantial Dilution," "Use of Proceeds,"
"Dilution," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business--Business Strategy."
POTENTIAL NEGATIVE EFFECT ON PRICE OF THE COMPANY'S SECURITIES AS A RESULT
OF SHARES ELIGIBLE FOR FUTURE SALE. The sale, or availability for sale, of a
substantial number of Common Shares in the public market subsequent to this
offering, pursuant to Rule 144 under the Securities Act ("Rule 144") or
otherwise, could materially adversely affect the market price of the Common
Shares and could impair the Company's ability to raise additional capital
through the sale of its equity securities or debt financing. The availability of
Rule 144 to the holders of restricted securities, as defined in Rule 144, of the
Company would be conditioned on, among other factors, the availability of
certain public information concerning the Company. All of the 1,677,875 Common
Shares currently outstanding are "restricted securities" as that term is defined
in Rule 144 and may, under certain circumstances, be sold without registration
under the Securities Act. In addition, any shares issuable upon exercise of
options granted under the Plan could be sold publicly commencing 90 days after
the Company becomes a reporting company under the Exchange Act, pursuant to Rule
701 under the Securities Act. However, officers, directors and certain
shareholders of the Company and option holders under the Plan have executed
agreements ("Lock-Up Agreements") pursuant to which they have agreed not to,
directly or indirectly, issue, offer, agree to sell, sell, grant an option for
the purchase or sale of, transfer, pledge, assign, hypothecate, distribute or
otherwise dispose of or encumber any Common Shares or options, rights, warrants
or other securities convertible into, or exercisable or exchangeable for, or
evidencing any right to purchase or subscribe for, Common Shares, whether or not
beneficially owned by such person, or any beneficial interest therein, for a
period of 18 months from the date of this Prospectus. See "Underwriting."
16
<PAGE>
REGISTRATION RIGHTS. For a period of 18 months from the date of this
Prospectus, the Company has agreed that it will not sell or otherwise dispose of
any securities of the Company without the prior written consent of the
Representative, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, during such period, the Company shall be entitled
to issue (i) Common Shares in connection with mergers and acquisitions, (ii) up
to 435,000 Common Shares issuable upon exercise of options which may be granted
under the Plan, (iii) up to 22,125 Common Shares issuable upon the exercise of
currently outstanding options and warrants which will, except in certain
circumstances, be issued for an aggregate exercise price of $1.00, (iv) 200,000
Common Shares issuable upon the exercise of currently exercisable options, the
holder of which has agreed not to sell, transfer, assign, hypothecate or
otherwise dispose of such Common Shares for a period of two years after he
exercises such options without the consent of the Company and (v) up to 100,000
Common Shares issuable upon the exercise of the Representative's Warrants.
The holders of the Representative's Warrants will have certain demand
registration rights with respect to such warrants, the Common Shares underlying
such warrants and the "Warrant Shares" commencing one year after the date
hereof. If the Representative should exercise its registration rights to effect
a distribution of the Representative's Warrants or the Warrant Shares, the
Representative, prior to and during such distribution, may be unable to make a
market in the Company's securities. If the Representative ceases making a market
in the Common Shares, the market and market prices of the Common Shares may be
materially adversely affected, and holders thereof may be unable to sell or
otherwise dispose thereof. See "Shares Eligible for Future Sale" and
"Underwriting."
NO DIVIDENDS. The Company does not intend to pay dividends on the Common
Shares in the foreseeable future, but rather intends to retain future earnings,
if any, for reinvestment in the development and expansion of its business.
Pursuant to the Company's agreement with the Business Development Bank of Canada
("BDC"), the Company will not pay dividends so long as any portion of the
Company's loan from BDC remains outstanding. September 30, 1998, the outstanding
balance on such loan was $488,730. Such loan is due in August 2003, and the
Company has no plans to pre-pay such loan. Dividend payments in the future may
also be limited by other loan agreements or covenants contained in other
securities which the Company may issue. Dividend payments from the Company are
subject to Canadian withholding tax requirements. Any future determination to
pay cash dividends will be at the discretion of the Board of Directors and will
be dependent upon the Company's financial condition, results of operations,
capital and legal requirements and such other factors as the Board of Directors
deems relevant. See "Dividend Policy," "Management's Discussion and Analysis of
Financial Condition and Results of Operations-- Liquidity and Capital
Resources," "Description of Securities -- Common Shares" and "Certain United
States and Canadian Federal Income Tax Considerations."
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS
PROSPECTUS. This Prospectus contains certain forward-looking statements
regarding the plans and objectives of management for future operations. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. The Company's plans and
objectives are based on a successful execution of the Company's expansion
strategy and are based upon a number of assumptions, including assumptions
relating to the growth in the use of the Internet and that there will be no
unanticipated material adverse change in the Company's operations or business.
Assumptions relating to the foregoing involve judgments with respect to, among
other things, future economic, political, competitive and market conditions, and
future business decisions, all of which are difficult or impossible to predict
accurately and many of which are beyond the control of the Company. Although the
Company believes that its assumptions underlying such forward-looking statements
are reasonable, any of the assumptions could prove to be inaccurate and,
therefore, there can be no assurance that the forward-looking statements
included in this Prospectus will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved.
17
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the Shares
offered hereby are estimated to be $3,840,000 ($4,492,500 if the Underwriters'
over-allotment option is exercised in full) assuming an initial public offering
price of $5.00 per Share, after deducting underwriting commissions and offering
expenses to be paid by the Company. The Company expects to apply the net
proceeds of this offering as follows:
<TABLE>
<CAPTION>
APPLICATION OF PROCEEDS APPROXIMATE AMOUNT PERCENTAGE OF NET PROCEEDS
- ------------------------------------------------------------------ ------------------- ---------------------------
<S> <C> <C>
Expansion into new regional markets (1)........................... $ 3,200,000 83.3%
Funding of the joint venture regarding AppTracker (2)............. 350,000 9.1%
General corporate and working capital purposes.................... 290,000 7.6%
------------------- -----
Total............................................................. $ 3,840,000 100.0%
------------------- -----
------------------- -----
</TABLE>
- ------------------------
(1) Such funds will primarily be used for expenses incurred in the opening of
new offices, including leasing office space, purchasing or leasing office
equipment and computer hardware and related expenses prior to the
commencement of operations in new locations. The Company estimates that
opening a new office will cost approximately $200,000 to $500,000 per
location, which costs will vary depending on the size of the office and the
cost of doing business in the location in question. The Company expects to
open the majority of its new offices in the United States. As part of its
expansion plan, the Company may utilize a portion of these proceeds for the
acquisition of, or investment in, complementary or competitive companies in
these new locations. The Company has not currently identified any
acquisition or investment candidates and has no agreements, plans or
arrangements with respect to any such acquisition or investments.
(2) Such funds will represent the Company's capital contribution to a joint
venture with Great Lakes for the continued development and commercialization
of AppTracker. Such capital contribution will be utilized for continued
development and testing costs and, if such testing is successful, to provide
funds for the initial marketing of the product. See "Business--Information
Technology and the Internet."
The net proceeds to the Company from the exercise of the Underwriters'
over-allotment option, if any, will be utilized for general corporate and
working capital purposes.
Pending their use, the net proceeds of this offering will be invested in
high-quality, short-term, interest bearing U.S. government obligations.
The foregoing represents the Company's best estimate of its allocation of
the net proceeds of the sale of the Shares based upon the Company's currently
contemplated operations, the Company's business plan and current economic and
industry conditions and is subject to reapportionment among the categories
listed above in response to, among other things, changes in its plans,
regulations, industry conditions and future revenues and expenditures. The
amount and timing of expenditures will vary depending on a number of factors,
including changes in the Company's contemplated operations or business plan and
changes in economic and industry conditions.
Based on the Company's operating plans, the Company believes that the net
proceeds of this offering, together with available cash and anticipated revenues
from operations, will be sufficient to satisfy the Company's working capital
requirements for a period of at least the next 18 months following the
completion of this Offering. This belief is based on certain assumptions, which
may prove to be incorrect. After such 18-month period, or sooner if the
Company's assumptions prove to be incorrect, the Company may require additional
capital in order to meet its then current plans for expansion and capital
requirements. Such financing may take the form of public or private common or
preferred equity securities or debt securities, or may involve bank financing.
There can be no assurance that the Company will be able to obtain additional
capital on a timely basis, on favorable terms, or at all. In any of such events,
the Company may be unable to implement its current plans for expansion. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
18
<PAGE>
DIVIDEND POLICY
The Company does not intend to pay dividends on the Common Shares in the
foreseeable future, but rather intends to retain future earnings, if any, for
reinvestment in the development and expansion of its business. Pursuant to the
Company's agreement with the Business Development Bank of Canada ("BDC"), the
Company will not pay dividends so long as any portion of the Company's loan from
BDC remains outstanding. At September 30, 1998, the outstanding balance on such
loan was $488,730. Such loan is due in August 2003, and the Company has no plans
to pre-pay such loan. Dividend payments in the future may also be limited by
other loan agreements or covenants contained in other securities which the
Company may issue. Dividend payments from the Company are subject to Canadian
withholding tax requirements. Any future determination to pay cash dividends
will be at the discretion of the Board of Directors and will be dependent upon
the Company's financial condition, results of operations, capital and legal
requirements and such other factors as the Board of Directors deem relevant. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources, "Description of Securities--Common
Shares" and "Certain United States and Canadian Federal Income Tax
Considerations."
19
<PAGE>
DILUTION
At September 30, 1998, the net tangible book value of the Company was
approximately $351,595, or $0.21 per Common Share, based on 1,677,875 Common
Shares outstanding. The net tangible book value per Share represents the amount
of the Company's total assets less the amount of its intangible assets and
liabilities, divided by the number of Common Shares outstanding. After giving
effect to the receipt of net proceeds (estimated to be approximately $3,840,000,
from the sale of the Shares at an assumed initial public offering price of $5.00
per Share), the pro forma net tangible book value of the Company at September
30, 1998 would be approximately $4,191,595, or $1.57 per Share. This would
result in dilution to the public investors (i.e., the difference between the
assumed initial public offering price per Share and the net tangible book value
thereof after giving effect to this offering) of approximately $3.43 per share
(or 69%). The following table illustrates the per Share dilution:
<TABLE>
<CAPTION>
PER COMMON
SHARE
-------------
<S> <C> <C>
Assumed initial public offering price................................. $ 5.00
Net tangible book value at September 30, 1998....................... $ 0.21
Increase in net tangible book value attributable to new investors... 1.36
---------
Net tangible book value after this offering (1)....................... 1.57
-----
Dilution of net tangible book value to new investors (1).............. $ 3.43
-----
-----
</TABLE>
- ------------------------
(1) If the Underwriters' over-allotment option is exercised in full, the net
tangible book value per share would be $1.72 and the dilution per Share to
new investors in this offering would be $3.28.
The following table sets forth, as of the date of this Prospectus, the
number of Common Shares purchased, the percentage of the total number of Common
Shares purchased, the total consideration paid, the percentage of total
consideration paid, and the average price per Common Shares paid by the
investors in this offering and the current shareholders of the Company:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
----------------------- ------------------------- PRICE PER
NUMBER(1) PERCENTAGE AMOUNT(1) PERCENTAGE SHARE
---------- ----------- ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Current Shareholders............................... 1,677,875 63% $ 1,248,368 20% $ 0.74
New Investors(1)................................... 1,000,000 37% $ 5,000,000 80% $ 5.00
---------- ----- ------------ -----
Total.......................................... 2,677,875 100.0% $ 6,248,368 100.0%
---------- ----- ------------ -----
---------- ----- ------------ -----
</TABLE>
- ------------------------
(1) Assuming an initial public offering price of $5.00 per Share.
20
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1998 and as adjusted to reflect the sale of the Shares offered
hereby at the assumed initial public offering price per share of $5.00, after
deducting estimated underwriting discounts and commissions, estimated offering
expenses and the initial applications of the net proceeds of this offering as
set forth in "Use of Proceeds." The information provided below should be read in
conjunction with the other financial information included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998
----------------------------
<S> <C> <C>
AS ADJUSTED
ACTUAL (1)
------------ --------------
Long-term debt, less current maturities............................................ $ 381,630 $ 381,630
Shareholders' equity
Common Shares, no par value, 1,677,875 issued and outstanding; and 2,677,875
issued and outstanding, as adjusted............................................ 1,248,368 5,088,368
Foreign currency translation adjustment.......................................... (111,139) (111,139)
Retained earnings................................................................ 451,949 451,949
Total shareholders' equity......................................................... 1,589,178 5,429,178
Total capitalization............................................................... 1,970,808 5,810,808
</TABLE>
- ------------------------
(1) As adjusted to reflect the sale by the Company of the 1,000,000 shares
offered hereby at an assumed initial public offering price of $5.00 per
share.
21
<PAGE>
SELECTED FINANCIAL DATA
The following selected statement of operations data for the years ended
December 31, 1996 and 1997 are derived from the Financial Statements of the
Company and Notes thereto included elsewhere herein audited by Schwartz Levitsky
Feldman, Chartered Accountants, the independent accountants for the Company. The
unaudited statement of operations data presented for the nine month periods
ended September, 1997 and 1998, and the unaudited balance sheet data at
September 30, 1998, are derived from the unaudited Consolidated Financial
Statements of the Company, which have been prepared on a basis consistent with
the audited Consolidated Financial Statements of the Company, and, in the
opinion of management, include all adjustments consisting only of normal
recurring adjustments, necessary for a fair presentation of the financial
condition and results of operations of the Company as of the dates and for the
periods presented.
This information should be read in conjunction with "Capitalization,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and the Notes thereto,
each included elsewhere herein. The results of operations for any interim period
are not necessarily indicative of results to be expected the entire year.
<TABLE>
<CAPTION>
YEAR ENDED, DECEMBER NINE MONTHS ENDED
31, SEPTEMBER 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1996 1997 1997 1998
--------- --------- --------- ---------
<CAPTION>
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue
Contract services........................................................ 296 3,730 2,673 6,558
Permanent placements..................................................... 468 975 746 2,198
--------- --------- --------- ---------
764 4,705 3,419 8,756
COST OF CONTRACT SERVICES.................................................. 259 2,889 2,116 5,011
Gross profit............................................................... 505 1,816 1,303 3,745
Expenses
Selling.................................................................. 273 1,123 796 2,104
Administrative........................................................... 182 373 264 968
Financial................................................................ 14 126 42 129
--------- --------- --------- ---------
469 1,622 1,102 3,201
Income Before Income Taxes................................................. 36 194 201 544
Income Taxes............................................................. 6 56 66 218
--------- --------- --------- ---------
Net income................................................................. 30 138 135 326
Earnings per share......................................................... 0.03 .11 .10 .20
Weighted Average Number of Shares Outstanding.............................. 1,021 1,309 1,309 1,650
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
--------------------------
ACTUAL AS ADJUSTED(1)
--------- ---------------
<S> <C> <C>
BALANCE SHEET DATA
Working capital.......................................................................... $ 609 $ 4,099
Total assets............................................................................. 3,493 7,333
Long-term debt........................................................................... 382 382
Total liabilities........................................................................ 1,904 1,904
Shareholders' equity..................................................................... 1,589 5,429
</TABLE>
- ------------------------
(1) As adjusted to reflect the sale by the Company of the 1,000,000 Shares
offered hereby at an assumed initial public offering Price of $5.00 per
Share and the initial application of the net proceeds therefrom. See "Use of
Proceeds."
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES THERETO AND THE OTHER FINANCIAL
DATA INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS PROSPECTUS CONTAINS
FORWARD-LOOKING STATEMENTS REGARDING THE PLANS AND OBJECTIVES OF MANAGEMENT FOR
FUTURE OPERATIONS. THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN ARE BASED ON
CURRENT EXPECTATIONS AND ASSUMPTIONS THAT INVOLVE NUMEROUS RISKS AND
UNCERTAINTIES. ALTHOUGH MANAGEMENT BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE
FORWARD-LOOKING STATEMENTS ARE REASONABLE, ANY OF THE ASSUMPTIONS COULD PROVE TO
BE INACCURATE AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE FORWARD-LOOKING
STATEMENTS INCLUDED HEREIN WILL PROVE TO BE ACCURATE. IN LIGHT OF THE
SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED
HEREIN, THE INCLUSION OF SUCH INFORMATION SHOULD NOT BE REGARDED AS A
REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES AND PLANS
OF THE COMPANY WILL BE ACHIEVED.
GENERAL
The Company is a provider of IT staffing services, primarily in Toronto,
Ontario, Canada, supplying qualified IT professionals to its customers as
independent contractors for short and long term assignments and for permanent
placement within such enterprises. The Company's customers include financial
service companies, software and other technology companies, Canadian
governmental entities and large multinational companies, including Merrill Lynch
Canada Inc., Bank of Montreal, Bell Sygma Inc., Revlon of Canada, Inc., IBM
Corporation and American Express Company. The Company has recently expanded its
operations into the United States and intends to develop a network of offices to
provide IT staffing services throughout North America.
For the year ended December 31, 1997 and the nine months ended September 30,
1998, the Company derived 96% and 99%, respectively, of its revenue in Canada
and the remainder in the United States. The Company's books and records are
recorded in Canadian dollars. For purposes of financial statement presentation,
the Company converts balance sheet data to U.S. dollars using the exchange rate
in effect at the balance sheet date. Income and expense accounts are translated
using an average exchange rate prevailing during the relevant reporting period.
There can be no assurance that the Company would have been able to exchange
currency on the rates used in these calculations. The Company does not engage in
exchange rate hedging transactions. A material change in exchange rates between
U.S. and Canadian dollars could have a material effect on the reported results
of the Company.
The Company's services are generally classified as either contract services
or permanent placement services. In the case of contract services, the Company
provides its customers with independent contractors or "contract workers" who
usually work under the supervision of the customer's management. Generally, the
Company enters into a time-and-materials contract with its customer whereby the
customer pays the Company an agreed upon hourly rate for the contract worker.
The Company pays the contract worker pursuant to a separate consulting
agreement. The contract worker generally receives between 75% and 80% of the
amount paid by the customer to the Company; however, such payment is usually not
based on any formula and may vary for different engagements. The Company has
been seeking to gain "preferred supplier status" with its larger customers to
secure a larger percentage of those customers' business. While such status is
likely to result in increased revenue and gross profit, it is likely to reduce
gross margin percentage because the Company is likely to accept a lower hourly
rate from its customers and there can be no assurance that it will be able to
reduce the hourly rate paid to its consultants.
Revenue from contract services is recognized as services are provided.
Similarly, expenses for contract services, which usually consist solely of
consulting fees paid to contract workers, are recognized as services are
provided. For the year ended December 31, 1997 and the nine months ended
September 30, 1998, the gross margin on contract services revenue was
approximately 23% and 24%, respectively. Contract services
23
<PAGE>
accounted for 79% of revenue and 46% of gross profit for the year ended December
31, 1997 and approximately 75% of revenue and 41% of gross profit for the nine
months ended September 30, 1998.
In the future, the Company may perform contract services for customers on a
project by project basis whereby the Company will be engaged to complete a
particular, specified project. The Company may hire full time employees to
supervise these projects. These projects may be billed on a time-and-materials
basis or the Company may charge a fixed price for the project. If the Company
charges a fixed price for a project, it will be required to estimate the total
costs involved in the project and formulate a bid that contains an adequate
profit margin. If the Company is unable to accurately predict the costs of such
a project, or the costs of the project change due to unanticipated
circumstances, which may be circumstances that are beyond the control of the
Company, the Company may earn lower profit margins or suffer a loss on a given
project. Currently, the Company is not providing any IT professionals pursuant
to fixed price contracts.
In the case of permanent placement services, the Company identifies and
provides candidates to fill a permanent position for its customer. The Company
recognizes revenue when the IT professional commences employment. The Company
performs permanent placement services pursuant to three invoicing policies.
Contingency services are engagements in which the Company is only paid if it is
successful in placing a candidate in a position. Contingency exclusive services
are similar to contingency services; however, the Company is the only firm
engaged to fill the position. Retained search services are similar to
contingency exclusive services, except that the Company receives a
non-refundable portion of the fee prior to performing any services, with the
remainder paid if the position is filled. Contingency, contingency exclusive and
retained search services accounted for approximately 71%, 18% and 11%,
respectively, of the Company's permanent placement services for the year ended
December 31, 1997 and 83%, 15% and 2% for the nine months ended September 30,
1998.
The Company calculates gross profit by subtracting the fees paid to
contractors from net revenue. The Company does not attribute any direct costs to
permanent placement services; therefore the gross profit margin on such services
is 100% of revenue. As a result, the addition of permanent placement revenue to
contract services revenue has a significant effect on the gross profit margin of
the Company as a whole. Permanent placement services accounted for 21% of
revenue and 54% of gross profit for the year ended December 31, 1997 and 25% of
revenue and 59% of gross profit for the nine months ended September 30, 1998.
The Company anticipates expanding into new regional markets by establishing
new offices or by acquiring or investing in complementary or competitive
companies. The Company has not yet identified any acquisition candidates and has
no agreements, plans, or arrangements with respect to such acquisitions or
investments. The Company expects the cost of opening and funding a new office to
range from $200,000 to $500,000, depending on the size of the office and the
costs of doing business in the city in which the office is to be located. Such
costs will primarily consist of leasing office space, purchasing or leasing
office equipment and computer hardware and other related expenses incurred prior
to the commencement of operations in new locations. Such costs also include
operating expenses, such as payroll and advertising, prior to such time that the
new office is able to generate significant cash flow from operations. The
opening of new offices in new regional markets results in increased operating
expenses including, but not limited to, salaries, equipment, insurance,
marketing and public relations. Senior management also devotes resources to
training and management support. Based on the experience of the Company's
principals, the Company expects newly opened offices to become productive within
6 to 12 months of opening. Although there can be no assurance that such
expectations will be satisfied, the Company's expectations in terms of
productivity for new offices by the 12th month of operations are: 30 contractors
and between $30,000 to $50,000 in permanent placement sales per month with
annual revenues of approximately $450,000. The Company is likely to utilize
acquisitions as an attempt to avoid or limit these costs, but the Company will
incur other costs as a result of any acquisitions, including funding the
purchase price and expenses related to the integration of operations and
training of new employees. With regard to previous acquisitions,
24
<PAGE>
integration costs were expensed in the period that they were incurred and the
Company expects to continue to do so with future acquisitions. The Company
intends its acquisition targets to be small companies who can benefit from the
Company's advanced IT and other operating systems. There can be no assurance
that integrating the Company's operations with those of acquired companies will
result in improvements in such companies' operations or increased revenue from
such operations.
In April 1998, the Company completed the acquisition of all the issued and
outstanding shares of SCI and SPSI for aggregate consideration of $100,007 and
174,551 Common Shares. In addition, the Company issued 113,459 Common Shares to
Globe Capital Corporation for services in connection with the acquisition. SPSI
is inactive but holds certain assets utilized by Systems in its operations. The
acquisition was effective as of January 2, 1997. Declan French, the President
and Chairman of the Board of the Company, participated in the management of
Systems during 1997 and the Company and Systems shared data and operating
information during the year ended December 31, 1997. Accordingly, the Company's
Consolidated Financial Statements incorporate the operations of Systems since
January 1, 1997.
On May 19, 1998, the Company completed the acquisition of all the issued and
outstanding shares of capital stock of ICS for $303,555 in cash and 130,914
Common Shares to John A. Irwin, who was not affiliated with the Company prior to
this acquisition. In connection with the acquisition, ICS made a distribution to
Mr. Irwin of certain ICS assets that were not necessary for the operation of the
business. The transaction was effective as of January 1, 1998. Declan French and
other officers of the Company participated in the management of ICS during the
nine months ended September 30, 1998. Accordingly, the Company's Consolidated
Financial Statements incorporate the operation of ICS since January 1, 1998.
In November 1998, the Company completed the acquisition of certain assets of
Southport from
Mr. Michael Carrazza for $50,000 in cash and an amount of Common Shares with a
value of $200,000 based on the offering price. If at the time Mr. Carrazza is
eligible to sell shares under Rule 144 and any contractual arrangement with the
Representative, the price of the Common Shares is less than the initial public
offering price the Company will be required to either issue additional shares or
fund the difference in cash.
Each acquisition was accounted for using the purchase method of accounting,
which requires that the purchase price be allocated to the assets of the
acquired entity based on fair market value. In connection with the acquisitions
of Systems, ICS and certain assets of Southport the Company recorded $434,657,
$851,763 and $100,000, respectively, in goodwill, which is being amortized over
thirty years in accordance with generally accepted accounting principles as
applied in the United States.
RESULTS OF OPERATIONS
The following table presents certain financial data of the Company as a
percentage of the Company's revenue based on information derived from the
Company's financial statements.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED, DECEMBER 31,
SEPTEMBER 30,
------------------------ ------------------------
1996 1997 1997 1998
----- ----- ----- -----
<S> <C> <C> <C> <C>
Sales........................................... 100% 100% 100% 100%
Contractor Costs................................ 34% 61% 62% 57%
Gross profit.................................... 66% 39% 38% 43%
Operating Expenses.............................. 61% 34% 32% 37%
Income from operations.......................... 5% 4% 6% 6%
Net income...................................... 4% 3% 4% 4%
</TABLE>
25
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1997
REVENUE. Revenue for the nine months ended September 30, 1998 increased by
$5.3 million, or 199%, to $8.7 million, as compared to $3.4 million for the nine
months ended September 30, 1997. The increase is primarily attributable to the
acquisition effective January 1, 1998 of ICS, which had sales of $3.4 million
for the nine months ended September 30, 1998. Also contributing to the increase
was an increase of $530,000 in the sales of Systems as a result of improvements
in operations since it was acquired by the Company effective January 2, 1997,
and growth in the contract sales in the Toronto office. Revenue from contract
services and permanent placement services accounted for 75% and 25%,
respectively, of revenue for the nine months ended September 30, 1998 as
compared to 78% and 22%, respectively, for the nine months ended September 30,
1997.
CONTRACTOR COSTS. Contractor costs for the nine months ended September 30,
1998 increased by $2.9 million, or 137%, to $5.0 million, as compared to $2.1
million for the nine months ended September 30, 1997. This increase was due to
the increased volume of contract services. As a percentage of revenue from
contract services, contractor costs remained constant at 77%.
GROSS PROFIT. Gross profit for the nine months ended September 30, 1998
increased by $2.4 million, or 187%, to $3.7 million, as compared to $1.3 million
for the nine months ended September 30, 1997. This increase was attributable to
the aforementioned increase in revenue during the nine months ended September
30, 1998. As a percentage of revenue, gross profit increased to 43% for the nine
months ended September 30, 1998 as compared to 38% for the nine months ended
September 30, 1997. This increase was due to the slight decrease in the
percentage of revenue which was derived from contract services.
OPERATING EXPENSES. Operating expenses for the nine months ended September
30, 1998 increased by $2.1 million, or 190%, to $3.2 million, as compared to
$1.1 million for the nine months ended September 30, 1997. This increase was
primarily attributable to increases of $928,000 in selling expenses and $431,000
in administrative expenses at ICS during the nine months ended September 30,
1998. Administrative expenses at the IT Staffing Division also increased as the
Company expanded its infrastructure to support operations from multiple
locations and operated additional offices. As a percentage of revenue, operating
costs increased to 37% for the nine months ended September 30, 1998 from 32% for
the nine months ended September 30, 1997 due to an increase in the number of
locations and volume of transactions.
ACCOUNTS RECEIVABLE. The Company had accounts receivable of $1,838,633 for
the nine months ended September 30, 1998 as compared to $698,046 for the
comparable period of the previous year. Accounts receivable represented 21% of
revenues for the nine months ended September 30, 1998 as compared to 20.4% in
the comparable period of the previous year.
NET INCOME. Net income for the nine months ended September 30, 1998
increased by $190,000, or 140% to $326,000, as compared to $135,000 for the nine
months ended September 30, 1997 due to, among other things, the reasons
enumerated above.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
REVENUE. Revenue for the year ended December 31, 1997 increased by $3.9
million, or 510%, to $4.7 million, as compared to $764,000 for the year ended
December 31, 1996. The increase is primarily attributable to the acquisition of
Systems, which had revenue for the year ended December 31, 1997 of $2.0 million,
effective January 2, 1997, and an increase of $1.7 million of revenue during
such period from contract services at the IT Staffing Division as a result of
internal growth. Revenue from contract services and permanent placement services
accounted for 79% and 21%, respectively, of revenue for the year ended December
31, 1997 as compared to 39% and 61%, respectively, for the year ended December
31, 1996.
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<PAGE>
CONTRACTOR COSTS. Contractor costs for the year ended December 31, 1997
increased by $2.6 million, or 1000%, to $2.9 million, as compared to $260,000
for the year ended December 31, 1997. This increase was attributable to the
increased volume of contract services. As a percentage of revenue from contract
services, contractor costs decreased to 78% for the year ended December 31, 1997
from 88% for the year ended December 31, 1996 primarily as a result of an
increase in average hourly billing rates for the Company's contract services.
GROSS PROFIT. Gross profit for the year ended December 31, 1997 increased
by $1.3 million, or 256%, to $1.8 million, as compared to $505,000 for the year
ended December 31, 1996. This increase was atttributable to the aforementioned
increase in revenue. As a percentage of revenue, gross profit decreased to 38%
for the year ended December 31, 1997 as compared to 66% for the year ended
December 31, 1996. This decrease was due to the increase in the percentage of
revenue which was derived from contract services.
OPERATING EXPENSES. Operating expenses for the year ended December 31, 1997
increased $1.2 million, or 234%, to $1.6 million, as compared to $470,000 for
the year ended December 31, 1997. This increase was primarily attributable to
the acquisition of Systems, which incurred operating expenses of $515,000 during
the year ended December 31, 1997, and an increase of $442,000 in selling
expenses at the IT Staffing division due to increased volume of sales.
Administrative expenses at the IT Staffing Division also increased as the
Company expanded infrastructure to support operations from multiple locations.
As a percentage of revenue, operating costs decreased to 34% for the year ended
December 31, 1997 from 61% for the year ended December 31,1996 as a result of
increased revenue since many administrative costs are relatively fixed and do
not vary with revenue.
ACCOUNTS RECEIVABLE. The Company had accounts receivable of $761,570 for
the year ended December 31, 1997, as compared to $211,978 for the year ended
December 31, 1996. Accounts receivable represented 16.2% of revenues for the
year ended December 31, 1997, as compared to 27.7% for the year ended December
31, 1996. The decrease as a percentage of revenues stems from the fact that a
large portion of 1996 revenues were in the last part of the year and were not
yet paid at December 31, 1996.
NET INCOME. Net income for the year ended December 31, 1997 increased by
$108,000, or 360%, to $138,000 for the year ended December 31, 1997 as compared
to $30,000 for the year ended December 31, 1996 as a result of, among other
things, the reasons enumerated above.
LIQUIDITY AND CAPITAL RESOURCES.
The Company's primary sources of cash are cash flow from operations and a
credit line with the Toronto-Dominion Bank ("TDB").
At September 30, 1998, the Company had cash of $150,000 and working capital
of $609,000. During the nine months ended September 30, 1998, the Company had a
cash flow deficiency from operations of $28,000, due primarily to an increase in
accounts receivable of $1,178,000, which was partially offset by net income of
$326,000 and an increase in accounts payable of $727,000. The increase in
accounts receivable is primarily due to the increase in revenue in the months
prior to September 30, 1998 as compared to the months prior to December 31,
1997. At December 31, 1997, the Company had cash and cash equivalents of
$10,000, and a working capital deficiency of $10,000. For the year ended
December 31, 1997, the Company had a cash flow deficiency from operations of
$70,000, due primarily to an increase in accounts receivable of $577,000, which
was partially offset by increase in accounts payable of $317,000 and net income
of $138,000.
For the nine months ended September 30, 1998, the Company had cash flow from
financing activities of $896,000, attributable primarily to proceeds from the
issuances of Common Shares. For the year ended December 31, 1997, the Company
had cash flow from financing activities of $250,000 attributable primarily
27
<PAGE>
to the increase in Notes payable and bank indebtedness. During the nine months
ended September 30, 1998, the Company received $620,944 for the issuance of
281,464 Common Shares.
The Company's arrangement with TDB, which was revised in October 1998,
allows for an operating line, payable on demand, of up to $650,000. Outstanding
balances bear interest at 1.75% over TDB's prime rate. The line is secured by
substantially all of the Company's assets, an assignment of life insurance on
the life of Declan French to the extent of $200,000, and is personally
guaranteed by Declan French and his wife to the extent of $130,000. The loan is
subject to certain financial covenants including a minimum net worth of
$562,065. At September 30, 1998, there was $240,000 outstanding on this line.
As of September 30, 1998, the Company had a total of $488,730 due to BDC
pursuant to four separate loans. The loans bear interest at the BDC's prime rate
plus 4% to 5% and are being repaid in monthly installments which currently
aggregate $8,800. In addition to interest, the Company granted BDC an option to
acquire 22,125 Common Shares for an aggregate exercise price of $1.00 and to pay
BDC a royalty equal to .063% of gross sales until August 2003. The Company is
restricted from paying dividends until these loans have been repaid to BDC. On
December 1, 1998 the Company obtained an additional loan of $196,800 from BDC.
The loan bears interest at 11% and is to be repayable in 60 equal payments
commencing on April 23, 1999. In addition, the Company shall pay BDC additional
interest in the form of a royalty on sales equal to .0184% of the Company's
gross sales consolidated beginning in the month following the initial
disbursement of the loan or on January 23, 1999, whichever comes later.
During the nine months ended September 30, 1998, the Company had a cash flow
deficit from investing activities of $721,000, primarily attributable to the
aforementioned acquisition of ICS. During the year ended December 31, 1997, the
Company had a cash flow deficit from investing activities of $184,000, primarily
attributable to the aforementioned acquisition of Systems.
During the fourth quarter of 1997, the Company experienced a financial loss
of $7,000. This loss was a function of two issues relating to operations. In
October 1997, the Company had begun operations in a New York office and incurred
approximately $67,000 of expenses relating to the start-up. While this type of
expense is a re-occurring item with each office opening, the costs will vary
depending upon the size and location of each new office. The second issue
relates to significant management time, commitment and effort invested in the
development of HR Workbench and AppTracker software programs. These are key
strategic initiatives for the internet oriented nature of the Company's
operations.
The Company has entered into employment and consulting agreements with
certain of its key employees. These agreements provide for significant salaries
and/or bonuses based on the Company and/or certain of its divisions' financial
performance. These agreements could affect the Company's liquidity. See
"Management--Employment Agreements" and "--Consulting Agreements."
The Company believes that cash flow from operations, together with the
proceeds of the offering, will be sufficient to satisfy the Company's working
capital needs for at least the next 18 months.
YEAR 2000 PREPARATION
Many computer systems and software products worldwide and throughout all
industries will not function properly, unless upgraded, as the year 2000
approaches, due to a once common programming standard that represents years
using two-digits. This is the "Year 2000 problem" that has received considerable
media coverage. The Company believes that it is Year 2000 compliant with respect
to its internal systems, including its HR Workbench software. AppTracker is also
designed to be Year 2000 compliant.
SEASONALITY
The Company also experiences a minor decrease in contract billings in the
second half of December as workers take their holidays; there also tends to be a
sluggish start to new billings in January due to lack of hiring momentum from
managers newly returned from holidays. Beyond these two instances, the Company
does not experience much seasonal fluctuation in its level of business.
28
<PAGE>
BUSINESS
The Company is a provider of IT staffing services, primarily in Toronto,
Ontario, Canada, supplying qualified IT professionals to its customers as
independent contractors for short and long term assignments and for permanent
placement within such enterprises. The Company's customers include financial
service companies, software and other technology companies, Canadian
governmental entities and large multinational companies, including Merrill Lynch
Canada Company, Inc., Bank of Montreal, Bell Sygma Inc., Revlon Canada Inc., IBM
Corporation and American Express Company. The Company has recently expanded its
operations into the United States and intends to develop a network of offices to
provide IT staffing services throughout North America.
The Company has focused on the recruiting of quality IT professionals. The
Company utilizes established testing methods to ensure that its IT professionals
are properly qualified. The Company also reviews a candidates' technical
backgrounds and conducts preliminary interviews prior to referring candidates to
its customers. By attracting the most qualified IT professionals, the Company
believes that it will be able to attract high quality customers who require the
services of such professionals.
Since inception, the Company has pursued a strategy of developing and
utilizing technology that it believes will provide it a competitive advantage.
As a result, the Company believes that one of its primary competitive strengths
is its utilization of technology. The Company maintains a database of over
35,000 IT professionals and advertises on the Internet to attract both
candidates and customers. The Company uses HR Workbench, software developed by
the Company in conjunction with Great Lakes Research and Development ("Great
Lakes"), an unaffiliated entity, to locate the IT professionals in the Company's
database with the technical skills and job interests that best satisfy the
requirements of the position that the Company is attempting to staff. The
database allows all of the Company's recruiters immediate access to active
candidates. Candidates can register themselves directly into the database
through the Internet or be entered into the system by the Company's recruiters.
The Company and Great Lakes have developed, and are in the process of
testing, an additional software product called AppTracker, which the Company,
through a joint venture with Great Lakes, intends to market to human resource
departments during the year ending December 31, 1999. The software is designed
to aid human resources departments in performing numerous recruitment tasks,
such as scheduling interviews and evaluating candidates. Statistics about the
recruitment process, including the costs and expenses, are tabulated in various
databases. The Company believes that it will have an advantage in marketing its
staffing services to companies using AppTracker because of the Company's
familiarity with the software and the ease of electronic data interchange
("EDI") with the Company.
The Company was incorporated under the laws of the Province of Ontario,
Canada in 1994.
INDUSTRY BACKGROUND
The staffing industry has experienced significant growth in recent years in
response to the increased popularity of outsourcing of many staffing
requirements. This growth has been driven by employers who have sought to
convert personnel costs from fixed to variable in nature by reducing their
permanent staff and supplementing their workforce with contract employees for
specific projects, peak work loads and other needs. The use of flexible staffing
services has allowed employers to improve productivity, outsource specialized
skills and avoid the negative effects of layoffs. This trend has accelerated
with the pace of technological change and greater global competitive pressures.
Regulations governing employee benefits, insurance and retirement plans, as well
as the high cost of hiring, laying off and terminating permanent employees, have
prompted many employers to take advantage of the flexibility offered through
contract staffing arrangements. According to the STAFFING INDUSTRY REPORT, a
leading industry publication, revenue for the year ended December 31, 1997 for
IT staffing services in the United States is estimated to have been $14.8
billion, a 27% increase over such revenues for the year ended December 31, 1996.
According to an 1998 IDC Canada survey, an independent Canadian industry
publication, the Canadian Information
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Technology services industry grew by more than 11% in 1997, reaching CDN$11.5
billion in revenues, an increase of 11.5% over such revenues for the year ended
December 31, 1996, and is expected to grow at a compounded annual rate of 12.1%
through 2001.
The high technology industry as a whole continues to experience substantial
growth as constant innovations, such as open and distributed computing,
client/server technology, the Internet, relational databases and object-oriented
programming, shortens product lifecycles and accelerates the demand for
computer-related products. These trends, combined with the intense competition
faced by high technology companies, have put considerable pressure on such
companies to shorten the time-to-market of their products. The development of
these next generation products often requires highly specialized technical
talent which may not be available internally. This need for IT professionals is
particularly critical during the period prior to the release of new software or
hardware products. As a result, these high technology companies are frequently
utilizing supplemental sources of IT professionals with expertise in current
technologies.
As new technologies are developed and introduced, businesses are attempting
to integrate and implement these technologies into their already complex IT
systems. As these systems are being deployed on an enterprise-wide basis and on
multiple hardware and software platforms, the process of systems design and
implementation has become more complex. As a result, businesses are forced to
find qualified IT professionals to design, develop, deploy and maintain their
systems. Frequently, however, qualified IT professionals do not exist internally
or it may be impractical to redeploy and retrain internal personnel.
Consequently, these businesses are increasingly seeking to augment their staffs
with IT professionals skilled in the management and operation of such systems.
The Company believes that the growth of the Internet is likely to contribute
to the demand for IT professionals. North American companies are increasingly
establishing or maintaining a presence on the Internet. Although many companies
outsource to web site maintenance companies, others retain direct control of
their web sites and may utilize contract workers to establish and maintain such
sites.
Despite increased demand for IT professionals, there is a shortage of IT
professionals proficient in the most current computer languages and
applications. According to the Information Technology Association of America,
recent studies indicate that the United States has a shortage of approximately
346,000 IT professionals. According to a study performed by the KPMG/CATA
Alliance, Canada has a shortage of between 20,000 and 30,000 IT professionals.
The studies also suggests that the shortfall is growing. Due to the high demand
for their services, many IT professionals have a variety of opportunities in the
job market and an increasing number are attracted to the benefits of working on
a contract basis. Such benefits include more flexible work schedules and the
opportunity to work with emerging and challenging technologies in a variety of
industries.
The Company believes that to address their increasing demand for contract
and permanent IT professionals, both research and development departments of
technology companies and IT departments of large corporations are turning to IT
staffing companies to augment their existing operations. Technology-dependent
companies are increasingly utilizing outside consultants to: (i) meet critical
production deadlines; (ii) focus on their core business and avoid devoting
valuable time to the recruiting and hiring processes; (iii) access specialized
technical skills; (iv) better match staffing levels to current needs; and (v)
reduce the costs of recruiting, training and terminating employees.
BUSINESS STRATEGY
The Company's business objectives are to increase its share of the IT
staffing services market in Canada and the United States, as well as to
establish a network of offices throughout such countries which, when linked by
means of the Internet, will allow the Company to provide its customers with an
array of IT staffing services. The primary components of the Company's strategy
to achieve such objectives are as follows:
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LEVERAGE CLIENT BASE TO ATTRACT AND RETAIN HIGHLY QUALIFIED IT PROFESSIONALS
A key element of the Company's success has been its ability to attract and
retain highly qualified IT professionals. The Company believes that the primary
reason that it can attract such professionals is due to its high quality
customer base, which allows the Company the opportunity to identify and deliver
high quality assignments involving leading-edge technologies. Additionally, the
Company believes that it has developed a reputation among IT professionals for
efficient and high quality placements by focusing on an IT professional's
particular field of technical specialization and providing access for IT
professionals to cash compensation levels comparable to, or higher than, that of
similarly skilled, full-time employees.
As the Company's high quality clients have allowed it to attract a large
number of qualified IT professionals, the Company's database of IT
professionals, in turn, has allowed the Company to increase its number of
clients. The Company believes that this cyclical phenomenon in the recruiting
business creates the opportunity for significant growth as the Company expands
and implements the other facets of its business plan.
FOCUS ON NICHE MARKETS
The Company believes that its expertise in the IT industry provides it a
competitive advantage over recruiting firms that do not utilize IT specialists
in their recruiting. The Staffing Report On-Line, an on-line magazine for the
employment and temporary service industry, views the IT staffing business as
distinctly different from traditional staffing businesses. The Company's
recruiters follow IT industry trends, are usually knowledgeable in the IT area
and have access to the Company's databases of IT professionals, all of which
enables them to provide their customers with candidates who will satisfy a
particular client's requirements.
Although the Company recruits professionals in all aspects of the IT
business, the Company places added emphasis on certain areas, such as Enterprise
Resource Planning ("ERP") software products produced by Oracle Corporation, SAP
AG, Peoplesoft, Inc. and the BAAN Company. The Company is often discussed in Web
sites for Oracle product users and believes it can develop a reputation as one
of the premier sources of IT professionals with skills and experience relating
to Oracle Corporation and other ERP products. The Company has also developed an
excellent reputation for recruiting IT professionals who specialize in network
management. The Company believes that developing niche specialties will enhance
the reputation of the Company as a whole and create opportunities for the
Company to establish relationships with new customers who then may utilize the
Company to locate IT professionals with other skills.
EXPAND INTO NEW REGIONAL MARKETS
As opportunities arise, the Company intends to expand into certain markets
by means of acquisition, but believes that most expansion will come from the
establishment of new offices. The Company intends to establish such offices by
hiring experienced recruiters familiar with the local markets and providing them
access to the Company's existing group of IT professionals and customers by
means of the Internet. By hiring local recruiters the Company believes that it
will be able to attract local clients and IT professionals who may not have been
previously familiar with the Company. The Company believes that such recruiters
will find the Company to be an attractive place to work because of the Company's
existing relationships with multinational and other large corporate clients, the
Company's good reputation among IT professionals, the Company's quality
information technology system and the Company's incentive based compensation
package which will generally combine base salary, bonuses, commissions and
incentive stock options.
Where the Company deems it more cost effective, or a particular acquisition
candidate will provide the Company with a competitive advantage, the Company may
enter a new regional market by acquiring an existing IT staffing company. The
Company intends to focus on small acquisition targets who will be able to
benefit from the Company's strong IT and operating systems.
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CONTINUE TO UTILIZE THE INTERNET AND INFORMATION TECHNOLOGY
The Company believes that its use of technology provides it a competitive
advantage over many of its competitors. The Company utilizes its HR Workbench
software to operate its database and allow recruiters to use a query based
system that matches the skill set and employment preferences of the IT
professionals with the needs of the customer. This system also tracks other
information, such as average salaries of a particular position, which enables
the Company to provide valuable advice to its clients in selecting the proper IT
professional. The Company's IT professional database and recruiting software is
available to its employees in other cities through its fully secure intranet
system. For example, a recruiter in a new office in Austin, Texas could have
complete access to the Company's information technology in Toronto, Ontario. The
Company believes that this will enable it to open new offices that are quickly
ready to provide services to customers without incurring significant IT start-up
costs. In smaller markets, the Company intends to utilize its IT system to
create lightly staffed "virtual offices" that rely on the Toronto, Ontario
office for all administrative and many operating functions.
The Company utilizes the Internet to promote its services and to provide IT
professionals with a complete listing of available employment opportunities. IT
professionals can e-mail their resumes to the Company's recruiters and, by
completing an on-line form, enter themselves into the Company's database.
Currently, the Company is upgrading its Web site so that it will more
effectively promote the Company's services to potential customers.
The Company, in conjunction with Great Lakes, is developing software that
will enable human resources departments to perform numerous recruitment tasks,
such as scheduling interviews and evaluating candidates. Statistics related to
the recruitment process, including the costs and expenses, are tabulated in
various databases. The Company believes that it will have an advantage in
marketing its recruitment services to companies that are using AppTracker
because of the Company's familiarity with the software and the ease of EDI with
the Company.
DEVELOP AND PROMOTE A MANAGED SERVICES PRACTICE
The Company intends to form a team of consultants who will aid the Company's
customers in determining their IT staffing needs. The Company believes that this
will provide it with a competitive advantage when compared with traditional
recruiting firms. Furthermore, the Company believes that Managed Services could
provide it with an additional source of revenue, which could be particulary
important if companies utilize AppTracker and Internet sources to reduce their
reliance on recruiting firms.
CAPITALIZE ON YEAR 2000 AND OTHER OPPORTUNITIES
Due to a once-common programming standard that represents years using
two-digits, many computer systems and software products, unless upgraded, will
not function properly as the year 2000 approaches. The problem will result in
the inability of computer systems to properly recognize date-sensitive data and
will result in the production of erroneous information or system failure.
The Company believes that many companies will turn to contract workers to
review their computer systems and make necessary changes to avoid Year 2000
problems. For example, the Company assembled a group of specialists to remedy
the potential Year 2000 problems at the Canadian offices of a large financial
services firm. Contract workers are ideal for this task because it is likely to
be a time consuming and complicated, yet temporary, project. Although the
increase in revenues from Year 2000 related projects will be temporary, the
Company intends to use the Year 2000 as an opportunity to develop additional
customer relationships and to expand the scope of its contract work on a
project-by-project basis. The Company intends to assemble teams of Year 2000
specialists and aggressively market their services to the Company's customers.
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The Company believes that there will be opportunities for projects like Year
2000 projects as the Dow Jones Industrial Average, which is often recorded in
data fields designed to read four digits, approaches 10,000, and when the
European Union adopts a single currency. Computer systems will require
modifications to be able to properly record these data changes, and companies
may rely on contract workers and consulting teams to implement these changes.
The Company intends to capitalize on the need for a quick response to such
provisions by assembling teams of specialists to address such problems which the
Company intends to use as an opportunity to establish additional customer
relationships.
As the state of the economy fluctuates, so too do expenditures on new IT
systems. This is particularly true of the financial services industry, where
there is a higher amount of discretionary spending for IT systems. The Company
has guarded against being adversely affected by a curb in spending from the
financial services sector by diversifying its client base to include
manufacturing, distributing and telecommunications firms, and software
companies.
Currently there is a high demand for IT people to tackle the Year 2000 and
European Currency conversion projects. There has been some speculation that
demand for IT workers will decline dramatically after these projects have been
completed. More accurately, however, the level of demand will not change
significantly. New projects that are currently on hold in order to focus finite
resources on the pressing Year 2000 issue, will come alive and will keep
requirements for IT workers at a consistently high level.
The Company has been focusing its infrastructure development and marketing
initiatives on niche market areas, such as ERP and network management. The
Company believes that by doing so it has positioned itself in the lowest
possible risk sector for market fluctuations.
The niche IT specialists mentioned above will be in strong demand for new
system initiatives currently on hold while resources are focused on the more
critical Year 2000 issue.
CONTRACT SERVICES
The Company's contract services revenue is derived from time and materials
contracts in which the Company supplies a contract worker to perform under the
supervision of the client. The Company's contract services generally consist of
providing contract workers to customers for short and long term assignments.
These assignments generally last from three to twelve months, but can sometimes
last much longer. The assignments may be for specified projects or general IT
consulting work. Although the Company currently bills the clients only on a time
and materials basis at an agreed upon hourly rate, in the future it may assemble
teams that will perform projects for an agreed upon fixed price for the project.
The Company pays the contract worker an agreed upon rate, pursuant to the
Company's standard consulting services agreement. The contract worker generally
receives between 75% and 80% of the amount paid by the customer to the Company,
however such payment is usually not based on any formula and may vary for
different engagements. This agreement, which is terminable by the Company at any
time, obligates the contract worker to provide notice prior to leaving the
position, contains a confidentiality clause, and prohibits the worker from going
to work directly for the customer for a period of six months from the date that
the worker no longer works for such customer without the consent of the Company.
At September 30, 1998, approximately 160 contract workers placed by the Company
were performing services for the Company's customers.
The Company intends to increase the amount of project services work it is
doing by assembling teams specializing in particular projects, such as Year 2000
problem resolution. See "Business--Business Strategy--Focus on Niche Markets."
In the future, the Company may hire project leaders as salaried employees to
lead teams of consultants on certain projects. The Company believes that this
will enable the Company to earn higher margins on its project work. Furthermore,
such teams would enable the Company to market itself as a full-service provider
of IT staffing services with a wide array of services that can be tailored to
meet a customer's particular needs.
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PERMANENT STAFFING PLACEMENT SERVICES
The Company's permanent placement services generally consist of the
placement of an IT professional in a position for the Company's customers. The
Company identifies and provides candidates to its customers who its recruiters
believe, based on the Company's data, have the technical skills and job interest
to best satisfy the requirements of the position. The Company recognizes revenue
when the IT professional commences employment. However, the Company is required
to find a replacement free of charge if the employee does not remain in the
position for at least 90 days. This placement fee is usually structured as a
percentage of the IT professional's first-year annual compensation. This
percentage ranges from 20% to 30%, although the Company expects to reduce the
fee to 15% for customers utilizing the Company's Internet technology because
those placements will require less time and input from the Company's recruiters.
Salaries for the IT professionals that the Company places generally range from
$45,000 to $125,000.
The Company performs permanent placement services pursuant to three
invoicing policies. Contingency services are engagements in which the Company is
only paid if it is successful in placing a candidate in a position. Contingency
exclusive services are similar to contingency engagements, however, the Company
is the only firm engaged to fill the position. Retained search services are
similar to contingency exclusive services, except that the Company receives a
non-refundable portion of the fee prior to performing any services, with the
remainder paid if the position is filled.
SALES AND MARKETING
The Company's primary target markets are software, telecommunications and
other technology companies, financial service companies and multinational and
other large corporations. The Company maintains a database of human resource
administrators and IT department heads at these firms and utilizes its sales
forces to build relationships with these individuals by stressing the quality of
IT professionals that the Company recruits. As the Company expands into new
regional markets it intends to hire local sales people who are familiar with
local customers. Because many of the Company's customers maintain offices in
more than one city, the Company believes that it will have an advantage in
establishing relationships with these additional offices as the Company expands
into new regional markets.
The Company markets its services via the Internet. The Company is in the
process of upgrading its web site, which previously has been used primarily as a
tool to advertise job opportunities to IT professionals and to promote its
services to its customers. The Company also utilizes traditional advertising
outlets and trade shows to promote its services to potential customers.
CUSTOMERS
The Company provides staffing services to customers in a wide array of
industries. Software development, telecommunications, and other technology
companies utilize the Company's services to locate programmers in the
development of new products. The Company also provides services to financial
services companies, such as Bank of Montreal and Merrill Lynch Canada Inc.,
which are extremely reliant on their IT systems. Large consulting firms, such as
Deloitte & Touche Tohmatsu, are also beginning to utilize the Company to meet
their need for IT professionals.
The Company's customers include the Canadian units of Fortune 1000
companies, such as American Express Company, Revlon Canada Inc. and IBM
Corporation. The Company believes that it will be able to provide services to
other multinational and large companies and expand services provided to these
existing customers by expanding into new regional markets. These multinational
and other large companies have indicated to the Company that they desire to use
fewer suppliers to meet their needs and the Company believes that it will be
able to utilize relationships in one market to establish relationships with such
companies in other markets. Additionally, the Company believes that its high
profile customer base
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provides it credibility when pursuing other customers. The following is a list
of certain of the larger companies who utilize the Company's services.
<TABLE>
<CAPTION>
FINANCIAL SERVICES SOFTWARE, TECHNOLOGY AND TELECOMMUNICATIONS
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Bank of Montreal Bell Sygma Inc.
Merrill Lynch Canada Inc. Bell Canada
CIBC Wood Gundy Securities Inc. SHL Systemhouse Co.
First American Title Insurance Company Star Data Systems, Inc.
Harris Trust and Savings Bank IBM Corporation
<CAPTION>
GOVERNMENT AND EDUCATIONAL OTHER
- -------------------------------------------------------- --------------------------------------------------------
<S> <C>
Revenue Canada American Express Company
Environment Canada Imperial Oil Limited
University of Toronto Deloitte & Touche Tohmatsu
National Grocers Co. Ltd.
SolCorp
Revlon Canada Inc.
</TABLE>
As is common in the staffing industry, the Company does not have long-term
written contracts with most of its customers. The Company, however, generally
enters into a standard form agreement with its customers that indicates which
parties are responsible for taxes and other expenses, and provides that all
intellectual property and other proprietary information will remain confidential
and the property of the customer. Some customers, such as the Canadian
government, Dow Jones and CIBC Wood Gundy Securities Inc., require the Company
to use another form of agreement which is similar in all material respects to
the Company's standard form. With certain clients, most significantly, Bank of
Montreal, the Company enters into an agreement allocating other
responsibilities, such as the supervision of the IT professionals it recruits.
Other customers, such as Bell Sygma Inc., enter into annual contracts with the
Company pursuant to which the Company will supply contract workers during the
year as required by the customer at fees to be negotiated.
STRATEGIC ALLIANCES
The Company has entered into a strategic alliance with Great Lakes which has
resulted in the development of HR Workbench and AppTracker. See
"Business--Information Technology and the Internet." The Company has also
established relationships with other job search resources on the Internet to
promote the Company's services. For example, the job listing page of the Toronto
Star newspaper's Web site displays the Company's name and has a hyperlink to the
Company's Web site.
The Company intends to utilize strategic alliances to promote its staffing
services. The Company may enter into arrangements with consulting firms to staff
major IT projects. Alternatively, the Company may enter into arrangements with
software companies whereby the Company's contract workers will be trained to
perform customer support services. Lastly, the Company may enter into agreements
with other staffing companies in geographic regions in which the Company does
not intend to expand. Such arrangements will allow the Company to provide its
existing large corporate clients with services in areas where the Company is not
familiar with the local market. Currently, the Company is not a party to any
agreements to enter into arrangements such as these, and there can be no
assurance that the Company will find entities with which to enter into strategic
alliances on terms acceptable to the Company, or at all.
RECRUITING
The Company believes that its technology and experienced recruiting staff of
52 individuals enables it to recruit qualified IT professionals whose skills
match the needs of its customers. Many of the Company's recruiters have strong
IT backgrounds and are required by the Company to take a two week training
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course when hired by the Company. The Company maintains a database of over
35,000 IT professionals. The Company's recruiters maintain ongoing relationships
with certain IT professionals and are aware of their particular skills and
employment status. Using the Company's database and its recruiters' knowledge of
available IT professionals, the Company is often able to quickly locate a number
of suitable candidates for a position, which is particularly important for
positions in which the Company does not have an exclusive engagement. The
database also contains reference and employment history information which
accelerates the screening process.
The Company tests the computer skills of all of its IT professionals
utilizing TeckChek software. This software provides recruiters with a consistent
rating system and a reliable method of evaluating candidates, which aids
recruiters in matching candidates with positions requiring their skill set. This
software also allows the Company to provide evidence to its customers that
potential employees have sufficient technical skills. Additionally, the Company
screens candidates by telephone and in-person interviews and by reference
checks.
If the Company is unable to locate suitable candidates for a position by
means of its databases, the Company may utilize advertisements in newspapers and
trade magazines. The Company often prepares and places advertisements on behalf
of its clients. The Company has been approved by the Canadian Newspaper
Association as an advertising agency, which allows the Company to earn a
commission on any advertisements it places. Additionally, the Company posts job
openings on its Web site and invites IT professionals to submit their resumes to
the Company by e-mail.
The Company intends to recruit IT professionals from other countries, such
as Singapore and India, where there are a number of IT professionals and the job
opportunities are inferior to those in North America. United States and Canadian
immigration laws contain preferences for immigrants who can fill skilled labor
positions for which there is a shortage of native applicants.
The Company believes that turbulent economic and political situations in
other parts of the world, as well as the general lack of opportunities for top
IT professionals in countries such as Russia and India, make Canada and the
United States an appealing choice for immigration. According to a recent KPMG/
CATA Alliance High Tech Labor Survey, there is a shortage of IT workers in
Canada. Bringing in foreign workers helps to alleviate this shortage. The
Canadian government, in recognition of this fact, has relaxed entrance
requirements for IT professionals, allowing such workers to enter the country
more quickly than ever before.
The Company is dedicated to maximizing the value of overseas recruitment
through a variety of methods. The first is through the extensive use of the
Internet and its Internet-based products, WorkBench and AppTracker. By using a
combination of its Web site and e-mail, it is able to communicate with IT
professionals around the globe, making them aware of the opportunities it has
available, and discussing immigration options.
Internally, the Company has started to build a knowledge base around the
particular issues of bringing IT workers to Canada. The Company has also been
building a library of information about the legal technicalities surrounding
work visas and immigration for Canadian workers migrating to the United States.
To complement this knowledge that the Company is building internally, it has
also developed strategic relationships with legal counsel specializing in
immigration and visa issues.
Another strategy the Company is employing in the area of foreign recruitment
is the establishment of lightly staffed virtual offices in different parts of
the world. Recruiters with country-specific contacts and knowledge are given
access to the Company's database and job postings. They then carry this
information into the field where they screen and select foreign candidates who
they feel would be appropriate for the opportunities that the Company has
available. The Company then takes these pre-screened candidates and continues
with the evaluation process.
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INFORMATION TECHNOLOGY AND THE INTERNET
The Company has established an extensive IT system which it believes
provides it with a competitive advantage over less technologically advanced
competitors. The primary components of the Company's IT system and its use of
technology are described below.
THE HR WORKBENCH SOFTWARE AND PROPRIETARY DATABASES
The HR Workbench software is an Internet-based software application that is
used by the Company in the administration and tracking of internal processes
relating to the recruitment and placement of IT professionals. This software was
developed by the Company in conjunction with Great Lakes, and they will share in
all intellectual property rights to the software equally. The HR Workbench
software is a query based software program that allows the Company's recruiters
to locate the IT professional in the Company's database with the technical
skills and job interests that best satisfy the requirements of the position that
the Company is attempting to staff. This system also tracks other information,
such as average salaries of a particular position, which enables the Company to
provide valuable advice to its clients in selecting the proper IT professional.
The software also incorporates the Company's database of over 35,000 IT
professionals. The Company continually updates its database and occasionally
accesses other databases of IT professionals that are available for sale or over
the Internet. HR Workbench allows information entered into the database by a
Company employee, or directly by an IT professional by means of the Internet, to
be shared by all of the Company's recruiters and salespeople.
UTILIZATION OF THE INTERNET
The Company utilizes the Internet to promote its services and to enable
customers and IT professionals to utilize its services. The descriptions of the
employment opportunities are segregated among permanent and contract positions,
describe the necessary skills required by IT professional candidates, and
provides a phone number and e-mail address for the Company's recruiter who works
with the relevant client. Alternatively, IT professionals can e-mail their
resumes to the Company or can enter themselves into the Company's database by
means of the Internet. The Company also utilizes the Internet to connect its
offices to its Toronto, Ontario office. This results in substantial savings in
software and hardware costs in the maintenance of the Company's IT system and
allows for the creation of lightly staffed regional virtual offices.
THE APPTRACKER SOFTWARE
The Company and Great Lakes have developed a software package called
AppTracker. The software is designed to aid a human resources department in
performing numerous recruitment tasks, such as scheduling interviews and
evaluating candidates. The software has a feature that allows a human resources
department to have a description of any job openings sent automatically to
selected e-mail addresses, such as those of recruiting firms or previous
applicants. Statistics about the recruitment process, including the costs and
expenses, are tabulated in various databases. Additionally, the software allows
the human resource department to compile their own database of prospective
employees and contract workers.
Traditionally, recruiters acquire new candidates using as many sources as
possible. Normally the number of sources would be limited to the recruiting
office's ability to handle the logistics of communicating job specifications to
those sources and handling the incoming responses. Therefore, their ability to
hire quality IT candidates is directly related to the size of the group of
candidates they can attract and the speed with which they can assimilate,
contact, interview, evaluate, file for future use and/or hire those candidates.
AppTracker, the process through which recruiters post or communicate job
specifications to applicant sources, is fully automated. Once the hiring manager
and the recruiter have constructed the job specification using AppTracker, they
use the AppTracker Broadcast facility to communicate this job specification to
all designated sources. With a click of the mouse the recruiter defines and
chooses the broadcast strategy.
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<PAGE>
The information can be communicated/posted simultaneously and automatically to
appropriate employment agencies, web news groups, web job posting sites,
archived candidates, internal candidates (as per policy) and personal referral
sources.
AppTracker consolidates and automates the communication process for all
sources. Each unique information source is provided with a web interface. All
out-going and in-coming communications/ applications are managed using this web
interface. No specialized client software is required. All transactions are
initiated through a web browser. Recruiters, hiring managers and applicants now
use a common medium for communication. This type of common-interface messaging
reduces significantly the reliance on hard-copy mail, phone communication and
fax transmission. Additionally, a Website address is provided for all candidates
that are informed of the job requirements by means of trade journals or
newspapers. This further centralizes the incoming applicant response.
The joint venture between the Company and Great Lakes is primarily designed
to market AppTracker to human resources departments commencing during the year
ending December 31, 1999, but also governs ownership of HR Workbench and any
future software developed by the Company. The AppTracker development program was
launched as a result of the positive response observed during its first test-
marketing session. A working prototype was demonstrated at the annual Human
Resources Professional Association Conference in Toronto, Ontario in February
1998. The Company performed more than 40 one-on-one demo sessions with
companies, currently, the product is being test marketed by the human resources
departments of two of the Company's customers. The first customer for the
AppTracker is the Toronto Stock Exchange, which is viewed as a Canadian leader
in the development and deployment of application software. The Company believes
that it will be able to provide assistance in the marketing of the software as a
result of its existing relationships with management in the human resources and
IT departments of its customers, although there can be no assurance thereof. The
Company's joint venture allocates costs and responsibilities in marketing
Apptracker. The Company has spent approximately $235,000 on research and
development related to the HR Workbench and the Apptracker software. The joint
venture agreement provides that all costs of development and marketing will be
shared equally between the Company and Great Lakes as will all profits and
losses. The initial contribution of the Company was the macro design, marketing
and all recruitment needs of Great Lakes. Great Lakes' initial contribution was
the establishment of a team of programmers to design and implement HR Workbench
and AppTracker.
Although there can be no assurance thereof, the Company believes that it
will have an advantage in marketing its recruitment services to companies using
AppTracker because of its familiarity with the software and the ease of EDI with
the Company. There is a possibility, however, that utilization of the software
will reduce reliance of certain customers on recruiting firms, including the
Company. Notwithstanding the foregoing, the Company does not anticipate any
material reduction in such reliance as a result of the utilization of this
software due to the difficulty of hiring IT professionals. Furthermore, the
Company intends to offer lower commission rates to customers using AppTracker
software to make it less likely that they will reduce the level of utilization
of the services of recruiting firms. The Company believes that the use of
AppTracker and its familiarity with the software will enable it to aid customers
in finding suitable, professionals in a more timely and cost efficient manner,
allowing for the decrease in prices charged by the Company.
EXPANSION AND ACQUISITIONS
The Company believes that it can leverage its database of IT professionals,
reputation, and IT system to achieve revenue growth by establishing new offices
in other regional markets. Such offices may be established by opening new
offices and staffing them with local recruiters and sales people or by acquiring
complimentary or competitive companies.
38
<PAGE>
The Company primarily intends to focus its expansion in large United States
cities, such as Atlanta, Chicago, San Francisco and Austin. The Company is
selecting locations that have other offices of its existing customers, such as
Chicago, the headquarters of Harris Bank & Trust, or areas with numerous
technology companies, such as Austin. In addition to attracting local IT
professionals, the Company intends to attempt to recruit Canadian and other
foreign IT professionals for these positions in the United States. Due to the
strength of the U.S. dollar against the Canadian dollar and other currencies,
the Company believes that foreign IT professionals will find the economic
opportunities in the United States attractive. The Company is currently
endeavoring to expand its operations in the northeastern United States. In July
1998, the Company hired John J. Silver as Senior Vice President and placed him
in charge of the New York office. Mr. Silver has existing relationships with
numerous potential customers in the New York market. The Company believes that
recruiters in other markets will find the Company to be an attractive place to
work because of its existing relationships with multinational and other large
corporate clients, the Company's good reputation among IT professionals, quality
information technology system and the Company's incentive based compensation
package, which will generally combine base salary, bonuses, commissions and
incentive stock options.
The Company has also expanded in Ontario, Canada in order to obtain
additional business from large Canadian customers. For example, the Company has
opened an office in Ottawa in order to expand its relationship with Bell Canada.
The Company believes that other large customers with offices or affiliated
offices in Ottawa will consider using the Company's services in that city,
providing the Company's sales force an advantage in building relationships when
compared with other companies opening new offices.
The Company may seek to establish offices in smaller markets that contain
desirable customers. The Company believes that it can do so in a cost effective
manner because of the strength of its IT system. A single recruiter/sales person
can operate a "virtual office" by utilizing the Toronto, Ontario office's
database and other operational systems by means of the Company's intranet. For
example, the Company has opened a "virtual office" in Indian Wells, California
to provide services to U.S. Filters and Armtech Incorporated.
Based on the experience of the Company's principals who, prior to forming
the Company, have been involved in the opening of several offices throughout
Ontario and most recent experience with the opening of its New York office, the
Company expects newly opened offices to become productive within 6 to 12 months
of opening. The delay in productivity can be attributed to the following
factors:
- Recruiting, hiring, training and orientation of new staff with
recruitment/sales methodologies and practices, as well as technology
(databases, software, Internet, e-mail, etc.);
- Recruiting and developing a base of qualified IT professionals
(advertising, open houses, career fairs);
- Attracting and building client relations; and
- Getting on preferred supplier lists.
Although there can be no assurance that such expectations will be satisfied,
the Company's expectations in terms of productivity for new offices by the 12th
month of operations are: 30 contractors and between $30,000 to $50,000 in
permanent placement sales per month with annual revenues of approximately
$450,000.
The opening of new offices with the addition of qualified employees and
entrance into new regional markets results in increased operating expenses
including:
- Salaries and payroll costs;
- Infrastructure (office equipment, office space, office supplies,
telephone, insurance) including an elaborate technological infrastructure;
39
<PAGE>
- Advertising (print and career fairs);
- Marketing and public relations; and
- Travel and business development costs.
There are also the related head office expenses associated with opening new
offices, including:
- Time spent by management and technical personnel on training (recruitment
sales; HR Workbench, databases, e-mail, Internet, job postings to user
groups); and
- Time spent by management and support personnel on implementing and
maintaining reporting procedures (financial and administration).
The Company may also expand by acquiring complementary or competitive
companies, including existing IT staffing companies, which will provide an
immediate increase to the Company's customer base and in some circumstances,
provide a more cost effective method of expansion than opening a new office. The
Company intends to target companies who have a strong customer base or group of
IT professionals, but do not utilize an advanced internal IT system. The Company
believes that providing an acquired company access to the Company's IT system
will allow the acquired company to provide better service without substantially
increasing costs, which may also lead to increased revenue. Although, due to
consolidation in the industry, there is competition for the acquisition of
companies in the IT staffing industry, the Company intends to avoid competing
for acquisition candidates by focusing on smaller companies.
The Company may also utilize acquisitions or hiring of new employees to
achieve growth in its existing markets. The Company utilized the acquisitions of
Systems and ICS in the metropolitan Toronto, Ontario area to acquire access to
experienced recruiters with an existing customer base.
With regard to customer services, the Company plans to implement a
decentralized management plan. The Company believes that allowing existing
management of an acquired company to remain an important part of its operations
will be beneficial in retaining customers, recruiters and IT professionals.
Similarly, local recruiters and sales people hired to staff new offices will
have the flexibility to continue relationships with customers and IT
professionals. The Company's intranet will provide all offices full access to
the Company's databases and operating software, promoting uniformity in certain
functions. The Company intends to hold monthly meetings of its Operations
Committee, which will consist of the heads of each regional office and
subsidiary, to exchange information on industry trends and promote "best
practices" among the offices. With regard to financial controls, the Company
plans to have a fully integrated system which will allow control of cash flows
and accounting and payroll functions from the Toronto, Ontario office.
COMPETITION
The IT staffing industry is highly competitive and fragmented and is
characterized by low barriers to entry. The Company competes for potential
clients with other providers of IT staffing services, systems integrators,
providers of outsourcing services, computer consultants, employment listing
services and temporary personnel agencies. Many of the Company's current and
potential competitors have longer operating histories, significantly greater
financial, marketing and human resources, greater name recognition and a larger
base of IT professionals and clients than the Company which may provide such
competitors with a competitive advantage when compared to the Company. In
addition, many of these competitors, including numerous smaller privately held
companies, may be able to respond more quickly to customer requirements and to
devote greater resources to the marketing of services than the Company. Because
there are relatively low barriers to entry, the Company expects that competition
will increase in the future. Increased competition could result in price
reductions, reduced margins or loss of market share, any of which could
materially and adversely affect the Company's business, prospects, financial
condition and results of operations. Further, there can be no assurance that the
Company will be able to compete
40
<PAGE>
successfully against current and future competitors or that competitive
pressures faced by the Company will not have a material adverse effect on its
business, prospects, financial condition and results of operations. The Company
believes that the principal factors relevant to competition in the IT staffing
services industry are the recruitment and retention of highly qualified IT
professionals, rapid and accurate response to client requirements and, to a
lesser extent, price. The Company believes that it competes favorably with
respect to these factors.
The Company believes that its competitive advantage is not only in their use
of technology, but also in the accessibility of this technology to all of the
Company's employees. The building and maintenance of the Company's database of
over 35,000 has been a combined effort of employees in Toronto, New York and
Ottawa. The Company also has Internet access and membership to over 25 local,
national and international databases for IT professionals.
PROPERTY AND FACILITIES
The Company maintains its headquarters in a 8,076 square foot office located
at 55 University Avenue in Toronto, Ontario. The Company has leased such
facility for a term of ten years terminating in November 2007. The Company pays
annual rent of $30,307, which will increase to $36,080 commencing in December
2002. The Company leases additional offices at the following locations:
<TABLE>
<CAPTION>
LEASE
LOCATION SQUARE FEET EXPIRATION CURRENT RENT PER ANNUM
- ---------------------------------------------------------- ------------- --------------- -----------------------
<S> <C> <C> <C>
Etobicoke, Ontario........................................ 1,610 4/13/03 $ 22,300
New York, New York........................................ 1,214 10/31/01 $ 47,352
Tampa, Florida............................................ 188 2/28/99 $ 4,355
Scarborough, Ontario...................................... 6,000 5/31/01 $ 39,000
Ottawa, Ontario........................................... 1,291 9/30/03 $ 14,739
</TABLE>
EMPLOYEES AND CONSULTANTS
EMPLOYEES
The Company's corporate staff at December 31, 1998 consisted of 88 full-time
employees, including 52 recruiters, 19 account managers/salespeople and 17
administrative employees. The Company is not a party to any collective
bargaining agreements covering any of its employees, has never experienced any
material labor disruption and is unaware of any current efforts or plans to
organize its employees. The Company considers its relationships with its
employees to be good.
CONSULTANTS
The Company enters into consulting agreements with the IT professionals at
hourly rates negotiated with each IT professional based on such individuals
technical and other skills. The agreements provide that the IT professional is
responsible for taxes and all other expenses and that the IT professional is not
an employee of the Company for tax or other legal purposes. At December 31,
1998, approximately 180 contract workers placed by the Company were performing
services for the Company's customers.
LEGAL PROCEEDINGS
The Company is not party to any material legal proceedings.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the directors
and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Declan French........................................ 54 Chairman of the Board of Directors, President and
Chief Executive Officer
John R. Wilson....................................... 45 President--Systems
John A. Irwin........................................ 46 President--ICS
John J. Silver....................................... 41 Senior Vice President
Lloyd Maclean........................................ 46 Chief Financial Officer and Director
William J. Neill..................................... 37 Director Nominee
John Dunne........................................... 59 Director Nominee
Blair Taylor......................................... 46 Director Nominee
James Reddy.......................................... 59 Director Nominee
Robert M. Rubin...................................... 58 Director Nominee
Michael Carrazza..................................... 33 Director Nominee
</TABLE>
Each director is elected for a period of one year at the Company's annual
meeting of shareholders and serves until the next such meeting and until his or
her successor is duly elected and qualified. Directors may be re-elected
annually without limitation. Officers are appointed by, and serve at the
discretion of, the Board of Directors. The Company's directors do not presently
receive any compensation for their services as directors, but it is contemplated
that directors will be granted options pursuant to the Plan. In addition, for a
period of three years following the date of this Prospectus, the Representative
shall have the right, at its option, to designate one director or observor to
the Board of Directors, which director shall be reasonably acceptable to the
Board of Directors. The Director-Nominees will assume office as of the effective
date of this Registration Statement.
Set forth below is a biographical description of each director and executive
officer of the Company based on information supplied by each of them.
DECLAN FRENCH has served as the Company's Chairman of the Board of
Directors, President and Chief Executive Officer since the inception of the
Company in February 1994. Prior to founding the Company, Mr. French was
President and Chief Executive Officer of TEC Partners Ltd., a IT recruiting firm
in Toronto, Ontario. Mr. French has a diploma in Psychology and Philosophy from
the University of St. Thomas in Rome, Italy.
JOHN R. WILSON has served as President of Systems since 1982 and was its
sole shareholder prior to its sale to the Company in April 1998. Mr. Wilson is a
member of the Company's Operations Committee.
JOHN A. IRWIN has served as President of ICS since 1980 and was its sole
shareholder prior to its sale to the Company in May 1998. Mr. Irwin has a degree
in Computer Programming from Cambridge College of Arts and Technology. Mr. Irwin
is a member of the Company's Operations Committee.
JOHN J. SILVER has served as a Senior Vice President of the Company since
July 1998. From April 1995 until July 1998, Mr. Silver served as Director of
Professional Services Volt Technical Services, a New York based IT staffing
firm, where he was in charge of managed services for major accounts. From
November 1994 until March 1995, he was a regional manager for ADIA Personnel
Services in Santa Monica, California. From July 1992 until November 1994, Mr.
Silver was a regional Vice President for Spectrum Information Technolgies/Data
One in Lancaster, California. Mr. Silver has a marketing degree from Suffolk
College. Mr. Silver is a member of the Company's Operations Committee.
LLOYD MACLEAN has served as the Company's Chief Financial Officer since
September 1997 and as a Director since June 1998. Mr. Maclean is the sole
officer and director of Globe Capital Corporation. From
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1996 to 1997, Mr. Maclean was Vice President and Chief Financial Officer of ING
Direct Bank of Canada. From 1994 until 1996, he was Vice President and Chief
Financial Officer of North American Trust, Inc., where he also served as a Vice
President from 1990 until 1994. Mr. Maclean has an MBA from Harvard University
and is a member of the Canadian Institute of Chartered Accountants.
WILLIAM J. NEILL has been nominated and has agreed to join the Board of
Directors after the closing of this offering. Mr. Neill is currently a senior
executive at Sun Media Corp. From October 1997 to October 1998 he served as
Publisher and Chief Executive Officer of the Financial Post. From 1996 until
1997, Mr. Neill was Publisher of the Ottawa Sun. From 1993 until 1996, he was a
Vice President of the Financial Post. Mr. Neill has an MBA from Queens
University in Kingston, Ontario.
BLAIR TAYLOR has been nominated and has agreed to join the Board of
Directors after the closing of this offering. Since July 1997, Mr. Taylor has
served as Director of Finance and Operations for Phoenix Research and Trading
Corporation. From 1993 to 1997, he was a managing director of CIBC Wood Gundy
Securities, Inc. Mr. Taylor has a degree in computer science from the University
of Waterloo and is a member of the Canadian Institute of Chartered Accountants.
JOHN DUNNE has been nominated and has agreed to join the Board of Directors
after the closing of this offering. Mr. Dunne has been Chairman and Chief
Executive Officer of the Great Atlantic & Pacific Company of Canada, Ltd ("Great
Atlantic") since August 1997, where he also served as President and Chief
Operating Officer from September 1996 until August 1997. From November 1995
until September 1996, Mr. Dunne was Chairman and Chief Executive Officer of Food
Basics Ltd. Prior to that, he had served as Vice Chairman and Chief
Merchandising Officer of Great Atlantic.
JAMES REDDY has been nominated and has agreed to join the Board of Directors
after the closing of this offering. Mr. Reddy has served as Chief Financial
Officer of Gemstar Communications, Inc. since July 1998. From July 1997 to July
1998, Mr. Reddy was an independent management consultant. He is a member of the
Canadian Institute of Chartered Accountants. From 1989 to 1997, he was employed
by DFI Securities, Inc., most recently as Chief Financial Officer.
ROBERT M. RUBIN has been nominated and has agreed to join the Board of
Directors after the closing of this offering. Mr. Rubin has served as Chairman
of the Board of Directors of Diplomat Direct Marketing Corporation since 1994.
From October 1990 to the present, Mr. Rubin has served as the Chairman of the
Board of Directors and Chief Executive Officer of American United Global Inc., a
telecommunications and software company ("AUGI"). Mr. Rubin was formerly a
Director and Vice Chairman of the Board of Directors, and is a minority
stockholder of American Complex Care, Incorporated ("ACCI"). In April 1995, the
principal operating subsidiaries of ACCI petitioned in the Circuit Court of
Broward County, Florida for an assignment for the benefit of creditors. Mr.
Rubin is also a Director of Help At Home, Inc., Western Power and Equipment
Corporation, IDF International Inc., Response USA, Inc. and Med-Emerg
International, Inc., each of which are public companies. Mr. Rubin was Chairman
of the Board of Directors, Chief Executive Officer and remains a Director and a
principal stockholder of ERD Waste Corp., which filed for bankruptcy protection
in 1997. Mr. Rubin was the founder, President, Chief Executive Officer and a
Director of Superior Care, Inc. ("SCI") from its inception in 1976 until May
1986 and continued as a Director of SCI (now known as Olsten Corporation
("Olsten")) until the latter part of 1987. Olsten, a New York Stock Exchange
listed company, is engaged in providing home care and institutional staffing
services and health care management services.
MICHAEL CARRAZZA has been nominated and has agreed to join the Board of
Directors after the closing of this offering. From September 1991 to November
1998 Mr. Carrazza was the Managing Director and sole shareholder of Southport
Consulting Corp. Southport provided IT workers to clients, in the New York area,
primarily in the financial sector. He is currently the Managing Director of
Craven Street Capital Partners, a privately owned equity investment and
management company which specializes in acquisitions. Since 1997, Mr. Carrazza
has held a Senior Corporate Finance advisory position and has been the assistant
to the Chief Financial Officer of Mitchell Madison Group, a global management
consultant. From 1995 to 1997, he served as Vice-President of South Street
Capital Group, a company specializing in turnarounds
43
<PAGE>
for middle market public and private companies. From 1989 to 1995, Mr. Carrazza
was an associate and an advisor to Goldman, Sachs & Co. where he was involved in
automating operations within the Investment Banking, Finance and Treasury
Divisions. Mr. Carrazza is a Certified Management Consultant and a member of the
Turnaround Management Association. Mr. Carrazza has a B.S. in Electrical
Engineering from the Pennsylvania State University and an MBA from the Stern
School of Business at New York University. Mr. Carrazza is the brother of James
Carrazza, a principal of the Underwriter.
COMMITTEES OF THE BOARD
In July 1998, the Board of Directors formalized the creation of a
Compensation Committee, which will be comprised of Blair Taylor, William J.
Neill and Declan French. The Compensation Committee has (i) full power and
authority to interpret the provisions of, and supervise the administration of,
the Plan and (ii) the authority to review all compensation matters relating to
the Company. The Compensation Committee has not yet met and has not yet
formulated compensation policies for senior management and executive officers.
However, it is anticipated that the Compensation Committee will develop a
Company-wide program covering all employees and that the goals of such program
will be to attract, maintain and motivate the Company's employees. It is further
anticipated that one of the aspects of the program will be to link an employee's
compensation to his or her performance, by granting stock options, or other
awards to employees who reach certain objectives. It is expected that salaries
will be set competitively relative to the IT staffing industry and that
individual experience and performance will be considered in setting salaries.
In July 1998, the Board of Directors also formalized the creation of an
Audit Committee, which is comprised of two or more directors of the Company
designated by a majority vote of the entire Board of Directors. A majority of
the Audit Committee are Directors who are not officers of the Company and who
are not and have not been employed by the Company or any affiliates thereof. The
Audit Committee, after the consummation of the Offering will be comprised of
Lloyd Maclean, James Reddy and John Dunne and is charged with reviewing the
following matters and advising and consulting with the entire Board of Directors
with respect thereto: (i) the preparation of the Company's annual financial
statements in collaboration with the Company's chartered accountants; (ii)
annual review of the financial statements and annual report of the Company; and
(iii) all contracts between the Company and the officers, directors and other
affiliates thereof. The Audit Committee, like most independent committees of
public companies, does not have explicit authority to veto any actions of the
entire Board of Directors relating to the foregoing or other matters; however,
the Company's senior management, recognizing their own fiduciary duty to the
Company and its shareholders, is committed not to take any action contrary to
the recommendation of the Audit Committee in any matter within the scope of its
review.
OPERATIONS COMMITTEE
The Company has established an Operations Committee in order for the
Company's officers to exchange information on industry trends and promote "best
practices" among the officers. The head of each regional office and subsidiary
will serve on the Operations Committee. Currently, the Operations Operations
consists of Declan French, Lloyd Maclean, John A. Irwin, John R. Wilson and John
J. Silver.
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Bylaws of the Company provide that the Company shall indemnify to the
fullest extent permitted by Canadian law directors and officers (and former
officers and directors) of the Company. Such indemnification includes all costs
and expenses and charges reasonably incurred in connection with the defense of
any civil, criminal or administrative action or proceeding to which such person
is made a party by reason of being or having been an officer or director of the
Company if such person was substantially successful on the merits in his or her
defense of the action and he or she acted honestly and in good faith with a view
to the best interests of the Company, and if a criminal or administrative action
that is enforced by a monetary penalty, such person had reasonable grounds to
believe his or her conduct was lawful.
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Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
and the Underwriters pursuant to the foregoing provisions, or otherwise, the
Company has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses,
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person or by the Underwriters in connection
with the securities being registered, the Company will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question of whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
paid by the Company during each of the last three fiscal years to the Company's
Chief Executive Officer and to each of the Company's executive officers who
earned in excess of $100,000 during the year ended December 31, 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
YEAR/ OTHER
ENDED ANNUAL COM-
NAME AND PRINCIPAL POSITION DECEMBER COMPENSATION BONUS PENSATION
- ------------------------------------------------------------------- ----------- ------------- --------- -----------
<S> <C> <C> <C> <C>
Declan French...................................................... 1998 $ 98,000 -- $ 8,342
Chairman of the Board of Directors 1997 104,275 -- 8,342
President and Chief Executive Officer 1996 108,350 -- 8,668
John A. Irwin...................................................... 1998 130,580 -- 35,888
President-ICS 1997 195,000 -- 8,342
1996 -- -- --
--
John R. Wilson..................................................... 1998 90,000 -- 77,282
President-System 1997 83,420 -- 20,855
1996 80,659 -- 10,113
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into an employment agreement with Declan French
whereby he will serve as the Company's Chairman of the Board of Directors,
President and Chief Executive Officer for a period of five years commencing on
the effective date of the Registration Statement of which this Prospectus forms
a part. Mr. French shall be paid a base salary of $97,900 (CDN$150,000) and a
bonus based on a percentage of the Company's net income.
On May 19, 1998, in connection with the acquisition of ICS, the Company
entered into an employment agreement for John A. Irwin whereby he will serve as
President of ICS. The employment agreement is for a term of three years
commencing on January 1, 1998, the effective date of the acquisition of ICS. Mr.
Irwin receives a salary of $130,580 (CDN$200,000) plus a quarterly bonus of 2%
of all permanent placement service revenue and 2% of the gross profit all
contract services revenue.
In February 1998, in connection with the acquisition of Systems, the Company
entered into a three year employment agreement with John R. Wilson whereby he
will serve as President of Systems at a salary of $90,000 (CDN$137,195) per
year. The agreement was effective as of January 2, 1997. Mr. Wilson receives a
commission of 10% of the permanent placement revenue of Systems. Additionally,
he receives $0.65 for every hour of contract services provided by IT
professionals placed by Systems, provided that the
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<PAGE>
gross margin on such hour exceeds $6.50. Pursuant to the agreement, Mr. Wilson
will have control of the day-to-day management of Systems.
In August 1998, the Company entered into a one year employment with John J.
Silver whereby he will serve as a Senior Vice President. Mr. Silver is to be
paid an annual salary of $175,000 plus a bonus of 4% of the net income of the
Company's New York office. The agreement also requires the Company to grant Mr.
Silver 50,000 stock options exercisable at the initial public offering price.
The agreement is terminable by either party upon three months notice.
CONSULTING AGREEMENTS
In November 1998, in connection with the acquisition of certain assets of
Southport, the Company entered into a consulting agreement with Michael
Carrazza, the owner of Southport. Mr. Carrazza is the brother of a principal of
the Representative. Southport was engaged in the business of providing IT
workers to corporations in the New York, tri-state region. The consulting
agreement is for a term of two years and provides for an annual salary of
$125,000. Mr. Carrazza has committed to join the Company's Board of Directors
upon the closing of this offering.
In May 1998, the Company entered into a consulting agreement with Robert M.
Rubin, a director-nominee of the Company, pursuant to which Mr. Rubin will aid
the Company in structuring and negotiating acquisitions, strategic partnerships
and other expansion opportunities. In exchange for such services, Mr. Rubin has
been granted an option to purchase 200,000 Common Shares at a purchase price of
$2.10 per share and a consulting fee of $80,000 per year. The consulting
agreement is for a term of five years. Mr. Rubin has agreed not to sell,
transfer, assign, hypothecate or otherwise dispose of the Common Shares issuable
upon exercise of the options for a period of two years after exercise without
the consent of the Company.
STOCK OPTION PLAN
The Plan will be administered by the Compensation Committee or the Board of
Directors, which will determine among other things, those individuals who shall
receive options, the time period during which the options may be partially or
fully exercised, the number of Common Shares issuable upon the exercise of the
options and the option exercise price.
The Plan is effective for a period for ten years, expiring in 2008. Options
to acquire an aggregate of 435,000 Common Shares may be granted to officers,
directors, consultants, key employees, advisors and similar parties who provide
their skills and expertise to the Company. The Plan is designed to enable
management to attract and retain qualified and competent directors, employees,
consultants and independent contractors. Options granted under the Plan may be
exercisable for up to ten years, generally require a minimum two year vesting
period and shall be at an exercise price all as determined by the Board of
directors provided that pursuant to the terms of the Underwriting Agreement
between the Company and the Underwriters, the exercise price of any options may
not be less than the fair market value of the Common Shares on the date of the
grant. Options are non-transferable, and are exercisable only by the participant
(or by his or her respective guardian or legal representative) during his or her
lifetime or by his or her legal representatives following death.
If a participant ceases affiliation with the Company by reason of death,
permanent disability or retirement at or after age 65, the option remains
exercisable for one year from such occurrence but not beyond the option's
expiration date. Other types of termination allow the participant 90 days to
exercise the option, except for termination for cause which results in immediate
termination of the option.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the Plan, subject to applicable securities regulation.
The Plan may be terminated or amended at any time by the Board of Directors,
except that the number of Common Shares reserved for issuance upon the exercise
of options granted under the Plan may not be increased without the consent of
the shareholders of the Company.
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<PAGE>
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information, as of the date hereof,
and as adjusted to give effect to this offering and the transactions
contemplated thereby, with respect to the beneficial ownership of the Common
Shares by (i) each person known to the Company to beneficially own more than 5%
of the outstanding shares of Common Shares, (ii) each executive officer and
director of the Company and (iii) all executive officers and directors of the
Company as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE
COMMON SHARES BENEFICIALLY OWNED
NAME AND ADDRESS OF BENEFICIALLY BEFORE AFTER
BENEFICIAL OWNER(1) OWNED OFFERING OFFERING
- --------------------------------------------------------------- ------------------- --------------------- -----------
<S> <C> <C> <C>
Declan French(2)............................................... 1,021,126 60.9% 38.1%
John R. Wilson................................................. 130,914 7.8% 4.9%
John A. Irwin.................................................. 130,914 7.8% 4.9%
Lloyd Maclean (3).............................................. 113,459 6.8% 4.2%
Robert M. Rubin (4)............................................ 200,000 10.7% 6.9%
William J. Neill............................................... 19,637 1.2% *
John Dunne (5)................................................. 13,091(5) * *
Blair Taylor (6)............................................... 19,637(6) 1.2% *
James Reddy.................................................... 19,637 1.2% *
All executive officers and directors as a group (five
persons)..................................................... 1,648,913 88.8% 58.0%
</TABLE>
- ------------------------
* Less than 1.0%
(1) Unless otherwise indicated, the address of the referenced individual is c/o
IT Staffing Ltd., 55 University Avenue, Suite 505, Toronto, Ontario M5J 2H7.
(2) Includes 510,563 Common Shares owned by Christine French, the wife of Declan
French.
(3) Such Common Shares are owned by Globe Capital Corporation, an Ontario
corporation that is wholly owned by Lloyd Maclean.
(4) Consists of currently exercisable options to acquire 200,000 Common Shares
at an exercise price of $2.10 per share for a period of seven years.
(5) Consists of 13,091 Common Shares owned by Mr. Dunne's spouse.
(6) Includes 9,818 Common Shares owned by Mr. Taylor's spouse.
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<PAGE>
CERTAIN TRANSACTIONS
In April 1998, the Company acquired all the issued and outstanding capital
stock of SCI and SPSI from John R. Wilson for aggregate consideration of
$100,007 and 174,551 Common Shares. The acquisition was effective as of January
2, 1997. SPSI is inactive but holds certain assets utilized by Systems in its
operations. Mr. Wilson was not affiliated with the Company prior to the
acquisition.
On May 19, 1998, the Company completed the acquisition of all the issued and
outstanding capital stock of ICS for $303,955 in cash and 130,914 shares of
Common Shares to John A. Irwin. In connection with the acquisition, ICS made a
distribution to Mr. Irwin of certain ICS assets that were not necessary for the
operation of the business. The transaction was effective as of January 1, 1998.
Mr. Irwin was not affiliated with the Company prior to the acquisition.
The Company, through ICS, leases its Scarborough, Ontario office facility
from 1242541 Ontario Ltd., a corporation owned by John A. Irwin, President of
ICS, and certain other ICS employees. The three year lease, which expires in May
2001, requires annual rental payments of $60,000, which the Company believes is
as least as favorable as could be obtained from a non-affiliated third party.
In October 1997, in consideration for business consulting services,
including identifying, structuring and effecting the acquisitions of Systems and
ICS, the Company issued 113,459 Common Shares to Globe Capital Corporation,
which is controlled by Lloyd Maclean, the Company's Chief Financial Officer and
a Director.
In May 1998, the Company entered into a consulting agreement with Robert M.
Rubin, a director of the Company, pursuant to which Mr. Rubin will aid the
Company in structuring and negotiating acquisitions, strategic partnerships and
other expansion opportunities. In exchange for such services, Mr. Rubin received
an option to purchase 200,000 Common Shares at a purchase price of $2.10 per
share and a consulting fee of $80,000 per year. The consulting agreement is for
a term of five years. Mr. Rubin has agreed not to sell, transfer, assign,
hypothecate or otherwise dispose of the Common Shares issuable upon exercise of
the options for a period of two years after exercise without the consent of the
Company.
In November 1998, the Company purchased certain assets of Southport from
Michael Carrazza for $50,000 in cash and an amount of Common Shares with a value
of $200,000 based on the offering price. Mr. Carrazza will join the Company's
Board of Directors upon the closing of the offering. In connection with the
acquisition, Mr. Carrazza entered into a consulting agreement with the Company
for a period of two years. Mr. Carrazza shall be paid $250,000 in consideration
for his consulting services. Certain payments under such consulting agreement
are secured by a lien, secured in priority on the accounts receivable of the
Company. Mr. Carrazza is the brother of James Carrazza, a principal of the
Underwriter.
While the Company was a private company, the Company lacked sufficient
independent directors to ratify the foregoing transactions. However, management
believes that the foregoing transactions were on terms no less favorable to the
Company than could have been obtained from unaffiliated third parties. All
future transactions between the Company and its officers, directors or 5%
shareholders, and their respective affiliates, will be on terms no less
favorable than could be obtained from unaffiliated third parties. In the event
that the Company enters into future affiliated transactions they will be
approved by the Company's independent directors who do not have an interest in
the transactions and who have access, at the Company's expense, to the Company's
counsel or independent legal counsel.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have 2,677,875 Common
Shares outstanding (2,827,875 Common Shares outstanding if the Underwriters'
over-allotment option is exercised in full). Of these shares, the 1,000,000
Common Shares offered hereby (1,150,000 shares if the Underwriters' over-
allotment option is exercised in full) and 1,265,499 of the 1,677,875 Common
Shares outstanding immediately prior to this offering will be freely tradeable
commencing 90 days after the effective date of the registration statement of
which this Prospectus is a part, without further registration thereunder,
subject to compliance with the volume requirements, the holding period and other
requirements of Rule 144. All executive officers and directors of the Company,
the holders of Common Shares outstanding immediately prior to the offering, and
all the option holders under the Plan have agreed (i) not to publicly sell, or
otherwise dispose of, any Common Shares or Common Shares issuable upon exercise
of options or warrants for a period of 18 months from the date of this offering
without the Representative's prior written consent, which consent will not be
unreasonably withheld, and (ii) not to privately sell or otherwise dispose of
any such shares during such period unless the proposed transferee agrees to be
bound by such restrictions on transfer. The Representative may, in its sole
discretion and at any time without notice, release all or any portion of the
securities subject to the above described restrictions on sale.
All of the 1,677,875 Common Shares outstanding prior to this offering are
"restricted securities" within the meaning of Rule 144 of the Securities Act
and, if held for at least one year, would be eligible for sale in the public
market in reliance upon, and in accordance with, the provisions of Rule 144
following the expiration of such one year period. As of October 31, 1998,
1,368,958 Common Shares had been held for at least one year. In general, under
Rule 144 as currently in effect, beginning 90 days after the date of this
Prospectus, a person or persons whose shares are aggregated, including a person
who may be deemed to be an "affiliate" of the Company, as the term is defined
under the Securities Act (an "Affiliate"), would be entitled to sell within any
three month period a number of shares beneficially owned for at least one year
that does not exceed the greater of (i) 1% of the then outstanding Common
Shares, or (ii) the average weekly trading volume in the Common Shares during
the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain requirements as to the manner of sale, notice and the
availability of current public information about the Company. However, a person
who is not deemed to have been an affiliate of the Company during the 90 days
preceding a sale by such person and who has beneficially owned Common Shares for
at least two years may immediately sell such shares without regard to the
volume, manner of sale or notice requirements of Rule 144.
Rule 701 under the Securities Act provides that the Common Shares acquired
on the exercise of options granted under a written compensatory plan of the
Company or contract with the Company prior to the date of this Prospectus may be
resold by persons, other than Affiliates, beginning 90 days after the date of
this Prospectus, subject only to the manner of sale provisions of Rule 144 and
by Affiliates under Rule 144 without compliance with its one-year minimum
holding period, subject to certain limitations. There are 435,000 Common Shares
issuable upon the exercise of options which may be granted under the Plan prior
to the date of this Prospectus (the "Option Shares") and 200,000 options. Except
as otherwise provided above, beginning 90 days after the date of this
Prospectus, the Option Shares, if any, would be eligible for sale in reliance on
Rule 701, subject to certain vesting provisions.
For a period of 18 months from the date of this Prospectus, the Company has
agreed that it will not sell or otherwise dispose of any securities of the
Company without the prior written consent of the Representative, which consent
shall not be unreasonably withheld. Notwithstanding the foregoing, during such
period, the Company shall be entitled to issue (i) Common Shares in connection
with mergers and acquisitions, (ii) up to 435,000 Common Shares issuable upon
exercise of options which may be granted under the Plan, (iii) up to 22,125
Common Shares issuable upon the exercise of currently outstanding warrants which
will, except in certain circumstances, be issued for an aggregate exercise price
of $1.00, (iv) 200,000 Common Shares issuable upon the exercise of currently
exercisable options, the holder of which has agreed not to sell, transfer,
assign, hypothecate or otherwise dispose of such Common Shares for
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<PAGE>
a period of two years after he exercises such options without the consent of the
Company, which consent will not be unreasonably withheld, and (v) up to 100,000
Common Shares issuable upon the exercise of the Representative's Warrants.
Prior to this offering, there has been no public market for the Company's
securities. Following this offering, the Company cannot predict the effect, if
any, that sales of Common Shares pursuant to Rule 144 or otherwise, or the
availability of such shares for sale, will have on the market price prevailing
from time to time. Nevertheless, sales by the current shareholders of a
substantial number of Common Shares in the public market could materially
adversely affect prevailing market prices for the Common Shares. In addition,
the availability for sale of a substantial number of Common Shares acquired
through the exercise of the Representative's Warrants or the outstanding options
under the Plan could materially adversely affect prevailing market prices for
the Common Shares. See "Risk Factors--Shares Eligible for Future Sale."
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<PAGE>
DESCRIPTION OF SECURITIES
The authorized capital of the Company consists of 15,000,000 Common Shares
and 1,000,000 preferred shares, issuable in series, of which 1,677,875 Common
Shares and no preferred shares were issued and outstanding as of the date of
this Prospectus. The following is a summary of the material provisions attaching
to each class of shares of the Company and is qualified in all respects by
reference to the Articles of Incorporation, as amended, and Bylaws of the
Company, copies of which have been filed as Exhibits to the Registration
Statement of which this Prospectus is a part.
Pursuant to the Business Corporations Act (Ontario) ("BCA"), a shareholder
of an Ontario corporation has the right to have the corporation pay the
shareholder the fair market value for its shares of the corporation in the event
such shareholder dissents from certain actions have been taken by the
corporation, such as amalgamation or the sale of all or substantially all of the
assets of the corporation, and such shareholder follows the procedures set forth
in the BCA.
COMMON SHARES
The holders of Common Shares are entitled to receive, as and when declared
by the Board of Directors of the Company, dividends in such amounts and in such
form as the Board of Directors of the Company may determine from time to time.
The holders of Common Shares are entitled to receive notice of and to attend all
meetings of shareholders of the Company and have one vote for each Common Share
held at all such meetings, except for meetings at which only the holders of
another class or series of shares of the Company are entitled to vote separately
as a class or series. The Common Shares rank junior to the preferred shares with
respect to dividends and distributions of assets in the event of the
liquidation, dissolution or winding-up of the Company.
PREFERRED SHARES
The preferred shares may be issued from time to time in one or more series,
each series having such number of shares and such designations, rights,
privileges, restrictions and conditions as the Board of Directors of the Company
may determine. Accordingly, the Company's Board of Directors may, without
shareholder approval, issue preferred shares with dividend, liquidation,
conversion or other rights that could materially adversely affect the rights of
the holders of the Common Shares. In addition, specific rights granted to future
holders of preferred shares could be used to restrict the Company's ability to
merge with, or sell its assets to, a third party. The ability of the Board of
Directors to issue preferred shares could discourage, delay or prevent a
takeover of the Company, thereby preserving control of the Company by the
current shareholders. Except as required by law or where the rights, privileges,
restrictions and conditions attaching to a series of preferred shares provide
for voting rights for the holders of that series of preferred shares, the
holders of preferred shares are not entitled as such to receive notice of, to
attend at or to vote at, a meeting of the shareholders of the Company. The
preferred shares rank prior to the Common Shares with respect to dividends and
distributions of assets in the event of the liquidation, dissolution or
winding-up of the Company. Although the Company has no present intention to
issue any preferred shares, there can be no assurance that it will not do so in
the future. In the event that the Company issues preferred shares in a
transaction with an affiliate, the issuance will be approved by a majority of
the Company's independent directors who do not have an interest in the
transaction and who have access, at the Company's expense, to the Company's
counsel or independent legal counsel.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Shares is Continental Stock
Transfer & Trust Company.
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<PAGE>
CERTAIN UNITED STATES AND CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
UNITED STATES
The following describes the principal United States federal income tax
consequences of the purchase, ownership and disposition of the Common Shares by
a shareholder that is a citizen or resident of the United States or a United
States domestic corporation or that otherwise will be subject to United States
federal income tax (a "U.S. Holder"). This summary is based on the United States
Internal Revenue Code of 1986, as amended (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, changes to any of which subsequent to the date of this Prospectus
may affect the tax consequences described herein. This summary discusses only
the principal United States federal income tax consequences to those beneficial
owners holding the securities as capital assets within the meaning of Section
1221 of the Code and does not address the tax treatment of a beneficial owner
that owns 10% or more of the Common Shares. It is for general guidance only and
does not address the consequences applicable to certain specialized classes of
taxpayers such as certain financial institutions, insurance companies, dealers
in securities or foreign currencies or United States persons whose functional
currency (as defined in Section 985 of the Code) is not the United States
dollar. Persons considering the purchase of these securities should consult
their tax advisors with regard to the application of the United States and other
income tax laws to their particular situations. In particular, a U.S. Holder
should consult his tax advisor with regard to the application of the United
States federal income tax laws to his situation.
A U.S. Holder generally will realize, to the extent of the Company's current
and accumulated earnings and profits, foreign source ordinary income on the
receipt of cash dividends, if any, on the Common Shares equal to the United
States dollar value of such dividends determined by reference to the exchange
rate in effect on the day they are received by the U.S. Holder (with the value
of such dividends computed before any reduction for any Canadian withholding
tax). U.S. Holders should consult their own tax advisors regarding the treatment
of foreign currency gain or loss, if any, on any dividends received which are
converted into United States dollars on a date subsequent to receipt. Subject to
the requirements and limitations imposed by the Code, a U.S. Holder may elect to
claim Canadian tax withheld or paid with respect to dividends on the Common
Shares as a foreign credit against the United States federal income tax
liability of such holder. Dividends on the Common Shares generally will
constitute "passive income" or, in the case of certain U.S. Holders, "financial
services income," for United States foreign tax credit purposes. U.S. Holders
who do not elect to claim any foreign tax credits may claim a deduction for
Canadian income tax withheld. Dividends paid on the Common Shares will not be
eligible for the dividends received deduction available in certain cases to
United States corporations.
Upon a sale or exchange of a Common Share, a U.S. Holder will recognize gain
or loss equal to the difference between the amount realized on such sale or
exchange and the tax basis of such Common Share.
Generally, any gain or loss recognized as a result of the foregoing will be
a capital gain or loss and will either be long-term or short-term depending upon
the period of time the Common Shares sold or exchanged, as the case may be, were
held.
THIS SUMMARY IS OF GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD
NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE INVESTOR AND NO
REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY PARTICULAR INVESTOR
IS MADE.
CANADA
The following is a summary of the principal Canadian federal income tax
considerations generally applicable to the acquisition, holding and disposition
of Common Shares purchased pursuant to this Prospectus by a holder (a "U.S.
holder") who, for the purposes of the INCOME TAX ACT (Canada) (the "ITA") and
the CANADA-UNITED STATES INCOME TAX CONVENTION (the "Convention"), as applicable
and at all relevant times, (i) is resident in the United States and not resident
in Canada, (ii) holds Common Shares as
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<PAGE>
capital property, (iii) does not have a "permanent establishment" or "fixed
base" in Canada (as defined in the Convention), and (iv) deals at arm's length
with the Company. Special rules, which are not discussed in this summary, may
apply to "financial institutions" (as defined in the ITA) and to non-resident
insurers carrying on an insurance business in Canada and elsewhere.
This summary is based on the current provisions of the ITA and the
regulations thereunder and the Convention, all specific proposals to amend the
ITA or the regulations thereunder announced by the Canadian Minister of Finance
prior to the date of this Prospectus and the current published administrative
practices of Revenue Canada. This summary does not otherwise take into account
or anticipate any changes in law or administrative practice nor does it take
into account income tax laws or considerations of any province or territory of
Canada or any jurisdiction other than Canada, which may differ from the federal
income tax consequences described herein. This summary is of a general nature
only and is not intended to be, and should not be interpreted as, legal or tax
advice to any particular purchaser of Common Shares.
DIVIDENDS
Under the ITA and the Convention, dividends paid or credited, or deemed to
be paid or credited, on the Common Shares to a U.S. holder who owns less than
10% of the Company's voting shares will be subject to Canadian withholding tax
at the rate of 15% of the gross amount of such dividends or deemed dividends.
Under the Convention, dividends paid or credited to certain religious,
scientific, charitable and similar tax exempt organizations and certain pension
organizations that are resident, and exempt from tax, in the United States and
that have complied with certain administrative procedures are exempt from this
Canadian withholding tax.
DISPOSITION OF COMMON SHARES
A capital gain realized by a U.S. holder on a disposition or deemed
disposition of Common Shares will not be subject to tax under the ITA unless
such Common Shares constitute taxable Canadian property within the meaning of
the ITA at the time of the disposition or deemed disposition. In general, the
Common Shares will not be "taxable Canadian property" to a U.S. holder unless
they are not listed on a prescribed stock exchange (which includes the Nasdaq
SmallCap Market-Registered Trademark-) or at any time within the five year
period immediately preceding the disposition the U.S. holder, persons with whom
the U.S. holder did not deal at arm's length, or the U.S. holder together with
such persons owned or had an interest in or a right to acquire more than 25% of
any class or series of the Company's shares. A deemed disposition of Common
Shares will arise on the death of a U.S. holder.
If the Common Shares are taxable Canadian property to a U.S. holder, any
capital gain realized on a disposition or deemed disposition of such Common
Shares will generally be exempt from tax under the ITA by virtue of the
Convention if the value of the Common Shares at the time of the disposition or
deemed disposition is not derived principally from real property (as defined by
the Convention) situated in Canada. The Company is of the view that the Common
Shares do not now derive their value principally from real property situated in
Canada; however, the determination as to whether Canadian tax would be
applicable on a disposition or deemed disposition of Common Shares must be made
at the time of the disposition or deemed disposition.
THIS SUMMARY IS OF GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND SHOULD
NOT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PROSPECTIVE INVESTOR AND NO
REPRESENTATION WITH RESPECT TO THE TAX CONSEQUENCES TO ANY PARTICULAR INVESTOR
IS MADE.
53
<PAGE>
INVESTMENT CANADA ACT
The Investment Canada Act, a Canadian federal statute, regulates the
acquisition of control of existing Canadian businesses by any "non-Canadian" (as
that term is defined in the Investment Canada Act).
The Company is currently a "Canadian Business" (as that term is defined in
the Investment Canada Act). If a non-Canadian seeks to acquire control of the
Company, such acquisition will be subject to the Investment Canada Act. In
general, any transaction which is subject to the Investment Canada Act is a
reviewable transaction if the book value of the Company's assets, as set out in
its most recent financial statements, exceeds the applicable threshold. If the
potential acquiror is a "WTO Investor", acquiring control of the Company would
only be reviewable if the book value of the Company assets exceeded Cdn$179
million. (This number is the threshold amount for 1998 and this amount is
increased each year by a factor equal to the increase in the rate of Canadian
inflation for the previous year). A WTO Investor is defined in the Investment
Canada Act as an investor ultimately controlled by nationals of World Trade
Organization member states, such as the United States of America.
If the book value of the Company's assets exceeds the applicable threshold
for review, the potential acquiror must file an application for review and
obtain the approval of the Minister of Industry before acquiring control of the
Company. In deciding whether to approve the reviewable transaction, the Minister
considers whether the investment "is likely to be of net benefit to Canada."
This determination is made on the basis of economic and policy criteria set out
in the Investment Canada Act.
The approval process begins with an initial review period of 45 days from
the date the completed application is received. However, the Minister of
Industry has authority to extend the review period unilaterally for an
additional 30 days. Any further extensions requires the potential acquiror's
consent.
54
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the underwriting agreement
(the "Underwriting Agreement"), the Company has agreed to sell to each of the
Underwriters named below, and each of the Underwriters, for which Strasbourger
Pearson Tulcin Wolff Incorporated is acting as Representative, has severally,
and not jointly, agreed, to purchase the number of Shares offered hereby set
forth opposite their respective names below.
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ----------------------------------------------------------------------------------------------------- ----------
<S> <C>
Strasbourger Pearson Tulcin Wolff Incorporated.......................................................
Total................................................................................................ 1,000,000
</TABLE>
A copy of the Underwriting Agreement has been filed as an exhibit to the
Registration Statement, to which reference is hereby made. The Underwriting
Agreement provides that the obligations of the Underwriters to purchase the
Shares is subject to certain conditions. The Underwriters shall be obligated to
purchase all of the Shares (other than those covered by the Underwriters'
over-allotment option described below), if any are purchased.
The Representative has advised the Company that the Underwriters propose to
offer the Shares to the public at the initial public offering price set forth on
the cover page of this Prospectus and that they may allow to certain dealers who
are members of the National Association of Securities Dealers, Inc. (the
"NASD"), and to certain foreign dealers, concessions not in excess of $
per Share, of which amount a sum not in excess of $ per Share may in
turn be reallowed by such dealers to other dealers who are members of the NASD
and to certain foreign dealers. After completion of the offering, the offering
price, the concession to selected dealers, and the reallowance to other dealers
may be changed by the Representative.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including civil liabilities under the Securities Act, or will
contribute to payments the Underwriters may be required to make in respect
thereof.
The Company has agreed to pay to the Representative an expense allowance, on
a non-accountable basis, equal to 3% of the gross proceeds derived from the sale
of 1,000,000 Shares offered hereby (or 1,150,000 Shares if the Underwriters'
over-allotment option is exercised in full). The Company paid an advance on such
allowances in the amount of $75,000. The Company has also agreed to pay certain
of the Representative's expenses in connection with this offering, including
expenses in connection with qualifying the Shares offered hereby for sale under
the laws of such states as the Representative may designate and the placement of
tombstone advertisements.
In connection with this offering, the Company has granted the Representative
the right, for the three-year period commencing on the closing date of this
offering, to appoint an observer to attend all meetings of the Company's Board
of Directors. This designee has the right to notice of all meetings of the Board
of Directors and to receive reimbursement for all out-of-pocket expenses
incurred in attending such meetings. In addition, such designee will be entitled
to indemnification to the same extent as the Company's directors.
The Company has agreed to retain the Representative as financial consultants
for a period of two years to commence on the closing of this offering at an
aggregate fee of $150,000, $100,000 of which shall be payable at the closing of
this offering and the remainder of which shall be due on the date one year and
one day after such closing. Pursuant to this agreement, the Representative shall
provide advisory services related to mergers and acquisitions activity,
corporate finance and other matters.
55
<PAGE>
The Representative has advised the Company that the Underwriters do not
intend to confirm sales of the Shares offered hereby to any account over which
they exercise discretionary authority.
The Company, its officers, directors and shareholders, as well as the
holders of options under the Plan, have agreed not to offer, assign, issue,
sell, hypothecate or otherwise dispose of any Common Shares, securities of the
Company convertible into, or exercisable or exchangeable for, Common Shares, or
Common Shares received upon conversion, exercise or exchange of such securities
to the public without the prior written consent of the Representative for a
period of 18 months from the date of this Prospectus.
Prior to this offering, there has been no public trading market for the
Common Shares. The initial public offering price for the Shares will be
determined by arms-length negotiations between the Company and the
Representative and does not necessarily bear any relationship to the Company's
book value, assets, past operating results, financial condition or other
established criteria of value. Among the factors to be considered in such
negotiations will be prevailing market conditions, the history and prospects for
the Company and the industry in which the Company competes, an assessment of the
Company's management, its capital structure, and such other factors deemed
relevant.
The Company has also granted to the Underwriters an option, exercisable
during the 45-day period commencing on the date of this Prospectus, to purchase
at the public offering price per share, less the underwriting discounts and
commissions, up to an aggregate of 150,000 Common Shares. To the extent such
option is exercised, each Underwriter will become obligated, subject to certain
conditions, to purchase additional Common Shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table. The
Underwriters may exercise such right of purchase only for the purpose of
covering over-allotments, if any, made in connection with the sale of Shares.
Purchases of Common Shares upon exercise of the over-allotment option will
result in the realization of additional compensation by the Underwriters.
In connection with this offering, the Company has agreed to sell to the
Representative, individually and not as Representative of the several
Underwriters, at the price of $.001 per warrant, the Representative's Warrants
to purchase an aggregate of 100,000 Common Shares. The Representative's Warrants
are exercisable for a period of four years commencing one year from the date of
this Prospectus at an exercise price per share (the "Exercise Price") equal to
165% of the public offering price per share. The Representative's Warrants may
not be sold, transferred, assigned, pledged, or hypothecated for a period of 12
months from the date of the Prospectus, except to members of the selling group
and to officers and partners of the Representative and members of the selling
group. The Representative's Warrants contain anti-dilution provisions providing
for adjustments of the Exercise Price and number of shares issuable on exercise
of the Representative's Warrants, upon the occurrence of certain events,
including dividends, stock splits, and recapitalizations. The holders of the
Representative's Warrants have no voting, dividend or other rights as
stockholders of the Company with respect to Common Shares underlying the
Representative's Warrants, unless the Representative's Warrants shall have been
exercised.
A new registration statement or post-effective amendment to the Registration
Statement will be required to be filed and declared effective before
distribution to the public of the Representative's Warrants and the Warrant
Shares. The Company has agreed, on one occasion during the period beginning one
year after the date of this Prospectus and ending four years thereafter, if
requested by the holders of a majority of the Representative's Warrants or
Warrant Shares, to make all necessary filings to permit a public offering of the
Representative's Warrants and Warrant Shares and to use its best efforts to
cause such filing to become effective under the Securities Act and to remain
effective for at least 12 months, at the Company's sole expense. In addition,
the Company has agreed to give advance notice to holders of the Representative's
Warrants and Warrant Shares of its intention to file a registration statement,
and in such case, holders of the Representative's Warrants and the Warrant
Shares shall have the right to require the Company to include the Warrant Shares
in such registration statement ("Piggyback Registration Rights")
56
<PAGE>
at the Company's expense (subject to certain limitations). Such Piggyback
Registration Rights will expire five years from the effective date of the
Registration Statement.
During and after this offering, the Underwriters may purchase and sell
Common Shares in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover syndicate short positions
created in connection with this offering. The Underwriters also may impose a
penalty bid, whereby selling concessions allowed to syndicate members or other
broker-dealers in respect of the Common Shares sold in this offering for their
account may be reclaimed by the syndicate if such shares are repurchased by the
syndicate in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Shares
which may be higher than the price that might otherwise affect the market price
of the Common Shares, which may be higher than the price that might otherwise
prevail in the open market. Neither the Company nor any of the Underwriters
makes any representation or prediction as to the direction or magnitude of any
effect that the transactions described above may have on the price of the Common
Shares. In addition, neither the Company nor any of the Underwriters makes any
representation that the Underwriters will engage in such transactions or that
such transactions, once commenced, will not be discontinued at any time.
The foregoing is a summary of the principal terms of the agreements
described above and does not purport to be complete. Reference is made to a copy
of each such agreement, which are filed as exhibits to the Registration
Statement. See "Additional Information."
LEGAL MATTERS
Certain legal matters relating to Canadian law, including the validity of
the issuance of the Common Shares offered hereby, will be passed upon for the
Company by McMillan Binch, Toronto, Ontario. Certain legal matters in connection
with the offering will be passed upon for the Company by its United States
counsel, Gersten, Savage, Kaplowitz & Fredericks, LLP, New York, New York.
Certain legal matters will be passed upon for the Underwriters by Stroock &
Stroock & Lavan LLP, New York, New York.
EXPERTS
The financial statements of the Company, ICS and Systems for each of the two
fiscal years ended December 31, 1996 and 1997, appearing in this Prospectus and
Registration Statement have been audited by Schwartz Levitsky Feldman, Chartered
Accountants, as set forth in their reports thereon appearing elsewhere herein
and in the Registration Statement, and are included in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement under the
Securities Act with respect to the Common Shares offered hereby. This Prospectus
omits certain information contained in the Registration Statement and the
exhibits thereto, and references are made to the Registration Statement and the
exhibits thereto for further information with respect to the Company and the
Common Shares offered hereby. Statements contained herein concerning the
provisions of any documents are not necessarily complete, and in each instance
reference is made to the copy of such document filed as an exhibit to the
Registration Statement. Each such statement is qualified in its entirety by such
reference. The Registration Statement, including exhibits and schedules filed
therewith, may be inspected without charge at the public reference facilities
maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room
1024, Washington, D.C. 20549 and at the regional offices of the Commission
located at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained from the
57
<PAGE>
Public Reference Section of the Commission, Judiciary Plaza, 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and its public reference facilities in
New York, New York and Chicago, Illinois upon payment of the prescribed fees.
Electronic registration statements filed through the Electronic Data Gathering,
Analysis, and Retrieval System are publicly available through the Commission's
Web site (http:/ /www.sec.gov). Further information on public reference rooms
available at the Commission is available by contacting the Commission at 1-(800)
SEC-0330.
58
<PAGE>
IT STAFFING LTD.
CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<S> <C>
Independent Auditors' Report................................................................... F-2
Consolidated Balance Sheets.................................................................... F-3
Consolidated Statements of Income.............................................................. F-4
Consolidated Statements of Stockholders' Equity................................................ F-5
Consolidated Statements of Cash Flows.......................................................... F-6
Notes to Consolidated Financial Statements..................................................... F-7
</TABLE>
SUPPLEMENTARY SCHEDULES
<TABLE>
<S> <C>
Consolidated Schedules of Expenses............................................................. F-17
</TABLE>
INTERNATIONAL CAREER SPECIALISTS LTD.
FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<S> <C>
Independent Auditors' Report................................................................... F-20
Balance Sheets................................................................................. F-21
Statement of Income............................................................................ F-22
Statements of Stockholder's Equity............................................................. F-23
Statement of Cash Flows........................................................................ F-24
Notes to Financial Statements.................................................................. F-25
</TABLE>
SUPPLEMENTARY SCHEDULES
<TABLE>
<S> <C>
Schedules of Expenses.......................................................................... F-29
</TABLE>
SYSTEMSEARCH CONSULTING SERVICES INC.
FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<S> <C>
Independent Auditors' Report................................................................... F-31
Balance Sheets................................................................................. F-32
Statements of Income........................................................................... F-33
Statements of Stockholders' Equity............................................................. F-34
Statements of Cash Flows....................................................................... F-35
Notes to Financial Statements.................................................................. F-36
SUPPLEMENTARY SCHEDULES
Schedules of Expenses.......................................................................... F-39
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
IT Staffing Ltd.
We have audited the accompanying consolidated balance sheets of IT Staffing
Ltd. (incorporated in Canada) as of December 31, 1997 and 1996 and the related
consolidated statements of income, stockholders' equity and cash flows for the
years ended December 31, 1997 and 1996. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
IT Staffing Ltd. as of December 31, 1997 and 1996 and the consolidated results
of its operations and its cash flows for the years ended December 31, 1997 and
1996, in conformity with generally accepted accounting principles in the United
States of America.
<TABLE>
<S> <C>
Toronto, Ontario
July 27, 1998 Schwartz Levitsky Feldman
Chartered Accountants
</TABLE>
F-2
<PAGE>
IT STAFFING LTD.
CONSOLIDATED BALANCE SHEETS
AS AT DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER DECEMBER DECEMBER
30, 30, 31, 31,
1998 1997 1997 1996
----------- ----------- ----------- -----------
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash..................................... 149,572 2,935 9,860 5,743
Accounts receivable (note 3)............. 1,838,633 698,046 761,570 211,928
Prepaid expenses......................... 143,585 37,788 19,997 4,352
----------- ----------- ----------- -----------
2,131,790 738,769 791,427 222,023
CAPITAL ASSETS (note 4).................... 123,836 40,631 47,955 22,000
GOODWILL (note 5).......................... 1,237,583 467,296 434,833 --
----------- ----------- ----------- -----------
3,493,209 1,246,696 1,274,215 244,023
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness (note 6)............... 156,746 91,652 196,248 123,396
Accounts payable......................... 1,057,805 422,194 388,250 84,742
Income taxes payable..................... 200,750 61,594 40,786 6,421
Note payable (note 7).................... -- 108,609 104,858 --
Current portion of long-term debt (note
8)..................................... 107,100 17,535 21,191 7,296
Advances from stockholders............... -- 52,885 49,749 29,988
----------- ----------- ----------- -----------
1,522,401 754,469 801,082 251,843
LONG-TERM DEBT (note 8).................... 381,630 43,742 37,278 4,864
----------- ----------- ----------- -----------
1,904,031 798,211 838,360 256,707
----------- ----------- ----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
CAPITAL STOCK (note 9)..................... 1,248,368 328,327 328,327 4
CUMULATIVE TRANSLATION ADJUSTMENT.......... (111,139) (2,542) (18,133) 59
RETAINED EARNINGS (DEFICIENCY)............. 451,949 122,700 125,661 (12,747)
----------- ----------- ----------- -----------
1,589,178 448,485 435,855 (12,684)
----------- ----------- ----------- -----------
3,493,209 1,246,696 1,274,215 244,023
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
IT STAFFING LTD.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE PERIODS ENDED DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
REVENUE
Contract services................................. $ 6,558,250 $ 2,673,449 $3,729,703 $ 295,980
Permanent placements.............................. 2,198,232 746,054 974,638 468,207
------------- ------------- ------------ ------------
8,756,482 3,419,503 4,704,341 764,187
CONTRACTOR COSTS...................................... 5,010,878 2,116,823 2,888,540 259,334
------------- ------------- ------------ ------------
GROSS PROFIT.......................................... 3,745,604 1,302,680 1,815,801 504,853
EXPENSES
Selling........................................... 2,104,823 795,564 1,123,051 273,689
Administrative.................................... 967,741 263,900 373,627 181,876
Financial......................................... 128,702 42,125 125,594 13,733
------------- ------------- ------------ ------------
3,201,266 1,101,589 1,622,272 469,298
INCOME BEFORE INCOME TAXES............................ 544,338 201,091 193,529 35,555
Income Taxes (Note 10)............................ 218,050 65,644 55,121 5,353
------------- ------------- ------------ ------------
NET INCOME............................................ 326,288 135,447 138,408 30,202
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING
(Note 9)
Basic............................................... 1,650,238 1,309,135 1,309,135 1,021,125
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Fully Diluted....................................... 1,821,095 1,309,135 1,309,135 1,021,125
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
EARNINGS PER WEIGHTED AVERAGE COMMON SHARE
Basic............................................... 20 NTS 10 NTS 11 NTS 3 CENTS
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Fully Diluted....................................... 18 NTS 10 NTS 11 NTS 3 CENTS
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
IT STAFFING LTD.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
COMMON
STOCK RETAINED CUMULATIVE
NUMBER OF EARNINGS TRANSLATION
SHARES AMOUNTS (DEFICIT) ADJUSTMENTS
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
$ $ $
Balance as of December 31, 1995................................ 1,021,125 4 (20,948) --
Foreign currency translation................................... -- -- -- 59
Dividends paid................................................. -- -- (22,001) --
Net income for the year........................................ -- -- 30,202 --
---------- ---------- --------- -----------
Balance as of December 31, 1996................................ 1,021,125 4 (12,747) 59
Common shares issued........................................... 288,010 328,323 -- --
Foreign currency translation................................... -- -- -- (2,601)
Net income for the period...................................... -- -- 135,447 --
---------- ---------- --------- -----------
Balance as of September 30, 1997............................... 1,309,135 328,327 122,700 (2,542)
Foreign currency translation................................... -- -- -- (15,591)
Net income for the period...................................... -- -- 2,961 --
---------- ---------- --------- -----------
Balance as of December 31, 1997................................ 1,309,135 328,327 125,661 (18,133)
Common shares issued........................................... 368,740 920,041 -- --
Foreign currency translation................................... -- -- -- (93,006)
Net income for the period...................................... -- -- 326,288 --
---------- ---------- --------- -----------
Balance as of September 30, 1998............................... 1,677,875 1,248,368 451,949 (111,139)
---------- ---------- --------- -----------
---------- ---------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
IT STAFFING LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
Cash flows from operating activities:
Net income.......................................... 326,288 135,447 138,408 30,202
------------- ------------- ------------ ------------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Amortization...................................... 24,356 8,228 16,968 5,037
Amortization of goodwill.......................... 33,579 12,023 15,258 --
Decrease (increase) in accounts receivable........ (1,178,966) (489,358) (577,114) (211,535)
Decrease (increase) in prepaid expenses........... (130,645) 2,742 (15,645) (3,629)
Increase (decrease) in accounts payable........... 727,044 339,226 317,281 60,934
Increase (decrease) in income taxes payable....... 170,124 55,406 34,365 6,454
------------- ------------- ------------ ------------
Total adjustments................................... (354,508) (71,733) (208,887) (142,739)
------------- ------------- ------------ ------------
Net cash generated by operating activities.......... (28,220) 63,714 (70,479) (112,537)
------------- ------------- ------------ ------------
Cash flows from investing activities:
Purchases of capital assets......................... (107,024) (27,090) (44,739) (25,830)
Incorporation costs................................. -- -- 733 (744)
Acquisition of goodwill............................. (614,030) (190,035) (140,028) --
------------- ------------- ------------ ------------
Net cash used in investing activities............... (721,054) (217,125) (184,034) (26,574)
------------- ------------- ------------ ------------
Cash flows from financing activity:
Increase (decrease) in note payable................. (102,466) 108,972 108,350 --
Increase (decrease) in long-term debt............... 454,050 49,374 23,837 12,223
Increase (decrease) in advances from shareholders... (48,614) 23,202 21,716 30,142
Proceeds from issuance of capital stock............. 620,944 -- -- --
Payment of dividends................................ -- -- -- (22,001)
Increase (decrease) in bank's indebtedness.......... (27,828) (30,909) 96,601 115,605
------------- ------------- ------------ ------------
896,086 150,639 250,504 135,969
------------- ------------- ------------ ------------
Effect of foreign currency exchange rate changes...... (7,100) (36) 8,126 8,394
------------- ------------- ------------ ------------
Net increase (decrease) in cash....................... 139,712 (2,808) 4,117 5,252
Cash
--Beginning of year................................. 9,860 5,743 5,743 491
------------- ------------- ------------ ------------
End of year......................................... 149,572 2,935 9,860 5,743
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Interest paid......................................... $ 80,717 $ 13,757 6,491 2,910
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Income taxes paid..................................... -- -- -- --
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
1. BASIS OF PRESENTATION
The consolidated financial statements for the nine months ended September
30, 1998 and 1997 are unaudited. The interim results are not necessarily
indicative of the results for any future period. In the opinion of management,
the data in the consolidated financial statements reflects all adjustments
necessary for a fair presentation of the results of the interim periods
disclosed. All adjustments are of a normal and recurring nature.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. The earnings of the subsidiaries are
included from the date of acquisition. All significant inter-company
accounts have been eliminated.
Systemsearch Consulting Services Inc. was acquired on January 2, 1997 for
$391,850. This amount was paid by the issuance of Common Shares and a
cash payment of $100,007. The purchase has been reflected as follows:
<TABLE>
<S> <C>
Consideration.................................................. $ 391,850
Assumption of net liabilities.................................. 42,807
Goodwill......................................................... 434,657
</TABLE>
International Career Specialists Ltd. was acquired on January 1, 1998 for
$653,083. This amount was paid by the issuance of Common Shares and a
cash payment of $303,555. The purchase was reflected as follows:
<TABLE>
<S> <C>
Consideration.................................................. $ 653,083
Assumption of net liabilities.................................. 198,680
Goodwill......................................................... 851,763
</TABLE>
Had the Systemsearch Consulting Services Inc. income been included with
the Company's December 31, 1996 consolidated results of operations, the
pro-forma summarized results of operations would have been as follows:
<TABLE>
<S> <C>
Revenue......................................................... $1,971,976
Net loss........................................................ 29,854
Loss per share.................................................. (.02)
Pro-forma shares outstanding.................................... 1,309,135
</TABLE>
F-7
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Had the International Career Specialists Ltd. income been included with
the Company's December 31, 1997 consolidated results of operations, the
pro-forma summarized results of operations would have been as follows:
<TABLE>
<S> <C>
Revenue................................................. $8,363,133
Net earnings............................................ 153,744
Earnings per share...................................... .11
Pro-forma shares outstanding............................ 1,440,049
</TABLE>
b) Principal Business Activity
IT Staffing is an information technology staffing company, which along
with its subsidiaries System Search Consulting Services Inc. and
International Career Specialists Ltd., specialize in placing information
technology personnel on both a contract and permanent basis
System Search Consultants Inc. was purchased by IT Staffing Ltd. in a
transaction effective January 2, 1997. The acquisition was accounted for
using the purchase method.
International Career Specialists Ltd. was purchased by IT Staffing Ltd.
in a transaction effective January 1, 1998. The acquisition was accounted
for using the purchase method.
c) Cash
Cash includes cash on hand, and any other highly liquid investments
purchased with a maturity of three months or less. The carrying amount
approximates fair value because of the short maturity of those
instruments.
d) Other Financial Instruments
The carrying amount of the company's other financial instruments
approximate fair value because of the short maturity of these instruments
or the current nature of interest rates borne by these instruments.
e) Long-term Financial Instruments
The fair value of each of the company's long-term financial assets and
debt instruments is based on the amount of future cash flows associated
with each instrument discounted using an estimate of what the company's
current borrowing rate for similar instruments of comparable maturity
would be.
f) Capital Assets
Property and equipment are recorded at cost and are depreciated on the
declining balance basis over their estimated useful lives.
F-8
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
g) Revenue
Revenue from contract placements is recognized as services are performed.
Revenue from permanent placements is recognized upon commencement of
employment.
h) Goodwill
Goodwill representing the cost in excess of the fair value of net assets
acquired related to the acquisitions of System Search Consulting Services
Inc. and International Career Specialists Ltd. is being amortized on a
straight-line basis over a thirty year period. The Company calculates the
recoverability of goodwill on a quarterly basis by reference to estimated
undiscounted future cash flows.
i) Foreign Currency Translation
The translation of the consolidated financial statements from Canadian
dollars ("CDN $") into United States dollars is performed for the
convenience of the reader. Balance sheet accounts are translated using
closing exchange rates in effect at the balance sheet date and income and
expense accounts are translated using an average exchange rate prevailing
during each reporting period. No representation is made that the Canadian
dollar amounts could have been, or could be, converted into United States
dollars at the rates on the respective dates or at any other rates.
Adjustments resulting from the translation are included in the cumulative
translation adjustments in stockholders' equity.
j) Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles in the United States of America
requires management to make estimates and assumptions that affect certain
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the consolidated financial
statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. ACCOUNTS RECEIVABLE
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Accounts receivable................................... 1,871,287 698,046 796,523 211,928
Less: Allowance for doubtful accounts................. 32,654 -- 34,953 --
------------- ------------- ------------ ------------
Accounts receivable, net.............................. 1,838,633 698,046 761,570 211,928
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
F-9
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31,
----------------------------------- 1996
ACCUMULATED -------------
COST AMORTIZATION NET NET
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
$ $ $ $
Furniture and equipment.......................................... 40,565 16,000 24,565 14,084
Computer equipment............................................... 25,477 9,078 16,399 7,175
Computer software................................................ 13,982 6,991 6,991 --
Incorporation costs.............................................. 710 710 -- 741
--------- ------ --------- ------
80,734 32,779 47,955 22,000
--------- ------ --------- ------
--------- ------ --------- ------
</TABLE>
Amortization for the year ended December 31, 1997 amounted to $16,968;
($5,037 at December 31, 1996).
<TABLE>
<CAPTION>
SEPTEMBER 30, 1998 SEPTEMBER 30,
---------------------------------------- 1997
ACCUMULATED -------------
COST AMORTIZATION NET NET
----------- ------------- ------------ -------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1) (NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Furniture and equipment................................. 122,650 47,676 74,974 27,564
Computer equipment...................................... 56,778 19,442 37,336 13,067
Computer software....................................... 23,051 11,525 11,526 --
Automobile.............................................. -- -- -- --
----------- ------ ------------ ------
202,479 78,643 123,836 40,631
----------- ------ ------------ ------
----------- ------ ------------ ------
</TABLE>
Amortization for the period ended September 30, 1998 amounted to $24,356;
($8,228 at September 30, 1997).
5. GOODWILL
Goodwill is the excess of cost over the value of assets acquired over
liabilities assumed.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- -------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ -----------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Cost.................................................. 1,286,420 479,319 450,091 --
Accumulated amortization.............................. 48,837 12,023 15,258 --
--
------------- ------------- ------------
Net................................................... 1,237,583 467,296 434,833 --
--
--
------------- ------------- ------------
------------- ------------- ------------
Amortization for the period........................... 33,579 12,023 15,258 --
--
--
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
F-10
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
6. BANK INDEBTEDNESS AND LINE OF CREDIT
The companies have available a line of credit to a maximum of $650,000,
which bears interest at plus 1.75% over the Toronto Dominion Bank's prime rate
per annum and is secured by a general assignment of book debts, a general
security agreement and guarantees and postponements of claims by various
affiliated companies.
7. NOTES PAYABLE
Notes payable are represented by $104,858 ($108,609 in September 1997) of
notes payable in conjunction with the acquisition of Systems Search Consulting
Ltd.
8. LONG-TERM DEBT
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Included therein
a) A Business Development Bank of Canada ("BDC") loan,
secured by a general security agreement, payable in
59 equal monthly payments of $4,354 from October
23, 1998, plus interest of the BDC base rate plus
4% per annum. Currently the interest rate is 13%.
In addition IT Staffing Ltd. shall pay interest
monthly by way of a royalty of 0.0426% per annum of
IT Staffing Ltd.'s projected annual gross sales.... 256,886 -- -- --
A BDC loan, secured by a general security agreement,
payable in 59 monthly payments of $3,265 plus
interest of the BDC base rate plus 4% per annum.
Currently, the interest rate is 13%. In addition IT
Staffing Ltd. shall pay interest monthly by way of
royalty of 0.0198% per annum of its projected gross
annual sales........................................ 192,659 -- -- --
------------- ------------- ------------ ------------
Balance forward..................................... 449,545 -- -- --
a) Balance forward.................................... 449,545 -- -- --
A BDC loan secured by a general security agreement,
payable in 34 remaining monthly payments of $653
plus interest of the BDC operational interest rate
prime plus 5%, per annum. Currently, the interest
rate is 14%......................................... 22,205 33,277 28,974 --
</TABLE>
F-11
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
8. LONG-TERM DEBT (CONTINUED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
A BDC loan secured by a general security agreement
payable in 26 remaining monthly payments of $653
plus interest of the BDC base rate plus 3% per
annum. Currently, the interest rate is 12%.......... 16,980 28,000 23,749 --
A National Bank of Canada non-revolving, demand loan
currently with no outstanding balance. Payments were
made on a monthly basis in the amount of $608 for 24
months, at a rate equal to the National Bank of
Canada Canadian prime rate plus 2% per annum........ -- -- 5,746 12,160
------------- ------------- ------------ ------------
488,730 61,277 58,469 12,160
Less: Current portion............................... 107,100 17,535 21,191 7,296
------------- ------------- ------------ ------------
381,630 43,742 37,278 4,864
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
b) Future principal payments consist of the following as of September 30,
1998:
<TABLE>
<S> <C>
September 30, 1999................................................ $ 107,100
September 30, 2000................................................ 107,100
September 30, 2001................................................ 99,264
September 30, 2002................................................ 91,428
September 30, 2003................................................ 83,838
---------
$ 488,730
---------
---------
</TABLE>
c) Interest expense with respect to the long-term debt amounted to $36,000
for the nine months ended September 30, 1998 ($18,000 for the nine
months ended September 30, 1997) and $6,491 at December 31, 1997 ($2,910
at December 31, 1996).
d) Pursuant to the BDC loan agreement, BDC has the option to acquire 22,125
shares for an aggregate consideration of $1. The fair market value of
these shares at the time of issuance was $62,393 ($2.82 share). The
imputed discount on these options is being amortized over the term of
the loan as interest.
F-12
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
9. CAPITAL STOCK
<TABLE>
<S> <C> <C>
Authorized
An unlimited number of Common Shares
Issued
<CAPTION>
SHARES $
--------- ---------
<S> <C> <C>
September 30, 1998..................................... 1,677,875 1,248,368
September 30, 1997..................................... 1,309,135 328,327
December 31, 1997...................................... 1,309,135 328,327
December 31, 1996...................................... 1,021,125 4
</TABLE>
On January 2, 1997 288,010 shares were issued in conjunction with the
acquisition of System Search Consulting Services Inc. with a carrying value of
$328,323
On January 1, 1998 130,914 shares were issued in conjunction with the
acquisition of International Career Specialists Ltd. with a carrying value of
$349,528.
A private placement of 196,370 shares was completed in March 1998 yielding
proceeds of $423,639.
A second private placement of 85,094 shares was completed in April 1998
yielding proceeds of $216,814
The Company redeemed 43,637 shares for $69,940 in April 1998.
The Company has outstanding stock options issued in conjunction with its
long-term financing arrangements for 22,125 shares (see note 8d) and additional
options issued to a consultant of the Company for 200,000 shares exercisable at
$2.10/Share.
Subsequent to June 30, 1998 the Company granted options to purchase 50,000
shares to a vice president. The options are exerciseable at the issue price of
Common Shares in the proposed initial public offering.
The Company has initiated a stock option plan for officers, directors,
consultants, key employees and advisors. Under the plan, options to acquire an
aggregate of 435,000 Common Shares may be granted at the discretion of the board
of directors. The shares will require a two year vesting period and will be
exerciseable for up to 10 years. The option exercise price will be determined by
the board of directors and may not be less than the fair market value of the
Common Shares on the date of the granting of an option. To date, no options have
been granted under this plan.
On August 6, 1998, the Company split its stock. The result of the split
converted the outstanding shares from 1,281,667 to 1,667,875 shares. The number
of shares indicated above have been retroactively restated in all periods to
reflect the stock split on August 6, 1998.
The fully diluted shares outstanding after the effect of the stock split is
1,900,000 shares .
Weighted average number of shares outstanding is calculated on a fully
diluted basis after giving effect to the stock split.
F-13
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
10. INCOME TAXES
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
-------------------- ------------------------
SEPT. SEPT. DECEMBER DECEMBER
1998 1997 1997 1998
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Income Taxes (Recovery) consist of:
Amount calculated at Federal and
Provincial Statutory rates......................................... 226,246 77,293 70,702 5,333
Increase (decrease) resulting from:
Permanent Differences.............................................. 6,265 4,021 2,714 1,216
Timing Differences................................................. (268) 74 (29) (106)
Other Differences.................................................. (14,193) (15,744) (18,266) (1,090)
--------- --------- ----------- -----------
(8,196) (11,649) (15,581) 20
--------- --------- ----------- -----------
Current Income Taxes (Recovery)...................................... 218,050 65,644 55,121 5,353
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
11. TRANSACTIONS WITH RELATED COMPANIES
Prior to IT Staffing Ltd. purchasing shares of International Career
Specialists Ltd. on January 1, 1998, the Company rented premises from
International Career Specialists Ltd. The land and building were disposed of as
part of the purchase price.
12. LEASE COMMITMENTS
a) Minimum payments under operating leases for premises occupied by the
Company and its subsidiaries in Toronto and New York, exclusive of most
operating costs and realty taxes, for the fiscal year end of December 31 for the
next five years are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 117,849
1999.............................................................. 95,734
2000.............................................................. 95,734
2001.............................................................. 71,888
2002.............................................................. 55,855
---------
$ 437,060
---------
---------
</TABLE>
b) Minimum payments under other operating leases for the fiscal year end
December 31 until expiry are as follows:
<TABLE>
<S> <C>
1998.............................................................. $ 53,158
1999.............................................................. 32,916
2000.............................................................. 16,011
2001.............................................................. 4,242
2002.............................................................. 3,181
---------
$ 109,508
---------
---------
</TABLE>
F-14
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
13. SEGMENTED INFORMATION
a) Sales by Geographic Area
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
------------------------ ------------------------
SEPTEMBER SEPTEMBER DECEMBER DECEMBER
30, 30, 31, 31,
1998 1997 1997 1996
----------- ----------- ----------- -----------
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Canada..................................... 8,627,912 3,419,503 4,503,642 764,187
United States of America................... 98,570 -- 200,699 --
----------- ----------- ----------- -----------
8,756,482 3,419,503 4,704,341 764,187
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
b) Net Income by Geographic Area
The Company's accounting records do not readily provide information on net
income by geographic area. Management is of the opinion that the proportion
of net income based principally on sales, presented below, would fairly
present the results of operations by geographic area.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
------------------------ ------------------------
SEPTEMBER SEPTEMBER DECEMBER DECEMBER
30, 30, 31, 31,
1998 1997 1997 1996
----------- ----------- ----------- -----------
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Canada..................................... 322,615 135,447 131,822 30,202
United States of America................... 3,673 -- 6,586 --
----------- ----------- ----------- -----------
326,288 135,447 138,408 30,202
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
c) Identifiable Assets by Geographic Area
All identifiable assets were located in Canada for 1998, 1997 and 1996.
d) Sales to Major Customers
The consolidated entity had the following sales to major customers:
<TABLE>
<S> <C> <C>
September 1998............................................................. None
September 1997............................................................. None
December 1997
Bank of Montreal........................................................... $ 674,426 14%
SHL Systemhouse............................................................ $ 511,951 11%
December 1996
Bank of Montreal........................................................... $ 176,972 23%
Inco Limited............................................................... $ 77,119 10%
</TABLE>
e) Purchases From Major Suppliers
F-15
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
13. SEGMENTED INFORMATION (CONTINUED)
There were no significant purchases from major suppliers.
14. SUBSEQUENT EVENTS
a) The Company has entered into a Letter of Intent with an underwriting
firm and is proceeding to complete an initial public offering of 1,000,000
Common Shares for net proceeds to the Company of $4,500,000. Upon successful
completion of the offering the company will apply to have its stock listed on
Nasdaq.
b) Subsequent to September 30, 1998, the company acquired certain major
assets of Southport Consulting Company, a New Jersey corporation. The
consideration for the acquisition of US$250,000 was as follows:
<TABLE>
<S> <C>
Cash.............................................................. $ 50,000
Shares............................................................ 200,000
---------
$ 250,000
---------
---------
</TABLE>
The number of shares shall be determined by the issue price of the initial
public offering and shall have a value of $200,000. In the event that the public
offering is not completed 50,000 shares will be issued.
The assets acquired are valued as follows:
<TABLE>
<S> <C>
Software.......................................................... $ 130,000
Office furniture and equipment.................................... 20,000
Goodwill.......................................................... 100,000
---------
$ 250,000
---------
---------
</TABLE>
IT Staffing has contracted to retain Mr. Michael Carrazza, the key employee
of Southport Consulting Company through December 31, 2000.
15. COMPARATIVE FIGURES
Certain figures in the 1997 financial statements have been reclassified to
conform with the basis of presentation used in 1998.
16. STOCK OPTION PLAN
In July 1998, the Directors of the Company adopted and the stockholders
approved the adoption of the Company's 1998 Stock Option Plan.
The Plan will be administrated by the Compensation Committee or the Board of
Directors, which will determine among other things, those individuals who shall
receive options, the time period during which the options may be partially of
fully exercised, the number of Common Shares issuable upon the exercise of the
options and the option exercise price.
F-16
<PAGE>
IT STAFFING LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
The Plan is effective for a period for ten years, expiring in 2008. Options
to acquire 435,000 Common Shares may be granted to officers, directors,
consultants, key employees, advisors and similar parties who provide their
skills and expertise to the Company. The Plan is designed to enable management
to attract and retain qualified and competent directors, employees, consultants
and independent contractors. Options granted under the Plan may be exercisable
for up to ten years, generally require a minimum two year vesting period, and
shall be at an exercise price all as determined by the Board of Directors
provided that, pursuant to the terms of the Underwriting Agreement between the
Company and the Underwriters, the exercise price of any options may not be less
than the fair market value of the Common Shares on the date of the grant.
Options are non-transferable, and are exercisable only by the participant (or by
his or her guardian of legal representative) during his or her lifetime or by
his or her legal representatives following death.
If a participant ceases affiliation with the Company by reason of death,
permanent disability or retirement at or after age 65, the option remains
exercisable for one year from such occurrence but not beyond the option's
expiration date. Other types of termination allow the participant 90 days to
exercise the option, except for termination for cause which results in immediate
termination of the option.
The Company has agreed with the Representative not to grant any options
under the Plan at less than 100% of the fair market value of the Common Shares
at the date of the grant of the option.
Any unexercised options that expire or that terminate upon an employee's
ceasing to be employed by the Company become available again for issuance under
the Plan, subject to applicable securities regulation.
The Plan may be terminated or amended at any time by the Board of Directors,
except that the number of Common Shares reserved for issuance upon the exercise
of options granted under the Plan may not be increased without the consent of
the shareholders of the Company.
F-17
<PAGE>
IT STAFFING LTD.
SCHEDULES OF EXPENSES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS ENDED DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
------------------------ ------------------------
SEPTEMBER SEPTEMBER DECEMBER DECEMBER
30, 30, 31, 31,
1998 1997 1997 1996
----------- ----------- ----------- -----------
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
SELLING
Commissions................................ 1,855,764 690,844 954,915 190,551
Advertising and promotion.................. 198,762 89,187 144,455 67,589
Automobile and travel...................... 50,297 15,533 23,681 15,549
----------- ----------- ----------- -----------
2,104,823 795,564 1,123,051 273,689
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
ADMINISTRATIVE
Office and salaries and benefits........... 229,969 79,966 96,132 56,288
Rent....................................... 156,204 51,048 66,261 33,599
Management salaries and fees............... 291,698 0 -- --
Telephone.................................. 74,966 24,703 40,011 16,034
Office and general......................... 80,041 36,129 60,898 35,001
Taxes and licenses......................... 4,577 10,912 15,066 5,326
Insurance.................................. 8,715 5,697 8,751 6,897
Repairs and maintenance.................... 8,132 1,183 3,486 762
Equipment rental........................... 55,504 34,011 50,796 22,932
Amortization of goodwill................... 33,579 12,023 15,258 --
Amortization............................... 24,356 8,228 16,968 5,037
----------- ----------- ----------- -----------
967,741 263,900 373,627 181,876
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
FINANCIAL
Bad debts.................................. -- -- 36,117 --
Interest and bank charges.................. 85,657 25,428 42,153 8,762
Professional fees.......................... 43,045 16,697 47,324 4,971
----------- ----------- ----------- -----------
128,702 42,125 125,594 13,733
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
F-18
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
(AMOUNTS EXPRESSED IN US DOLLARS)
F-19
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
International Career Specialists Ltd.
We have audited the accompanying balance sheets of International Career
Specialists Ltd. (incorporated in Canada) as of December 31, 1997 and 1996 and
the related statements of income, stockholders' equity and cash flow for the
years ended December 31, 1997 and 1996. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of International Career
Specialists Ltd. as of December 31, 1997 and 1996 and the results of its
operations and its cash flows for the years ended December 31, 1997 and 1996, in
conformity with generally accepted accounting principles in the United States of
America.
<TABLE>
<S> <C>
Schwartz Levitsky Feldman
Chartered Accountants
</TABLE>
Toronto, Ontario
July 27, 1998
F-20
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
BALANCE SHEETS
AS AT DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1A) (NOTE 1A)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... 134,096 159,250 161,839 76,220
Accounts receivable....................................... 413,504 249,826 426,121 174,243
Short-term investments (note 2)........................... 0 60,983 47,135 32,773
Loan receivable--parent company........................... 45,716 0 -- --
Due from shareholder...................................... 0 0 -- 43,702
------------- ------------- ------------ ------------
593,316 470,059 635,095 326,938
CAPITAL ASSETS (note 3)..................................... 32,997 29,088 151,844 34,132
INVESTMENT IN RELATED COMPANY............................... 0 59,411 61,167 --
------------- ------------- ------------ ------------
626,313 558,558 848,106 361,070
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable.......................................... 454,440 305,708 505,446 235,093
Accrued wages............................................. 0 157,296 209,018 65,665
Income taxes payable...................................... 104,766 7,761 3,845 (1,016)
Advances from shareholder................................. 0 0 34,228 --
------------- ------------- ------------ ------------
559,206 470,765 752,537 299,742
------------- ------------- ------------ ------------
STOCKHOLDERS' EQUITY
CAPITAL STOCK (note 4)...................................... 1 1 1 1
CUMULATIVE TRANSLATION ADJUSTMENT........................... (9,817) (850) (4,093) (298)
RETAINED EARNINGS........................................... 76,923 88,642 99,661 61,625
------------- ------------- ------------ ------------
67,107 87,793 95,569 61,328
------------- ------------- ------------ ------------
626,313 558,558 848,106 361,070
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-21
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
STATEMENTS OF INCOME
FOR THE PERIODS ENDED DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1A) (NOTE 1A)
<S> <C> <C> <C> <C>
REVENUE
Contract sales.................................... 2,418,973 1,533,992 2,275,859 999,680
Permanent sales................................... 1,053,710 985,522 1,382,934 716,134
------------- ------------- ------------ ------------
3,472,683 2,519,514 3,658,793 1,715,814
Contractor fees................................... 1,661,952 1,179,639 1,736,037 786,245
------------- ------------- ------------ ------------
GROSS PROFIT.......................................... 1,810,731 1,339,875 1,922,756 929,569
Other income...................................... 6,919 3,571 2,665 11,332
------------- ------------- ------------ ------------
1,817,650 1,343,446 1,925,421 940,901
------------- ------------- ------------ ------------
EXPENSES
Administrative.................................... 430,695 396,857 503,627 234,440
Selling........................................... 928,351 903,289 1,356,978 689,834
Financial......................................... 2,610 8,522 15,946 2,204
------------- ------------- ------------ ------------
1,361,656 1,308,668 1,876,551 926,478
------------- ------------- ------------ ------------
INCOME BEFORE INCOME TAXES............................ 455,994 34,778 48,870 14,423
Income taxes (note 5)............................. 167,282 7,761 10,834 6,679
------------- ------------- ------------ ------------
NET INCOME............................................ 288,712 27,017 38,036 7,744
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
COMMON
STOCK CUMULATIVE
NUMBER OF RETAINED TRANSLATION
SHARES AMOUNTS EARNINGS ADJUSTMENTS
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
$ $ $
Balance as of December 31, 1995................................ 2 1 53,881 --
Foreign currency translation................................... -- -- -- (298)
Net income for the year........................................ -- -- 7,744 --
---------- ---------- ---------- ------
Balance as of December 31, 1996................................ 2 1 61,625 (298)
Foreign currency translation................................... -- -- -- (552)
Net income for the period...................................... -- -- 27,017 --
---------- ---------- ---------- ------
Balance as of September 30, 1997............................... 2 1 88,642 (850)
Foreign currency translation................................... -- -- -- (3,243)
Net income for the period...................................... -- -- 11,019 --
---------- ---------- ---------- ------
Balance as of December 31, 1997................................ 2 1 99,661 (4,093)
Foreign currency translation................................... -- -- -- (5,724)
Distribution of assets--dividends paid (note 6)................ -- -- (311,450) --
Net income for the period...................................... -- -- 288,712 --
---------- ---------- ---------- ------
Balance as of September 30, 1998............................... 2 1 76,923 (9,817)
---------- ---------- ---------- ------
---------- ---------- ---------- ------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1A) (NOTE 1A)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... 288,712 27,017 38,036 7,744
------------- ------------- ------------ ------------
Adjustments to reconcile net income to net cash
(used in) provided by operating activities:
Amortization...................................... 3,155 10,672 15,933 8,264
Decrease (increase) in accounts receivable........ (16,116) (77,165) (267,804) (106,202)
Decrease (increase) in short-term investments..... 46,060 (28,554) (16,258) 2,553
Increase (decrease) in accounts payable........... (19,042) 72,643 289,526 193,767
Increase (decrease) in accrued wages.............. (204,249) 92,444 150,968 66,002
Increase (decrease) in income taxes payable....... 105,827 8,799 4,979 (936)
------------- ------------- ------------ ------------
Total adjustments................................... (84,365) 78,839 177,344 163,448
------------- ------------- ------------ ------------
Net cash generated by operating activities.......... 204,347 105,856 215,380 171,192
------------- ------------- ------------ ------------
Cash flows from investing activities:
Purchases of capital assets....................... -- (5,871) (139,041) (25,590)
Disposal of capital assets........................ 110,710 -- -- --
------------- ------------- ------------ ------------
Net cash used in investing activities............. 110,710 (5,871) (139,041) (25,590)
------------- ------------- ------------ ------------
Cash flows from financing activities:
Decrease (increase) in investment in related
company......................................... 59,772 (59,610) (63,204) --
Decrease (increase) in advances to shareholder.... -- 43,515 35,358 --
Decrease (increase) in loan to parent company..... (47,817) -- -- --
Increase (decrease) in advances from shareholder...... (33,447) -- 43,266 (36,805)
Payment of dividends................................ (311,450) -- -- --
------------- ------------- ------------ ------------
(332,942) (16,095) 15,420 (36,805)
------------- ------------- ------------ ------------
Effect of foreign currency exchange rate changes...... (9,858) (860) (6,140) (391)
------------- ------------- ------------ ------------
Net increase (decrease) in cash....................... (27,743) 83,030 85,619 108,406
Cash
-- Beginning of year................................ 161,839 76,220 76,220 (32,186)
------------- ------------- ------------ ------------
-- End of year...................................... 134,096 159,250 161,839 76,220
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Interest paid......................................... -- -- -- --
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
Income taxes paid..................................... 38,545 3,503 5,856 7,615
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997, DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Presentation
The financial statements for the nine-months ended September 30, 1998 and 1997
are unaudited. The interim results are not necessarily indicative of the results
for any future period. In the opinion of management, the data in the financial
statements reflects all adjustments necessary for a fair presentation of the
results of the interim periods disclosed. All adjustments are of a normal and
recurring nature.
b) Business Operations
International Career Specialists is an information technology staffing company
specializing in placing high technology personnel on both a contract and
permanent basis.
c) Cash
Cash includes cash on hand, and any other highly liquid investments purchased
with a maturity of three months or less. The carrying amount approximates fair
value because of the short maturity of those instruments.
d) Other Financial Instruments
The carrying amount of the company's other financial instruments approximate
fair value because of the short maturity of these instruments or the current
nature of interest rates borne by these instruments.
e) Short-term Investments
The Company's marketable securities are in equity investments. Short-term
investments are carried at fair market value.
f) Revenue Recognition
Revenue from contract placements is recognized as services are performed.
Revenue from permanent placements are recognized upon commencement of
employment.
g) Capital Assets
Capital assets are recorded at cost and are amortized at the undernoted rates
and methods:
<TABLE>
<S> <C> <C>
Declining
Vehicles 20% balance
Declining
Office equipment 20% balance
Declining
Computer 30% balance
Leasehold improvements 5 years Straight-line
Declining
Building--U.S. office 5% balance
Office equipment--U.S. Declining
office 20% balance
</TABLE>
Amortization of assets acquired during the year is recorded at one-half of the
normal rates.
F-25
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997, DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
h) Foreign Currency Translation
The translation of the financial statements from Canadian dollars ("CDN$") into
United States dollars is performed for the convenience of the reader. Balance
sheet accounts are translated using closing exchange rates in effect at the
balance sheet date and income and expense accounts are translated using an
average exchange rate prevailing during each reporting period. No representation
is made that the Canadian dollar amounts could have been, or could be, converted
into United States dollars at the rates on the respective dates or at any other
rates. Adjustments resulting from the translation are including in the
cumulative translation adjustments in stockholders's equity.
i) Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires management to
make estimates and assumptions that affect certain reported amounts of assets
and liabilities and disclosures of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
2. SHORT-TERM INVESTMENTS
Short-term investments consist of:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- ----------------------------
<S> <C> <C> <C> <C>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------- -------------
<CAPTION>
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1A) (NOTE 1A)
<S> <C> <C> <C> <C>
Marketable securities............. -- 60,983 47,135 32,773
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
All marketable securities are in equity investments and have been adjusted to
reflect their market value. The securities were disposed of during 1998. Gains
are recorded in other income.
3. CAPITAL ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
--------------------------------------------------
ACCUMULATED ------------------------
COST AMORTIZATION NET NET
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
$ $ $ $
Land--US................................... 24,467 -- 24,467 --
Building--US............................... 85,984 2,150 83,834 --
Office equipment--US....................... 5,276 514 4,762 --
Vehicles................................... 18,577 7,597 10,980 16,372
Office equipment........................... 39,482 16,229 23,253 8,905
Computer................................... 14,038 9,490 4,548 5,080
Leasehold improvements..................... 5,692 5,692 -- 3,775
--------- ------ --------- ------
193,516 41,672 151,844 34,132
--------- ------ --------- ------
--------- ------ --------- ------
</TABLE>
F-26
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997, DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
3. CAPITAL ASSETS (CONTINUED)
Amortization for the year ended December 31, 1997 amounted to $15,933
($8,264 as of December 31, 1996).
<TABLE>
<CAPTION>
SEPTEMBER 30,
1998 SEPTEMBER 30,
(UNAUDITED) 1997
(NOTE 1A) (UNAUDITED)
----------------------------------- (NOTE 1A)
ACCUMULATED -------------
COST AMORTIZATION NET NET
--------- ------------- --------- -------------
<S> <C> <C> <C> <C>
$ $ $ $
Vehicles..................................... -- -- -- 12,148
Office equipment............................. 43,992 19,907 24,085 11,719
Computer..................................... 17,439 8,527 8,912 3,937
Leasehold improvements....................... -- -- -- 1,284
--------- ------ --------- ------
61,431 28,434 32,997 29,088
--------- ------ --------- ------
--------- ------ --------- ------
</TABLE>
Amortization for the nine months ended September 30, 1998 amounted to $3,155
($10,672 for the nine months ended September 30, 1997).
4. CAPITAL STOCK
<TABLE>
<S> <C> <C> <C> <C>
Authorized
10,000 Preferred shares, 10% non-cumulative, non-participating, non-voting,
redeemable at par value of $7.30 each ($10 Canadian)
25,000 Common shares, no par value
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
------------------------------------ ------------------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
----------------- ----------------- ----------------- -----------------
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1A) (NOTE 1A)
----------------- -----------------
<S> <C> <C> <C> <C>
Issued
2 Common shares.......... 1 1 1 1
- - - -
- - - -
</TABLE>
F-27
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997, DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
5. INCOME TAXES
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
-------------------- ------------------------
<S> <C> <C> <C> <C>
SEPT. SEPT. DECEMBER DECEMBER
1998 1997 1997 1996
--------- --------- ----------- -----------
Income Taxes (Recovery) consist of:
Amount calculated at Federal and
Provincial Statutory rates.......................................... 173,278 13,216 18,571 5,769
Increase (decrease) resulting from:
Permanent Differences............................................... 448 554 735 784
Timing Differences.................................................. (458) (440) (583) --
Other Differences................................................... (5,986) (5,569) (7,888) 125
--------- --------- ----------- -----
(5,995) (5,454) (7,736) 909
--------- --------- ----------- -----
Current Income Taxes (Recovery)....................................... 167,282 7,761 10,834 6,679
--------- --------- ----------- -----
--------- --------- ----------- -----
</TABLE>
6. DISTRIBUTION OF ASSETS--DIVIDENDS PAID
On January 1, 1998, the Company paid a dividend in kind to its shareholder
distributing assets as follows:
<TABLE>
<S> <C>
Short-term investments (at market value).......................... $ 53,464
Investment in 1242541 Ontario Inc................................. 68,194
Land--Building U.S................................................ 109,834
Vehicle........................................................... 10,443
Cash.............................................................. 69,515
---------
$ 311,450
---------
---------
</TABLE>
7. LEASE COMMITMENTS
Minimum payments under an operating lease for premises, inclusive of all
operating costs, hydro, basic insurance, utilities and property taxes for which
the company is responsible, for the fiscal year end, is as follows until expiry:
<TABLE>
<S> <C>
1998............................................................... $ 40,878
1999............................................................... 40,878
2000............................................................... 40,878
2001............................................................... 17,032
</TABLE>
F-28
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
SCHEDULES OF EXPENSES
FOR THE PERIODS ENDED DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
------------------------------ --------------------------
<S> <C> <C> <C> <C>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
-------------- -------------- ------------ ------------
<CAPTION>
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1A) (NOTE 1A)
<S> <C> <C> <C> <C>
ADMINISTRATIVE
Management salaries and fees................... 291,698 296,385 366,225 139,338
Office salaries and benefits................... 70,143 35,109 47,055 33,574
Rent........................................... 34,000 32,048 43,688 35,066
Telephone...................................... 15,819 10,640 14,486 11,118
Office and general............................. 13,610 12,003 16,240 7,080
Repairs and maintenance........................ 2,270 -- -- --
Amortization................................... 3,155 10,672 15,933 8,264
------- ------- ------------ ------------
430,695 396,857 503,627 234,440
------- ------- ------------ ------------
------- ------- ------------ ------------
SELLING
Commission..................................... 910,740 880,100 1,323,007 659,090
Advertising and promotion...................... 11,699 15,404 22,235 17,650
Automobile and travel.......................... 5,912 7,785 11,736 13,094
------- ------- ------------ ------------
928,351 903,289 1,356,978 689,834
------- ------- ------------ ------------
------- ------- ------------ ------------
FINANCIAL
Professional fees.............................. 2,001 8,265 15,596 1,868
Interest and bank charges...................... 609 257 350 336
------- ------- ------------ ------------
2,610 8,522 15,946 2,204
------- ------- ------------ ------------
------- ------- ------------ ------------
</TABLE>
F-29
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1998 AND SEPTEMBER 30, 1997
(UNAUDITED)
YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
TOGETHER WITH INDEPENDENT AUDITORS' REPORT
(AMOUNTS EXPRESSED IN US DOLLARS)
F-30
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Systemsearch Consulting Services Inc.
We have audited the accompanying balance sheets of Systemsearch Consulting
Services Inc. (incorporated in Canada) as of December 31, 1997 and 1996 and the
related statements of income, stockholders' equity and cash flows for the years
ended December 31, 1997 and 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Systemsearch Consulting
Services Ltd. as of December 31, 1997 and 1996 and the results of its operations
and its cash flows for the years ended December 31, 1997 and 1996, in conformity
with generally accepted accounting principles in the United States of America.
<TABLE>
<S> <C>
Schwartz Levitsky
Feldman
Chartered Accountants
</TABLE>
Toronto, Ontario
July 27, 1998
F-31
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
BALANCE SHEETS
AS AT DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
SEPTEMBER SEPTEMBER DECEMBER DECEMBER
30, 30, 31, 31,
1998 1997 1997 1996
----------- ----------- ----------- -----------
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Bank..................................... 13,259 2,935 7,948 4,050
Accounts receivable...................... 370,946 233,121 271,985 144,615
Income taxes recoverable................. -- -- 19,000
Due from parent company (note 3)......... 65,308 --
----------- ----------- ----------- -----------
449,513 236,056 279,933 167,665
CAPITAL ASSETS (note 4).................... 11,711 12,223 11,176 9,339
----------- ----------- ----------- -----------
461,224 248,279 291,109 177,004
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
LIABILITIES
CURRENT LIABILITIES
Bank indebtedness........................ -- 13,343 12,183 5,905
Accounts payable......................... 154,783 165,845 176,438 158,700
Income taxes payable..................... 113,059 14,313 20,168 --
Due to shareholder (note 5).............. -- -- 20,972 --
----------- ----------- ----------- -----------
267,842 193,501 229,761 164,605
DUE TO SHAREHOLDER (note 5)................ -- 21,722 -- 57,489
----------- ----------- ----------- -----------
267,842 215,223 229,761 222,094
----------- ----------- ----------- -----------
SHAREHOLDER'S EQUITY
CAPITAL STOCK (note 6)..................... 36 36 36 36
CUMULATIVE TRANSLATION ADJUSTMENT.......... (11,863) 315 (1,074) 329
RETAINED EARNINGS.......................... 205,209 32,705 62,386 (45,455)
----------- ----------- ----------- -----------
193,382 33,056 61,348 (45,090)
----------- ----------- ----------- -----------
461,224 248,279 291,109 177,004
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-32
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
STATEMENTS OF INCOME
FOR THE PERIODS ENDED DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
------------------------ ------------------------
SEPTEMBER SEPTEMBER DECEMBER DECEMBER
30, 30, 31, 31,
1998 1997 1997 1996
----------- ----------- ----------- -----------
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
REVENUE
Contract sales........................... 1,504,978 1,192,167 1,703,097 1,009,238
Permanent sales.......................... 429,024 209,114 248,961 198,550
----------- ----------- ----------- -----------
1,934,002 1,401,281 1,952,058 1,207,788
Contractor fees.......................... 1,230,896 890,138 1,289,229 838,855
----------- ----------- ----------- -----------
GROSS PROFIT............................... 703,106 511,143 662,829 368,933
Other income............................. 3,533 0 -- --
----------- ----------- ----------- -----------
706,639 511,143 662,829 368,933
----------- ----------- ----------- -----------
EXPENSES
Administrative........................... 128,641 66,518 89,031 81,617
Selling.................................. 329,817 315,965 406,718 341,495
Financial................................ 6,809 17,331 19,400 9,619
----------- ----------- ----------- -----------
465,267 399,814 515,149 432,731
----------- ----------- ----------- -----------
EARNINGS BEFORE INCOME TAXES............... 241,372 111,329 147,680 (63,798)
Income taxes (note 7).................... 98,549 33,169 39,839 (19,000)
----------- ----------- ----------- -----------
NET INCOME................................. 142,823 78,160 107,841 (44,798)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-33
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
COMMON
STOCK RETAINED CUMULATIVE
NUMBER OF EARNINGS TRANSLATION
SHARES AMOUNTS (DEFICIT) ADJUSTMENTS
------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
$ $ $
Balance as of December 31, 1995................................... 65 36 (657) --
Foreign currency translation...................................... -- -- -- 329
Net loss for the year............................................. -- -- (44,798) --
----- ----- --------- -----------
Balance as of December 31, 1996................................... 65 36 (45,455) 329
Foreign currency translation...................................... -- -- -- (14)
Net income for the year........................................... -- -- 78,160 --
----- ----- --------- -----------
Balance as of September 30, 1997.................................. 65 36 32,705 315
Foreign currency translation...................................... -- -- -- (1,389)
Net income for the year........................................... -- -- 29,681 --
----- ----- --------- -----------
Balance as of December 31, 1997................................... 65 36 62,386 (1,074)
Foreign currency translation...................................... -- -- -- (10,789)
Net income for the year........................................... -- -- 142,823 --
----- ----- --------- -----------
Balance as of September 30, 1998.................................. 65 36 205,209 (11,863)
----- ----- --------- -----------
----- ----- --------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-34
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
STATEMENTS OF CASH FLOWS
FOR THE PERIODS ENDED DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.......................................... 142,823 78,160 107,841 (44,798)
------------- ------------- ------------ ------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization........................................ 2,162 1,947 2,582 2,347
Decrease (increase) in accounts receivable.......... (122,220) (89,904) (137,868) 48,795
Increase (decrease) in accounts payable............. (10,744) 8,379 25,196 (50,617)
Increase (decrease) in income taxes payable......... 98,276 33,181 39,839 (19,000)
------------- ------------- ------------ ------------
Total adjustments..................................... (32,526) (46,397) (70,251) (18,475)
------------- ------------- ------------ ------------
Net cash generated by operating activities.......... 110,297 31,763 37,590 (63,273)
------------- ------------- ------------ ------------
Cash flows from investing activities:
Purchases of capital assets......................... (3,491) 1,947 (4,884) --
------------- ------------- ------------ ------------
Cash flows from financing activities
Decrease (increase) in laon to parent company....... (68,311)
Increase (decrease) in advance from shareholder..... (20,493) (35,448) (35,246) 22,000
Increase (decrease) in bank indebtedness............ (11,902) 7,508 6,278 5,905
------------- ------------- ------------ ------------
(100,706) (27,940) (28,968) 27,905
------------- ------------- ------------ ------------
Effect of foreign currency exchange rate on changes... (789) (6,885) 160 9
------------- ------------- ------------ ------------
Net increase (decrease) in cash....................... 5,311 (1,115) 3,898 (35,359)
Cash
--Beginning of year................................. 7,948 4,050 4,050 39,409
------------- ------------- ------------ ------------
--End of year....................................... 13,259 2,935 7,948 4,050
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
--Interest paid..................................... 2,477 2,941 3,936 8,548
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
--Income taxes paid................................. -- -- -- --
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
1. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial statements for the nine months ended September 30, 1998 and
1997 are unaudited. The interim results are not necessarily indicative of the
results for any future period. In the opinion of management, the data in the
financial statements reflects all adjustments necessary for a fair presentation
of the results of the interim periods disclosed. All adjustments are of normal
and recurring nature.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Business
Systemsearch Consulting Services Inc. is an information technology
staffing company, specializes in placing information technology personnel
on both a contract and permanent basis.
b) Cash
Cash includes cash on hand, and any other highly liquid investments
purchased with a maturity of three months or less. The carrying amount
approximates fair value because of the short maturity of those
instruments.
c) Other Financial Instruments
The carrying amount of the Company's other financial instruments
approximate fair value because of the short maturity of these instruments
or the current nature of interest rates borne by these instruments.
d) Long-term Financial Instruments
The fair value of each of the Company's long-term financial assets and
debt instruments is based on the amount of future cash flows associated
with each instrument discounted using an estimate of what the Company's
current borrowing rate for similar instruments of comparable maturity
would be.
e) Capital Assets
Property and equipment are recorded at cost and are amortized on the
declining balance basis over their estimated useful lives.
f) Revenue Recognition
Revenue from contract placements is recognized as services are performed.
Revenue from permanent placements are recognized upon commencement of
employment.
g) Foreign Currency Translation
The translation of the financial statements from Canadian dollars ("CDN
$") into United States dollars is performed for the convenience of the
reader. Balance sheet accounts are translated using closing exchange
rates in effect at the balance sheet date and income and expense accounts
are translated using an average exchange rate prevailing during each
reporting period. No
F-36
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
representation is made that the Canadian dollar amounts could have been,
or could be, converted into United States dollars at the rates on the
respective dates or at any other rates. Adjustments resulting from the
translation are included in the cumulative translation adjustments in
stockholders' equity.
h) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles in the United States of America requires
management to make estimates and assumptions that affect certain reported
amounts of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
3. DUE FROM PARENT COMPANY
This loan is unsecured, non-interest bearing and has no specific terms of
repayment.
4. CAPITAL ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1996
--------------------------------- -------------
ACCUMULATED
COST AMORTIZATION NET NET
--------- ----------- --------- -------------
$ $ $ $
<S> <C> <C> <C> <C>
Furniture and fixtures............................... 22,203 11,027 11,176 9,339
--------- ----------- --------- -----
--------- ----------- --------- -----
Amortization for the year ended December 31, 1997 amounted to
$2,582 ($2,347 as of December 31, 1996).
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
(UNAUDITED) SEPTEMBER 30,
(NOTE 1) 1996
------------------------------------- (UNAUDITED)
ACCUMULATED (NOTE 1)
AMORTIZATION -----------------
COST NET NET NET
----------- ----------- ----------- -----------------
$ $ $ $
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1) (NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
Furniture and fixtures.................... 24,080 12,369 11,711 12,223
----------- ----------- ----------- ------
----------- ----------- ----------- ------
</TABLE>
Amortization for the period ended September 30, 1998 amounted to $2,162
($1,947 for the period ended September 30, 1997).
5. DUE TO SHAREHOLDER
The shareholder loan is unsecured, non-interest bearing and has no specific
terms of repayment.
F-37
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998, SEPTEMBER 30, 1997, DECEMBER 31, 1997 AND DECEMBER 31, 1996
(AMOUNTS EXPRESSED IN US DOLLARS)
6. CAPITAL STOCK
<TABLE>
<S> <C> <C> <C> <C>
Authorized
An unlimited number of Common Shares, no par value
Issued
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- ----------------------------
SEPTEMBER 30 SEPTEMBER 30 DECEMBER 31 DECEMBER 31
1998 1997 1997 1996
------------- ------------- ------------- -------------
$ $ $ $
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
65 Common shares....................... 36 36 36 36
----- ----- ----- -----
----- ----- ----- -----
</TABLE>
7. INCOME TAXES
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
------------------------ ------------------------
SEPTEMBER SEPTEMBER DECEMBER DECEMBER
1998 1997 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Income Taxes (Recovery) consist of:
Amount calculated at Federal and Provincial
Statutory rates............................... 98,359 46,758 56,119 (19,139)
Increase (decrease) resulting from:
Permanent Differences......................... 299 129 134 319
Timing Differences............................ (110) (57) (68) (180)
Other Differences............................. -- (13,662) (16,346) --
----------- ----------- ----------- -----------
189 (13,589) (16,279) 139
----------- ----------- ----------- -----------
Current Income Taxes (Recovery)................. 98,549 33,169 39,839 (19,000)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
8. LEASE COMMITMENTS
Minimum lease payments under an operating lease for the premises, exclusive
of all operating costs, hydro, basic insurance, utilities and property taxes for
which the company is responsible, is as follows for the fiscal year end:
<TABLE>
<CAPTION>
<S> <C>
1998............................................................................... $ 21,695
1999............................................................................... 23,380
2000............................................................................... 23,380
2001............................................................................... 23,380
2002............................................................................... 23,380
</TABLE>
F-38
<PAGE>
SYSTEMSEARCH CONSULTING SERVICES INC.
SCHEDULES OF EXPENSES
FOR THE PERIODS ENDED DECEMBER 31 AND SEPTEMBER 30
(AMOUNTS EXPRESSED IN US DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
---------------------------- --------------------------
<S> <C> <C> <C> <C>
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1998 1997 1997 1996
$ $ $ $
<CAPTION>
(UNAUDITED) (UNAUDITED)
(NOTE 1) (NOTE 1)
<S> <C> <C> <C> <C>
ADMINISTRATIVE
Office salaries and benefits........................ 61,098 -- -- --
Rent................................................ 29,222 22,878 28,848 26,732
Office and general.................................. 13,610 23,992 35,649 32,627
Telephone........................................... 9,872 8,248 10,473 10,532
Taxes and licences.................................. 4,236 4,857 5,948 2,916
Insurance........................................... 1,808 1,869 1,858 2,287
Equipment rental.................................... 1,814 1,772 2,158 4,176
Repairs and maintenance............................. 4,819 955 1,515 --
Management salaries and fees........................ -- -- -- --
Amortization........................................ 2,162 1,947 2,582 2,347
------------- ------------- ------------ ------------
128,641 66,518 89,031 81,617
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
SELLING
Commission.......................................... 316,979 312,113 402,059 332,529
Automobile and travel............................... 12,838 3,852 4,659 8,966
------------- ------------- ------------ ------------
329,817 315,965 406,718 341,495
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
FINANCIAL
Interest and bank charges........................... 2,477 2,941 3,936 8,548
Professional fees................................... 4,332 14,390 15,464 1,071
------------- ------------- ------------ ------------
6,809 17,331 19,400 9,619
------------- ------------- ------------ ------------
------------- ------------- ------------ ------------
</TABLE>
F-39
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO UNDERWRITER, DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANY PERSON IN ANY JURISDICTION
WHERE SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER DELIVERY OF THIS
PROSPECTUS NOR ANY SALE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Prospectus Summary............................. 4
Risk Factors................................... 8
Use of Proceeds................................ 18
Dividend Policy................................ 19
Dilution....................................... 20
Capitalization................................. 21
Selected Financial Data........................ 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 23
Business....................................... 29
Management..................................... 42
Principal Shareholders......................... 47
Certain Transactions........................... 48
Shares Eligible for Future Sale................ 49
Description of Securities...................... 51
Certain United States and Canadian Federal
Income Tax Considerations.................... 52
Investment Canada Act.......................... 54
Underwriting................................... 55
Legal Matters.................................. 57
Experts........................................ 57
Additional Information......................... 57
Index to Financial Statements.................. F-1
</TABLE>
------------------------
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMPANY'S SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WITH
RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
IT STAFFING LTD.
1,000,000
COMMON SHARES
------------------------
PROSPECTUS
------------------------
STRASBOURGER PEARSON
TULCIN WOLFF INCORPORATED
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Bylaws of the Company provide that the Company shall indemnify directors
and officers of the Company. The pertinent section of Canadian law is set forth
below in full. In addition, upon effectiveness of this registration statement,
management intends to obtain officers' and directors' liability insurance.
See the second and third paragraphs of Item 28 below for information
regarding the position of the Securities and Exchange Commission (the
"Commission") with respect to the effect of any indemnification for liabilities
arising under the Securities Act of 1933, as amended (the "Securities Act").
Section 136 of the Business Corporations Act (Ontario) provides as follows:
(1) INDEMNIFICATION OF DIRECTORS. A corporation may indemnify a director or
officer of the corporation, a former director or officer of the corporation or a
person who acts or acted at the corporation's request as a director or officer
of a body corporate of which the corporation is or was a shareholder or
creditor, and his or her heirs and legal representatives, against all costs,
charges and expenses, including an amount paid to settle an action or satisfy a
judgment, reasonably incurred by him or her in respect of any civil, criminal or
administrative action or proceeding to which he or she is a party by reason of
being or having been a director or officer of such corporation or body
corporate, if,
(a) he or she acted honestly and in good faith with a view to the best
interests of the corporation; and
(b) in the case of a criminal or administrative action or proceeding
that is enforced by a monetary penalty, he or she had reasonable grounds for
believing that his or her conduct was lawful.
(2) IDEM. A corporation may, with the approval of the court, indemnify a
person referred to in subsection (1) in respect of an action by or behalf of the
corporation or body corporate to procure a judgment in its favour, to which the
person is made a party by reason of being or having been a director or an
officer of the corporation or body corporate, against all costs, charges and
expenses reasonably incurred by the person in connection with such action if he
or she fulfils the conditions set out in clauses (1)(a) and (b).
(3) IDEM. Despite anything in this section, a person referred to in
subsection (1) is entitled to indemnity from the corporation in respect of all
costs, charges and expenses reasonably incurred by him in connection with the
defense of any civil, criminal or administrative action or proceeding to which
he or she is made a party by reason of being or having been a director or
officer of the corporation or body corporate, if the person seeking indemnity;
(a) was substantially successful on the merits in his or her defense of
the action or proceeding; and
(b) fulfills the conditions set out in clauses (1)(a) and (b).
(4) LIABILITY INSURANCE. A corporation may purchase and maintain insurance
for the benefit of any person referred to in subsection (1) against any
liability incurred by the person,
(a) in his or her capacity as a director or officer of the corporation,
except where the liability relates to the person's failure to act honestly
and in good faith with a view to the best interests of the corporation; or
II-1
<PAGE>
(b) in his or her capacity as a director or officer of another body
corporate where the person acts or acted in that capacity at the
corporation's request, except where the liability relates to the person's
failure to act honestly and in good faith with a view to the best interests
of the body corporate.
(5) APPLICATION TO COURT. A corporation or a person referred to in
subsection (1) may apply to the court for an order approving an indemnity under
this section and the court may so order and make any further order it thinks
fit.
(6) INDEM. Upon application under subsection (5), the court may order notice
to be given to any interested person and such person is entitled to appear and
be heard in person or by counsel.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of the estimated expenses to be paid by the
Company in connection with the issuance and distribution of the securities being
registered:
<TABLE>
<S> <C>
SEC Registration Fee........................................................... $ 1,808.15
NASD Filing Fee................................................................ 1,325.00
Nasdaq Listing Fees*........................................................... 15,000.00
Printing Engraving Expenses*................................................... 75,000.00
Legal Fees and Expenses*....................................................... 150,000.00
Accounting Fees and Expenses*.................................................. 70,000.00
Blue Sky Fees and Expenses*.................................................... 35,000.00
Transfer Agent and Registrar Fees and Expenses................................. 3,500.00
Miscellaneous*................................................................. 8,366.85
Total.......................................................................... $360,000.00
</TABLE>
- ------------------------
* estimate
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
In October 1997, in consideration for business consulting services,
including identifying, structuring and effecting the acquisitions of Systems and
ICS, the Company issued 113,459 Common Shares to Globe Capital Corporation,
which is controlled by Lloyd Maclean, the Company's Chief Financial Officer and
a Director. The shares were valued at CDN$50,000.
In January 1997, in connection with the acquisition of Systems, the Company
issued 174,551 Common Shares to John R. Wilson. The shares were valued at
$291,843. 43,637 of these shares were redeemed in April 1998 for $69,940.
II-2
<PAGE>
In February through March of 1998, the Company sold 196,372 Common Shares to
12 individuals at a purchase price of approximately $2.15 per share for
aggregate consideration of $423,639. The twelve individuals included employees
and directors of the Company were:
<TABLE>
<CAPTION>
PURCHASE PRICE IN
SHAREHOLDER SHARES CANADIAN DOLLARS AFFILIATION(1)
- ----------------------------------------------- --------- -------------------------------- --------------------
<S> <C> <C> <C>
Patrick French................................. 19,637 60,000 (2)
James French................................... 6,546 20,000 (2)
Paul Dodd...................................... 19,637 60,000 Employee
Deidre Taylor.................................. 9,819 30,000 (3)
Blair Taylor................................... 9,819 30,000 Director Nominee
John Richardson................................ 9,819 30,000
Dennis Marsh................................... 19,637 60,000
Owen McCreery.................................. 39,274 120,000
Maureen Neglia................................. 9,819 30,000 Employee
Michael Helferman.............................. 19,637 60,000
Gail Dunne..................................... 13,091 40,000 (4)
Jim Reddy...................................... 19,637 60,000 Director Nominee
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the investors had no affiliation with the
Company.
(2) Mr. Patrick French and Mr. James French are the brothers of Declan French,
the Company's Chairman and Chief Executive Officer.
(3) Ms. Taylor is the spouse of Blair Taylor, a director nominee.
(4) Ms. Dunne is the spouse of John Dunne, a director nominee.
In May and June of 1998, the Company sold 85,582 Common Shares to seven
individuals at a purchase price of approximately $2.53 per share for aggregate
consideration of $216,814. The seven individuals were:
<TABLE>
<CAPTION>
PURCHASE PRICE IN
SHAREHOLDER SHARES CANADIAN DOLLARS AFFILIATION(1)
- ----------------------------------------------- --------- -------------------------------- --------------------
<S> <C> <C> <C>
Dennis Marsh................................... 15,704 60,000
Owen McCreery.................................. 31,914 120,000
Donna Hankinson................................ 2,618 10,000
Kelly Hankinson................................ 1,309 5,000 Employee
William Neill.................................. 19,637 60,000 Director Nominee
Paul Dodd...................................... 6,546 25,000 Employee
Maureen Neglia................................. 7,854 30,000 Employee
</TABLE>
- ------------------------
(1) Unless otherwise indicated, the investors had no affiliation with the
Company.
In January 1998, in connection with the Acquisition of ICS, the Company
issued 130,914 shares of Common Stock to John A. Irwin. The shares were valued
at $349,528.
All of such issuances were made in Canada to Canadian residents in
conformity with the relevant local securities laws and the Company believes
would have been exempt from registration in the United States pursuant to the
exemption provided by Section 4(2) of the Securities Act.
In May 1998, the Company granted an option to purchase 200,000 Common Shares
at an exercise price of $2.10 per share to Robert M. Rubin. The options are
exercisable out of proceeds of Mr. Rubin's consulting agreement which provides
for an $80,000 per year cash compensation.
II-3
<PAGE>
ITEM 27. EXHIBITS
<TABLE>
<C> <S>
*1.1 Form of Underwriting Agreement
***3.1 Bylaws of Registrant
***3.2 Articles of Incorporation dated February 11, 1994
***3.3 Articles of Amendment dated February 15, 1996
***3.4 Articles of Amendment dated April 15, 1998
***3.5 Articles of Amendment dated August 6, 1998
*3.6 Articles of Amendment dated January 19, 1999
***4.2 Form of Underwriters' Warrant
*4.3 Specimen Common Share Certificate
***5.1 Opinion of McMillan Binch
***10.1 Form of Financial Consulting Agreement
***10.2 1998 Stock Option Plan
***10.3(a) Lease of the Company's headquarters in Toronto, Ontario
***10.3(b) Lease of the Company's office in New York, New York
***10.3(c) Lease of the Company's office in Etobicoke, Ontario
*10.3(d) Lease of the Company's office in Scarborough, Ontario
*10.3(e) Lease of the Company's office in Ottawa, Ontario
***10.4 Employment Agreement between the Company and Declan French dated August 1998
***10.5 Employment Agreement between the Company and John A. Irwin dated May 19, 1998
***10.6 Employment Agreement between the Company and John R. Wilson dated February 8,
1998
***10.7 Employment Agreement between the Company and John J. Silver dated August 10, 1998
***10.8 Form of consulting agreement for the Company's independent contractors
***10.9 Form of services agreement for the Company's customers
*10.10 Agreement for the Acquisition of the Capital Stock of International Career
Specialists Ltd.
*10.11 Agreement for the acquisition of the Capital Stock of Systemsearch Consulting
Services, Inc. and Systems, PS, Inc.
***10.12 License Agreement between the Company and International Office Centers Corp.
dated
August 1, 1998
***10.13 Joint Venture Agreement between the Company and Great Lakes Research and
Development, Ltd. dated October 30, 1998
***10.14 Consulting Agreement between the Company and Robert M. Rubin
***10.15 Form of Employment Agreement with Confidentiality Provision
*10.16 Asset Purchase Agreement between IT Staffing Ltd. and Southport Consulting
Company
***10.17 Consulting Agreement between IT Staffing Ltd. and Michael Carrazza
*23.1 Consent of Schwartz Levitsky Feldman, independent auditors of IT Staffing LTD.
*23.2 Consent of Schwartz Levitsky Feldman, independent auditors of Informational
Career Specialists Ltd.
*23.3 Consent of Schwartz Levitsky Feldman, independent auditors of System Search
Consulting Services, Inc.
***23.4 Consent of Gersten, Savage, Kaplowitz & Fredericks, LLP
***23.5 Consent of McMillan Binch
*23.6 Consents to act as Directors
</TABLE>
- ------------------------
* Filed herewith.
*** Previously filed.
II-4
<PAGE>
ITEM 28. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to any charter provision, by-law, contract
arrangements, statute, 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 a claim for indemnification against such
liabilities (other than the payment by the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned small business issuer hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement: (i)To include any
Prospectus required by section 10(a)(3) of the Securities Act; (ii)To reflect in
the Prospectus any facts or events arising after the effective date of the
registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement; (iii)To include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
Offering.
(4) For determining any liability under the Securities Act, treat the
information omitted from the form of Prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the small business issuer under Rule 424(b)(1), or (4) or
497(h), under the Securities Act as part of this registration statement as of
the time the Commission declared it effective.
(5) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of Prospectus as a new
registration statement at that time as the initial bona fide offering of those
securities.
(6) The Company will provide to the Underwriter at the closing specified in
the underwriting agreement certificates in such denominations and registered in
such names as required by the underwriter to permit prompt delivery to each
purchaser.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies
that it has reasonable grounds to believe that it meets all of the requirement
for filing on Form SB-2 and has duly caused this Pre-Effective Amendment No. 3
to the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Province of Ontario, Canada on February 10,
1999.
<TABLE>
<S> <C> <C>
IT STAFFING LTD.
By: /s/ DECLAN FRENCH
-----------------------------------------
Declan French
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
Pursuant to the requirements of the Securities Act, this Pre-Effective
Amendment No. 3 to the Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------------------ --------------------------- -------------------
Chairman, President and
/s/ DECLAN FRENCH Chief Executive Officer
- ------------------------------ (Principal Executive February 10, 1999
Declan French Officer)
/s/ LLOYD MACLEAN Chief Financial Officer and
- ------------------------------ Director (Principal February 10, 1999
Lloyd Maclean Accounting Officer)
II-6
<PAGE>
Exhibit 1.1
1,000,000 Common Shares
IT STAFFING LTD.
UNDERWRITING AGREEMENT
_________, 1998
Strasbourger Pearson Tulcin Wolff Incorporated
As Representative of the several
Underwriters named in Schedule I
attached hereto
c/o Strasbourger Pearson Tulcin Wolff Incorporated
61 Broadway
New York, New York 10006
Gentlemen:
The undersigned, IT Staffing Ltd., a Ontario corporation (the
"Company"), hereby confirms its agreement with Strasbourger Pearson Tulcin
Wolff Incorporated (individually, "Strasbourger," and, as representative (the
"Representative") of the several underwriters named in Schedule I hereto (the
"Underwriters")), and the Underwriters as follows:
1. Introduction.
(a) The Company proposes to issue and sell to the
Underwriters an aggregate of 1,000,000 common shares, no par value, of the
Company (the "Common Shares"). Such Common Shares are hereinafter referred to
as the "Firm Stock".
(b) Solely for the purpose of covering
over-allotments, if any, the Company proposes to grant to the Underwriters an
option (the "Over-allotment Option") to purchase from
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it, in the aggregate, up to an additional 150,000 Common Shares. Such Common
Shares are hereinafter referred to as the "Additional Stock." The Firm Stock and
the Additional Stock are hereinafter referred to as the "Stock."
(c) The Company proposes to sell to Strasbourger,
individually and not as Representative, warrants (the "Representative's
Warrants") to purchase up to an aggregate of 100,000 Common Shares(the "Warrant
Shares") for an aggregate purchase price of $100.00. The Representative's
Warrants shall be substantially in the form filed as an exhibit to the
Registration Statement (as hereinafter defined). The Representative's Warrants
and the Warrant Shares are hereinafter referred to collectively as the
"Representative's Securities." The Stock and the Representative's Securities are
hereinafter referred to collectively as the "Securities."
2. Representations and Warranties. The Company represents and warrants
to, and agrees with, the several Underwriters that:
(a) The Company has filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1
(Registration No. 333-_______), and may have filed one or more amendments
thereto and a Rule 462(b) Registration Statement (as hereinafter defined) in
accordance with Rule 462(b) under the Securities Act, including in such
registration statement and each such amendment a related preliminary prospectus,
for the registration of the Securities under the Securities Act of 1933, as
amended (the "Securities Act"). As used in this Agreement, the term
"Registration Statement" shall refer to such registration statement referred to
in the first sentence of this Section 2(a), as amended, on file with the
Commission at the time such registration statement is declared by the Commission
to be effective under the Securities Act (including the prospectus, financial
statements, and exhibits filed as a part thereof, provided,
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however, that such registration statement, at the time it is declared by the
Commission to be effective under the Securities Act, may omit such information
as is permitted to be omitted from such registration statement when it becomes
effective under the Securities Act pursuant to Rule 430A of the General Rules
and Regulations of the Commission under the Securities Act (the "Regulations"),
which information (the "Rule 430A Information") shall be deemed to be included
in such registration statement when a final prospectus is filed with the
Commission in accordance with Rules 430A and 424(b)(1) or (4) of the Regulations
and includes any Rule 462(b) Registration Statement); the term "Preliminary
Prospectus" shall refer to each prospectus included in the Registration
Statement, or any amendments thereto, before the Registration Statement is
declared by the Commission to be effective under the Securities Act, the form of
prospectus omitting Rule 430A Information included in the Registration Statement
when the Registration Statement becomes effective under the Securities Act, if
applicable (the "Rule 430A Prospectus"), and any prospectus filed by the Company
with the consent of the Representative pursuant to Rule 424(a) of the
Regulations; and the term "Prospectus" shall refer to the final prospectus
forming a part of the Registration Statement in the form first filed with the
Commission pursuant to Rule 424(b)(1) or (4) of the Regulations or, if no such
filing is required, the form of final prospectus forming a part of the
Registration Statement. As used in this Agreement, the term "Rule 462(b)
Registration Statement" means the registration statement and any amendments
thereto filed pursuant to Rule 462(b) of the Regulations relating to the
offering covered by the Initial Registration Statement.
(b) When the Registration Statement becomes effective
under the Securities Act, and at all times subsequent thereto up to and
including the Closing Date (as defined in Section 3(a) hereof) and each
Additional Closing Date (as defined in Section 3(b) hereof), and during such
longer
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period as the Prospectus may be required to be delivered in connection with
sales by the Underwriters or a dealer, and during such longer period until any
post-effective amendment thereto shall become effective under the Securities
Act, the Registration Statement (and any post-effective amendment thereto) and
the Prospectus (as amended or as supplemented if the Company shall have filed
with the Commission any amendment or supplement to the Registration Statement or
the Prospectus) will contain all statements which are required to be stated
therein in accordance with the Securities Act and the Regulations, will comply
with the Securities Act and the Regulations, and will not contain any 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 not misleading, and
no event will have occurred which should have been set forth in an amendment or
supplement to the Registration Statement or the Prospectus which has not then
been set forth in such an amendment or supplement; if a Rule 430A Prospectus is
included in the Registration Statement at the time it is declared by the
Commission to be effective under the Securities Act, the Prospectus filed
pursuant to Rules 430A and 424(b)(1) or (4) of the Regulations will contain all
Rule 430A Information and all statements which are required to be stated therein
in accordance with the Securities Act or the Regulations, will comply with the
Securities Act and the Regulations, and will not contain any 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 not misleading; and each Preliminary
Prospectus, as of the date filed with the Commission, contained all statements
required to be stated therein in accordance with the Securities Act and the
Regulations, complied with the Securities Act and the Regulations, and did not
contain any 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
not misleading; except that no representation or
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warranty is made in this Section 2(a)(2) with respect to statements or omissions
made in reliance upon, and in conformity with, written information furnished to
the Company as stated in Section 8(b) with respect to any Underwriter by, or on
behalf of, such Underwriter through the Representative expressly for inclusion
in the Registration Statement, any Preliminary Prospectus, or the Prospectus, or
any amendment or supplement thereto.
(c) Neither the Commission nor the "blue sky" or
securities authority of any jurisdiction has issued an order (a "Stop Order")
suspending the effectiveness of, or preventing or suspending the use of, the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, refusing to permit the effectiveness of the
Registration Statement, or suspending the registration or qualification of the
Securities, nor has any of such authorities instituted or threatened to
institute any proceedings with respect to a Stop Order.
(d) Any contract, agreement, instrument, lease, or
license required to be described in the Registration Statement or the Prospectus
has been properly described therein. Any contract, agreement, instrument, lease,
or license required to be filed as an exhibit to the Registration Statement has
been filed with the Commission as an exhibit to the Registration Statement.
(e) The following corporations are the only subsidiaries
(as defined in the Regulations) of the Company: Systemsearch Consulting, Inc., a
________ corporation ("SCI"), Systems PS Inc., a __________ corporation ("SPS"),
and International Career Specialists Ltd., a ________ corporation ("ICS," and
collectively with SCI and SPS, the "Subsidiaries"). The Company and each of the
Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of its respective jurisdiction of incorporation, with
full power and authority,
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and all necessary consents, authorizations, approvals, orders, licenses,
certificates, and permits of and from, and declarations and filings with, all
federal, state, local, and other governmental authorities and all courts and
other tribunals, to own, lease, license, and use its properties and assets and
to conduct its business in the manner described in the Prospectus. The Company
and each Subsidiary is duly qualified to do business as a foreign corporation
and is in good standing as such in every jurisdiction in which its ownership,
leasing, licensing, or use of property and assets or the conduct of its business
makes such qualification necessary, except where the failure to so qualify will
not have a material adverse effect on the Company's business, properties, or
financial condition on a consolidated basis.
(f) The authorized capital stock of the Company consists
of 15,000,000 Common Shares, of which 1,677,876 shares are outstanding prior to
this offering, and 1,000,000 shares of preferred stock, no par value, of which
none are outstanding. Each outstanding Common Share is validly authorized and
issued, fully paid, and nonassessable, without any personal liability attaching
to the ownership thereof, has not been issued and is not owned or held in
violation of any preemptive or similar rights of shareholders. Each share of
capital stock of each Subsidiary is owned of record and beneficially by the
Company. There is no commitment, plan, or arrangement to issue, and no
outstanding option, warrant, or other right calling for the issuance of, any
share of capital stock of the Company or any Subsidiary or any security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock of the Company, except as may be properly
described in the Prospectus. There is outstanding no security or other
instrument which by its terms is convertible into, or exercisable or
exchangeable for, capital stock
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of the Company or any Subsidiary, except as may be properly described in the
Prospectus. The certificates evidencing the Common Shares are in due and proper
form.
(g) The consolidated financial statements of the Company
and each of the Subsidiaries included in the Registration Statement and the
Prospectus fairly present in all material respects, with respect to the Company,
the financial position, the results of operations, the cash flows, and the other
information purported to be shown therein at the respective dates and for the
respective periods to which they apply. Such consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
(except to the extent that certain footnote disclosures regarding any stub
period may have been omitted in accordance with the applicable rules of the
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) consistently applied throughout the periods involved, are correct and
complete in all material respects, and are in accordance with the books and
records of the Company. Schwartz Levitsky Feldman, the accountants whose reports
on the audited consolidated financial statements for the years ended and at
December 31, 1996 and 1997, are filed with the Commission as a part of the
Registration Statement, is, and during the periods covered by their reports
included in the Registration Statement and the Prospectus was, independent
certified public accountants with respect to the Company and each of the
Subsidiaries within the meaning of the Securities Act and the Regulations. No
other financial statements are required by Form S-1 or otherwise to be included
in the Registration Statement or the Prospectus. There has at no time been a
material adverse change in the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the Company on
a consolidated basis from the latest information set forth in the Registration
Statement or the Prospectus, except as may be properly described in the
Prospectus.
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(h) There is no litigation, arbitration, claim,
governmental or other proceeding (formal or informal), or investigation pending,
threatened, or, to the best knowledge of the Company, in prospect (or any basis
therefor) with respect to the Company, any Subsidiary, or any of their
respective operations, businesses, properties, or assets, except as may be
properly described in the Prospectus or such as individually or in the aggregate
do not now have, and will not in the future have, a material adverse effect upon
the financial condition, results of operations, business, properties, assets,
liabilities, or future prospects of the Company and the Subsidiaries taken as a
whole. To the best knowledge of the Company, neither the Company nor any
Subsidiary is in violation of, or in default with respect to, any law, rule,
regulation, order, judgment, or decree, except as may be properly described in
the Prospectus or such as in the aggregate do not now have, and will not in the
future have, a material adverse effect upon the operations, business,
properties, or assets of the Company and the Subsidiaries taken as a whole; nor
is the Company or any Subsidiary currently required to take any action in order
to avoid any such violation or default.
(i) The Company and each Subsidiary has good and
marketable title to all properties and assets which the Prospectus indicates are
owned by it, free and clear of all liens, security interests, pledges, charges,
encumbrances, and mortgages, except as may be properly described in the
Prospectus or as are not material to the Company and the Subsidiaries taken as a
whole. No real property owned, leased, licensed, or used by the Company or any
Subsidiary lies in an area which is, or to the knowledge of the Company will be,
subject to zoning, use, or building code restrictions which would prohibit, and
no state of facts relating to the actions or inaction of another person or
entity or his or its ownership, leasing, licensing, or use of any real or
personal property exists or will exist which would prevent, the continued
effective ownership, leasing,
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licensing, or use of such real property in the business of the Company and the
Subsidiaries, each as presently conducted or as the Prospectus indicates it
contemplates conducting, except as may be properly described in the Prospectus.
(j) Neither the Company or any Subsidiary nor, to the
knowledge of the Company, any other party, is now, or is expected by the Company
to be, in violation or breach of, or in default with respect to, any provision
of any contract, agreement, instrument, lease, license, arrangement, or
understanding which is material to the Company and the Subsidiaries taken as a
whole, and each such contract, agreement, instrument, lease, license,
arrangement, and understanding is in full force and effect and is the legal,
valid, and binding obligation of the parties thereto and is enforceable as to
them in accordance with its respective terms. The Company and each Subsidiary
enjoys peaceful and undisturbed possession under all leases and licenses under
which it is operating. Except as described in the Prospectus, neither the
Company nor any Subsidiary is a party to, or bound by, any contract, agreement,
instrument, lease, license, arrangement, or understanding, or subject to any
charter or other restriction, which has had, or may in the future have, a
material adverse effect on the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the Company
and the Subsidiaries taken as a whole. Neither the Company nor any Subsidiary is
in violation or breach of, or in default with respect to, any term of its
respective certificate of incorporation (or other charter document) or by-laws.
(k) The Company and each Subsidiary owns or possesses
adequate rights to use all patents, patent rights, inventions, trade secrets,
licenses, know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names, and copyrights
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described or referred to in the Prospectus as owned or used by it or which are
necessary for the conduct of its business as currently conducted as described in
the Prospectus and, to the best knowledge of the Company, its business as
contemplated as described in the Prospectus. To the best knowledge of the
Company, all such patents, patent rights, licenses, trademarks, service marks,
and copyrights are (i) valid and enforceable, (ii) not being infringed by any
third parties which infringement could, singly or in the aggregate, materially
and adversely affect the business, properties, operations, condition (financial
or otherwise), results of operations, income, or business prospects of the
Company and the Subsidiaries taken as a whole, as presently being conducted or
as proposed to be conducted as described in the Prospectus, and (iii) are
uncontested by any third party. The Company has no knowledge of, nor has it
received any notice of, infringement of, or conflict with, asserted rights of
others with respect to any patents, patent rights, inventions, trade secrets,
licenses, know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names, or copyrights which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling, or finding could
materially and adversely affect the business, properties, operations, condition
(financial or otherwise), results of operations, income, or business prospects
of the Company and the Subsidiaries taken as a whole, as presently being
conducted or as proposed to be conducted as described in the Prospectus.
(l) Neither the Company or any Subsidiary, nor, to the
best knowledge of the Company, any director, officer, agent, employee, or other
person associated with, or acting on behalf of, the Company or any Subsidiary,
has, directly or indirectly: used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; made any unlawful payment to foreign or domestic government
officials or employees or to foreign
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or domestic political parties or campaigns from corporate funds; violated any
provision of the Foreign Corrupt Practices Act of 1977, as amended; or made any
bribe, rebate, payoff, influence payment, kickback, or other unlawful payment.
The Company's internal accounting controls and procedures are sufficient to
cause the Company and each of the Subsidiaries to comply in all respects with
the Foreign Corrupt Practices Act of 1977, as amended.
(m) The Company has all requisite power and authority to
execute, deliver, and perform each of this Agreement, the financial advisory
agreement, between the Company, and Strasbourger, a form of which has been filed
as an Exhibit to the Registration Statement (the "Financial Advisory
Agreement"), and the Representative's Warrants. All necessary corporate
proceedings of the Company have been duly taken to authorize the execution,
delivery, and performance by the Company of this Agreement, the Financial
Advisory Agreement, and the Representative's Warrants. This Agreement has been
duly authorized, executed, and delivered by the Company and is the legal, valid,
and binding obligation of the Company. The Financial Advisory Agreement and the
Representative's Warrants have been duly authorized by the Company and, when
executed and delivered by the Company, will be legal, valid, and binding
obligations of the Company, each enforceable as to the Company in accordance
with its terms. No consent, authorization, approval, order, license,
certificate, or permit of or from, or declaration or filing with, any federal,
state, local, or other governmental authority or any court or other tribunal is
required by the Company or any Subsidiary for the execution, delivery, or
performance by the Company of this Agreement, the Financial Advisory Agreement,
or the Representative's Warrants, except filings under the Securities Act which
have been or will be made before the Closing Date, and consents consisting only
of consents under "blue sky" or securities laws which have been obtained at or
prior
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to the date of this Agreement. No consent of any party to any contract,
agreement, instrument, lease, license, arrangement, or understanding to which
the Company or any Subsidiary is a party, or to which any of their respective
properties or assets are subject, is required for the execution, delivery, or
performance of this Agreement, the Financial Advisory Agreement, and the
Representative's Warrants; and the execution, delivery, and performance of this
Agreement , the Financial Advisory Agreement, and the Representative's Warrants
will not violate, result in a breach of, conflict with, result in the creation
or imposition of any lien, charge, or encumbrance upon any properties or assets
of the Company or any Subsidiary pursuant to the terms of, or, with or without
the giving of notice or the passage of time or both, entitle any party to
terminate or call a default under, any such contract, agreement, instrument,
lease, license, arrangement, or understanding, or violate, result in a breach
of, or conflict with any term of the certificate of incorporation (or other
charter document) or by-laws of the Company, or violate, result in a breach of,
or conflict with, any law, rule, regulation, order, judgment, or decree binding
on the Company or any Subsidiary or to which any of their respective operations,
businesses, properties, or assets are subject.
(n) The Firm Stock is validly authorized and, when issued
and delivered in accordance with this Agreement, will be validly issued, fully
paid, and nonassessable, without any personal liability attaching to the
ownership thereof, and will not be issued in violation of any preemptive or
similar rights of shareholders, and the Underwriters will receive good title to
the shares of Firm Stock purchased by them, respectively, free and clear of all
liens, security interests, pledges, charges, encumbrances, shareholders'
agreements, and voting trusts. The Additional Stock is validly authorized and,
when issued in accordance with the terms hereof, will be validly issued, fully
paid, and nonassessable, without any personal liability attaching to the
ownership thereof, and
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will not be issued in violation of any preemptive or similar rights of
shareholders. The Additional Stock has been duly and validly reserved for
issuance. The Stock conforms to all statements relating thereto contained in the
Registration Statement and the Prospectus.
(o) The Warrant Stock is validly authorized and has been
duly and validly reserved for issuance and, when issued and delivered upon
exercise of the Representative's Warrants in accordance with the terms thereof,
will be validly issued, fully paid, and nonassessable, without any personal
liability attaching to the ownership thereof, and will not be issued in
violation of any preemptive or similar rights of shareholders; and the holders
of the Representative's Warrants will receive good title to the securities
purchased by them upon the exercise of the Representative's Warrants, free and
clear of all liens, security interests, pledges, charges, encumbrances,
shareholders' agreements, and voting trusts. The Representative's Securities
conform to all statements relating thereto contained in the Registration
Statement and the Prospectus.
(p) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus, and
except as may otherwise be properly described in the Prospectus, neither the
Company nor any Subsidiary has (i) issued any securities or incurred any
material liability or material obligation, primary or contingent, for borrowed
money, (ii) entered into any material transaction not in the ordinary course of
business, (iii) declared or paid any dividend on its capital stock, except
dividends by a Subsidiary to the Company or another Subsidiary, or (iv)
experienced any adverse changes or any development which may materially
adversely effect the condition (financial or otherwise), net assets or
shareholders' equity, results of operations, business, key personnel, assets, or
properties of the Company and the Subsidiaries taken as a whole.
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(q) Neither the Company or any Subsidiary nor any of
their respective officers, directors, or affiliates (as defined in the
Regulations), has taken or will take, directly or indirectly, prior to the
termination of the offering contemplated by this Agreement, any action designed
to stabilize or manipulate the price of any security of the Company, or which
has caused or resulted in, or which might in the future reasonably be expected
to cause or result in, stabilization or manipulation of the price of any
security of the Company, to facilitate the sale or resale of any of the Firm
Stock or the Additional Stock.
(r) The Company has obtained from each of its directors,
officers, and shareholders a written agreement, in form and substance
satisfactory to counsel for the Underwriters, that, for a period of 24 months
from the date on which the Registration Statement is declared by the Commission
to be effective under the Securities Act, he, she, or it will not, without the
prior written consent of the Representative, publicly offer, pledge, sell,
contract to sell, grant any option for the sale of, or otherwise dispose of,
directly or indirectly, any Common Shares or any security or other instrument
which by its terms is convertible into, or exercisable or exchangeable for,
Common Shares or other securities of the Company, including, without limitation,
any Common Shares issuable pursuant to the terms of any employee stock options;
provided, however, that such persons may offer, sell, contract to sell, grant an
option for the sale of, or otherwise dispose of all or any part of his, her, or
its Common Shares or other such security or instrument of the Company during
such period if such transaction is private in nature and the transferee of such
Common Shares or other securities or instruments agrees, prior to such
transaction, to be bound by all of the provisions of such agreement.
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(s) The Company is not, and does not intend to conduct
its business in a manner in which it would be required to register as, an
"investment company" as defined in the Investment Company Act of 1940, as
amended (the "Investment Company Act"), and the rules and regulations
promulgated thereunder.
(t) No person or entity has the right to require
registration of Common Shares or other securities of the Company because of the
filing or effectiveness of the Registration Statement, which right has not been
waived.
(u) Except as may be set forth in the Prospectus, the
Company has not incurred any liability for a fee, commission, or other
compensation on account of the employment of a broker or finder in connection
with the transactions contemplated by this Agreement.
(v) Neither the Company or any Subsidiary, nor any of
their respective affiliates, is presently doing business with the government of
Cuba or with any person or affiliate located in Cuba. If, at any time after the
date on which the Registration Statement is declared by the Commission to be
effective under the Securities Act or with the Florida Department of Banking and
Finance (the "Florida Department"), whichever is later, and prior to the end of
the period referred to in the first clause of Section 2(b) hereof, the Company
and any Subsidiary commences engaging in business with the government of Cuba or
with any person or affiliate located in Cuba, the Company will so inform the
Florida Department within 90 days after such commencement of business in Cuba,
and, during the period referred to in Section 2(2) hereof, will inform the
Florida Department within 90 days after any change occurs with respect to
previously reported information.
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(w) No officer, director, or shareholder of the Company
has any affiliation or association with the National Association of Securities
Dealers, Inc. (the "NASD") or any member thereof.
(x) Except as disclosed in the Prospectus, the Company,
each of the Subsidiaries, and all shareholders of the Company have filed all
necessary federal, state, local, and foreign income and franchise tax returns
and other reports required to be filed and has paid all taxes shown as due
thereon; and there is no tax deficiency which has been, or, to the knowledge of
the Company, might be, asserted against the Company or any Subsidiary.
(y) To the best knowledge of the Company, none of the
activities or business of the Company or any Subsidiary is in violation of, or
will cause the Company or any Subsidiary to violate, any law, rule, regulation,
or order of the United States, any state, county, or locality, or of any agency
or body of the United States or of any state, county, or locality, the violation
of which would have a material adverse effect upon the financial condition,
results of operations, business, properties, assets, liabilities, or future
prospects of the Company and the Subsidiaries taken as a whole.
(z) The Common Shares have been approved for quotation on
the Nasdaq SmallCap Market and the _________ Stock Exchange (the "Stock
Exchange").
(aa) The Company is in compliance with all U.S. and
Cannadian federal, state, local, and foreign laws and regulations respecting
employment and employment practices, terms and conditions of employment, and
wages and hours. There are no pending investigations involving the Company, by
the U.S. Department of Labor, or any other U.S. or Canadian governmental agency
responsible for the enforcement of such federal, state, local, or foreign laws
and regulations. There
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is no unfair labor practice charge or complaint against either the Company
pending before the National Labor Regulations Board or its Canadian counterpart
or any strike, picketing, boycott, dispute, slowdown or stoppage pending or, to
the best knowledge of the Company, threatened against or involving the Company
or any predecessor entity, and none has ever occurred. No representation
question exists respecting the employees of the Company, and no collective
bargaining agreement or modification thereof is currently being negotiated by
the Company. No grievance or arbitration proceeding is pending or threatened
under any expired or existing collective bargaining agreements of the Company.
No labor dispute with the employees of the Company exists, or, is imminent.
(ab) Except as described in the Prospectus, the Company
does not maintain, sponsor or contribute to nay program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan," or a
"multi employer plan" as such terms are defined in Sections 3(2), 3(1) and
3(37), respectively, of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") ("ERISA" Plans"). The Company does not maintain or contribute,
now or at any time previously, to a defined benefit plan, as defined in Section
3(35) of ERISA. No "accumulated funding deficiency" (as defined in Section 302
of ERISA) or any of the events set forth in Section 4043(b) of ERISA (other than
events with respect to which the 30-day notice under Section 4043 of ERISA has
been waived) has occurred with respect to any employee benefit plan which could
reasonably be expected to have a material adverse effect of the business,
prospects, financial condition, or results of operations of the Company. No
ERISA Plan (or any trust created thereunder) has engaged in a "prohibited
transaction" within the meaning of Section 406 of ERISA or Section 4975 of the
Internal Revenue Code, which could subject the Company to any tax penalty
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on prohibited transactions and which has not adequately been corrected. Each
ERISA Plan is in compliance with all material reporting, disclosure and other
requirements of the Internal Revenue Code of 1986, as amended ("the "Code") and
ERISA as they relate to any such ERISA Plan. Determination letters have been
received from the Internal Revenue Service with respect to each ERISA Plan which
is intended to comply with Code Section 401(a), stating that such ERISA Plan and
the attendant trust are qualified therunder. The Company has never completely or
partially withdrawn from a "multi employer plan."
(ac) The Company has not been notified nor is otherwise
aware that it is potentially liable, or is considered potentially liable, under
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended, or any similar law ("Environmental Laws"). To the best
knowledge of the Company, the Company is in compliance with all applicable
existing Environmental Laws, except for such instances of non-compliance which
would not have a material adverse effect on the business, prospects, financial
condition, or results of operations. The term "Hazardous Material" means (i) any
"hazardous substance" as defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, (ii) any "hazardous waste"
as defined by the Resource Conservation and Recovery Act, as amended, (iii) any
petroleum or petroleum product, (iv) any polychlorinated biphenyl, and (v) any
pollutant or contaminant or hazardous, dangerous or toxic chemical, material,
waste or substance regulation under or within the meaning of any other
Environmental Law. To the best knowledge of the Company, no disposal, release or
discharge of Hazardous Material has occurred on, in, at or about any of the
facilities or properties of the Company except for those instances which are in
compliance with Environmental Laws or in the aggregate would not have a material
adverse effect on the
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business, prospects, financial condition, or results of operations of the
Company. Except as described in the Prospectus, to the best knowledge of the
Company: (i) there has been no storage, disposal, generation, transportation,
handling or treatment of Hazardous Material by the Company (or to the knowledge
of the Company, and of its predecessors in interest) at, upon or from any of the
property now or previously owned or leased by the Company in violation of any
applicable law, ordinance, rule, regulation, order, judgement, decree or permit
or which would require remedial action which has not been taken, under any
applicable law, ordinance, rule, regulation, order, judgement, decree or permit,
except for such violations and failures to take remedial action which would not
result in, singularly or in the aggregate, a material adverse effect on the
business, prospects, financial condition, or results of operations of the
Company; and (ii) there has been no material spill, discharge, leak, emission,
injection, escape, dumping or release of any kind onto such property or into the
environmental surrounding such property by the Company of any Hazardous
Material, except for such spills, discharge, leaks, emissions, injections,
escapes, dumping or releases which are in compliance with Environmental Laws or
would not result in, singularly or in the aggregate, a material adverse effect
the business, prospects, financial condition, or results of operations of the
Company.
(ad) None of the proceeds of the sale of the Securities
will be used, directly or indirectly, for the purpose of purchasing or carrying
any margin security, for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any margin security or for
any other purpose which might cause any of the Securities or Warrants to be
considered a "purpose credit" within the meanings of Regulation G,T,U or X of
the Board of Governors of the Federal Reserve Board.
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3. Purchase, Sale, and Delivery of the Stock and the
Representative's Warrants.
(a) On the basis of the representations, warranties,
covenants, and agreements of the Company herein contained, but subject to the
terms and conditions herein set forth, the Company agrees to issue and sell to
the several Underwriters, and, the Underwriters, severally and not jointly,
agree to purchase from the Company, the numbers of shares of Firm Stock set
forth opposite the respective names of the Underwriters in Schedule I hereto.
The purchase price per share of the Firm Stock to be paid by the
several Underwriters shall be $____. The initial public offering price per share
of the Firm Stock shall be $_____.
Payment for the Firm Stock by the Underwriters shall be made by
certified or official bank check in New York Clearing House (next day) funds or
by electronic wire transfer of next day funds, payable to the order of the
Company, at the offices of Strasbourger Pearson Tulcin Wolff Incorporated, 61
Broadway, New York, New York 10005, or at such other place in the New York City
metropolitan area as the Representative shall determine and advise the Company
by at least two full days' notice in writing, upon delivery of the Firm Stock to
the Representative for the respective accounts of the Underwriters. Such
delivery and payment shall be made at 9:00 a.m., New York City local time, on
the third business day following the time of the initial public offering, as
defined in Section 11(a) hereof (unless such time and date is postponed in
accordance with the provisions of Section 9(c) hereof), or at such other time as
shall be agreed upon between the Representative and the Company. The time and
date of such delivery and payment are hereinafter referred to as the "Closing
Date."
Certificates representing the Firm Stock shall be registered in such
name or names and in such authorized denominations as the Representative may
request in writing at least two full
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business days prior to the Closing Date. The Company shall permit the
Representative to examine and package such certificates for delivery at least
one full business day prior to the Closing Date.
(b) The Company hereby grants to the Underwriters' the
Over-allotment Option to purchase up to an aggregate of 100,000 Common Shares,
as may be necessary to cover over-allotments, at the same purchase price per
share to be paid by the several Underwriters to the Company for the Firm Stock
as provided for in this Section 3 hereof. The Over-allotment Options may be
exercised only to cover over-allotments in the sale of shares by Underwriters'
and shall be exercised pro rata to the numbers of Common Shares set forth
opposite the names of such Underwriters in Schedule I hereto. The Over-allotment
Option may be exercised by the Underwriters on the basis of the representations,
warranties, covenants, and agreements of the Company herein contained, but
subject to the terms and conditions herein set forth, at any time and from time
to time on or before the forty-fifth day following the date on which the
Registration Statement becomes effective under the Securities Act, by written
notice by the Representative to the Company. Such notice shall set forth the
aggregate number of shares of Additional Stock as to which the Over-allotment
Option is being exercised, the name or names in which the certificates
representing the Additional Stock are to be registered, the authorized
denominations in which the Additional Stock is to be registered, and the time
and date, as determined by the Representative, when such shares of Additional
Stock are to be delivered (each such time and date are hereinafter referred to
as an "Additional Closing Date"); provided, however, that no Additional Closing
Date shall be earlier than the Closing Date nor earlier than the second business
day after the date on which the notice of the exercise of the Over-allotment
Option shall have been given nor later than the eighth business day after the
date on which such notice shall have been given.
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In the event the Company declares or pays a dividend or a distribution
on the Common Shares, whether in the form of cash, Common Shares, or other
consideration, prior to the Additional Closing Date, such dividend or
distribution shall also be paid on the Additional Stock on the later of the
Additional Closing Date and the date on which such dividend or distribution is
payable.
Payment for the shares of Additional Stock by the Underwriters shall be
made by certified or official bank check in New York Clearing House (next day)
funds or by electronic wire transfer of next day funds payable to the order of
the Company at the offices of Strasbourger Pearson Tulcin Wolff Incorporated, 61
Broadway, New York, New York 10005, or at such other place in the New York City
metropolitan area as the Representative shall determine and advise the Company
by at least two full days' notice in writing, upon delivery of the shares of
Additional Stock to the Underwriters' for their respective accounts.
Certificates for the shares of Additional Stock shall be registered in
such name or names and in such authorized denominations as the Representative
may request in writing at least two full business days prior to the Additional
Closing Date with respect thereto. The Company shall permit the Representative
to examine and package such certificates for delivery at least one full business
day prior to the Additional Closing Date with respect thereto.
(c) The Company hereby agrees to issue and sell to the
Representative (individually and not as the representative of the several
Underwriters) and/or its designees on the Closing Date the Representative's
Warrants to purchase the Warrant Shares for an aggregate purchase price of
$100.00.
Delivery and payment for the Representative's Warrants shall be made on
the Closing Date. The Company shall deliver to the Representative upon payment
therefor, certificates representing
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<PAGE>
the Representative's Warrants in the name or names and in such authorized
denominations as the Representative may request. The Representative's Warrants
shall be exercisable for a period of four years commencing one year from the
date on which the Registration Statement was declared effective under the
Securities Act at an initial exercise price per Warrant Share equal to $______.
(d) It is understood that the Representative may (but
shall not be obligated to) make any and all the payments required pursuant to
this Section 3 on behalf of any Underwriters whose check or checks shall not
have been received by the Representative at the time of delivery of the Stock to
be purchased by such Underwriter or Underwriters. Any such payment by the
Representative shall not relieve any such Underwriter or Underwriters of any of
its or their obligations hereunder.
4. Offering. The Underwriters are to make a public offering of the Firm
Stock as soon, on or after the date on which the Registration Statement becomes
effective under the Securities Act, as the Representative deems it advisable so
to do. The Firm Stock is to be initially offered to the public at the initial
public offering price as provided for in Section 3(a) (such price being
hereinafter referred to as the "public offering price"). After the initial
public offering, the Representative may from time to time increase or decrease
the public offering price, in the sole discretion of the Representative, by
reason of changes in general market conditions or otherwise.
5. Covenants. The Company covenants that it will:
(a) Use its best efforts to cause the Registration
Statement to become effective under the Securities Act as promptly as possible
and notify the Representative and counsel to the Underwriters immediately, and
confirm such notice in writing, (i) when the Registration Statement and any
post-effective amendment thereto become effective under the Securities Act, (ii)
of the
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<PAGE>
receipt of any comments from the Commission or the "blue sky" or securities
authority of any jurisdiction regarding the Registration Statement, any
post-effective amendment thereto, the Prospectus, or any amendment or supplement
thereto, (iii) of the filing with the Commission of any supplement to the
Prospectus, and (iv) of the receipt of any notification with respect to a Stop
Order or the initiation or threatening of any proceeding with respect to a Stop
Order. The Company will use its best efforts to prevent the issuance of any Stop
Order and, if any Stop Order is issued, to obtain the lifting thereof as
promptly as possible. If the Registration Statement has become or becomes
effective under the Securities Act with a form of prospectus omitting Rule 430A
Information, or filing of the Prospectus with the Commission is otherwise
required under Rule 424(b) of the Regulations, the Company will file with the
Commission the Prospectus, properly completed, pursuant to Rule 424(b) of the
Regulations within the time period prescribed and will provide evidence
satisfactory to the Representative of such timely filing.
(b) During the time when a prospectus relating to the
Firm Stock or the Additional Stock is required to be delivered hereunder or
under the Securities Act or the Regulations, comply with all requirements
imposed upon it by the Securities Act, as now existing and as hereafter amended,
and by the Regulations, as from time to time in force, so far as necessary to
permit the continuance of sales of, or dealings in, the Stock in accordance with
the provisions hereof and the Prospectus. If, at any time when a prospectus
relating to the Firm Stock or the Additional Stock is required to be delivered
hereunder or under the Securities Act or the Regulations, any event shall have
occurred as a result of which, in the reasonable opinion of counsel for the
Company or counsel for the Underwriters, the Registration Statement or the
Prospectus as then amended or supplemented contains any untrue statement of a
material fact or omits to state any
24
<PAGE>
material fact required to be stated therein or necessary to make the statements
therein not misleading, or if, in the opinion of either of such counsel, it is
necessary at any time to amend or supplement the Registration Statement or the
Prospectus to comply with the Securities Act or the Regulations, the Company
will immediately notify the Representative and promptly prepare and file with
the Commission an appropriate amendment or supplement (in form and substance
satisfactory to the Representative and counsel to the Underwriters) which will
correct such statement or omission or which will effect such compliance and will
use its best efforts to have any such amendment declared effective under the
Securities Act as soon as possible.
(c) Deliver without charge to each of the several
Underwriters such number of copies of each Preliminary Prospectus as may
reasonably be requested by the Underwriters and, as soon as the Registration
Statement, or any amendment thereto, becomes effective under the Securities Act
or a supplement is filed with the Commission, deliver without charge to the
Representative two signed copies of the Registration Statement, including
exhibits, or such amendment thereto, as the case may be, and two copies of any
supplement thereto, and deliver without charge to each of the several
Underwriters such number of copies of the Prospectus, the Registration
Statement, and amendments and supplements thereto, if any, without exhibits, as
the Representative may reasonably request for the purposes contemplated by the
Securities Act.
(d) Endeavor in good faith, in cooperation with the
Representative, at or prior to the time the Registration Statement becomes
effective under the Securities Act, to qualify the Securities for offering and
sale under the "blue sky" or securities laws of such jurisdictions as may be
designated by the Representative; provided, however, that no such qualification
shall be required in any jurisdiction where, as a result thereof, the Company
would be subject to service of general
25
<PAGE>
process or to taxation as a foreign corporation doing business in such
jurisdiction to which it is not then subject. In each jurisdiction where such
qualification shall be effected, the Company will, unless the Representative
agrees in writing that such action is not at the time necessary or advisable,
file and make such statements or reports at such times as are or may be required
by the laws of such jurisdiction.
(e) Make generally available, within the meaning of
Section 11(a) of the Securities Act and the Regulations, to its security holders
as soon as practicable, but not later than _____________, an earnings statement,
which need not be certified by independent certified public accountants unless
required by the Securities Act or the Regulations, but which shall satisfy the
provisions of Section 11(a) of the Securities Act and the Regulations, covering
a period of at least 12 months beginning after the date on which the
Registration Statement was declared effective under the Securities Act.
(f) For a period of 18 months after the date of the
Prospectus, not, without the prior written consent of the Representative, offer,
issue, sell, contract to sell, grant any option for the sale of, or otherwise
dispose of, directly or indirectly, any Common Shares or other securities of the
Company, or any security or other instrument which by its terms is convertible
into, or exercisable or exchangeable for, Common Shares, except as contemplated
by Section 3 hereof and except for (i) the issuance of stock options, or Common
Shares issuable upon the exercise thereof, which have been or may be granted
pursuant to the Company's 1998 Stock Option Plan, up to an aggregate of 435,000
Common Shares, all as properly described in the Prospectus, (ii) upon the
exercise of warrants outstanding on the date hereof, as properly described in
the Prospectus, (iii)
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<PAGE>
the issuance of shares of Warrant Stock issuable upon exercise of the
Representative's Warrants, and (iv) the issuance of Common Shares in connection
with acquisitions by the Company.
(g) For a period of five years after the date on which
the Registration Statement was declared effective under the Securities Act
furnish the Representative without charge, the following:
(1) within 90 days after the end of each fiscal
year, one copy of financial statements certified by independent certified public
accountants, including a balance sheet, statement of operations, and statement
cash flows of the Company and its then existing subsidiaries, if any, with
supporting schedules, prepared in accordance with generally accepted accounting
principles, as at the end of such fiscal year and for the 12 months then ended,
which may be on a consolidated basis;
(2) as soon as practicable after they have been
sent to shareholders of the Company or filed with, or furnished to, the
Commission, the NASD, or the Exchange one copy of each annual and interim
financial and other report or communication sent by the Company to its
shareholders or filed with, or furnished to, the Commission, the NASD, or the
Exchange;
(3) as soon as practicable, one copy of every
press release and every material news item and article in respect of the
Company, any Subsidiary, or their respective affairs which was released by the
Company or any such Subsidiary; and
(4) such additional documents and information
with respect to the Company, any Subsidiary, and their respective affairs, as
the Representative may from time to time reasonably request; provided, however,
that such additional documents and information shall be received by the
Representative on a confidential basis, unless otherwise disclosed to the
public, and
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<PAGE>
shall not be used in violation of the federal securities laws and the rules and
regulations promulgated thereunder.
(h) Apply the net proceeds received by the Company from
the offering contemplated by this Agreement in the manner set forth under the
heading "Use of Proceeds" in the Prospectus.
(i) Furnish to the Representative as early as practicable
prior to the Closing Date and each Additional Closing Date, if any, as the case
may be, but not less than two full business days prior thereto, a copy of the
latest available unaudited interim financial statements of the Company which
have been read by the Company's independent certified public accountants, as
stated in their letters to be furnished pursuant to Section 7(f) hereof.
(j) File no amendment or supplement to the Registration
Statement or Prospectus at any time, whether before or after the date on which
the Registration Statement was declared effective under the Securities Act,
unless such filing shall comply with the Securities Act and the Regulations and
unless the Representative shall previously have been advised of such filing and
furnished with a copy thereof, and the Representative shall have approved such
filing in writing. Until the later of (i) the completion by the Underwriters of
the distribution of the Stock (but in no event more than nine months after the
date on which the Registration Statement shall have been declared effective
under the Securities Act) and (ii) 25 days after the date on which the
Registration Statement shall have been declared effective under the Securities
Act, the Company will prepare and file with the Commission, promptly upon the
Representative's request, any amendments or supplements to the Registration
Statement or the Prospectus which, in the sole opinion of the Representative,
may be necessary or advisable in connection with the distribution of the Stock.
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<PAGE>
(k) File timely with the Commission an appropriate form
to register the Common Shares, including the Stock, pursuant to Section 12(b) of
the Exchange Act and comply with all registration, filing, and reporting
requirements of the Exchange Act, which may from time to time be applicable to
the Company.
(l) Comply with all provisions of all undertakings
contained in the Registration Statement.
(m) Prior to the later of (A) the date referred to in the
second sentence of clause (j) of this Section 5, and (B) any Additional Closing
Date, issue no press release or other communication, directly or indirectly, and
hold no press conference with respect to the Company, the financial condition,
results of operations, business, properties, assets, liabilities of any the
Company or any Subsidiary, or this offering, without the prior written consent
of the Representative.
(n) Make all filings required to maintain the inclusion
of the Common Shares on the Nasdaq SmallCap Market and the Exchange for at least
five years from the date of this Agreement.
(o) On the Closing Date, sell to the Representative,
individually and not as Representative of the several Underwriters, at the price
of $.001 per warrant, warrants to purchase the Warrant Stock, which
Representative's Warrants shall be substantially in the form set forth as an
exhibit to the Registration Statement. On the Closing Date, execute and deliver
to the Representative the Financial Advisory Agreement.
(p) Until expiration of the Representative's Warrants,
keep reserved sufficient Common Shares for issuance upon exercise of the
Representative's Warrants.
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<PAGE>
(q) Deliver to the Representative, without charge, within
a reasonable period after the last Additional Closing Date or the expiration of
the period during which the Representative may exercise the Over-allotment
Options, five sets of leather bound volumes of the Registration Statement and
all related materials to the individuals designated by the Representative or
counsel to the Underwriters.
(r) For a period of three years after the effective date
on which the Registration Statement is declared effective under the Securities
Act, provide, at its sole expense, to the Representative copies of the Company's
daily transfer sheets, if so requested by the Representative.
(s) Maintain key-person life insurance payable to the
Company on the life of Mr. Declan A. French, the President, Chairman of the
Board of Directors, and Chief Executive Officer of the Company, in the amount of
at least $__________ for the period of time equal to the longer of three years
from the date on which the Registration Statement becomes effective under the
Securities Act and the term of the employment agreement between the Company and
such officer.
(t) For a period of three years from the date on which
the Registration Statement becomes effective under the Securities Act, the
Representative shall have the right to designate a director or appoint a
designee as an observer of the Company's Board of Directors. Such director or
observer will have the right to attend all meetings of the Board of Directors.
Such director or observer shall be entitled to receive reimbursement for all
out-of-pocket expenses incurred in attending such meetings, including, but not
limited to, food, lodging, transportation, and any fees paid to directors for
attending meetings. The Representative shall be given notice of such meetings at
the same time and in the same manner as directors of the Company are informed.
The Representative and such director or observer shall be indemnified to the
same extent as the other
30
<PAGE>
directors. The Company will purchase directors and officers insurance in an
amount of not less than $2,000,000, provided, however, that the Company shall
not be required to pay more than $50,000 per year in order to maintain such
insurance, and if insurance in such amount is not available at such cost, the
Company shall purchase that amount of such insurance which is available at a
cost of $50,000 per year.
(u) For a period of three years from the date on which
the Registration Statement becomes effective under the Securities Act, retain a
transfer agent reasonably acceptable to the Representative.
6. Payment of Expenses. The Company hereby agrees to pay all expenses
(other than fees of counsel for the Underwriters, except as provided in Section
6(c)) in connection with (a) the preparation, printing, filing, distribution,
and mailing of the Registration Statement and the Prospectus and the printing,
filing, distribution, and mailing of this Agreement and the Agreement Among
Underwriters, any Selected Dealer Agreement and related documents, including the
cost of all copies thereof and of the Preliminary Prospectuses and of the
Prospectus and any amendments or supplements thereto supplied to the
Underwriters in quantities as hereinabove stated, (b) the issuance, sale,
transfer, and delivery (as applicable) of the Securities, including, without
limitation, the purchase from the Company of the Stock by the Underwriters, the
purchase by the Representative of the Representative's Warrants, the
consummation by the Company of any of its obligations under the this Agreement,
the Financial Advisory Agreement, or under the Representative's Warrants, the
resale of the Stock by the Underwriters in connection with the distribution
contemplated by this Agreement, and any transfer or other taxes payable thereon,
(c) the qualification of the Securities under state or foreign "blue sky" or
securities laws, including the
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<PAGE>
costs of printing and mailing the preliminary and final "Blue Sky Survey" and
the fees of counsel for the Underwriters ($35,000) and the disbursements in
connection therewith, (d) the filing fees payable to the Commission, the NASD,
NASD Regulation, Inc. ("NASDR"), and the jurisdictions in which such
qualification is sought, (e) any fees relating to the listing of the Common
Shares on the Exchange and any other stock market or exchange, (f) the cost of
printing or engraving certificates representing the Securities, (g) the fees of
the transfer agent for the Securities, (h) advertising costs and expenses,
including, but not limited to, costs and expenses relating to the "road show,"
information meetings and presentations (including travel and hotel), bound
volumes, prospectus memorabilia, and expenses relating to tombstone
advertisements, (i) a non-accountable expense allowance equal to three percent
of the gross proceeds of the sale of the Firm Stock and the Additional Stock
(less amounts, if any, previously paid to the Representative by the Company in
respect of such non-accountable expense allowance) to the Representative on the
Closing Date. Notwithstanding the foregoing, if the offering contemplated hereby
should be terminated, the Company agrees to pay the Representative only the
out-of-pocket expenses incurred by the Underwriters in connection with this
Agreement or the proposed offer, sale, and delivery of the Securities, (j) fees
and expenses of counsel to, and independent certified public accountants of, the
Company, and (k) costs and expenses in connection with due diligence
investigations, including, but not limited to, fees of any independent counsel
or consultant retained by the Underwriters.
7. Conditions of Underwriters' Obligations. The obligations of the
several Underwriters to purchase and pay for the Firm Stock and the Additional
Stock, as provided herein, and the obligation of the Representative,
individually and not as representative of the several Underwriters, to purchase
and pay for the Representative's Warrants, each as provided herein, shall
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<PAGE>
be subject, in the discretion of the Representative, to the continuing accuracy
of the representations and warranties of the Company contained herein and in
each certificate and document contemplated under this Agreement to be delivered
to the Underwriters, as of the date hereof and as of the Closing Date (or any
Additional Closing Date, as the case may be), to the performance by the Company
of its obligations hereunder, and to the following conditions:
(a) The Registration Statement shall have become
effective under the Securities Act not later than 6:00 P.M., New York City local
time, on the date of this Agreement or such later date and time as shall be
consented to in writing by the Representative; on or prior to the Closing Date,
or any Additional Closing Date, as the case may be, no Stop Order shall have
been issued and no proceeding shall have been initiated or threatened with
respect to a Stop Order; and any request by the Commission for additional
information shall have been complied with by the Company to the reasonable
satisfaction of counsel for the Underwriters. If required, the Prospectus shall
have been filed with the Commission in the manner and within the time period
required by Rule 424(b) under the Securities Act.
(b) (i) At the Closing Date and any Additional
Closing Date, as the case may be, you shall have received the opinion of Messrs.
Gersten, Savage, Kaplowitz & Fredericks, LLP, United Stated counsel for the
Company, dated the date of delivery, addressed to the Underwriters, and in form
and scope satisfactory to counsel for the Underwriters, with reproduced copies
or signed counterparts thereof for each of the Underwriters.
(ii) At the Closing Date and any Additional
Closing Date, as the case may be, you shall have received the opinion of Messrs.
McMillan Binch, Canadian counsel for the Company, dated the date of delivery,
addressed to the Underwriters, and in form and scope
33
<PAGE>
satisfactory to counsel for the Underwriters, with reproduced copies or signed
counterparts thereof for each of the Underwriters.
(c) On or prior to the Closing Date and any Additional
Closing Date, as the case may be, the Underwriters shall have been furnished
such information, documents, certificates, and opinions as they may reasonably
require for the purpose of enabling them to review the matters referred to in
Section 7(b), and in order to evidence the accuracy, completeness, or
satisfaction of any of the representations, warranties, covenants, agreements,
or conditions herein contained, or as the Representative may reasonably request.
(d) At the Closing Date or any Additional Closing Date,
as the case may be, (i) the Registration Statement and the Prospectus and any
amendments or supplements thereto shall contain all statements which are
required to be stated therein in accordance with the Securities Act and the
Regulations, and in all material respects conform to the requirements thereof,
and neither the Registration Statement nor the Prospectus nor any amendment or
supplement thereto shall contain any 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 not misleading, (ii) there shall have been, since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, no material adverse change, or any development involving a
prospective material adverse change, in the business, properties, or condition
(financial or otherwise), results of operations, capital stock, long-term or
short-term debt, or general affairs of the Company or any Subsidiary from that
set forth in the Registration Statement and the Prospectus, except changes which
the Registration Statement and Prospectus indicate might occur after the date on
which the Registration Statement becomes effective under the Securities Act, and
neither the Company nor
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<PAGE>
any Subsidiary shall have incurred any material liabilities or entered into any
agreements not in the ordinary course of business other than as referred to in
the Registration Statement and Prospectus, (iii) except as set forth in the
Prospectus, no litigation, arbitration, claim, governmental or other proceeding
(formal or informal), or investigation shall be pending, threatened, or in
prospect (or any basis therefor) with respect to the Company or any Subsidiary
or any of their respective operations, businesses, properties, or assets which
would be required to be set forth in the Registration Statement, wherein an
unfavorable decision, ruling, or finding would materially adversely affect the
business, property, condition (financial or otherwise), results of operations,
or general affairs of the Company or such Subsidiary, and (iv) the Stock be
listed upon the Nasdaq SmallCap Market and the Exchange.
(e) At the Closing Date and any Additional Closing Date,
as the case may be, you shall have received a certificate of the chief executive
officer, the chief financial officer, and the chief accounting officer of the
Company, dated the Closing Date or such Additional Closing Date, as the case may
be, to the effect, among other things, that (i) the conditions set forth in
Sections 7(a) and 7(d) have been satisfied, (ii) as of the date of this
Agreement and as of the Closing Date or such Additional Closing Date, as the
case may be, the representations and warranties of the Company contained herein
were and are accurate and correct in all material respects, and (iii) as of the
Closing Date or such Additional Closing Date, as the case may be, the
obligations to be performed by the Company hereunder on or prior to such time
have been fully performed.
(f) (1) At the time this Agreement is executed and
at the Closing Date and any Additional Closing Date, as the case may be, you
shall have received a letter, addressed to the Underwriters, and in form and
substance satisfactory to the Representative, with reproduced copies
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<PAGE>
or signed counterparts thereof for each of the Underwriters, from Schwartz
Levitsky Feldman, independent certified public accountants for the Company and
each of the Subsidiaries, dated the date of delivery, in form and substance
satisfactory to the Representative and counsel to the Underwriters.
(g) All proceedings taken in connection with the
issuance, sale, transfer, and delivery of the Securities shall be satisfactory
in form and substance to the Representative and to counsel for the Underwriters,
and the Underwriters shall have received from such counsel for the Underwriters
the opinion, dated as of the Closing Date and the Additional Closing Date, as
the case may be, with respect to such of the matters set forth under Section
7(b), and with respect to such other related matters, as the Representative may
reasonably request.
(h) NASDR, upon review of the terms of the public
offering of the Stock shall not have objected to the Underwriters' participation
in such offering.
(i) Prior to or on the Closing Date, the Company shall
have entered into the Financial Advisory Agreement and the Representative's
Warrants with the Representative.
(j) Prior to or on the Closing Date, the Company shall
have provided to you copies of the agreements referred to in Section 2(r).
Any certificate or other document signed by any officer of the Company
and delivered to the Representative or to counsel for the Underwriters shall be
deemed a representation and warranty by the Company hereunder to the
Underwriters as to the statements made therein. If any condition to the
Underwriters' obligations hereunder to be fulfilled prior to or at the Closing
Date or any Additional Closing Date, as the case may be, is not so fulfilled,
the Representative may, on behalf
36
<PAGE>
of the several Underwriters, terminate this Agreement or, if the Representative
so elects, in writing waive any such conditions which have not been fulfilled or
extend the time for their fulfillment.
8. Indemnification and Contribution.
(a) Subject to the conditions set forth below, the
Company agrees to indemnify and hold harmless each Underwriter, its officers,
directors, partners, employees, agents, and counsel, and each person, if any,
who controls any Underwriter within the meaning of Section 15 of the Securities
Act or Section 20(a) of the Exchange Act, against any and all loss, liability,
claim, damage, and expense whatsoever (which shall include, for all purposes of
this Section 8, but not be limited to, attorneys' fees and any and all expense
whatsoever incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever and any and all
amounts paid in settlement of any claim or litigation) as and when incurred
arising out of, based upon, or in connection with, (i) any untrue statement or
alleged untrue statement of a material fact contained in (A) the Registration
Statement, any Preliminary Prospectus, or the Prospectus (as from time to time
amended and supplemented), or any amendment or supplement thereto or (B) any
application or other document or communication (for purposes of this Section 8,
collectively referred to as an "application") executed by, or on behalf of, the
Company or based upon written information furnished by, or on behalf of, the
Company filed in any jurisdiction in order to qualify the Securities under the
"blue sky" or securities laws thereof or filed with the Commission or any
securities exchange; or any omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, unless such statement or omission was made in reliance upon, and
in conformity with, written information furnished to the Company as stated in
Section 8(b) with respect to any Underwriter by, or on behalf of, such
37
<PAGE>
Underwriter through the Representative expressly for inclusion in the
Registration Statement, any Preliminary Prospectus, or the Prospectus, or any
amendment or supplement thereto, or in any application, as the case may be, or
(ii) any breach of any representation, warranty, covenant, or agreement of the
Company contained in this Agreement. The foregoing agreement to indemnify shall
be in addition to any liability the Company may otherwise have, including
liabilities arising under this Agreement.
If any action is brought against an Underwriter or any of its
respective officers, directors, partners, employees, agents, or counsel, or any
controlling persons of an Underwriter (an "indemnified party") in respect of
which indemnity may be sought against the Company pursuant to the foregoing
paragraph, such indemnified party or parties shall promptly notify the Company
in writing of the institution of such action (but the failure so to notify shall
not relieve the Company from any liability it may have other than pursuant to
this Section 8(a)) and the Company shall promptly assume the defense of such
action, including, without limitation, the employment of counsel satisfactory to
such indemnified party or parties and payment of expenses. Such indemnified
party or parties shall have the right to employ its or their own counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
such indemnified party or parties unless the employment of such counsel shall
have been authorized in writing by the Company in connection with the defense of
such action or the Company shall not have promptly employed counsel satisfactory
to such indemnified party or parties to have charge of the defense of such
action or such indemnified party or parties shall have concluded that there may
be one or more legal defenses available to it or them or to other indemnified
parties which are different from, or in addition to, those available to the
Company, in any of which events such fees and expenses shall be borne by the
38
<PAGE>
Company, and the Company shall not have the right to direct the defense of such
action on behalf of the indemnified party or parties. Anything in this paragraph
to the contrary notwithstanding, the Company shall not be liable for any
settlement of any such claim or action effected without its written consent,
which consent shall not be unreasonably withheld. The Company shall not, without
the prior written consent of each indemnified party that is not released as
described in this sentence, settle or compromise any action, or permit a default
or consent to the entry of judgment or otherwise seek to terminate any pending
or threatened action, in respect of which indemnity may be sought hereunder
(whether or not any indemnified party is a party thereto), unless such
settlement, compromise, consent, or termination includes an unconditional
release of each indemnified party from all liability in respect of such action.
The Company agrees promptly to notify the Underwriters of the commencement of
any litigation or proceedings against the Company or any of its officers or
directors in connection with the sale of the Securities, the Registration
Statement, any Preliminary Prospectus, or the Prospectus, or any amendment or
supplement thereto, or any application.
(b) Each Underwriter severally agrees to indemnify and
hold harmless the Company, each director of the Company, each officer of the
Company who shall have signed the Registration Statement, and each other person,
if any, who controls the Company within the meaning of Section 15 of the
Securities Act or Section 20(a) of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to the several Underwriters in Section
8(a), but only with respect to statements or omissions, if any, made in the
Registration Statement, any Preliminary Prospectus, or the Prospectus (as from
time to time amended and supplemented), or any amendment or supplement thereto,
or in any application, in reliance upon, and in conformity with,
39
<PAGE>
written information furnished to the Company as stated in this Section 8(b) with
respect to any Underwriter by, or on behalf of, such Underwriter through the
Representative expressly for inclusion in the Registration Statement, any
Preliminary Prospectus, or the Prospectus, or any amendment or supplement
thereto, or on any application, as the case may be; provided, however, that the
obligation of each Underwriter to provide indemnity under the provisions of this
Section 8(b) shall be limited to the amount which represents the product of (i)
the number of shares of Stock underwritten by such Underwriter hereunder and the
(ii) the underwriting discount per Common Share set forth on the cover page of
the Prospectus. For all purposes of this Agreement, the amounts of the selling
concession and reallowance and the name of each of the Underwriters, and the
number of shares of Firm Stock purchased by each of the Underwriters set forth
in the Prospectus constitute the only information furnished in writing by, or on
behalf of, such Underwriter expressly for inclusion in the Registration
Statement, any Preliminary Prospectus, or the Prospectus (as from time to time
amended or supplemented), or any amendment or supplement thereto, or in any
application, as the case may be. If any action shall be brought against the
Company or any other person so indemnified based on the Registration Statement,
any Preliminary Prospectus, or the Prospectus, or any amendment or supplement
thereto, or in any application, and in respect of which indemnity may be sought
against any Underwriter pursuant to this Section 8(b), such Underwriter shall
have the rights and duties given to the Company, and the Company and each other
person so indemnified shall have the rights and duties given to the indemnified
parties, by the provisions of Section 8(a).
(c) To provide for just and equitable contribution, if
(i) an indemnified party makes a claim for indemnification pursuant to Section
8(a) or 8(b) (subject to the limitations
40
<PAGE>
thereof), but it is found in a final judicial determination, not subject to
further appeal, that such indemnification may not be enforced in such case, even
though this Agreement expressly provides for indemnification in such case or
(ii) any indemnified or indemnifying party seeks contribution under the
Securities Act, the Exchange Act, or otherwise, then the Company (including for
this pur pose any contribution made by, or on behalf of, any director of the
Company, any officer of the Company who signed the Registration Statement, and
any controlling person of the Company), as one entity, and the Underwriters
(including for this purpose any contribution by, or on behalf of, an indemnified
party) as a second entity, shall contribute to the losses, liabilities, claims,
damages, and expenses whatsoever to which any of them may be subject, so that
the Underwriters, in the aggregate, are responsible for the proportion thereof
equal to the percentage which the underwriting discount per Common Share set
forth on the cover page of the Prospectus represents of the initial public
offering price per Common Share set forth on the cover page of the Prospectus
and the Company is responsible for the remaining portion; provided, however,
that if applicable law does not permit such allocation, then other relevant
equitable considerations such as the relative fault of the Company and the
Underwriters in connection with the facts which resulted in such losses,
liabilities, claims, damages, and expenses shall also be considered. The
relative fault, in the case of an untrue statement, alleged untrue statement,
omission, or alleged omission, shall be determined by, among other things,
whether such statement, alleged statement, omission, or alleged omission relates
to information supplied by the Company or by the Underwriters, and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement, alleged statement, omission, or alleged omission. The
Company and the Underwriters agree that it would be unjust and inequitable if
the respective obligations of the Company and the Underwriters
41
<PAGE>
for contribution were determined by pro rata or per capita allocation of the
aggregate losses, liabilities, claims, damages, and expenses (even if the
Underwriters and the other indemnified parties were treated as one entity for
such purpose) or by any other method of allocation that does not reflect the
equitable considerations referred to in this Section 8(c). No person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who is not
guilty of such fraudulent misrepresentation. For purposes of this Section 8(c),
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Securities Act or Section 20(a) of the Exchange Act and each officer,
director, partner, employee, agent, and counsel of any Underwriter shall have
the same rights to contribution as such Underwriter, and each person, if any,
who controls the Company within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Exchange Act, each officer of the Company who shall have
signed the Registration Statement and each director of the Company shall have
the same rights to contribution as the Company, subject in each case to the
provisions of this Section 8(c). Anything in this Section 8(c) to the contrary
notwithstanding, no party shall be liable for contribution with respect to the
settlement of any claim or action effected without its written consent. This
Section 8(c) is intended to supersede any right to contribution under the
Securities Act, the Exchange Act, or otherwise.
9. Default by an Underwriter.
(a) If any Underwriter or Underwriters shall default in
its or their obligation to purchase Firm Stock or Additional Stock hereunder,
and if the number of shares of Firm Stock or Additional Stock to which the
defaults of all Underwriters in the aggregate relate does not exceed 10% of the
number of shares of Firm Stock or Additional Stock, as the case may be, which
all
42
<PAGE>
Underwriters have agreed to purchase hereunder, then such shares of Firm Stock
or Additional Stock to which such defaults relate shall be purchased by the
non-defaulting Underwriters in proportion to their respective commitments
hereunder.
(b) If such defaults exceed in the aggregate 10% of the
number of shares of Firm Stock or Additional Stock, as the case may be, which
all Underwriters have agreed to purchase hereunder, the Representative may, in
its discretion, arrange to purchase itself or for another party or parties to
purchase such shares of Firm Stock or Additional Stock, as the case may be, to
which such default relates on the terms contained herein. If the Representative
does not arrange for the purchase of such shares of Firm Stock or Additional
Stock, as the case may be, within one business day after the occurrence of
defaults relating to in excess of 10% of the Firm Stock or the Additional Stock,
as the case may be, then the Company shall be entitled to a further period of
one business day within which to procure another party or parties satisfactory
to the Representative to purchase such shares of Firm Stock or Additional Stock,
as the case may be, on such terms. If the Representative or the Company does not
arrange for the purchase of the shares of Firm Stock or Additional Stock, as the
case may be, to which such defaults relate as provided in this Section 9(b),
this Agreement may be terminated by the Representative or by the Company without
liability on the part of the Company (except that the provisions of Sections
5(a)(1), 6, 8, 10, and 13 shall survive such termination) or the several
Underwriters, but nothing in this Agreement shall relieve a defaulting
Underwriter of its liability, if any, to the other several Underwriters and to
the Company for any damages occasioned by its default hereunder.
(c) If the shares of Firm Stock or Additional Stock to
which such defaults relate are to be purchased by the non-defaulting
Underwriters, or are to be purchased by another party or
43
<PAGE>
parties as aforesaid, the Representative or the Company shall have the right to
postpone the Closing Date or the Additional Closing Date, as the case may be,
for a reasonable period but not in any event more than seven business days in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus or in any other documents and
arrangements with respect to the Firm Stock or the Additional Stock, and the
Company agrees to prepare and file promptly any amendment or supplement to the
Registration Statement or the Prospectus which in the opinion of counsel for the
Underwriters may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any party substituted under this Section 9 as if
such party had originally been a party to this Agreement and had been allocated
the number of shares of Firm Stock and Additional Stock actually purchased by it
as a result of its original commitment to purchase Firm Stock and Additional
Stock and its purchase of shares of Firm Stock or Additional Stock pursuant to
this Section 9.
10. Representations and Agreements to Survive Delivery. All
representations, warranties, covenants, and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants, and
agreements at the Closing Date and any Additional Closing Date, and such
representations, warranties, covenants, and agreements of the Underwriters and
the Company, including the indemnity and contribution agreements contained in
Section 8, shall remain operative and in full force and effect regardless of any
investigation made by, or on behalf of, any Underwriter or any indemnified
person, or by, or on behalf of, the Company or any person or entity which is
entitled to be indemnified under Section 8(b), and shall survive termination of
this Agreement or the delivery of the Firm Stock and the Additional Stock, if
any, to the several Underwriters. In addition, the provisions of Sections
5(a)(1), 6, 8, 10, 11, and 13 shall survive
44
<PAGE>
termination of this Agreement, whether such termination occurs before or after
the Closing Date or any Additional Closing Date. Notwithstanding anything in the
second sentence of Section 6 hereof to the contrary, and in addition to the
obligations assumed by the Company pursuant to the first sentence of Section 6
hereof, if the offering should be terminated, the Company shall be liable to the
Underwriters only for out-of-pocket expenses incurred by the Underwriters in
connection with this Agreement or the proposed, offer, sale, and delivery of the
Securities.
11. Effective Date of This Agreement and Termination Thereof.
(a) This Agreement shall become effective at 9:30 A.M.,
New York City local time, on the first full business day following the day on
which the Registration Statement becomes effective under the Securities Act or
at the time of the initial public offering by the Underwriters of the Firm
Stock, whichever is earlier. The time of the initial public offering shall mean
the time, after the Registration Statement becomes effective under the
Securities Act, of the release by the Representative for publication of the
first newspaper advertisement which is subsequently published relating to the
Firm Stock or the time, after the Registration Statement becomes effective under
the Securities Act, when the Firm Stock is first released by the Representative
for offering by the Underwriters or dealers by letter or telegram, whichever
shall first occur. The Representative or the Company may prevent this Agreement
from becoming effective without liability of any party to any other party,
except as noted below in this Section 11, by giving the notice indicated in
Section 11(d) before the time this Agreement becomes effective under the
Securities Act.
(b) If the purchase price of the Firm Stock has not been
determined as provided for in Section 3 prior to 4:30 p.m., New York City local
time, on the fifth full business day after the date on which the Registration
Statement becomes effective under the Securities Act, this
45
<PAGE>
Agreement may be terminated at any time thereafter either by the Representative
or by the Company by giving notice to the other unless before such termination
the purchase price for the Firm Stock has been so determined. If the purchase
price of the Firm Stock has not been so determined prior to 4:30 p.m., New York
City local time, on the tenth full business day after the date on which the
Registration Statement becomes effective under the Securities Act, this
Agreement shall automatically terminate forthwith.
(c) In addition to the right to terminate this Agreement
pursuant to Sections 7 and 9 hereof, the Representative shall have the right to
terminate this Agreement at any time prior to the Closing Date or any Additional
Closing Date, as the case may be, by giving notice to the Company, and, if
exercised, the Over-allotment Option, at any time prior to any Additional
Closing Date, by giving notice to the Company, (i) if any domestic or
international event, act, or occurrence has materially and adversely disrupted,
or, in the opinion of the Representative, will in the immediate future
materially and adversely disrupt, the securities markets; or (ii) if there shall
have been a general suspension of, or a general limitation on prices for,
trading in the Common Shares or in securities generally on the New York Stock
Exchange or the American Stock Exchange or in the over-the-counter market; or
(iii) if there shall have been an outbreak or increase in the level of major
hostilities or other national or international calamity; or (iv) if a banking
moratorium has been declared by a state or federal authority; or (v) if a
moratorium in foreign exchange trading by major international banks or persons
has been declared; or (vi) if there shall have been a material interruption in
the mail service or other means of communication within the United States; or
(vii) if the Company shall have sustained a material or substantial loss by
fire, flood, accident, hurricane, earthquake, theft, sabotage, or other calamity
or malicious act, whether or not such loss shall have
46
<PAGE>
been insured, or from any labor dispute or court or government action, order,
or decree, which will, in the opinion of the Representative, make it
inadvisable to proceed with the offering, sale, or delivery of the Firm Stock
or the Additional Stock, as the case may be; or (viii) if any material
governmental restrictions shall have been imposed on trading in securities in
general, which restrictions are not in effect on the date hereof; or (ix) if
there shall be passed by the Congress of the United States or by any state
legislature any act or measure, or adopted by any governmental body or
authoritative accounting institute or board, or any governmental executive,
any orders, rules, or regulations, which the Representative believes likely
to have a material adverse effect on the business, financial condition, or
financial statements of the Company or the market for the Common Shares; or
(x) if the obligations of the Company set forth in Section 7 hereof have not
been performed, satisfied, or waived or the Company shall have failed,
refused, or been unable to perform all obligations and satisfy all conditions
on its part to be satisfied or performed hereunder prior thereto; (xi) there
shall have been a material adverse effect, or any development involving a
prospective material adverse effect, in the business, prospects, financial
condition, or results of operations of the Company, or any executive officer
of the Company shall have suffered any injury or disability of a nature that
materially adversely affects his ability to function in his or her respective
capacities for the Company for more than six months, or any material action,
suit, or proceeding shall be threatened, instituted, or pending, at law or in
equity,
47
<PAGE>
against the Company or any of its directors or executive officers, by any person
or by any federal, state, or other governmental body or entity.
(d) If the Representative elects to prevent this
Agreement from becoming effective, as provided in this Section 11, or to
terminate this Agreement pursuant to Section 7 of this Agreement or this Section
11, the Representative shall notify the Company promptly by telephone, telex, or
telegram, confirmed by letter. If, as so provided, the Company elects to prevent
this Agreement from becoming effective or to terminate this Agreement, the
Company shall notify the Representative promptly by telephone, telex, or
telegram, confirmed by letter.
(e) Anything in this Agreement to the contrary
notwithstanding other than Section 11(f), if this Agreement shall not become
effective by reason of an election pursuant to this Section 11 or if this
Agreement shall terminate or shall otherwise not be carried out within the time
specified herein by reason of any failure on the part of the Company to perform
any covenant or agreement or satisfy any condition of this Agreement by it to be
performed or satisfied, the sole liability of the Company to the several
Underwriters, in addition to the obligations the Company assumed pursuant to the
first sentence of Section 6, will be to reimburse the several Underwriters for
such out-of-pocket expenses (including the fees and disbursements of their
counsel) as shall have been incurred by them in connection with this Agreement
or the proposed offer, sale, and delivery of the Securities, and, upon demand,
the Company agrees to pay promptly the full amount thereof to the Representative
for the respective accounts of the Underwriters. Anything in this Agreement to
the contrary notwithstanding other than Section 11(f), if this Agreement shall
not be carried out within the time specified herein for any reason other than
the failure on the part of the Company to perform any covenant or agreement or
satisfy any condition of this Agreement by it to be performed
48
<PAGE>
or satisfied, the Company shall have no liability to the several Underwriters
other than for obligations assumed by the Company pursuant to Section 6.
(f) Notwithstanding any election hereunder or any
termination of this Agreement, and whether or not this Agreement is otherwise
carried out, the provisions of Sections 5(a)(1), 6, 8, 10, and 13 shall not be
in any way affected by such election or termination or failure to carry out the
terms of this Agreement or any part hereof. Notwithstanding anything in the
second sentence of Section 6 hereof to the contrary, and in addition to the
obligations assumed by the Company pursuant to the first sentence of Section 6
hereof, if the offering should be terminated, the Company shall be liable to the
several Underwriters only for out-of-pocket expenses incurred by the several
Underwriters in connection with this Agreement or the proposed, offer, sale, and
delivery of the Securities.
12. Notices. All communications hereunder, except as may be otherwise
specifically provided herein, shall be in writing and, if sent to any
Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed
by letter, to such Underwriter, c/o Strasbourger Pearson Tulcin Wolff
Incorporated, 61 Broadway, New York, New York 10005, Attention: Mr. James
Carrazza, with a copy to Brock Silverstein McAuliffe LLC, One Citicorp Center,
56th Floor, York, New York 10022, Attention: Robert Steven Brown; or if sent to
the Company, shall be mailed, delivered, or telexed or telegraphed and confirmed
by letter, to the Company, IT Staffing Ltd., 55 University Avenue, Toronto,
Canada M5J 2H7, Attention: Delcan A, French, with a copy to Gersten, Savage,
Kaplowitz & Fredericks, LLP, 101 East 52nd Street, 9th Floor, New York 10022,
Attention: Jay M. Kaplowitz, Esq. and Arthur S. Marcus, Esq. All notices
hereunder shall be effective upon receipt by the party to which it is addressed.
49
<PAGE>
13. Parties. The Representative, individually and not as the
representative of the several Underwriters, represents that it is authorized to
act as the Representative on behalf of the several Underwriters named in
Schedule I hereto, and the Company shall be entitled to act and rely on any
request, notice, consent, waiver, or agreement purportedly given on behalf of
the Underwriters when the same shall have been given by the Representative on
such behalf. This Agreement shall inure solely to the benefit of, and shall be
binding upon, the several Underwriters, the Company, and the persons and
entities referred to in Section 8 who are entitled to indemnification or
contribution, and their respective successors, legal representatives, and
assigns (which shall not include any buyer, as such, of the Firm Stock or the
Additional Stock), and no other person shall have, or be construed to have, any
legal or equitable right, remedy, or claim under, in respect of, or by virtue of
this Agreement or any provision herein contained. Notwithstanding anything
contained in this Agreement to the contrary, all of the obligations of the
Underwriters hereunder are several and not joint.
14. Construction. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to
conflict of laws. Time is of the essence in this Agreement.
15. Consent to Jurisdiction. The Company irrevocably consents to the
jurisdiction of the courts of the State of New York and of any federal court
located in such State in connection with any action or proceeding arising out
of, or relating to, this Agreement, any document or instrument delivered
pursuant to, in connection with, or simultaneously with this Agreement, or a
breach of this Agreement or any such document or instrument. In any such action
or proceeding, the Company waives personal service of any summons, complaint, or
other process and agrees that
50
<PAGE>
service thereof may be made in accordance with Section 12. Within 30 days after
such service, or such other time as may be mutually agreed upon in writing by
the attorneys for the parties to such action or proceeding, the Company shall
appear or answer such summons, complaint, or other process. Should the Company
fail to appear or answer within such 30-day period or such extended period, as
the case may be, the Company shall be deemed in default and judgment may be
entered against the Company for the amount as demanded in any summons,
complaint, or other process so served. The Company hereby irrevocably appoints
Gersten, Savage, Kaplowitz & Fredericks, LLP, United States counsel to the
Company, as the Company's agent to receive service of process in any action
against the Company in any federal or state court of the State of New York
arising out of this offering.
51
<PAGE>
If the foregoing correctly sets forth the understandings among the
Representative and the Company, please so indicate in the space provided below
for that purpose, whereupon this letter shall constitute a binding agreement
between us.
Very truly yours,
IT STAFFING LTD.
By:
---------------------------------
Name:
Title:
Accepted as of the date first above
written in New York, New York
STRASBOURGER PEARSON TULCIN WOLFF
INCORPORATED*
By:
------------------------------------
Name:
Title:
*On behalf of itself and the other several
Underwriters named in Schedule I hereto.
52
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Total
Number
of Shares
to be
Underwriter Purchased
----------- ---------
<S> <C>
Total..........................................................................................1,000,000
---------
---------
</TABLE>
53
<PAGE>
Exhibit 3.6
1.
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la societe en Ontario
1065259
--------------------------------
Form 3 Business Corporations Act
Formule 3 Loi sur les societes par actions
ARTICLES OF AMENDMENT
STATUTS DE MODIFICATION
1. The name of the corporation is: Denomination sociale de la societe:
IT STAFFING LTD.
2. The name of the corporation is Nouvelle denomination sociale de la
changed to (if applicable): N/A societe (s'il y a lieu):
Date of incorporation/amalgamation: Date de la constitution ou de la fusion:
1994 February 11
- --------------------------------------------------------------------------------
(Year, Month, Day)
(annee, mois, jour)
4. The articles of the corporation Les statuts de la societe sont modifies
are amended as follows: de la facon suivante:
A. By changing the authorized share capital of the Corporation by:
(a) creating 1,000,000 Preferred Shares, issuable in series; and
(b) changing the number of common shares that the Corporation is
authorized to issue from an unlimited number to 15,000,000,
so that the Corporation is authorized to issue 15,000,000 common shares
and 1,000,000 Preferred Shares, issuable in series.
B. The rights, privileges, restrictions and conditions attaching to the
common shares and the Preferred Shares (as a class) of the Corporation are
as follows:
<PAGE>
1a
1. COMMON SHARES
1.1 Dividends. Subject to the prior rights of the holders of the Preferred
Shares, the holders of the common shares shall be entitled to receive all
dividends declared by the board of directors of the Corporation (the "Board of
Directors"). The Board of Directors may determine at any time or from time to
time with respect to any cash dividend declared payable on the common shares,
that the holders of the common shares, or the holders of the common shares whose
addresses, on the books of the Corporation, are in Canada and/or in specified
jurisdictions outside Canada, shall have the right to elect to receive such
dividend in the form of a stock dividend payable in common shares. In such
event, the stock dividend must have a value, as determined by the Board of
Directors, that is substantially equivalent, as of a date or a period of days
determined by the Board of Directors, to the cash amount of such dividend.
Unless the Board of Directors otherwise determines, however, each shareholder
shall be paid cash in lieu of any fractional interests in common shares to which
such holder would otherwise have been entitled. If the Board of Directors
determines that shareholders are entitled to fractional interests in common
shares issued by way of stock dividend, such holders shall be entitled to
receive dividends in respect of such fractional share interests.
1.2 Dissolution. Subject to the prior rights of the holders of the Preferred
Shares, the holders of the common shares shall be entitled to receive the
remaining property of the Corporation in the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
or in the event of any other distribution of the property or assets of the
Corporation among its shareholders for the purpose of winding up its affairs,
whether voluntary or involuntary.
1.3 Voting. Except for meetings at which the holders of the Preferred Shares
(including, without limitation, meetings of the holders of a series of Preferred
Shares) are entitled to vote separately as a class or series, the holders of the
common shares shall be entitled to one vote for each common share held by them
at all meetings of shareholders of the Corporation.
2. PREFERRED SHARES
2.1 One or More Series. The Preferred Shares may at any time or from time to
time be issued in one or more series. Before the issue of any Preferred Shares
of any series, the Board of Directors shall fix the number of Preferred Shares
in, and determine the designation, rights, privileges, restrictions and
conditions attaching to the Preferred Shares of, such series, which may, without
in any way limiting the generality of the foregoing, include:
(a) the issue price per share of the shares of such series, which may be
expressed in a foreign currency;
<PAGE>
1b
(b) the rate, amount or method of calculation of dividends and whether
such rate, amount or method shall be subject to change or adjustment
in the future;
(c) whether such dividends shall be cumulative, non-cumulative,
partially cumulative, deferred or payable on some other basis;
(d) the date or dates, manner and currency or currencies of payment of
such dividends;
(e) the restrictions, if any, respecting the payments of dividends on
any Junior Shares (as defined below in this section 2.1);
(f) the rights and obligations, if any, of the Corporation to purchase
Preferred Shares of such series or to redeem the same and the prices
and the other terms of any such purchase or redemption;
(g) the terms of any share purchase plan or sinking fund or similar fund
providing for the purchase or redemption of Preferred Shares of such
series;
(h) the rights of retraction, if any, vested in the holders of Preferred
Shares of such series, and the prices and the other terms of any
rights of retraction, and whether any additional rights of
retraction may be vested in such holders in the future;
(i) the rights of conversion and/or exchange, if any, of Preferred
Shares of such series, and the rates and the other terms of any such
rights;
(j) the voting rights, if any, attached to the Preferred Shares of such
series; and
(k) the amounts of the preferences over the Junior Shares with respect
to the distribution of assets of the Corporation in the event of
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, or in the event of any other distribution
of the property or assets of the Corporation among its shareholders
for the purpose of winding up its affairs, whether voluntary or
involuntary.
For the purpose of this section B.(2.), the term "Junior Shares" means the
common shares and any other shares of the Corporation ranking junior to the
Preferred Shares with respect to the payment of dividends and with respect to
the distribution of assets in the event of the liquidation, dissolution or
winding up of the Corporation, whether voluntary or involuntary, or in the event
of any other distribution of the property or assets of the Corporation among its
shareholders for the purpose of winding up its affairs, whether voluntary or
involuntary. For the purpose of this
<PAGE>
1c
section B, none of an amalgamation, arrangement, compromise or reorganization,
nor a sale, lease or exchange of all or substantially all of the assets of the
Corporation, shall be deemed to be a liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, or deemed to be a
distribution of the property or assets of the Corporation among its shareholders
for the purpose of winding up its affairs, whether voluntary or involuntary.
2.2 Dissolution. In the event of the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, or in the event of any other
distribution of the property or assets of the Corporation among its shareholders
for the purpose of winding up its affairs, whether voluntary or involuntary,
before any amount shall be paid to, or any property distributed among, the
holders of the common shares, each holder of Preferred Shares shall be entitled
to receive:
(a) an amount equal to the amount paid up in respect of such shares, or
such other amount or amounts as have been provided for with respect
to the Preferred Shares of such series;
(b) such premium, if any, as has been provided for with respect to the
Preferred Shares of such series;
(c) in the case of Preferred Shares entitled to any amount of cumulative
dividends, all unpaid cumulative dividends thereon, which for such
purpose shall be calculated as if such cumulative dividends were
accruing from day to day for the period from the expiration of the
last dividend period for which cumulative dividends have been paid
to and including the date of distribution; and
(d) in the case of Preferred Shares entitled to non-cumulative
dividends; any declared but unpaid non-cumulative dividends.
After payment to the holders of the Preferred Shares of the amounts so payable
to them, the holders of the Preferred Shares shall not be entitled to share in
any further distribution of the property of the Corporation.
2.3 Voting. Except where the rights, privileges, restrictions and conditions
attaching to a series of Preferred Shares provide for voting rights for the
holders of such series of Preferred Shares, the holders of Preferred Shares are
not entitled as such to receive notice of, to attend at, or to vote at, a
meeting of the shareholders of the Corporation but shall be entitled to receive
notice of any meeting of shareholders called for the purpose of authorizing the
dissolution of the Corporation or the sale, lease or exchange of all or
substantially all of the assets of the Corporation other than in the ordinary
course of business of the Corporation.
<PAGE>
1d
2.4 No Voting Required. Subject to the rights, privileges, restrictions and
conditions attaching to a series of Preferred Shares, the Corporation may,
without the approval or consent of the holders of Preferred Shares voting
separately as a class or series, at any time and from time to time:
(a) create one or more other classes of shares ranking on a parity with
the Preferred Shares with respect to the payment of dividends and/or
the distribution of assets in the event of the liquidation,
dissolution or winding up of the Corporation, whether voluntary or
involuntary, or in the event of any other distribution of the
property or assets of the Corporation among its shareholders for the
purpose of winding up its affairs, whether voluntary or involuntary;
(b) if all dividends on each outstanding series of Preferred Shares
accrued to the most recently preceding date for the payment of
dividends on such series shall have been declared and paid or set
apart for payment, create one or more other classes of shares
ranking superior to the Preferred Shares with respect to the payment
of dividends and/or the distribution of assets in the event of the
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, or in the event of any other distribution
of the property or assets of the Corporation among its shareholders
for the purpose of winding up its affairs, whether voluntary or
involuntary;
(c) increase any maximum number of authorized shares of any other class
of shares; and
(d) effect an exchange, reclassification or cancellation of all or part
of the Preferred Shares.
2.5 No Pre-Emptive Rights. The holders of the Preferred Shares shall not be
entitled as such to subscribe for, purchase or receive any part of any issue of
shares, bonds, debentures or other securities of the Corporation, now or
hereafter authorized, or any rights to acquire the same, otherwise than in
accordance with any conversion, exchange or other rights which may from time to
time be attached to any series of the Preferred Shares.
<PAGE>
2
5. The amendment has been duly La modification a ete dument autorisee
authorized as required by Sections conformement aux articles 168 et 170
168 & 170 (as applicable) of the (selon le cas) de la Loi sur les
Business Corporations Act. societes par actions.
6. The resolution authorizing the Les actionnaires ou les administrateurs
amendment was approved by the (selon le cas) de la societe ont
shareholders/directors (as approuve la resolution autorisant la
applicable) of the corporation on modification le
1999, January, 19
- --------------------------------------------------------------------------------
(Year, Month, Day)
(annee, mois, jour)
These articles are signed in Les presents statuts sont signes en
duplicate. double exemplaire
IT STAFFING LTD.
-----------------------------------------------------
(Name of Corporation)
(Denomination sociale de la societe)
By/Par: /s/ Declan A. French Declan A French, President
------------------------------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
<PAGE>
Exhibit 4.3
IT STAFFING LTD.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM
TEN ENT
JT TEN
tenants in common
tenants by the entireties
joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT-D Custodian
(Cust)
(Minor)
under Uniform Gifts to Minors
Act
(State)
Additional abbreviations may also be used though not in the above list.
For Value Received, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
Shares of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint Attorney to transfer the said shares on the
books of the within named Corporation with full power of substitution in the
premises.
Dated
NOTICE:
THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATEVER.
SIGNATURE GUARANTEED:
SIGNATURE MUST CORRESPOND IN EVERY PARTICULAR WITH HOLDER'S NAME ON FACE OF
CERTIFICATE AND IF PRESENTED IN CANADA MUST BE GUARANTEED BY A CANADIAN
CHARTERED BANK, MAJOR CANADIAN TRUST COMPANY, OR MEMBER OF A RECOGNIZED
SIGNATURE GUARANTEE PROGRAM, OR, IF PRESENTED FOR TRANSFER IN THE UNITED STATES,
SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
THE SIGNATURE GUARANTEED MEDALLION PROGRAM) PURSUANT TO THE S.E.C. RULE
17A(d)-15.
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE RIGHTS, PRIVILEGES,
RESTRICTIONS OR CONDITIONS ATTACHED THERETO. THE CORPORATION IS AUTHORIZED TO
ISSUE SHARES OF MORE THAN ONE CLASS AND SERIES AND WILL FURNISH TO A
SHAREHOLDER, ON DEMAND AND WITHOUT CHARGE, A FULL COPY OF THE TEXT OF (i) THE
RIGHTS, PRIVILEGES, RESTRICTIONS AND CONDITIONS ATTACHED TO EACH CLASS
AUTHORIZED TO BE ISSUED AND TO EACH SERIES IN SO FAR AS THE SAME HAVE BEEN FIXED
BY THE DIRECTORS, AND (ii) THE AUTHORITY OF THE DIRECTORS TO FIX THE RIGHTS,
PRIVILEGES, RESTRICTIONS AND CONDITIONS OF SUBSEQUENT SERIES.
<PAGE>
IT STAFFING LTD.
CUSIP 450672 10 0
SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE COMMON STOCK, NO PAR VALUE OF
IT STAFFING LTD.
(hereinafter called the "Corporation"). The shares evidenced by this
certificate are transferable only on the stock transfer books of the
Corporation by the holder hereof, in person or by attorney, upon surrender of
the certificate properly endorsed.
IN WITNESS WHEREOF the Corporation has caused this certificate to be executed
by the signatures of its duly authorized officers and has caused its facsimile
seal to be hereunto affixed.
Dated:
SECRETARY
PRESIDENTCOUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(JERSEY CITY, NJ)
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED OFFICER
<PAGE>
Exhibit 10.3(d)
LEASE AGREEMENT
The following are the terms and conditions of the lease between ICS (the
"Tenant") and 1242531 Ontario Ltd. (the "Landlord").
1. Premises The area comprising approximately 6,000 square feet
of rentable area at 1041 McNicholl Avenue,
Scarborough, Ontario, M1W 3W6.
2. Term The term of the lease shall be for three (3) years
commencing on June 1st, 1998 and expiring on May
31st, 2001.
3. Basic Rent Sixty Thousand dollars ($60,000) per annum, payable
monthly in advance in the amount of Five Thousand
($5,000) commencing on the Term Commencement Date.
4. Additional Rent No additional rent is payable as the above amount of
$5,000 includes property taxes, basic insurance,
utilities and the tenant's proportionate share of
operating costs.
5. Condition of The Tenant agrees to accept the premises in their
Leased Premises present "as is" condition.
6. Leasehold The Tenant shall be responsible for all future
Improvements leasehold improvements.
7. Parking Unlimited parking in the common parking lot at 1041
McNicholl Avenue is included in the rent.
/s/ Declan French /s/ C. Hoth
---------------------------- ------------------------------
for ICS for 1242541 Ontario Ltd.
May 20, 1998 May 26, 1998
---------------------------- ------------------------------
Date Date
<PAGE>
Exhibit 10.3(e)
LEASE
ARNON DEVELOPMENT CORPORATION LIMITED
as manager on behalf of the registered owner of the Lands
and
IT STAFFING LTD.
Premises: 6th floor
180 Elgin Street
Ottawa, ON K2P 2K3
<PAGE>
INDEX
ARTICLE 1 - THE LEASED PREMISES
1.01 - The Leased Premises
ARTICLE 2 - DEFINITIONS
2.01 - Definitions
ARTICLE 3 - TERM
3.01 - Term of Lease
ARTICLE 4 BASE RENT
4.01 - Base Rent
4.02 - Rent Payment
4.03 - Pro Rata Rent Payment
4.04 - Net Rent
ARTICLE 5 - Intentionally deleted
ARTICLE 6 - BUSINESS TAXES, ETC.
6.01 - Business Taxes
6.02 - Evidence of Payments
6.03 - Goods and Services Tax
ARTICLE 7 - TAXES
7.01 - Definitions
7.02 - Payment of Tax
ARTICLE 8 - ASSESSMENT
8.01 - Tenant's Right to Appeal Assessment
ARTICLE 9 - TIME FOR PAYMENT OF TAX
9.01 - lime for Payment of Taxo
ARTICLE 10 - OPERATING COSTS
10.01 - Operating Costs
ARTICLE 11 - ADDITIONAL RENT
11.01 - Additional Rent for Operating Costs
11.02 - Allowance on Account of Tax and Operating Costs
11.03 - Full Occupancy
ARTICLE 12 - RIGHT TO EXAMINE VOUCHERS
12.01 - Right to Examine Vouchers
ARTICLE 13 UTILITIES
13.01 - Utilities
13.02 - Meters
13.03 - Electrical Service
ARTICLE 14 - RELAMPING
14.01 - Relamping
ARTICLE 15 - TENANT REPAIR
15.01 - Repair of Building
15.02 - Repair of Leased Premises
15.03 - Tenant Maintenance
15.04 - Repair at End of Term
15.05 - Leased Premises to be Left Tidy
ARTICLE 16 - ASSIGNMENT, SUBLETTING, PARTING
WITH POSSESSION, ETC.
16.01 - Use and Possession
16.02 - Assignment, Subletting, Parting with Possession
16.03 - Notice to Landlord
16.04 - Corporate Tenant
ARTICLE 17 - RULES AND REGULATIONS
<PAGE>
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17.01 - Rules and Regulations
ARTICLE 18 - USE OF LEASED PREMISES
18.01 - Use of Leased Premises
18.02 - Increase In Insurance Premiums
18.03 - Prohibited Uses
ARTICLE 19 - TENANT'S INSURANCE
19.01 - Tenant's Insurance
ARTICLE 20 - CANCELLATION OF INSURANCE
20.01 - Cancellation of Insurance
ARTICLE 21 - OBSERVANCE OF LAW
21.01 - Observance of Law
ARTICLE 22 - WASTE AND NUISANCE
22.01 - Waste and Nuisance
ARTICLE 23 - ENTRY BY LANDLORD
23.01 - Entry by Landlord
ARTICLE 24 - INDEMNIFICATION OF LANDLORD
24.01 - Indemnification of Landlord
24.02 - Landlord's Consent
ARTICLE 25 - EXHIBITING PREMISES
25.01 - Exhibiting Premises
ARTICLE 26 - IMPROVEMENTS AND ALTERATIONS
26.01 - Improvements and Alterations
26.02 - Control of Building
ARTICLE 27 - PIPES, CONDUITS
27.01 - Pipes, Conduits
ARTICLE 28 - GLASS
28.01 - Glass
ARTICLE 29 - SIGNS AND ADVERTISING
29.01 - Signs and Advertising
ARTICLE 30 - NAME OF BUILDING
30.01 - Name of Building
ARTICLE 31 - SUBORDINATION AND ATTORNMENT
31.01 - Subordination
31.02 - Attornment
ARTICLE 32 - ACCEPTANCE OF PREMISES
32.01 - Acceptance of Premises
ARTICLE 33 - CERTIFICATES
33.01 - Certificates
ARTICLE 34 - QUIET ENJOYMENT
34.01 - Quiet Enjoyment
ARTICLE 35 - CLIMATE CONTROL
35.01 - Climate Control
ARTICLE 36 - SERVICES TO LEASED PREMISES
36.01 - Services to Leased Premises
ARTICLE 37 - ELEVATOR SERVICE
37.01 - Elevator Service
37.02 - Failure to Provide Elevator Service
<PAGE>
-3-
ARTICLE 38 - JANITORIAL SERVICES
38.01 - Janitorial Services
ARTICLE 39 - REPAIR AND MAINTENANCE
39.01 - Repair and Maintenance
ARTICLE 40 - TRADE FIXTURES
40.01 - Trade Fixtures
ARTICLE 41 - REMOVAL OF TRADE FIXTURES
41.01 - Removal of Trade Fixtures
ARTICLE 42 IMPROVEMENTS
42.01 - Improvements
ARTICLE 43 - TIME FOR REPAIR
43.01 - lime for Repair
ARTICLE 44 - LANDLORD'S INSURANCE
44.01 - Landlord's Insurance
ARTICLE 45 - FIRE, DAMAGE, ETC.
45.01 - Damage and Destruction to the Leased Premises
45.02 - Damage and Destruction to the Building
45.03 - Architect's Certificate
ARTICLE 46 - LOSS AND DAMAGE
46.01 - Loss and Damage
ARTICLE 47 - DELAYS
47.01 - Delays
ARTICLE 48 - DEFAULT
48.01 - Default
ARTICLE 49 - BANKRUPTCY, ETC.
49.01 - Bankruptcy, etc.
ARTICLE 50 - DISTRESS
50.01 - Distress
ARTICLE 51 - RIGHT OF RE-ENTRY
51.01 - Right of Re-entry
ARTICLE 52 - RIGHT OF TERMINATION
52.01 - Right of Termination
ARTICLE 53 - TO PAY RENT AND PERFORM COVENANTS
53.01 - To Pay Rent and Perform Covenants
ARTICLE 54 - REMEDYING BY LANDLORD, NON-PAYMENT
AND INTEREST
54.01 - Remedying by Landlord, Non-Payment and Interest
54.02 - Enforcement Expenses
54.03 - Cost to Remedy
ARTICLE 55 - NON-WAIVER
55.01 - Non-Waiver
ARTICLE 56 - OVERHOLDING
56.01 - Overholding
ARTICLE 57 - DIRECTORY BOARD
57.01 - Directory Board
ARTICLE 58 - ACCRUAL OF RENT
<PAGE>
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58.01 - Accrual of Rent
ARTICLE 59 - TRANSFER BY LANDLORD
59.01 - Transfer by Landlord
ARTICLE 60 - NOTICE
60.01 - Notice
60.02 - When Sufficiently Given
ARTICLE 61 - LAWS OF PROVINCE APPLY
61.01 - Laws of Province Apply
ARTICLE 62 - PAYMENT IN CANADIAN FUNDS
62.01 - Payment In Canadian Funds
ARTICLE 63 - LEASE ENTIRE AGREEMENT
63.01 - Lease Entire Agreement
ARTICLE 64 - BINDING EFFECT
64.01 - Binding Effect
ARTICLE 65 - REGISTRATION AND PLANNING ACT
65.01 - Registration and Planning Act
ARTICLE 66 - INTERPRETATION
66.01 - Interpretation
ARTICLE 67 - SEVERABLE
67.01 - Severable
ARTICLE 68 - CAPTIONS
68.01 - Captions
ARTICLE 69 - ARBITRATION
69.01 - Arbitration
ARTICLE 70 - LEASEHOLD IMPROVEMENT ALLOWANCE
70.01 - Leasehold Improvement Allowance
SCHEDULE 1 - THE LANDS
SCHEDULE 2 - OUTLINING THE LEASED PREMISES
SCHEDULE 3 - METHOD OF FLOOR MEASUREMENT
SCHEDULE 4 - RULES AND REGULATIONS
SCHEDULE 5 - BUILDING SERVICE & CLEANING
<PAGE>
-1-
THIS INDENTURE made as of the 10th day of September, 1998.
BETWEEN:
Arnon Development Corporation Limited
as manager on behalf of the owners of the Lands
(hereinafter called the "Landlord"),
OF THE FIRST PART;
AND:
IT Staffing Ltd.
(hereinafter called the "Tenant"),
OF THE SECOND PART.
WHEREAS the Landlord is the owner of a building known as Barrister
House (hereinafter called the "Building"), on lands municipally known as 180
Elgin Street in the City of Ottawa;
AND WHEREAS the Landlord has agreed to demise and lease to the
Tenant that part of the Building on the 6th floor which comprises a Usable Area
of the Leased Premises of 1,291.25 square feet, as shown crosshatched on the
plan attached hereto as Schedule "2", (which premises are hereinafter called the
"leased Premises") and which comprises a Rentable Area of the Leased Premises of
1,417 square feet but excluding therefrom any part of the exterior face of such
building and the Tenant has agreed to lease the same on the terms and conditions
hereinafter set forth;
The LEASED PREMISES
1.01 The Leased Premises. NOW THEREFORE THIS INDENTURE WITNESSES that in
consideration of the Rent, covenants and agreements hereinafter reserved and
contained on the part of the Tenant to be respectively paid, observed and
performed, the Landlord demises and leases the Leased Premises to the Tenant and
the Tenant demises and leases the Leased Premises from the Landlord, together
with the right of the Tenant, the Tenant's employees, agents, suppliers and
persons having business with the Tenant, to use in common with all others
entitled thereto, the public entrance doors, halls, stairways, passages,
elevators and lavatories in the Building, other than any of the foregoing if the
same is located on a floor In the Building occupied or subsequently occupied by
a single tenant or other party.
DEFINITIONS
2.01 Definitions. In this Indenture:
(a) the words "herein", "hereof", "hereby", "hereunder", "hereto",
"hereinafter" and similar expressions used in this Lease refer to
the whole of this Lease and not to just any particular paragraph,
section or other portion thereof, unless there is something in the
subject matter or context inconsistent therewith;
(b) "Business Day" means any of the days from Monday to Friday of each
week inclusive unless such day Is a holiday;
(c) "Commencement Date" means the 1st day of October 1998;
(d) "Lands" means the lands described in Schedule "1" hereto, together
with any other additions thereto as may be designated from time to
time by the Landlord in its sole discretion for use in connection
with the Building;
(e) "Lease" means this lease and includes the following schedules:
Schedule "1" - Legal Description
Schedule "2" - Outlining the Leased Premises
Schedule "3" - Method of Floor Measurement
<PAGE>
-2-
Schedule "4" - Rules and Regulations
Schedule "5" - Cleaning Specifications
(f) "Lease Year" means each period of twelve (12) consecutive calendar
months during the Term beginning on the 1st day of January, except
that:
(i) the first Lease Year during the Term shall begin on the
Commencement Date and may be a period less than twelve (12)
consecutive calendar months; and
(ii) the last Lease Year during the Term shall end on the last day
of the Term, and may be a period of less than twelve (12)
consecutive calendar months;
(g) "Normal Business Hours" means the hours from 7 A.M. to 6 P.M. on
Business Days;
(h) "Proportionate Share" means the fraction which has as its numerator
the Rentable Area of the Leased Premises and which has as its
denominator the Total Rentable Area of the Building, both determined
In accordance with Schedule "3" hereto;
(i) "Rent" means base rent, additional rent and unless expressly stated
to the contrary in this Lease, all other amounts payable by the
Tenant under this Lease or pursuant to any other obligation In
respect of the Leased Premises regardless of whether such amounts
are payable to the Landlord or to another party;
(j) "Rentable Area of the Leased Premises" shall be determined in
accordance with Schedule "3";
(k) "Term" means the period commencing on the Commencement Date and
expiring five (5) years thereafter on the 30th day of September
2003;
(l) "Total Rentable Area of the Building" shall be determined in
accordance with Schedule "3"; and
(m) "Usable Area of the Leased Premises" shall be determined in
accordance with Schedule "3".
TERM OF LEASE
3.01 Term of Lease. The Landlord hereby leases the Leased Premises to the Tenant
and the Tenant hereby leases the Leased Premises from the Landlord for and
during the Term unless sooner terminated in accordance with the provisions of
this Lease or otherwise at law.
BASE RENT
4.01 Base Rent. The Tenant shall pay to the Landlord without deduction, set-off
or abatement yearly and every year during the Term, and in addition to all other
amounts payable under the Lease, base rent as follows:
(a) During the period commencing on October 1, 1998 and ending on
September 30, 1999 base rent of twenty thousand nine hundred
fourteen dollars ninety-two cents ($20,914.92) per annum payable in
equal monthly installments of one thousand seven hundred forty-one
dollars ninety-one cents ($1,741.91) in advance, on the first day of
each and every month during this period; and
(b) During the period commencing on October 1, 1999 and ending on
September 30, 2003 base rent of twenty-two thousand three hundred
thirty-one dollars ninety-two cents ($22,331.92) per annum payable
in equal monthly installments of one thousand eight hundred sixty
dollars ninety-nine cents ($1,860.99) in advance, on the first day
of each and every month during this period.
4.02 Rent Payment. All Rent shall be paid to the Landlord at the address stated
in Section 60.01 or to such other party or place as the Landlord may designate
from time to time in writing.
<PAGE>
-3-
4.03 Pro Rata Rent Payment. If the Term commences on any day other than the
first or expires on any day other than the last day of a month, base rent and
additional rent for fractional months shall be adjusted pro rata based upon the
number of days In the relevant month.
4.04 Net Rent. The base rent reserved by this Lease shall be absolutely net to
the Landlord, so that this Lease shall yield net to the Landlord, the base rent
specified in Section 4.01 hereof, in each year during the Term of this Lease
without notice or demand, and free of any charges, assessments, impositions or
deductions of any kind. All Rent shall be paid by the Tenant without abatement,
deduction or set-off. Under no circumstances or conditions whether now existing
or hereafter arising whether beyond the present contemplation of the parties is
the Landlord to be expected or required to make any payment of any kind
whatsoever or to be under any other obligation or liability except as herein
otherwise expressly set forth. All expenses and obligations of every kind and
nature whatsoever relating to the Leased Premises, or relating to the Lands or
Building as allocated by the Landlord to the Leased Premises, which arise or
become due during or out of the Term of this Lease shall be paid by the Tenant
and the Landlord shall be indemnified and saved harmless by the Tenant from all
costs of same.
5.01 This section has been intentionally deleted.
TENANT'S COVENANTS
THE TENANT COVENANTS WITH THE LANDLORD AS FOLLOWS:
6.01 Business Taxes, Etc. The Tenant shall pay, as additional rent, all
business and other taxes, charges, rates, duties and assessments levied, rated,
imposed, charged or assessed against or in respect of the Tenant's occupancy of
the Leased Premises or in respect of the personal property, trade fixtures,
furniture, leasehold improvements and facilities of the Tenant or the business
or income of the Tenant on and from the Leased Premises if, as and when the same
become due, and will indemnify and keep indemnified the Landlord from and
against all payment of all loss, costs, charges and expenses occasioned by or
arising from any and all taxes.
6.02 Evidence of Payments. The Tenant further covenants and agrees that upon the
written request of the Landlord the Tenant will promptly deliver to it for
inspection, receipts for payment of all taxes, rates, duties, assessments and
other charges in respect of all improvements, equipment and facilities of the
Tenant on or in the Leased Premises which were due and payable up to one (1)
month prior to such request and In any event will furnish to the Landlord if
requested by the Landlord evidence of payments satisfactory to the Landlord
before the 21st day of January in each year covering such payments for the
preceding year.
6.03 Goods and Services Tax. The Tenant shall also pay in each Lease Year during
the Term as additional rent any business transfer tax, value-added tax, sales
tax, goods and services tax or any tax levied, rated, charged or assessed on or
in respect of Rent, whether in existence as at the Commencement Date or not, and
whether levied, rated, charged or assessed against the Landlord, the Tenant or
any other third party, including without limitation, the goods and services tax
payable under Part IX of the Excise Tax Act, as amended from time to time. Any
such tax imposed, or any change which occurs in the imposition of such tax as a
result of any budgetary pronouncement, legislation, ruling or any judicial or
quasi-judicial decision imposing a tax or affecting the rate of tax or the
status of the Landlord or Tenant shall be borne by the Tenant. The Tenant shall
pay all such taxes to either the lawful taxing authority or to the Landlord, as
the Landlord may direct. All such payments shall be made prior to the date that
the same shall become due and payable and any interest and any penalties
assessed as a result of any default in or late payment of same shall be the sole
responsibility of the Tenant. Notwithstanding any other provision of this Lease,
the amount payable by the Tenant under this Section 6.03 shall be deemed not to
be Rent but the Landlord shall have all of the same remedies for and rights of
recovery of such amount as it has for the recovery of Rent under this Lease or
otherwise.
DEFINITIONS
7.01 Definitions. For the purpose of Sections 7.02, 8.01, 9.01, 11.02 and 11.03
of this Lease:
"Tax" means:
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(a) all taxes, rates, duties, levies and assessments whatsoever, whether
municipal, parliamentary or otherwise assessed against the Lands,
Building or any part thereof or upon the Landlord in respect
thereof, including taxes for education and all taxes, rates, duties,
levies and assessments for local improvements, commercial
concentration levies, density and other similar levies, including
any, and all taxes which may in future be levied in addition to or
in lieu of any of the foregoing, including without limiting the
generality of the foregoing, all school taxes, but excluding such
taxes as income, profits or excess profits taxes assessed upon the
income of the Landlord but only to the extent that such taxes are
not levied in lieu of taxes, rates, duties and assessments against
the Lands, the Building or any part thereof or upon the Landlord in
respect thereof; and
(b) the costs and expenses incurred for consulting, appraisal, legal and
other fees and expenses to the extent they are incurred in an
attempt to minimize, allocate or reduce amounts mentioned in
subsection 7.01(a).
7.02 Payment of Tax. The Tenant shall pay to the Landlord as additional rent
that part of Tax separately assessed, charged or levied upon the Leased
Premises. In addition, the Tenant shall also pay its Proportionate Share of that
part of Tax assessed, charged or levied upon the Lands and Building or upon the
Landlord in respect of the Lands and Building to the extent only that such Tax
has not been included in the Tax separately assessed, charged or levied upon the
Leased Premises or upon other premises in the Building set aside from time to
time by the Landlord for lease as office or retail space. If Tax is not
separately assessed, charged or levied upon the Leased Premises, the Tenant
shall pay to the Landlord as additional rent its Proportionate Share of all Tax.
The Tenant shall pay its share of Tax (as set forth above) to the Landlord at
the address stated in section 60.01 or to such other party as the Landlord may
designate from time to time in writing, at the times and in the manner set forth
in section 11.02 of this Lease.
ASSESSMENT
8.01 Tenant's Right to Appeal Assessment. The Tenant shall, with the prior
written consent of the Landlord, be entitled at any time and from time to time
at its own cost and expense to appeal or apply for the reduction of any
assessment of Tax imposed or levied on the Leased Premises and the Landlord
shall co-operate in and support such appeal or application, and the Tenant shall
indemnify the Landlord from its costs in connection with any such appeal or
application. The Tenant shall from the effective date of the reassessment until
such time as the Tax is next reassessed on the Leased Premises, the Building or
the Lands, as the case may be, be solely responsible and shall indemnity and
save the Landlord harmless from any increase in the Tax assessed, imposed or
levied on the Leased Premises, the Building or the Lands, as the case may be,
arising directly or indirectly as a result of the Tenant's application or
appeal, notwithstanding such costs and Tax may be incurred or arise after the
expiry of the Term; it being agreed and understood that the Tenant's obligation
to indemnify shall survive the expiry or earlier termination of this Lease.
Notwithstanding the foregoing, the Tenant's obligation under this Section 8.01
to indemnify the Landlord for any increase in Tax shall be reduced to the extent
the Landlord may (but shall not be obliged to) collect the increase in Tax from
other tenants of the Building.
TIME FOR PAYMENT OF TAX
9.01 Time for Payment of Tax. The Landlord shall pay, on behalf of the Tenant,
the Tenant's share of Tax as set out in this Lease after the timely receipt by
the Landlord from the Tenant of funds sufficient to pay the Tenant's share of
the Tax as set out in this Lease.
OPERATING COSTS
10.01 Operating Costs. For the purpose of this Lease:
(a) (1) "Operating Costs" means the total amount, without duplication,
of all costs, obligations and expenses of every kind and
nature whatsoever incurred by the Landlord or others on behalf
of the Landlord for climate control, maintaining, operating,
managing, administrating, insuring, improving, replacing and
repairing the Building and the Lands including, without
limiting the generality of the foregoing,
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(i) Capital Tax as defined In Section 10.01(b) hereof;
(ii) the aggregate of the amount paid or payable for all fuel used
in heating or for other purposes;
(iii) the amount paid or payable for all hot and cold water;
(iv) the amount paid or payable for all labour and/or wages and
other payments made to janitors, caretakers, site personnel
and other employees (including wages of the building manager
and other supervisory personnel) involved in the maintenance,
cleaning, repair and operation of the Building and the Lands
and all contributions and premiums in respect of the foregoing
persons, including without limitation, all fringe benefits,
unemployment and workers' compensation insurance, pension plan
contributions, employer health tax and similar premiums and
contributions;
(v) postage, paper, stationery and photocopying charges and other
administrative disbursements;
(vi) the total charges of any contractors employed in the
operation, repair. care, maintenance and cleaning of the
Building and the Lands;
(vii) the amount paid or payable for the rental or purchase of any
equipment and supplies used by the Landlord in respect of the
Building and the Lands (including without limitation all
supplies and necessities which are occasioned by wear and tear
such as relamping as more particularly described in Section
14.01 hereof);
(viii) the cost of operating, maintaining, improving, repairing and
replacing the heating, ventilating and air-conditioning
systems serving the Building, and includes without limitation,
the cost of fuel, electricity, repair and replacement
allowances, operation of air distribution and heating and
cooling equipment, labour, materials, repairs, maintenance and
operation of the area occupied by a central climate control
system or other service or facility used with respect to
climate control, maintenance, servicing and other such costs;
provided that if, in the opinion of the Landlord, acting
reasonably, such costs are properly considered to be capital
in nature then such costs shall be amortized over a reasonable
period of time, as determined by the Landlord, acting
reasonably, but in no event shall such period exceed ten (10)
years;
(ix) telephone costs for security and administrative purposes;
(x) all utility costs including without limitation all electrical,
water, sewer and gas charges;
(xi) the amount paid or payable for bookkeeping and audit charges,
and accounting services to compute the rents and charges
payable by tenants of the Building;
(xii) the cost of operating, repairing, replacing, improving and
maintaining the Building's elevators;
(xiii) the cost of porters, guards and other protection services;
(xiv) the cost of general maintenance and repairs to the plant and
equipment supplying climate control;
(xv) the cost of all insurance taken out by the Landlord, including
without limitation, that provided for in Section 44.01 hereof
and including the cost of any deductible amount paid by the
Landlord in connection with a claim under its insurance;
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(xvi) the cost of snow clearance and removal, lawn and garden
maintenance, maintenance, repair and improvement of the
grounds and parking lot, cleaning, garbage and waste
collection and disposal;
(xvii) the cost of repairing, decorating, maintaining and operating
the Building and the Lands, and such improvements,
replacements and modifications thereto, whether capital or
not, incurred to reduce Operating Costs, to provide energy
conservation equipment or systems or life safety systems, to
improve the operation of the Building or the Lands, or to
maintain the stature of the Building as a first class
building. or incurred to replace machinery or equipment which
by its nature requires periodic replacement; provided that if,
in the opinion of the Landlord, acting reasonably, such costs
are properly considered to be capital in nature then such
costs shall be amortized over a reasonable period of time, as
reasonably determined by the Landlord, but in no event shall
such period exceed ten (10) years;
(xviii) the business taxes assessed, charged or levied upon the
common areas and facilities of the Lands and Building, or any
part thereof. including without limiting the generality of the
foregoing, the parking areas serving the Building;
(xix) the cost of window cleaning;
(xx) interest calculated at one (1) percentage point above the
average daily prime bank commercial lending rate charged
during the Lease Year by any Canadian chartered bank
designated from time to time by the Landlord upon the
unamortized balance of the costs referred to in subparagraphs
10.01(a)(1)(viii) and (xvii); and
(xxi) Goods and Services Tax payable by the Landlord pursuant to
Part IX of the Excise Tax Act, as amended from time to time,
on the purchase of goods and services included in the
calculation of Operating Costs to the extent that the Landlord
has not recovered an input tax credit or refund in respect of
the same.
(a) (2) Only the following costs shall be excluded from the
calculation of "Operating Costs":
(i) interest payments on debt made by the Landlord, except where
such debt was incurred to pay Operating Costs or any component
thereof;
(ii) capital retirement of debt made by the Landlord, except where
such debt was incurred to pay Operating Costs or any component
thereof;
(iii) depreciation claimed or taken by the Landlord;
(iv) expenses incurred by the Landlord in respect of tenants'
leasehold improvements;
(v) repairs and replacements to the extent that the cost of the
same are recovered by the Landlord under original construction
warranties;
(vi) costs attributed to and recovered from the Tenant by the
Landlord under subsection 11.03(b);
(vii) costs included in the calculation of Operating Costs to the
extent such costs are recovered by the Landlord from its
insurance proceeds, net of all costs incurred by the Landlord
to recover the same;
(viii) the sum of those utility charges for which the Tenant has been
separately invoiced or billed pursuant to Section 13.01
provided such amounts have been paid by the Tenant; and
(ix) if the Tenant has pursuant to Section 13.01 been separately
invoiced or billed for the total cost of a utility used in or
supplied to the whole of the
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Leased Premises and such amount has been paid by the Tenant,
the cost of such utility used in or supplied to other leasable
premises in the Building (as designated from time to time by
the Landlord for lease as office or retail premises) for the
period that the Tenant is so separately invoiced or billed.
(b) "Capital Tax" means all taxes and excises imposed upon the Landlord which
are measured or based in whole or in part upon the capital employed by the
Landlord and includes without limiting the generality of the foregoing the
amount of any capital or place of business tax and any large corporations
tax, in either case, levied or imposed by any municipal, provincial or
federal government or other applicable taxing authority against the
Landlord with respect to the Landlord's taxable capital.
ADDITIONAL RENT
11.01 Additional Rent for Operating Costs. The Tenant shall pay its
Proportionate Share of the Operating Costs to the Landlord as additional rent
during the Term at the address stated In Section 60.01 or to such other party or
place as the Landlord may designate from time to time in writing and at the
times and in the manner hereinafter set forth in Section 11.02 of this Lease.
The Tenant shall pay to the Landlord at each of the times a payment of Rent is
due a management fee equal to three and one-half percent (3.5%) of the
installment of Rent then due.
11.02 Allowance on Account of Tax and Operating Costs. In addition to the base
rent, the Tenant shall pay to the Landlord as additional rent, in advance, on
the first (1st) day of each and every month during the Term, in equal
consecutive monthly instalments, an amount on account of Tax and Operating Costs
for each Lease Year based upon the Tax and Operating Costs for the previous
Lease Year plus projected increases, if any, in such Tax and Operating Costs as
estimated by the Landlord. If, during any Lease Year the Landlord determines
that an estimate previously given by it in respect of that Lease Year is
insufficient (including, without limitation, an estimate given by the Landlord
pursuant to Section 13.01), the Landlord may adjust such estimate whereupon it
shall notify the Tenant of such readjustment and the Tenant shall promptly pay
to the Landlord as additional rent the amount of the deficiency for the period
beginning the first day of that Lease Year up to and including the last day of
the month in which the Landlord so notifies the Tenant of the adjusted estimate.
The Tenant shall pay to the Landlord on account of Tax and Operating Costs the
estimated amount, as adjusted, in advance, in equal consecutive monthly
Instalments on the first (1st) day of each and every month until such time as
the Landlord next adjusts the estimated amount.
During calendar year 1998 the amount to be charged to the Tenant on
account of Tax and Operating Costs will be estimated to be $13.73 per square
foot per annum of Rentable Area of the Leased Premises.
At the expiry of each Lease Year. upon the determination by the
Landlord of the Tax and Operating Costs for that Lease Year, the Landlord shall
furnish to the Tenant a statement of those costs. If the amount paid by the
Tenant on account of Tax or Operating Costs during the Lease Year exceeds the
amount of the Tenant's Proportionate Share of Operating Costs or its liability
for Tax, as the case may be, for the Lease Year as set forth in the Landlord's
statement, the Landlord shall retain the excess as a deposit and credit the same
to the Tenant firstly on account of any amount owing by the Tenant to the
Landlord whether in consequence of any default of the Tenant under this Lease or
otherwise, and then on account of the Tenant's liability for any future Tax or
its Proportionate Share of Operating Costs due or accruing due hereunder. If the
amount paid by the Tenant on account of Tax or Operating Costs for the Lease
Year is less than the amount of the Tenant's Proportionate Share of Operating
Costs or its liability for Tax, as the case may be, as set forth in the
Landlord's statement, the Tenant shall pay forthwith to the Landlord the amount
of the deficiency.
Notwithstanding the foregoing, if the Landlord is required to pay
any amount, which it is entitled to collect, in whole or in part, from the
Tenant, more frequently than required as at the Commencement Date or if the
Landlord is required to prepay any such amount, in whole or in part, or elects
to pay any such amount in something other than equal monthly instalments, the
Tenant shall pay to the Landlord its share of such amount, calculated In
accordance with this Lease, forthwith upon demand.
11.03 Full Occupancy. (a) If in any Lease Year less than one hundred percent
(100%) of the Total Rentable Area of the Building has been occupied by tenants
carrying on business for the whole of such Lease Year, the amount of the
Operating Costs for such Lease Year may be
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adjusted by the Landlord, acting reasonably, to an amount which reflects what
the amount of the Operating Costs would be if the Building had been fully
occupied by tenants carrying on business for the whole of such Lease Year. Only
those Items of Operating Costs, the cost of which would have been increased if
the Building had been fully occupied by tenants carrying on business, shall be
adjusted; those items shall include but are not limited to amounts payable for
fuel, climate control, the supply of hot and cold water, cleaning, supplies and
the cost of accounting services to compute the rents and charges payable by
tenants of the Building.
(b) In addition to the foregoing and notwithstanding anything else
contained herein, any costs incurred or to be incurred whether by the Landlord
or others on behalf of the Landlord, in maintaining, managing, administrating,
repairing, improving and operating the Building and the Lands, including without
limitation, utilities and any components of Operating Costs and Tax, may be
attributed by the Landlord, in its sole discretion acting reasonably, to one or
more particular tenants of the Building in accordance with reasonable practices
and on a basis consistent with the nature of the particular costs being
attributed, the relevant rates of demand and consumption of the matter to which
the costs relate and the nature of any particular tenant's business. The
Landlord shall notify the Tenant of those costs attributed to it by the Landlord
and the Tenant shall promptly pay to the Landlord as additional rent, all such
costs so attributed to it for the period ending on the date such costs are so
attributed by the Landlord. Thereafter, the Tenant shall continue to pay to the
Landlord as additional rent on account of such costs an amount equal to the
Landlord's estimate of such costs, in advance, in equal monthly instalments on
the first day of each month thereafter. The Landlord reserves the right to
adjust from time to time the costs attributed by it to the Tenant and its
estimate of such costs whereupon the Tenant shall promptly pay to the Landlord,
as additional rent, the amount of the deficiency and thereafter the estimated
amount, as adjusted, in advance, in equal monthly instalments on the first day
of each and every month until such time as the Landlord next adjusts the
estimated amount.
(c) In addition to the foregoing and notwithstanding anything to the
contrary in this Lease, the Landlord may in its sole discretion acting
reasonably, (i) vary the denominator for determining the Tenant's Proportionate
Share of Operating Costs or Tax, as the case may be, or any components thereof,
or (ii) adjust the amount of Operating Costs or Tax, as the case may be or any
components thereof, or do both (i) and (ii), so as to provide for the equitable
allocation of Operating Costs and Tax, and any components thereof among the
tenants of the Building. Without limiting the generality of the foregoing. the
Landlord may, among other things, take into account the following: (i) if
pursuant to its lease or otherwise by arrangement with the Landlord, the Tenant
or any other tenant of the Building pays to the Landlord or another party the
cost of any goods or services or any component of Tax the cost of which would
otherwise be included in the calculation of Operating Costs or Tax; and (ii) if
any goods or services the cost of which is included in the calculation of
Operating Costs benefit any tenants of the Building to a materially greater or
lesser extent than the Tenant.
(d) In addition to the foregoing and notwithstanding anything to the
contrary in this Lease, if the Term commences on any day other than January 1,
or expires on any day other than December 31, the Tenant's share of Tax and its
Proportionate Share of Operating Costs for the first Lease Year and the last
Lease Year, as the case may be, shall be calculated as if each such Lease Year
was comprised of a full calendar year and otherwise in accordance with
paragraphs 11.03(a), (b) and (c), except that the Tax and Operating Costs
payable by the Tenant for the first Lease Year and the last Lease Year shall be
adjusted by multiplying the Tenant's share of Tax and its Proportionate Share of
Operating Costs that would have been payable by the Tenant had such Lease Year
been comprised of a full calendar year, by a fraction the numerator of which
shall be the number of days comprising the first Lease Year or the last Lease
Year, as the case may be, and the denominator of which shall be 365.
RIGHT TO EXAMINE VOUCHERS
12.01 Right to Examine Vouchers. The Tenant may examine during Normal Business
Hours any invoices, receipts, cancelled cheques, vouchers or other instruments
used to support any statement of Operating Costs or Tax on reasonable prior
written notice to the Landlord. If the Tenant disagrees with any statement of
Operating Costs or Tax it shall nevertheless pay the Landlord in accordance with
that statement, but it may, within thirty (30) days of the Landlord delivering
its statement of Operating Costs or Tax, as the case may be, give written notice
to the Landlord of the item or items disagreed with, and the Landlord and the
Tenant shall thereupon negotiate in good faith with a view to resolving that
disagreement. If the Landlord and the Tenant are unable to resolve that
disagreement by negotiation, either party may require that the question in
disagreement be settled by arbitration in accordance with Section 69.01, except
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that notwithstanding any provision in section 69.01 to the contrary, if the
Operating Costs or Tax (as the case may be) for such Lease Year, as determined
by the arbitration, are not reduced by at least five percent (5%), the Tenant
shall forthwith reimburse the Landlord for all costs reasonably incurred by the
Landlord in connection with such arbitration. If the Tenant fails to dispute any
Landlord's statement of Operating Costs or Tax within the time and in the manner
provided above, the Tenant shall be deemed to accept that statement and shall
forfeit its right to dispute the statement or to claim an adjustment in that
regard, and the Tenant acknowledges and agrees that this Section may be pleaded
as an estoppel against the Tenant in any action or arbitration brought by the
Tenant to dispute any Landlord's statement of Operating Costs or Tax.
UTILITIES
13.01 Utilities. The Tenant shall pay for the cost of all utilities used in or
supplied to the Leased Premises, including without limitation water, gas and
electricity, for which the Tenant receives a separate invoice or bill. If the
invoice or bill is from the Landlord, the amount of such invoice or bill shall
be paid to the Landlord forthwith, provided that the Landlord may, by notice to
the Tenant, elect to estimate the amount for which the Tenant will be liable for
utilities supplied to or used in the Leased Premises for a Lease Year, in which
case the Tenant shall pay to the Landlord the estimated amount in equal monthly
instalments on the first (1st) day of each and every month until such time as
the Landlord adjusts or readjusts the estimated amount. If the invoice or bill
is from a utility company, the Tenant shall pay the amount of such invoice or
bill to the utility company before its due date and shall provide the Landlord
with copies of all invoices together with proof of payment. The cost of those
utilities used or supplied to the Leased Premises for which the Tenant does not
receive a separate invoice or bill from either the Landlord or the utility
company shall be included in the calculation of Operating Costs and be paid by
the Tenant in accordance with the relevant provisions of this Lease, if the
Tenant fails to provide the Landlord with copies of all invoices and bills (as
provided above) or fails to satisfy all such invoices and bills on or before
their due dates, the Landlord, in addition to any other rights it may have under
this Lease or at law, may at its sole option discontinue the supply of utilities
to the Leased Premises, without any liability whatsoever to the Tenant.
13.02 Meters. The Tenant covenants to pay for the cost of metering utilities
used in or supplied to the Leased Premises as may be requested by the Tenant or
the Landlord, which costs shall, without limiting the generality of the
foregoing, include all costs incurred to install meters and check meters for the
purpose of measuring demand and consumption of utilities used in or supplied to
the Leased Premises.
13.03 Electrical Service. The Tenant agrees that it will not effect changes to
the Building's electrical service or connect any equipment which might overload
or damage that service.
RELAMPING
14.01 Relamping. The Landlord shall have the exclusive right to replace light
bulbs, tubes and ballasts contained in fixtures forming part of the ceiling
system of the Building In the Leased Premises, and all costs so incurred shall
be included in the term Operating Costs; provided however that the Landlord
shall have the right, in its absolute discretion to charge the Tenant directly
for all costs relating to such relamping of the Leased Premises if, in the
Landlord's reasonable opinion, the cost and frequency of same in respect of the
Leased Premises is excessive, such costs to be paid by the Tenant within thirty
(30) days after the Landlord gives to the Tenant a statement of those costs. At
its option, exercisable at any time and from time to time, the Landlord may
(a) carry out the replacement as and when required; or
(b) carry out a program of periodic replacement of lamps and ballasts on
a group basis in accordance with good practice.
TENANT REPAIR
15.01 Repair of Building. If the Building or any part thereof, including without
limitation the roof, structure, exterior walls, elevators, engines, pipes and
apparatus used for the purpose of climate control of the Building or operating
the elevators, or if the water pipes, drainage pipes, electric lighting or other
equipment of the Building requires repair or becomes damaged or destroyed
through the negligence, carelessness, misuse, or wrongful act or omission of the
Tenant, its servants, employees or anyone permitted by it to be in the Building
or for whom the
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Tenant Is responsible at law, or through him or them in any way stopping up or
injuring the heating apparatus, elevators, water pipes, drainage pipes or other
equipment or part of the Building, the cost of any such repairs, replacements or
alterations caused by that negligence, carelessness, misuse, or wrongful act or
omission by any such entities shall be borne by the Tenant who shall pay the
same to the Landlord as additional rent forthwith on demand.
15.02 Repair of Leased Premises. The Tenant shall maintain and repair the Leased
Premises in first-class order and condition (excluding only those repairs which
the Landlord is obligated to effect pursuant to Sections 39.01 and 45.01)
including, without limiting the generality of the foregoing, all interior
partitions, fixtures and leasehold improvements in the Leased Premises
(including without limitation, improvements and alterations made by or on behalf
of all prior tenants and occupants of the Leased Premises) but excluding janitor
and equipment closets and shafts within the Leased Premises designated by the
Landlord for use by it in connection with the operation and maintenance of the
Building. The Tenant shall also maintain and repair in a first-class order and
condition all electrical and telephone outlets and conduits and all fixtures and
shelving within the Leased Premises, and special mechanical and electrical
equipment, plumbing, electrical and sewage systems not a normal part of the
Building and installed by or for the Tenant or any prior tenant or occupant of
the Leased Premises (hereinafter referred to as the "Tenant's Specialized
Equipment and Systems") wherever situate. The Landlord may enter and view the
state of repair and the Tenant shall repair according to notice in writing,
subject to the foregoing exceptions.
15.03 Tenant Maintenance. The Tenant shall keep the Leased Premises in a clean
and sanitary condition conforming to all municipal by-laws, ordinances and laws
affecting the Leased Premises and shall promptly comply with all requirements of
the local Board of Health, Police and Fire Departments and municipal authorities
respecting the manner in which it uses or maintains the Leased Premises.
15.04 Repair At End of Term. At the end of the Term or sooner termination of the
Term, the Tenant shall leave the Leased Premises in good repair as aforesaid and
in a state of broom cleanliness, subject only to the exceptions set forth in
Sections 15.02.
15.05 Leased Premises To Be Left Tidy. The Tenant agrees at the end of each
Business Day to leave the Leased Premises in a reasonably tidy condition so as
not to impede the Landlord's cleaning service hereinafter referred to.
ASSIGNMENT, SUBLETTING, PARTING WITH POSSESSION, ETC.
16.01 Use and Possession. The Tenant shall not permit any part of the Leased
Premises to be used or occupied by any persons other than the Tenant, any
sub-tenants permitted under Section 16.02 and 16.03, and the employees of the
Tenant and any such permitted sub-tenant, or permit any part of the Leased
Premises to be used or occupied by any licensee or concessionaire, or permit any
person to be upon the Leased Premises other than the Tenant, such permitted
sub-tenants, and their respective employees, customers and others having lawful
business with them.
16.02 Assignment, Subletting, Parting with Possession. The Tenant shall not
assign or sublet or part with the possession of all or part of the Leased
Premises without leave, which leave shall not be unreasonably withheld; provided
however, such leave to any assignment or subletting (or any subsequent
assignment or subletting) shall not relieve the Tenant from the full and
faithful observance and performance of all of the Tenant's covenants, terms and
conditions herein contained, including without limitation, the payment of Rent.
The Tenant shall not advertise the whole or any part of the Leased Premises or
the Lease for the purpose of an assignment or subletting and shall not print,
publish, post, display or broadcast any notice or advertisement to that effect
and shall not permit any broker or other person to do any of the foregoing.
Without in any way limiting the reasons for which the Landlord may refuse to
grant its consent to an assignment or sublet, it shall not be considered
unreasonable for the Landlord to take into account the following factors:
restrictive clauses contained in other leases of tenants in the Building; the
financial background and business history of the proposed assignee or subtenant;
and the leasing program for the Building.
16.03 Notice to the Landlord. Provided further and notwithstanding anything
hereinbefore set forth:
(a) If at the time of any proposed assignment or subletting and from time
to time, the Tenant proposes to assign this Lease or sublet the Leased Premises,
the Tenant shall send to
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the Landlord a notice setting forth, the name and address of the proposed
assignee or subtenant and such information as to the nature of its business and
its financial responsibility and standing as the Landlord may reasonably require
and as is within the knowledge or possession of the Tenant or is available to
the Tenant on reasonable inquiry, and all the terms and conditions of the
proposed assignment or sublease, as the case may be. The Landlord, within
fourteen (14) days of receipt of such notice from the Tenant shall inform the
Tenant whether it consents or does not consent. In addition, the Landlord,
within fourteen (14) days of receipt of such notice from the Tenant, may elect
to terminate this Lease by giving to the Tenant notice of its intention to so
terminate, fixing as the date of termination either (A) the date the sub-tenant
or assignee proposes to occupy the Leased Premises, or (B) such other date as
the Landlord, in its discretion may determine, provided such date is not later
than the date specified in (A) above, and the Tenant shall deliver up vacant
possession of the Leased Premises on such date of termination and the Lease
shall terminate and come to an end and adjustments shall be made in Rent, taxes
and other charges payable by any party under this Lease. If the Landlord fails
to inform the Tenant that it withholds its consent or fails to elect to
terminate the Lease within the aforementioned time periods then the Tenant may
not assign or sublet such space to the proposed assignee or sub-tenant and the
Lease shall continue in full force and effect.
(b) The Tenant shall have the right without the consent of the Landlord,
to assign or sublet this Lease to a company incorporated by the Tenant provided
that the Tenant owns or beneficially controls all the issued and outstanding
shares in the capital stock of the company. Such assignment or subletting shall
however not relieve the Tenant from its obligations for the payment of Rent and
for the full and faithful observance and performance of all the covenants, terms
and conditions herein contained.
(c) The Landlord shall not be obligated to recognize any assignment or
subletting unless, within ten (10) days after the execution thereof, the Tenant
delivers to the Landlord a duplicate original of such assignment or such sublet
agreement duly executed by the assignee or sublessee and the Tenant, in form
satisfactory to the Landlord, provided that if it is an assignment such
instrument shall contain, among other things, provisions whereby such assignee
shall assume liability for, and the Tenant shall remain liable for, the Tenant's
obligations for the payment of Rent and for the full and faithful observance and
performance of the terms and conditions contained in this Lease. And further
provided that if it is a sublet agreement, such instrument shall contain, among
other things, provisions whereby such subtenant shall assume liability for, and
the Tenant shall remain liable for, the Tenant's obligations for the payment of
Rent and for the full and faithful performance of the terms and conditions
contained in this Lease insofar as they apply to the sublet premises, mutatis
mutandis. Additionally, the subtenant shall waive its rights under subsections
32(2), 39(2) and Section 21 of the Landlord and Tenant Act, as amended or
replaced from time to time.
16.04 Corporate Tenant.
(a) If the Tenant is a corporation and if at any time during the Term, any
part or all, of the corporate shares or voting rights of shareholders shall be
transferred by sale, assignment, bequest, inheritance, trust, operation of law
or other disposition, or treasury shares be issued so as to result in a change
in the effective control of the Tenant, then and so often as a change of
effective control shall occur, the Tenant shall immediately notify the Landlord
in writing of each such change. If the Tenant amalgamates with another
corporation resulting in an amalgamated corporation, effective control of which
is different from that of the Tenant prior to such amalgamation, then and so
often as such an amalgamation shall occur, the Tenant shall immediately notify
the Landlord in writing of each such amalgamation. The Landlord shall have the
right to terminate this Lease and the Term at any time after any such change in
the effective control of the corporation or any such amalgamation resulting in a
change of effective control, by giving the Tenant sixty (60) days prior written
notice of such termination.
(b) The Tenant shall, upon request of the Landlord, make available to the
Landlord for inspection or copying or both, all books and records of the Tenant
which, alone or with other data, show the applicability or inapplicability of
paragraph 16.03(b) or paragraph 16.04(a). If the Tenant shall, upon request of
the Landlord, fail or refuse to furnish to the Landlord all requested books,
records and data verified by an affidavit of an officer or director of the
Tenant or other credible person, then the Landlord may terminate this Lease by
giving the Tenant sixty (60) days prior written notice of such termination.
(c) Section 16.04 shall not apply to the Tenant if on and from the date of
this Lease the Tenant is a corporation whose shares are listed on a recognized
security exchange.
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RULES AND REGULATIONS
17.01 Rules and Regulations. The Tenant and the Tenant's employees and all
persons visiting and doing business with the Tenant in the Leased Premises shall
be bound by and shall observe the Rules and Regulations attached to this Lease
as Schedule "4" and such further and other rules and regulations made hereafter
by the Landlord relating to the Building or the Leased Premises and all such
rules and regulations shall be deemed to be incorporated in and form part of
this Lease.
USE OF THE LEASED PREMISES
18.01 Use of Leased Premises. The Leased Premises shall be used for the purposes
of normal office use in a manner befitting a first class building and for no
other purpose; provided such use shall comply with the terms of this Lease and
all applicable laws, by-laws, regulations or other governmental ordinances from
time to time in existence.
18.02 Increase in Insurance Premiums. The Tenant agrees that it will not keep,
use, sell or offer for sale In or upon the Leased Premises any article which may
be prohibited by any insurance policy in force from time to time covering the
Building. In the event the Tenant's occupancy or conduct of business in, or on
the Leased Premises, whether or not the Landlord has consented to the same,
results in any increase in premiums for the insurance carried from time to time
by the Landlord with respect to the Building, the Tenant shall pay any such
increase in premiums as additional rent within ten (10) days after bills for
such additional premiums shall be given by the Landlord to the Tenant. In
determining whether increased premiums are a result of the Tenant's use or
occupancy of the Leased Premises, a schedule issued by the organization
computing the insurance rate of the Building showing the various components of
such rate, shall be conclusive evidence of the several items and charges which
make up such rate. The Tenant shall promptly comply with all reasonable
requirements of the insurer now or hereafter in effect relating to the Leased
Premises.
18.03 Prohibited Uses. Without limiting the generality of Sections 18.01 and
18.02, the Tenant shall not use or permit the Leased Premises to be used for the
carrying on of any business or activity which would tend to lower the first
class character of the Building or which could be reasonably expected to
increase the number of persons entering and leaving the Leased Premises from
that as of the Commencement Date.
TENANT'S INSURANCE
19.01 Tenant's Insurance.
(a) The Tenant shall during any rent free period and the entire Term
hereof, at its sole cost and expense, take out and keep in full force and effect
the following insurance protecting the interests of the Tenant, the Landlord and
the mortgagees of the Landlord as their respective interests may appear:
(i) insurance upon property of every description and kind owned by the
Tenant, installed by or on behalf of the Tenant or for which the
Tenant is legally liable (and which is located within the Building),
including without limitation furniture, fittings, installations,
alterations, additions, partitions, fixtures and anything in the
nature of a leasehold improvement; such insurance to be in an amount
not less than ninety (90%) percent of the full replacement cost
thereof, with coverage against, at least, the perils of fire and
standard extended coverage including sprinkler leakages (when
applicable), earthquake, flood and collapse and if there is a
dispute as to the amount which comprises full replacement cost, the
decision of the Landlord or the mortgagees of the Landlord shall be
conclusive;
(ii) business interruption insurance in such amounts as will reimburse
the Tenant for a period of not less than two (2) years for direct
and indirect loss of earnings attributable to all perils commonly
insured against by prudent tenants or attributable to prevention of
access to the Leased Premises or to the Building as a result of such
perils; in the event the Tenant fails to provide aforesaid insurance
then the Tenant shall be deemed to have given to the Landlord a
waiver of claim as it pertains to any business interruption;
(iii) public liability and property damage insurance including without
limitation
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personal Injury liability, contractual liability, non-owned
automobile liability and owners' and contractors' protective
insurance coverage with respect to the Leased Premises and the
Tenant's use of any part of the Building and which coverage shall
include the activities and operations conducted by the Tenant and
any other person on the Leased Premises; such policies shall be
written on a comprehensive basis with limits of not less than
$5,000,000.00 for bodily injury to any one or more persons, or
property damage, or such higher limits as the Landlord or the
mortgagees of the Landlord may reasonably require from time to time,
for any one occurrence;
(iv) tenant's legal liability insurance for the full replacement cost of
the Leased Premises; such coverage to include the activities and
operations conducted by the Tenant and any other persons on the
Leased Premises; and
(v) any other form or forms of insurance as the Tenant or the Landlord
or the mortgagees of the Landlord may reasonably require from time
to time in form, in amounts and for insurance risks against which a
prudent tenant would protect itself.
(b) All insurance policies written on behalf of the Tenant shall also name
the Landlord as an additional insured, shall be primary, non-contributing with,
and not in excess of any Insurance otherwise available to the Landlord or its
mortgagees. In addition, each of the Tenant's insurance policies shall contain
cross-liability and severability of interest endorsements, and a waiver of any
subrogation rights which the Tenant's insurers may have against the Landlord and
against those for whom the Landlord is in law responsible whether any such
damage is caused by the act or omission (whether wrongful or otherwise) of the
Landlord or by those for whom the Landlord is in law responsible. The Tenant
hereby waives any right to recover from the Landlord for damage covered under
any of the Tenant's insurance policies.
(c) All policies shall be taken out and maintained with companies licensed
to do business in the Province of Ontario. In addition to the foregoing all
policies shall be taken out with insurers acceptable to the Landlord. The Tenant
agrees that certificates of insurance will be delivered to the Landlord as soon
as practicable after the placing of the required insurance. All policies shall
contain an undertaking by the insurers to notify the Landlord in writing not
less than thirty (30) days prior to any material change, cancellation or other
termination thereof.
(d) The Tenant covenants and agrees that in the event of damage or
destruction to the leasehold Improvements in the Leased Premises covered by
insurance required to be taken out by the Tenant pursuant to this Section 19.01,
the Tenant will use the proceeds of such insurance for the purpose of repairing
or restoring such leasehold Improvements. In the event of damage to or
destruction of the Building entitling the Landlord to terminate this Lease
pursuant to Section 45.02 hereof, if the Leased Premises have not been damaged,
the Tenant will deliver to the Landlord in accordance with the provisions of
this Lease, the leasehold improvements other than leasehold improvements which
the Tenant is entitled to remove from the Leased Premises in accordance with
this Lease.
(e) The Tenant hereby further covenants and agrees with the Landlord to
obtain, maintain and keep in force during the Term and any renewal thereof
adequate plate and other glass insurance to repair and replace at the Tenant's
sole cost any broken or damaged glass or damaged frames in the exterior facade
or interior improvements to the Leased Premises.
CANCELLATION OF INSURANCE
20.01 Cancellation of Insurance. If any insurance policy upon the Building or
any part thereof shall be cancelled or shall be threatened by the Insurer to be
cancelled or the coverage thereunder reduced in any way because of the use or
occupation of the Leased Premises or any part thereof by the Tenant or by any
assignee or sub-tenant of the Tenant or by anyone permitted by the Tenant to be
upon the Leased Premises, and if the Tenant fails to remedy the condition giving
rise to cancellation, threatened cancellation or reduction of coverage within
forty-eight (48) hours after notice thereof, or is not within that period
proceeding diligently to remedy that condition if that condition cannot be
remedied in forty-eight (48) hours, the Landlord may, at its option, enter upon
the Leased Premises and attempt to remedy such condition and the Tenant shall
forthwith pay the cost thereof to the Landlord as additional rent. The Landlord
shall not be liable for any damage or injury caused to any property of the
Tenant or of others located on the Leased Premises as a result of such entry no
matter how caused and whether or not such damage or injury results from or is
contributed to by the gross negligence of
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the Landlord or those for whom it is in law responsible. In the event that the
Landlord shall be unable to remedy such condition, the Landlord shall be
entitled to re-enter the Leased Premises forthwith by leaving upon the Leased
Premises notice in writing of its intention so to do and thereupon the
provisions of Section 51.01 hereof shall apply.
OBSERVANCE OF LAW
21.01 Observance of Law. The Tenant shall comply with all provisions of law
including without limitation, federal and provincial legislative enactments,
by-laws, and any other governmental or municipal regulations which affect the
Leased Premises or relate to the partitioning, equipment, operation or use of
the Leased Premises, or to the making of any repairs, replacements, alterations,
additions, changes, substitutions or improvements of or to the Leased Premises.
The Tenant shall comply with all police, fire, recycling, environmental and
sanitary regulations imposed by any federal, provincial or municipal
authorities, or made by insurance underwriters, and to observe and obey all
governmental and municipal regulations and other requirements governing the
conduct of any business conducted In the Leased Premises. The Tenant shall be
solely responsible for all costs incurred In compliance with this section
including, without limiting the generality of the foregoing, all costs incurred
by or on behalf of the Landlord with respect to the same, which costs shall be
paid by the Tenant to the Landlord on demand, as additional rent.
Notwithstanding the foregoing, it shall be the Landlord's responsibility to
comply with federal and provincial legislative enactments, by-laws, and any
other governmental or municipal regulations which affect or relate to the
structure of the Building or the common areas of the Lands and Building (whether
structural or not). All costs incurred by or on behalf of the Landlord to comply
with this Section shall be included in the calculation of Operating Costs and
shall be paid for by the Tenant in accordance with the relevant provisions of
this Lease; provided that the Tenant shall be solely responsible for all costs
incurred by or on behalf of the Landlord to the extent that such costs are
directly or indirectly caused by or relate to the nature of the use of the
Leased Premises or improvements contemplated, made or removed by or on behalf of
the Tenant, and shall be paid by the Tenant to the Landlord on demand, as
additional rent.
The Landlord reserves the right, in its sole discretion, to perform.
In whole or In part, work required to be carried out by the Tenant pursuant to
the provisions of this Section, the cost of which shall be paid by the Tenant,
as additional rent, within ten (10) days after delivery of an invoice therefor.
WASTE AND NUISANCE
22.01. Waste and Nuisance. The Tenant shall not do or suffer any waste or damage
or disfiguration or injury to the Lands or Building or the fixtures and
equipment thereof or permit or suffer any overloading of the floors in the
Leased Premises. The Tenant shall not place in the Leased Premises any safe,
heavy business machinery, computers, data processing machines, or other heavy
things without first obtaining the consent in writing of the Landlord and shall
not cause or permit any nuisance in, at or on the Lands or the Building.
ENTRY BY LANDLORD
23.01 Entry By Landlord. The Tenant shall permit the Landlord, its servants or
agents to enter upon the Leased Premises upon twenty-four (24) hours' prior
written notice of its intention to do so at reasonable times and from time to
time for the purpose of inspecting and of making repairs, alterations or
improvements to the Leased Premises or to the Building or to the access panels
to mechanical shafts (which the Tenant agrees not to obstruct), and the Tenant
shall not be entitled to compensation for any inconvenience, nuisance or
discomfort occasioned thereby. The Landlord may at any time and from time to
time give notice to the Tenant requiring the Tenant to remove any article or
remedy any condition which the Landlord has been advised by its insurer would be
likely to lead to the cancellation of any policy of insurance as referred to in
Section 44.01 hereof, and if the Tenant does not cause that article to be
removed or condition to be remedied within a reasonable time after the giving of
the notice, the Landlord, its servants or agent may hereafter enter upon the
Leased Premises to remove such article or remedy such condition, and such entry
by the Landlord shall not be deemed to be re-entry, but the Landlord, its
servants or agents may enter upon the Leased Premises without notice in the
event of any emergency, but the Landlord shall carry out any such re-entry with
due diligence and so as to interfere as little as possible with the Tenant's
occupancy of the Leased Premises.
INDEMNIFICATION OF LANDLORD
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24.01 Indemnification of Landlord. The Tenant shall indemnify the Landlord and
save it harmless from and against any and all loss, claims, actions, damages,
liability and expense in connection with the loss of life, personal injury or
damage to property arising from any occurrence in, upon or, at the Leased
Premises, or the occupancy or use by the Tenant of the Leased Premises or any
part thereof, or occasioned by any act or omission of the Tenant, its agents,
contractors, employees, servants, licensees, or concessionaires or invitees or
by anyone permitted to be on the Lands or in the Building by the Tenant. In case
the Landlord shall be made a party to any litigation commenced in relation to
any of the foregoing, then the Tenant shall protect and hold the Landlord
harmless and shall pay all costs, expenses and legal fees (on a solicitor and
his own client basis) incurred or paid by the Landlord in connection with such
litigation, notwithstanding such costs, expenses and legal fees may be incurred
after the expiry of the Term; it being agreed and understood that the Tenant's
obligation to indemnify shall survive the expiry or earlier termination of this
Lease.
24.02 Landlord's Consent. If the Landlord withholds, delays or refuses to give
consent as provided by the terms of this Lease, whether or not the Landlord is
entitled to do so, the Landlord shall not be liable for any losses or damages in
any way resulting therefrom and the Tenant hereby specifically releases the
Landlord from any such liability, and the Tenant shall not be entitled to
terminate this Lease or exercise any remedy whatsoever in respect thereof except
to seek the order of a court of competent jurisdiction compelling the Landlord
to grant such consent.
EXHIBITING PREMISES
25.01 Exhibiting Premises. The Tenant shall permit the Landlord and its agents
to exhibit the Leased Premises to its mortgagees or prospective mortgagees, any
purchaser or prospective purchaser of the Building, and prospective tenants,
during Normal Business Hours upon reasonable notice to the Tenant and subject to
the Tenant's reasonable security requirements. During the last six (6) months of
the Term, the Landlord and its agents shall be permitted to place upon the
Leased Premises signage indicating the premises are "For Sale" or "For Rent".
The Tenant shall permit such signage to remain where placed without molestation.
IMPROVEMENTS AND ALTERATIONS
26.01 Improvements and Alterations. The Tenant shall not make, install, erect or
perform in or to the Leased Premises any repairs, improvements, installations,
alterations, additions or partitions (which for the purposes of this Section
26.01 shall be collectively referred to as the "Improvements") without first
submitting the drawings and specifications in relation to such Improvements to
the Landlord and obtaining the Landlord's prior consent in each instance, which
consent shall not be unreasonably withheld. The Landlord may in its sole
discretion as a condition to granting its consent require the Tenant to post
with the Landlord security in an amount and type as the Landlord may in its sole
discretion require. Furthermore, the Tenant must obtain the Landlord's prior
written consent to any changes in such drawings or specifications submitted as
aforesaid. Prior to proceeding with any Improvements, the Tenant shall pay the
Landlord's and its consultants' reasonable costs incurred in reviewing such
drawings and specifications and any changes thereto. The Landlord may in its
sole discretion require that the Improvements be performed, in whole or in part,
on behalf of the Tenant by the Landlord or contractors which the Landlord has
engaged, whether on its own behalf or on behalf of the Tenant. The cost of
performing the Improvements shall be paid by the Tenant to the Landlord within
ten (10) days after delivery to the Tenant of an invoice therefor, on the basis
of either;
(a) a price agreed to by the Landlord and the Tenant prior to proceeding
with any of the Improvements; or
(b) failing agreement as aforesaid, a sum equal to:
(i) the cost of such work plus ten percent (10%) of the cost of
such work for the Landlord's overhead; plus
(ii) ten percent (10%) of (i) above for the Landlord's profit.
Without limiting the generality of the foregoing, all Improvements performed by
or for the Tenant shall be performed by contractors and subcontractors who have
been engaged or approved in advance by the Landlord and by competent workers
whose labour union affiliations are compatible with those of any workers who may
be employed in the Building by the Landlord, its contractors or sub-contractors.
The Tenant shall submit to the Landlord's supervision over
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construction and promptly pay when due the cost of all such work and of all
materials, labour and services involved therein and of all decoration and all
changes in the Building, Its equipment or services necessitated thereby. The
Tenant covenants that the Tenant will not suffer or permit during the Term
hereof any construction or other liens for work, labour, services, or materials
ordered by the Tenant or for the cost of which the Tenant may be in any way
obligated, to attach to the Leased Premises or to the Building and that whenever
and so often as any such liens shall attach or claims therefore shall be filed,
the Tenant shall within twenty (20) days after the Tenant has notice of claim
for lien procure the discharge thereof by payment or by giving security in such
other manner as is or may be required or permitted by law. The Tenant shall, at
its own cost and expense, take out or cause to be taken out any additional
insurance reasonably required by the Landlord to protect the Landlord's and the
Tenant's interest during the period the Improvements are being performed. If in
accordance with this Section 26.01, the Tenant submits drawings and
specifications for a proposed improvement to the Landlord and requests the
Landlord's written consent then the Landlord shall within thirty (30) days from
the date upon which the Landlord has received those drawings and specifications
and requested that consent inform the Tenant whether It consents or does not
consent. If the Landlord fails to so inform the Tenant, the Landlord shall be
considered to have denied consent.
26.02 Control of Building. The Landlord hereby reserves the right at any time
and from time to time to make changes in, additions to, subtractions from or
rearrangements of the Building including, without limitation, all improvements
at any time thereon, all entrances and exits thereto, and to grant, modify and
terminate easements or other agreements pertaining to the use and maintenance of
all or parts of the Building, provided that prior to the commencement of the
Term, the Landlord may relocate the Leased Premises to the extent found
necessary by the Landlord to accommodate changes in construction design or
facilities including major relocations but provided always that the Leased
Premises as relocated shall be in all material aspects comparable to the Leased
Premises as defined herein.
PIPES, CONDUITS
27.01 Pipes, Conduits. The Landlord shall have the right to use and make changes
or additions to the pipes, wires, conduits, utilities, ducts and other necessary
building services in the Leased Premises where necessary to serve other premises
in the Building but not in any way so as to interfere materially with the use
and enjoyment of the Leased Premises or to the Tenant's equipment so caused. The
Tenant shall not obstruct such pipes, conduits and ducts in the Leased Premises
so as to prevent reasonable access thereto.
GLASS
28.01 Glass. The Tenant shall pay the cost of replacement with as good quality
and size of any glass broken on the Leased Premises including outside windows
and doors of the perimeter of the Leased Premises (including perimeter windows
in the exterior walls) during the Term and any renewal thereof.
SIGNS AND ADVERTISING
29.01 Signs and Advertising. The Landlord will prescribe a uniform pattern of
identification signs for tenants to be installed by the Landlord, at the
Tenant's expense, on the outside of the doors leading into the Leased Premises.
Other than such prescribed identification signs, the Tenant shall not paint,
display, inscribe, place or affix any sign, picture, advertisement, notice,
lettering or direction on the outside of the Building or outside the Leased
Premises or within the Leased Premises and visible from outside the Building.
NAME OF BUILDING
30.01 Name of Building. The Tenant shall not refer to the Building by a name
other than that designated from time to time by the Landlord, nor use such name
for any purpose other than as the business address of the Tenant, provided that
the Tenant may use the municipal number of the Building assigned to it by the
Landlord instead of the name of the Building.
SUBORDINATION AND ATTORNMENT
31.01 Subordination. This Lease is subject to and subordinate to all mortgages
(including any deed of trust and mortgage securing bonds and all Indentures
supplemental thereto), and to any lien resulting from any other method of
financing, refinancing or collateral financing and to all underlying, superior,
ground or head leases and all renewals, modifications, consolidations,
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replacements and extensions thereof which may now or hereafter affect the Leased
Premises, the Building or the Lands or any part of any of the foregoing. The
Tenant shall execute any such acknowledgement or agreement or any application to
register a postponement of this Lease in favour of any such mortgage in order to
give effect to the foregoing provisions of this Section 31.01.
31.02 Attornment. If possession is taken under, or any proceedings are brought
for the foreclosure of, or a power of sale is exercised under any mortgage
(including a deed of trust and mortgage securing bonds and all indentures
supplemental thereto), or any method of financing, refinancing or collateral
financing or any underlying, superior, ground or head lease, or any renewal,
modification, consolidation, replacement or extension thereof which may now or
hereafter affect the Leased Premises, Building or the Lands or any part of any
of the foregoing, the Tenant shall attorn to such mortgagee, chargee, lessor,
trustee or other encumbrancer or purchaser upon any such foreclosure, sale or
taking of possession and recognize such mortgagee, chargee, lessor, trustee or
other encumbrancer or purchaser, as the Landlord under this Lease.
ACCEPTANCE OF PREMISES
32.01 Acceptance of Premises. The Tenant shall accept the Leased Premises on an
"as is" basis. The Tenant agrees that there is no promise, representation or
undertaking by or binding upon the Landlord with respect to the condition of the
Leased Premises or any alteration, remodelling or redecoration of or
installation of equipment or fixtures in the Leased Premises, except such as are
expressly set forth in this Lease.
CERTIFICATES
33.01 Certificates. The Tenant and the Landlord agree that they will at any time
and from time to time upon not less than ten (10) days' prior notice execute and
deliver to the other a statement in writing certifying that the Lease is
unmodified and in full force and effect (or if modified stating the
modifications and that the same is in full force and effect as modified), the
amount, of the annual Rent then being paid hereunder, the dates to which the
same, by instalments or otherwise, and other charges hereunder have been paid,
and whether or not there is an existing default on the part of the Landlord or
the Tenant (as the case may be) of which the party delivering the statement has
notice.
QUIET ENJOYMENT
34.01 Quiet Enjoyment. The Landlord covenants with the Tenant for quiet
enjoyment.
CLIMATE CONTROL
35.01 Climate Control. The Landlord shall provide climate control to the Leased
Premises during Normal Business Hours to maintain a temperature adequate for
comfortable occupancy, except during the making of repairs, alterations or
improvements and provided that the Landlord shall have no responsibility or
liability for failure to supply climate control service except for direct
damages suffered by the Tenant, where such damages are caused by the gross
negligence of the Landlord. Under no circumstances, however, shall the Landlord
be responsible or liable for indirect or consequential damages even if caused or
contributed to by the gross negligence of the Landlord or those for whom it is
in law responsible. The Tenant acknowledges that the Landlord has installed in
the Building a system for the purpose of climate control, which system is
designed to heat and cool during normal occupancy of the Leased Premises as
general offices on the basis of one person to every one hundred and twenty (120)
square feet of space on an open floor basis and based on window shading being
fully closed In those areas having exterior windows exposed to the sun and
without regard to the Tenant's specific use thereof or the installation of any
computers or data processing equipment. Any use of the Leased Premises not in
accordance with the design standards or arrangements or partitioning which
interferes with the normal operation of such system may require changes or
alterations in the system or ducts through which the same operates. Any changes
or alterations so occasioned, if such changes can be accommodated by the
Landlord's equipment, shall be carried out in accordance with Section 26.01 at
the Tenant's sole cost and expense but only with the written consent of the
Landlord first had and obtained, which consent may be withheld by the Landlord
in its sole discretion, and in accordance with drawings and specifications and
by a contractor first approved in writing by the Landlord, which approval may be
withheld by the Landlord in its sole discretion. If installation of partitions,
equipment or fixtures by the Tenant necessitates the re-balancing of the climate
control equipment in the Leased Premises, the
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same will be performed by the Landlord at the Tenant's expense. The Tenant
acknowledges that one (1) year may be required after the Tenant has fully
occupied the Leased Premises in order to adjust and balance the climate control
systems.
SERVICES TO LEASED PREMISES
36.01 Services to Leased Premises. Except during the making of repairs,
alterations or improvements and subject to Section 13.01, the Landlord shall
provide to the Leased Premises electric power sufficient for normal office use
for lighting and for small office equipment capable of operating from circuits
available to the Leased Premises and standard to the Building. Except during the
making of repairs, alterations or Improvements, the Landlord shall also provide
to the Building domestic running water sufficient for normal office use by the
tenants of the Building. Notwithstanding the foregoing, the Landlord shall have
no responsibility or liability for failure to supply electricity or water except
for direct damages suffered by the Tenant where such damages are caused by the
gross negligence of the Landlord. Under no circumstances, however, shall the
Landlord be responsible or liable for indirect or consequential damages even if
caused or contributed to by the gross negligence of the Landlord or those for
whom it is in law responsible.
ELEVATOR SERVICE
37.01 Elevator Service. Subject to the Rules and Regulations referred to in
Section 17.01, the Landlord shall furnish, except when repairs are being made,
elevator service at all times in common with others, provided that the Tenant
and such employees and all other persons using the same shall do so at their own
risk.
37.02 Failure to Provide Elevator Service. There shall be no liability on the
Landlord for any claim in respect of any failure by the Landlord to provide
elevator service except for direct damages suffered by the Tenant where such
damages are caused by the gross negligence of the Landlord. Under no
circumstances, however, shall the Landlord be responsible or liable for indirect
or consequential damages even if caused or contributed to by the gross
negligence of the Landlord or those for whom it is in law responsible.
JANITORIAL SERVICES
38.01 Janitorial Services. The Landlord shall cause when reasonably necessary
from time to time the floors to be swept and windows to be cleaned and the
desks, tables and other furniture of the Tenant to be dusted substantially In
accordance with the Cleaning Specifications attached hereto as Schedule "5".
With the exception of the obligation to cause such work to be done, the Landlord
shall not be responsible for any act or omission (whether wrongful or not) on
the part of the person or persons employed to perform such work. Such work shall
be done at the Landlord's direction without interference by the Tenant, its
employees or those for whom it is responsible at law.
REPAIR AND MAINTENANCE
39.01 Repair and Maintenance. Subject to Sections 45.01, 45.02 and 45.03, the
Landlord shall repair, replace and maintain the foundations and external and
structural parts of the Building, janitor and equipment closets and shafts
within the Leased Premises designated by the Landlord for use by it in
connection with the operation and maintenance of the Building, damages resulting
from structural defect, and all common areas, plumbing, electrical, mechanical
and sewage systems of the Building save and except the Tenant's Specialized
Equipment and Systems (as the same is defined in Section 15.02), and shall
perform such repairs, replacements and maintenance with reasonable dispatch, in
a good and workmanlike manner, but the Landlord shall not be liable for any
damages for failing to do so except for direct damages suffered by the Tenant
where such damages are caused by the gross negligence of the Landlord. Under no
circumstances, however, shall the Landlord be responsible or liable for indirect
or consequential damages even if caused or contributed to by the gross
negligence of the Landlord or those for whom it is in law responsible.
TRADE FIXTURES
40.01 Trade Fixtures. The Tenant may install its usual trade fixtures provided
such installation does not affect the structure of the Leased Premises or the
Building and provided further that the Tenant shall have submitted detailed
plans and specifications for such trade fixtures to the Landlord and obtained
its prior written consent thereof which consent shall not be unreasonably
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withheld. If In accordance with this Section 40.01 the Tenant submits plans and
specifications for a proposed installation to the Landlord and requests the
Landlord's written consent then the Landlord shall within thirty (30) days from
the date it has received those drawings and specifications and a request for
consent inform the Tenant whether It consents or does not consent. If the
Landlord fails so to inform the Tenant, the Landlord shall not be considered or
deemed to have given its consent.
REMOVAL OF TRADE FIXTURES
41.01 Removal of Trade Fixtures. All trade fixtures installed by the Tenant in
the Leased Premises shall remain the properly of the Tenant and shall be removed
at the expiration of the Term, or other termination thereof, provided the Tenant
shall promptly repair, at its expense, any damage to the Leased Premises caused
by any such removal, and provided further that the Tenant shall not at such time
be in default under any covenant or agreement contained herein; and if in
default, the Landlord shall have a lien on such fixtures and apparatus as
security against loss or damage resulting from any such default by the Tenant
and said fixtures and apparatus shall not be removed by the Tenant until such
default is cured, unless otherwise directed by the Landlord. If at the expiry or
earlier termination of the Term, the Tenant fails to remove its trade fixtures
or any of its other properly on the Leased Premises, the Landlord shall have no
obligation in respect thereof and may in its sole discretion sell or destroy the
same or have them removed or stored at the expense of the Tenant, or at the
option of the Landlord, such trade fixtures or property, as the case may be,
shall become and shall be deemed to be the absolute property of the Landlord
without any compensation to the Tenant.
IMPROVEMENTS
42.01 Improvements. Provided further, any or ail installations, alterations,
additions, partitions and fixtures other than trade or tenant's fixtures in or
upon the Leased Premises, whether placed there by the Tenant or the Landlord,
shall, immediately upon such placement, become the properly of the Landlord
without compensation therefor to the Tenant unless before undertaking any work
the Tenant submits to the Landlord such plans and specifications as the LandIord
may reasonably require and obtains the Landlord's approval in writing of such
plans and specifications and unless the Landlord's approval in writing states
that those installations, alterations, additions, partitions or fixtures may be
removed at the end of the Term. Notwithstanding anything herein contained, the
Landlord shall be under no obligation to repair, maintain or insure such
installations, alterations, additions, partitions and fixtures or anything in
the nature of a leasehold improvement made or installed by or on behalf of the
Tenant or any predecessor tenant, and regardless or whether paid for by the
Tenant, the Landlord or another. The Landlord may elect that any or all
installations made or installed by or on behalf of the Tenant be removed and it
shall be the Tenant's obligation to restore the Leased Premises to the condition
they were in before such alterations, installations, partitions and fixtures.
Such removal and restoration shall be at the sole expense of the Tenant.
TIME FOR REPAIR
43.01 Time For Repair. If any of the boilers, engines, pipes, climate control
equipment or other apparatus or any of them used for the purpose of climate
control or if the water pipes, drainage pipes, electric lighting, elevators or
other equipment of the Building require repair or become damaged or destroyed
the Landlord shall have a reasonable time in which to make such repairs or
replacements as may be reasonably required for the resumption of those services
to the Leased Premises which it has by this Lease expressly agreed to provide
and, except in the case of direct damage caused by the gross negligence of the
Landlord, the Tenant shall not be entitled to any compensation or damages
therefor, and where the Tenant would be entitled to receive proceeds of
insurance in respect of such damage, the Tenant shall not be entitled to receive
compensation from the Landlord therefor. If, however, any such equipment of the
Building is impaired, damaged or destroyed through the act or omission, whether
wrongful or not, of the Tenant, its employees or anyone for whom it is
responsible at law, or through it or them making use of or permitting others to
use improper paper in the water closets or in any other manner or way stopping
up or injuring such climate control equipment, water pipes, drainage pipes,
electric or other equipment, the expense of the necessary repair shall be borne
entirely by the Tenant who shall pay the same to the Landlord upon demand as
additional rent. Nothing in this Section shall require the Landlord to make a
claim under any policy of insurance. Notwithstanding anything to the contrary in
this Lease, under no circumstances shall the Landlord be responsible or liable
for indirect or consequential damages, even if caused or contributed to by the
gross negligence of the Landlord or those for whom It is in law responsible. If
by any act or omission, whether wrongful or not, the Tenant, its employees or
anyone for
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whom the Tenant is responsible at law, directly or indirectly causes injury or
damage to the Lands or Building beyond normal wear and tear, the expense of
repairing such damage or injury shall be borne entirely by the Tenant who shall
pay the same to the Landlord upon demand as additional rent. The Tenant's
obligations under this Section 43.01 shall survive the expiration on sooner
termination of this Lease and are in addition to the Tenant's obligations under
Sections 15.01 and 15.02.
LANDLORD'S INSURANCE
44.01 Landlord's Insurance. The Landlord covenants and agrees that throughout
the Term it will insure the Building (excluding foundations and excavations) and
the machinery, boilers and equipment contained therein owned by the Landlord
(excluding any properly with respect to which the Tenant is obliged to Insure
pursuant to the provisions of Section 19.01 hereof) against damage by fire and
extended perils coverage in such reasonable amounts as would be carried by a
prudent owner of a similar property. The Landlord will also, throughout the
Term, carry public liability and property damage insurance with respect to the
operation of the Building in reasonable amounts as would be carried by a prudent
owner of a similar property. The Landlord may, but shall not be obliged to, take
out and carry any other form or forms of insurance as it or the mortgagees of
the Landlord may reasonably determine advisable. Notwithstanding any
contribution by the Tenant to the cost of insurance premiums, as provided
herein, the Tenant acknowledges that it has no right to receive any proceeds
from any such insurance policies carried by the Landlord.
FIRE, DAMAGE, ETC.
45.01 Fire and Damage to the Leased Premises.
(a) If the Leased Premises are at any time destroyed or damaged
(including, without limitation, smoke or water damage) as a result of fire, the
elements, accident or other casualty and if as a result of such occurrence:
(i) the Leased Premises are rendered untenantable only in part, this
Lease shall continue in full force and effect and the Landlord
shall, subject to Subsection 45.02(a) hereof, proceed to
reconstruct, rebuild or repair the Leased Premises, to the extent of
the insurance proceeds actually received by the Landlord to carry
out its obligations under this paragraph 45.01(a), to the condition
that the Leased Premises were in immediately prior to the Tenant or
any prior tenant or occupant making or having made on its behalf any
improvements or alterations to the Leased Premises, regardless of
whether such improvements or alterations were carried out before or
after the Commencement Date and regardless of whether such
improvements or alterations were paid for or performed in whole or
in part by the Landlord. Only the base rent (not additional rent or
other payments payable by the Tenant hereunder) shall abate
proportionately (according to the ratio that the portion of the
Rentable Area of the Leased Premises rendered untenantable is
compared to the Rentable Area of the Leased Premises) from the date
of the destruction or damage until the Leased Premises have been
restored by the Landlord to the extent required of the Landlord;
(ii) the Leased Premises are rendered wholly untenantable, the Landlord
shall, subject to Subsection 45.02(a) hereof, proceed to
reconstruct, rebuild or repair the Leased Premises, to the extent of
the insurance proceeds actually received by the Landlord to carry
out its obligations under this paragraph 45.01(a), to the condition
that the Leased Premises were in immediately prior to the Tenant or
any prior tenant or occupant making or having made on its behalf any
improvements or alterations to the Leased Premises, regardless of
whether such improvements or alterations were carried out before or
after the Commencement Date and regardless of whether such
improvements or alterations were paid for or performed in whole or
in part by the Landlord. Only the base rent (not additional rent or
other payments due by the Tenant hereunder) shall abate from the
date of the destruction or damage until the Leased Premises have
been restored by the Landlord to the extent required of the
Landlord;
(iii) the Leased Premises are not rendered untenantable in whole or in
part, the Lease shall continue in full force and effect, the base
rent, additional rent and
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other amounts payable by the Tenant shall not terminate, be reduced
or abate and the Landlord shall, subject to Subsection 45.02(a)
hereof, proceed to reconstruct, rebuild or repair the Leased
Premises, to the extent of the insurance proceeds actually received
by the Landlord to carry out its obligations under this paragraph
45.01 (a), to the condition that the Leased Premises were in
immediately prior to the Tenant or any prior tenant or occupant
making or having made on its behalf any improvements or alterations
to the Leased Premises, regardless of whether such improvements or
alterations were carried out before or after the Commencement Date
and regardless of whether such improvements or alterations were paid
for or performed in whole or in part by the Landlord.
(b) In repairing, reconstructing or rebuilding the Leased Premises
or any part thereof, the Landlord may use designs, plans and specifications
other than those used in the original construction and may alter or relocate, or
both, any or all of the facilities or improvements provided the Leased Premises
as altered or relocated shall be of substantially the same size and otherwise be
reasonably comparable to the Leased Premises defined herein. Upon the Tenant
being notified in writing by the Landlord that the Landlord's work has been
substantially completed, the Tenant shall forthwith complete all work required
to fully restore, rebuild and repair to a first-class standard, the Leased
Premises and the leasehold improvements for business (in any case, without the
benefit of any capital allowance or payments made at the time of original
construction by the Landlord to the Tenant in connection with the Leased
Premises or leasehold improvements pertaining thereto). The Landlord may, in its
sole discretion, proceed to complete the Tenant's portion of the restoration,
rebuilding or repair all for the account of the Tenant in accordance with the
provisions of Section 26.01 hereof.
45.02 Fire and Damage to the Building.
(a) Notwithstanding anything contained in this Lease and
specifically notwithstanding the provisions of Section 45.01 hereof, if:
(i) twenty-five percent (25%) or more of the Total Rentable Area of the
Building is at any time destroyed or damaged (including without
limitation, damage by either or both smoke and water) as a result of
fire, the elements, accident or other casualty, whether or not the
Leased Premises are affected by such occurrence;
(ii) twenty-five percent (25%) or more of the area of the interior common
areas and facilities (excluding all parking areas, if any) is at any
time destroyed or damaged (including, without limitation, damage by
either or both smoke or water) as a result of fire, the elements,
accident or other casualty, whether or not the Leased Premises are
affected by such occurrence;
(iii) the Building or the Leased Premises are damaged or destroyed, in
whole or in part, by an occurrence against which the Landlord is not
insured or required to insure or beyond the extent to which the
Landlord is required to insure pursuant to this Lease;
(iv) the Building or the Leased Premises are damaged or destroyed
(including without limitation, damage by either or both smoke and
water) as a result of fire, the elements, accident or other
casualty, at any time within the last two (2) years of the Term or
the renewal term (if any), as the case may be; or
(v) the Leased Premises are damaged or destroyed, in whole or in part,
(including without limitation, damage by either or both smoke and
water) as a result of fire, the elements, accident or other
casualty, and if, in the Landlord's opinion, the Leased Premises are
not reasonably capable of being repaired to the extent of the
Landlord's obligation to repair under this Lease, within one hundred
and eighty (180) days after such damage or destruction;
then and so often as any such events occur, the Landlord may, at its option (to
be exercised by written notice to the Tenant within ninety (90) days following
any such occurrence), elect to terminate this Lease. In the case of such
election, the Term and the tenancy hereby created shall expire on the thirtieth
(30th) day after such notice is given, without indemnity or penalty payable or
any other recourse by one party to or against the other and the Tenant shall,
within such thirty (30) day period, vacate the Leased Premises and surrender
them to the Landlord failing which the Landlord shall have the right to re-enter
and repossess the Leased Premises
<PAGE>
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discharged of this Lease and to expel all persons and remove all property
therefrom. All Rent shall be due and payable without reduction or abatement
subsequent to the destruction or damage and until the date of vacation of the
Leased Premises by the Tenant, unless the Leased Premises shall have been
destroyed or damaged as well, in which event the provisions of Section 45.01
regarding the abatement of base rent shall apply, mutatis mutandis.
(b) If all or any part of the Building is at any time destroyed or
damaged as set out in Section 45.02(a), and the Landlord does not elect to
terminate this Lease in accordance with the rights hereinbefore granted, the
Landlord shall, following such destruction or damage, proceed to reconstruct,
rebuild or repair, if necessary, that part of the Building requiring same, but
only to the extent of the Landlord's responsibilities pursuant to the terms of
the various leases for the premises in the Building and exclusive of any
tenant's responsibilities set out therein and, in any event, only to the extent
of the insurance proceeds actually received by the Landlord with respect to such
destruction or damage. If the Landlord elects to repair, reconstruct or rebuild
the Building or any part thereof, the Landlord may use designs, plans and
specifications other than those used in the original construction of the
Building or any part thereof and may alter or relocate or both, any or all of
the facilities and improvements.
45.03 Architect's Certificate. The certificate of the Landlord's architect shall
bind the parties as to:
(a) the percentage of the Total Rentable Area of the Building or the
percentage of the area of the common areas and facilities damaged or
destroyed;
(b) whether or not the Leased Premises are rendered untenantable and the
extent of such untenantability;
(c) the date upon which the Landlord's work or Tenant's work of
reconstruction, rebuilding or repair is completed or substantially
completed and the date when the Leased Premises are rendered
tenantable; and
(d) the state of completion of any work of either the Landlord or the
Tenant under this Lease.
LOSS AND DAMAGE
46.01 Loss and Damage. The Tenant acknowledges and agrees that notwithstanding
anything in this Lease to the contrary, it is understood and agreed that:
(a) the Landlord shall not be liable or responsible in any way for any
death, injury, loss or damage to property, unless such death, injury, loss or
damage is directly caused by the gross negligence of the Landlord, except where
the Tenant has waived such liability under Sections 19.01(b) or 43.01, or under
paragraphs 46.01(b), (c), or (d), in which case the Landlord shall have no
liability whatsoever even if grossly negligent;
(b) the Tenant acknowledges and agrees that the Landlord shall not be
liable or responsible in any way for loss or damage to computer programmes,
software, stored data, money, securities, negotiable instruments, papers, works
of art, precious metals or other valuables of the Tenant or others no matter how
caused and whether or not caused or contributed to by the gross negligence of
the Landlord or those for whom it is in law responsible and the Tenant shall
indemnify the Landlord and save it harmless from any claims arising out of
damages to the same;
(c) the Landlord shall not be liable or responsible in any way for any
damage whatsoever caused by any other tenant or persons in, upon or at the
Building or the Lands, or by an occupant of adjacent property thereto, or the
public, or caused by construction of any private, public or quasi-public works
no matter how caused and whether or not such death, injury, loss or damage, as
the case may be, results from or is contributed to by the gross negligence of
the Landlord or those for whom it is in law responsible; and
(d) the Tenant acknowledges and agrees that notwithstanding anything in
this Lease or at law to the contrary, under no circumstances shall the Landlord
be liable or responsible for indirect or consequential damages even if caused or
contributed to by the gross negligence of the Landlord or those for whom it is
in law responsible.
DELAYS
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47.01 Delays. Whenever and to the extent that the Landlord or the Tenant are
unable to fulfill or are delayed or restricted in the fulfillment of any
obligation under this Lease in respect of the supply or provision of any service
or utility or the doing of any work or the making of any repairs by reason of
being unable .to obtain the material, goods, equipment, service, utility or
labour required to enable it to fulfil such obligation or by reason of any
statute, law or Order-In-Council or any regulation or order passed or made
pursuant thereto or by reason of the order or direction of any administrator,
controller or board, or any governmental department or officer or other
authority, or by reason of not being able to obtain any permission or authority
required thereby, or by reason of any other cause beyond its reasonable control
whether of the foregoing character or not, the Landlord or the Tenant as the
case may be shall be entitled to extend the time for fulfilment of such
obligation by a time equal to the duration of such delay or restriction, and the
other party shall not be entitled to compensation for any inconvenience,
nuisance or discomfort thereby occasioned.
DEFAULT
48.01 Default. If and whenever:
(i) the Rent or any part thereof shall not be paid on the day appointed
for payment thereof whether lawfully demanded or not; or
(ii) in the case of breach or non-observance of any of the covenants,
agreements, provisos, conditions or Rules and Regulations on the
part of the Tenant to be kept, observed or performed (save and
except the Tenant's covenants to pay Rent), the Tenant shall not
have remedied such breach after reasonable notice from the Landlord
of such breach (provided, however, in no event shall such notice
period exceed five (5) business days); or
(iii) in case the Leased Premises shall be vacant or remain unoccupied for
fifteen (15) consecutive days or in case the Term shall be taken in
execution or attachment for any cause whatsoever;
then in every such case it shall be lawful for the Landlord to immediately
thereafter enter into and upon the Leased Premises or any part thereof in the
name of the whole. If any period during which the Leased Premises are vacant or
remain unoccupied occurs during the first year of this Lease and is associated
with the phasing in of the Tenant's occupation of the Leased Premises and is of
a duration of not more than thirty (30) days, that vacancy or failure to occupy
shall not be considered to be a breach of this Section 48.01.
BANKRUPTCY, ETC.
49.01 Bankruptcy, Etc. If the Term hereby granted or any of the goods and
chattels of the Tenant shall at any time during the Term or any renewal thereof
be seized or taken in attachment by any supplier or creditor of the Tenant, or
if a writ of execution, sequestration or extent shall issue against the goods
and chattels of the Tenant or if the Tenant shall execute any security
agreement, chattel mortgage or bill of sale of its goods and chattels (other
than one incidental to any public issue of bonds, debentures or other securities
of the Tenant, or to any reorganization of the Tenant, or its amalgamation with
any other company) or if any petition or other application is presented to any
court of competent jurisdiction for the dissolution, liquidation or winding-up
of the Tenant or for the appointment of a receiver or receiver and manager of
the Tenant, or if the Tenant makes any assignment for the benefit of creditors
or becomes bankrupt or insolvent or takes the benefit of any statute now or
hereafter in force for bankrupt or insolvent debtors, or if the Tenant shall
abandon or attempt to abandon the Leased Premises, or if the said Leased
Premises shall be used for any purpose other than that for which they were let
without the written consent of the Landlord, or if the Tenant shall make any
sale or other disposition of its goods and chattels pursuant to or which should
legally have been done pursuant to any legislation relating to bulk sales
(except one incidental to any reorganization of the Tenant, or its amalgamation
with any other company), then in every case the then current and the next
ensuing three (3) monthly instalments of Rent shall immediately become due and
payable; and the Landlord may, at its sole option, without prior notice re-enter
and take possession of the Leased Premises, or any part thereof in the name of
the whole, and have again, repossess and enjoy the Leased Premises in its former
estate, anything herein to the contrary notwithstanding, and the Term shall, at
the option of the Landlord, forthwith become forfeited and determined and
accelerated Rent shall be recoverable by the Landlord as if it were Rent in
arrears, but the Tenant shall remain liable under this Lease.
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DISTRESS
50.01 Distress. The Tenant waives and renounces the benefit of any present or
future statute taking away or limiting the Landlord's right of distress, and
covenants and agrees that notwithstanding any such statute none of the goods and
chattels of the Tenant on the Leased Premises at any time during the Term shall
be exempt from levy by distress for Rent in arrears.
RIGHT OF RE-ENTRY
51.01 Right of Re-entry. The Tenant further covenants and agrees that on the
Landlord's becoming entitled to re-enter upon the Leased Premises under any of
the provisions of this Lease or otherwise at law, the Landlord in addition to
all other rights shall have the right (but not the obligation) to enter the
Leased Premises as the agent of the Tenant, either by force or otherwise,
without being liable for any prosecution therefore and as agent of the Tenant to
relet the Leased Premises, to make alterations to the Leased Premises to
facilitate their reletting, to receive rent therefore, and as agent of the
Tenant, to take possession of any furniture or other properly on the Leased
Premises and to sell the same by public or private sale without notice. The
Landlord shall apply the proceeds of any such reletting and sale first, to the
payment of any expenses incurred by the Landlord with respect to any such
reletting or sale, including without limitation the making of alterations to the
Leased Premises; second, to the payment of any indebtedness of the Tenant to the
Landlord other than Rent; and third, to the payment of Rent in arrears; with the
residue to be held by the Landlord and applied in payment of future Rent as it
become due and payable and the Tenant shall be liable for the deficiency, if
any. The Landlord shall be entitled to relet the Lease Premises, or any part
thereof for such term or terms (which may be for a term or terms extending
beyond the Term) and at such rents and upon such other terms, covenants and
conditions as the Landlord in its discretion considers advisable.
Notwithstanding any such reletting without termination, the Landlord may at any
time thereafter elect to terminate this Lease for any previous breach.
If the Landlord at any time re-enters the Leased Premises or any
part thereof in the name of the whole, the Tenant shall pay to the Landlord upon
such re-entry the then current and the next ensuing three (3) monthly
instalments of Rent, which shall immediately become due and payable as
accelerated Rent. Furthermore, if upon re-entering the Leased Premises the
Landlord exercises its right to terminate this Lease, in addition to any other
remedies it may have, it may recover from the Tenant all damages it incurs by
reason of such breach, including without limitation, the cost of recovering the
Leased Premises, solicitor's fees (on a solicitor and his client basis) and Rent
required to be paid pursuant to this Lease for the remainder of the Term, all of
which amounts shall be immediately due and payable by the Tenant to the
Landlord.
RIGHT OF TERMINATION
52.01 Right of Termination. The Tenant further covenants and agrees that on the
Landlord's becoming entitled to re-enter the Leased Premises under any of the
provisions of this Lease, the Landlord in addition to all other rights, shall
have the right to terminate forthwith this Lease and the Term by giving notice
in writing addressed to the Tenant of its intention to do so, and thereupon Rent
shall be computed, apportioned and paid in full to the date of such termination
of this Lease, and any other payments for which the Tenant is liable under this
Lease shall be paid and the Tenant shall forthwith deliver up possession of the
Leased Premises to the Landlord and the Landlord may re-enter and take
possession of the same.
TO PAY RENT AND PERFORM COVENANTS
53.01 To Pay Rent and Perform Covenants. The Tenant shall pay to the Landlord in
the manner specified herein, without any deduction, set-off or abatement, all
Rent hereby reserved and all other amounts which are collectible by the Landlord
as Rent. The Tenant shall observe and perform all covenants, provisions and
terms of this Lease on its part to be observed and performed and shall not do or
suffer to be done anything contrary to any covenant, provision or term hereof.
REMEDYING BY LANDLORD. NON-PAYMENT AND INTEREST
54.01 Remedying By Landlord. Non-Payment and Interest. In addition to all rights
and remedies of the Landlord available to it in the event of any default
hereunder by the Tenant either by any other provision of this Lease or by
statute or the general law the Landlord:
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(a) shall have the right at all times, upon notice which is reasonable in
the circumstances (but in no event shall such notice period exceed five (5)
Business Days), to remedy or attempt to remedy any default of the Tenant and in
so doing may make any payments due or alleged to be due by the Tenant to third
parties and may enter upon the Leased Premises to do any work or other things
therein, and in such event all costs and expenses of the Landlord in remedying
or attempting to remedy such default shall be payable by the Tenant to the
Landlord forthwith upon demand; and
(b) shall have the same rights and remedies in the event of any
non-payment by the Tenant of any amounts payable by the Tenant under any
provision of this Lease as in the case of non-payment of Rent; and
(c) if the Tenant shall fail to pay any Rent or other amount from time to
time payable by it to the Landlord promptly when due, the Landlord shall be
entitled, if it shall demand it, to interest thereon at a rate per annum which
is equal to the interest rate set from time to time by The Royal Bank of Canada
as its reference rate for Canadian dollar commercial loans made by it in Canada
plus five percent (5%) from the date upon which the same was due until actual
payment thereof.
54.02 Enforcement Expenses. The Tenant shall pay to the Landlord, as additional
rent, all costs and expenses incurred by the Landlord in the enforcement of the
covenants, provisions and terms of this Lease, including without limitation,
legal costs on a solicitor and his own client basis.
54.03 Cost to Remedy. Without in any way limiting the generality of the
provisions of Section 54.01, the Tenant shall pay to the Landlord all expenses
incurred by the Landlord pursuant to Section 15.01 or to remedy or attempt to
remedy default by the Tenant in respect of any of its covenants under this
Lease, including without limitation, a default under Sections 15.02, 15.03,
15.04, 21.01 and 43.01, an amount equal to the Landlord's costs incurred in
remedying or attempting to remedy the Tenant's default, These costs shall be
paid by the Tenant to the Landlord within ten (10) days after delivery to the
Tenant of an invoice therefor. The Landlord's cost shall be equal to:
(i) the Landlord's expenses (including without limitation amounts paid
to its consultants) plus ten percent (10%) of such expenses for the
Landlord's overhead; plus
(ii) ten percent (10%) of (i) above for the Landlord's profit.
NON-WAIVER
55.01 Non-Waiver. No condoning, excusing, or overlooking by the Landlord of any
default, breach or non-observance by the Tenant at any time or times in respect
of any covenants, provisos or conditions herein contained shall operate as a
waiver of the Landlord's rights hereunder in respect of any continuing or
subsequent default, breach or non-observance, or so as to defeat or affect such
continuing or subsequent default or breach, and no waiver shall be inferred from
or implied by anything done or omitted by the Landlord save only express waiver
in writing. All rights and remedies of the Landlord in this Lease contained
shall be cumulative and not alternative. Unless otherwise expressly stated to
the contrary, both the Indemnifier's and the Tenant's obligations under this
Lease, shall survive the expiry or early termination, disclaimer or repudiation
of this Lease and shall remain in full force and effect until fully complied
with,
OVERHOLDING
56.01 Overholding. If the Tenant shall continue to occupy the Leased Premises
after the expiration of this Lease or any renewal thereof without any further
written agreement, the Tenant shall be a monthly tenant at a monthly base rent
payable in advance on the first day of each month during the period of such
overholding, equal to either:
(a) the then current market base rent as determined by the Landlord but in no
event shall such current market base rent be less than base rent payable
during the last month of the then expiring Term or renewal term as the
case may be;
or at the Landlord's sole option,
<PAGE>
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(b) a sum equal to two (2) times the monthly instalment of base rent payable
during the last month of the then expiring Term or renewal term as the
case may be;
and otherwise on the terms and conditions herein set out, except as to base rent
and as to the length of tenancy. Nothing contained in this Section shall
preclude the Landlord from exercising all of its rights set out in this Lease or
at law or in equity including, without limitation, the taking of any action for
recovery of possession of the Leased Premises. The Tenant shall promptly
indemnity and hold harmless the Landlord from and against all liabilities and
damages suffered by the Landlord together with all liabilities, damages, claims,
suits and actions brought against the Landlord as a result (whether direct or
indirect) of the Tenant remaining in possession of all or part of the Leased
Premises after the expiry of the Term and all costs incurred by the Landlord as
a result thereof, including legal fees (on a solicitor and his own client basis)
and consultant's fees. The Tenant shall not interpose any counterclaim in any
proceeding, whether summary or otherwise, based on an overholding by the Tenant.
DIRECTORY BOARD
57.01 Directory Board. The Tenant shall be entitled, at its expense, to have its
name shown upon the Directory Board of the Building, and the Landlord shall
design the style of such identification, and the Directory Board shall be
located in an area designated by the Landlord in the main lobby.
ACCRUAL OF RENT
58.01 Accrual of Rent. Rent shall be considered as annual and accruing from day
to day, and where it becomes necessary for any reason to calculate such Rent for
an irregular period of less than (1) year an appropriate apportionment and
adjustment shall be made. Where the calculation of any Rent is not made until
after the termination of this Lease, the obligation of the Tenant to pay such
Rent shall survives the termination of this Lease and such amounts shall be
payable by the Tenant upon demand by the Landlord.
TRANSFER BY LANDLORD
59.01 Transfer By Landlord. In the event of a sale, transfer, lease or other
form of disposition by the Landlord of the Building or a portion thereof
containing the Leased Premises or the assignment by the Landlord of this Lease
or any interest of the Landlord hereunder, the Landlord shall, without further
written agreement, to the extent that such purchaser, transferee, lessee,
assignee, mortgagee or recipient of the said interest of the Landlord has become
bound by the covenants and obligations of the Landlord hereunder, be freed,
released and relieved of all liability or obligations under this Lease, accruing
after that sale, transfer or lease is effective and the Tenant, on its own
behalf and on behalf of any successor or assign of it shall not commence any
proceeding or make any claim or permit same to be commenced or made which would
or may result in a claim over against the Landlord being made.
NOTICE
60.01 Notice. Any notice, request, statement or other writing pursuant to this
Lease shall be deemed to have been given if sent by registered prepaid post as
follows:
TO THE LANDLORD:
1801 Woodward Drive,
Ottawa, Ontario
K2C OR3
or such other address as the Landlord shall notify the Tenant in writing at any
time or from time to time;
TO THE TENANT:
At the Leased Premises
or at the last address known to the Landlord and such notice shall be deemed to
have been received by the Landlord or Tenant as the case may be, on the fourth
business day after the date on which it shall have been so mailed unless prior
to the deemed receipt thereof there shall have occurred an actual or threatened
interruption of postal services in which event the
<PAGE>
-27-
notice shall not be deemed to have been received until it has actually been
received.
60.02 When Sufficiently Given. Notice shall also be sufficiently given if and
when the same shall be personally delivered, in the case of notice to the
Landlord, to an executive officer of the Landlord, and in the case of the
Tenant, to the Leased Premises. Such notice, if personally delivered, shall be
conclusively deemed to have been given and received at the time of such personal
delivery. If in this Lease two or more persons are named as Tenant such notice
shall also be sufficiently given if and when the same shall be delivered to the
Leased Premises. Provided that the Landlord may, by notice to the Tenant, from
time to time designate another address in Canada to which notices are to be
mailed such designation to be effective upon the deemed or actual receipt of
same as provided for in Sections 60.01 or 60.02, as the case may be.
LAWS OF PROVINCE APPLY
61.01 Laws of Province Apply. This Lease shall be deemed to have been made in
and shall be construed in accordance with the laws of the Province in which the
Building is situate.
PAYMENT IN CANADIAN FUNDS
62.01 Payment in Canadian Funds. The Rent reserved herein and all other amounts
required to be paid or payable under the provisions of this Lease shall be paid
in lawful money of Canada.
LEASE ENTIRE AGREEMENT
63.01 Lease Entire Agreement. The Tenant acknowledges that there are no
covenants, representations, warranties, agreements or conditions expressed or
implied, collateral or otherwise forming part of or in any way affecting or
relating to this Lease save as expressly set out in this Lease and that this
Lease, the Schedules attached and the Rules and Regulations, constitute the
entire agreement between the Landlord and Tenant and may not be modified except
as herein explicitly provided or except by subsequent agreement in writing of
equal formality hereto executed by the Landlord and the Tenant.
BINDING EFFECT
64.01 Binding Effect. Subject to the provisions of this Lease respecting
assignment or subletting by the Tenant with the consent of the Landlord, this
Lease shall enure to the benefit of and be binding upon the parties hereto and
their respective heirs, executors, administrators, other legal representatives,
successors and permitted assigns (as the case may be). All covenants and
agreements herein contained to be observed and performed by the Tenant shall be
joint and several if more than one person executes this Lease as Tenant.
REGISTRATION AND PLANNING ACT
65.01 Registration and Planning Act. The Tenant covenants and agrees with the
Landlord that the Tenant will not register or record this Lease against the
title to the Lands, except by way of notice or short form of lease executed by
or on behalf of the Landlord. The Tenant further covenants and agrees with the
Landlord that any such notice or short form of lease so registered or recorded
shall not disclose any financial terms of this Lease, which financial terms
include, without limiting the generality of the foregoing, rental rates, rent
free, rent deferred and rent reduced periods, work to be performed by or on
behalf of the Landlord, and any other form of tenant inducements.
INTERPRETATION
66.01 Interpretation. The use, herein, of the neuter singular pronoun to refer
to the Landlord or the Tenant is deemed a proper reference even though the
Landlord or the Tenant is an individual, a partnership. a corporation or other
entity or a group of two or more individuals, partnerships, corporations or
other entities. Any grammatical changes required to make the provisions of this
Lease apply in the plural sense where the Landlord, the Tenant or any other
party hereto, comprises more than one entity and to corporations, associations,
partnerships or individuals, males or females, shall, in all instances, be
assumed as though fully expressed in each instance. Time shall be of the essence
of this Lease. Whenever a word importing the singular or plural is used in this
Lease such word shall include the plural and singular respectively.
SEVERABLE
<PAGE>
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67.01 Severable. The Landlord and the Tenant agree that all of the provisions of
this Lease are to be construed as covenants and agreements as though the words
importing such covenants and agreements were used in each separate paragraph
hereof. Should any provision or provisions of this Lease be illegal or not
enforceable it or they shall be considered separate and severable from this
Lease and its remaining provisions shall remain in force and be binding upon the
parties hereto as though the said provision or provisions had never been
included.
CAPTIONS
68.01 Captions. The captions appearing within the body of the Lease have been
inserted as a matter of convenience and for reference only and in no way define,
limit or enlarge the scope or meaning of this Lease or of any provision hereof.
ARBITRATION
69.01 Arbitration. If in accordance with any provision of this Lease any matter
is required or permitted to be submitted to arbitration, that matter or
disagreement will be submitted to arbitration by three (3) arbitrators. One is
to be named by the Landlord and one by the Tenant within seven (7) days of the
giving of notice by either party that the matter or disagreement is being
submitted to arbitration. The two (2) arbitrators thus chosen shall forthwith
select a third arbitrator. If the two arbitrators thus chosen fail to select a
third arbitrator within fifteen (15) days after their appointment, either party
may apply to a Judge of the Ontario Court (General Division) in the Judicial
District of Ottawa-Carleton for the purpose of having such a third arbitrator
appointed, and that Judge should appoint the third arbitrator. Each arbitrator
appointed or named hereunder must be a member in good standing of either the Law
Society of Upper Canada or the Appraisal Institute of Canada for at least five
(5) years. The award of the arbitrators shall be made not later than forty-five
(45) days after the appointment of the last of the arbitrators. The expense of
the arbitration shall be borne equally between the parties. If either party
neglects or refuses to name its arbitrator within ten (10) days after naming of
the arbitrator of the other party, or neglects or refuses to proceed with the
arbitration, the arbitrator named by the other party shall proceed and determine
the matter in dispute. Any award by the arbitrators or an arbitrator under this
paragraph is final.
LEASEHOLD IMPROVEMENT ALLOWANCE
70.01 Leasehold Improvement Allowance. In accordance with Section 26.01, the
Landlord shall complete all initial leasehold improvements required by the
Tenant at the cost of the Tenant, and in respect thereof the Landlord shall
provide an improvement allowance to the tenant in an amount equal to thirty-four
thousand one hundred seventy-two dollars ($34,172.00) ("Improvement
Allowance"). The invoiced cost of the leasehold improvements completed by the
Landlord under Section 26.01 shall be set off against the Improvement Allowance
payable by the Landlord to the Tenant and the Tenant shall become entitled to
the remainder, if any, of the Improvement Allowance upon the fulfilment of the
following conditions:
(a) the leasehold improvements to the Leased Premises required by the
Tenant have been completed in accordance with the provisions of
Section 26.01;
(b) the Term has begun, the Tenant has opened for business in the Leased
Premises and there is no default by the Tenant under this Lease; and
(c) all appropriate Construction Lien Act time periods have expired and
no lien is or may be claimed with respect to the leasehold
improvements to the Leased Premises.
The remainder of the Improvement Allowance payable to the Tenant as aforesaid
shall be credited against base rent payable for the next immediately succeeding
month or months.
If actual costs and expenses pertaining to the preparation and completion of the
leasehold improvements exceeds the Improvement Allowance, the Tenant shall be
responsible for and shall forthwith pay to the Landlord the amount of such
excess and such excess amount shall be considered as additional rent hereunder.
PARKING
71.01 Parking. During the Term and any renewal thereof, the Tenant shall lease
one parking space per 1,000 square feet of Rentable Area of the Leased Premises
for a total of one (1) space. During the first twelve months of the Term the
monthly base rent for the parking space
<PAGE>
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payable by the Tenant to the Landlord (the "Parking Charge") shall be one
hundred thirty dollars ($130.00). Thereafter, the Parking Charge payable by the
Tenant shall be the prevailing market rent charged by the Landlord for parking
spaces in the parking garage of the Building. The Parking Charge shall be
payable by the Tenant to the Landlord on the first day of each month during the
Term and any renewal thereof.
IN WITNESS WHEREOF the parties hereto have executed this Lease.
SIGNED, SEALED AND DELIVERED ) Arnon Development Corporation Limited
in the presence of ) as manager on behalf of the owners of
) the Lands
)
)
)
) Per: /s/ [ILLEGIBLE]
) --------------------------
) (seal)
) Name: Gilad A. Vered
) -----------------------------
)
) Title: Secretary
) ----------------------------
) I have the authority to bind the
) corporation.
)
) IT Staffing Ltd.
)
)
) Per:
) --------------------------
) (seal)
) Name: Declan A. French
) -----------------------------
)
) Title: President
) ----------------------------
) I/We have the authority to bind
) the corporation.
)
) Per: /s/ [ILLEGIBLE]
) ------------------------------
)
) Name:
) -----------------------------
)
) Title:
) ----------------------------
<PAGE>
Schedule "1" - Legal Description
ALL AND SINGULAR that certain parcel or tract of lands and premises
situate, lying and being in the City of Ottawa, in the Regional Municipality of
Ottawa-Carleton, and being composed of Lots 56 and 57 on the south side of
Nepean Street in the City of Ottawa aforesaid, the said lots forming part of the
Original Lot Letter "D" in Concession Letter "C" fronting on the River Rideau in
the Township of Nepean said lots being laid down on a plan prepared by Thistle &
Baldwin, O.L.S. dated the 4th day of August, 1867, and registered in the
Registry Office for the City of Ottawa on the 3rd day of April 1868 being Plan
No. 2996.
<PAGE>
Schedule "2"
- --------------------------------------------------------------------------------
[FLOOR MAP OMITTED]
- --------------------------------------------------------------------------------
The purpose of this schedule, is to show the approximate location of the Leased
Premises and its contents are not intended as a representation as to the precise
size or dimensions of the Leased Premises
<PAGE>
SCHEDULE "3" - METHOD OF FLOOR MEASUREMENT
(a) The Rentable Area of a floor shall be computed by measuring to
the inside surface of the exterior glass finishes, or if no glass finish, to the
inside surface of exterior walls, excluding only telephone, janitorial, garbage,
mechanical and electrical closets serving the whole Building, elevator shafts,
flues, stacks, pipe shafts and vertical ducts with their enclosing walls, and
stairs, provided such stairs do not exclusively serve a tenant occupying space
on more than one floor. No deductions shall be made for columns and projections
necessary to the Building. Rentable Area shall, without limiting the generality
of the foregoing, include washrooms, telephone, mechanical, electrical, garbage
and janitorial closets not serving the whole Building and elevator lobbies.
(b) The Useable Area of leasable premises on a multi-tenancy floor
shall be calculated on a floor by floor basis. If the leasable premises consist
of or include area on more than one floor, the total Useable Area of such
leasable premises shall be calculated by adding together the Useable Area of
that part of the leasable premises on each floor comprising the same. The
Useable Area of leasable premises on a multi-tenancy floor shall be computed by
measuring to the finished surface of the office side of the corridor and other
permanent walls, to the centre of partitions that separate the leasable premises
being measured from adjoining leasable premises (if any), and to the inside
surface of exterior glass finishes, or if no glass finish to the inside surface
of the exterior walls. No deductions shall be made for columns and projections
necessary to the Building.
(c) The Useable Area of a multi-tenancy floor shall be equal to the
sum of all Useable Areas on such floor.
(d) The Useable Area of a single tenancy floor shall be equal to the
Rentable Area of such floor.
(e) The Rentable Area of leasable premises shall be calculated on a
floor by floor basis. If the leasable premises being measured consist of or
include area on more than one floor, the total Rentable Area of such leasable
premises shall be calculated by adding together the Rentable Area of that part
of the leasable premises on each floor comprising the same. The Rentable Area of
leasable premises on a multi-tenancy floor shall be calculated by dividing the
Useable Area of the leasable premises on a floor by the Useable Area of such
floor and multiplying the result by the Rentable Area of such floor. The
Rentable Area of ground floor leasable premises shall be calculated by
multiplying the Useable Area of the leasable premises in question by a common
area factor determined by the Landlord.
(f) The Total Rentable Area of the Building shall be equal to the
sum of the Rentable Areas of those parts of the Building designated from time to
time by the Landlord for lease as office or retail premises, whether actually
leased or not.
Notwithstanding the foregoing, the parties acknowledge and agree that:
(a) The Usable Area of the Leased Premises is 1,291.25 square feet;
(b) The Rentable Area of the Leased Premises is 1,417 square feet; and
(c) The Total Rentable Area of the Building is 94,102 square feet.
The parties further acknowledge and agree that the Total
Rentable Area of the Building may on written notice to the Tenant be adjusted
from time to time by the Landlord, acting reasonably, to reflect any structural,
functional or other change affecting the same.
<PAGE>
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SCHEDULE "4"
RULES AND REGULATIONS
1. The Tenant shall not place or permit to be placed or left in or upon any
part of the Building outside of the Leased Premises, or in or upon any
part of the Building of which the Leased Premises form a part, any debris
or refuse.
2. The Landlord shall permit the Tenant and the Tenant's employees and all
persons lawfully requiring communication with them to have the use during
Normal Business Hours in common with others entitled thereto of the main
entrance and the stairways, corridors, elevators or other mechanical means
of access leading to the Leased Premises, save and except when repair and
maintenance undertaken by the Landlord necessitates the non-use or
restricted use of the same. At times other than during Normal Business
Hours the Tenant and the employees of the Tenant and persons lawfully
requiring communication with the Tenant shall have access to the Building
and to the Leased Premises in accordance with procedures determined by the
Landlord.
3. The Landlord shall permit the Tenant and the employees of the Tenant in
common with others entitled thereto, to use the washrooms on the floor of
the Building on which the Leased Premises are situated or, in lieu
thereof, those washrooms designated by the Landlord, save and except when
the general water supply may be turned off from the public main or at such
other times when repair and maintenance undertaken by the Landlord
necessitates the non-use or restricted use of such facilities.
4. The Tenant shall not permit any cooking or smoking in the Leased Premises.
5. The sidewalks, entries, passages, escalators, elevators and staircases
shall not be obstructed or used by the Tenant, its agents, servants,
contractors, invitees or employees for any purpose other than ingress to
and egress from the offices. The Landlord reserves entire control of all
parts of the Building employed for the common benefit of the tenants and
without restricting the generality of the foregoing, the sidewalks,
entries, corridors and passages not within the Leased Premises, washrooms,
lavatories, air-conditioning closets, fan rooms, janitor's closets,
electrical closets and other closets, stairs, escalators, elevator shafts,
flues, stacks, pipe shafts and ducts and shall have the right to place
such signs and appliances therein, as it may deem advisable, provided that
ingress to and egress from the Leased Premises is not unduly permanently
impaired thereby.
6. The Tenant, its agents, servants, contractors, invitees or employees,
shall not bring in or take out, position, construct, install or move any
safe, business machinery or other heavy machinery or equipment or anything
liable to injure or destroy any part of the Building without first
obtaining the consent in writing of the Landlord. In giving such consent,
the Landlord shall have the right in its sole discretion, to prescribe the
weight permitted and the position thereof, and the use and design of
planks, skids, or platforms, to distribute the weight thereof. All damage
done to the Building by moving or using any such heavy equipment or
machinery shall be repaired at the expense of the Tenant. The moving of
all heavy machinery or equipment or furniture shall occur only by prior
arrangement with the Landlord. Safes and other heavy office equipment and
machinery shall be moved through the halls and corridors only upon steel
bearing plates. No freight or bulky matter of any description will be
received into the Building or carried in the elevator except during hours
approved by the Landlord.
7. The Tenant shall not place or cause to be placed any additional locks upon
any doors of the Leased Premises. Two keys shall be supplied to the
Landlord for each entrance door to the Leased Premises and all locks shall
be standard to permit access to the Landlord's master key. If additional
keys are requested, they must be paid for by the Tenant. No one, other
than the Landlord's staff, will have keys to the outside entrance doors of
the Building.
8. The water closets and other water apparatus shall not be used for any
purpose other than those for which they were constructed, and no
sweepings, rubbish, rags, ashes or other substances shall be thrown
therein. Any damage resulting by
<PAGE>
-2-
misuse shall be borne by the Tenant by whom or by whose agents, servants,
or employees the same is caused. The Tenant shall not let the water run
unless it is in actual use.
9. The Tenant shall not deface or mark any part of the Building, or drive
nails, spikes, hooks or screws into the walls or woodwork of the Building.
10. The Tenant shall not do or permit anything to be done in the Leased
Premises, or bring or keep anything therein which will in any way increase
the risk of fire or the rate of fire insurance on the said Building or on
property kept therein, or obstruct or interfere with the rights of other
tenants or in any way injure or annoy them or the Landlord, or violate or
act at variance with the laws relating to fires or with the regulations of
the Fire Department, or with any insurance upon said Building or any part
thereof, or violate or act in conflict with any of the rules and
ordinances of the Board of Health or with any statute or municipal by-law.
11. No one shall use the Leased Premises for sleeping apartments or
residential purposes, or for the storage of personal effects or articles
other than those required for business purposes.
12. The Tenant shall permit window cleaners to clean the windows of the Leased
Premises during Normal Business Hours.
13. Canvassing, soliciting and peddling in or about the Building and in the
parking area are prohibited.
14. The Tenant shall not receive or ship articles of any kind except through
facilities, and designated doors and at hours designated by the Landlord
and under the supervision and in compliance with the procedures of the
Landlord.
15. It shall be the duty of the respective tenants to assist and co-operate
with the Landlord in preventing injury to the premises demised to them
respectively.
16. No inflammable oils or other inflammable, dangerous or explosive materials
save those approved in writing by the Landlord's insurers shall be kept or
permitted to be kept in the Leased Premises.
17. No bicycles or other vehicles shall be brought within the Building without
the consent of the Landlord.
18. No animals or birds shall be brought into the Building without the consent
of the Landlord.
19. The Tenant shall not install or permit the installation or use of any
machine dispensing goods for sale in the Leased Premises or the Building
or permit the delivery of any food or beverage to the Leased Premises
without the approval of the Landlord or in contravention of any
regulations fixed or to be fixed by the Landlord. Only persons authorized
by the Landlord shall be permitted to deliver or to use the elevators in
the Building for the purpose of delivering food or beverages to the Leased
Premises.
20. If the Tenant desires telegraphic or telephonic connections, the Landlord
will direct the electricians as to where and how the wires are to be
introduced, and without such directions no boring or cutting for wires
will be permitted. No gas pipes, water pipes or electric wire will be
permitted which has not been ordered or authorized by the Landlord. No
outside radio or television aerials shall be allowed on the Leased
Premises, the Building or the Lands without prior authorization in writing
by the Landlord.
21. The Tenant shall not cover or obstruct any of the skylights and windows
that reflect or admit light into any part of the Building except for the
proper use of approved blinds and drapes.
22. Any hand trucks, carryalls, or similar appliances used in the Building
with the consent of the Landlord, shall be equipped with rubber tires and
slide guards and such other safeguards as the Landlord shall require.
<PAGE>
-3-
23. The Tenant shall not permit undue accumulations of garbage, trash, rubbish
or other refuse within or without the Leased Premises or cause or permit
objectionable odours to emanate or be dispelled from the Leased Premises.
24. The Tenant shall not place or maintain any supplies or other articles in
any of the common areas, including without limitation, any vestibule or
entry to the Leased Premises, on the footwalks adjacent thereto or
elsewhere to the exterior of the Leased Premises or the Building.
25. The Landlord shall have the right to amend the rules and regulations and
to make other and further reasonable rules and regulations, and the same
shall be kept and observed by the Tenant, its employees, invitees and
licensees.
<PAGE>
SCHEDULE "5"
BUILDING SERVICE & CLEANING
1. EXTERIOR GENERAL
1. Nightly, keep polished and thoroughly clean at all times all
ornamental metal work, metal entrance doors and push bars of the
building.
2. Keep the main and service entrances clear of debris, such as paper,
cartons, refuse cans, etc.
3. Remove slush and sand accumulations around entrances as conditions
demand.
4. Sweep loading platforms nightly and keep clear of debris at all
times.
5. Clean windows, inside and out, including sash, frames and sills
twice yearly.
2. INTERIOR GENERAL
1. If the Landlord determines that uniformed staff should be on duty
then the same shall be maintained on duty during the working hours
of the occupants to perform the specified work in entrances,
lobbies, public areas and servicing of washrooms, all as the
Landlord may determine.
2. Freight Receiving Room
1. Sweep nightly using a dust control method.
2. Wash nightly if required for cleanliness.
3. Dust doors and wash free from markings, once per week.
4. Garbage rooms and waste paper rooms to be cleaned daily.
3. CLEANING
1. Dust high ledges, tops of partitions, pipes and other high areas
where dust collects every three months.
2. Clean notice boards, interior of fire hose cabinets and display show
cases once per month, keep glass clean as required.
3. Dust and clean frames, etc., around cabinets and notice boards
weekly. Keep bright metal finishes polished on a daily basis.
4. Clean ceiling and wall air diffusers and metal work every six (6)
months.
5. Dust all other air grills monthly and wash every six (6) months.
6. Remove finger and other marks from door-kick and hand-plates daily.
Clean and polish as required.
7. Dust door grills once per month and wash with mild soap solution
every three months.
8. Thoroughly wash, clean and disinfect water fountains nightly. Odour
of disinfectant shall not be objectionable.
9. Clean wood and metal door frames throughout the Building of finger
and scuff-marks as required.
4. MAIN ENTRANCE AND MAIN LOBBIES
1. Sweep, wash and spray buff floors nightly using a dust control
method.
<PAGE>
2. Remove foot grills and clean recess pans as Landlord may determine.
3. Remove mats and clean on both sides nightly.
4. Keep main entrances, main lobbies and corridors free of debris and
sweep as required.
5. Keep glass in doors and adjacent glass clean on both sides as
required.
5. STAIRS AND LANDINGS
1. Sweep stairs and landings, using a dust control method, and wash
daily.
2. Dust hand railings daily; balusters, posts and stringers weekly.
6. ELEVATORS
1. Sweep and wash floors nightly, vacuum carpet nightly.
2. Polish hand rails nightly.
3. Dust doors, frames and mirrors and remove finger marks nightly.
4. Dust and wash ceilings, light fixtures and diffusers weekly.
5. Clean stainless steel, if any, nightly.
7. WASHROOMS
1. Floors: Sweep, using a dust control method, and wash nightly. Bases
and corners must be left clean. Strip and refinish as required.
2. Clean and disinfect toilet seats, bowls, urinals, wash basin and
body contact points on water taps, dispenser, receptacles, door
plates, and flushing handles daily.
3. Dust and clean flush tank, dispenser, receptacles, mirrors, shelves,
and all exposed piping daily. Also traps and brackets, etc., under
basins, as required.
4. Empty, wash and disinfect sani-cans and replace sani-bags daily.
5. Dust and clean partitions weekly.
6. Wash walls as required.
7. Remove waste paper on a daily basis.
8 Descale toilet bowls and urinals weekly.
9. Wash and disinfect refuse receptacles weekly.
10. Replenish soap dispensers, toilet paper and towel dispensers
nightly.
11. Change linen towels if any in cabinets as required.
8. RUGS. CARPETS AND DRAPES
1. Vacuum rugs and carpets nightly.
2. Remove spots and stains as required.
9. BROADLOOM (Wall to Wall)
1. Vacuum nightly.
2. Remove spots and stains as required.
3. Shampoo and steam clean yearly.
<PAGE>
10. FLOOR - OFFICE AREAS
1. Sweep nightly, using a dust control method and wash nightly. Spray
buff operation once per week.
2. Scrub well, removing wax, every twelve (12) months. Remove wax
accumulation under furniture and radiators. Rinse with clean water.
Apply two coats of wax and buff each coat.
11. FLOORS - CORRIDORS. RESILIENT COVERING
1. Sweep and wash nightly, using a dust control method.
2. Spray buff operation nightly.
3. Strip and wash once yearly.
12. FLOORS - TERRAZZO. MARBLE OR CERAMIC TILE
1. Sweep and wash nightly, using a dust control method.
2. Spray buff operation nightly.
3. Strip and wash once yearly.
13. BASEMENT AND STORAGE AREAS
Sweep and wash storage areas and other concrete areas in the
building as determined by the Landlord.
14. WALLS AND PARTITIONS
1. Spot clean interior walls and partitions weekly.
2. Dust baseboards weekly. Keep free of mop streaks, floor wax, and
splash marks at all times.
3. Dust and clean ceramic tile walls monthly.
4. Dust marble walls, pillars and frames weekly. Wash every three (3)
months.
15. COUNTERS
Dust or wash counter tops and facings as required;
16. INTERIOR GLASS
1. Clean glazed doors of fingermarks daily. Wash as required.
2. Wash interior glass partitions and door transom glass every six (6)
months.
3. Clean and wash glass partitions, dividers or walls in the Tenant's
reception area, of finger marks daily.
17. LIGHT FIXTURES
Remove accumulated debris and insects as required.
18. FURNITURE AND FIXTURES
1. Dust horizontal surfaces of cleared office furniture, including
cabinets, weekly, using a dust control method.
2. Dust exposed vertical surfaces of furniture weekly.
3. Dust boardroom and executive office furniture on both vertical and
horizontal surfaces daily.
<PAGE>
4. Dust empty shelving weekly.
5. Dust bookcases weekly. Do not remove books. Clean glass doors on
both sides once per month.
6. Vacuum upholstered furniture once per month. Dust leather and fabric
upholstered furniture daily and damp wipe once per month.
7. Do not stack chairs, waste paper receptacles, etc. on desks or
tables during cleaning operations.
19. WASTE PAPER BASKETS
Empty and damp wipe nightly. Wash and disinfect inside and out
weekly.
20. INTERPRETATION
For the purposes of this Schedule "5" the words "as required" shall
be deemed to mean "as required determined by the Landlord acting reasonably" and
the words "Nightly" and "Daily' shall be deemed to mean "five (5) times per
week".
21. CLEANING OPERATIONS
All cleaning operations contemplated by this Schedule "5" shall be done during
those hours designated from time to time by the Landlord for the performance
<PAGE>
Exhibit 10.10
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made effective as of the 1st day of January 1998.
AMONG:
IT STAFFING LTD., a corporation incorporated and subsisting under the
laws of the Province of Ontario (hereinafter called "IT")
AND:
JOHN IRWIN, an individual residing in the Town of Markham, in the
Province of Ontario (hereinafter called the "Vendor")
AND:
INTERNATIONAL CAREER SPECIALISTS LTD., a corporation incorporated and
subsisting under the laws of the Province of Ontario (hereinafter
called "ICS").
AREAS:
The Vendor is the legal and beneficial owner of 100% of the issued and
outstanding shares in capital stock of ICS.
IT desires to acquire, on the terms and conditions as set forth below,
100% of the issued and outstanding shares in the capital stock of ICS.
The Vendor desires to sell, on the terms and in the manner set forth
below, 100% of the issued and outstanding shares in the capital stock of ICS.
The Vendor, as a consequence of the payment of the purchase price will
become a significant shareholder of IT.
NOW THEREFORE THIS AGREEMENT STATES THAT in consideration of the
premises set forth above, the mutual covenants and agreements and such other
good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
DEFINITIONS
Capitalized terms defined in the Employment Agreement or the Share
Option Agreement, and not otherwise defused in this Agreement, shall have the
same meanings where used in this Agreement. Where used in this Agreement the
following terms shall have the following meanings:
(a) "Affiliate" means any person, firm or corporation (excepting the IT)
who, directly or indirectly through other corporations, or trusts,
has any interest, other than by way of pledge, in any of the
outstanding shares of IT and any firm or corporation controlled,
directly or indirectly through other corporations, firm or trusts, by
any one or more of such persons and any person who is related by blood
relationship, marriage or adoption to any such person;
(b) "Closing Conditions" means, collectively, the IT Conditions and the
Vendor Conditions;
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(c) "Employment Agreement" means the Employment Agreement of even date
herewith between ICS, as employer, and the Vendor, as employee, in the
fortn attached as Schedule "A" hereto;
(d) "Issue Date" means the date of completion of any Public Offering;
(e) "Public Offering" has the meaning ascribed thereto in the Share Option
Agreement;
(f) "Securities" means, collectively, the ICS Shares and the IT Shares;
(g) "Share Option Agreement" means the Share Option Agreement of even date
herewith between the Vendor, as optionee, and IT, as optionor;
(h) "Target Date" means the earliest of the following dates:
July 29. 1999; and
any date on which:
(A) IT ceases to carry on its business; or
(B) IT makes a general assignment for the benefit of its
creditors or a proposal under the Bankruptcy and
Insolvency Act or is declared bankrupt or a receiver
is appointed for IT and such appointment is not
stayed within 10 business days thereof, or a
proposal or plan of arrangement or restructuring
under any applicable laws relating to bankruptcy
and/or insolvency, or any similar laws is made by or
for it; or
(C) an order is made, or an elective resolution is passed
by IT, for the winding-up, liquidation or dissolution
of IT.
2. PURCRASE OF SHARES
(a) Closing. Closing of the transactions contemplated under this
Agreement shall occur at the offices of IT on May 15, 1998, or
such later date as all the parties might agree in writing (the
"Closing Date"), provided, however, that closing shall not in
any event occur at any date later than May 26, 1998, after
which date this Agreement shall (if closing has not occurred)
be deemed tenti'mated and of no furdier force or effect and
the Deposit deemed forfeited.
(b) Purchase Price, in aggregate, is $ 1,000,000 paid as follows:
(i) the aggregate purchase price for 50% of the
issued and outstanding shares in the capital
stock of ICS is $500,000 and is to be paid
as follows:
(A) a non-refundable deposit (the "Deposit") in the sum
of $30,000, by cheque;and
(B) on closing, a further $470,000 by certified cheque.
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the aggregate price for 50% of the issued and outstanding
shares in the capital stock of ICS is $5,500,000 and is to be
paid and satisfied:
(A) by IT's issuing to the Vendor on the Closing Date,
from treasury, 100,000 common shares in the capital
stock of IT.
(c) Delivery of share certification. On the Closing Date: the
Vendor shall deliver to IT share certificates represent
100% of the issued and outstanding shares in ICS (the "ICS
Shares"), duly endorsed in blank for transfer to IT; and
IT shall deliver to the Vendor share certificates
representing 100,000 common shares in the capital of IT
(the "IT Shares"), duly authorized, issued and registered
in IT's corporate minute books/ledgers in the name of
the Vendor.
3. SPECIAL RIGHTS OF VENDOR.
At any time on or within 90 days following any Target Date, and if as
at such date no Public Offering has been completed, the Vendor may at his option
(exercised by written notice however to IT) exercise any one or more of the
following rights, hereby granted to it:
(a) to require IT to purchase from the Vendor all its IT Shares,
in consideration of a purchase price of either (at the option
of IT):
the return to the Vendor, free and clear of all
encumbrances, charges or claims of any kind 50% of the
ICS Shares originally purchased by IT from the Vendor
pursuant to this Agreement; or
$100,000, paid by certified cheque;
(b) to terminate his employment under the Employment Agreement and
to require IT, and ICS to release and discharge the Vendor of
any obligations on its part to be performed or observed under
any of this Agreement, any Transaction Documents or any other
agreements binding on it, existing otherwise by law based on
any of the Vendor's employment, appointment as director or
officer or otherwise, or its status at any relevant time as a
fiduciary or as a holder or former holder of any shares in
either IT or ICS, or otherwise applicable to the Vendor in any
capacity whatsoever, to refrain from freely competing directly
or indirectly, in any manner, with ICS or IT, or from
soliciting third parties (including without limitation any
customers or former customers of ICS), to the fullest extent
as though the Vendor had never sold the ICS Shares to IT and
the tmmactions contemplated under the Transaction Documents
never occurred, and each of IT and ICS shall be deemed to have
consented to such matters upon the date of delivery by the
Vendor of any notice under this Section invoking this right;
in such event, IT and ICS shall be deemed further to have
consented to the Vendor's using thereafter in a competing
business any business name or style at any time previously
used by ICS, including without limitation the names
"International Career Specialists Ltd." and "ICS", and if so
requested by the Vendor, ICS and IT shall effect a change
(non-continuing) to ICS's corporate name and any required
business styles.
4. FILING ELECTIONS.
The Vendor and IT shall elect in prescribed form and manner to have
the provisions of subsection 85(1) of the Income Tax Act (Canada) apply to the
transfer of the ICS Shares, and shall deliver the same to Revenue Canada,
Taxation within the time period prescribed under such Act.
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CONDUCT OF BUSINESS.
Interim Operation fom January I st, 1998 until the Target Date:
(a) the Vendor and ICS shall conduct their respective businesses
in the ordinary course, completely autonomously, and 'm a
manner consistent with the Employment Agreement, and they
shall not make any material change in the customary terms and
conditions upon which they historically did business unless
otherwise agreed in writing between IT and the Vendor, with
the following exception:
That John Armstrong of ICS shall be offered a VP title within ICS, a role of
increased responsibility, an annual bonus of one half of one per cent of the
total Production (as such term is defmed in the Employment Agreement) of ICS,
and stock options in IT equal to 50% of this annual bonus;and
(b) the Vendor and ICS shall use their best efforts to preserve
the business organization and goodwill of the suppliers,
staff, customers and Business of ICS, provided that the
Vendor's obligations in this regard shall be as set forth in
the Employment Agreement.
6. VENDOR COVENANTS.
The Vendor hereby covenants that
(a) it shall not take any action or omission which will in any way
delay or prevent the completion of this transaction on the
Closing Date;
(b) all bonuses (other dm any bonuses relating to Asset Proceeds,
or Bonuses as defined in and payable to the Vendor under the
Employment Agreement) are to be forgiven by ICS on closing,
(c) it shall cause the owner of ICS's business premises (in
respect of which ICS is currently in occupation) forthwith
after execution and delivery of this Agreement to enter into a
formal commercial lease (a "Premises Lease") with IT or with
ICS. Said lease will have a 3 year term at rents of
$5,000/month, which rent terms shall apply in respect of an
periods of occupation prior to execution and delivery of such
lease. Other Premises Lease terms shall be as settled between
the parties, consistent otherwise with ICS's past use and
occupation of the premises, and IT shall prepare and submit to
the owner a draft document for this purpose within 10 days of
the date of execution hereof;
(d) ICS will be responsible for its' own share of professional
fees relating to this acquisition; and
(e) it shall keep all details of this Agreement strictly
confidential.
7. IT REPRESENTATIONS AND WARRANTIES.
IT hereby represents to and in favour of the Vendor that the
following statements are and will be true and correct on and as
at the Closing Date:
(a) IT is a corporation duly incorporated and organized and is a
valid and subsisting corporation under the laws of Ontario and
has all necessary corporate power and authority to carried on
by it;
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<PAGE>
(b) IT has the power, full legal right and corporate authority to
enter into, execute and deliver this Agreement, the Employment
Agreement and the Share Option Agreement (collectively, the
"Transaction Documents") and to do all acts and things and
execute and deliver all documents and instruments as are
required hereunder and thereunder to be done, observed or
performed by it in accordance with the terms thereof;
(c) IT has taken all necessary corporate action to authorize the
creation, execution, delivery and performance of the
Transaction Documents and none of the foregoing requires or
will require the consent or approval of any person except such
as has already been obtained and is in full force and effect
nor is any such action in contravention of or in conflict with
its charter or by-laws or resolutions of its directors or
shareholders, the provisions of any statute or regulation or
the terms and provisions of any mortgage, indenture, contract
agreement, instrument, judgment, decree or order to which IT
is a party or by which it or any of its properties or assets
are or may become bound;
(d) each of the Transaction Documents, constitutes a valid and
legally binding obligation of IT enforceable against it in
accordance with its terms;
(e) the IT Shares have been duly and validly issued as fully
paid and non-assessable shares by IT to the Vendor; forms
of share certificates representing the IT Shares have been
validly adopted by IT and the share certificates delivered
to the Vendor have been validly executed and delivered
under the corporate seal of IT by proper officers of IT
duly authorized in that behalf;
(g) the by-laws of IT as enacted by its board of directors are
consistent in all material respects, and do not conflict in
any material way with the provisions of the Transaction
Documents;
(h) attached as Schedule "C" hereto are true copies of IT's
Articles of Incorporation (the "IT Articles"); and
(i) IT is a Canadian-controlled private corporation, within the
meaning of such term as referenced in Section 248 of the
Income Tax Act (Canada).
8. IT COVENANTS:
IT hereby covenants that:
(a) it will be responsible for its' own share of professional fees
relating to this acquisition, which for this purpose shall
include all accounting fees charged from and after April 15,
1998, by Nathan Feiner;
(b) it will be responsible for filing all financial statements and
applicable tax returns subsequent to the Closing Date;
(c) no changes will be made to the commission structure of ICS's
consultants or bank signing authorities before the Issue Date
without the express written consent of the Vendor;
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<PAGE>
(d) no changes will be made to the time to time for ICS
consultant's commission payouts, between when the applicable
cheque is received by ICS from the customer and when the ICS
consultant's commission is paid, currently at a maximum of 72
hours;
(e) it shall indemnify the Vendor from any clause, damages and
legal actions that could occur after the Closing Date;
(f) it shall keep all details of this Agreement strictly
confidential;
(g) it shall not, without the prior written consent of the Vendor
cause or permit, at any time prior to the Issue Date:
(h) any amendment to the IT Articles, other than any amendment
made in anticipation of the Public Offering strictly to remove
any private company restrictions and/or requirements for
d'uector's consent to share transfers;
(i) the taking by ICS of any proceedings with a view to the
dissolution, winding-up or termination of the corporate
existence of ICS;
(j) the creation or assumption after the date hereof of any
mortgage, pledge, charge or other encumbrance on or the
creation of any security interest in any of the Excluded
ICS Assets;
(k) any material change in the undertaking of the business or
operations of ICS;
(l) the making by ICS of any agreements with any of the parties or
any Affiliate of IT not in the ordinary course of business; or
(m) the assumption by ICS of liability for the obligations of any
third party other than IT.
9. VENDOR REPRESENTATIONS AND WARRANTIES.
The Vendor represents and warrants to and in favour of IT that the
following statements are true and correct on and as of the Closing Date:
(a) it has not been induced into entering into this Agreement by
oral or written representation or promises except as to this
Agreement or any other document referenced in this Agreement
to which it is a party;
(b) it is not now and will not be on Closing Date a non-resident
as defined in the Income Tax Act (Canada);
(c) there is no material information or knowledge which has been
withheld from IT relating to ICS which, if known, would cause
the purchaser to alter his decision to purchase the ICS
Shares;
(d) from November 1, 1997, other than the purchase and subsequent
sale of the Pahn Harbor, Florida house, or other transactions,
bonuses, dividends and/or divestitures by or on behalf of ICS
referenced in this Agreement, there are no out of the ordinary
transactions affecting ICS, including but not limited to,
declaration or payment of dividends and payment of declared
bonuses other dm a payment up to a maximum of $100,000 over
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<PAGE>
and above the employment contract as a bonus payment;
(e) IT is relying on the October 31st 1997 financial
statements, copies of which are attached as Schedule "B"
hereto; the Vendor is the beneficial owner of the ICS
Shares with good and marketable title thereto, free and
clear of any mortgage, charge, pledge, security interest
lien, demand or other encumbrance whatsoever;
(g) the Vendor has the right to sell and offer the ICS Shares free
and clear of any mortgage, charge, pledge, security interest,
lien, demand or other encumbrance whatsoever, all in
accordance with the terms of this Agreement and no person,
firm or corporation (other than the Purchaser) has any
agreement or option for the purchase or acquisition of the ICS
Shares from the Vendor;
(h) the share certificates representing the ICS Shares were
duly and validly issued by ICS, and have been validly
executed and delivered under the corporate seal of ICS by
proper officers of ICS duly authorized in that behalf; and
the by-laws of ICS enacted by its board of directors are
consistent in all material respects, and do not conflict in
any material way with the provisions of the Transaction
Documents.
10. EXCLUDED ICS ASSETS.
IT acknowledges that with its consen@ ICS will, prior to the Closing Date
dispose of (and pay out the net proceeds thereof ("Asset Proceeds") to the
Vendor, by way of dividend or bonus) the following assets (collectively the
"Excluded ICS Assets"):
(a) Florida (Pahn Harbor) property (the "Excluded Real Property");
(b) investment in 1242541 Ontario Ltd.;
(c) ICS Stocks/Mutual fund investments with Midland Walwyn of
$71,000 (approximate); and
(d) 1993 Jeep Cherokee; and
(e) pay out to the Vendor, by way of bonus or dividend up to
$ 100,000 of cash in ICS's account.
These assets will not, in any event form part of this transaction, whether or
not they have been disposed of as of the Closing Date, and the parties shall
make appropriate adjustments in the event that any of same is not disposed of
prior to the Closing Date. IT shall cause ICS to pay out to the Vendor by way
of bonus any Asset Proceeds not rendered paid out or distributed prior to the
Closing Date. Any Asset Proceeds received by ICS shall be held in escrow for
the Vendor and shall be immediately thereupon paid over to the Vendor.
IT CLOSING CONDITIONS.
The obligations of the IT hereunder to Purchase the ICS Shares on the
Closing Date is subject to compliance with the following conditions precedent
(the "IT Conditions"), it being agreed that such conditions precedent are for
the exclusive benefit of IT:
(a) the representations and warranties of the Vendor contained
in this Agreement or any other, Transaction Documents shall be
true and correct on and as at the Closing Date;
<PAGE>
(b) all the Transaction Documents and other closing documents as
are contemplated hereby or as are reasonable and appropriate
in the circumstances shall have been executed and delivered by
each of the parties thereto; and
(c) the Vendor shall have complied with its covenants hereunder.
12. VENDOR CLOSING CONDITIONS.
The obligations of the Vendor hereunder to sell the ICS Shares on the
Closing Date is subject to compliance with the following conditions
precedent (the "Vendor Conditions"), it being agreed that such
conditions precedent are for the exclusive benefit of the Vendor:
(a) the representations and warranties of IT contained in this
Agreement or any other Transaction Documents shall be true and
correct on and as at the Closing Date;
(b) the IT Articles shall be in form and substance satisfactory to
the Vendor, acting reasonably;
(c) all the Transaction Documents and other closing documents as
are contemplated hereby or as are reasonable and appropriate
in the circumstances shall have been executed and delivered by
each of the parties thereto;
(d) in the event that the Excluded Real Property is not disposed
of by ICS prior to the Closing Date, the Vendor and IT shall
have entered into an arrangement satisfactory to both of them
for the purchase of beneficial ownership of the Excluded Real
Property from the Vendor; and
(e) IT shall have complied with its covenants hereunder.
13. CONFIDENTIALITY.
IT, ICS and the Vendor agree that any information obtained during
examination of the fmancial records and/or other legal documentation is
confidential and warrant that any such information will not be transmitted to
anyone other than their respective advisors.
14. SEVERABIILITY.
If any term, representation or condition of this Agreement is
determined invalid or to any extent unenforceable, that provision insofar as it
related to that party or circumstances shall be deemed not to be included herein
and the balance of this Agreement shall remain in full force and effect and
continue to be binding upon the parties hereto.
15. SECTIONS AND HEADINGS.
The division of this Agreement into Articles and Sections and the
insertion of headings are for the convenience of reference only and shall not
affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement or instrument supplemental or ancillary hereto. Unless
something in the subject matter or context is inconsistent therewith, references
herein to Articles and
9
<PAGE>
Sections are to Articles and Sections of this Agreement.
16. TIME PERIOD.
Time shall be of the essence of this Agreement. When calculating the
period of time within which or following which any act is to be done or step
take, pursuant to this Agreement, the date which is the reference date in
calculating such period shall be excluded.
17. EXTENDED MEANINGS.
Words importing the singular number only shall include the plural and
vice versa and words importing gender shall include masculine, feminine and
neuter genders.
18. CANADIAN DOLLARS.
Unless otherwise provided herein, all monetary amounts set forth in
this Agreement are in Canadian dollars.
19. NOTICES.
Any notices required or permitted to be given hereunder shall be in
writing and may be given by delivering same or sending same by facsimile
addressed to:
(a) the Vendor at: 38 Shady Lane Crescent
Itomhill, ON L3T 3W7
Attention: Mr. John Irwin
Facsimile No.: (905) 707-9941;
(b) IT at: c/o Mr. Declan French
IT Staffing Ltd.
55 University Avenue, Suite 505
Toronto, ON M5H 3L9
Facsimile No.: (416) 364-2424;
with copy to ICS; and
(c) ICS at: c/o Mr. John Irwin
International Career Specialists Ltd.
1041 McNicoll Avenue
Scarborough, ON M I W 3W6
Facsimile No.: (416) 942-0341
with copy to IT.
Any such notice if sent by facsimile shall be deemed to have been
received by the addressee on the day following the day of which the
notice was so sent. Any party to this Agreement may change its or his
address for notice from time to time by notice given in accordance with
the foregoing and any subsequent notice shall be sent to the party at
its or his changed address.
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20. FURTHER DOCUMENTS.
Subject to the satisfaction of all Closing Conditions, this Agreement
shall operate as a transfer, assignment and delivery by each transferor to each
transferee of the Securities, as applicable, (effective on the Closing Date),
but nevertheless each party hereto covenants with the others of them to execute
all such further documents and perform such other acts as may be requisite or
necessary to carry out the purpose and intent of this Agreement.
21. SURVIVAL.
Any representation, warranty or covenant contained in this Agreement
made by a party hereto, and the rights of the Vendor under Section 3, shall
survive the Closing Date and shall continue in full force and effect thereafter
for a period of three years from the Closing Date except for the Vendor's
representation and warranty in Section 9(f) which shall survive indefinitely.
22. AMENDMENT.
This Agreement may not be amended except by a written instrument
signed by all the parties hereto.
IN WITNESS WHEREOF the parties hereto have duly executed this
Agreement as of the 19th day of May, 1998.
International Career Specialists Ltd.
/s/ John Irwin
---------------------------
John Irwin
IT Staffing Ltd.
/s/ Declan French
---------------------------
President
11
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SCHEDULE "A"
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of January 1,1998 by and between
INTERNATIONAL CAREER SPECIALISTS LTD., a corporation incorporated under the laws
of the Province of Ontario, (the "Company") and JOHN IRWIN, an individual
residing in the Town of Markham in the Province of Ontario (the "Executive").
FOR VALUE RECEIVED by each of the parties hereto, receipt and
sufficiency of which is hereby acknowledged by each of them, it is hereby agreed
as follows:
1. As from January 1, 1998 (the "Commencement Date") the Executive shall be
employed by the Company under the terms of this agreement. This Agreement shall
be conditional, and shall become effective, as of the Commencement Date, upon
the completion of the purchase by IT STAFFING LTD. ("IT") of all the issued and
outstanding shares in the capital of the Company under that certain Share
Purchase Agreement dated as of January 1, 1998.
2. The Company shall employ the Executive and the Executive shall continue to
hold office and serve the Company as President and Chief Executive Officer (the
"Appointment"). The Executive shall during the course of his employment
hereunder perform the duties and exercise the powers consistent with the
Appointment, including the making (subject to the terms hereof) of all
management decisions affecting generally the Company, and those specific matters
which may from time to time be reasonably assigned to or vested in him by the
Board of Directors of the Company (the "Board") and shall from time to time give
to the Board all such information regarding such matters as it shall require and
implement and apply the policy of the Company as set forth by the Board from
time to time, provided that:
(a) during the period from the Commencement Date to and including the
date on which the shares in the capital of IT are listed on a
recognized stock exchange or quoted on a national quotation system
(a "Public Offering"), the Executive shall not without the consent
of IT make any material change in the customary terms or conditions
upon which the Company has historically (i.e., prior to its
acquisition by IT) done business, and shall otherwise apply his
reasonable best efforts (consistent otherwise with the nature of the
Appointment) to preserve the business organization and the goodwill
of the suppliers, staff, customers and business of the Company and
to continue upon such terms and conditions to build such business;
and
(b) the Executive not, without obtaining the specific approval of the
Board, do any of the following on behalf of the Company:
(i) incur any single capital expenditure exceeding $25,000;
(ii) hire any employee at a salary exceeding S75,000 per annum,
(iii) open any new branch offices;
(iv) make any material change in the undertaking of the business of
the Company; or
(v) enter into any agreements or other obligations with any person
otherwise than in the ordinary course of the business of the
Company.
<PAGE>
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3. The Appointment shall continue for a period of 3 years from the Commencement
Date (the "Contract Period"), during which the Company shall not be entitled to
terminate the Executive's employment except in accordance with and upon the
occurrence of any of the events or causes specified in Section 9.
4. (a) The Company shall pay to the Executive during the continuance of his
employment hereunder a salary at the rate of Cdn.$200,O0O per annum
(the "Salary"), to accrue from day to day and be payable (by direct
deposit to the Executive's designated bank account) in equal
bi-weekly instalments in arrears on the last day of each bi-weckly
period;
(b) the Company shall provide to the Executive:
(i) an automobile and cellular phone allowance of Cdn.$1,000 per
month; and
(ii) a corporate American Express card, to be used by the Executive
for business expenses;
(c) the Company shall pay to the Executive a bonus (the "Bonus") of 2%
of Production in each of the Company's fiscal quarters (a
"Quarter"). The first payment date for purposes hereof shall be July
1,1998, in respect of the Quarter ending on June 30, 1998.
"Production" for purposes of the Bonus, and in respect of any
Quarter, shall mean the aggregate of the following amounts:
(i) total full time placement fees (exclusive of GST), before tax,
billed by the Company in such Quarter; and
(ii) total spread, representing pre-tax profit to the Company, for
such Quarter, in respect of all billable hours of contract
placements and consulting fees;
in each case as determined (such determination to be conclusive in
the absence of manifest error) by the Company's accountants in
accordance with generally accepted accounting principles, for each
such Quarter, and within 7 days of the end of any such Quarter. The
Executive's right to receive Bonus payments from the Company shall
continue in full force and effect for a period of one full year
after the date upon which his employment hereunder ceases, whether
as the result of the expiry of the term hereof or his earlier
resignation or termination, provided that such entitlement shall
cease and determine upon his becoming employed by or otherwise
directly or indirectly interested or concerned in any business,
company or firm carrying on a business in the Province of Ontario or
any other jurisdiction in which the Company may be carrying on
business which is competitive with the business carried on by the
Company (otherwise than through the Executive's holding or being
beneficially interested in any class of securities in any company if
such class of securities is listed on any recognized stock exchange
and the Executive neither holds nor is beneficially interested in
more than a total of ten per cent of all securities of that class);
and
(d) in order to induce him to enter into this Employment Agreement, the
Company shall procure the granting to the Executive by IT,
contemporaneously herewith, by IT of an option to acquire additional
shares in the capital of IT, in the form attached as Schedule "A"
hereto.
5. The Company shall also pay to the Executive (on production of such evidence
as the Company may reasonably require) the amount of all hotel, travelling and
other expenses reasonably and properly incurred by him in the discharge of his
duties contemplated hereunder.
<PAGE>
-3-
6. Subject to Section 9 and to the production of satisfactory evidence from a
registered medical practitioner in respect of any period of absence in excess of
90 consecutive days, the Executive shall be paid in full during any period of
absence from work due to sickness or injury.
7. The Executive shall be entitled to 6 weeks holiday with pay in every calendar
year in addition to recognized public holidays. The entitlement to holiday (and
on termination of employment to holiday pay in lieu of holiday) accrues pro rata
throughout each calendar year of employment.
8 (a) Subject to his rights under the Share Purchase Agreement of even
date herewith between the Executive, as vendor and IT, as purchaser
of shares in the Company (the "SPA"), the Executive shall not,
either during the continuance of his employment hereunder, except so
far as necessary in the performance of his duties or thereafter,
without the consent in writing of the Board being first obtained,
divulge to any person and shall use his best endeavours to prevent
the publication or disclosure of any information concerning the
business, accounts, finances, dealings, transactions or affairs of
the Company which has or may come to his knowledge during the course
of his employment hereunder or during any previous service with the
Company; and
(b) the Executive shall not, during the continuance of his employment
directly or indirectly be interested or concerned in any business,
company or firm carrying on a business in the Province of Ontario or
any other jurisdiction in which the Company may, from to time,
conduct business which is competitive with the business carried on
by the Company or IT, provided that nothing herein contained shall
prevent the Executive from being the holder of or from being
beneficially interested in any class of securities in any company if
such class of securities is listed on any recognized stock exchange
and the Executive neither holds nor is beneficially interested in
more than a total of ten per cent of all securities of that class.
9. The Executive's employment is guaranteed for the entirety of the Contract
Period, without restrictions, provided however that is the Executive shall:
(a) die;
(b) be adjudged or declared bankrupt or shall take advantage of any
statute for the time being in force offering relief for insolvent
debtors; or
(c) become a person whose person or estate is liable to be dealt with
under the law relating to mental health; or
(d) otherwise become or be unable substantially to perform his duties
hereunder by reason of ill-health, accident or otherwise for a
period or periods aggregating at least 180 days in any period of 12
consecutive months;
than the Company may in any such case by written notice to the Executive (or his
representative, as applicable) forthwith terminate his employment hereunder, but
no notice under subsection (c) of this Section shall be given by the Company to
the Executive after the expiration of three calendar months from the end of any
such periods or periods aggregating at least 180 days.
10. Any notice in writing required or permitted to be given to the Executive
hereunder shall be sufficiently given if delivered to him personally or if
mailed by registered mail to the Executive's last home address of which the
Company has notice. Any notice in writing required or permitted to be given to
the Company hereunder shall be sufficiently given if delivered or mailed by
registered mail to the Company at its head office c/o Mr. Declan French, IT
Staffing Ltd., 55 University Avenue, Suite 505, Toronto, ON M5H 3L9. Any such
<PAGE>
-4-
notices mailed as aforesaid shall be deemed to have been received on the fifth
business day following the date of the mailing. Any address for the giving of
notices hereunder may be changed by notice in writing in the manner provided in
this Section for the giving of notices.
11. This agreement shall be governed by and construed in accordance with the
laws of the Province of Ontario.
12. This agreement shall ensure to the benefit of and be binding upon the heirs,
executors, administrators and legal personal representative of the Executive and
the successors and assigns of the Company.
13. Other than the other agreements contemplated expressly herein, each of even
date herewith (collectively, the "Transaction Agreements"), this agreement
constitutes and contains the entire and only agreement among the parties
relating to the matters described herein and supersedes and cancels any and all
previous agreements and understandings between all or any of the parties
relative hereto. Any and all prior and contemporaneous negotiations, memoranda
of understanding or position, and preliminary drafts and prior versions of this
Agreement whether signed or unsigned, between the parties leading up to the
execution hereof shall not be used by any party to construe the terms or affect
the validity of this Agreement. There are no representations, inducements,
promises, understandings, conditions or warranties express, implied or
statutory, between the parties other than as expressly set forth in this
Agreement or any of the Transaction Agreements.
IN WITNESS WHEREOF this agreement has been executed by the parties
hereto on the 1 day of May, 1998, effective as at the day and year first herein
above set out.
SIGNED, SEALED AND DELIVERED )
in the presence of: )
)
/s/ [ILLEGIBLE] ) /s/ John Irwin
- ------------------------------------ ) -----------------------------------
Witness: ) JOHN IRWIN
INTERNATIONAL CAREER SPECIALISTS LTD.
Per: /s/ John Irwin c/s
--------------------------------
Name:
Title: President
<PAGE>
SCHEDULE "A"
SHARE OPTION AGREEMENT
THIS AGREEMENT dated as of January 1,1998, by and between IT
STAFFING LTD., a corporation incorporated and subsisting under the laws of the
Province of Ontario ("Optionor") and JOHN IRWIN, an individual residing in the
Town of Markham, in the Province of Ontario (the "Optionee").
WHEREAS the Optionor desires to grant to the Optionee an option to
purchase Shares on the terms and conditions set out herein;
AND WHEREAS the Optionee is as at the date of execution and delivery
hereof the beneficial owner of 100,000 Shares (as the same may be changed from
time to time by being classified or reclassified, subdivided, consolidated or
converted into a different number of class or otherwise changed in any manner
contemplated under Section 3.7 of this Agreement) (the "Existing Shares").
NOW THEREFORE in consideration of the mutual promises contained
herein and the payment of $1 by each party hereto to the other and for other
good and valuable consideration, the receipt and sufficiency of which are
acknowledged, the parties hereto agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 Definitions: In this Agreement and the recitals hereto, unless the context
otherwise requires, the following words and expressions shall have the following
meanings:
(a) "Existing Shares Number" means the number of Existing Shares held at
any material time by the Optionee, or that the Optionee would have
held if it had retained at all times all the Existing Shares that
comprised the 100,000 common shares in the capital of the Optionor
originally issued to the Optionee;
(b) "Issue Date" means the date of completion of any Public Offering;
(c) "Issue Price" means the initial price at which one Offered Share is
offered by the Company pursuant to a Public Offering on the Issue
Date;
(d) "Option" means the option granted to the Optionee under Section 2.1;
(e) "Option Notice" means a notice indicating that the Optionee is
exercising the Option in whole or in part;
(f) "Option Price" means $1.00, as the aggregate purchase price for all
the Optioned Shares;
(g) "Offered Share" has the meaning ascribed thereto in the definition
of Public Offering;
(h) "Optioned Shares" means that number of Offered Shares, calculated as
at the Issue Date and by reference to the Issue Price (regardless of
their market value otherwise at any time, including without
limitation the date of issuance of any Option Notice), that would
provide a value for the Option equal to the amount calculated in
accordance with the following formula: $500,000 - (Issue Prices
Existing Shares Number) x 1.33;
<PAGE>
-2-
(i) "Public Offering" means a distribution of Shares (as the same may be
changed from time to time by being classified or reclassified,
subdivided, consolidated or converted into a different number or
class or otherwise changed in any manner contemplated under Section
3.7) (each an "Offered Share") in respect of a listing on a
recognized stock exchange or quotation on a national quotation
system;
(j) "Shares" means the common shares of the Optionor as currently
constituted in accordance with its constating documents; and
(k) "Termination Date" means December 31, 2002.
1.2 Sections and Headings: The division of this Agreement into Articles and
Sections and the insertion of headings are for the convenience of reference only
and shall not affect the construction or interpretation of this Agreement. The
terms "this Agreement", "hereof", "hereunder" and similar expressions refer to
this Agreement and not to any particular Article, Section or other portion
hereof and include any agreement or instrument supplemental or ancillary hereto.
Unless something in the subject matter or context is inconsistent therewith,
references herein to Articles and Sections are to Articles and Sections of this
Agreement.
1.3 Time Periods: When calculating the period of time within which or following
which any act is to be done or step taken pursuant to this Agreement, the date
which is the reference date in calculating such period shall be excluded.
1.4 Extended Meanings: Words importing the singular number only shall include
the plural and vice versa and words importing gender shall include masculine,
feminine and neuter genders.
1.5 Canadian Dollars: Unless otherwise provided herein, all monetary amounts set
forth in this Agreement are in Canadian dollars.
ARTICLE 2 - OPTION
2.1 The Optionor hereby grants to the Optionee the irrevocable option (the
"Option") to purchase the Optioned Shares, at the Option Price, subject to the
terms and provisions of this Agreement. Once a determination may be made as to
the number of Optioned Shares hereunder (i.e., the time at which the Issue Price
becomes known), the option to acquire same shall be deemed to have vested in the
Optionee upon the execution and delivery of this Agreement, and it may
thereafter be exercised in accordance with the terms hereof.
2.2 The Option may be exercised in whole or in part at any time and from time to
time up to and including the Termination Date in respect of all (and not fewer
than all) the Optioned Shares. The Option may be exercised by the Optionee's
giving to the Optionor an Option Notice accompanied by a cheque or bank draft
representing the Option Price in respect of the Optioned Shares.
2.3 The Optionor hereby represents and warrants (which representation and
warranty shall survive without time limit that execution, delivery and
performance of this Agreement, and shall continue in full force and effect) that
all necessary corporate action has been taken to permit the Optioned Shares to
be validly issued to the Optionee and recorded on the books of the Optionor in
the name of the Optionee or its nominee upon exercise of the Option in whole or
in part in accordance with the terms and conditions of this Agreement.
2.4 The Optionor will at all times prior to the Termination Date reserve and
keep available such number of its Shares (or any reasonable estimate of such
number as may be determined prior to the determination of the Issue Price) as
will be sufficient to satisfy the requirements of this Agreement.
<PAGE>
-3-
ARTICLE 3 - GENERAL
3.1 Amendments and Waivers: No modification, variation, amendment or termination
by mutual consent of this Agreement and no waiver of the performance of any of
the responsibilities of any of the parties hereto shall be effected unless such
action is taken in writing and is signed by all parties. No amendment to this
Agreement shall be valid or binding unless set forth in writing and duly
executed by all of the parties hereto. No waiver of any breach of any provision
of this Agreement shall be effective or binding unless made in writing and
signed by the party purporting to give the same and, unless otherwise provided
in the written waiver, shall be limited to the specific breach waived.
3.2 Severability: Each of the covenants, provisions, Articles, Sections,
subsections and other subdivisions hereof is severable from every other
covenant, provision, Article, Section, subsection and the invalidity or
unenforceability of any one or more covenants, provisions, Articles, Sections,
subsections or subdivisions of this Agreement shall not affect the validity or
enforceability of the remaining covenants, provisions, Articles, Sections,
subsections and subdivisions hereof.
3.3 Time of Essence: Time shall be of the essence in this Agreement.
3.4 Notice:
(l) Any notice or other written communication required or permitted
hereunder shall be in writing and:
(i) delivered personally to the party or, if the party is a
corporation, an officer of the party to whom it is directed;
(ii) sent by registered mail, postage prepaid, return receipt
requested (provided that such notice or other written
communication shall not be forwarded by mail if on the date of
mailing the party sending such communication knows or ought
reasonably to know of any difficulties with the postal system
which might affect the delivery of mail, including the
existence of an actual or imminent postal service disruption
in the city from which such communication is to be mailed or
in which the address of the recipient is found); or
(iii) sent by facsimile or telex with all necessary charges fully
prepaid, confirmation of delivery requested.
(m) All such notices shall be addressed to the party to whom it is
directed at the following addresses:
If to the Optionee:
38 Shady Lane Crescent
Thornhill, ON L3T 3W7
Attention: Mr. John Irwin
Facsimile No.: (905) 707-9941;
If to the Optionor
c/o Mr. Declan French
IT Staffing Ltd.
55 University Avenue, Suite 505
Toronto, ON M5H 3L9
Facsimile No.: (416) 364-2424;
<PAGE>
-4-
(n) Any party may at any time change its address hereunder by giving
notice of such change of address to the other party or parties in
the manner specified in this section. Any such notice or other
written communication shall, if mailed or given by telegram, be
effective on the day it is first attempted to be delivered to such
party at such address (whether or not such delivery takes place),
and if given by personal delivery, shall be effective on the day of
actual delivery.
3.5 Entire Agreement: Other than an Employment Agreement between the Optionee
and International Career Specialists Ltd. ("ICS"), and a Share Purchase
Agreement between the Optionee, the Optionor and ICS, and any other agreements
contemplated expressly therein, each of even date herewith (collectively, the
"Transaction Agreements"), this Agreement constitutes and contains the entire
and only agreement among the parties relating to the matters described herein
and supersedes and cancels any and all previous agreements and understandings
between all or any of the parties relative hereto. Any and all prior and
contemporaneous negotiations, memoranda of understanding or position, and
preliminary drafts and prior versions of this Agreement, whether signed or
unsigned, between the parties leading up to the execution hereof shall not be
used by any party to construe the terms or affect the validity of this
Agreement. There are no representations, inducements, promises, understandings,
conditions or warranties express, implied or statutory, between the parties
other than as expressly set forth in this Agreement or any of the Transaction
Agreements.
3.6 This Agreement shall be binding upon and enure to the benefit of the parties
hereto and their respective heirs, administrators, executors, successors and
permitted assigns. Except as hereinafter provided, neither of the parties hereto
may assign its rights or obligations under this Agreement without the prior
written consent of the other party hereto. The Optionee may assign its rights
hereunder to any person to whom it is permitted to transfer some or all of its
Shares.
3.7 Subdivision or Consolidation of Shares: If the Shares (including without
limitation the Existing Shares and any Offered Shares) are changed by way of
being classified or reclassified, subdivided, consolidated or converted into a
different number or class of shares or otherwise, or if the Optionor
amalgamates, the type of security to be delivered to the Optionee upon exercise
of the Option in whole or in part shall be adjusted accordingly, in all cases so
that the Option Price shall not change and the Optionee shall receive the same
number and type of securities as would have resulted from such change if the
Optionor the remaining part thereof had been exercised before the date of the
change.
3.8 Offerings: No Public Offering shall be made, without the prior written
consent of the Optionee, of any shares of any series or class other than common
shares in the capital of the Optionor, or otherwise of any series or class that
does not include all the Existing Shares.
3.9 Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein.
<PAGE>
-5-
3.10 Execution: This Agreement may be executed in several counterparts, each of
which, when so executed, shall be deemed to be an original, and such
counterparts together shall constitute one and the same instrument.
IN WITNESS WHEREOF the parties have executed this agreement.
SIGNED, SEALED AND DELIVERED )
in the presence of: )
)
/s/ [ILLEGIBLE] ) /s/ John Irwin
- ------------------------------------ ) -----------------------------------
Witness: ) JOHN IRWIN
IT STAFFING LTD.
Per: /s/ Declan A. French c/s
---------------------------------
Name: D. French
Title: President
<PAGE>
SCHEDULE "B"
INTERNATIONAL CAREER SPECIALISTS LTD.
FINANCIAL STATEMENTS
OCTOBER 31, 1997
WITH 1996 COMPARISONS
Unaudited - See Notice to Reader
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
INDEX
OCTOBER 31,1997
Page
Notice to Reader 1
Balance Sheet 2
Statement of Retained Earnings 3
Statement of Income 4
Notes to Financial Statements 5
<PAGE>
[LETTERHEAD OF NATHAN FEINER Certified General Accountant]
NOTICE TO READER
I have compiled the balance sheet of International Career Specialists Ltd. as at
October 31, 1997 and the statements of income and retained earnings for the year
then ended from information provided by management. I have not audited, reviewed
or otherwise attempted to verify the accuracy of such information. Readers are
cautioned that these statements may not be appropriate for their purposes.
/s/ Nathan Feiner
Certified General Accountant
Toronto Canada
April 3,1998
-1-
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
BALANCE SHEET
OCTOBER 31, 1997 WITH 1996 COMPARISONS
1997 1996
$ $
ASSETS
CURRENT
Cash 116,047 57,847
Short term investments 124,562 39,655
Accounts receivable 507,835 215,793
Income taxes receivable -- 1,393
------- -------
748,534 314,688
FIXED ASSETS (Note 1) 52,933 46,782
INVESTMENTS IN 1242541 ONTARIO INC 87,500 --
------- -------
888,967 361,470
======= =======
LIABILITIES
CURRENT
Accounts payable and accrued liabilities 503,803 225,106
Accrued wages 149,000 90,000
Income taxes payable 35,647 --
Due to shareholder 363 102
------- -------
688,813 315,208
------- -------
SHAREHOLDER'S EQUITY
CAPITAL STOCK 1 1
RETAINED EARNINGS 200,153 46,261
------- -------
200,154 46,262
------- -------
888,967 361,470
======= =======
APPROVED ON BEHALF OF THE BOARD
- -------------------------------
Director
See the accompanying notes
Unaudited - See Notice to Reader
-2-
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
STATEMENT OF RETAINED EARNINGS
YEAR ENDED OCTOBER 31, 1997 WITH 1996 COMPARISONS
1997 1996
$ $
Balance, beginning of year 46,261 17,782
Net income 153,892 28,479
------- -------
Balance, end of year 200,153 46,261
======= =======
See the accompanying notes
Unaudited - See Notice to Reader
-3-
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
STATEMENT OF INCOME
YEAR ENDED OCTOBER 31, 1997 WITH 1996 COMPARISONS
1997 1996
$ $
REVENUE
Fees earned 4,722,474 1,944,980
--------- ---------
EXPENSES
Subcontract and commissions 3,851,280 1,560,621
Management salaries and fees 457,000 190,000
Office salaries and benefits 63,114 37,918
Rent 52,389 51,031
Telephone 18,789 16,062
Advertising and promotion 26,037 21,365
Office and general 25,421 7,367
Automobile and travel 9,291 19,230
Professional fees 2,985 2,547
Interest and bank charges 594 384
Depreciation and amortization 18,594 11,269
--------- ---------
4,525,494 1,917,794
Less: sundry income (2,059) (10,400)
--------- ---------
4,523,435 1,907,394
--------- ---------
INCOME BEFORE INCOME TAXES 199,039 37,586
Income taxes 45,147 9,107
--------- ---------
NET INCOME 153,892 28,479
========= =========
See the accompanying notes
Unaudited - See Notice to Reader
-4-
<PAGE>
INTERNATIONAL CAREER SPECIALISTS LTD.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1997 WITH 1996 COMPARISONS
1. FIXED ASSETS 1997 1996
$ $
Office furniture and equipment 53,284 30,457
Computer 20,081 18,162
Vehicle 26,575 26,575
Leasehold improvements -- 8,144
------ ------
99,940 83,338
Less: Accumulated depreciation 47,007 36,556
------ ------
52,933 46,782
====== ======
Unaudited - See Notice to Reader
-5-
<PAGE>
1.
SCHEDULE "C"
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la societe en Ontario
1065259
-------------------------------
[LOGO]
Ministry of Ministere de
Consumer and la Consommation
Commercial Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that these Ceci certifie que les presents
articles are effective on status entrent en vigueur le
APRIL 15 AVRIL, 1998
- -----------------------------------------------------------------
/s/ [ILLEGIBLE]
Director/Directeur
Business Corporations Act/Loi sur les societes par actions
- --------------------------------------------------------------------------------
ARTICLES OF AMENDMENT
STATUTS MODIFICATION
Form 3
Business
Corporations
Act
Formule 3
Loi sur les
societe par
actions
1. The name of the corporation is:
Denomination sociale de la societe:
IT STAFFING LTD.
2. The name of the corporation is changed to (if applicable):
Nouvelle denomination sociale de la societe (s'il y a lieu):
3. Date of incorporation/amalgamation:
Date de la constitution ou de la fusion:
1994 February, 11
- --------------------------------------------------------------------------------
(Year, Month, Day)
(annee, mois, jour)
4. The articles of the corporation are amended as follows:
Les statuts de la societe sont modifies de la facon suivante.
A. The authorized shares of the Corporation are amended by removing the
maximum number of common shares that the Corporation is authorized
to issue so that after giving effect to the foregoing, the
Corporation is authorized to issue common shares in an unlimited
number.
B. Article 8 of the articles of the Corporation with respect to the
issue, transfer or ownership of shares is amended by deleting the
word "None" and substituting the following in its place:
No share shall be transferred without either:
(a) the consent of the directors expressed by resolution or by an
instrument or instruments signed by a majority of the
directors, which consent may be given either prior or
subsequent to the time of transfer of such shares; or
<PAGE>
1A
(b) the consent of the holders of more than 50% of the outstanding
voting shares of the Corporation expressed by resolution or by
an instrument or instruments signed by such holders, which
consent may be given either prior or subsequent to the time of
transfer of such shares.
C. Article 9 of the articles of the Corporation with respect to other
provisions is amended by deleting the word "Nil" and substituting
the following in its place:
(a) The number of shareholders of the Corporation, exclusive of
persons who are in its employment and exclusive of persons
who, having been formerly in the employment of the
Corporation, were, while in that employment, and have
continued after the termination of that employment to be
shareholders of the Corporation, is limited to not more than
50, 2 or more persons who are the joint registered owners of 1
or more shares being counted as 1 shareholder.
(b) Any invitation to the public to subscribe for securities of
the Corporation is prohibited.
(c) The Corporation shall be entitled to a lien on a share
registered in the name of a shareholder or his legal
representative for a debt of that shareholder to the
Corporation.
(d) The directors may, without authorization of the shareholders,
hypothecate any property, moveable or immoveable, present or
future, which the Corporation may own.
<PAGE>
2
5. The amendment has been duly authorized as required by Sections 168 and 170
(as applicable) of the Business Corporations Act.
La modification a ete dument autorisee conformement a l'article 168 et
s'il y a lieu, a l'article 170 de la Loi sur les compagnies.
6. The resolution authorizing the amendment was approved by the
shareholders/directors (as applicable) of the corporation on
La actionnaires ou les adminstrateurs (le cas echeant) de la compagnie ont
approuve la resolution autorisant la modification
15th April, 1998
--------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate.
Les presents statuts sont signes en double exemplaire.
IT STAFFING LTD.
--------------------------------------
(Name of Corporation)
(Denomination sociale de la compagnie)
By/Par: /s/ [ILLEGIBLE] director
--------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
<PAGE>
1.
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la societe en Ontario
1065259
-------------------------------
[LOGO]
Ministry of Ministere de
Consumer and la Consommation
Commercial Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that these Ceci certifie que les presents
articles are effective on. status entrent en vigueur le
FEBRUARY 20 FEVRIER, 1998
/s/ [ILLEGIBLE]
Director/Directeur
Business Corporations Act/Loi sur les societes par actions
- --------------------------------------------------------------------------------
ARTICLES OF AMENDMENT
STATUTS MODIFICATION
Form 3
Business
Corporations
Act
Formule 3
Loi sur les
societe par
actions
1. The present name of the corporation is:
Denomination sociale actuelle de la compagnie:
DECLAN TECHNOLOGIES INC
2. The name of the corporation is changed to (if applicable):
Nouvelle denomination sociale de la societe (s'iI y a lieu):
IT STAFFING LTD.
3. Date of incorporation/amalgamation:
Date de la constitution ou de la fusion:
11 February 1994
- --------------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
4. The articles of the corporation are amended as follows:
Les statuts de la societe sont modifies de la facon suivante.
Be it resolved that the name of the corporation be and is hereby changed
from Declan Technologies Inc. to IT Staffing Ltd.
<PAGE>
5. The amendment has been duly authorized as required by Sections 167 and 169
(as applicable) of the Business Corporations Act.
La modification a ete dument autorisee conformement a l'article 167 et
s'il y a lieu, a l'article 169 de la Loi sur les compagnies.
6. The resolution authorizing the amendment was approved by the
shareholders/directors (as applicable) of the corporation on
Les actionnaires ou les adminstrateurs (le cas echeant) de la compagnie
ont approuve la resolution autorisant la modification
15 FEBRUARY, 1996
- --------------------------------------------------------------------------------
(Day, Month, Year)
(jour, mois, annee)
These articles are signed in duplicate.
Les presents statuts sont signes en double exemplaire.
DECLAN TECHNOLOGIES INC.
--------------------------------------
(Name of Corporation)
(Denomination sociale de la compagnie)
By/Par: /s/ Declan A. French
--------------------------------------
(Signature) (Description of Office)
(Signature) (Fonction)
DECLAN A. FRENCH, President
<PAGE>
1.
For Ministry Use Only Ontario Corporation Number
A l'usage exclusif du ministere Numero de la compagnie en Ontario
1065259
-------------------------------
Trans Line Comp Method
Code No Stet Type Incorp
|A| |0| |0| |A| |3|
26 27 28 28 30
Notice
Share Req of Jurisdiction
|S| |N| |ONTARIO |
31 32 33 42
[LOGO]
Ministry of Ministere de
Consumer and la Consommation
Commercial Relations et du Commerce
CERTIFICATE CERTIFICAT
This is to certify that these Ceci certifie que les presents
articles are effective on. statuts entrent en vigueur le
FEBRUARY 11 FEVRIER, 1998
- ------------------------------------------------------------------
/s/ [ILLEGIBLE]
Director/Directeur
Business Corporations Act/Leu sur les societes par actions
- --------------------------------------------------------------------------------
ARTICLES OF AMENDMENT
STATUTS MODIFICATION
Form 1
Business
Corporations
Act
Formule
numero 1
Loi
sur les
compagnies
1. The name of the corporation is:
Denomination sociale de la societe:
DECLAN TECHNOLOGIES INC.
2. The address of the registered office is:
Adresse du siege social:
26 Wellington St. East, Suite 800
- --------------------------------------------------------------------------------
(Street & Number or R.R. Number & if Multi-Office Building give Room No.)
(Rue et numero ou numero de la R.R. et [ILLEGIBLE] d'un edifice a bureau)
numero du bureau)
city of Toronto |M|5|E|1|S|2|
- --------------------------------------------------------------------------------
(Name of Municipality or Post Office) (Postal Code)
(Nom de le municipalite ou du bureau de poste) (Code Postal)
city of Toronto in Municipality of Metropolitan
- ------------------------------------ ----------------------------------
(Name of Municipality, Geographic (County, District or Regional
Township) Municipality)
(Nom de le municpalite dans le/la (Comte], district,
du canton) municipalite regionale)
3. Number (or minimum and maximum number) Nombre (ou nombres minimal et
of directors is: maximal) d'adminisrateurs:
Minimum 1
Maximum 10
4. The first director(s) is/are:
Premier(s) administrateur(s):
First name, initials and last name
Prenom, initiales et nom de famille
- --------------------------------------------------------------------------------
DECLAN A. FRENCH
Residence address, giving Street & No. or R.R. no.,
Municipality and Postal Code
Adresse personnelle, y compris la rue et le numero, le
numero de la R.R., le nom de la municipalite et le code
postal
- --------------------------------------------------------------------------------
5410 TURNEY DRIVE
MISSISSAUGA, ONTARIO
L5M 4Y8
Resident Canadian State Yes or No
Resident Canadien Oui/Non
- --------------------------------------------------------------------------------
YES
<PAGE>
2
5. Resolutions, if any, on business the corporation may carry on or on powers
the corporation may exercise.
Limites, s'il y lieu, imposees aux activities commerciales ou aux pouvoirs
de la compagnie.
NONE
6. The Classes and any maximum number of shares that the corporation is
authorized to issue:
Categories nombre maximal, s'il y a lieu, d'actions que la compagnie est
autorisee a emettre:
100 COMMON SHARES
<PAGE>
3
7. Rights, privileges, restrictions and conditions (if any) attaching to each
class of shares and directors authority with respect to any class of
shares which may be issued in series:
Droits, privileges, resrictions et conditions, s'il y a lieu, rattaches a
chaque categorie d'actions et pouvoirs des administrateurs relatifs a
chaque categories d'actions qui peut etre emise en serie:
NONE
<PAGE>
4
8. The issue, transfer or ownership of shares is/is not restricted and the
restrictions (if any) are as follows:
L'emission, le transfert ou la proprlete d'actions est/n'est pas
restreinte. Les restrictions, s'il y a lieu, sont les sulvantes:
NONE
<PAGE>
5
9. Other provisions, if any, are:
Autres dispositions, s'il y a lieu:
NIL
<PAGE>
6
10. The names and addresses of the incorporators are
Nome et adresse des fondateurs
First name, initials and last name or corporate name
Prenom, initiale et nom de famile ou denomination sociale
- --------------------------------------------------------------------------------
DECLAN A. FRENCH
Full residence address or address of registered office or of principal
place of business giving street & No. or R.R. No., municipality and postal
code
Adresse personnelle su complet adresse du siege social ou adresse de
l'etablissement principal, y compris la rue et le numero, le numero de la
R.R., le nom de la municipalite et le code postal
- --------------------------------------------------------------------------------
5410 TURNEY DRIVE
MISSISSAUGA, ONTARIO
L5M 4Y8
These articles are signed in duplicate.
Les presents statuts sont signes en double exemplaire.
- --------------------------------------------------------------------------------
Signature of incorporators
(Signature des fondateurs)
/s/ Declan A. French
<PAGE>
[LOGO] [ILLEGIBLE] Registration Form 2
under the Business Names Act - Corporations
Enregistrement Formule 2
en virtu de la loi sure les noms commerciaux
(Personnes morales)
Print clearly in CAPITAL LETTERS / Ecrivez clairement en LET TRES MAJUSCULES
Page ___ of/de ___
--------------------------------------------------
1. Registration Type [ILLEGIBLE]
Type d'enregistrement
A. New
Nouvel
--------------------------------------------------
2. Business or identification Name / Nom commercial ou d'identification
IT STAFFING
3. Mailing Street Number / [ILLEGIBLE] Street name / Nom de la rue
Address
Adresse 69 Yonge St Suite 1200
Postale
City/town Province Country/Pays Postal Code
/Ville / Code Postal
Toronto Ont. M5E 1K3
4. Business address in Ontario
Adresse commerciale en Ontario
Street No./Rue Street name / Suite No.
et numero Nom de la rue [ILLEGIBLE]
69 Yonge St. 1200
City/town Province/Provence Postal Code
Ville / Code Postal
Toronto Ontario M5E 1K3
5. Date of first use of Name Year/Month/Day 95-05-10
Date de la premiere utilistion Annee/Mois/Jour
de la denomination
6. Give a Brief description of the ACTIVITY being carried out under the
business/identification name.
Resumez brievement le genre d'ACTIVITE exercee sous le nom commercial ou
d'identification.
Computer Contracting / Consulting & Placement
7. Corporation Name / Personne morale
DECLAN TECHNOLOGIES INC
8. Ontario corporation number / Numero la personne morale de l'Ontario
1065259
9. Jurisdiction in which the corporation was incorporated / La territoire de
competence ou la personne morale a ete constitutee.
Ontario
10. Address of Head or Registered Office of the corporation / Adresse du siege
social ou bureau enregistre de la personne morale.
Street No./Rue Street name / Suite No.
et numero Nom de la rue [ILLEGIBLE]
69 Yonge St. 1200
City Province/Provence Country Postal Code
[ILLEGIBLE] Pays Code Postal
Toronto Ont. Canada M5E 1K3
11. Name of Signing Officer
Nom du signataire
Last Name --------------------------------
[ILLEGIBLE] FRENCH MINISTRY USE ONLY -
RESERVE AU MINISTERE
First Name
[ILLEGIBLE] DECLAN
[ILLEGIBLE]
[ILLEGIBLE] ANTHONY BIN...: 951228659
NAME..: IT STAFFIN
12. Signature of authorized signing officer REGIN.: 1995-10-25
Signature ou signaire autorise EXPIRE: 2000-10-24
X /s/ D A French
--------------------------------
MINISTRY COPY / COPIE DU MINISTERE
<PAGE>
Exhibit 10.11
SHARE PURCHASE AGREEMENT
THIS AGREEMENT made effective as of the 2nd day of January, 1997
AMONG
IT STAFFING LTD., an Ontario Corporation (hereinafter called IT)
And
John Robert Wilson, an individual resident in the Town of Rockwood, in the
Province of Ontario (hereinafter called "vendor")
And
Systemsearch Consultants Inc., an Ontario Corporation (hereinafter called
"Systems")
And
Systems PS Inc., an Ontario Corporation (hereinafter called "PS")
WHEREAS:
John Wilson is the legal beneficial owner of 100% of the issued and outstanding
shares in capital stock of both Systems and PS.
IT desires to acquire, on the terms and conditions as set forth below, 100% of
the issued and outstanding shares in the capital stock of both Systems and PS.
The Vendor desires to sell, on the terms and in the manner set forth below, 100%
of the issued and outstanding shares in the capital stock of both Systems and
PS.
The Vendor, as a consequence of the payment of the purchase price will become a
significant shareholder of IT.
<PAGE>
NOW THEREFORE THIS AGREEMENT WITNESSES THAT in consideration of the premises set
forth above, the mutual covenants and agreements and such other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
PURCHASE OF SHARES
(A) Closing. The Parties agree to use their best efforts towards the
closing of this agreement on or before March 16th, 1998 but in any
event no later than April 30th, 1998 at the offices of IT. The Vendor
and IT may agree in writing to close the transaction at another time
and place;
(B) Purchase Price is $550,000 paid as follows:
The aggregate purchase price for the issued and outstanding shares in
the capital stock of Systems and P.S. is $550,000.00 and is to be paid
as follows
i) A deposit in the sum of $5,000.00.
ii) On closing, a further deposit of $145,000 by
certified cheque
iii) On or before closing, 133,333 shares in the capital
stock of IT resulting in percentage ownership to John
Wilson on closing of 13.3 percent of all of
outstanding and issued shares in the capital stock of
IT.
iv) IT herein guarantees that the dollar value of the
133,333 shares at the time of a listing on a Public
Exchange based on the share issue price therein shall
have a minimum value of $400,000.00, on the terms of
this agreement, or in the alternative sufficient
shares will be issued to the Vendor, such that the
Vendor receives a total minimum consideration of
$400,000.00.
v) Said shares shall be issued to the Vendor and held in
escrow until closing of this transaction and until
the shares have been listed on a public exchange.
vi) Delivery of share certification. On closing the
Vendor shall deliver to IT share certificates
representing 100% of the issued and outstanding
shares in Systems and PS duly endorsed in blank for
transfer to IT and the share certificates are to be
held in escrow pending the listing of the shares of
IT on a public exchange
vii) The parties hereby agree that in the event IT is
unsuccessful in listing its shares on a public
exchange within fifteen months of closing, then the
shares of IT will be released from escrow to IT and
the shares of Systems and PS shall be released from
escrow to John Wilson and John Wilson shall be
entitled to retain his deposits as liquidated damages
and not as penalty.
CONDUCT OF BUSINESS
Interim Operation from January 2, 1997 until the Closing Date:
(a) The Vendor, Systems and PS shall conduct the Business
in the ordinary course, completely autonomously but
they shall not make any material change in the
customary terms and conditions upon which they
historically did business unless otherwise agreed by
IT and the Vendors.
(b) The Vendor, Systems and PS shall use their best
effort to preserve the Business organization and
goodwill of the suppliers, staff, customers and
Business of Systems and PS.
DUE DILIGENCE
(A) Period. The purchaser shall have until February 16,1998 to conduct its
investigations and at its sole discretion, by written notice and within
the time specified, cause this agreement to be null and void.
<PAGE>
VENDOR COVENANTS
The Vendor hereby covenants:
(a) That it shall not take any action or omission which
will in any way prejudice the completion of this
transaction;
(b) That upon acceptance of this agreement, a binding
contract of purchase and sale is constituted;
(c) That it has not been induced into entering into this
Agreement by oral or written representation or
promises except as set out in the Agreement;
(d) That it is not now and will not be on Closing Date a
non-resident as defined in the Income Tax Act;
(e) There is no material information or knowledge which
has been withheld from IT relating to either Systems
or PS, which if known would cause the purchaser to
alter his decision to purchase the shares of either
Systems or PS.
IT ACKNOWLEDGEMENTS
IT hereby acknowledges:
(a) The government filings for both GST and Corporate
taxes are delinquent.
(b) Judd Bedford has a claim outstanding that is not
reflected in the books of Systems and PS.
(c) All professional fees related to this acquisition are
for the account of Systems and PS. and will be paid
on closing.
(d) That there is a management salary liability of
$30,000 pertaining to 1996 which will be paid asap.
And IT acknowledges that it will be responsible for same after closing.
IT shall enter into an employment or consulting agreement with John Wilson or
John R. Wilson Enterprises Inc. as John Wilson may direct, substantially in the
form annexed.
CONFIDENTIALITY
IT, Vendor, Systems and PS agree that any information obtained during
examination of the financial records and/or other legal documentation is
confidential and warrant that any such information will not be transmitted to
anyone other than their respective advisors.
If any term, representation or condition of this Agreement is determined invalid
or to any extent unenforceable, that provision insofar as it related to that
party or circumstances shall be deemed not to be included herein and the balance
of this Agreement shall remain in full force and effect and continue to be
binding upon the parties hereto.
IN WITNESS WHEREOF the partied here to have duly executed this Agreement as of
the 4th day of February, 1998.
IT STAFFING LTD.
Per: /s/ Declan French
------------------------------
SYSTEMSEARCH CONSULTANTS INC. SYSTEMS PS INC.
Per: /s/ John Robert Wilson Per:/s/ John Robert Wilson
------------------------------ ---------------------------
/s/ John Robert Wilson
------------------------------
John Robert Wilson
<PAGE>
AMENDING AGREEMENT
THIS AGREEMENT made as of January 2, 1997
A M O N G:
IT STAFFING LTD.,
a corporation existing under
the laws of the Province of Ontario
("IT")
- and -
John Robert Wilson, an individual, resident in the
Town of Rockwood, in the Province of Ontario
("Vendor")
- and-
SYSTEMSEARCH CONSULTING SERVICES INC.,
a corporation existing under
the laws of the province of Ontario
("Systemsearch")
- and -
SYSTEMSEARCH PS INC.
a corporation existing under
the laws of the Province of Ontario
("PS")
- and -
Declan French, an individual, resident in the
City of Toronto, in the Province of Ontario
<PAGE>
FOR VALUE RECEIVED the parties agree as follows:
1. INTERPRETATION
1.1 Definitions. In this Agreement:
(a) "Share Purchase Agreement" means the agreement dated effective as of January
2, 1997 among IT, Vendor, Systemsearch and PS without regard to this Agreement;
(b) All other capitalized terms used in this Agreement have the meanings given
to them in the Share Purchase Agreement.
1.2 Headings. The division of this Agreement into sections and the insertion of
headings are for the convenience of reference only and are not to affect the
construction or interpretation of this Agreement.
1.3 References. Unless otherwise specified, all references to Sections in this
Agreement are to sections of the Share Purchase Agreement.
1.4 Governing Law. This Agreement is governed by, and is to be construed and
interpreted in accordance with, the laws of the Province of Ontario and the laws
of Canada applicable in the Province of Ontario.
1.5 One Agreement. This Agreement amends the Share Purchase Agreement. This
Agreement and The Share Purchase Agreement shall be read together and constitute
one agreement with the same effect as if the amendments made by this Agreement
had been contained in the Share Purchase Agreement as of the date of this
Agreement.
1.6 Conflict. If there is a conflict between any provision of this Agreement and
any provision of the Share Purchase Agreement, the relevant provision of this
Agreement is to prevail.
<PAGE>
2. AMENDMENTS
2.1 The parties confirm that Systemsearch is the proper party to the Share
Purchase Agreement and acknowledge and agree that the reference in the Share
Purchase Agreement to "Systemsearch Consultants Inc." was meant to be a
reference to Systemsearch.
2.2 Section (B) iv) of the Share Purchase Agreement under the heading "Purchase
Of Shares" is amended by deleting the figure "$4000,000" in the third and fifth
lines thereof and inserting instead "$3.00 per share"
2.3 Section (B) of the Share Purchase Agreement under the heading "Purchase of
Shares" is amended by deleting subsections v), vi) and vii) in their entirety.
2.4 The Share Purchase Agreement is amended by adding a new Section (C) under
the heading "Purchase of Shares" as follows:
(C) Failure of IT to Gain Listing on Stock Exchange
1. Re-Purchase of IT Shares
1.1 In the event that the 133,000 common shares of IT (the "IT Shares")
to be issued to the Vendor hereunder are not listed and posted for
trading on a North American stock exchange (a "Public Exchange") prior
to July 31, 1999, or in the event that the value of the IT Shares owned
by the Vendor on the date on which they are listed and posted for
trading on a Public Exchange (the "Listing Date") is less than $3.00
per share and IT is unable to fulfil its obligations to Vendor under
Section B iv), IT shall, upon written request from the Vendor, which
request shall be made within 30 days of the earlier of the Listing Date
and July 31, 1999, purchase from Vendor for cancellation all of the IT
Shares then owned by the Vendor (the "Re-Purchased Shares") for a
purchase price of $3.00 per share (the "Purchase Price"), subject to
Section 1.4 below.
1.2 The closing of the transaction of purchase and sale contemplated in
Section C 1.1 of this Agreement shall take place at the offices of IT
at such time and date as shall be mutually agreed by the parties, but
not later than 10 days after July 31, 1999 (the "IT Closing Date").
1.3 On the IT Closing Date:
(a) the Vendor shall deliver to IT the certificate or certificates
representing the Re-Purchased Shares, together with a duly
endorsed share transfer instrument and a representation and
warranty executed by Vendor in favour of IT that the
Re-Purchased Shares are owned of record and beneficially by
Vendor with a good and marketable title thereto, free and
clear of all encumbrances of any kind;
<PAGE>
(b) IT shall deliver to the Vendor the Purchase Price in cash or
by certified cheque or bank draft payable to the Vendor; and
(c) If requested by the Vendor, IT shall cause Systemsearch and PS
to change their respective names and shall do all such acts
and things as are reasonably required and within its power in
connection therewith to make such names available for use by
the Vendor.
1.4 If, for any reason other than the fault of the Vendor, IT fails to
complete the purchase of the Re-Purchased Shares on the IT Closing
Date, then in consideration of the sum of two dollars and other good
and valuable consideration, including the benefit derived by French
from the completion of the transactions contemplated by the Share
Purchase Agreement in his capacity as a shareholder of IT, French
agrees to purchase from the Vendor all of the Re-Purchased Shares for
the Purchase Price and upon payment of the Purchase Price by French, IT
shall have no further rights or obligations to the Vendor hereunder,
except under Section 1.6 (C).
1.5 The closing of the transaction of purchase and sale contemplated in
Section C 1.2 of this Agreement shall take place at the offices of IT
at such time and date as shall be mutually agreed by the parties, but
not later than 5 days after the IT Closing Date (the "French Closing
Date").
1.6 On the French Closing Date:
(a) the Vendor shall deliver to French the certificate or
certificates representing the Re-Purchased Shares, together
with a duly endorsed share transfer instrument and a
representation and warranty executed by Vendor in favour of
French that the Re-Purchased Shares are owned of record and
beneficially by Vendor with a good and marketable title
thereto, free and clear of all encumbrances of any kind; and
(b) IT shall deliver to the Vendor the Purchase Price in cash or
by certified cheque or bank draft payable to the Vendor; and
(c) If requested by the Vendor, IT shall cause Systemsearch and PS
to change their respective names and shall do all such acts
and things as are reasonably required and within its power in
connection therewith to make such names available for use by
the Vendor.
1.7 Notwithstanding anything in the Employment Agreement dated
February 11, 1998 (the "Employment Agreement") between the
Vendor and IT, upon the completion of the transaction of
purchase and sale of the Repurchased Shares, the Employment
Agreement shall be terminated and
<PAGE>
neither the Vendor nor IT shall have any further obligations
to the other except with respect to such remuneration as shall
have been earned by the Vendor pursuant to the Employment
Agreement prior to such termination and the Vendor shall not
be restricted from competing with the business of IT.
3.0 GENERAL
3.1 Benefit of Agreement. This Agreement enures to the benefit of and
binds the parties and their respective heirs, executors,
administrators, personal and legal representatives successors and
permitted assigns.
3.2 Further Assurances. Each party shall from time to time promptly
execute and deliver all further documents and take all further
action reasonably necessary or appropriate to give effect to the
provisions and intent of this Agreement.
3.3 Execution in Counterparts. This Agreement may be executed and
delivered in any number of counterparts, each of which when
executed and delivered is an original but all of which taken
together constitute one and the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement as
of the date first written above.
IT STAFFING LTD SYSTEMSEARCH CONSULTING
SERVICES INC.
By: /s/ John Robert Wilson By: /s/ John Robert Wilson
----------------------- --------------------------
SYSTEMSEARCH PS INC.
By: /s/ John Robert Wilson /s/ John Robert Wilson
----------------------- -----------------------------
John Robert Wilson
<PAGE>
ANNEX TO SHARE PURCHASE AGREEMENT
February 11th, 1998
John R. Wilson Enterprises Inc.
3300 Bloor St West
Toronto, Ontario
RE: Contract Agreement
Dear John,
This will serve to confirm our understanding that from January 2, 1997 to the
completion of a listing on a Public Exchange you have and will continue in the
capacity of President and Chief Executive Officer of Systemsearch Consulting
Services Inc. (hereinafter referred to as Systems) and Systems PS Inc.
(hereinafter referred to as PS).
During the interim period from January 2, 1997 until the closing of the share
purchase transaction contemplated in the share purchase agreement dated February
11th, 1998 you shall conduct the business in the ordinary course, completely
autonomously but you shall not make any material change in the customary terms
and conditions upon which Systems and PS historically did Business unless
otherwise agreed by IT. You shall use your best effort to preserve the Business
organization and goodwill of the suppliers, staff, customers and Business of
Systems and PS and to continue to build the Business. It is understood that
Systems and PS currently operate from two offices being located in Toronto and
Tampa.
Subsequent to the closing of the share purchase agreement as aforesaid there
will be no change in your position and you will continue as President and Chief
Executive Officer. Your contract will be $120,000.00 per annum paid on a
bi-weekly basis by direct deposit into your bank. You will be entitled to a
$2,500.00 per month auto and cell phone allowance and the use of a corporate
American Express card for business expenses. You will also be entitled to the
following bonus plan:
A 10% Management Bonus on all permanent placements. This override/bonus
comprises the full management override/bonus and may be distributed to
other managers at your sole discretion.
$1.00 per billed hour for each contractor signed after February 1st, 1998,
including renewals, providing the margin is a minimum of $10.00.
This employment is guaranteed for a period of 3 years without restrictions. In
the event that this employment contract is terminated by IT thereafter you will
still be entitled to the above bonus of $1.00 per contract hour for a further
period of 1 year provided you do not get involved with a competing business.
<PAGE>
Scope of Authority
It is understood and agreed that Systems and PS will continue as an
independently run organization, and that all day to day management decisions and
the overall management of the company will continue to be your sole
responsibility. Any capital expenditures exceeding $25,000, new hire exceeding
$75,000 per annum, new branch opening or any other out of the ordinary day to
day decision making will require board of directors approval.
I trust that you will find the terms and conditions set out above acceptable. On
behalf of IT Staffing Ltd., I am pleased that you have agreed to join us and
wish you a long and successful association.
/s/ Declan French Feb. 11, 1998
- ------------------------------ --------------------------------------
Declan French Date
By my signature below, I hereby accept the offer of contract outlined above and
acknowledge receiving a duplicate copy of this letter of agreement on the date
indicated below.
/s/ John R. Wilson Feb. 11, 1998
- ------------------------------ --------------------------------------
John R. Wilson Enterprises Inc. Date
<PAGE>
AMENDING AGREEMENT
THIS AGREEMENT made as of January 2, 1997
A M O N G:
IT STAFFING LTD.,
a corporation existing under
the laws of the Province of Ontario
("IT")
- and -
John Robert Wilson, an individual, resident in the
Town of Rockwood, in the Province of Ontario
("Vendor")
- and -
SYSTEMSEARCH CONSULTING SERVICES INC.,
a corporation existing under
the laws of the Province of Ontario
("Systemsearch")
- and -
SYSTEMSEARCH PS INC.,
a corporation existing under
the laws of the Province of Ontario
("PS")
- and -
Declan French, an individual, resident in the
City of Toronto, in the Province of Ontario
<PAGE>
-2-
FOR VALUE RECEIVED the parties agree as follows:
1. INTERPRETATION
1.1 Definitions. In this Agreement:
(a) "Share Purchase Agreement" means the agreement dated effective as of January
2, 1997 among IT, Vendor, Systemsearch and PS without regard to this Agreement;
(b) All other capitalized terms used in this Agreement have the meanings given
to them in the Share Purchase Agreement.
1.2 Headings. The division of this Agreement into sections and the insertion of
headings are for convenience of reference only and are not to affect the
construction or interpretation of this Agreement.
1.3 References. Unless otherwise specified, all references to Sections in this
Agreement are to sections of the Share Purchase Agreement.
1.4 Governing Law. This Agreement is governed by, and is to be construed and
interpreted in accordance with, the laws of the Province of Ontario and the laws
of Canada applicable in the Province of Ontario.
1.5 One Agreement. This Agreement amends the Share Purchase Agreement. This
Agreement and the Share Purchase Agreement shall be read together and constitute
one agreement with the same effect as if the amendments made by this Agreement
had been contained in the Share Purchase Agreement as of the date of this
Agreement.
1.6 Conflict. If there is a conflict between any provision of this Agreement and
any provision of the Share Purchase Agreement, the relevant provision of this
Agreement is to prevail.
<PAGE>
-3-
2. AMENDMENTS
2.1 The parties confirm that Systemsearch is the proper party to the Share
Purchase Agreement and acknowledge and agree that the reference in the Share
Purchase Agreement to "Systemsearch Consultants Inc." was meant to be a
reference to Systemsearch.
2.2 Section (B) iv) of the Share Purchase Agreement under the heading "Purchase
Of Shares" is amended by deleting the figure "$400,000" in the third and fifth
lines thereof and inserting instead "$3.00 per share"
2.3 Section (B) of the Share Purchase Agreement under the heading "Purchase of
Shares" is amended by deleting subsections v), vi) and vii) in their entirety.
2.4 The Share Purchase Agreement is amended by adding a new Section (C) under
the heading "Purchase of Shares" as follows:
"(C) Failure of IT to Gain Listing on Stock Exchange
1. Re-Purchase of IT Shares
1.1 In the event that the 133,000 common shares of IT (the "IT Shares") to
be issued to the Vendor hereunder are not listed and posted for trading on
a North American stock exchange (a "Public Exchange") prior to July 31,
1999, or in the event that the value of the IT Shares owned by the Vendor
on the date on which they are listed and posted for trading on a Public
Exchange (the "Listing Date") is less than $3.00 per share and IT is
unable to fulfil its obligations to Vendor under Section B iv), IT shall,
upon written request from the Vendor, which request shall be made within
30 days of the earlier of the Listing Date and July 31, 1999, purchase
from Vendor for cancellation all of the IT Shares then owned by the Vendor
(the "Re-Purchased Shares") for a purchase price of $3.00 per share (the
"Purchase Price"), subject to Section 1.4 below.
1.2 The closing of the transaction of purchase and sale contemplated in
Section C 1.1 of this Agreement shall take place at the offices of IT at
such time and date as shall be mutually agreed by the parties, but not
later than 10 days after July 31, 1999 (the "IT Closing Date").
1.3 On the IT Closing Date:
(a) the Vendor shall deliver to IT the certificate or certificates
representing the Re-Purchased Shares, together with a duly endorsed
share transfer instrument and a representation and warranty executed
by Vendor in favour of IT that the Re-
<PAGE>
-4-
Purchased Shares are owned of record and beneficially by Vendor with
a good and marketable title thereto, free and clear of all
encumbrances of any kind;
(b) IT shall deliver to the Vendor the Purchase Price in cash or by
certified cheque or bank draft payable to the Vendor; and
(c) If requested by the Vendor, IT shall cause Systemsearch and PS to
change their respective names and shall do all such acts and things
as are reasonably required and within its power in connection
therewith to make such names available for use by the Vendor.
1.4 If, for any reason other than the fault of the Vendor, IT fails to
complete the purchase of the Re-Purchased Shares on the IT Closing Date,
then in consideration of the sum of two dollars and other good and
valuable consideration, including the benefit derived by French from the
completion of the transactions contemplated by the Share Purchase
Agreement in his capacity as a shareholder of IT, French agrees to
purchase from the Vendor all of the Re-Purchased Shares for the Purchase
Price and upon payment of the Purchase Price by French, IT shall have no
further rights or obligations to the Vendor hereunder, except under
Section 1.6(c).
1.5 The closing of the transaction of purchase and sale contemplated in
Section C 1.2 of this Agreement shall take place at the offices of IT at
such time and date as shall be mutually agreed by the parties, but not
later than 5 days after the if Closing Date (the "French Closing Date").
1.6 On the French Closing Date:
(a) the Vendor shall deliver to French the certificate or certificates
representing the Re-Purchased Shares, together with a duly endorsed
share transfer instrument and a representation and warranty executed
by Vendor in favour of French that the Re-Purchased Shares are owned
of record and beneficially by Vendor with a good and marketable
title thereto, free and clear of all encumbrances of any kind; and
(b) IT shall deliver to the Vendor the Purchase Price in cash or by
certified cheque or bank draft payable to the Vendor; and
(c) If requested by the Vendor, IT shall cause Systemsearch and PS to
change their respective names and shall do all such acts and things
as are reasonably required and within its power in connection
therewith to make such names available for use by the Vendor.
1.7 Notwithstanding anything in the Employment Agreement dated February
11, 1998 (the "Employment Agreement") between the Vendor and IT,
upon the completion of the transaction of purchase and sale of the
Repurchased Shares, the
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-5-
Employment Agreement shall be terminated and neither the Vendor nor
IT shall have any further obligations to the other except with
respect to such remuneration as shall have been earned by the Vendor
pursuant to the Employment Agreement prior to such termination and
the Vendor shall not be restricted from competing with the business
of IT.
3.0 GENERAL
3.1 Benefit of Agreement. This Agreement enures to the benefit of and binds the
parties and their respective heirs, executors, administrators, personal and
legal representatives successors and permitted assigns.
3.2 Further Assurances. Each party shall from time to time promptly execute and
deliver all further documents and take all further action reasonably necessary
or appropriate to give effect to the provisions and intent of this Agreement.
3.3 Execution in Counterparts. This Agreement may be executed and delivered in
any number of counterparts, each of which when executed and delivered is an
original but all of which taken together constitute one and the same instrument.
IN WITNESS WHEREOF the parties have executed this Agreement as of the date
first written above.
IT STAFFING LTD SYSTEMSEARCH CONSULTING
SERVICES INC.
By: /s/ D French By: /s/ John Wilson
-------------------------- -------------------
SYSTEMSEARCH PS INC.
By: /s/ John Wilson /s/ John Wilson
-------------------------- -----------------------
John Robert Wilson
/s/ D French
- -----------------------------
Declan French
<PAGE>
Exhibit 10.16
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is made this ___ day of
November, 1998 by and between IT STAFFING, LTD., a corporation duly organized
under the laws of the Province of Ontario and authorized to conduct business in
the State of New York ("Buyer") and SOUTHPORT CONSULTING CO., a corporation duly
organized under the laws of the State of New Jersey ("Seller").
WHEREAS Seller is the owner of certain assets used in connection with
the operation of its business; and
WHEREAS Buyer desires to purchase the hereinafter described assets of
Seller pursuant to the terms and conditions set forth herein; and
WHEREAS Seller desires to sell and transfer such assets to Buyer
pursuant to the terms and conditions set forth herein:
NOW, THEREFORE, for and in consideration of the premises and mutual
promises and covenants hereinafter contained, it is agreed between Buyer and
Seller as follows:
1. SALE OF ASSETS
Subject to the terms and conditions set forth herein, Seller shall
sell, assign, convey, transfer and set over to Buyer, and Buyer shall purchase,
assume and accept from Seller, free and clear of any and all liens, claims,
encumbrances, liabilities, obligations, security interests and debts, full and
complete title to the following tangible and intangible properties and assets of
Seller, wherever located, as more particularly set forth on Schedule 1(i) (the
"Assets"). The Assets are all of the Assets necessary to enable Buyer to
operate the business related to the Assets. In that
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connection, on the date of the closing of the transactions contemplated herein
(the "Closing"), Seller shall deliver to Buyer: (i) a bill of sale in the form
of Exhibit 1(i) covering the Assets; and (ii) an assignment of the trade name
Southport Consulting. The Purchase Price (as hereinafter defined) shall be
allocated as set forth on Schedule 1(i).
2. LIABILITIES.
Buyer does not hereby and shall not at any time assume any liabilities
or obligations of Seller of any nature whatsoever.
3. PURCHASE PRICE.
3.1 As consideration for the Assets being purchased hereby, subject
to adjustment as provided in Paragraph 3.1(c) hereinbelow, Buyer shall pay to
Seller or any designee(s) of Seller the sum of Two Hundred Fifty Thousand United
States Dollars (USD$250,000) (the "Purchase Price"):
(a) Fifty Thousand United States Dollars (USD$50,000) by bank or
certified check or by wire transfer of funds upon the execution hereof; and
(b)(i) in the event that certain registration statement bearing
number 333-___________ becomes effective on or before January 29, 1999 (the
"Registration Statement"), that number of shares of unregistered common stock of
Buyer ("IT Shares") equal to Two Hundred Thousand United States Dollars
(USD$200,000) based upon the offering price per share set forth in the
Registration Statement. Such IT Shares shall be recorded on the books and
records of Buyer and shall be delivered to the Seller simultaneously with the
execution hereof; or
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(b)(ii) in the event that the Registration Statement does not become
effective on or before January 29, 1999, Buyer shall pay and deliver to Seller,
on February 1, 1999, Fifty Thousand (50,000) IT Shares.
(c) In the event that Buyer furnishes consideration to Seller in the
form described in Paragraph 3.1(b) above and on each date that Seller is first
permitted to sell IT Shares pursuant to Rule 144 and any applicable contractual
arrangement (each such date being hereinafter referred to as a "Sale Date"), and
the value of the IT Shares available for sale on such Sale Date is less than
Five United States Dollars (USD$5.00) per share (the "Target Price Per Share"),
unless the price to the public pursuant to the Registration Statement is less
than Five United States Dollars (USD$5.00) per share, in which case the Target
Price Per Share shall be the price to the public at the Buyer's initial public
offering pursuant to the Registration Statement, subject to notice to be
furnished to Buyer pursuant to Paragraph 3(d) hereinbelow, Buyer shall, on each
such date, deliver to Seller, at Buyer's option, (i) cash or that number of
registered shares of common stock of the Seller equal to the difference between
(A) the number of IT Shares available for sale on the applicable Sale Date
multiplied by the Target Price Per Share, and (B) the value of said shares on
the applicable Sale Date as determined by the closing bid on the applicable Sale
Date if the Registration Statement became effective, or by the book value of
Buyer on said date in the event that the Registration Statement did not become
effective (either such valuation being hereinafter referred to as the "Market
Price"), or (ii) Two Hundred Thousand United States Dollars (USD$200,000) in
exchange for the IT Shares delivered to Seller under paragraphs 3(b)(i) or
3(b)(ii), as applicable.
(d) In the event that the Target Price Per Share is less than the
Market Price per share, Seller shall furnish to Buyer notice thereof within Ten
(10) business days following the
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applicable Sale Date which notice shall set forth the amount of cash and IT
Shares owed by Buyer to Seller. Buyer shall pay and deliver to Seller, within
Ten (10) business days following receipt of said notice, at Buyer's option, the
cash, by certified check or wire transfer of funds, or a certificate
representing the applicable number of IT Shares.
(e) All IT Shares delivered to Seller under this Agreement shall be
subject to the
same limitations in connection with transferability and registration rights as
those of senior management of the Buyer; provided, however, that Buyer shall (i)
not permit said rights to be any more restrictive to Seller as same exist on the
date hereof, and (ii) cause Seller to be furnished with tag-along rights,
drag-along rights, and registration rights and the like on the same terms and at
the same time(s) as same may be offered to senior management of the Buyer from
time to time.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF SELLER. Seller
represents, warrants, and covenants to Buyer as follows:
4.1 EXISTENCE/AUTHORIZATION. Seller is a corporation duly organized
and validly existing under the laws of the State of New Jersey. Seller has the
corporate power to own and operate its properties and the Assets and to carry on
its business as it is now being conducted. Seller conducts business only in New
York and New Jersey and is not authorized and has not applied to become
authorized to conduct business in any other jurisdiction.
4.2 CORPORATE POWER. Seller has full power and authority to
execute and deliver this Agreement and such other agreements and instruments to
be executed and delivered by it pursuant hereto, and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by or on the part of Seller to authorize it
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to execute, deliver and perform this Agreement and such other agreements,
instruments and transactions contemplated hereby have been duly and properly
taken.
4.3 BINDING OBLIGATION. This Agreement has been duly executed and
delivered by Seller and constitutes, and such other agreements and instruments
contemplated hereby when duly executed and delivered by Seller will constitute,
legal, valid and binding obligations of Seller enforceable in accordance with
their respective terms, subject, as to enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally from time to time in
effect, and subject to any equitable principles limiting the right to obtain
specific performance of certain obligations of Seller hereunder and thereunder.
4.4 SECURITIES ACT.
(a) Seller is acquiring the IT Shares for its own account for
investment and not with a view to the distribution thereof within the meaning of
the United States Securities Act of 1933 (the "Act").
(b) Seller understands that the IT Shares have not been
registered under the Act by reason of their issuance by the Buyer in a
transaction exempt from the registration requirements of the Act and that the IT
Shares must be held by Seller for a period of at least one (1) year unless
registered under the Act or exempt from registration thereunder.
(c) Seller further understands that the exemption from registration
afforded by Rule 144 (the provisions of which are known to Seller) promulgated
under the Act depends on the satisfaction of various conditions, and that, if
applicable, sales made pursuant to Rule 144 may only be made in limited amounts.
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(d) In addition to complying with all applicable restrictions
and other provisions in this Agreement, Seller represents and warrants to Buyer
that it will not transfer any of the IT Shares except in compliance with United
States federal and applicable state securities laws.
(e) It is understood and agreed that the certificates evidencing
the IT Shares will bear a legend stating, in addition to any other applicable
legend, in substance:
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended. They may not be sold,
offered for sale, pledged, hypothecated or otherwise disposed of
unless they are registered under the Act or an exemption from
registration is available."
4.5 TITLE TO ASSETS. Seller has good and valid title to all of the
Assets, free and clear of all mortgages, liens, or encumbrances. The
performance by Seller of its obligations hereunder will vest in the Buyer full
and complete title in and to the Assets, free and clear of any and all liens,
claims and encumbrances.
4.6 CUSTOMER INFORMATION. At the Closing, Seller shall deliver to
Buyer files containing complete and accurate customer lists and customer
databases used by or for Seller (the "Customer Information") as of Closing. The
Customer Information will set forth the name and address of all of Seller's
customers as of the date of the Closing.
4.7 INTELLECTUAL PROPERTY. Southport Consulting is the only trade
name employed by Seller.
4.8 FINANCIAL STATEMENTS.
(a) Seller has heretofore delivered to Buyer its unaudited
balance sheet (the "1996 and 1997 Balance Sheet") for the years ended December
31, 1996 and 1997 and the
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related statement of income and retained earnings (collectively the "1996 and
1997 Financial Statements").
(b) The 1996 and the 1997 Financial Statements have been
prepared in accordance with the books and records of Seller.
(c) From January 1, 1998 through the date of the Closing (the
"Closing Date"), Seller has conducted its business and affairs prudently and in
a consistent manner. 4.9 COMPLIANCE WITH APPLICABLE LAWS. To
the best of Seller's knowledge, Seller and the Assets are in material compliance
with all applicable statutes, laws, ordinances, rules and regulations of any
governmental authority or instrumentality, domestic or foreign.
4.10 RECORDS AND SYSTEMS. All data and information of the
business relating to the Assets of Seller are recorded, stored, maintained or
operated or otherwise held by Seller, are included in the Assets, and are not
wholly or partly dependent on any facilities which are not under the exclusive
ownership or control of Seller.
4.11 SOFTWARE LICENSES. Seller is licensed to use all software
necessary to enable it to continue to conduct its business and use its
computerized records for the foreseeable future in the same manner in which they
have been used prior to the Closing Date. All such licenses to use are included
in the Assets, and Seller does not share any user rights in respect of such
software with any other person or entity, but consent is required to assign
Seller's rights in such licenses to Buyer. To the extent available to Seller,
Seller shall use reasonable efforts to cause all software licenses to be
transferred to Buyer.
4.12 BROKERS/FINDERS. Neither Seller nor any of Seller's directors,
employees or agents has employed any broker, finder, investment banker or other
person and none of the foregoing
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has incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby.
4.13 NON-COMPETITION. Seller shall cause Michael Carrazza to
execute a non-competition agreement in the form of Exhibit 4.13 annexed hereto.
4.14 FINANCIAL SOPHISTICATION OF SELLER. The Seller has knowledge and
experience in financial and business matters such that it is capable of
evaluating the merits and risks, including the risk of loss, attendant to its
capacity as a stockholder in Buyer.
5. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BUYER.
Buyer hereby represents, warrants and covenants to Seller as of the
date hereof and at the Closing as follows:
5.1 EXISTENCE. Buyer is a corporation duly organized and validly
existing under the laws of the Province of Ontario. Buyer is authorized to
conduct business in the State of New York. Buyer has the corporate power to own
and operate its properties and to carry on its business as it is now being
conducted.
5.2 CORPORATE POWER. Buyer has full corporate power and authority to
execute and deliver this Agreement and such other agreements and instruments to
be executed and delivered by it pursuant hereto, and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by or on the part of the Buyer to authorize it
to execute, deliver and perform this Agreement and such other agreements,
instruments and transactions contemplated hereby have been duly and properly
taken.
5.3 BINDING OBLIGATION; GOVERNMENTAL CONSENTS. This Agreement has
been duly executed and delivered by Buyer and constitutes, and such other
agreements and instruments when
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duly executed and delivered by Buyer will constitute, legal, valid and binding
obligations of Buyer enforceable in accordance with their respective terms,
subject, as to enforcement of remedies, to applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally from time to time in effect, and
subject to any equitable principles limiting the right to obtain specific
performance of certain obligations of Buyer hereunder and thereunder. All
consents of governmental and other regulatory authorities and of other parties
required to be received by or on the part of Buyer to enable it to enter into
and carry out this Agreement and the transactions contemplated hereby have been
obtained. Without limiting the foregoing, Buyer has made all such filings and
submissions which may be required under applicable law for Buyer to consummate
the transactions contemplated hereby. Neither the execution and delivery of
this Agreement nor the consummation by Buyer of the transactions contemplated
hereby will (i) violate or conflict with any of the provisions of the Articles
of Incorporation or By-laws of Buyer; or (ii) violate or constitute a default
under any note, bond, mortgage, indenture, contract, agreement, license or other
instrument or any order, judgment or ruling of any governmental authority to
which Buyer is a party or by which any of its properties are bound. No other
consent, approval, license, permit, or authorization of, or registration,
declaration or filing with, any state or federal court, administrative agency or
commission or other governmental authority or instrumentality, or of any other
third party, is required to be obtained or made by Buyer in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby other than those that may be required solely by reason of
Seller's or the Stockholders' (as opposed to any third party's) participation in
the transactions contemplated hereby.
5.4 RESTRICTIONS RELATING TO THE IT SHARES. Except for restrictions
on the transfer of the IT Shares in that they have not been registered under the
United States securities laws, good
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and marketable title to the IT Shares will pass to Seller, free and clear of any
claims, liens, encumbrances, security interests, options, charges or
restrictions whatsoever. The IT Shares are not subject to any voting trust
agreement or other contract, agreement, arrangement, commitment or
understanding, including any such agreement, arrangement, commitment or
understanding restricting or otherwise relating to the voting, dividend rights
or disposition of the IT Shares. Buyer shall cause the IT Shares and the
holder(s) thereof to have anti-dilution protection, pre-emptive rights and other
rights relating to the IT Shares on terms no less favorable to current
management and non-management shareholders of Buyer. Attached hereto as
Exhibit 5.4 are copies of all agreements and proposals relating to rights and
obligations of shareholders of Buyer including without limitation, shareholders
agreements, registration rights agreements and lock-up agreements.
5.5 CAPITAL STOCK. The IT Shares issued and to be issued pursuant
hereto are, or when issued will be, validly issued and outstanding and fully
paid. Upon the Closing, the Seller will be the registered holder of the IT
Shares issuable hereunder and to be delivered on the Closing Date. Such IT
Shares have not been and will not be issued in violation of, and are not subject
to, any preemptive or subscription rights. Except as set forth herein, there
are no outstanding warrants, options, agreements, subscriptions, convertible or
exchangeable securities or other commitments pursuant to which Seller is or may
become obligated to issue, sell, purchase, return or redeem any or all of the IT
Shares issued or issuable to it and there are no shares of capital stock.
5.6 THE IT SHARES. Upon Closing and upon each issuance hereunder,
the Seller will have, good, valid and legal title to the IT Shares issued to it,
free and clear of any claims, liens, encumbrances, options, charges or
restrictions whatsoever (except for any restrictions imposed by the Buyer's
underwriter underwriting the Registration Statement of Buyer's initial public
offering and by virtue of any of the IT Shares not being registered under the
Securities Act of 1933). At the
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Closing, good, valid and legal title to the IT Shares will pass to Seller, free
and clear of any claims, liens, encumbrances, options, charges or restrictions
whatsoever, except as provided herein. The IT Shares issuable hereunder are not
subject to any voting trust agreement or other contract, agreement, arrangement,
commitment or understanding, including any such agreement, arrangement,
commitment or understanding restricting or otherwise relating to the voting,
dividend rights or disposition of such IT Shares, except as disclosed herein.
6. INDEMNIFICATION.
6.1 INDEMNIFICATION BY SELLER. Seller hereby agrees to indemnify and
defend Buyer against and hold it harmless from any loss, liability, claim,
damage or expense (including reasonable legal fees and expenses) suffered or
incurred by Buyer to the extent arising from any breach of any representation,
warranty or covenant of the Seller contained in this Agreement and for any loss,
liability, claim, damage or expense (including reasonable legal fees and
expenses) suffered or incurred by Buyer to the extent arising from Seller's
conduct or omission occurring prior to the Closing Date. In addition, Seller
hereby agrees to indemnify Buyer against all liability for reasonable legal,
accounting and other fees and expenses directly attributable to any such
indemnification.
6.2 INDEMNIFICATION BY BUYER. Buyer hereby agrees to indemnify and
defend Seller against, and hold it harmless from, any loss, liability, claim,
damage or expense (including reasonable legal fees and expenses) suffered or
incurred by Seller to the extent arising from any breach of any representation,
warranty or covenant of Buyer set forth herein or arising from the conduct of
the business relating to the Assets after the Closing. In addition, Buyer
agrees to indemnify Seller from and against all liability for reasonable legal,
accounting and other fees and expenses directly attributable to any such
indemnification.
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6.3 PROCEDURES RELATING TO INDEMNIFICATION.
(a) In order for a party (the "Indemnified Party") to be
entitled to any indemnification provided for under Paragraph 6.1 or 6.2 of this
Agreement in respect of, arising out of, or involving a Claim (as hereinafter
defined) or demand made by any person, firm, governmental authority or
corporation against the Indemnified Party (a "Claim" or a "Third Party Claim"),
such Indemnified Party shall notify the indemnifying party as soon as
practicable following receipt of written notice of said Third Party Claim;
PROVIDED, HOWEVER, that the failure to give or delay in giving such notification
shall not affect the indemnification provided hereunder except to the extent the
indemnifying party shall have been actually prejudiced as a result of such
failure or delay. Thereafter, the Indemnified Party shall deliver to the
indemnifying party, as soon as practicable following the Indemnified Party's
receipt thereof, copies of all notices and documents (including court papers)
received by the Indemnified Party relating to the Third Party Claim. In
providing notice to the indemnifying party, the Indemnified Party acknowledges
its responsibility to provide said notice as promptly as possible in order that
the indemnifying party shall be able to engage counsel and to submit appropriate
answers to any Third Party Claim within the time period required by law.
(b) If a Third Party Claim is made against an Indemnified Party,
the indemnifying party shall assume the defense thereof with counsel selected by
the indemnifying party and reasonably acceptable to the Indemnified Party. The
Indemnified Party may participate in the defense of such Third Party Claim;
PROVIDED, HOWEVER, the indemnifying party will not be liable to the Indemnified
Party for legal expenses incurred by the Indemnified Party in connection with
such defense subsequent to the assumption thereof by the indemnifying party.
The indemnifying party shall be liable for the fees and expenses of counsel
employed by the Indemnified Party for any period
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during which the indemnifying party has not assumed the defense thereof. All of
the parties hereto shall cooperate in the defense or prosecution of any Third
Party Claim. Such cooperation shall include the retention and (upon the
indemnifying party's written request) the provision to the indemnifying party of
records and information which are reasonably relevant to such Third Party Claim,
and making employees available on a mutually convenient basis to provide
additional information and explanation of any material provided hereunder. The
Indemnified Party shall not admit any liability with respect to, or settle,
compromise or discharge, such Third Party Claim without the indemnifying party's
prior written consent.
7. DURATION OF REPRESENTATIONS. The representations, warranties,
covenants and indemnities in this Agreement and in any other document delivered
in connection herewith shall survive the Closing of this Agreement and shall
terminate on the later of (i) the close of business on December 31, 1999, and
(ii) the final resolution of any claim, with respect to that claim, made on or
prior to December 31, 1999.
8. CONFIDENTIAL INFORMATION.
Each party agrees to maintain as confidential all information which is
delivered to it by the other and agrees further not to disclose the same to any
third party whatsoever or use any such information for any purpose except in
connection with the implementation of the undertakings of the parties described
herein.
9. CLOSING. The Closing of the transactions contemplated hereby shall
take place at the offices of Buyer, 420 Lexington Avenue, Suite 300, New York,
New York and shall occur on or about October 20, 1998.
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10. ANCILLARY DOCUMENTS AND RELATED ACTIONS OR CONDITIONS PRECEDENT TO
CLOSING. (a) The obligation of Buyer to consummate the transactions
contemplated herein and to perform its obligations hereunder on or prior to the
Closing Date is, at the option of Buyer, subject to the following conditions,
any or all of which may be waived by Buyer in whole or in part at or prior to
the Closing:
(i) no action or proceeding shall have been instituted or
threatened or claim or demand made against Buyer and/or Seller before any court
or other governmental body, seeking to restrain or prohibit, or to obtain
damages with respect to, the consummation of the transactions contemplated
hereby, or which, if adversely determined to Buyer and/or Seller, might have a
material adverse effect on the Assets or the business, operations or prospects
of Buyer or Seller;
(ii) Seller shall deliver to Buyer evidence satisfactory to
Buyer that the name of Seller has been changed; and
(iii) Michael Carrazza shall execute a Non-Competition Agreement
in the form of Exhibit 4.13 annexed hereto.
(b) The obligation of Seller to consummate the transactions
contemplated herein and to perform their obligations hereunder on and after the
Closing Date is, at the option of the Seller, subject to the following
conditions, any or all of which may be waived by Seller in whole or in part at
or prior to the Closing:
(i) no action or proceeding shall have been instituted or
threatened or claim or demand made against Buyer and/or Seller before any court
or other governmental body, seeking to restrain or prohibit, or seeking to
obtain damages with respect to, the consummation of the transactions
contemplated hereby;
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(ii) Buyer shall deliver to Seller a certificate of an
officer of Buyer stating that the transactions contemplated hereby have been
approved by Seller's board of directors; and
(iii) Buyer shall have furnished the Seller with a legal
opinion of its counsel in form and substance reasonably satisfactory to Seller
and its counsel.
11. MISCELLANEOUS PROVISIONS.
11.1 FURTHER ASSURANCES. Each party hereto agrees to execute and
deliver such other documents, agreements or instruments and take such further
action as may be reasonably requested by any other party hereto for the
implementation of this Agreement and the consummation of the transactions
contemplated hereby.
11.2 NOTICES. Any notices required or permitted hereunder shall
be sufficiently given if in writing and personally delivered, by telecopy and
confirmed by telephone, or by internationally recognized overnight courier,
addressed as follows or to such other address as the parties shall have given
notice of pursuant hereto:
(a) If to the Seller:
Mr. Michael Carrazza
48 Davey Drive
West Orange, NJ 07052
with a copy to:
Eric J. Dale, Esq.
Lev, Berlin & Dale, P.C.
535 Connecticut Avenue
Norwalk, Connecticut 06854
tel. (203) 838-8500
fax. (203) 854-1652
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(b) If to Buyer:
Mr. Declan French
IT Staffing Ltd.
55 University Avenue Suite 525
Toronto, Ontario, Canada M5J 2H7
tel. (416) 364-8800
fax. (416) 364-2424
with a copy to:
Jay M. Kaplowitz, Esq.
Gersten, Savage, Kaplowitz & Fredericks, LLP
101 East 52nd Street 9th Floor
New York, New York 10022
tel. (212) 752-9700
fax. (212) 752-9713
All such notices shall be effective upon the earlier of receipt, date of
confirmation, or, in the case of registered mail, seven (7) days after
depositing in the mail, postage prepaid, return receipt requested and addressed
as shown above.
11.3 ENTIRE AGREEMENT. This Agreement (including the Schedules and
Exhibits hereto) represents the entire understanding and agreement between the
parties with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the parties
hereto. This Agreement supersedes all prior agreements and arrangements between
the parties hereto and their affiliates.
11.4 SUCCESSORS AND ASSIGNS; BENEFITS. This Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and, except as
otherwise provided below, their respective successors and assigns. Nothing
contained in this Agreement or in any of the Schedules or Exhibits hereto is
intended to create any rights in any person or entity that is not a party to
this Agreement and no person or entity shall be deemed to be a third party
beneficiary hereof or thereof.
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11.5 SECTION HEADINGS. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
11.6 APPLICABLE LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York,
without regard to the principles thereof relating to conflicts of law. The
parties hereto consent to the jurisdiction of the courts of the State of New
York in Manhattan and the United States District Court for the Southern District
of New York.
11.7 EXPENSES. Except as otherwise provided herein, the parties
hereto shall pay their own respective fees and expenses, including without
limitation, attorneys' fees. Notwithstanding the foregoing, in the event that
Seller commences legal action to recover any amounts owed hereunder, Buyer shall
pay all professional fees and expenses, including without limitation,
attorneys' fees and expenses.
11.8 SEVERABILITY. If any provision of this Agreement shall be held
by any court of competent jurisdiction to be illegal, void or unenforceable,
such provision shall be of no force and effect, but the illegality or
unenforceability of such provision shall have no effect upon and shall not
impair the enforceability of any other provision of this Agreement.
11.9 PUBLICITY. None of the parties hereto shall issue any press
release or make any other public statement or announcement relating to,
connected with or arising out of this Agreement or the matters contained herein,
without obtaining the prior written approval of the other parties hereto to the
contents and the manner of presentation and publication thereof. Notwithstanding
the foregoing, after the Closing Buyer may issue any such release, statement or
announcement as it reasonably deems appropriate in connection with its
responsibilities as a publicly traded company.
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11.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument. This Agreement may be
executed by telecopied signatures with the same effect as original signatures.
11.11 SCHEDULES AND EXHIBITS. All Schedules and Exhibits referenced
herein are incorporated herein by reference and shall be initialed by both
parties in order to be deemed an integral part of this Agreement. The contents
of such Schedules and Exhibits are deemed to be disclosures to Buyer by Seller.
In the event that any Schedule or Exhibit provided for herein is incomplete or
has not been prepared by Seller and attached hereto as of the execution and
delivery of this Agreement, it shall be a condition precedent to Closing that
such Schedule or Exhibit shall be in form and substance reasonably satisfactory
to Buyer.
IT STAFFING LTD. SOUTHPORT CONSULTING CO.
By: /s/ Declan French By: /s/ Michael Carrazza
--------------------------- ----------------------------
Declan French Michael Carrazza
Its President Its President
Hereunto duly authorized Hereunto duly authorized
18
<PAGE>
SCHEDULE 1(i)
Assets
<PAGE>
SCHEDULE 1(i)
Assets
(1) Deli Computer with Software
(1) Gateway Computer with Software
(1) HP III Printer
(1) Scanner with Software
(1) Fax Machine
ACT! Contact Manager Software
Skill Track Consultant/Client Searchable Database Software
ACCPAC Simply Accounting Software
Existing Office Supplies
Active and Historical Client Lists
Active and Historical Manager Contacts
Active and Historical Consultant Information
Active and Historical Master Client Agreements
Active and Historical Master Consultant Agreements
Active and Historical Consultant Schedule of Work
Active and Historical Job Requests
Hardcopy files of Consultant Resumes
<PAGE>
EXHIBIT 1(i)
Bill of Sale
18
<PAGE>
EXHIBIT 4.13
Consulting Agreement
19
<PAGE>
BILL OF SALE
Know All Men By These Presents that SOUTHPORT CONSULTING CO., a New Jersey
corporation ("Seller"), for the consideration of FIFTY THOUSAND UNITED STATES
DOLLARS (USD$50,000) and that number of shares of common stock of Buyer (as
hereinafter defined) calculated pursuant to that certain Asset Purchase
Agreement between Buyer and Seller of even date, received to Seller's full
satisfaction, subject to adjustment pursuant to said Agreement, from IT STAFFING
LTD., a corporation duly organized under the laws of the Province of Ontario and
authorized to conduct business in the State of New York ("Buyer"), does hereby
sell, transfer and convey unto the Buyer the assets described on schedule A
annexed hereto, free and clear of all liens, claims and encumbrances, to have
and to hold the same to the Buyer and the Buyer's executors, administrators,
assigns and successors forever, to the Buyer's and their proper use. And the
Seller does, for the Seller's heirs, executors, administrators, successors and
assigns covenant and agree with the Buyer to Warrant and Defend said property to
the Buyer against all persons whatsoever.
In all references herein to any parties, persons, entities or corporations
the use of any particular gender or the plural or singular number is intended to
include the appropriate gender or number as the text of the within instrument
may require.
In Witness Whereof, the Seller has signed and sealed this instrument or if
a corporation has caused these presents to be signed by its corporate officers
and its corporate seals to be hereto affixed this ____ day of___________ 1998.
SOUTHPORT CONSULTING CO.
By:
---------------------
Michael Carrazza
Its President
Hereunto duly authorized
<PAGE>
EXHIBIT 4.14
Non-Competition Agreement
20
<PAGE>
NON-COMPETITION AGREEMENT
The undersigned covenants that be shall not, directly or indirectly, for a
period of Eighteen (18) Months after the date hereof, without prior express
written consent of the Buyer:
(i) be engaged in any work or other activity in the territory in which
Southport Consulting Co. conducts or has during the immediately preceding Twelve
(12) months conducted its business (the "Territory"), whether as owner,
stockholder, partner, consultant, employer, employee or otherwise, involving the
staffing of information technology consultants (the "Business"); nor
(ii) either on behalf of itself or any other person, firm or company
anywhere in the Territory, canvass or solicit orders relating to the Business
from or in any way interfere with any person, firm or company who shall at any
time have been directly or indirectly a customer or customers of the Buyer, or
any of its subsidiaries or affiliated companies.
____________, 1998
---------------------------
Michael Carrazza
<PAGE>
EXHIBIT 23.1
CONSENT OF SCHWARTZ LEVITSKY FELDMAN
The undersigned, Schwartz Levitsky Feldman, hereby consents to the use of
our name and the use of our opinion dated July 27, 1998 for IT Staffing Ltd.
(the "Company") as filed with its Registration Statement on Form SB-2 being
filed by the Company.
/s/ Schwartz Levitsky Feldman
Schwartz Levitsky Feldman
Chartered Accountants
February 10, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF SCHWARTZ LEVITSKY FELDMAN
The undersigned, Schwartz Levitsky Feldman, hereby consents to the use of
our name and the use of our opinion dated July 27, 1998 for International Career
Specialists Ltd. as filed with IT Staffing Ltd.'s Registration Statement on Form
SB-2 being filed by IT Staffing Ltd.
/s/ Schwartz Levitsky Feldman
Schwartz Levitsky Feldman
Chartered Accountants
February 10, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF SCHWARTZ LEVITSKY FELDMAN
The undersigned, Schwartz Levitsky Feldman, hereby consents to the use of
our name and the use of our opinion dated July 27, 1998 for Systemsearch
Consulting Services, Inc. as filed with IT Staffing Ltd's Registration Statement
on Form SB-2 being filed by IT Staffing Ltd.
/s/ Schwartz Levitsky Feldman
Schwartz Levitsky Feldman
Chartered Accountants
February 10, 1999
<PAGE>
Exhibit 23.6
CONSENT OF MICHAEL CARRAZZA
The undersigned, Michael Carrazza, does hereby consent to act as a Director of
IT Staffing Ltd. (the "Company"), effective immediately upon the closing of the
public offering. In addition, the undersigned, Michael Carrazza, does hereby
consent to the use of my name as filed with the Company's Registration Statement
on Form SB-2, and any amendment thereof.
January 19, 1999 /S/ MICHAEL CARRAZZA
------------------------------
Michael Carrazza
<PAGE>
CONSENT TO ACT AS A DIRECTOR
TO: IT STAFFING LTD.
(the "Corporation")
I, James Reddy:
1. consent to act as a director of the Corporation, such consent to continue
in effect from time to time until a date upon which I give written notice
to the Corporation revoking such consent or cease to be a director of the
Corporation;
2. consent to the holding of meetings of directors or of committees of
directors by means of such telephone, electronic or other communication
facilities as permit all persons participating in the meetings to
communicate with each other simultaneously and instantaneously;
3. acknowledge and declare that I am not less than 18 years of age and
/X/ a Canadian citizen ordinarily resident in Canada or a permanent
resident withing the meaning of the Immigration Act (Canada)
ordinarily resident in Canada; or
/ / a Canadian citizen not ordinarily resident in Canada; or
/ / none of the above;
4. undertake to advise the corporation in writing of any change in my
citizenship or residence forthwith after such change;
5. acknowledge that persons of unsound mind who have been so found by a court
in Canada or elsewhere and persons with the status of a bankrupt are
disqualified from being directors of as corporation and declare that I am
not so disqualified;
6. undertake to advise the Corporation in writing forthwith if I become
disqualified to act as a director; and
7. acknowledge that the Corporation will rely upon the foregoing information.
DATED: September 1, 1998
/s/ James Reddy
--------------------------
James Reddy
<PAGE>
CONSENT TO ACT AS A DIRECTOR
TO: IT STAFFING LTD.
(the "Corporation")
I, William J. Neill:
1. consent to act as a director of the Corporation, such consent to continue
in effect from time to time until a date upon which I give written notice
to the Corporation revoking such consent or cease to be a director of the
Corporation;
2. consent to the holding of meetings of directors or of committees of
directors by means of such telephone, electronic or other communication
facilities as permit all persons participating in the meetings to
communicate with each other simultaneously and instantaneously;
3. acknowledge and declare that I am not less than 18 years of age and
/X/ a Canadian citizen ordinarily resident in Canada or a permanent
resident withing the meaning of the Immigration Act (Canada)
ordinarily resident in Canada; or
/ / a Canadian citizen not ordinarily resident in Canada; or
/ / none of the above;
4. undertake to advise the corporation in writing of any change in my
citizenship or residence forthwith after such change;
5. acknowledge that persons of unsound mind who have been so found by a court
in Canada or elsewhere and persons with the status of a bankrupt are
disqualified from being directors of as corporation and declare that I am
not so disqualified;
6. undertake to advise the Corporation in writing forthwith if I become
disqualified to act as a director; and
7. acknowledge that the Corporation will rely upon the foregoing information.
DATED: September 1, 1998
/s/ William J. Neill
--------------------------
William J. Neill
<PAGE>
CONSENT TO ACT AS A DIRECTOR
TO: IT STAFFING LTD.
(the "Corporation")
I, John Dunne:
1. consent to act as a director of the Corporation, such consent to continue
in effect from time to time until a date upon which I give written notice
to the Corporation revoking such consent or cease to be a director of the
Corporation;
2. consent to the holding of meetings of directors or of committees of
directors by means of such telephone, electronic or other communication
facilities as permit all persons participating in the meetings to
communicate with each other simultaneously and instantaneously;
3. acknowledge and declare that I am not less than 18 years of age and
/X/ a Canadian citizen ordinarily resident in Canada or a permanent
resident withing the meaning of the Immigration Act (Canada)
ordinarily resident in Canada; or
/ / a Canadian citizen not ordinarily resident in Canada; or
/ / none of the above;
4. undertake to advise the corporation in writing of any change in my
citizenship or residence forthwith after such change;
5. acknowledge that persons of unsound mind who have been so found by a court
in Canada or elsewhere and persons with the status of a bankrupt are
disqualified from being directors of as corporation and declare that I am
not so disqualified;
6. undertake to advise the Corporation in writing forthwith if I become
disqualified to act as a director; and
7. acknowledge that the Corporation will rely upon the foregoing information.
DATED: September 1, 1998
/s/ John Dunne
--------------------------
John Dunne
<PAGE>
CONSENT TO ACT AS A DIRECTOR
TO: IT STAFFING LTD.
(the "Corporation")
I, Blair Taylor:
1. consent to act as a director of the Corporation, such consent to continue
in effect from time to time until a date upon which I give written notice
to the Corporation revoking such consent or cease to be a director of the
Corporation;
2. consent to the holding of meetings of directors or of committees of
directors by means of such telephone, electronic or other communication
facilities as permit all persons participating in the meetings to
communicate with each other simultaneously and instantaneously;
3. acknowledge and declare that I am not less than 18 years of age and
/X/ a Canadian citizen ordinarily resident in Canada or a permanent
resident withing the meaning of the Immigration Act (Canada)
ordinarily resident in Canada; or
/ / a Canadian citizen not ordinarily resident in Canada; or
/ / none of the above;
4. undertake to advise the corporation in writing of any change in my
citizenship or residence forthwith after such change;
5. acknowledge that persons of unsound mind who have been so found by a court
in Canada or elsewhere and persons with the status of a bankrupt are
disqualified from being directors of as corporation and declare that I am
not so disqualified;
6. undertake to advise the Corporation in writing forthwith if I become
disqualified to act as a director; and
7. acknowledge that the Corporation will rely upon the foregoing information.
DATED: September 1, 1998
/s/ Blair Taylor
--------------------------
Blair Taylor
<PAGE>
CONSENT TO ACT AS A DIRECTOR
TO: IT STAFFING LTD.
(the "Corporation")
I, Robert M. Rubin:
1. consent to act as a director of the Corporation, such consent to continue
in effect from time to time until a date upon which I give written notice
to the Corporation revoking such consent or cease to be a director of the
Corporation;
2. consent to the holding of meetings of directors or of committees of
directors by means of such telephone, electronic or other communication
facilities as permit all persons participating in the meetings to
communicate with each other simultaneously and instantaneously;
3. acknowledge and declare that I am not less than 18 years of age and
/ / a Canadian citizen ordinarily resident in Canada or a permanent
resident withing the meaning of the Immigration Act (Canada)
ordinarily resident in Canada; or
/ / a Canadian citizen not ordinarily resident in Canada; or
/X/ none of the above;
4. undertake to advise the corporation in writing of any change in my
citizenship or residence forthwith after such change;
5. acknowledge that persons of unsound mind who have been so found by a court
in Canada or elsewhere and persons with the status of a bankrupt are
disqualified from being directors of as corporation and declare that I am
not so disqualified;
6. undertake to advise the Corporation in writing forthwith if I become
disqualified to act as a director; and
7. acknowledge that the Corporation will rely upon the foregoing information.
DATED: September 1, 1998
/s/ Robert M. Rubin
--------------------------
Robert M. Rubin
