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U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED: COMMISSION FILE NUMBER: 0-25881
December 31, 1999
NETSTAFF, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
INDIANA 35-2065470
(STATE OR OTHER JURISDICTION (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
168 SOUTH PARK
SAN FRANCISCO, CA 94107
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(415) 908-1000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED UNDER SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
(TITLE OF CLASS)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form,
10-KSB or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $500
The number of shares of Common Stock outstanding as of April 28, 2000
was 13,500,000. The aggregate market value of the Common Stock of the registrant
held by non-affiliates, as of April 28, 2000, was approximately $8,477,410
based on the average bid and asked prices for such Common Stock as reported on
the OTC Bulletin Board.
Documents incorporated by reference: None
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
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TABLE OF CONTENTS
Item Page
PART I
1. Description of Business.......................................... 1
2. Description of Property.......................................... 27
3. Legal Proceedings................................................ 28
4. Submission of Matters to a Vote of Security Holders.............. 28
PART II
5. Market for Common Equity and Related Stockholder
Matters......................................................... 28
6. Management's Discussion and Analysis or Plan of
Operation....................................................... 33
7. Financial Statements............................................. 38
8. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure......................................... 38
PART III
9. Directors, Executive Officers, Promotions and Control Persons;
Compliance With Section 16(a) of the Exchange Act............... 39
10. Executive Compensation........................................... 42
11. Security Ownership of Certain Beneficial Owners and Management... 44
12. Certain Relationships and Related Transactions...................
13. Exhibits and Reports on Form 8-K................................. 47
Signatures....................................................... 50
Financial Statements............................................. F-1
Index to Exhibits................................................ 65
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This Annual Report on Form 10-KSB contains express or implied forward-looking
statements. Additional written or oral forward-looking statements may be made by
the Company from time to time in filings with the Securities and Exchange
Commission ("SEC"), in its press releases, periodic conference calls or
otherwise. The words "believes," "expects," "anticipates," "intends,"
"forecasts," "projects," "plans," "estimates" and similar expressions identify
forward-looking statements. Such statements reflect the Company's current views
with respect to future events and financial performance or operations and speak
only as of the date the statements are made. Such forward-looking statements
involve risks and uncertainties and readers are cautioned not to place undue
reliance on forward-looking statements. The Company's actual results may differ
materially from such statements. Factors that cause or contribute to such
differences include, but are not limited to, the Company's limited operating
history, unpredictability of operating results, intense competition in various
aspects of its business, the risks of rapid growth, the Company's dependence on
key personnel, uncertainty of product/service acceptance, changes in laws and
regulations, changes in economic conditions and an inability to obtain
financing, as well as those discussed elsewhere in this Form 10-KSB. Although
the Company believes that the assumptions underlying its forward-looking
statements are reasonable, any of the assumptions could prove inaccurate and,
therefore, there can be no assurance that the results contemplated in such
forward-looking statements will be realized. The inclusion of such
forward-looking information should not be regarded as a representation by the
Company or any other person that the future events, plans or expectations
contemplated by the Company will be achieved. The Company undertakes no
obligation to publicly update, review or revise any forward-looking statements
to reflect any change in the Company's expectations with regard thereto or any
change in events, conditions or circumstances on which any such statements is
based.
PART 1
ITEM 1. DESCRIPTION OF BUSINESS.
ORGANIZATION
NetStaff, Inc. was incorporated in Indiana on October 7, 1996, as
MAS Acquisition VIII Corp. ("MAS"). MAS acquired NetStaff, Inc., a Delaware
corporation ("NetStaff Delaware"), which was incorporated June 21, 1996, and the
entities were combined, pursuant to a Stock Exchange Agreement, dated September
15, 1999 (the "Stock Exchange Agreement"), that provided for the merger of
NetStaff Delaware with and into MAS as the surviving entity, pursuant to a
tax-free reorganization in accordance with Sections 354 and 368 of
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the Internal Revenue Code, as amended. Under the terms of the Stock Exchange
Agreement, one share of the common stock of NetStaff Delaware was to be
converted into 5.0943 shares of common stock, par value $0.001 per share (the
"Common Stock") of MAS.
In September 1999, in anticipation of the transactions set forth
in the Stock Exchange Agreement, MAS had increased the number of authorized
shares of Common Stock from 80 million to 100 million, effected an 11 for 1
forward split of its Common Stock and accepted the return of, and canceled,
88,722,800 shares of Common Stock from the sole director and officer of MAS.
In addition, in September 1999, coincident with the signing of
the Stock Exchange Agreement, and in furtherance of the transactions
contemplated therein, MAS changed its name to NetStaff, Inc. and also changed
its fiscal year end from March 31 to December 31. Further, pursuant to the terms
of the Stock Exchange Agreement, the sole director and officer of MAS resigned,
and the management of NetStaff Delaware filled the vacancies.
When used in this Report, unless the context requires otherwise,
the terms "Company" and "NetStaff" refer to NetStaff, Inc., an Indiana
corporation (formerly known as MAS Acquisition VIII Corp.).
The closing of the Stock Exchange Agreement was effected on
December 17, 1999, at which time, among other things, 1,669,505 shares of common
stock of NetStaff Delaware, representing all the issued and outstanding shares
of NetStaff Delaware, were exchanged for 8,505,000 shares of Common Stock of
the Company. The 8,505,000 shares of Common Stock issued by the Company in the
exchange were not registered under the Securities Act of 1933, as amended (the
"Securities Act"), are "restricted securities" as defined therein and are
subject to the limitations of Rule 144 promulgated thereunder. After the
issuance of the 8,505,000 shares of Common Stock, the Company had a total of
13,500,000 shares of Common Stock issued and outstanding.
Prior to the merger with NetStaff Delaware, the Company had no
significant operations and had never commenced any operational activities. Upon
the closing of the Stock Exchange Agreement, the Company acquired and assumed
the properties, intellectual property rights, operations, assets, liabilities
and obligations of NetStaff Delaware.
The Company's principal offices are located at 168 South Park,
San Francisco, CA 94107. The Company's main telephone is (415) 908-1000; its
facsimile number is (415) 908-1010; and its Website is WWW.NETSTAFF.COM.
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OVERVIEW
The Company is an Internet-based business-to-business electronic
commerce firm that provides a first to market, unique proprietary multiple
listing service for its target market: the professional staffing and recruiting
industry. The Company's Website at WWW.NETSTAFF.COM also provides an Internet
portal, catering to the human resource professional.
ONLINE RECRUITING MARKET
The emergence of the Internet has created an opportunity to
connect staffing and recruiting companies with employers and hiring companies
more efficiently and cost effectively when compared to traditional recruiting
methods. Online recruiting can automate the recruiting process, providing more
informative and responsive real-time interaction between staffing and recruiting
companies and employers and hiring companies, and has the potential to lower the
cost and time to fill open positions. Staffing and recruiting companies, as well
as employers, are empowered with access to an aggregation of information about
employment opportunities worldwide not previously available to them in one
place. In addition, Internet-based solutions may replace more expensive
client/server recruiting software and change the way companies manage and
distribute information about employment openings throughout their organizations.
MARKET OPPORTUNITY
The Company believes that most of the advantages offered by
Internet technology have not been fully applied to the professional recruiting
and staffing market. While online job boards have improved the aggregation of
job postings and job seekers, they have not fundamentally improved workflow
throughout the recruiting process between and among professional staffing
companies and employers. Additionally, few Web-based commercial software
applications are available to help employers manage their internal recruiting
processes. The Company also believes that most employers and hiring companies
are in the early stages of understanding how to use the Internet to increase
their competitiveness in recruiting.
Apart from the circumstance that no site actually targets the
professional staffing and recruiting market, the Company believes that the
current Internet-based recruiting offerings also suffer from a number of
limitations, including, among others:
- Lack of Privacy. Most online recruiting solutions do not allow job
seekers to restrict access to their resumes. Thus, the Company believes
many experienced, qualified professionals will not post their resumes on a job
board if
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there is a chance that they may be detected by their current employers.
- Lack of Screening Process. Many of the current online job boards offer
no or only limited testing and screening capabilities. Many sites stress the
size of their resume database and the number of people who visit the site each
month. This focus on quantity rather than quality results in the recruiter
receiving an excessive amount of unwanted resumes. There is simply no real
screening mechanism, resulting in a database of unscreened, and, thus,
potentially unqualified candidates.
- Limited Utility for the HR Professional. Many online offerings are
simply job boards, whose function is only to attract candidates without
providing employers or hiring companies with the tools they need to manage the
staffing and recruiting process within their organizations. Additionally, these
job boards generally lack the ability to help employers compile and analyze
candidate data.
- Unfavorable Pricing Model. Many staffing or recruiting company
Websites charge employers and hiring companies to post potential employment
opportunities for a fixed period of time on a price-per-post basis. The Company
believes that such a model lacks an understanding of the underlying market
dynamics, especially at this time in the United States economy. For employers or
hiring companies with ongoing recruiting needs, this model appears to be grossly
inefficient and unnecessarily expensive: openings that have been filled remain
posted, attracting unwanted applicants; while unfilled openings need to be
posted again and again until someone is hired.
The Company believes that its products and services do not suffer from
these limitations, and is convinced that an opportunity exists to become the
market leader in online professional staffing and recruiting solutions.
PRODUCTS AND SERVICES
- - The NetStaff(R) Multiple Listing Service
The NetStaff(R) Multiple Listing Service ("NetStaff MLS") aggregates the various
candidate databases of the Company's client staffing companies. The NetStaff MLS
also allows an employer or hiring company to simultaneously search the candidate
databases of multiple staffing companies.
The NetStaff MLS offers:
- - A browser-based application which can be accessed from any computer in
the world by logging on to the Company's Website at WWW.NETSTAFF.COM.
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- - A user-friendly interface with no downloads required.
- - No enrollment fee.
- - Fees charged only upon successful completion of candidate placement.
- - Instant online access to multiple staffing companies' screened
candidates.
- - A unique niche in the human resources industry by accelerating hiring
and recruiting efficiencies through the combined capabilities of
localized staffing companies with its up-to-the-second, centralized
Internet database resources.
The Process at a Glance
An employer or hiring company advertising an open position is often sent
hundreds or even thousands of unscreened resumes that must be sorted through.
Once the resume pool is narrowed down to a stack of qualified candidates, the
time-consuming task of making contact with each candidate begins.
The employer or hiring company may also use a staffing company to provide
potential hirees. However, the staffing industry is very fragmented with over
20,000 staffing companies in the United States. The industry is dominated by
owner operated firms, with over 80% of the industry's revenue realized by
independent agencies. An employer seeking to fill an open position typically
deals with this cottage industry environment by using multiple staffing
companies to meet its needs. Indeed, a large employer or hiring company may
have fifteen or twenty different staffing companies with which it conducts
business. Each of those companies, in turn, would search through its own
individual database for potential candidates to present to the employer or
hiring company.
Alternatively, the employer or hiring company may conduct multiple searches on
the various resume posting services now available over the Internet. The
Internet job sites with which most businesses and individuals are most familiar
are posting boards where individuals can directly submit their resume to a
company advertising a position. There is no review process, so the employer is
often besieged by resumes sent from qualified and unqualified candidates. There
is also no mechanism for qualifying the source or integrity of the resume.
Generally, the employer or hiring company is charged a fee for posting the open
position that ranges from $250 to $5,000. The employer or hiring company then
must dedicate a small army of human resource professionals to sift through the
responses.
Examples of job posting boards described above are:
- - Hot Jobs www.hotjobs.com
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- - MonsterBoard www.monster.com
- - Career Mosaic www.careermosaic.com
However, the revenue models that the above companies rely on are based on
advertising and job posting fees. Their sites are mass marketed in order to
attract as many eyeballs as possible. This actually works to the detriment of
the employer since mass marketing results in a higher workload for the employer.
The NetStaff Solution
The NetStaff MLS streamlines the entire process by offering the employer or
hiring company an aggregated database comprised of screened candidates from
multiple staffing companies. The MLS also provides an array of search parameters
so that the employer or hiring company can succinctly target the candidate best
qualified for an open position.
Prior attempts at database integration have failed because of the confidential
nature of the candidate lists from the various staffing companies. The Company's
MLS deals with this in two ways:
- - The names and addresses are blacked out on the candidate resumes so that
the employer or hiring company must go through the staffing company to
set up an interview.
- - NetStaff is not a staffing company. It is not in direct competition with
staffing companies that place candidates into the NetStaff MLS.
The Company believes its Web-based integration of the databases of various
staffing companies into one multiple listing service provides a unique
opportunity for market aggregation.
In addition to the time savings realized by performing one consolidated search
instead of ten, fifteen or more searches, an employer or hiring company using
the NetStaff MLS will realize efficiencies because the database is comprised of
candidates that have been included specifically because they have been screened
previously by a staffing company. This obviates spending unnecessary time and
effort sifting through hordes of unqualified applications.
If an employer or hiring company fills a position with a candidate found in the
NetStaff MLS, the employer or firm pays the staffing company who provided such
candidate to the MLS a standard industry fee of 30-35% of the candidate's first
year's salary. In turn, the staffing company pays the Company a referral fee
equal to 3-5% of the candidate's first year's salary.
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- - The NetStaff Portal
The Company is in the process of transforming its Website into a portal catering
to the human resource and staffing industry professional.
The portal includes access to the NetStaff MLS, as well as other content-rich
areas that are of importance professionally and personally to the human resource
and staffing industry target market.
Examples of content currently provided or anticipated in the foreseeable future
are:
- - Staffing industry news
- - Legislative updates
- - Continuing education programs
- - Stock reports / The NetStaff 50, tracking staffing firms traded on
public exchanges
- - "Ask a Staffing Professional" advice column, guest-hosted by the
Company's clients
- - Posting board
- - Relevant industry-related links.
The goals of portal implementation are to:
- - Breed customer familiarity with the Company's services
- - Develop and market brand equity
- - Increase the "stickiness" for the site to support the NetStaff MLS
- - Brand the Company as a major professional staffing industry information
resource.
The portal is not intended to be a site for the masses. The portal is very
specific in its scope and will be aggressively promoted to its intended niche
audience. Moreover, regardless of where the viewer is within the Company's
Website, there will be prompts that will point him/her to the NetStaff MLS.
- - NetStaff Private Label Services
The Company anticipates providing a private label service for both segments of
its market: the employer or hiring company; and the staffing or recruiting
company. To quickly gain critical mass, the Company currently does not charge
initial enrollment fees for these services but anticipates such enrollment fees
will be charged in the near future. The NetStaff Private Label sites function as
though it were integrated into the customer or client's intranet. The Private
Label
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provides, for each of its employer or staffing company clients, the client's own
home page that displays the client's name, logo, and corporate colors.
- NetStaff HR Private Label: From this interface, an employer or hiring
company can recruit candidates and have them apply directly into its own
unqualified section of the MLS database. The employer can also directly input
the candidate record into the system. One job order by an employer will allow
the user to search the employer's internal applicants, its internal screened
candidates, its primary staffing company vendors (if registered with the
Company), and the NetStaff MLS. A reporting system is available so human
resource managers in the employer's or hiring company's office can monitor
company department activity.
- NetStaff SC Private Label: Designed as an online service for staffing
or recruiting companies, the NetStaff SC Private Label Service allows staffing
company to recruit candidates and include them directly into the company's own
unqualified section of their internal database. From there, the recruiter can
interview and verify the information from the candidate record and move the
candidate over to the qualified section of the database. The recruiter can also
directly input the candidate record into the system. Once a candidate has been
qualified, he or she can be recruited by hiring companies using the NetStaff
MLS.
SALES AND MARKETING
The Company's marketing plan has two goals: market penetration and the
development of brand equity. The focus of the Company's sales and marketing
efforts is geared towards two audiences: corporate human resource professionals
and staffing companies.
The Company employs a geographic rollout strategy that it believes is
analogous to a model it perceives has been employed by Yahoo! which continues to
hold the most visible presence on the Web. The Company has regionalized its
campaigns and rolls them out incrementally. At present, the Company has targeted
the San Francisco Bay Area, as the start of a fourteen major market rollout.
The Company utilizes a variety of branding strategies to communicate to
its customer base the uniqueness of the Company's services offerings, including:
- - A portal Website, containing updated content relevant to the staffing
professional;
- - A direct mail and print advertising campaign;
- - A media campaign via radio, television and cable shows;
- - Strategic alliances and joint ventures with established industry
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organizations;
- - Visible trade show presence;
- - Development of a high profile in human resource industry functions,
conferences and events; and
The message reinforced in these venues is that WWW.NETSTAFF.COM is not
a site for the masses; it is a tool designed to help staffing professionals
with placements.
PROPRIETARY RIGHTS
The Company's success and ability to compete are dependent, in part,
upon its ability to develop and maintain the proprietary aspects of its
technology and operate without infringing on the proprietary rights of others.
The Company has no patents or patent applications pending. Instead, the Company
relies primarily on a combination of copyright, trademark and trade secret laws,
confidentiality procedures and contractual provisions to protect its
intellectual property and proprietary rights. Because the Internet-related and
software development industry is characterized by rapid technological change,
the Company believes that factors such as the technological and creative skills
of its personnel, new product developments, frequent product enhancements, name
recognition and reliable personalized service are more important to establishing
and maintaining a leadership position than the various legal protections
available for the Company's technology.
NetStaff(R) is a registered service mark of the Company. The Company
also intends to develop and apply for additional trade and service marks with
the United States Patent and Trademark Office.
The Company requires employee and third-party non-disclosure and
confidentiality agreements. The Company seeks to protect its software,
documentation and other written materials under trade secret and copyright laws,
which afford only limited protection. The Company cannot be certain that others
will not develop technologies that are similar or superior to the Company's
technology or design around the copyrights and trade secrets owned by it.
Despite these precautions, it may be possible for unauthorized parties to copy
portions of the Company's software products, reverse engineer, or obtain and use
information that the Company regards as proprietary.
The Company relies, in part, upon software that it licenses from third
parties, including software that is integrated with its internally developed
software and is used in the Company's services to perform key functions. There
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can be no assurance that these third-party software licenses will continue to be
available to the Company on commercially reasonable terms. The loss of, or
inability to maintain, any such software licenses could result in delays or
reductions until equivalent software could be developed, identified, licensed
and integrated and could materially adversely affect the Company's business,
operating results and financial condition.
COMPETITION
The business-to-business electronic commerce environment in which the
Company operates is still evolving and subject to rapid change. Currently, the
Company competes principally on the basis of the specialized nature and
uniqueness of its services. The Company believes the in-depth industry knowledge
embedded in the design and functionality of its services, its cost-effective fee
schedule, and the accessibility of its services to potential customers on both
the hiring company and staffing company sides of the industry are competitive
advantages for it. Additionally, the Company believes that it is the first to
market and has the only Internet-based electronic commerce solution today for
the professional staffing and recruiting industry.
The market for online recruiting and staffing solutions is competitive
and highly fragmented. The Company expects competition to increase because the
market poses no substantial barriers to entry. The Company anticipates that its
ability to compete depends upon many factors both within and beyond its control,
including:
- - the timing and market acceptance of new solutions and enhancements to
existing solutions developed either by the Company or its competitors;
- - service and support efforts;
- - sales and marketing efforts; and
- - the ease of use, performance, price and reliability of solutions
developed either by the Company or its competitors.
The Company believes that it occupies a unique market segment in the
industry as it targets professional staffing and recruiting companies and the
human resources professional and not the general public nor job seekers
themselves. Moreover, the Company's MLS offers screened candidates only.
In the Company's view, it does not compete directly with companies,
including recruiting search firms that offer a single database job board
solution, such as Monster.com, as well as newspapers, magazines and other
traditional media
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companies that provide online job search services, such as CareerPath.com. The
Company also believes that it is in a different market space and, thus, does not
compete with large Internet information hubs, or portals, such as Excite@Home,
recruiting software companies such as Webhire, Inc. or job fair companies such
as TechExpo Corporation. However, the Company recognizes that certain investors
and others may see such companies as providing solutions to the issue of
staffing that may potentially offer an alternative, or be a complement, to the
solutions offered by the Company.
The Company may experience competition from potential customers to the
extent that they develop their own online recruiting and staffing offerings
internally. The Company expects to face competition at some point, as other
established and emerging companies, including print media companies and
recruiting and staffing companies with established brands, enter the online
recruiting market.
Many of the Company's potential competitors have longer operating
histories, significantly greater financial, technical, marketing and other
resources, and larger customer bases than the Company does. These factors may
allow them to respond more quickly than the Company can to new or emerging
technologies and changes in customer requirements. It may also allow them to
devote greater resources than the Company can to the development, promotion and
sale of their products and services. These potential competitors may also engage
in more extensive research and development, undertake more far-reaching
marketing campaigns, adopt more aggressive pricing policies and make more
attractive offers to existing and potential employees and strategic partners.
There can be no assurance that competitors will not develop products or services
that are equal or superior to the Company's solutions or that achieve greater
market acceptance than our solutions. In addition, potential competitors are
making and are expected to continue to make strategic acquisitions or establish
cooperative, and, in some cases, exclusive relationships with significant
companies or competitors to expand their businesses or to offer more
comprehensive solutions.
The Company believes that there will be rapid business consolidation in
the online recruiting and staffing industry. Accordingly, new competitors may
emerge and rapidly acquire significant market share. In addition, new
technologies will likely increase the competitive pressures that the Company
faces. The development of competing technologies by market participants or the
emergence of new industry standards may adversely affect the Company's revenues
and ultimately its competitive position.
Due to competition, the Company may experience reduced margins on its
products and services, loss of market share or less use of its Website by hiring
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and staffing companies. If the Company is not able to compete effectively with
current or future competitors as a result of these and other factors, the
Company's revenues could be materially adversely affected.
EMPLOYEES
As of April 28, 2000, the Company had 14 full-time employees, of
whom 8 were employed in sales and marketing, 3 in technical support, development
and operations, and 3 in management, finance and administration. None of the
Company's employees are represented by a union. The Company has not experienced
any work stoppages and considers its relations with its employees to be good.
The Company intends to double the number of employees over the next twelve
months to support its business plan and growth. The Company believes that these
resources will be necessary to execute on the business initiatives scheduled for
the following months. While the Company, like other technology or
Internet-related companies, has experienced some difficulty in attracting and
retaining qualified personnel, it has been successful in attracting qualified
personnel to date. There can be no assurance that the Company will be successful
in attracting or retaining qualified personnel in the future.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
There are a number of uncertainties and risk factors that may
bear on the ability of the Company to achieve its business goals and reduce the
possibility of successfully fulfilling its plans. These include, but are not
limited to:
Risks Related To The Company's Financial Condition And Business Model
- - The Company has a limited operating history.
The Company has not yet generated significant revenue from its business
operations. As a new operating entity, the Company faces risks and uncertainties
relating to its ability to successfully implement its strategy. Some of these
include:
- ability to develop and sustain revenue growth;
- ability to increase awareness of the Company's brand;
- managing expanding operations;
- competition;
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- attracting, retaining and motivating qualified personnel;
- maintaining and developing new, strategic relationships;
- ability to anticipate and adapt to the changing Internet market and any
changes in government regulation; and
- attracting and retaining a large number of member companies for
employment exchange.
The Company also depends on the growing use of the Internet for
recruiting, staffing and hiring purposes and on general economic conditions. If
the Company cannot appropriately address these risks and uncertainties or is
unable to execute its strategy, the Company may not be successful.
- - The Company has not been profitable and losses may continue.
For the year ended December 31, 1999, the Company incurred a net loss of
approximately $311,828. At December 31, 1999, the Company had an accumulated
deficit of approximately $1,054,720. The Company expects to continue to lose
money in the foreseeable future because it anticipates incurring significant
expenses in connection with building awareness of the NetStaff service mark and
brand, converting the Website into a staffing portal, rapidly expanding
management and other personnel, developing strategic relationships and improving
products and services. The Company forecasts future expense levels based on
operating plans and estimates of future revenues. The Company may find it
necessary to accelerate expenditures relating to its sales and marketing,
products and technology, and expansion efforts or to otherwise increase the
Company's financial commitment to creating and maintaining brand awareness or
developing or improving its products and services. Although the Company expects
its revenues to grow in the future, there can be no assurance that revenues will
grow or that the Company will achieve sufficient revenues for profitability.
Even if the Company does achieve profitability, there can be no assurance that
the Company can sustain or increase profitability on a quarterly or annual basis
in the future. If the Company's revenues grow at a slower rate than it
anticipates, or if the Company's spending levels exceed its expectations or
cannot be adjusted to reflect slower revenue growth, the Company may not
generate sufficient revenues to achieve or sustain profitability.
- - The business model is unproven and may not be adaptable to a changing
market.
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If the Company is not able to anticipate changes in the online staffing
and recruiting market or if its business model is not successful, the Company
may not be able to expand its business or to successfully compete with other
companies, which could have a material adverse effect on the Company's business,
results of operations and financial condition. The Company's current business
model depends on recurring revenue from employers and hiring companies using the
Company's Website and staffing and recruiting companies paying fees associated
with a successful placement. This revenue model and profit potential in an
online context are unproven. If current employers, hiring companies and staffing
companies decide to discontinue their relationship with the Company, and the
Company is unable to replace them with new employers and staffing and hiring
companies, the Company's revenues could decrease or grow at a slower rate than
expected. It is possible that the Company will be required to further adapt its
business model in response to additional changes in the online staffing and
recruiting market or if the current business model is not successful.
- - The Company may not be able to obtain sufficient funds to grow its
business and any financing may be on terms adverse to the interests of
the Company's shareholders.
The Company may need financing to continue to grow its business. If
financing is not available when required or is not available on acceptable
terms, the Company may be unable to fund its expansion, successfully promote its
service mark or brand, develop or enhance its website, products and services,
take advantage of business opportunities or respond to competitive pressures,
any of which could have a material adverse effect on the Company's ongoing
business. If the Company is able to raise funds, and it does so by issuing
equity securities, holders of the Common Stock may experience significant
dilution of their ownership interest and holders of these securities may have
rights senior to those of the current holders of the Common Stock. If the
Company obtains financing by issuing debt securities, the terms of these
securities could restrict or prevent the Company from paying dividends and could
limit its flexibility in making business decisions.
Because the Company expects to generate losses for the foreseeable
future, it does not expect that income from its operations will be sufficient to
meet its capital needs. The Company expects to raise funds in the future in
order to fund its anticipated growth, more aggressive marketing programs or the
acquisition of complementary businesses, technologies and services. Obtaining
financing will be subject to a number of factors including: market and economic
conditions; the Company's financial condition and operating performance; and
investor sentiment. These factors may make the timing,
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<PAGE> 17
amount, terms and conditions of additional financing unattractive for the
Company.
Risks Related To Markets And Strategy
- - The Internet is unproven as a recruiting medium.
If the Company is unable to compete with traditional recruiting and
staffing methods, revenues could be reduced. The future of the Company's
business is dependent on the acceptance by staffing and human resources
professionals, hiring companies and employers of the Internet as an effective
staffing and recruiting tool. The online staffing and recruiting market is new
and rapidly evolving, and the Company does not yet know how effective online
staffing and recruiting is compared to traditional staffing and recruiting
methods. The adoption of online staffing and recruiting, particularly among
those companies that have historically relied upon traditional recruiting
methods, requires the acceptance of a new way of conducting business, exchanging
information, advertising and fulfilling job openings. Many of the Company's
potential staffing and hiring company, human resources and employer customers
have little or no experience using the Internet as a staffing tool. There can be
no assurance that companies will allocate or continue to allocate portions of
their budgets to Internet-based recruiting and staffing. As a result, the
Company cannot be sure that it will be able to effectively compete with
traditional recruiting and staffing methods. If Internet-based recruiting and
staffing is not widely accepted, the Company's business, results of operations
and financial condition could be materially adversely affected.
- - The business model depends on use of the Internet expanding.
If Internet usage does not continue to grow, the Company may not be able to meet
its business objectives. Internet usage may be inhibited by any of the following
factors:
- The Internet infrastructure may not be able to support the demands placed
on it, or its performance and reliability may decline as usage grows;
- Websites may not be able to provide adequate security and authentication
of confidential information contained in transmissions over the Internet;
and
- The Internet industry may not be able to adequately respond to privacy
concerns of potential users.
15
<PAGE> 18
- - The Company may not be able to develop brand awareness.
Brand recognition is a key differentiating factor among providers of
online recruiting and staffing services, and the Company believes it could
become more important as competition in the online recruiting market increases.
The Company believes that continuing to build and maintain awareness of its
service mark and brand name is critical to achieving widespread acceptance of
its business model. The service mark and brand name are critical in efforts to
sustain or increase the number of staffing and hiring companies and employers
and which use the Company's Website and other services. The Company anticipates
that the importance of brand recognition will increase due to the continued
growth in the number of apparent competitors entering the online recruiting
market. The Company may find it necessary to accelerate expenditures on sales
and marketing efforts or otherwise increase its financial commitment to creating
and maintaining brand awareness among potential customers and the market as a
whole. If the Company does not successfully protect, promote, position and
maintain its NetStaff service mark and brand, incurs significant expenses in
promoting the brand and fails to generate a corresponding increase in revenue as
a result of branding efforts, or encounters legal obstacles which prevent the
continued use of the service mark or brand name, the Company's business, results
of operations and financial condition could be materially adversely affected.
- - The Company may not be able to successfully introduce new or enhanced
products and services.
The failure of any new or enhanced products and services to achieve
market acceptance and generate revenue could result in a material adverse effect
on the Company's revenues. The Company expects to introduce enhanced products
and services in order to generate additional revenues, attract and retain more
employers, attract more hiring and staffing companies to its Website and respond
to competition. Any new or enhanced product or service introduced that is not
favorably received could damage the Company's reputation and the perception of
its service mark and brand.
- - The Company will not be able to attract hiring or staffing companies if
it does not continually enhance and develop the content and features of
its products and services.
To remain competitive, the Company must continually improve the
responsiveness, functionality and features of its Website, products and services
and develop other content, products and services that are attractive to hiring
and staffing companies. The Company may not succeed in developing or introducing
new content, features, functions, products or services that hiring and staffing
companies find attractive at all or quickly enough. This could reduce the
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<PAGE> 19
number of hiring and staffing companies using the Company's Website, products
and services and materially adversely affect its revenues.
- - The Company may lose business if it fails to keep pace with rapidly
changing technologies and customer needs.
If the Company is unable to timely and successfully develop and
introduce new content, products and services and enhancements to existing
content, products and services in response to its industry's changing
technological requirements, the Company's revenues could be materially adversely
affected. The Company's success is dependent, in part, on its ability to develop
new and enhanced content, services and related products to meet rapidly evolving
technological requirements for online recruiting and staffing software and
solutions. New Internet-based services or enhancements which the Company may
have offered or may offer in the future may contain design flaws or other
defects that could require extensive modifications or result in a loss of client
confidence. The Company's current technology may not meet the future technical
requirements of employers, hiring and staffing companies.
Trends that could have a critical impact on our success include:
- rapidly changing technology in online recruiting;
- evolving industry standards, including both formal and de facto
standards, relating to online recruiting and staffing;
- developments and changes relating to the Internet;
- competing products and services that offer increased functionality; and
- changes in employer, hiring company and staffing company requirements.
- - The Company's business and growth will suffer if it is unable to hire
and retain highly skilled personnel.
If the Company is unable to hire and retain highly skilled personnel,
its growth may be restricted, the quality of its products and services reduced
and its revenues may be reduced or grow at a slower rate than expected. The
Company's future success depends, in large part, on its ability to attract,
train, motivate and retain highly skilled employees. Competition for highly
skilled employees is intense, particularly in the Internet industry. The Company
may be unable to retain its skilled employees or attract, assimilate and retain
other highly skilled employees in the future. The Company has, from time to
time, in
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<PAGE> 20
the past, experienced, and it may experience in the future, difficulty in hiring
and retaining highly skilled employees with appropriate qualifications.
- - The Company may not be able to effectively manage its expanding
operations.
To execute its business plan and strategy, the Company must continue to
grow significantly. If the Company is not able to expand its operations in an
efficient manner, its expenses could grow disproportionately to revenues or its
revenues could decline or grow at a slower rate than expected, either of which
could have a material adverse effect on its business, results of operations and
financial condition. The Company has recently experienced a period of rapid
growth that has placed considerable demands on its managerial, operational,
financial and information system resources. To continue to successfully
implement its business plan and strategy in its rapidly evolving markets
requires an effective planning and management process at the Company. The
Company continues to increase the scope of its operations, and has grown its
workforce significantly from essentially one to twelve employees from 1999 to
2000. The Company expects that the number of its employees will double in the
next fiscal year and may continue to increase for the foreseeable future. The
Company's growth is expected to result in increased responsibility for both
existing and new management personnel. Such growth has placed, and anticipated
future growth combined with the requirements the Company faces as a public
company will continue to place, a significant strain on the Company's
management, operations, systems and resources. The Company expects that it will
need to continue to improve its financial and managerial controls and reporting
systems and procedures, and will need to continue to expand, train and manage
its workforce. The Company's success depends to a significant extent on the
ability of its executive officers and other members of management to operate
effectively both independently and as a group. The Company will also need to
continue to expand and maintain close coordination among its products, services
and technology, finance and administration and sales and marketing
organizations. There can be no assurance that if the Company continues to grow,
management will be effective in attracting and retaining additional qualified
personnel, expanding its physical facilities, integrating acquired businesses,
if any, or otherwise managing growth. There can be no assurance that the
Company's information systems, procedures or controls will be adequate to
support its operations or that management will be able to achieve the rapid
execution necessary to successfully offer its products and services and
implement the business plan and strategy. The Company's future performance may
also depend on its effective integration of acquired businesses, if any. Any
such integration, even if successful, may take a significant period of time and
expense, and may place a significant strain on the Company's resources. If the
Company
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<PAGE> 21
is not able to manage existing or anticipated growth, its business, results of
operations and financial condition will be materially adversely affected.
- - A failure to establish and maintain partnerships and alliances with
other Web properties could limit the growth of the Company's business.
The Company expects to enter into arrangements with third parties to
increase its database, bring traffic to its Website and enhance the NetStaff
brand. The Company cannot determine with certainty whether it will be successful
in entering into strategic partnerships and alliances or that any relationships,
if entered into, will be on terms favorable to the Company.
- - The loss of any of key management personnel could negatively impact the
Company's business.
The loss or departure of any of the Company's key employees could
materially adversely affect its ability to implement its business plan and could
lower its revenues or cause revenues to grow at a slower rate than expected. The
Company's future success depends to a significant extent on the continued
service and coordination of the Company's management team, particularly Patrick
Rylee, the Company's Chief Executive Officer and President. In addition, certain
members of the management team have joined within the last few months. In
addition, if one or more key employees join a competitor or form a competing
company, though the Company has non-competition agreements with each of its key
employees, the Company may lose existing or potential clients which could have a
material adverse effect on the Company's business, results of operations and
financial condition. Though the Company maintains confidentiality agreements
with its employees, if the Company were to lose a key employee, there can be no
assurance that the Company would be able to prevent the unauthorized disclosure
or use of its procedures, practices, new product development or client lists.
- - The Company may not be able to successfully make acquisitions of or
investments in other companies.
The Company expects its growth to continue, in part, by acquiring
complementary businesses, products, services or technologies. From time to time,
the Company has had discussions with other companies regarding the Company
acquiring, or investing in, their businesses, products, services or
technologies. There can be no assurance that the Company will be able to
identify suitable acquisition or investment candidates. Even if the Company does
identify
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<PAGE> 22
suitable candidates, there can be no assurance that it will be able to make
acquisitions or investments on commercially acceptable terms. Acquiring other
businesses and technologies involves several risks, including:
- the availability of financing at all or on terms the Company
finds acceptable;
- diversion of management attention from other business concerns;
- key personnel of the acquired company may decide not to work for
the Company;
- entry into markets in which the Company has little or no direct
prior experience;
- inability to identify and acquire businesses on a cost-effective
basis;
- inability to manage and integrate acquired personnel,
operations, services, products and technologies into the
Company's organization effectively; and
- inability to retain and motivate key personnel and to retain the
clients or goodwill of acquired entities.
In pursuing acquisitions, the Company may compete with competitors that
may be larger and have greater financial and other resources than it has.
Competition for these acquisition targets could result in increased prices. In
addition, in executing an acquisition strategy, the Company may incur expenses
without being able to identify suitable acquisition candidates, which could
reduce the Company's profitability. Furthermore, the Company may incur debt or
issue equity securities to pay for any future acquisitions. The issuance of
equity securities could be dilutive to the Company's existing shareholders.
Risks Related To The Internet And The Company's Technology Infrastructure
- - The Company may experience reduced visitor traffic, reduced revenue and
harm to its reputation in the event of unexpected network interruptions
caused by system failures.
Any system failure, including network, software or hardware failure,
that causes an interruption in the delivery of the Company's products and
services or a decrease in responsiveness of its services could result in reduced
visitor traffic, reduced revenue and could materially adversely affect the
Company's reputation and brand. The Company's servers and software must be able
to
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<PAGE> 23
accommodate a high volume of traffic. The Company has experienced system
interruptions in the past, and believes that these interruptions will continue
to occur from time to time in the future. The Company believes that visitor
traffic is also dependent on the timing and magnitude of advertising. The
Company has experienced fluctuations in visitor traffic, including short-term
reductions. Any substantial increase in demands on the Company's servers will
require the Company to expand and adapt its network infrastructure. If the
Company is unable to add additional software and hardware to accommodate
increased demand, the Company could experience unanticipated system disruptions
and slower response times. The Company's clients may become dissatisfied by any
system failure that interrupts the Company's ability to deliver its Website or
provide its products and services to them or results in slower response times.
The Company does not maintain business interruption insurance and its other
insurance may not adequately compensate the Company for any losses that may
occur due to any failures in the Company's system or interruptions in its
service.
- - Breaches of network security could be costly.
Because the Company hosts NetStaff-related data for many of its
customers, the Company may be liable to any of those customers that experience
losses due to security failures. As a result, the Company may be required to
expend capital and resources to protect against or to alleviate security
breaches, which could reduce the Company's profitability. A significant barrier
to confidential communications over the Internet has been the need for security.
The Company may incur significant costs to protect against the threat of
security breaches or to alleviate problems caused by these breaches. If
unauthorized persons penetrate the Company's network security, they could
misappropriate proprietary information or cause interruptions in the Company's
services. Misappropriation of the Company's proprietary information or
interruptions of its services could result in reduced visitor traffic. Reduced
visitor traffic may result in discouraging hiring and staffing companies from
uisng the Website and database for placements and referrals. The Company
generates a substantial portion of its revenue from referral fees.
- - Computer viruses may cause the Company's systems to incur delays or
interruptions, which could reduce demand for service and damage the
Company's reputation.
Computer viruses may cause the Company's systems to incur delays or
other service interruptions and could damage its reputation and have a material
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<PAGE> 24
adverse effect on its business, financial condition and results of operations.
The inadvertent transmission of computer viruses could expose the Company to a
material risk of loss or litigation and possible liability. Moreover, if a
computer virus affecting the Company's system is highly publicized, the
Company's reputation could be materially damaged and use of the Company's
web-based services and general visitor traffic may decrease. Any of these events
could have a material adverse effect on the Company's revenues.
The Company's success will depend, in large part, upon the maintenance
of the Web infrastructure, such as a reliable network backbone with necessary
speed, data capacity and security, and timely development of enabling products
such as high speed modems, for providing reliable Web access and services and
improved content. There can be no assurance that the Web infrastructure will
continue to effectively support the demands placed on it as the Web continues to
experience increased numbers of users, frequency of use or increased bandwidth
requirements of users. Even if the necessary infrastructure or technologies are
developed, the Company may have to spend considerable amounts to adapt its
solutions accordingly. Furthermore, the Web has experienced a variety of outages
and other delays due to damage to portions of its infrastructure.
- - The Company may not be able to access third party technology upon which
it depends.
If the Company loses the ability to access third party technology which
it uses, is unable to gain access to additional products or is unable to
integrate new technology with its existing systems, the Company could experience
delays in its development and introduction of new services and related products
or enhancements until equivalent or replacement technology can be accessed, if
available, or developed internally, if feasible. If the Company experiences
these delays, its revenues could be reduced or grow slower than expected and its
business could be materially adversely affected. The Company licenses technology
that is incorporated into its services and related products from third parties.
In light of the rapidly evolving nature of Internet technology, the Company may
increasingly need to rely on technology from other vendors. Technology from the
Company's current or other vendors may not continue to be available to the
Company on commercially reasonable terms, or at all.
- - Potential year 2000 problems with the Company's systems or software
could cause delay or loss of revenue, diversion of resources or
increased costs.
Many companies' computer systems, software products and control devices
needed to be upgraded or replaced in order to operate properly in the year 2000
and beyond because of an inability to distinguish 21st century dates
22
<PAGE> 25
from 20th century dates. The Company's systems and software did not experience
any material date-related problems on January 1, 2000 or in connection with the
leap year in 2000. However, its systems and software may contain undetected
errors or defects associated with year 2000 date functions that have not yet
surfaced. If any such errors or defects do exist, the Company may incur material
costs to resolve them. The internal systems used to run the Company's business
utilize third party hardware and software. Although to date the Company has not
experienced any date-related problems with third party hardware or software,
there can be no assurance that such problems will not surface in the next
several months. The Company's business is dependent on the ability of employers
and hiring and staffing companies to utilize hardware and software in the
employment process. The Company is not aware of any significant date-related
hardware or software problems experienced by its clients and customers. However,
there can be no assurance that such problems will not arise in the future. If
any of these systems do experience date-related problems, the Company could
experience delay or loss of revenue, diversion of resources or increased costs,
and its financial condition could be harmed.
In addition, although the Company believes that the costs of ensuring
that its systems and software and those of third parties with which it does
business do not experience any date-related problems will not be material, there
can be no assurance of this.
Risks Related To Legal Uncertainty
- - The Company may become subject to burdensome government regulations and
legal uncertainties affecting the Internet which could adversely affect
the Company's business.
Legal uncertainties and new regulations could increase the Company's
costs of doing business, prevent it from delivering its content, products and
services over the Internet or slow the growth of the Internet, any of which
could increase the Company's expenses, reduce its revenues or cause its revenues
to grow at a slower rate than expected and materially adversely affect its
business, financial condition and results of operations. Laws and regulations
directly applicable to Internet communications, commerce, recruiting and
advertising are becoming more prevalent, and new laws and regulations are under
consideration by the United States Congress and state legislatures. Any
legislation enacted or restrictions arising from current or future government
investigations or policy could dampen the growth in use of the Internet
generally and decrease the acceptance of the Internet as a communications,
commercial, recruiting and advertising medium. The laws governing the Internet,
however, remain largely unsettled, even in areas where there has been some
legislative action. It may take years to determine whether and how existing laws
such as those governing
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<PAGE> 26
intellectual property, privacy, libel and taxation apply to the Internet. In
addition to new laws and regulations being adopted, existing laws may be applied
to the Internet. New and existing laws may cover issues which include:
- user privacy;
- civil rights and employment claims;
- consumer protection;
- libel and defamation;
- copyright, trademark and patent infringement;
- pricing controls;
- characteristics and quality of products and services;
- sales and other taxes; and
- other claims based on the nature and content of Internet
materials.
In addition, any imposition of state sales and use taxes imposed on the
products and services sold over the Internet may decrease demand for products
and services that the Company sells over the Internet. The United States
Congress passed legislation in 1998 which limits for three years the ability of
states to impose any new taxes on Internet-based transactions. Failure by
Congress to renew this legislation and the subsequent imposition of state taxes
on Internet-based transactions could adversely affect the Company's future
operating results which could result in a decline in the Company's stock price.
- - Failure to adequately protect the Company's intellectual property rights
could permit others to appropriate its proprietary technology.
The unauthorized reproduction or other misappropriation of the Company's
proprietary technology could enable third parties to benefit from its technology
and brand without paying the Company. If this were to occur, the Company's
revenues could be materially adversely affected, and the value of the Company's
mark and brand could be diminished. The steps the Company has taken to protect
its proprietary rights may not be adequate to deter misappropriation of
proprietary information. The Company may not be able to detect unauthorized use
of its proprietary information or take appropriate steps to enforce its
intellectual property rights. In addition, the validity, enforceability and
scope of protection of intellectual property in Internet-related industries is
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<PAGE> 27
uncertain and still evolving. The laws of other countries in which the Company
may market its services in the future are uncertain and may afford little or no
effective protection of the Company's intellectual property. If the Company
resorts to legal proceedings to enforce its intellectual property rights, the
proceedings could be burdensome and expensive. The proceedings also could
involve a high degree of risk.
- - Defending against intellectual property infringement claims could be
time consuming and expensive, and the Company may be liable for
infringing on the intellectual property rights of others. If the Company
is not successful in defending against these claims, the Company could
be subject to significant damages and the disruption of its business.
Successful intellectual property infringement claims against the Company
could result in monetary liability or a material disruption in the conduct of
its business. The Company cannot be certain that its products, services, content
and brand do not or will not infringe valid patents, copyrights or other
intellectual property rights held by third parties. The Company expects that
infringement claims in its markets will increase in number as more participants
enter the markets. The Company may be subject to legal proceedings and claims
from time to time relating to the intellectual property of others in the
ordinary course of its business. The Company may incur substantial expenses in
defending against these third party infringement claims, regardless of their
merit.
- - The Company may be liable as a result of information retrieved from or
transmitted over the Internet.
The Company may be sued for defamation, civil rights infringement,
negligence, copyright or trademark infringement, personal injury, product
liability or other legal claims relating to information that is published or
made available on the Company's Website and the other sites linked to it. These
types of claims have been brought, sometimes successfully, against online
services in the past. The Company could also be sued for the content that is
accessible from its Website and through links to other Internet sites or through
content and materials that may be posted by members in chat rooms or on bulletin
boards. The Company may also offer email services, which may subject it to
potential risks, such as liabilities or claims resulting from unsolicited email
or spamming, lost or misdirected messages, security breaches, illegal or
fraudulent use of email or interruptions or delays in email service. The
Company's insurance does not specifically provide for coverage of these types of
claims and therefore may not adequately protect the Company against these types
of claims. In addition, the Company could incur significant costs in
investigating and defending such claims, even if, ultimately, it were
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<PAGE> 28
found not liable. If any of these events occur, the Company's revenues could be
materially adversely affected.
Other Risks
- - The Company's stock price may experience extreme price and volume
fluctuations.
The market price of the Company's Common Stock has fluctuated in the
past and is likely to continue to be volatile and subject to wide fluctuations.
The stock market in general and the market prices of shares in technology
companies, particularly those such as the Company that offer Internet-based
products and services, have been extremely volatile and have experienced
fluctuations that have often been unrelated or disproportionate to the operating
performance of such companies. The market price of the Company's Common Stock
may be subject to wide fluctuations in response to many factors, some of which
are largely beyond the Company's control. These factors include:
- quarterly variations in results of operations;
- adverse business developments;
- changes in financial estimates by securities analysts;
- investor perception of the Company and online recruiting and
staffing services in general;
- announcements by competitors of new products and services; and
- general economic conditions both in the United States and in
foreign countries.
- Since the Company's stock price is volatile, the Company may
become subject to securities litigation which is expensive and
could result in a diversion of resources.
Litigation brought against the Company could result in substantial costs
to the Company in defending against the lawsuit and a diversion of management's
attention. Securities class action litigation has often been brought against
companies that experience volatility in the market price of their securities.
Since the Company's stock price is volatile, the Company could be subject to
securities litigation and incur higher expenses than expected, which could have
a material adverse effect on its business and results of operations.
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- - Future sales of the Company's Common Stock may negatively affect its
stock price.
The market price of the Company's Common Stock could decline as a result
of sales of a large number of shares of Common Stock in the market or as a
result of sales by existing shareholders, or the perception that these sales
could occur. These sales might make it more difficult for the Company to sell
equity securities in the future at a time and at a price that the Company deems
appropriate. The shares of the Company's Common Stock currently outstanding are
or will become eligible for sale without registration pursuant to Rule 144 under
the Securities Act, subject to certain conditions of Rule 144.
- - The Company's officers, directors and existing stockholders, whose
interests may differ from other shareholders, will have the ability to
exercise significant control over the Company.
The Company's executive officers and directors and entities affiliated
with them will, in the aggregate, beneficially own a majority of the Company's
Common Stock. These shareholders will be able to exercise significant influence
over all matters requiring approval by the Company's shareholders, including the
election of directors and the approval of significant corporate transactions,
including a change of control of the Company. The interests of these
shareholders may differ from the interests of the Company's other shareholders.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's principal business offices are located in
approximately 4,500 square feet of space in San Francisco, California. The
Company occupies these premises under two lease agreements. The first lease is
for a nine-month term, from February 1, 2000 through October 31, 2000, and is
for approximately 500 square feet, at a monthly rental of $630.00, plus
one-sixth of monthly utility charges. The second lease is for a five-year term,
from June 1, 1997 through May 31, 2002, and is for approximately 4,000 square
feet. The monthly rental on this space is $4200.00 until May 31, 2000, with an
increase to $4400.00 from June 1, 2000 through May 31, 2001, increasing to
$4600.00 from June 1, 2001 through May 31, 2002. The areas under the two leases
are in the same building in San Francisco, California.
The Company considers its facilities to be sufficient for its
current and anticipated near-term operations. The Company believes that it may
have to lease additional office space to accommodate its anticipated expansion
plans.
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ITEM 3. LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings
and claims in the ordinary course of business, including claims of alleged
infringement of trademarks, copyrights and other intellectual property rights.
Such proceedings are of an ordinary and routine nature incidental to the
operations of the Company. The Company is not aware of any legal proceedings or
claims that it believes will have, individually or in the aggregate, a material
adverse effect on the Company's business or financial condition or results of
operations. None of the Company's officers, directors or beneficial owners of
5% or more of the Company's outstanding securities is a party adverse to the
Company, nor do any of the foregoing individuals have a material interest
adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the fiscal year covered by this
report, the year ended 12/31/99, no matters were submitted to a vote of security
holders of the Company through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
MARKET INFORMATION
The Common Stock of the Company is quoted on the National
Association of Securities Dealers, Inc. ("NASD") OTC Bulletin Board under the
symbol "NTSF" and is not listed for trading on any exchange. The OTC Bulletin
Board, which is separate and distinct from the Nasdaq Stock Market, is a
quotation service for subscribing members and is regulated by the Securities and
Exchange Commission ("SEC") and the NASD. OTC Bulletin Board securities are
traded by a community of market makers that enter quotes and trade reports
through a closed computer network.
The Company's Common Stock began trading on the OTC Bulletin
Board on January 14, 2000. Prior to this date, the Common Stock of the Company
was not publicly traded. There can be no assurance that a fluid trading market
in the Company's Common Stock will develop or, if such market does develop, that
it will continue or be sustained.
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Set forth below are the high/ask and low/bid quotations for the
Company's Common Stock, during the first two calender quarters of the year 2000,
from the inception of the Company's trading on the OTC Bulletin Board through
April 28, 2000, as reported by a member firm of the NASD that effects
transactions in stocks quoted on the OTC Bulletin Board and acts as one of the
market makers for the Company's Common Stock. The quotations listed below
reflect interdealer prices, without retail mark-up, mark-down or commission, and
may not represent actual transactions.
<TABLE>
<CAPTION>
High/Ask Low/Bid
-------- -------
<S> <C> <C>
First Quarter 2000 6-1/2 2-1/2
From January 24, 2000
(beginning of trading)
Second Quarter 2000 4 15/16
(through April 28, 2000)
</TABLE>
On April 28, 2000, the high/ask, low/bid and last sale price of
the Company's Common Stock as reported by a member firm of the NASD that effects
transactions in stocks quoted on the OTC Bulletin Board and acts as one of the
market makers for the Company's Common Stock were 1-1/2, 1-1/16, and 1-1/8,
respectively.
Signature Stock Transfer, Inc. of Dallas, Texas, currently acts
as transfer agent for the Company's Common Stock.
HOLDERS
As of April 28, 2000, there were approximately 211 shareholders
of record of the Company's Common Stock. Within the holders of record of the
Company's Common Stock are depositories, such as Cede & Co., that hold shares of
stock for brokerage firms which, in turn, hold shares of stock for beneficial
owners.
Although, pursuant to its amended Articles of Incorporation, the
Company is authorized to issue Twenty Million (20,000,000) shares of Preferred
Stock, par value $0.001 per share (the "Preferred Stock"), as of April 28, 2000,
no such stock has been issued, there are currently no plans to issue such
Preferred Stock in the foreseeable future, and there are currently no holders of
the Company's Preferred Stock.
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<PAGE> 32
DIVIDENDS
The Company has never declared or paid any cash dividends on its
Common Stock and does not expect to declare or pay any cash dividend in the
foreseeable future. The Company currently intends that it will retain all
earnings, if any, for use in the development of its business. The payment of
dividends will be at the discretion of the Company's board of directors and will
depend upon factors such as future earnings, capital requirements, the
Company's financial condition and general business conditions.
PENNY STOCK
Until the Company's shares qualify for inclusion in the Nasdaq
system, the public trading, if any, of the Company's Common Stock will be on the
OTC Bulletin Board. As a result, an investor may find it more difficult to
dispose of, or to obtain accurate quotations as to the price, of the Common
Stock offered.
The Company's Common Stock is subject to the provisions of
Section 15(g) and Rule 15g-9 of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), commonly referred to as the "penny stock rule." Section
15(g) sets forth certain requirements for transactions in penny stocks, and Rule
15g-9 (d) (1) incorporates the definition of "penny stock" that is found in Rule
3a51-1 of the Exchange Act.
The SEC generally defines "penny stock" to be any equity security
that has a market price less than $5.00 per share, subject to certain
exceptions. If the Company's Common Stock is deemed to be a penny stock, trading
in the shares will be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors. "Accredited investors" are persons with assets in
excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together
with their spouse.
For transactions covered by these rules, broker-dealers must make
a special suitability determination for the purchase of such security and must
have the purchaser's written consent to the transaction prior to the purchase.
Additionally, for any transaction involving a penny stock, unless exempt, the
rules require the delivery, prior to the first transaction, of a risk disclosure
document, prepared by the SEC, relating to the penny stock market. A
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current quotations for the
securities. Finally, monthly statements must be sent disclosing recent price
information for the penny stocks held in an account and information on the
limited market in penny stocks. Consequently, these rules may restrict the
ability of broker-dealers to
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<PAGE> 33
trade and/or maintain a market in the Company's Common Stock and may affect the
ability of the Company's shareholders to sell their shares.
OTC BULLETIN BOARD ELIGIBILITY RULES
In January 1999, the SEC granted approval of amendments to the
NASD OTC Bulletin Board Eligibility Rules 6530 and 6540. These amendments now
require a company listed on the OTC Bulletin Board to be a reporting company and
current in its reports filed with the SEC. As a result of this rule change, on
April 26,1999, the Company voluntarily filed a registration statement on Form
10-SB in order to become a fully reporting company and sustain the listing of
the Company's Common Stock on the OTC Bulletin Board. The NASD Eligibility Rule
requires that the SEC come to a position of no further comment regarding any
Form 10 registration statement before the NASD considers a company compliant.
The SEC came to such a position in regards to the Company's Form 10-SB
registration statement.
RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of transactions by the Company during
the fiscal year ended December 31, 1999, involving issuances and sales of the
Company's securities that were not registered under the Securities Act of 1933,
as amended (the "Securities Act"):
In anticipation of a proposed merger, the Company effected a 11
for 1 forward split on September 9, 1999. In addition, the Company accepted the
return of, and canceled, 88,722,800 shares of Common Stock of the Company issued
to Aaron Tsai, the former President and Director of the Company.
Subsequently, the Company entered into the Stock Exchange
Agreement, dated September 15, 1999 (the "Stock Exchange Agreement"), with
NetStaff Delaware, that provided for the merger of NetStaff Delaware into the
Company with the Company as the surviving entity. Pursuant to the terms of the
Stock Exchange Agreement, one common share of NetStaff Delaware was to be
converted into 5.0943 common shares of the Company. At the closing of the merger
provided for in the Stock Exchange Agreement, on December 17, 1999, a total of
1,669,505 common shares of NetStaff Delaware were exchanged for 8,505,000 shares
of Common Stock of the Company. The Company relied on an exemption provided for
by Section 4(2) of the Securities Act of 1933, as amended (the "Securities
Act"), in connection with the issuance of the Common Stock in the conversion.
The 8,505,000 shares of Common Stock issued in the exchange are
"restricted securities" under the Securities Act and may be sold in the public
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<PAGE> 34
market upon the expiration of the holding periods under Rule 144, described
below, subject to the volume, manner of sale, and other limitations of Rule 144.
In general, under Rule 144, as currently in effect, a person who
has beneficially owned shares for at least one year, including an "affiliate" (a
person that, directly or indirectly through one or more intermediaries,
controls, or is controlled by or is under common control with, the issuer), is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of:
- 1% of the then outstanding shares of the Company's
Common Stock (currently, approximately 135,000 shares);
or
- the average weekly trading volume during the four
calendar weeks preceding filing of notice of the sale of
shares of Common Stock.
Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the Company. A stockholder who is deemed not to have been an
"affiliate" of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned restricted shares for at least two years, would be
entitled to sell shares under Rule 144(k) without regard to the volume
limitations, manner of sale provisions or public information requirements.
Of the 13,500,000 shares of Common Stock outstanding as of April
28, 2000, approximately 2,842,750 shares of Common Stock are freely tradable
without restriction in the public market, unless the shares are held by
affiliates. The remaining shares of Common Stock outstanding (including the
8,505,000 issued in connection with the merger with NetStaff Delaware) are
"restricted securities" under the Securities Act and may be sold in the public
market upon the expiration of the holding periods under Rule 144, described
above, subject to the volume, manner of sale, and other limitations of Rule 144.
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<PAGE> 35
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE ACCOMPANYING,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, THE AUDITED FINANCIAL
STATEMENTS AND THE NOTES TO THOSE STATEMENTS, APPEARING ELSEWHERE IN THIS
REPORT.
IN ADDITION, THE COMPANY INCORPORATES HEREIN BY REFERENCE THAT SECTION OF
PART I, ITEM 1, ENTITLED "CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS."
Organization - Reverse Merger Treatment
NetStaff, Inc. was incorporated in Indiana on October 7, 1996, as
MAS Acquisition VIII Corp. ("MAS"). MAS acquired NetStaff, Inc., a Delaware
corporation ("NetStaff Delaware"), which was incorporated June 21, 1996, and the
entities were combined, pursuant to a Stock Exchange Agreement dated September
15, 1999 (the Stock Exchange Agreement), that provided for the merger of
NetStaff Delaware with and into MAS as the surviving entity, pursuant to a
tax-free reorganization in accordance with Sections 354 and 368 of the Internal
Revenue Code, as amended. Under the terms of the Stock Exchange Agreement, one
share of the common stock of NetStaff Delaware was to be converted into 5.0943
shares of common stock, par value $0.001 per share (the "Common Stock") of MAS.
In September 1999, in anticipation of the transactions set forth
in the Stock Exchange Agreement, MAS had increased the number of authorized
shares of Common Stock from 80 million to 100 million, effected an 11 for 1
forward split of its Common Stock and accepted the return of, and canceled,
88,722,800 shares of Common Stock from the sole director and officer of MAS.
In addition, in September 1999, coincident with the signing of
the Stock Exchange Agreement, and in furtherance of the transactions
contemplated therein, MAS changed its name to NetStaff, Inc. and also changed
its fiscal year end from March 31 to December 31. Further, pursuant to the terms
of the Stock Exchange Agreement, the sole director and officer of MAS resigned,
and the management of NetStaff Delaware filled the vacancies, thereby effecting
a change in control.
The closing of the Stock Exchange Agreement was effected, and the
reverse merger was completed pursuant to the statutory requirements
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<PAGE> 36
of Indiana and Delaware, on December 17, 1999, at which time, among other
things, 1,669,505 shares of common stock of NetStaff Delaware, representing all
the issued and outstanding shares of NetStaff Delaware, were exchanged for
8,505,000 shares of Common Stock of the Company. The 8,505,000 shares of Common
Stock issued by the Company in the exchange were not registered under the
Securities Act of 1933, as amended (the "Securities Act"), are "restricted
securities" as defined therein and are subject to the limitations of Rule 144
promulgated thereunder. After the issuance of the 8,505,000 shares of Common
Stock, the Company had a total of 13,500,000 shares of Common Stock issued and
outstanding. Of the 13,500,000 shares of Common Stock that remained outstanding
as of March 30, 2000, approximately 2,842,750 shares of Common Stock were freely
tradeable without restriction in the public market unless the shares are held
by affiliates.
Prior to the merger with NetStaff Delaware, the Company had no
significant operations and had never commenced any operational activities. Upon
the closing of the Stock Exchange Agreement, the Company acquired and assumed
the properties, intellectual property rights, operations, assets, liabilities
and obligations of NetStaff Delaware. In conformance with generally accepted
accounting principles, the merger has been accounted for as a "reverse merger"
and the accounting survivor is the Company, an Indiana corporation, formerly
known as MAS.
Operating History
The Company is in the business of providing an Internet-based
multiple listing service for the professional staffing industry - the NetStaff
MLS. The NetStaff MLS brings together the resources of the staffing industry
with the needs of the corporate human resources community, primarily by offering
an aggregated database of pre-qualified screened candidates from staffing
companies that register with the MLS to employers and hiring companies that have
access to the Company's staffing industry Web portal at WWW.NETSTAFF.COM.
Employers and hiring companies do not pay a fee to review candidates in the MLS.
The Company earns a fee from staffing companies upon the successful placement of
a candidate through the NetStaff MLS.
The design and development of the NetStaff MLS commenced in 1997.
This design and development of the database technology and supporting
distribution systems were strengthened with feedback received from staffing
companies at the major staffing industry conventions in 1997. Fine tuning of
this database and distribution system occurred throughout 1998 and beta testing
began on the system at that time. The technologies and systems employed by the
Company were refined to provide for the diverse needs of not only multi-national
staffing firms, but also the small independent staffing firms that comprise the
majority of the fragmented staffing industry. Efforts throughout the
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<PAGE> 37
years 1998 and 1999 were devoted to the pilot programs launched with several
regional staffing companies throughout the US. Upon the successful completion of
the pilot programs, the year end of 1999 and first quarter of 2000 was focused
on creating an effective marketing and sales rollout campaign for the Company,
as well as implementing necessary business and technology systems to allow the
Company to expand.
The Company now employs 14 full-time employees and plans to increase
employment to between 20 and 30 employees by year-end 2000. The additional
employees will be primarily in sales, customer service, and systems support.
Substantially all of the Company's technology systems development and support is
currently provided to the Company by a third-party consulting firm. The Company
anticipates that the additional costs incurred with the hiring of additional
systems personnel will be partially offset by a reduction in the services
provided by the consulting company.
The Company seeks to continually improve the systems handling and
supporting its MLS. This development effort is primarily focused on the software
used in running the systems and in the Company's computer hardware. During the
first six months of 2000, the Company anticipates spending between $250,000 and
$300,000 for the systems improvements. The equipment portion of the total
expenditures for systems improvements described above is estimated to be
approximately $150,000. No other significant capital additions are planned.
Liquidity and Capital Resources
The Company has incurred significant net losses and negative cash flows
from its inception as a development stage company, as a result of the
development and initial testing of its business model and operations. The
Company has funded these losses primarily from cash investments by the Company's
founders with repayment by the issuance of common stock to the Company's
founders and loans by third parties.
In the fourth quarter 1999, the Company entered into a limited license
agreement, granting territorial rights for the multiple listing service of the
Company's services in a foreign country, pursuant to which the licensee pays an
up-front, one-time license fee of $2 million, in three installments. The Company
received its first installment of the license fee in the amount of $1,000,000,
on December 31, 1999. In March 2000, the Company received an additional
$500,000, and in May 2000, the Company received an additional $350,000. The
Company anticipates receiving the balance of the license fee, less agreed upon
expenses, in the second quarter of fiscal 2000.
Management is reporting this license fee as equity, as opposed to
revenue or income, because it has been advised that the licensee is paying the
license fee with proceeds from the licensee's purchase and sale of shares of the
Common Stock of the Company, substantially all of which occurred in the December
1999 time frame. Since the fee is being paid with such proceeds, the Company
believes it is appropriate to record and recognize such amounts as equity.
The Company believes that the estimated aggregate $2 million it will
receive will allow the Company to continue operations through September 2000. At
that time, the Company will need to raise capital by debt or equity on a private
basis or through a public offering. The Company believes that it will be
dependent in
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<PAGE> 38
the foreseeable future on raising capital on a debt or equity basis to meet its
operating expenses and propel its strategic sales and marketing plans. The
Company anticipates that it will be able to continue to obtain working capital
through the proceeds of equity or debt financing on a private basis, and may
also consider exploring the availability of equity financing through a public
offering.
Operations.
Total expenses for the twelve months ended December 31, 1999 came to
$381,833, as compared to $250,671 incurred during the comparable time frame in
1998 (see the Statement of Operations in the accompanying financial statements).
The major increase in expenses is mainly attributable to increases in
professional fees ($78,048 increase), advertising/promotional ($25,798
increase), and travel/entertainment ($30,337). These increased expenses of the
Company resulted primarily from employment of third party professionals and
independent contractors to meet the company's development, technical and
financial demands on a timely basis, as well as associated costs relating to the
launch and initial implementation of its sales and marketing strategies. The
travel/ entertainment expense increase is due to participation in trade shows
and conventions for the staffing industry.
Year 2000 Compliance.
Year 2000 ("Y2K") issues relate to the ability of computer hardware and
software to respond to the problems posed by the fact that computer programs
have traditionally been written using two digits rather than four to define the
applicable year. As a consequence, unless modified, computer programs and
systems would not be able to differentiate between the year 2000 and 1900. The
failure to address the problem could result in system failures and the
generation of erroneous data.
The Company, and to the best of the Company's knowledge, its third party
vendors, Internet and other utility service providers did not experience any
interruption of operations as a result of the Year 2000.
In the third and fourth quarters of 1999, the Company assessed the
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<PAGE> 39
potential impact of Y2K issues on the processing of date-sensitive information
by the Company's information systems, operational systems and other ancillary
systems. While there can be no assurance that all potential Y2K issues could be
satisfactorily identified and resolved, the Company currently believes, based on
internal evaluations and discussions with its information systems vendors, that
Y2K issues will not have a material adverse effect on the Company or on the
results of its operations. The Company did not defer any major technology or
product or service development project as a result of its Y2K review.
The major Y2K risk may come from the Company's usage of third-party
products. The Company's system is based on Microsoft Windows NT operating system
running a Microsoft SQL database being driven by Borland's Delphi software.
These third-parties vendors claim their products to be Y2K compliant, and, to
date, the Company has no reason to question this claim.
The Company did not identify any material technology or non-technology
assets critical to its operations that presented a material risk of not being
ready, that could not be replaced with a suitable alternative, or for which it
did not have an acceptable contingency plan.
The Company will continue to monitor its technology systems and those of
third parties with whom it conducts business throughout the Y2K to ensure that
any latent Y2K issues that may arise are addressed promptly. Although the
Company does not anticipate any additional expenditures relating to Y2K
compliance, the Company cannot provide any assurance as to the magnitude of any
future costs until significant time has passed.
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<PAGE> 40
ITEM 7. FINANCIAL STATEMENTS
Reference is made to the Consolidated Financial Statements, the
Notes thereto, and Report of Independent Auditors thereon, commencing at Page
F-1 of this Report, which Consolidated Financial Statements, Notes and Report
are included herein by reference.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Pursuant to the Stock Exchange Agreement, whereby NetStaff
Delaware merged into the Company which was the surviving entity, the Company
changed its fiscal year end from March 31 to December 31.
The Company changed its accountants, and such change has been
previously reported by the Company on Form 8-K, initially filed on April 25,
2000. An amended Form 8-K was filed on May 4, 2000.
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information concerning the
executive officers and directors of the Company. Except as otherwise noted, none
of the executive officers are directors or officers of any publicly-owned
corporation or entity.
<TABLE>
<CAPTION>
Name Age Position/Office Held
- ---- --- --------------------
<S> <C> <C>
Patrick Rylee 41 Chief Executive Officer,
President and Director
David Davis 56 Chief Financial Officer, Chief
Operating Officer and Director
Colin Childerley 52 Director
David J. Cowan 45 Director
</TABLE>
Patrick Rylee has served as CEO, President and a Director of the
Company since September 15, 1999. He was the founder and served as President and
a Director of NetStaff, Inc., a Delaware corporation ("NetStaff Delaware"),
which was merged into the Company, pursuant to a Stock Exchange Agreement,
described below, since its inception in June 1996. Prior thereto, he was
National Sales Director for Qualify International, a software company
specializing in search and retrieval software for the staffing industry. From
1990 to 1993, he was the National Sales Director at TempFunds America, a finance
company, specializing in receivables financing for the temporary help industry.
David Davis has served as Chief Financial Officer, Chief
Operating Officer and a Director of the Company since January 17, 2000. From May
1996 until December 1999, he held various positions with Productivity Point
International ("PPI"), a computer and educational training company that was
acquired by Knowledge Universe. When he left PPI, Mr. Davis held the position of
Western Regional Finance Director. From 1989 through November 1995, he was
President of Madison Designs, a laminator of fabricated wood products, based in
Cincinnati, OH. Prior thereto, Mr. Davis was partner in the audit division of
Arthur Andersen &
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<PAGE> 42
Company with 14 years' experience in areas of finance, accounting and public
reporting aspects of corporations.
Colin Childerley has served as a Director of the Company since
September 15, 1999 and was a founder of NetStaff Delaware. Since 1996, he has
been a Principal in the design firm of Millennium 3 Design. From 1990 through
1996, Mr. Childerley was the President of 101 Ltd., a UK-based company,
specializing in property development.
David J. Cowan has been a Director of the Company since December
10, 1999. He is a partner in the Canadian law firm of Clark, Wilson, which he
joined in 1987. He obtained his LL.B. from the University of British Columbia
in 1979. Mr. Cowan has been guest lecturer for the Continuing Legal Education
society of British Columbia on securities and corporate matters. He is past
Chairman of the Securities and National Resources Subsection of the Canadian Bar
Association, British Columbia Branch, and current Chairman of the National
Natural Resources Subsection of the Canadian Bar Association. He is also a
member of the Securities Policy Advisory Committee to the British Columbia
Securities Commission. Mr. Cowan is also a director of Consolidated Granby
Resources Ltd, a British Columbia, Canada company listed on the Canadian Venture
Exchange.
On September 15, 1999, Aaron Tsai resigned as the Company's Chief
Executive Officer, Treasurer, Secretary and sole Director. Such resignation was
a result of the implementation of the Stock Exchange Agreement, dated September
15, 1999 (the "Stock Exchange Agreement"), between the Company and NetStaff
Delaware, whereby the Company was the surviving entity in a merger effected with
NetStaff Delaware. In connection with Mr. Tsai's resignation and the terms of
the Stock Exchange Agreement, as explained below, Messrs. Rylee and Childerley
were appointed as directors of the Company. Pursuant to Section 1.1 of the Stock
Exchange Agreement, on September 15, 1999, Mr. Rylee was also appointed Chief
Executive Officer and President of the Company.
Directors are generally elected at the annual meeting of the
Company's shareholders. Each director holds office until his successor is
elected and qualified, and, thus, generally hold one-year terms.
The current directors were appointed in connection with the
implementation of the Stock Exchange Agreement. Pursuant to Section 1.1 of the
Stock Exchange Agreement, the board of directors of the surviving entity was to
have a maximum of four members, of which two were to be appointed by the Company
and two by NetStaff Delaware. Messrs. Rylee and Childerley were selected by
NetStaff Delaware as its appointed directors; Messrs. Davis and
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Cowan were selected by the Company. Each of these directors will serve until the
next annual meeting of the Company's shareholders.
Executive officers are chosen by, and serve at the discretion of,
the Company's board of directors, absent any employment agreement, of which none
currently exists.
FAMILY RELATIONSHIPS
There are no family relationships between or among the directors,
executive officers, or persons nominated or chosen by the Company to become
directors or executive officers.
INVOLVEMENT IN LEGAL PROCEEDINGS
To the best of the Company's knowledge, during the past five
years, none of the following occurred with respect to a present or former
director or executive officer of the Company:
(1) Any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer
either at the time of the bankruptcy or within two years prior
to that time;
(2) Any conviction in a criminal proceeding or being subject to a
pending criminal proceeding (excluding traffic violations and
other minor offenses);
(3) Being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of any competent
jurisdiction, permanently or temporarily enjoining, barring,
suspending or otherwise limiting his involvement in any type of
business, securities or banking activities; and
(4) Being found by a court of competent jurisdiction (in a civil
action), the SEC or the Commodity Futures Trading Commission to
have violated a federal or state securities or commodities law,
and the judgment has not been reversed, suspended or vacated.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's
executive officers and directors, and persons who own more than five percent
(5%) of a registered class of the Company's equity securities, to file with the
SEC initial reports of ownership and reports of changes in ownership of Common
Stock and the Company's other equity securities. Officers, directors and persons
who
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<PAGE> 44
own more than ten percent (10%) of a registered class of the Company's equity
securities are required by Commission regulation to furnish the Company with
copies of all Section 16(a) forms so filed.
Based solely upon review of the copies of such forms furnished to
the Company during, and with respect to, the fiscal year ended December 31,
1999, Messrs. Rylee, Childerley and Cowan each filed his Form 3 late upon
becoming a reporting person. Further, Messrs. Rylee and Cowan each filed his
Form 5 late.
The Company has advised each of the Company's present Section 16
reporting persons of their obligations to file Forms 3, 4 and 5 with respect to
their initial beneficial ownership of securities of the Company and with respect
to transactions in such securities since becoming Section 16 reporting persons.
However, the Company is unable to predict whether such persons will comply with
their obligations under Section 16(a) of the Exchange Act and cannot give any
assurance that such persons will so comply or, if any of such persons does so
comply, that such persons will thereafter fail to remain in compliance with
Section 16(a) of the Exchange Act.
ITEM 10. EXECUTIVE COMPENSATION.
The Company paid the following compensation to the named
executive officers for the last completed fiscal year, during which time the
Company became a reporting company, pursuant to Section 13(a) or 15(d) of the
Exchange Act:
<TABLE>
<CAPTION>
Name and Position Year Salary
- ----------------- ---- ----------
<S> <C> <C>
Patrick Rylee* 1999 $20,769.21
Chief Executive Officer,
President and a Director
Aaron Tsai** 1999 -0-
Former Chief Executive Officer,
Treasurer, Secretary and sole
Director
</TABLE>
- ----------
* Mr. Rylee became Chief Executive Officer, President and a Director of
the Company, as of September 15, 1999, in connection with the
implementation of the Stock Exchange Agreement, dated September 15, 1999
(the "Stock Exchange Agreement"),
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<PAGE> 45
between the Company and NetStaff, Inc., a Delaware corporation
("NetStaff Delaware"), whereby the Company was the surviving entity in a
merger effected with NetStaff Delaware. Prior thereto, Mr. Rylee was the
Chief Executive Officer, President, Treasurer and a Director of NetStaff
Delaware. The amounts shown above as compensation include compensation
Mr. Rylee received prior to and after the merger between the two
companies was closed to be consistent with the consolidated financial
statements being filed herewith. After the merger was closed, Mr.
Rylee's annual salary was set at $120,000. In the foreseeable future,
the Company expects to negotiate an employment contract with Mr. Rylee,
but there is none at the present time.
** Mr. Tsai resigned as the Company's Chief Executive Officer, Treasurer,
Secretary and sole Director on September 15, 1999, in connection with
the implementation of the Stock Exchange Agreement. Prior thereto, Mr.
Tsai acted without compensation and without accruing compensation. Mr.
Tsai did not receive any amounts, no amounts are payable, nor were any
amounts accrued in connection with his resignation as set forth above or
the change in control of the Company as effected pursuant to the Stock
Exchange Agreement.
Neither of the above named executive officers received any
compensation in the form of a bonus, stock awards, stock options, stock
appreciation rights, stock dividends or award under any long-term incentive
plan. Mr. Rylee's shares of Common Stock in the Company, set forth below in Item
11, were received by him as a result of the closing of the Stock Exchange
Agreement and the conversion of shares in NetStaff Delaware held by him into
shares of Common Stock of the Company.
No retirement, pension, profit sharing, stock option or similar
programs have been adopted by the Company for the benefit of its employees. The
Company is in the process of developing a stock option and warrant plan that
will be reviewed and acted upon by its board of directors in the foreseeable
future. The Company expects that such plan will be presented at the next annual
shareholders meeting for shareholder approval.
There are currently no employment agreements with any of the
Company's executive officers.
Directors are not compensated for any services they may provide
as directors on the Company's board of directors.
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<PAGE> 46
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information known to the
Company with respect to beneficial ownership of the Company's Common Stock as of
April 28, 2000. Regarding the beneficial ownership of the Company's Common Stock
the table lists: (i) each stockholder known by the Company to be the beneficial
owner of more than five percent (5%) of the Company's Common Stock, (ii) each
Director and Executive Officer and (iii) all Directors and Executive Officer(s),
of the Company as a group:
<TABLE>
<CAPTION>
Name and Address Number of Shares
of Beneficial Owner Beneficially Owned Percent of Class
- ------------------- ------------------ ----------------
<S> <C> <C>
Patrick Rylee 4,090,093* 30.3%
c/o NetStaff, Inc.
168 South Park
San Francisco, CA 94107
David Davis -0- 0.0%
c/o NetStaff, Inc.
168 South Park
San Francisco, CA 94107
Colin Childerley 2,793,392** 20.7%
c/o NetStaff, Inc.
168 South Park
San Francisco, CA 94107
David J. Cowan -0- 0.0%
Clark, Wilson
800-885 West Georgia Street
Vancouver V6C 3H1
British Columbia, Canada
Aaron Tsai 1,300,000*** 9.6%
c/o MAS Financial Corp.
1710 E. Division St.
Evansville, IN 47711
All Directors and Executive 6,883,485**** 51%
Officers as a group
(4 persons)
</TABLE>
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<PAGE> 47
- ------------
* Includes 10,000 shares of Common Stock given to Mr. Rylee as a gift to
his parents. Mr. Rylee disclaims voting power over such shares.
** Includes 5,000 shares of Common Stock of the Company given by Mr.
Childerley as a gift to his brother. Mr. Childerley disclaims voting
power over such shares.
*** Includes 500,000 shares of Common Stock held in the name of MAS Capital
Inc., 1710 E. Division Street, Evansville, IN 4771, which entity is
controlled by Mr. Tsai. An entity called Fast Net Communications Inc.
has an option to purchase 360,000 shares of Common Stock from Mr. Tsai.
An entity called Jackson Hill Holdings Inc. has an option to purchase
400,000 shares from Mr. Tsai.
**** Includes the amount of shares set forth above over which Messrs. Rylee
and Childerley disclaim voting power.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
STOCK EXCHANGE AGREEMENT
On September 15, 1999, the Company entered a Stock Exchange
Agreement, dated September 15, 1999 (the "Stock Exchange Agreement"), with
NetStaff, Inc., a Delaware corporation ("NetStaff Delaware"), which provided for
the merger of NetStaff Delaware into the Company which was the surviving entity
and which changed its name to "NetStaff, Inc."
At the time of the signing of the Stock Exchange Agreement, Aaron
Tsai was the Chief Executive Officer, Treasurer, Secretary and sole Director of
the Company. Patrick Rylee was the Chief Executive Officer, President, Treasurer
and a Director of NetStaff Delaware; Colin Childerley was the Secretary and a
Director of NetStaff Delaware.
On September 9, 1999, in anticipation of the transaction
eventually described in the Stock Exchange Agreement, the Company effected an 11
to 1 forward split of its Common Stock. In addition, the Company accepted the
return of, and canceled, 88,722,800 shares of Common Stock of the Company issued
to Aaron Tsai who, as a result, held 1,300,000 shares of Common Stock.
Pursuant to Section 1.1 of the Stock Exchange Agreement, the
board of directors of the surviving entity was to have a maximum of four
45
<PAGE> 48
members, of which two were to be appointed by the Company and two by NetStaff
Delaware. Furthermore, Section 1.1 of the Stock Exchange Agreement, Patrick
Rylee was to be named Chief Executive officer and President of the surviving
entity.
On September 15, 1999, coincident with the signing of the Stock
Exchange Agreement, Aaron Tsai resigned as the Company's Chief Executive
Officer, Treasurer, Secretary and sole Director. In connection with Mr. Tsai's
resignation and the terms of the Stock Exchange Agreement, as set forth above,
Messrs. Rylee and Childerley were appointed as directors of the Company pursuant
to the request of NetStaff Delaware. On September 15, 1999, Mr. Rylee was also
appointed Chief Executive Officer and President of the Company. Subsequently,
the Company selected David Cowan and David Davis as its nominees to the board of
directors.
Pursuant to the terms of the Stock Exchange Agreement, one share
of the common stock of NetStaff Delaware, par value $0.001 per share, was to be
exchanged for 5.0943 shares of Common Stock of the Company. At the closing of
the Stock Exchange Agreement, on December 17, 1999, a total of 1,669,505 shares
of the common stock of NetStaff Delaware was exchanged for an aggregate
8,505,00 shares of Common Stock of the Company. As a result, Patrick Rylee, the
Chief Executive Officer, President and a Director of the Company became the
holder of 4,274,393 shares of Common Stock of the Company, and Mr. Childerley
became the holder of 2,849,592 shares of Common Stock of the Company.
INDEPENDENT CONTRACTOR AGREEMENT
On December 1, 1999, the Company entered into an independent
contractor agreement (the "Agreement") with Millennium 3 Design, a sole
proprietorship ("M3D"). Colin Childerley, a director of the Company, is the
owner of M3D. Pursuant to the terms of the Agreement, M3D provides corporate
image design and development services for the Company. As compensation for such
services, the Company pays M3D an aggregate fee of $90,000 per year, payable
monthly at the rate of $7500 per month, at the beginning of each month, for
twelve months, commencing December 1, 1999. In addition, the Company reimburses
M3D on a monthly basis for out-of-pocket expenses incurred during the course of
its performance of services for the Company upon the presentation of an itemized
invoice for such expenses. The term of the Agreement is one year, and it may be
terminated, with or without cause, at any time, upon written notice by the
Company. In the event of termination by the Company, the balance of the fee that
remains due and owing for the full term must be paid within thirty days.
46
<PAGE> 49
LEGAL SERVICES/ESCROW
David J. Cowan, a director of the Company, is a partner in the
Canadian firm of Clark, Wilson, Barristers & Solicitors, which has provided
certain legal services to the Company. Clark, Wilson is also holding certain
sums in trust for an entity called Commodore Sales Corp. ("Commodore") with
which the Company had entered a license agreement in September 1999. Pursuant to
the license agreement, Commodore is to pay the Company a license fee in the
gross amount of approximately $2 million, less agreed upon expenses. The Company
has received $1.850 million of the fee. The net balance is being held in trust
by Clark, Wilson pending the parties' agreement as to expenses. For a further
discussion of the license agreement and the Company's treatment of the license
fee for accounting purposes, see Item 6, "Management's Discussion and Analysis
or Plan of Operation," above, and the footnotes to the accompanying financial
statements, below.
LOANS TO/FROM RELATED PARTIES
The Company may lend funds to directors and officers from time to
time. At December 31, 1999, the Company had loans outstanding to related parties
of approximately $50,351.00. These loans are unsecured, require no interest
payments, and have no set maturity dates.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
2.0 Stock Exchange Agreement, dated September 15, 1999, between MAS
Acquisition VIII Corp. and NetStaff, Inc., incorporated by
reference to Exhibit 2.0 to the Company's Form 8-K, filed with
the SEC on September 16, 1999.
3.0 Articles of Incorporation of the Company, incorporated by
reference to Exhibit 3.0 to the Company's Form 10-SB Registration
Statement filed with the SEC on April 27, 1999.
3.1 Articles of Amendment of the Articles of Incorporation for MAS
Acquisition VIII Corp., effective September 1, 1999, incorporated
by reference to Exhibit 3.0 to the Company's Form 8-K, filed with
the SEC on September 16, 1999.
3.2 Articles of Merger of NetStaff, Inc., a Delaware corporation,
into MAS Acquisition VIII Corp., an Indiana corporation, dated
September 16, 1999, incorporated by reference
</TABLE>
47
<PAGE> 50
<TABLE>
<S> <C>
to Exhibit 3.1 to the Company's Form 8-K, filed with the SEC on
September 16, 1999.
3.3 Certificate of Merger of NetStaff, Inc., a Delaware corporation,
and MAS Acquisition VIII Corp., an Indiana corporation, dated
September 15, 1999, filed December 9, 1999 with the Secretary of
State of the State of Delaware.
3.4 Bylaws of the Company, incorporated by reference to Exhibit 3.1
to the Company's Form 10-SB Registration Statement filed with the
SEC on April 27, 1999.
4.0 Specimen stock certificate for MAS Acquisition VIII Corp.,
incorporated by reference to Exhibit 4.0 to the Company's Form
10-SB Registration Statement filed with the SEC on April 27,
1999.
4.1 Specimen stock certificate for NetStaff, Inc., an Indiana
corporation.
4.2 Please see Exhibits 3.0 and 3.4 for provisions of the certificate
of incorporation and bylaws defining the rights of holders of
Common and Preferred Stock of the Company.
10.0 Commercial lease between Michael J. Kirsch and NetStaff, Inc.,
dated May 16, 1997.
10.1 Commercial lease between Kearny Street Workshop and NetStaff,
Inc., dated January 5, 2000.
10.2 Equipment lease and pledge agreement with Citicorp Leasing, Inc.,
dated February 9, 2000.
10.3 Independent contractor agreement between NetStaff, Inc. and
Millennium 3 Design, dated December 1, 1999.
</TABLE>
48
<PAGE> 51
<TABLE>
<S> <C>
10.4 License agreement between NetStaff, Inc. and Commodore
Sales Corp., dated September 21, 1999.
10.5 Form of staffing company agreement.
10.6 Letter agreement, dated December 2, 1999, between
NetStaff, Inc. and Golden Horde Investments Ltd.
10.7 Agreement between NetStaff, Inc. and Intellectual
Capital, Inc., dated January 15, 2000.
10.8 Professional Service Agreement between NetStaff, Inc.
and Elliott, Lane & Associates, Inc., dated March 31,
2000.
10.9 Warrants to Purchase Common Shares of NetStaff, Inc.,
issued to Elliott, Lane & Associates, April 1, 2000, per
Professional Services Agreement, and Warrant Terms and
Conditions.
24 Power of Attorney set forth below on signature page.
27 Financial Data Schedule.
</TABLE>
(b) Reports on Form 8-K:
On October 6, 1999, the Company filed an amended Form 8-K,
reporting the Company: (i) had entered into a Stock Exchange Agreement, dated
September 15, 1999, providing for the merger of NetStaff, Inc., a Delaware
corporation, into the Company which would be the surviving entity; (ii) changed
its name to "NetStaff, Inc."; (iii) changed its fiscal year from March 31 to
December 31; (iv) increased its authorized shares of common stock from 80
million to 100 million; (v) effected an 11 to 1 forward stock split; (vi)
accepted the resignation of Aaron Tsai as the Company's sole Director and
Officer; and (vii) appointed Patrick Rylee as a Director, President and Chief
Executive Officer and Colin Childerley as a Director. As part of such amended
Form 8-K, the Company also filed audited financial statements for NetStaff, Inc.
for the years ended December 31, 1997 and 1998 and unaudited financial
statements for NetStaff, Inc., for the six months ended June 30, 1999.
The Form 8-K was initially filed on September 20, 1999.
49
<PAGE> 52
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 4th day of
May, 2000.
NETSTAFF, INC.
By: /s/ PATRICK RYLEE
-----------------------------------------
Patrick Rylee
Chief Executive Officer, President and
Director
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Patrick Rylee and David Davis, or any of them,
his attorneys-in-fact, each with the power of substitution, for him in any and
all capacities, to sign any amendments to this Report on Form 10-KSB, and to
file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that the said attorney-in-fact, or his substitute or substitutes,
may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ PATRICK RYLEE Chief Executive Officer, May 4, 2000
- --------------------------- President and Director
Patrick Rylee (Principal executive officer)
/s/ DAVID DAVIS Chief Financial Officer, May 4, 2000
- --------------------------- Chief Operating Officer
David Davis and Director
(Principal financial and
accounting officer)
/s/ COLIN CHILDERLEY Director May 4, 2000
- ---------------------------
Colin Childerley
</TABLE>
50
<PAGE> 53
<TABLE>
<S> <C> <C>
/s/ DAVID COWAN Director May 4, 2000
- ---------------------------
David Cowan
</TABLE>
51
<PAGE> 54
Netstaff, Inc.
(A Development Stage Company)
As of and for the years ended
December 31, 1999, and
December 31, 1998, and
the period June 21, 1996 (inception)
to December 31, 1999
<PAGE> 55
Netstaff, Inc.
(A Development Stage Company)
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors F-1
Report of Independent Auditors on prior years F-2
Balance Sheet F-3
Statements of Operations F-4
Statement of Changes in Stockholders' Equity F-5
Statements of Cash Flows F-6
Notes to Financial Statements F-7 - F-14
</TABLE>
<PAGE> 56
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
Netstaff, Inc.
We have audited the accompanying balance sheet of Netstaff, Inc. (a development
stage company) as of December 31, 1999 and the related statements of operations,
stockholders' equity, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Netstaff, Inc. (a development
stage company) as of December 31, 1999, and the results of its operations, and
its cash flows for the year then ended, in conformity with generally accepted
accounting principles.
/s/ STARK TINTER & ASSOCIATES, LLC
Denver, Colorado
May 2, 2000
F-1
<PAGE> 57
[ARTHUR YORKES & COMPANY LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To The Board of Directors and Stockholders
Netstaff, Inc.
We have audited the accompanying balance sheet of Netstaff, Inc. (a development
stage company) as of December 31, 1998, and the related statements of
operations, stockholders' equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our 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.
As discussed in Note 5 to the financial statements, the Company is actively
engaged in obtaining outside sources of additional financing.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Netstaff, Inc. as of December
31, 1998, and the results of its operations, and its cash flows for the two
years then ended, in conformity with generally accepted accounting principles.
The June 21, 1996 (inception) to December 31, 1998 financial statements were
compiled by us in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We have not
audited or reviewed the financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
/s/ ARTHUR YORKES & COMPANY
New York, NY
May 27, 1999
F-2
<PAGE> 58
Netstaff, Inc.
(A Development Stage Company)
Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash $ 928,655
Loans to officer 50,351
Prepaid expenses 7,700
-----------
Total current assets 986,706
Property and equipment - net of accumulated depreciation 180,624
Trademarks-net of accumulated amortization 14,767
-----------
$ 1,182,097
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 176,174
Accrued interest 21,417
Short term notes payable 107,100
-----------
Total current liabilities 304,691
-----------
Stockholders' equity
Preferred stock, $0.001 par value,
20,000,000 shares authorized, no shares issued
or outstanding --
Common stock, $0.001 par value,
100,000,000 shares authorized,
13,500,000 shares issued and outstanding 13,500
Additional paid in capital 2,917,801
Deficit accumulated during the
development stage (1,053,895)
-----------
1,877,406
Stock subscription receivable (1,000,000)
-----------
Total stockholders' equity 877,406
-----------
$ 1,182,097
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE> 59
Netstaff, Inc.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
June 21, 1996
(inception)
Year Ended Year Ended Through
December 31, December 31, December 31,
1999 1998 1999
------------ ------------ ------------
<S> <C> <C> <C>
Revenue $ 500 $ 10,600 $ 16,100
Costs and expenses:
General and administrative 371,719 251,683 1,142,306
Depreciation and Amortization 10,614 9,588 20,202
------------ ------------ ------------
(Loss) from operations (381,833) (250,671) (1,146,408)
------------ ------------ ------------
Other income (expense):
Office sub-lease income 70,830 21,683 92,513
------------ ------------ ------------
Net (loss) $ (311,003) $ (228,988) $ (1,053,895)
============ ============ ============
Per share information:
Weighted average number
of common shares outstanding - basic and diluted 11,755,494 5,972,357 6,988,878
============ ============ ============
Net (loss) per common share - basic and diluted $ (0.03) $ (0.04) $ (0.16)
============ ========= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE> 60
Netstaff, Inc.
(A Development Stage Company)
Statement of Stockholders' Equity
For the Period June 21, 1996 (Inception) through December 31, 1999
<TABLE>
<CAPTION>
Preferred Common Stock
----------------------------- -----------------------------
Shares Amount Shares Amount
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance, June 21, 1996 (inception) -- $ -- -- $ --
Issuance of preferred stock for cash 35,000 35,000
Issuance of stock for cash 4,535,848 890
Net (loss) for the period ended December 31, 1996
----------- ----------- ----------- -----------
Balance, December 31, 1996 35,000 35,000 4,535,848 890
Net (loss) for the year ended December 31, 1997
----------- ----------- ----------- -----------
Balance, December 31, 1997 35,000 35,000 4,535,848 890
Issuance of common stock for cash 2,849,578 2,850
Reclassification of paid in capital 3,645
Net (loss) for the year ended December 31, 1998
----------- ----------- ----------- -----------
Balance, December 31, 1998 35,000 35,000 7,385,426 7,385
Issuance of common stock for cash 21,585 22
Issuance of common stock for cash 32,430 32
Common stock issued in consideration for services 203,772 204
Conversion of Preferred Stock to common stock (35,000) (35,000) 178,301 178
Common stock issued for conversion of notes payable 683,487 684
Acquisition of the net assets of MAS Acquisition Corp. VIII 4,995,000 4,995
Commodore license agreement
Loans payable converted to warrants
Net (loss) for the year ended December 31, 1999
----------- ----------- ----------- -----------
Balance, December 31, 1999 -- $ -- 13,500,000 $ 13,500
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Deficit
Accumulated Stock
Additional During the Subscriptions
Paid in Capital Development Stage Receivable Total
--------------- ----------------- ------------- -----------
<S> <C> <C> <C> <C>
Balance, June 21, 1996 (inception) $ -- $ -- $ -- $ --
Issuance of preferred stock for cash 35,000
Issuance of stock for cash 890
Net (loss) for the period ended December 31, 1996 (110,674) (110,674)
----------- ----------- ------------- -----------
Balance, December 31, 1996 -- (110,674) -- (74,784)
Net (loss) for the year ended December 31, 1997 (403,230) (403,230)
----------- ----------- ------------- -----------
Balance, December 31, 1997 -- (513,904) -- (478,014)
Issuance of common stock for cash 556,516 559,366
Reclassification of paid in capital (3,645) --
Net (loss) for the year ended December 31, 1998 (228,988) (228,988)
----------- ----------- ------------- -----------
Balance, December 31, 1998 552,871 (742,892) -- (147,636)
Issuance of common stock for cash 19,978 20,000
Issuance of common stock for cash 14,968 15,000
Common stock issued in consideration for services 39,796 40,000
Conversion of Preferred Stock to common stock 34,822 --
Common stock issued for conversion of notes payable 160,316 161,000
Acquisition of the net assets of MAS Acquisition Corp. VIII (4,950) 45
Commodore license agreement 2,000,000 (1,000,000) 1,000,000
Loans payable converted to warrants 100,000 100,000
Net (loss) for the year ended December 31, 1999 (311,003) (311,003)
----------- ----------- ------------- -----------
Balance, December 31, 1999 $ 2,917,801 $ (1,053,895) $ (1,000,000) 877,406
=========== =========== ============= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE> 61
Netstaff, Inc.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
June 21, 1996
(Inception)
Year Ended Year Ended Through
December 31, December 31, December 31,
1999 1998 1999
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $ (311,003) $ (228,988) $(1,053,895)
Adjustments to reconcile net (loss) to net
cash used in operating activities:
Depreciation and amortization 10,613 9,588 20,135
Write off of Organizational Costs (45) -- (45)
Loan forgiveness (5,000) -- (5,000)
(Increase) decrease in prepaid expenses 1,300 540 (7,700)
Increase in accounts payable 53,236 111,303 242,682
----------- ----------- -----------
Net cash (used in) operating activities (250,899) (107,557) (803,823)
----------- ----------- -----------
Cash flows from investing activities:
Purchase of property and equipment (2,525) (238) (199,324)
Purchase of trademarks (10,000) -- (16,269)
----------- ----------- -----------
Net cash (used in) investing activities (12,525) (238) (215,593)
----------- ----------- -----------
Cash flows from financing activities:
Loans made to officers (50,351) -- (50,351)
Increase (decrease) in notes payable 207,100 (451,286) 368,100
Issuance of preferred stock -- -- 35,000
Proceeds from the sale of common stock 1,035,000 559,366 1,595,322
----------- ----------- -----------
Net cash provided by financing activities 1,191,749 108,080 1,948,071
----------- ----------- -----------
Net increase in cash 928,325 285 928,655
Beginning cash 330 45 --
----------- ----------- -----------
Ending cash $ 928,655 $ 330 $ 928,655
=========== =========== ===========
Supplemental cash flow information:
Non-cash investing and financing transactions:
Common stock issued in conversion of loans $ 161,000 $ -- $ 161,000
Common stock issued in consideration for services
rendered $ 40,000 $ -- $ 40,000
Cash paid for:
Interest $ -- $ -- $ --
Income taxes $ -- $ -- $ --
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE> 62
Netstaff, Inc.
(A Development Stage Company)
Notes to the Financial Statements
Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated on June 21, 1996 in the State of Delaware. The
Company is in the development stage and is in the business of providing an
Internet-based multiple listing service for the professional staffing and
recruiting industry.
On September 15, 1999, Netstaff, Inc. entered into a stock exchange agreement
with MAS Acquisition VIII Corp. (MAS), an Indiana Corporation, whose assets
consisted of intangibles of $45, whereby Netstaff agreed to merge into MAS,
pursuant to a tax-free reorganization. MAS became the surviving corporation.
Pursuant to the terms of the agreement, as of December 17,1999 each common share
of Netstaff was exchanged for 5.0943 common shares of the MAS. A total of
1,669,505 shares of common stock of Netstaff were exchanged for 8,505,000 common
shares of MAS.
This reorganization will be accounted for as though it were a recapitalization
of the Company and sale by the Company of 4,995,000 shares of common stock in
exchange for the net assets of MAS. During September, 1999 MAS filed Articles of
Merger changing its name to Netstaff, Inc.
Revenue recognition
Revenue is recognized for fees earned as direct staffing placements are made.
For temporary or contract placements, fee revenue is recognized as the candidate
provides services to the employer.
Depreciation
The cost of property and equipment is depreciated over the estimated useful
lives (5 years) of the related assets. Depreciation is computed on the
straight-line method for financial reporting purposes.
Intangibles
Trademarks are amortized over their estimated useful life of 15 years.
Amortization of the trademarks expensed to operations during years ended
December 31, 1999 and 1998 and the period from June 21, 1996 (inception) to
December 31, 1999 was $1,084, $419, and $1,503, respectively.
Software and website development costs
Product and website development costs incurred in developing the Company's
website are accounted for in accordance with SOP 98-1. Product and website
development costs include amounts incurred by the Company to develop, enhance,
manage, monitor and operate the Company's website. The Company has capitalized
software development costs totaling $132,609. The Company will start to amortize
these costs once operation has commenced.
F-7
<PAGE> 63
Netstaff, Inc.
(A Development Stage Company)
Notes to the Financial Statements
Use of estimates
The preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the balance sheet date and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Net loss per share
The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"). Basic earnings (loss) per common share
("EPS") calculations are determined by dividing net loss by the weighted average
number of shares of common stock outstanding during the year. Diluted earnings
per common share calculations are determined by dividing net income by the
weighted average number of common shares and dilutive common share equivalents
outstanding. Common stock equivalents were not considered during the periods
presented, as their effect would be anti dilutive.
Cash and Cash Equivalents
For purposes of balance sheet classification and the statements of cash flows,
the Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
Segment Information
Effective in 1999, the Company adopted SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information." Certain information is disclosed, per
SFAS No. 131, based on the way management organizes financial information for
making operating decisions and assessing performance. The Company currently
operates in a single segment and will evaluate additional segment disclosure
requirements as it expands its operations.
Stock-Based Compensation
The Company accounts for stock based compensation in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation." The provisions of SFAS No. 123
allow companies to either expense the estimated fair value of stock options or
to continue to follow the intrinsic value method set forth in APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma
effects on net income (loss) had the fair value of the options been expensed.
The Company has elected to continue to apply APB 25 in accounting for its stock
option incentive plans.
F-8
<PAGE> 64
Netstaff, Inc.
(A Development Stage Company)
Notes to the Financial Statements
Comprehensive Income
There were no items of comprehensive income for the years ended December 31,
1999 and 1998, or the period from June 21, 1996 (inception) to December 31,
1999, and thus net loss is equal to comprehensive loss for those years.
Advertising Costs
Advertising is expensed as incurred. Advertising costs expensed during years
ended December 31, 1999 and 1998 and the period from June 21, 1996 (inception)
to December 31, 1999 were $2,482, $2,388, and $60,508, respectively.
Impairment Of Long-Lived Assets
The Company periodically reviews the carrying amount of property, plant and
equipment and its identifiable intangible assets to determine whether current
events or circumstances warrant adjustments to such carrying amounts. If an
impairment adjustment is deemed necessary, such loss is measured by the amount
that the carrying value of such assets exceeds their fair value. Considerable
management judgement is necessary to estimate the fair value of assets,
accordingly, actual results could vary significantly from such estimates. Assets
to be disposed of are carried at the lower of their financial statement carrying
amount or fair value less costs to sell. As of December 31, 1999, management
does not believe there is any impairment of the carrying amounts of assets.
Concentration of Credit Risk
As of December 31, 1999, $750,000 was invested in an insured money market
account, and the remaining balance was in the Company's operating accounts,
which are federally insured up to $100,000.
Fair Value of Financial Instruments
Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 1999. The
respective carrying value of certain on-balance-sheet financial instruments
approximate their fair values.
These financial instruments include cash, stock subscriptions receivable,
amounts due from related parties, accounts payable, accrued expenses and notes
payable. Fair values of the short-term financial instruments were assumed to
approximate carrying values for these financial instruments because they are
short term in nature or are due or payable on demand.
F-9
<PAGE> 65
Netstaff, Inc.
(A Development Stage Company)
Notes to the Financial Statements
Reclassifications
Certain amounts from prior years financial statements have been reclassified to
conform to current year presentation.
Recent Pronouncements
The FASB recently issued Statement No 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement
No. 133". The Statement defers for one year the effective date of FASB Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
rule now will apply to all fiscal quarters of all fiscal years beginning after
June 15, 2000. In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is required to be adopted
in years beginning after June 15, 1999. The Statement permits early adoption as
of the beginning of any fiscal quarter after its issuance. The Statement will
require the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be adjusted to fair value through
income. If the derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of derivatives will either be offset against the
change in fair value of the hedged assets, liabilities, or firm commitments
through earnings or recognized in other comprehensive income until the hedged
item is recognized in earnings. The ineffective portion of a derivative's change
in fair value will be immediately recognized in earnings. The Company has not
yet determined if it will early adopt and what the effect of SFAS No. 133 will
be on the earnings and financial position of the Company.
NOTE 2. STOCK SUBSCRIPTION RECEIVABLE
The Company entered into a License Agreement, dated September 21, 1999, with
Commodore Sales Corporation ("Commodore") an unaffiliated third party. Pursuant
to the license agreement the Company granted Commodore a nontransferable, ten
year limited license for the purpose of exploiting the Company's multiple
listing service (MLS) within South Africa. Pursuant to the terms of the license
agreement, the Company is to receive a license fee of $2,000,000 payable in
installments. On December 31, 1999, the Company received $1,000,000 representing
the first installment of the license fee. The balance of the license fee is
dependant upon milestones achieved by the Company in terms of staffing companies
or corporations registering with the MLS service. In March 2000, the Company
received the second installment of $500,000 and in May, 2000 the Company
received another installment of $350,000. The Company has been advised that in
December 1999, Commodore purchased approximately 1,000,000 shares of the
Company's common stock from unaffiliated shareholders of the Company at a
nominal price and sold the shares to unaffiliated third parties.
The Company has received documentation that Commodore has placed proceeds from
such sales of shares in trust with Clark, Wilson, a Canadian law firm in which
David J. Cowan, a director of the Company, is a partner. The Company has been
further advised that Commodore is using the proceeds to pay the above described
license fees. The Company has characterized the $2,000,000 fee as equity,
because management has concluded that the use of proceeds resulting from
transactions in shares of the Company are most appropriately reflected as equity
despite the execution of a license agreement.
F-10
<PAGE> 66
Netstaff, Inc.
(A Development Stage Company)
Notes to the Financial Statements
NOTE 3. PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at cost, less accumulated
depreciation at December 31, 1999:
<TABLE>
<S> <C>
Computer equipment $ 43,800
Proprietary software 132,609
Furniture and equipment 15,141
Leasehold improvements 7,774
--------
199,324
Less: Accumulated depreciation 18,700
--------
$180,624
========
</TABLE>
For the years ended December 31, 1999 and 1998, and the period from June 21,
1996 (inception) to December 31, 1999, depreciation expense charged to
operations was $9,530, $9,170, and $18,700, respectively.
NOTE 4. LEASE OBLIGATION
The Company leases office space under an operating lease arrangement. The lease
expires on May 31, 2002.
Minimum future lease payments on the office lease are as follows:
<TABLE>
<CAPTION>
Year Amount
- ---- --------
<S> <C>
2000 $ 51,800
2001 54,200
2002 23,000
--------
Totals $129,000
========
</TABLE>
For the years ended December 31, 1999 and 1998, and the period from June 21,
1996 (inception) to December 31, 1999, the amounts charged to operations for
rent expense were $43,151, $54,209, and $171,040, respectively.
The Company has sublet a portion of the premises to an outside non-related
company. The lease expired October 31, 1999. The annual rental approximates
$97,100. For the years ended December 31, 1999 and 1998, and the period from
June 21, 1996 (inception) to December 31, 1999, the amounts received to other
income for sub-rental were $70,830, $21,683, and $92,513, respectively.
F-11
<PAGE> 67
Netstaff, Inc.
(A Development Stage Company)
Notes to the Financial Statements
NOTE 5. NOTES PAYABLE
The following summarizes notes payable at December 31, 1999:
<TABLE>
<CAPTION>
Short-term:
-----------
<S> <C>
Non-interest bearing promissory notes payable $ 32,600
12% promissory notes 74,500
--------
$107,100
</TABLE>
Note 6. STOCKHOLDERS' EQUITY
Common and preferred stock issuances
During 1996, the Company issued 35,000 shares of Preferred Stock at $1.00 per
share for cash aggregating $35,000.
During 1996, the Company issued 4,535,848 shares of Common Stock at $0.0002 per
share for cash aggregating $890.
During 1998, the Company issued 2,849,578 shares of Common Stock at $0.20 per
share for cash aggregating $559,366.
During 1999, the Company issued 21,585 shares of Common Stock at $0.93 per share
for cash aggregating $20,000.
During 1999, the Company issued 32,430 shares of Common Stock at $0.46 per share
for cash aggregating $15,000.
During 1999 the Company issued 203,772 shares of Common Stock at $0.20 per share
for services rendered. The value of the services of $40,000 has been charged to
operations.
During 1999, the Company converted $161,000 in debt to 683,487 shares of Common
Stock.
During 1999, 35,000 shares of Preferred Stock were converted into 178,301 shares
of Common Stock.
During the periods covered by these financial statements, the Company issued
shares of Common Stock without registration under Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for recission of the sales and
any other applicable remedies if such exemptions were found not to apply, which
could have a material negative impact on the Company.
F-12
<PAGE> 68
Netstaff, Inc.
(A Development Stage Company)
Notes to the Financial Statements
NOTE 7. STOCK WARRANTS
During the year ended December 31, 1999, the Company agreed to issue 200,000
common stock warrants to Golden Horde Investments for the assumption of $100,000
in notes payable. The warrants are exercisable at $1.00 per share, with a
maximum term of three years. There was no expense related to these issuances.
For accounting purposes, this commitment is reflected as if the warrants had
been issued at December 31, 1999.
Common stock warrant activity is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
-------- -----
<S> <C> <C>
Granted 200,000 $1.00
--------
Outstanding at December 31, 1999 200,000 $1.00
======== =====
Options exercisable at December 31, 1999 200,000
Weighted average fair value of options --------
granted during year $ --
========
</TABLE>
The status of all options outstanding at December 31, 1999 is 200,000 options
with an exercise price of $1.00, and a weighted average remaining contractual
life of 3 years.
NOTE 8. INCOME TAXES
The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109 (FAS 109), "Accounting for Income Taxes", which requires use
of the liability method. FAS 109 provides that deferred tax assets and
liabilities are recorded based on the differences between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes, referred to as temporary differences. Deferred tax assets and
liabilities at the end of each period are determined using the currently enacted
tax rates applied to taxable income in the periods in which the deferred tax
assets and liabilities are expected to be settled or realized.
Income tax provision (benefit) for income taxes differs from the amounts
computed by applying the statutory federal income tax rate of 34% as a result of
the following:
<TABLE>
<CAPTION>
June 21, 1996
Year Ended Year Ended (inception) to
Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1999
--------- --------- ---------
<S> <C> <C> <C>
Computed "expected" tax (benefit) ($105,741) ($ 77,856) ($358,347)
Valuation allowance 105,741 77,856 358,347
--------- --------- ---------
$ -- $ -- $ --
========= ========= =========
</TABLE>
F-13
<PAGE> 69
Netstaff, Inc.
(A Development Stage Company)
Notes to the Financial Statements
The types of temporary differences between the tax basis of assets and their
financial reporting amounts that give rise to a significant portion of the
deferred tax asset are as follows:
<TABLE>
<CAPTION>
Temporary Tax
Difference Effect
---------- ------
<S> <C> <C>
Net operating loss carryforward: $1,053,961 $358,347
========== ========
</TABLE>
The net operating loss carry forward will expire in the years through 2019.
NOTE 9. RELATED PARTY TRANSACTIONS
On December 1, 1999, the Company entered into an independent contractor
agreement ("the Agreement") with Millennium 3 Design, a sole proprietorship
("M3D"). A director of the Company, is the owner of M3D. Pursuant to the terms
of the Agreement, M3D provides corporate image design and development services
for the Company. As compensation for such services, the Company pays M3D an
aggregate fee of $90,000 per year, payable monthly at the rate of $7,500 per
month commencing December 1, 1999. The Agreement may be terminated, with or
without cause, at any time, upon written notice by the Company. In the event of
termination by the Company, the balance of the fee that remains due and owing
for the full term must be paid within thirty days of the termination date. As of
December 31, 1999, the Company had paid M3D and aggregate amount of $13,233,
including expense reimbursement.
NOTE 10. COMMITMENTS AND CONTINGENCIES
The Company, one of its officers and one of its directors have been named as
defendants in a breach of contract action, seeking $21,000 plus punitive
damages. The Company and the individual defendants have answered the complaint
and made cross-claims against the plaintiff. A default judgement has been
entered against the individual defendants who intend to seek a court order to
set aside the default.
F-14
<PAGE> 70
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.0 Stock Exchange Agreement, dated September 15, 1999, between MAS
Acquisition VIII Corp. and NetStaff, Inc., incorporated by
reference to Exhibit 2.0 to the Company's Form 8-K, filed with
the SEC on September 16, 1999.
3.0 Articles of Incorporation of the Company, incorporated by
reference to Exhibit 3.0 to the Company's Form 10-SB Registration
Statement filed with the SEC on April 27, 1999.
3.1 Articles of Amendment of the Articles of Incorporation for MAS
Acquisition VIII Corp., effective September 1, 1999, incorporated
by reference to Exhibit 3.0 to the Company's Form 8-K, filed with
the SEC on September 16, 1999.
3.2 Articles of Merger of NetStaff, Inc., a Delaware corporation,
into MAS Acquisition VIII Corp., an Indiana corporation, dated
September 16, 1999, incorporated by reference to Exhibit 3.1
to the Company's Form 8-K, filed with the SEC on September 16, 1999.
3.3 Certificate of Merger of NetStaff, Inc., a Delaware corporation,
and MAS Acquisition VIII Corp., an Indiana corporation, dated
September 15, 1999, filed December 9, 1999 with the Secretary of
State of the State of Delaware.
3.4 Bylaws of the Company, incorporated by reference to Exhibit 3.1
to the Company's Form 10-SB Registration Statement filed with the
SEC on April 27, 1999.
4.0 Specimen stock certificate for MAS Acquisition VIII Corp.,
incorporated by reference to Exhibit 4.0 to the Company's Form
10-SB Registration Statement filed with the SEC on April 27,
1999.
4.1 Specimen stock certificate for NetStaff, Inc., an Indiana
corporation.
4.2 Please see Exhibits 3.0 and 3.4 for provisions of the certificate
of incorporation and bylaws defining the rights of holders of
Common and Preferred Stock of the Company.
10.0 Commercial lease between Michael J. Kirsch and NetStaff, Inc.,
dated May 16, 1997.
10.1 Commercial lease between Kearny Street Workshop and NetStaff,
Inc., dated January 5, 2000.
10.2 Equipment lease and pledge agreement with Citicorp Leasing, Inc.,
dated February 9, 2000.
10.3 Independent contractor agreement between NetStaff, Inc. and
Millennium 3 Design, dated December 1, 1999.
10.4 License agreement between NetStaff, Inc. and Commodore
Sales Corp., dated September 21, 1999.
10.5 Form of staffing company agreement.
10.6 Letter agreement, dated December 2, 1999, between
NetStaff, Inc. and Golden Harde Investments Ltd.
10.7 Agreement between NetStaff, Inc. and Intellectual Capital,
Inc., dated January 15, 2000.
10.8 Professional Service Agreement between NetStaff, Inc. and
Elliott, Lane & Associates, Inc., dated March 31, 2000.
10.9 Warrants to Purchase Common Shares of NetStaff, Inc. issued
to Elliott, Lane & Associates, April 1, 2000, per Professional
Services Agreement and Warrant Terms and Conditions.
24 Power of Attorney set forth below on signature page.
27 Financial Data Schedule.
</TABLE>
<PAGE> 1
EXHIBIT 3.3
State of Delaware
Secretary of State
Division of Corporations
Filed 09:00 AM 12/09/99
991527526-2633933
CERTIFICATE OF MERGER
OF
NETSTAFF, INC.
(A DELAWARE CORPORATION)
AND
MAS ACQUISITION VIII CORP.
(AN INDIANA CORPORATION)
It is hereby certified that:
1. The constituent business corporations participating in the merger
herein certified are:
(i) NetStaff, Inc., which is incorporated under the laws of
the State of Delaware; and
(ii) Mas Acquisition VIII Corp., which is incorporated under
the laws of the State of Indiana.
2. An agreement of merger has been approved, adopted, certified,
executed and acknowledged by each of the aforesaid constituent corporations in
accordance with the provisions of subsection (c) of Section 252 of the General
Corporation Law of the State of Delaware, to wit, by NetStaff, Inc., a Delaware
corporation, in the same manner as provided in Section 251 of the General
Corporation Law of the State of Delaware, and by MAS Acquisition VIII Corp., an
Indiana corporation, in accordance with the laws of the State of Indiana.
3. The name of the surviving corporation in the merger herein specified
is MAS Acquisition VIII Corp., an Indiana corporation, which will continue its
existence as said surviving corporation under the name NetStaff, Inc., upon the
effective date of said merger pursuant to the provisions of the Indiana Business
Corporation Law.
4. The Certificate of Incorporation of MAS Acquisition VIII Corp., the
surviving corporation, shall be amended to reflect the change of its name to
"NetStaff, Inc.," and once that is accomplished, said Certificate as now in full
force an effect shall otherwise continue to be the Certificate of Incorporation
of said surviving corporation until amended and changed pursuant to the
provisions of the Indiana Business Corporation Law.
<PAGE> 2
5. The executed agreement of merger between the aforesaid constituent
corporations is on file at an office of the aforesaid surviving corporation, the
address of which is 168 South Park, San Francisco, CA 94107.
6. A copy of the aforesaid agreement will be furnished by the aforesaid
surviving corporation, on request, and without cost, to any stockholder of each
of the aforesaid constituent corporations.
7. Pursuant to Section 252(d) of the General Corporation Law of the
State of Delaware, the aforesaid surviving corporation agrees that it may be
served with process in the State of Delaware for the reasons specified in that
Section 252(d) and irrevocably appoints the Secretary of State of Delaware as
its agent to accept such service of process in accordance with Section 252(d).
The address to which a copy of such process, if any, shall be mailed is
NetStaff, Inc., 168 South Park, San Francisco, CA 94107.
Dated: September 15, 1999 NETSTAFF, INC., a Delaware corporation
By: /s/ PATRICK RYLEE
-------------------------------------
Patrick Rylee, President
MAS ACQUISITION VIII CORP., an
Indiana corporation
By: /s/ PATRICK RYLEE
-------------------------------------
Patrick Rylee, President
2
<PAGE> 1
EXHIBIT 4.1
Specimen Common Stock Certificate
NUMBER _____ SHARES
NETSTAFF, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF INDIANA
PAR VALUE $0.001 CUSIP NO. 64116H 10 9
COMMON STOCK
THIS CERTIFIES THAT _________________________________________________________ is
the owner of ________________________________ FULLY PAID AND NON-ASSESSABLE
SHARES OF THE COMMON STOCK PAR VALUE OF $0.001 EACH OF NETSTAFF, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly endorsed. This Certficate
is not valid until countersigned by the Transfer Agent and registered by the
Registrar.
Witness the facsimile seal of the Corporation and the facsimile signatures
of its duly authorized officers.
DATED:
NETSTAFF,INC.
-------------- Countersigned and Registered:
CORPORATE SEAL
-------------- Signature Stock Transfer,Inc.
PRESIDENT INDIANA (Dallas, Texas) Transfer Agent
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT - _____ Custodian ______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN(J/T) - as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ______________________
in common (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 OF ASSIGNEE
________________________________________________________________________________
<PAGE> 2
__________________________________________________________________________Shares
of the Capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint __________________________________________
Attorney to transfer the said Stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated _________________________
X_______________________________________
SIGNATURE GUARANTEE _______________________________________
(BY BANK, BROKER, CORPORATE OFFICER) NOTICE: THE SIGNATURE TO THIS AGREEMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE, IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT, OR
ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 10.0
COMMERCIAL LEASE
THIS LEASE is made and executed in duplicate this..........16th..............day
Of ...............May..........................................., 1997.
BY AND BETWEEN ....Michael J. Kirsch.............. hereinafter called "Lessor"
and ........NetStaff, Inc......................... hereinafter called "Lessee."
WITNESSETH: That for and in consideration of the sum of $ ...7700.00..... to
Lessor, paid by Lessee, receipt of which is hereby acknowledged by Lessor, and
for the further consideration of the payment of the rents and the performances
of the covenants contained herein on the part of the Lessee, and in the manner
hereinafter stated, Lessor leases and lets to Lessee, and Lessee hereby leases,
hires and takes from Lessor, upon the terms and conditions hereinafter set
forth, the following described property, and its appurtenances, situated in the
City of San Francisco,
County of .........San Francisco............., State of...California............
................., particularly described as follows:
Ground floor office including enclosed parking area and basement, located at 168
South Park, San Francisco, California 94107.
TERM
For the term of 5 years commencing on the 1st day of June 1997
RENT
The total rent shall be sum of two hundred twenty nine thousand eight
hundred dollars ($229,800.00)payable monthly in advance installments of
$3500.00/Mo 6/1/97-5/31/98, $4000.00/Mo 11/1/98-5/31/99, $4200.00/Mo
6/1/99-5/31/2000, $4400.00/Mo 6/1/2000-5/31/2001, $4600.00/Mo 6/1/2001-5/31/2002
United State of America, on the first day of each and every calendar month. In
the event Lessee has paid the rental hereunder, as herein provided, and has duly
complied with the terms and provisions hereof, Lessee may occupy and enjoy the
leased premises for the final one-month of the term, free from obligation to pay
any rental for such final months.
This lease is made subject to the following terms and conditions:
PAYMENT OF RENT
1. Lessee agrees to pay rents to Lessor at the time and in the manner
herein provided.
REMOVAL OF PROPERTY
2. Should Lessee fail to pay any part of the rents herein specified, at the
times or in the manner herein provided, or fail faithfully to comply
with or perform any other of the terms, conditions, covenants and
agreements of this lease on the part of Lessee to be performed or
complied with, or should Lessee abandon the leased premises, then and in
that event, Lessor, at the sole option of Lessor may terminate this
lease, and Lessor and Lessee shall have all the rights and remedies as
provided in California Civil Code, Section 1951.2 Lessor may pursue any
remedy whatsoever provided for by law, and in any event Lessor shall be
entitled to the possession of the leased premises at the lawful
termination of this lease. Lessor is hereby authorized to remove and
store at Lessee's expense any personal property, which Lessee abandons
at the leased premises upon vacating those premises. The Lessor has the
remedy described in California Civil Code
<PAGE> 2
Section 1951.4 (Lessor may continue lease in effect after Lessee's
breach and abandonment and recover rent as it becomes due, if Lessee has
right to sublet or assign, subject only to reasonable limitations). The
rights of Lessor under this lease shall be cumulative to all other
rights or remedies given to Lessor by law or by the terms of this lease
USES AND USES PROHIBITED
3. That the lease premises shall be used, occupied and conducted
exclusively as and for The business offices of NetStaff, Inc. and for no
other purpose, and shall be used, occupied and conducted in a thoroughly
orderly and respectable manner, without let, hindrance, annoyance,
disturbance, detriment, injury or offence to Lessor. Lessee shall not
maintain or commit, nor suffer to be maintained of committed any
nuisance or waste in or about the leased premises. Lessee shall not do
or permit anything to be done in or about the leased premises, not bring
or keep anything therein, which will in any way affect fire or other
insurance on the building or any of its contents, or which shall in any
way conflict with any law, ordinance, rule or regulation affecting the
occupancy and use of the premises which are or may hereafter be enacted
or promulgated by any public authority.
Lease shall not construct, maintain or permit to be constructed or
maintained, any sign or billboard on the roof of the building located on
the premises, nor paint, nor hang, nor permit or authorize others to
paint, or hang any sign on the walls thereof, unless written permission
to do so has been obtained from Lessor. Lessee shall not maintain or
store any hazardous or toxic substances on the property of any kind.
Further, Lessee shall indemnify and hold Lessor free and harmless from
any loss, damage or liability that may be occasioned by any
contamination of the property by any hazardous or toxic substance.
ASSIGNMENT AND SUBLETTING
4. Lessee may assign his interest or sublet the property. But only with the
prior written consent of Lessor. Under no other circumstances, and
without prior obtained written consent, neither this lease nor any
interest therein shall be assignable or subject to subletting. Lessor
shall not unreasonably withhold requested written consent.
Lessee further promises and covenants that if he neglects or fails to
perform or observe any of the covenants contained in this lease and
continues this neglect or failure for ten (10) days after notice by the
Lessor, or if the estate hereby created shall be taken on execution, and
such execution shall not be satisfied, cancelled or otherwise removed
within thirty(30) days after notice by Lessor, or if the Lessee shall be
adjudicated bankrupt or insolvent according to law, or if any assignment
of its property shall be made for the benefit of creditors, the Lessor
may immediately terminate this lease. Lessee covenants that in case of
such termination it will indemnify Lessor against all loss of rent which
Lessor may incur by reason of such termination, during the residue of
the term above specified.
ALTERATION AND REPAIRS
DAMAGE TO PREMISES
5. Lessee agrees that the leased premises are now in tenantable and good
order and condition and the Lessee shall keep and maintain these
premises in good and sanitary order and condition, and that no damages,
alterations or change whatever shall be made in or about the leased
premises without the written consent of Lessor. All alterations,
additions, and improvements made in and to the leased premises shall,
unless otherwise provided by written agreement, be the property of
Lessor and shall remain upon, and be
<PAGE> 3
surrendered with the leased premises. Lessee shall not mar or deface in
any manner the walls, woodwork or any other part of leased premises. All
damage or injury done to the premises or property of the Lessor by
Lessee, or by any person who may be in or upon the premises, with the
consent of the Lessee shall be paid for by the Lessee at the time the
damage or injury is inflicted. Lessee shall, at the termination of the
lease, surrender the leased premises to Lessor in as good order and
condition as received, normal wear and tear excepted.
DELIVERY OF POSSESSION
6. In the event of the inability of Lessor to deliver possession of the
leased premises at the time herein fixed for the commencement of the
term of this lease, neither Lesser nor the agent of Lessor shall be
liable for any damage caused thereby, nor shall this lease thereby
become void or voidable, but in such event Lessee shall not be liable
for any rent until such time as Lessor can deliver possession.
NOTICE OF SURRENDER
7. Lessee shall, at least thirty(30) days before the date of expiration of
this lease, give Lessor a written notice of intention to surrender the
leased premises on that date. If such notice is not given, the Lessee
shall be liable for rent of one additional month in the event that he
shall have vacated the leased premises, at the expiration of the term of
this lease.
HOLDING OVER
8. If Lessee holds possession of premises after the expiration of the term
of this lease. Lessee shall become a tenant from month-to-month only
upon the terms herein specified, but at a monthly rental of Forty six
hundred dollars ($4600.00) per month payable monthly in advance in
lawful money of the United States on the first day of each month and
shall continue to be such tenant until such tenancy shall be terminated
by Lessor, or Lessee by written notice of at least one month prior to
the date of the termination of such monthly tenancy of the intention to
terminate such tenancy.
DESTRUCTION OF PREMISES
9. If the building or the leased premises shall be destroyed by fire or
other causes or be so damaged that they become untenantable and cannot
be rendered tenantable within ninety(90) days from the date of the
injury this lease may be terminated by Lessor. In case the premises
shall be so damaged as not to require a termination of the lease as
above provided, then a proportionate allowance shall be made to Lessee
for the rent hereinbefore reserved corresponding to the time during
which and to the portion of the premises of which Lessee shall be so
deprived. Lessee expressly waives the provisions of Section 1932 and
Subdivision 4 of section 1933 of the Civil Code of State of California.
Lessor shall be sole judge as to whether such damage has caused said
building or premises to be untenantable, and as to whether they can be
rendered tenantable within ninety(90) days from the date of injury.
ENTRY AND INSPECTION
10. Management is given the right to enter into or inspect the premises for
the following purposes:
a. In case of emergency
b. To make necessary or agreed repairs, decorations, alterations or
improvements, supply necessary or agreed services, or exhibit the
unit to prospective or actual purchasers, mortgagees, tenants,
workmen or contractors.
c. When the tenant has abandoned or surrendered the premises.
<PAGE> 4
d. Pursuant to court order.
Except in cases of emergency, when the tenant has abandoned or
surrendered the premises, or if it is impracticable to do so, the
Owner shall give the tenant reasonable notice of his intent to enter
and enter only during normal business hours. Twenty-four (24)hours
shall be presumed to be reasonable notice.
SERVICE CHARGES
11. Lessee agrees to pay during the term hereof, all charges made against
the premises for gas, electricity, power, heat, telephone and for any
other commodities furnished or supplied or used in or upon or about the
premises.
ROOF
12. Lessor agrees to maintain the roof over the demised premises in good
order and repair and repairs to the roof shall be made by and at the
expense of Lessor.
SUBORDINATION
13. Lessee's interest in this property shall be subject and subordinate at
all times to the lien of any mortgage or trust deed or deeds which may
now exist upon or which may be placed upon the premises or the property
of which the premises are a part and Lessee covenants that it will
execute and deliver to Lessor or the nominee of Lessor proper
subordination agreements to this effect at any time upon the request of
Lessor and without payment being made therefore.
BREACH OF CONDITIONS
14. Each and every covenant and term hereof to be kept and performed by
Lessee is expressly made a condition, upon breach whereof Lessor may
terminate this lease and exercise all rights of entry and re-entry upon
the leased premises, as provided for by law.
NON-WAIVER OF BREACH
15. The failure or omission of Lessor to terminate this lease, for any
violation of any of its terms, conditions, or covenants shall in no way
be deemed to be a consent by Lessor to such violation, and shall in no
way bar, estop or prevent Lessor from terminating this lease thereafter,
either for such or for any subsequent violation of any such term,
condition or covenant. The acceptance of rent hereunder shall not be, or
be construed to be, a waiver of any breach of any term, covenant or
condition of this lease.
COSTS OF SUIT
16. If any legal action of proceeding be brought by either party to enforce
any part of this Agreement the prevailing party shall recover, in
addition to all other relief, reasonable attorney's fees and costs.
SERVICE OF NOTICE
17. Notices required under this Agreement may served upon: Michael J. Kirsch
at 164 south Park, San Francisco, California. Said person is authorized
to accept legal service on behalf of Lessor. Notice may be served on
Lessee at the address set forth on page 1.
<PAGE> 5
SECURITY
18. It is further covenanted and agreed by Lessee that nothing herein
contained and no security or guarantee which may now or hereafter be
furnished Lessor for the payment of the rent herein reserved or for the
performance by Lessee of the other terms or covenants of this lease,
shall in any way be a bar or defence to any action in unlawful detainer,
or for the recovery of these premises, or in any action which Lessor may
at any time commence for breach of any part of the terms or covenants of
this lease.
LESSOR AND LESSEE DEFINED
HEIRS, ETC, INCLUDED
19. The word "Lessor" and the word "Lessee" as used herein include the
plural as well as the singular. The neuter gender when used here shall
include the masculine and feminine.
20. This lease shall include and inure to and bind the heirs, executors,
administrators, successors and assigns of respective parties hereto, but
nothing in this paragraph contained shall be construed to modify or
impair in any manner any of the provisions and restrictions of this
lease relating to the assignment of this lease or of any interest
therein, or to the subletting or underletting of the leased premises of
any part thereof.
21. Lessee agrees that this instrument contains all of the provisions of the
agreement between the parties hereto, and that no promise or agreement
not contained herein shall be binding on Lessor
22. Time is the essence of this agreement
23. Lessee accepts the leased premises subject to all zoning laws,
ordinances, and regulations applicable to and regulating the use of the
premises, and acknowledges that Lessor has made no representations or
warranties as to the suitability of the premises for any particular use.
24. Additional Provisions (Insert here and refer to paragraph 24)
Refer to paragraph 24 Details Attached
These parties have executed this lease the day and year first above written
This lease in section 8 provides for automatic renewal from month-to-month
if Lessee remains in possession after the expiration of the term of this
lease
/s/ MICHAEL J. KIRSCH /S/ NETSTAFF, INC. PATRICK RYLEE
............................ .......................................
Lessor 5/19/97 Lessee 5/19/97
Michael J. Kirsch NetStaff, Inc. Patrick L. Rylee
<PAGE> 6
LEASE ADDENDUM
Reference is made to that lease executed May 16, 1997 between Michael J.
Kirsch, Lessor and NetStaff, Inc., Lessee, for the property located at 168
South Park, San Francisco, CA
Paragraph 24, Additional Provisions
Late Charge
Lessee agrees to pay a $100.00 late charge if rent is paid after the 5th day
of the month
Security Alarm System
Lessor has installed an ADT Security Alarm System. Lessor shall pay the
monthly fee for said system. Lessee shall be responsible for false alarms
caused by Lessee.
First Right of Refusal
If Lessor shall decide to sell the premises during the lease term, Lessee
shall have the right to purchase the premises at the same price and the same
terms and conditions as any other acceptable offer made to Lessor of which
Lessor shall give Lessee written notice. Lessee shall have seven(7) days
from the date of said notice to exercise this right of purchase. If Lessor
has not received a written exercise of this right within the seven(7) days,
Lessor shall be free to sell the premises to said third party for said price
and terms.
Liability Insurance _ Hold Harmless
Lessor shall not be liable to Lessee or Lessee's employees, patrons, or
visitors for any damage to persons or property caused by an action, omission
or negligence of Lessee, and Lessee agrees to hold Lessor harmless from all
claims for any such damage; nor shall Lessor be liable for any damage to
persons for property (excepting those damages resulting from negligence of
Lessor) due to the building or any part of appurtenance thereof being
improperly constructed, or being out of repair, and Lessee accepts said
premises as suitable for the purpose for which the same are leased, and
accepts the said building and each and every appurtenance thereof and waives
defects therein. Lessee agrees at Lessee's expense to maintain in force
continuous throughout the term of this lease public liability insurance
covering the leased premise, with limits $1,000,000.00 for death or injury
to one person, $1,000,000.00 for death or injury to more than one person and
$1,000,000.00 for property damage, and shall forthwith furnish Lessor a
certificate by the insurer that such insurance is in force and naming Lessor
as an additional insured.
Rolling Metal Door
Lessor will provide Lessee with two automatic door openers for the metal
roll-up door at the rear of the property; Lessee will be responsible for
operation and maintenance of the door during the term of the lease. Lessee
shall not be held responsible for any damage to the door, its frame or its
mechanism not caused by Lessee.
<PAGE> 7
LEASE ADDENDUM
Addendum to Commercial Lease dated May 16, 1997 between Michael J. Kirsch,
Lessor and NetStaff, Inc., Lessee, for the property located at 168 South
Park, San Francisco, CA
RENT
The monthly rent for this property beginning 11/1/98-5/31/99, $4000.00;
6/1/99-5/31/00, $4200.00; 6/1/00-5/31/01 $4400.00; 6/1/01-5/31/02, $4600.00.
The total rent payable will be adjusted to reflect the increased rent
schedule
/S/ PATRICK RYLEE /s/ MICHAEL KIRSCH
10/8/98 10/8/98
Patrick Rylee Michael Kirsch
Lessee Lessor
<PAGE> 1
EXHIBIT 10.1
COMMERCIAL LEASE
THIS LEASE is made and executed in duplicate this 5th day of January 2000 BY
AND BETWEEN Kearny Street Workshop hereinafter called "Lessor" and NetStaff,
Inc. hereinafter called "Lessee".
WITNESSETH: that for and in consideration of the sum of $......... to
Lessor, paid by Lessee, receipt of which is herby acknowledged by Lessor,
and for the further consideration of the payment of the rents and the
performances of the covenants contained herein on the part of the Lessee,
and in the manner herein after stated, Lessor leases and lets to Lessee
hereby leases, hires and takes from Lessor, upon the terms and conditions
herinafter set forth, the following described property, and its
appurtenances, situated in the city of San Francisco, County of San
Francisco, State of California, Particularly described as follows:
TERM
For the term of 9 months commencing on the 1st day of February, 2000 through
October 31, 2000.
RENT
The total rent shall be the sum of $5,670.00 dollars payable monthly in
advance, instalments Of $630.00 dollars each in lawful money of the United
States of America on the 1st day of each and every calendar month. In the
event Lessee has paid the rental hereunder, as herein provided and has duly
complies with the terms and provisions hereof, Lessee may occupy and enjoy
the leased premises for the final....... Month of the term, free from
obligation to pay any rental for such .................. months.
This lease is made subject to the following terms and conditions:
PAYMENT OF RENT
1. Lessee agrees to pay rents to Lessor at the time and in the manner
herein provided
REMOVAL OF PROPERTY
2. Should Lessee fail to pay any part of the rents herein specified,
at the times or in the manner herein provided, or fail faithfully
to comply with or perform any other of the terms, conditions,
covenants and agreements of this lease on the part of Lessee to be
performed or complied with, or should Lessee abandon the leased
premises, then and in that event, Lessor, at the sole option of
Lessor may terminate this lease, and Lessor and Lessee shall have
all the rights and remedies as provided in California Civil code,
Section 1951.2 Lessor may pursue any remedy whatsoever provided for
by law, and in any event Lessor shall be entitled to the possession
of the leased premises at the lawful termination of this lease.
Lessor is hereby authorized to remove and store at Lessee's expense
any personal property, which Lessee abandons at the leased premises
upon vacating those premises. The Lessor has the remedy described
in California Civil Code Section 1951.4 (Lessor may continue lease
in effect after Lessee's breach and abandonment and recover rent as
it becomes due, if Lessee has right to sublet or assign, subject
only to reasonable limitation). The rights of Lessor under this
lease shall be cumulative to all other rights or remedies given to
Lessor by law or by the terms of this lease
1
<PAGE> 2
USES AND USES PROHIBITED
3. That the lease premises shall be used, occupied and conducted
exclusively as and for office space and for no other purpose, and
shall be used, occupied and conducted in a thoroughly orderly and
respectable manner, without let, hindrance, annoyance, disturbance,
detriment, injury or offence to Lessor. Lessee shall not maintain
or commit, nor suffer to be maintained of committed any nuisance or
waste in or about the leased premises. Lessee shall not do or
permit anything to be done in or about the leased premises, not
bring or keep anything therein, which will in any way affect fire
or other insurance on the building or any of its contents, or which
shall in any way conflict with any law, ordinance, rule or
regulation affecting the occupancy and use of the premises which
are or may hereafter be enacted or promulgated by any public
authority.
Lessee shall not construct, maintain or permit to be constructed or
maintained, any sign or billboard on the roof of the building located on
the premises, nor paint, nor hang, nor permit or authorize others to
paint, or hang any sign on the walls thereof, unless written permission
to do so has been obtained from Lessor. Lessee shall not maintain or
store any hazardous or toxic substances on the property of any kind.
Further, Lessee shall indemnify and hold Lessor free and harmless from
any loss, damage or liability that may be occasioned by any
contamination of the property by any hazardous or toxic substance.
ASSIGNMENT AND SUBLETTING
4. Lessee may assign his interest or sublet the property. But only
with the prior written consent of Lessor. Under no other
circumstances, and without prior obtained written consent, neither
this lease nor any interest therein shall be assignable or subject
to subletting. Lessor shall not unreasonably withhold requested
written consent.
Lessee further promises and covenants that if he neglects or fails to
perform or observe any of the covenants contained in this lease and
continues this neglect or failure for the (10) days after notice by
Lessor, or if the estate hereby created shall be taken on execution, and
such execution shall not be satisfied, cancelled or otherwise removed
within thirty days after notice by Lessor, or if the Lessee shall be
adjudicated bankrupt or insolvent according to law, or if any assignment
of its property shall be made for the benefit of creditors, the Lessor
may immediately terminate this lease. Lessee covenants that in case of
such termination it will indemnify Lessor against all loss of rent which
Lessor may incur by reason of such termination, during the residue of
the term above specified.
ALTERATION AND REPAIRS
DAMAGE TO PREMISES
5. Lessee agrees that the leased premises are now in tenantable and
good order and condition and the Lessee shall keep and maintain
these premises in good and sanitary order and condition, and that
no damages, alterations or change whatever shall be made in or
about the leased premises without the written consent of Lessor.
Unless otherwise provided by written agreement, all alterations,
improvements and changes that may be required shall be done by or
under the direction of Lessor but at the cost of Lessee. All
alterations, additions, and improvements made in and to the leased
premises shall, unless otherwise provided by written agreement, be
the property of Lessor and shall remain upon, and be surrendered
with the leased premises. Lessee shall not mar or deface in any
manner the walls, woodwork or any other part of leased premises.
All damage or injury done to the premises or property of the Lessor
by Lessee, or by any person who may be in or upon the premises,
with
2
<PAGE> 3
the consent of the Lessee shall be paid for by the lessee at the
time the damage or injury is inflicted. Lessee shall, at the
termination of the lease, surrender the leased premises to Lessor
in as good order and condition as received, normal wear and tear
excepted.
DELIVERY OF POSSESSION
6. In the event of the inability of the Lessor to deliver possession
of the leased premises at the time herein fixed for the
commencement of the term of this lease, neither Lessor nor the
agent of Lessor shall be liable for nay damage caused thereby, nor
shall this lease thereby become void or voidable, but in such event
Lessee shall not be liable for any rent until such time as Lessor
can deliver possession.
NOTICE OF SURRENDER
7. Lessee shall, at least thirty days before the date of expiration of
this lease, give Lessor a written notice of intention to surrender
the leased premises on that date. If such notice is not given, the
Lessee shall be liable for rent of one additional month in the
event that he shall have vacated the leased premises, at the
expiration of the term of this lease.
HOLDING OVER
8 Deleted
DESTRUCTION OF PREMISES
9. If the building or the leased premises shall be destroyed by fire
or other causes or be so damaged that they become untenantable and
cannot be rendered tenantable within ninety days from the date of
the injury this lease may be terminated by Lessor. In case the
premises shall be so damaged as not to require a termination of the
lease as above provided, then a proportionate allowance shall be
made to Lessee for the rent hereinbefore reserved corresponding to
the time during which and to the portion of the premises of which
Lessee shall be so deprived. Lessee expressly waives the provisions
of Section 1932 and Subdivision 4 of section 1933 of the Civil Code
of State of California. Lessor shall be sole judge as to whether
such damage has caused said building or premises to be
untenantable, and as to whether they can be rendered tenantable
within ninety(90) days from the date of injury.
ENTRY AND INSPECTION
10. Management is given the right to enter into or inspect the premises
for the following purposes:
a. In case of emergency
b. To make necessary or agreed repairs, decorations, alterations or
improvements, supply necessary or agreed services, or exhibit
the unit to prospective or actual purchasers, mortgages,
tenants, workmen or contractors.
c. When the tenant has abandoned or surrendered the premises.
d. Pursuant to court order.
Except in cases of emergency, when the tenant has abandoned or
surrendered the premises, or if it is impracticable to do so, the
Owner shall give the tenant reasonable notice of his intent to
enter and enter only during normal business hours. Twenty-four
(24)hours shall be presumed to be reasonable notice.
SERVICE CHARGES
3
<PAGE> 4
11. Lessee agrees to pay during the term hereof, one sixth (1/6)
charges made against the premises for water, rates, gas,
electricity, power, heat, telephone and garbage disposal services,
and for any other commodities furnished or supplied or used in or
upon or about the premises.
ROOF
12. Lessor agrees to maintain the roof over the demised premises in
good order and repair and repairs to the roof shall be made by and
at the expense of Lessor.
SUBORDINATION
13. Lessee's interest in this property shall be subject and subordinate
at all times to the lien of any mortgage or trust deed or deeds
which may now exist upon or which may be placed upon the premises
or the property of which the premises are a part and Lessee
covenants that it will execute and deliver to Lessor or the nominee
of Lessor proper subordination agreements to this effect at any
time upon the request of Lessor and without payment being made
therefore.
BREACH OF CONDITIONS
14. Each and every covenant and term hereof to be kept and performed by
Lessee is expressly made a condition, upon breach whereof Lessor
may terminate this lease and exercise all rights of entry and
re-entry upon the leased premises, as provided for by law.
NON-WAIVER OF BREACH
15. The failure or omission of Lessor to terminate this lease, for any
violation of any of its terms, conditions, or covenants shall in no
way be deemed to be a consent by Lessor to such violation, and
shall in no way bar, estop or prevent Lessor from terminating this
lease thereafter, either for such or for any subsequent violation
of any such term, condition or covenant. The acceptance of rent
hereunder shall not be, or be construed to be, a waiver of any
breach of any term, covenant or condition of this lease.
COSTS OF SUIT
16. If any legal action of proceeding be brought by either party to
enforce any part of this Agreement the prevailing party shall
recover, in addition to all other relief, reasonable attorney's
fees and costs.
SERVICE OF NOTICE
17. Notices required under this Agreement may serve upon: Nancy Horn,
Kearny Street Workshop at 166 South Park, California. Said person
is authorized to accept legal service on behalf of Lessor. Notice
may be served on Lessee at the address set forth on page 1.
SECURITY
18. It is further covenanted and agreed by Lessee that nothing herein
contained and no security or guarantee which may now or hereafter
be furnished Lessor for the payment of the rent herein reserved or
for the performance by Lessee of the other terms or covenants of
this lease, shall in any way be a bar or defence to any action in
unlawful detainer, or for the recovery of these premises, or in any
action which
4
<PAGE> 5
Lessor may at any time commence for breach of any part of the terms
or covenants of this lease.
LESSOR AND LESSEE DEFINED
HEIRS, ETC, INCLUDED
19. The word "Lessor" and the word "Lessee" as used herein include the
plural as well as the singular. The neuter gender when used here
shall include the masculine and feminine.
20. This lease shall include and inure to and bind the heirs,
Executors, Administrators, successors and assigns of respective
parties hereto, but nothing in this paragraph contained shall be
construed to modify or impair in any manner any of the provisions
and restrictions of this lease relating to the assignment of this
lease or of any interest therein, or to the subletting or
underletting of the leased premises of any part thereof.
21. Lessee agrees that this instrument contains all of the provisions
of the agreement between the parties hereto, and that no promise or
agreement not contained herein shall be binding on Lessor
22. Time is the essence of this agreement
23. Lessee accepts the leased premises subject to all zoning laws,
ordinances, and regulations applicable to and regulating the use of
the premises, and acknowledges that Lessor has made no
representations or warranties as to the suitability of the premises
for any particular use.
24. Additional Provisions (Insert here and refer to paragraph 24).
These parties have executed this lease the day and year first above written
/s/ NANCY HORN /S/ PATRICK RYLEE
.............................. ......................................
Lessor Lessee
Nancy Horn Patrick Rylee
Kearny Street Workshop NetStaff, Inc.
5
<PAGE> 1
EXHIBIT 10.2
CITICORP
EQUIPMENT LEASE
LESSOR: CITICORP LEASING, INC.
-----------------------------------------------------------------------
ADDRESS: HARRISON, NY 10528
-----------------------------------------------------------------------
LESSE'S LEGAL NAME: CUSTOMER NO.
NETSTAFF
- --------------------------------------------------------------------------------
ADDRESS CONTRACT NO.
168 SOUTH PARKER
- --------------------------------------------------------------------------------
COUNTY STATE/ZIP CODE CUST. REF. (P.O)
SAN FRANCISCO SAN FRANCISCO CA 94107
- --------------------------------------------------------------------------------
ADDRESS (IF DIFFERENT THAN ABOVE) ATTENTION
PATRICK RYLEE
- --------------------------------------------------------------------------------
COUNTY STATE/ZIP CODE STATE/ZIP CODE
- --------------------------------------------------------------------------------
EQUIPMENT LOCATION PRIMARY ADDRESS; BILLING ADDRESS SPECIFY:
- --------------------------------------------------------------------------------
EQUIPMENT DESCRIPTION/MANUFACTURER
- --------------------------------------------------------------------------------
THINKPADS 600X AND RELATED EQUIPMENT AND ACCESSORIES
- --------------------------------------------------------------------------------
(NO. MOS.): MONTHLY RENT USE/SALES TAX BASIC RENTAL PAYMENT
$945.78 $0.00 $946.78
- --------------------------------------------------------------------------------
END OF LEASE PURCHASE OPTION: CONTRACT RATE:
FMV $1.00 OTHER N/A %
- --------------------------------------------------------------------------------
TERMS AND CONDITIONS OF MASTER LEASE AGREEMENT
1. LEASE. Lessor leases to Lessee and Lessee leases from Lessor the personal
described above together with all replacements, repairs, additions and thereto
("Equipment").
2. TERM AND RENT. This Lease shall take effect on the date accepted by Lessor,
as below, for the term shown above, calculated from the date the lessee accepts
the ("Commencement Date"). Lessee agrees to pay to Lessor the aggregate of Basic
Rental Payments set forth above for the Term plus advance payments other amounts
payable under this Lease (a Basic Rental Payment plus all other due by Lessee
under this Lease are referred to together as the "Rental"). The amount of each
Basic Rental Payment shown above is based on estimated total cost of the
Equipment including, if applicable, installation cost. Basic Rental Payment
shall be adjusted proportionately upward of downward if the total cost of the
Equipment exceeds or is less than the estimate and Lessee authorizes Lessor to
adjust the Basic Rental Payments by up to fifteen percent that event. Rental
payments are due on the Commencement Date and on the day of each consecutive
month, quarter or year thereafter, as specified above. Payments are payable
<PAGE> 2
at the address of Lessor set forth above or at such other as Lessor may
designate. To the extent permitted by applicable law, whenever a portion of a
Rental Payment is not paid for more than ten (10) days after it is due, Lessee
agrees to pay Lessor on demand (as a fee to offset Lessor's collection and
operative expenses) the greater of twenty-five ($25.00) or ten percent (10%) of
overdue amount.
LEASE CANNOT BE CANCELLED OR TERMINATED EXCEPT AS EXPRESSLY PROVIDED HEREIN,
LESSEE ACKNOWLEGES AND AGREES THAT LESSEE'S OBLIGATION TO PAY ALL RENTAL
PAYMENTS DUE OR TO BECOME DUE HEREUNDER FOR THE TERM SHALL BE ABSOLUTE AND
UNCONDITIONAL AND SHALL NOT BE SUBJECT TO ANY REDUCTION, SETOFF, DEFENSE,
COUNTERCLAIM, OR DEFERMENT FOR ANY REASON WHATSOEVER.
3. INSTALLATION AND DELIVERY. The Lessee shall provide an acceptable environment
as specified in any applicable manufacturer's manual, and as otherwise specified
by manufacturer, shall furnish all labor required to install equipment. Lessee
shall be responsible for any delivery, rigging or other charges by manufacturer
with respect to the Equipment.
4. DISCLAIMER OF WARRANTIES. LESSEE HAS SELECTED THE EQUIPMENT BASED UPON ITS
OWN JUDGEMENT AND EXPRESSLY DISCLAIMS ANY RELIANCE UPON ANY STATEMENTS OR
REPRESENTATIONS MADE BY LESSOR. LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES
EITHER EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER, INCLUDING, BUT NOT
LIMITED TO, THE DESIGN OR CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY,
SUITABILITY, QUALITY OR FITNESS FOR A PARTICULAR PURPOSE, AND HEREBY DISCLAIMS
ANY SUCH WARRANTIES. Lessee specifically waives all rights to claim against
Lessor for breach of any warranty whatsoever. Lessor shall not be liable to
Lessee hereunder or at law or in equity for any liability, claim, loss damage or
expense caused directly or indirectly by the Equipment or any deficiency or
defect thereof or the operation, maintenance or repair thereof. Lessor agrees to
assign to Lessee, for the sole purpose of making and prosecuting a claim, all
rights Lessor may have against the Equipment manufacturer/seller for breach of
warranty or other representation to the extent the same are assignable.
5. TITLE: LABELLING. Lessor retains title to the Equipment and no right, title
or interest in the Equipment shall pass to Lessee except as expressly set forth
in this Lease. Lessee (a) shall not sell, assign, sublet or otherwise dispose
of, or permit legal process or encumbrance upon or against any interest in, this
Lease or the Equipment; (b) shall give immediate written notice to Lessor of any
such process or encumbrance; and (c) shall, at its sole expense, protect and
defend Lessor's title and interest against all persons claiming against or
through Lessee and indemnify and hold Lessor harmless from and against any loss
caused thereby. Lessee shall affix to the Equipment any markings requested by
Lessor showing Lessor's interest.
2
<PAGE> 3
6. TAXES. Lessee agrees to pay when due all sales, use, property, excise and
other taxes, fees or other charges of any nature whatsoever (except for any
taxes based upon Lessor's net income), however designated, now or hereafter
imposed by any governmental entity, whether based upon the Rent or the Equipment
or the purchase, delivery, ownership, leasing, use possession or return thereof.
Any fees, taxes or other charges paid by Lessor upon failure of Lessee to make
such payments shall at Lessor's demand become immediately due from Lessee to
Lessor.
7. USE; MAINTENANCE; ALTERATIONS; INSPECTION; REGULATORY COMPLIANCE. Lessee
agrees to comply with all laws, regulations and orders applicable to this Lease
and the Equipment and to use the Equipment in its business purpose for which the
Equipment was designed and in compliance with acceptable operating instructions
and to use properly trained personnel in the portion thereof, including, but not
limited to, obtaining and complying with all license, permit, certificate of
need, authorization, certification, accreditation, lease, approval, grant of
rights by any tribunal, regulatory or administrative party or third person
necessary or appropriate for Lessee to own, maintain, or acquire for its
business or Equipment, including Medicare and/or Medicaid certifications, is
applicable. Lessee, at its sole cost and expense, shall maintain the Equipment
according to the manufacturer's recommended guidelines or the equivalent and
meet specifications and all recertification requirements and shall furnish proof
of such maintenance, if operated by Lessor, and shall furnish all needed
servicing and parts, which parts become the property of Lessor and part of the
Equipment. Lessee shall not make any alterations or attachments to the Equipment
without the prior written consent of Lessor, and any permitted alteration or
attachment which cannot be easily removed without damaging the Equipment's
originally intended function or shall become part of the Equipment and the
property of Lessor. Lessee shall not attach the Equipment to any real property
if as a result, the Equipment would become a fixture under applicable law.
Lessor shall have the right during normal business hours to enter Lessee's
premises to inspect the Equipment. Lessee agrees not to remove the Equipment
from the location shown above without Lessor's prior written consent.
8. RETURN OF EQUIPMENT. Upon termination of the Lease, at the expiry of the
Lease or otherwise, Lessee, at its own risk and expense, shall immediately
return the Equipment to Lessor in the same condition as delivered, ordinary wear
and tear excepted, and meeting all recertification requirements of the
manufacturer to specifications, and provide proof thereof, at such location with
the United States as Lessor shall designate. Hardware and software shall be
repaired or replaced as necessary, at Lessee's expense, to ensure Equipment
operates to specifications. Lessee shall contact Lessor to obtain shipping
instructions. If Lessee fails to return Equipment when required to do so, the
terms and conditions of this Lease shall continue to be applicable and Lessee
shall continue to make Rental Payments until Equipment is received by Lessor.
9. EQUIPMENT PURCHASE OPTION (If Applicable). Provided no default has occurred
and continuing and provided this Lease shall not have been previously
terminated, Lessee shall have the option, exercisable by written notice to
Lessor received by Lessor at least ninety (90) days but not more than one
hundred eighty (180) days from
3
<PAGE> 4
the expiration of the Term, to purchase on the day following the last day of
Term ("Purchase Date"), all but not less than all the Equipment for a price
equal to Fair Market Value of such Equipment as determined by Lessor. Provided
Lessee has exercised such option, Lessee shall pay to Lessor on the Purchase
Date aforementioned purchase price in cash, all sales and other taxes applicable
and all other amounts due and owing. Lessor will then cause Equipment to be
delivered to Lessee without recourse or warranty.
10. INSURANCE. Lessee shall obtain and maintain during the Term, at its own
expense, liability insurance and insurance against property damage or loss,
insuring risks as are customarily insured against on the type of equipment
leased by businesses in which Lessee is engaged, in such amounts, in such form,
with insurers satisfactory to Lessor; provided, however, that the amount of
insurance against damage or loss shall not be less than the greater of (a) the
replacement value of the Equipment and (b) the aggregate amount of Rent
remaining for the Term. Each liability insurance policy shall name Lessor as an
additional insured and each property damage policy shall name Lessor as sole
loss payee and all policies shall contain a clause requiring the insurer to give
Lessor at least ten (10) days prior written notice of any alteration in the
terms or cancellation of the policy. Lessee shall furnish a certificate of
insurance or other evidence satisfactory to Lessor that the required insurance
coverage is in effect; however, Lessor shall have no duty to ascertain the
existence of or to examine the insurance policy to advise Lessee if the
insurance coverage does not comply with the requirements of this Paragraph. If
Lessee fails to insure the Equipment as required, Lessor shall have the right to
substitute its own insurance for any insurance obtained by Lessor in accordance
with this Paragraph upon reasonable notice to Citicorp with an insurer through
an agent or broker of its choice satisfactory to Lessor.
11. LOSS OR DAMAGE. Until the Equipment is returned to (and received by) the
Lessor as provided in Paragraph 8, Lessee shall bear the entire risk of loss,
theft, damage to or destruction of the Equipment (including, but not limited to,
any condemnation seizure or requisition of title or use) ("Event of Loss"). No
Event of Loss shall relieve Lessee from its obligations to pay Rental Payments
except as stated in (c) below. When any Event of Loss occurs, Lessee shall
immediately notify Lessor and, at the option of Lessor, shall (a) place such
Equipment in good and working order; or (b) replace such Equipment with like
Equipment in good and working order; with clear title to the replacement
Equipment in Lessor; or promptly pay to Lessor an amount equal to the aggregate
amount of all Rent and applicable amounts then remaining unpaid hereunder for
the Term, whereupon Lessor shall transfer to Lessee, without recourse or
warranty (express or implied), all of Lessor's interest, if any, in and to such
Equipment on an "as is", "where is" basis. The proceeds of any insurance payable
with respect to the Equipment shall be applied, at the option of Lessor, either
towards (i) replacement or purchase of the Equipment or (ii) payment of any of
Lessee's obligations hereunder. Lessee hereby appoints Lessor as Lessee's
attorney-in-fact to make claim for, receive payment of, and execute and endorse
all documents, checks or drafts issued with respect to any Event of Loss under
any insurance policy relating to the Equipment.
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<PAGE> 5
12. EVENTS OF DEFAULT. Each of the following shall be a Default under this
Lease: Lessee (a) fails to pay any portion of Rent within five (5) days of its
due date; or (b) fails to perform or observe any other covenant or agreement in
this Lease, or any representation in this Lease or in any document furnished in
connection with this Lease is inaccurate in any material respect and such
failure or inaccuracy continues unremedied for ten (10) days after written
notice sent by Lessor; or (c) shall or shall attempt to abandon, remove, sell,
encumber or sublet any item of Equipment; or (d) shall become insolvent or make
an assignment for the benefit of creditors, or a trustee or receiver shall be
appointed for Lessee or for a substantial part of its assets, or bankruptcy,
reorganization or insolvency proceedings shall be instituted by or against
Lessee; or (e) shall suffer a material adverse change in its financial condition
or operations; or (f) shall be in default under any other agreement with Lessor
or any of its affiliates or any other lender or Lessor; or (g) shall cause or
suffer to exist any sale or transfer of any interest which would result in a
change in majority ownership of the Lessee.
13. REMEDIES. Upon the occurrence of a Default and at any time thereafter,
Lessor may, in its sole discretion, to the extent permitted by and in conformity
with applicable law, do any one or more of the following: (a) upon notice to
Lessee, terminate this lease; (b) declare the total amount of unpaid Rent and
other applicable amounts due to become due hereunder for the Term immediately
due and payable, discounted at five percent (5%) simple interest per annum; (c)
demand the return of the Equipment in accordance with Paragraph 8 hereof; (d)
without demand or legal process, enter the premises where the Equipment is
located and take immediate possession of and remove the same, without liability
to Lessor or its agents for such entry or for damage to property or otherwise;
(e) sell any or all of the Equipment at public or private sale, with or without
notice to Lessee or advertisement, or otherwise dispose of, lease to others or
keep idle the Equipment, all free and clear of any rights of Lessee to the
Equipment; or (f) exercise any other right or remedy available to Lessor under
applicable law or proceed by court action to enforce the terms of this Lease or
to recover damages or expenses resulting from the breach of this Lease. Lessee
shall be liable for and shall pay to Lessor all legal expenses and other costs
incurred by Lessor in exercising Lessor's remedies, including placing any
Equipment incurred by Lessor in exercising Lessor's remedies, including placing
any Equipment in the condition required by Paragraph 8 hereof. If this Lease is
deemed at any time to be one intended as security, Lessee agrees that the
Equipment shall secure in addition to the indebtedness herein, all other
indebtedness at any time owing by Lessee to Lessor. No remedy referred to in
this Lease is intended to be exclusive, but each shall be in addition to any
other remedy referred to or otherwise available to Lessor at law or in equity.
No express or implied waiver by Lessor of any Default shall constitute a waiver
of any other Default by Lessee or a waiver of any of Lessor's rights and no
delay by Lessor in enforcing any right or requiring performance of any
provisions of this Lease by Lessee shall be a waiver of such right or affect the
right of Lessor to enforce such provision. To the extent permitted by applicable
law, Lessee hereby waives any rights now or hereafter conferred by statute or
otherwise which may require Lessor to sell, lease or otherwise use any Equipment
in mitigation of Lessor's damages as set forth in this Paragraph or which may
otherwise limit or modify any of Lessor's rights or remedies under this
Paragraph.
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<PAGE> 6
14. ASSIGNMENT BY LESSOR. Lessee acknowledges that Lessor may sell and/or assign
its interest in the Equipment and/or this Lease. Lessee agrees that upon notice
of such assignment it shall pay directly to assignee (unless otherwise directed
by assignee) without abatement, deduction or setoff all amounts which become due
hereunder and further agrees that it will not assert against assignee any
defense, counterclaim or setoff for any reason whatsoever in any action for rent
or possession brought by assignee. Lessee agrees that any such assignment; sale
or encumbrance of the Lessor's interest shall not materially change Lessee's
duties or obligations under this Lease nor materially increase Lessee's risks or
burdens.
15. GENERAL INDEMNITY. Lessee indemnifies and agrees to defend and hold Lessor
harmless from and against all claims, costs, expenses (including, but not
limited to, legal expenses), damages and liabilities arising from or pertaining
to ownership use, leasing, delivery, return or disposition of the Equipment. Any
payment made hereunder to Lessor shall include the amount of any taxes required
to be paid by Lessor as the result of the receipt of such payment. The
provisions of this Paragraph 15 shall survive the termination of this Lease.
16. FURTHER ASSURANCES. Lessee shall promptly execute and deliver to Lessor such
further documents and take such further action as Lessor may request to more
effectively carry out the intent and purpose of this Lease. Lessee agrees to
provide Lessor with copies of Lessee's balance sheet, profit and loss statement,
and such other financial reports as Lessor may from time to time request. Lessee
hereby appoints Lessor as its attorney-in-fact to execute and file on behalf of
Lessee and authorizes Lessor to file without Lessee's signature any UCC
financing statements and amendments Lessor deems advisable to secure the
interests of Lessor. To the extent permitted by applicable law, Lessee hereby
waives any and all rights and remedies conferred upon a Lessee by Sections
2A-508 through 2A-522 of the UCC.
17. NOTICES. Any notices shall be in writing, sent by regular mail, postage
prepaid, to the addresses set forth above, or to such other addresses as the
parties may substitute by written notices given in the manner described in this
paragraph.
18. MISCELLANEOUS. This Lease may not be amended except in writing and shall be
binding upon and inure to the benefit of the parties, their permitted successors
and assigns. This Lease shall be governed by, and construed in accordance with
the laws of New York. Any provision of this Lease which is unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such unenforceability without invalidating the remaining provisions hereof.
Lessee waives any right to trial by jury on any issues or claims arising under
this Lease.
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<PAGE> 7
(CONTINUED ON REVERSE SIDE)
- --------------------------------------------------------------------------------
This Lease, consisting of the foregoing, and THE REVERSE SIDE HEREOF, correctly
sets forth the entire agreement between Lessor and Lessee with respect to the
use, possession and lease of the Equipment. No agreements or understandings
concerning the foregoing shall be binding on either of the parties hereto unless
specifically set forth in this Lease. The term "Lessee" as used herein shall
mean and include any and all Lessees who sign hereunder, each of whom shall be
jointly and severally bound thereby. This Lease will not be binding on Lessor
until accepted below. The undersigned understands and agrees that consumer
credit reports concerning the undersigned may be requested by Lessor in
connection with processing this application furnished by any and all relevant
parties.
By execution hereof, the signer hereby certifies that he has read this
Lease, INCLUDING THE REVERSIDE SIDE HEREOF, and that he is duly authorized to
execute this Lease on behalf of Lessee, and that Lessee is duly authorized and
empowered to execute and deliver this Lease and any other document required or
necessary to be delivered pursuant to this Lease.
LESSEE: NETSTAFF
By: /s/ PATRICK RYLEE
Patrick Rylee 2/9/00
------------------------------------
PRINTED NAME, TITLE DATE
LESSOR: CITICORP LEASING, INC.
HEADQUARTERS, 450 MAMARONECK
LOCATED AT: AVENUE, HARRISON, NY 10528
----------------------------------
7
<PAGE> 8
- ---------------------------------------
AUTHORIZED SIGNATURE
- ----------------------------------------------------------
PRINTED NAME, TITLE DATE
8
<PAGE> 9
PLEDGE AGREEMENT
PLEDGE AGREEMENT (the "Agreement"). Made as of this 9th day of February, 2000
between NetStaff ("Pledgor"), having its principal place of business at 168
South Park, San Francisco, CA 94107 and Citicorp Inc., having a place of
business at 450 Mamaroneck Avenue, Harrison, NY 10528.
WITNESSETH:
WHEREAS, Pledgor, as Lessee, entered into an Equipment Lease Agreement
dated February 9, 2000 with Citicorp as Lessor, all as amended by an Amendment
dated __________________, 2000, (the "Agreement"); and
NOW, THEREFORE, it is agreed between the parties as follows:
1. Pledgor hereby pledges, assigns, transfers and delivers to Citicorp
as security for the payment and performance of all of the Obligation,
a Negotiable Certificate of Deposit NO. 6740414622 issued by Citibank
(together with any other issuer of a Certificate, the "Issuing Bank")
in the face amount of $29,000 bearing interest at the rate of 5.21%
per annum, maturing 8/9/00 and payable to the order of Pledgor,
together with all renewals thereof, all Substitute Certificates
(hereinafter defined), and all interest on and proceeds of, however
derived, any of the foregoing (collectively, the "Certificate").
2. Pledgor agrees to immediately deliver to Citicorp all certificates,
receipts or other instruments evidencing the Certificate.
3. Pledgor represents and warrants that: (i) Pledgor is the sole owner
of the Certificate; (ii) the Certificate is free of all liens,
security interests and encumbrances and Pledgor has not made any
prior assignment or transfer of any kind of the Certificate, except
such as may have been created in favor of Citicorp; (iii) Pledgor has
not withdrawn, canceled, been repaid or redeemed all of any part of
the Certificate; (iv) there is no pending application for the
withdrawal, cancellation, repayment or redemption of the Certificate;
(v) this Agreement does not violate, or require any consent, approval
or other action by any governmental official or body of any other
person or entity under; any law, regulation, decree or other or any
agreement binding upon Pledgor or the property of Pledgor; (vi)
Pledgor has the power and authority to enter into this Agreement;
(vii( this Agreement has been duly authorized, executed and delivered
by Pledgor; and (viii( this Agreement is a legal, valid and binding
obligation of Pledgor, enforceable in accordance with its terms.
4. This Agreement has been given for value and is hereby declared to be
irrevocable.
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<PAGE> 10
5. So long as any Obligation is outstanding, Pledgor hereby irrevocably
authorizes and empowers Citicorp, at Citicorp's option, at any time,
and from time to time, for its own use and benefit either in its own
name of in the name of Pledgor: (i) to renew the Certificate on such
terms and for such period (s) as Citicorp may deem appropriate; (ii)
to execute any and all instruments required for the withdrawal or
repayment of same, or any part thereof; (iii) to complete in any
respect any instrument for the withdrawal or repayment of funds; and
(iv) to in all respects deal with the Certificate as the owner
thereof. Pledgor waivers any presentation, demand of payment,
protest, and notice of non-payment under any circumstances be deemed
to assume any responsibility for or obligation or duty with respect
to the Certificate or any proceeds thereof, and shall not be required
to take any action or any kind to collect, preserve or protect its or
Pledgor's rights in the Certificate. Pledgor releases Citicorp from
any claims, causes or actions and demands at any time arising out of
or with respect to this Agreement, the use or disposition of the
Certificate or any action taken or omitted to be taken by Citicorp
with respect thereto, and Pledgor hereby agrees to hold Citicorp
harmless from and with respect to any and all claims, causes of
action and demands.
6. The obligation of Pledgor hereunder shall be absolute and
unconditional irrespective of: (i) any lack of validity or
enforceability of the Obligations, the Agreements or instrument
relating thereto: (ii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the Obligations or
any other amendment or waiver of or any consent to departure from any
agreement or instrument relating to the Obligations; (iii) any other
circumstance which might otherwise constitute a defense available to,
or a discharge of, Pledgor, as the Obligor of the Obligations, except
those defenses available to Pledgor as Lessee; or (iv) any law,
regulation or order now or hereafter in effect in any jurisdiction
affecting any of the terms or the rights of Citicorp with respect tot
the Obligations, the Agreements or any instrument relating thereto.
7. This Agreement shall continue to be effective or be reinstated, as
the case may be, if at any time any payment of any of the Obligations
is rescinded or must otherwise be returned by Citicorp upon the
insolvency, bankruptcy or reorganization of Pledgor or otherwise, all
as though such payment had not bee made.
8. Upon any default in the payment or performance of any Obligation, or
the breach of any representation or covenant contained in the
Agreements or this Agreement, Citicorp may, without regard to any
premium or penalty which may result from liquidation of the
Certificate prior to maturity; (iii) surrender the Certificate to the
Issuing Bank upon five days' notice by certified mail to Pledgor, and
demand, collect, and receive payment of any mail to Pledgor, and
demand, collect, and receive payment of any and all monies or
proceeds due or to become due under the Certificate or any part
thereof; (ii) hold any
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<PAGE> 11
and all monies or proceeds representing the Certificate in a cash
collateral account or invest such monies or proceeds as Citicorp may
deem appropriate and/or (iii) apply all or any portion of the
Certificate, in its sole discretion, first, to all costs and
expenses including without limitation, attorneys' fees) of Citicorp
in enforcing its rights and pursuing its remedies hereunder, second,
to the payment of on the Obligations, and any fees or commissions to
which Citicorp may be entitled, and third, to Pledgor or whosoever
may be entitled thereto. The rights, powers and remedies granted to
Citicorp herein shall be cumulative and in addition to any rights,
powers and remedies to which Citicorp may be entitled either by
operation of law or pursuant to any other document or instrument
delivered or from time to time to be delivered to Citicorp in
connection with Obligations.
9. At such time as Pledgor shall have fulfilled and satisfied all of
the Obligations, this Agreement shall be terminated; otherwise and
if not, this Agreement shall remain in full force and effect. Upon
such complete fulfillment and satisfaction, and provided that no
default specified in Paragraph 8 above shall have occurred, Citicorp
shall release and deliver the Certificate to Pledgor.
10. As long as the Pledgor is not in default as defined in Section 8,
interest shall accrue in favor of Pledgor. Pledgor shall direct the
Issuing Bank to reinvest interest accruing on the Certificate or to
follow such instructions regarding the disbursal of interest as
Pledgor, with the written consent of Citicorp, may from time to time
direct.
11. If any Certificate, whether original or a Substitute Certificate (as
defined below), shall mature prior to the payment in full of the
Obligations and provided Pledgor is not then in default under the
Agreements of this Agreement, Citicorp shall, upon the maturity of
the Certificate, endorse same in the name of Pledgor and deliver the
Certificate tot the Issuing Bank for collection. Citicorp shall then
immediately purchase a new Certificate of Deposit. ("Substitute
Certificate") from the Issuing Bank or such other bank as Pledgor
shall direct (with the written consent of Citicorp) in an amount
equal to the principal of and interest accrued on the Certificate
surrendered, and with a maturity not in excess of 180 days. Citicorp
shall hold such Substitute Certificate pursuant to this Agreement,
and any Substitute Certificate shall be deemed to be a "Certificate"
for all purposes hereunder. If taxes are imposed upon the interest
received from a Certificate, Pledgor shall pay such taxes or, of at
the option of Citicorp, Citicorp elects to pay such taxes, Pledgor
shall promptly reimburse Citicorp for any amounts so paid by
Citicorp.
12. If any penalty involving loss of forfeiture of interest is incurred
or assessed by the Issuing Bank because of the redemption of a
Certificate prior to its
11
<PAGE> 12
maturity, Pledgor shall promptly indemnify Citicorp to the extend of
the interest so forfeited or lost because of premature redemption.
13. The issuing Bank hereby waives any rights of setoff, counterclaim,
statement or reduction it may have against Pledgor in respect of the
Certificate.
14. Pledgor, upon written direction from Citicorp and at Pledgor's own
expense, shall do all further acts and execute, acknowledge and
deliver all deeds, conveyances, transfers, instruments, assurances
and other documents reasonably necessary or proper for the better
pledging, assuring, conveying, assigning and confirming to Citicorp
the Certificate.
15. To accomplish the purposes of this Agreement, Pledgor does hereby
name and appoint Citicorp as its attorney in fact, with full power
to endorse and deliver for collection any Certificate at any time
held by Citicorp as its attorney in fact, with full power to endorse
and deliver for collection any Certificate at any time held by
Citicorp in the name of Pledgor and to purchase new Certificates in
the name of Pledgor and to sign all checks, drafts or other orders
representing the proceeds of such Certificated cashed, and to take
any action set forth in Paragraph 5 above, all with the same force
and effect as if the same had been done by Pledgor. Pledgor also
agrees to execute any and all documents, including but not limited
to, any Uniform Commercial Code financing statements, as Citicorp
may reasonably request to effectuate the intent of this Agreement or
to further secure the pledge accomplished herein.
16. This Agreement shall be governed by and construed in accordance with
the laws of the State of New York and applicable federal law.
Pledgor hereby consents to the non-exclusive jurisdiction of the
state and federal courts sitting in the State of New York, and
agrees that in the event of dispute hereunder, suit may be brought
against Pledgor in such courts or in any other jurisdiction where
Pledgor or any of its assets may be found, and Pledgor hereby
irrevocably submits to the jurisdiction of such courts. Pledgor
irrevocably submits to the service of any and all process in such
action or proceeding by the mailing of copies of such process of
Pledgor at its address specified above.
17. Pledgor hereby waives any and every right to a trial by jury in any
action of related to this Agreement, the Obligations or the
enforcement of either or all of the same, and does further expressly
waive any and every right to interpose any counterclaim in any such
action or proceeding.
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<PAGE> 13
18. This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, each of which
when so executed and delivered shall be deemed to be an original and
all of which taken together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have set their hands and seals as
of the day and the year above written.
CITICORP
By: /s/ PATRICK RYLEE By: /s/ JOANNE LE
Title: President Title: Acquisition Manager
PLEDGE AGREED AND ACKNOWLEDGED:
Issuing Bank: CITIBANK FSB
By: /s/ LUIZ L.D. SOUZA
Title: FCEUP
13
<PAGE> 14
IBM
Assignment of Machines
User
Name NETSTAFF INC.
Address 168 South Park
City, State Zip San Francisco, CA 94107
Purchaser
Name CITICORP LEASING
Address 450 Mamaroneck Avenue
City, State Zip Harrison, NY 10528
User's Installation Address
Name NETSTAFF INC.
Address 168 South Park
City, State Zip San Francisco, CA 94107
The User, the Purchasers, and International Business Machines
Corporation *IBM) agree to the following terms (called the
"Assignment'). Under this Assignment, the User assigns to the Purchaser,
the User's right to purchase from IBM the Machine(s) listed below. By
signing below for our respective enterprises, each of us agrees to the
terms of this Assignment. Once signed, any reproduction of this
Assignment made by reliable means (for example, photocopy or facsimile)
is considered an original.
<TABLE>
<CAPTION>
Sales Order Purchase Order Invoice Quantity Model #
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
</TABLE>
If the Purchaser defaults on payment to IBM for the above product, than
the User is responsible for payment.
User's signature/title /s/ DAVE M. DAVIS, CFO
Purchaser's signature/title
IBM's signature/title
14
<PAGE> 1
EXHIBIT 10.3
INDEPENDENT CONTRACTOR AGREEMENT
This Independent Contractor Agreement (the "Agreement") is made and
entered into as of December 1, 1999, by and between NetStaff, Inc., having an
office at 168 South Park, San Francisco, CA 94107 (the "Company"), and
Millennium 3 Design ("Independent Contractor").
The Company desires to retain Independent Contractor as an independent
contractor to perform certain services for the Company and Independent
Contractor is willing to perform such services, on terms set forth more fully
below.
In consideration of the mutual promises contained herein, the parties
agree as follows:
1. SERVICES AND COMPENSATION
(a) Independent Contractor agrees to perform corporate image design
and development services for the Company.
(b) As compensation for such services, the Company agrees to pay
Independent Contractor an aggregate fee of $90,000.00 per year,
by paying $7500 per month, at the beginning of each month, for
twelve (12) months, commencing December 1, 1999, upon
presentation of an invoice from Independent Contractor. In
addition, Independent Contractor shall be entitled to
reimbursement on a monthly basis of out-of-pocket expenses
incurred during the course of its performance of the aforesaid
services upon presentation of an itemized invoice for such
expenses.
2. CONFIDENTIALITY
(a) "Confidential Information" means any Company proprietary
information, technical data, trade secrets or know-how, including, but not
limited to, research, business, product and service plans, products, services,
customers, customer lists, markets, strategy, software, developments,
inventions, processes, formulas, technology, designs, drawings, engineering,
hardware configuration information, marketing, finances or other business
information disclosed by the Company either directly or indirectly in writing,
orally or by drawings or inspection of parts, offices, documents or equipment.
(b) Independent Contractor will not, during or subsequent to the term of
this Agreement, use Confidential Information for any purpose whatsoever other
than in the performance of the Services on behalf of the Company or disclose
Confidential Information to any third party.
(c) It is understood that said Confidential Information shall remain the
sole property of the Company.
(d) Independent Contractor further agrees to take all reasonable
precautions to prevent any unauthorized disclosure of such Confidential
Information including, but not limited to, having each employee of Independent
Contractor, if any, with access to any Confidential Information, execute a
nondisclosure agreement containing provisions in the Company's favor identical
to Sections 2, 3 and 5 of this Agreement.
(e) Confidential Information does not include information which (i) is
known to Independent Contractor at the time of disclosure to Independent
Contractor by the Company as evidenced by written records of Independent
Contractor, (ii) has become publicly known and made generally available through
no wrongful act of Independent Contractor, or (iii) has been rightfully received
by Independent Contractor from a third party who is authorized to make such
disclosure.
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<PAGE> 2
(f) Without the Company's prior written approval, Independent Contractor
will not, directly or indirectly, disclose to anyone the existence of this
Agreement or the fact that Independent Contractor has this arrangement or
business relationship with the Company.
(g) Independent Contractor agrees that Independent Contractor will not,
during the term of this Agreement, improperly use or disclose any proprietary
information or trade secrets of any former or current employer or other person
or entity with which Independent Contractor has an agreement or duty to keep in
confidence information acquired by Independent Contractor, if any, and that
Independent Contractor will not bring onto the premises of the Company any
unpublished document or proprietary information belonging to such employer,
person or entity, unless consented to in writing by such employer, person or
entity. Independent Contractor will indemnify the Company and hold it harmless
from and against all claims, liabilities, damages and expenses, including
reasonable attorneys fees and costs of suit, arising out of or in connection
with any violation or claimed violation of a third party's rights resulting, in
whole or in part, from the Company's use of the work product of Independent
Contractor under this Agreement.
(h) Independent Contractor recognizes that the Company has received and
in the future will receive from third parties their confidential or proprietary
information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. Independent Contractor agrees that Independent Contractor owes the
Company and such third parties, during the term of this Agreement and
thereafter, a duty to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out the Services for
the Company consistent with the Company's agreement with such third party.
(i) Upon the termination of this Agreement, or upon Company's earlier
request, Independent Contractor will deliver to the Company all of the Company's
property or Confidential Information that Independent Contractor may have in
Independent Contractor's possession or control.
3. OWNERSHIP
(a) Independent Contractor agrees that all ideas, material, notes,
records, drawings, designs, inventions, improvements, developments, discoveries
and trade secrets (collectively, "Inventions") conceived, made or discovered by
Independent Contractor, solely or in collaboration with others, during the
period of this Agreement which relate in any manner to the business of the
Company that Independent Contractor may be directed to undertake, investigate or
experiment with, or which Independent Contractor may become associated with in
work, investigation or experimentation in the line of business of the Company in
performing the Services hereunder, are the sole property of the Company. In
addition, any Inventions which constitute copyrightable subject matter shall be
considered "works made for hire" as that term is defined in the United States
Copyright Act. Independent Contractor further agrees to assign (or cause to be
assigned) and does hereby assign fully to the Company all Inventions and any
copyrights, trademarks, patents, mask work rights or other intellectual property
rights relating thereto.
(b) Independent Contractor agrees to assist Company, or its designee, at
the Company's expense, in every proper way to secure the Company's rights in the
Inventions and any trademarks, copyrights, patents, mask work rights or other
intellectual property rights relating thereto in any and all countries,
including the disclosure to the Company of all pertinent information and data
with respect thereto, the execution of all applications, specifications, oaths,
assignments and all other instruments which the Company shall deem necessary in
order to apply for and obtain such rights and in order to assign and convey to
the Company, its successors, assigns and nominees the sole and exclusive right,
title and interest in and to such Inventions, and any trademarks, copyrights,
patents, mask work rights or other intellectual property rights relating
thereto. Independent Contractor further agrees that Independent Contractor's
obligation to execute or cause to be executed, when it is in Independent
Contractor's power to do so, any such instrument or papers shall continue after
the termination of this Agreement.
(c) Independent Contractor agrees that, if in the course of performing
the Services,
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<PAGE> 3
Independent Contractor incorporates into any Invention developed hereunder any
invention, improvement, development, concept, discovery or other proprietary
information owned by Independent Contractor or in which Independent Contractor
has an interest, the Company is hereby granted and shall have a nonexclusive,
royalty-free, perpetual, irrevocable, worldwide license to make, have made,
modify, use and sell such item as part of or in connection with such Invention.
(d) Independent Contractor agrees that if the Company is unable because
of Independent Contractor's unavailability, dissolution, mental or physical
incapacity, or for any other reason, to secure Independent Contractor's
signature to apply for or to pursue any application for any United States or
foreign trademarks, patents or mask work, or copyright registrations covering
the Inventions assigned to the Company above, then Independent Contractor hereby
irrevocably designates and appoints the Company and its duly authorized officers
and agents as Independent Contractor's agent and attorney in fact, to act for
and in Independent Contractor's behalf and stead to execute and file any such
applications and to do all other lawfully permitted acts to further the
prosecution and issuance of trademarks, patents, copyright and mask work
registrations thereon with the same legal force and effect as if executed by
Independent Contractor.
4. REPORTS
Independent Contractor agrees that it will from time to time during the
term of this Agreement, or any extension thereof, keep the Company advised as to
Independent Contractor's progress in performing the Services hereunder and that
Independent Contractor will, as requested by the Company, prepare written
reports with respect thereto. It is understood that the time required in the
preparation of such written reports shall be considered time devoted to the
performance of Independent Contractor's Services.
5. CONFLICTING OBLIGATIONS
(a) Independent Contractor certifies that Independent Contractor has no
outstanding agreement or obligation that is in conflict with any of the
provisions of this Agreement, or that would preclude Independent Contractor from
complying with the provisions hereof, and further certifies that Independent
Contractor will not enter into any such conflicting Agreement during the term of
this Agreement.
(b) In view of Independent Contractor's access to the Company's trade
secrets and proprietary know-how, Independent Contractor further agrees that
Independent Contractor will not, without Company's prior written consent, design
identical or substantially similar designs as those developed under this
Agreement for any third party during the term of this Agreement and for a period
of twelve (12) months after the termination of this Agreement.
6. TERM AND TERMINATION
(a) This Agreement will commence on the date set forth above and will
continue for a term of one (1) year or until termination as provided below.
(b) The Company may terminate this Agreement at any time, with or
without cause, upon giving written notice thereof to Independent Contractor. Any
such notice shall be addressed to Independent Contractor at the address shown
below or such other address as either party may notify the other of and shall be
deemed given upon delivery, if personally delivered, or forty-eight (48) hours
after deposited in the United States mail, postage prepaid, registered or
certified mail, return receipt requested. The Company may terminate this
Agreement immediately and without prior notice if Independent Contractor refuses
to or is unable to perform the Services or is in breach of any material
provision of this Agreement.
(c) Upon such termination, all rights and duties of the parties toward
each other shall cease except:
3
<PAGE> 4
(i) that the Company shall be obliged to pay, within thirty (30)
days of the effective date of termination, the balance of the fee that remains
owing to Independent Contractor for the full term of this Agreement; and
(ii) Sections 2 (Confidentiality), 3 (Ownership), 5 (b)
(Conflicting Obligations, 8 (Independent Contractors) and 9 (Arbitration and
Equitable Relief) shall survive termination of this Agreement.
7. ASSIGNMENT
Neither this Agreement nor any right hereunder or interest herein may be
assigned or transferred by Independent Contractor without the express written
consent of the Company.
8. INDEPENDENT CONTRACTOR
(a) Nothing in this Agreement shall in any way be construed to
constitute Independent Contractor as an agent, employee or representative of the
Company. Independent Contractor shall perform the Services hereunder as an
independent contractor. Independent Contractor agrees to furnish (or reimburse
the Company for) all tools and materials necessary to accomplish this contract,
and shall incur all expenses associated with its performance.
(b) Independent Contractor acknowledges and agrees that Independent
Contractor is obligated to report as income all compensation received by
Independent Contractor, pursuant to this Agreement, and Independent Contractor
agrees to and acknowledges the obligation to pay all self-employment and other
taxes thereon. Independent Contractor further agrees to indemnify the Company
and hold it harmless to the extent of any obligation imposed on the Company (i)
to pay in withholding taxes or similar items or (ii) resulting from Independent
Contractor's being determined not to be an independent contractor.
(c) Independent Contractor acknowledges that a portion of the work to be
performed by the Company involves or may involve physical risk. Independent
Contractor hereby releases and will hold harmless the Company from any physical
harm that it or any of its employees suffers as a result of Independent
Contractors performance under this Agreement. Independent Contractor also
acknowledges that it has sufficient medical benefits and insurance covering all
of its employees.
9. ARBITRATION AND EQUITABLE RELIEF
(a) Except as provided in Section 9(b) below, the Company and
Independent Contractor agree that any dispute or controversy arising out of or
relating to any interpretation, construction, performance or breach of this
Agreement, shall be settled by arbitration to be held in San Francisco County,
California, in accordance with the rules then in effect of the American
Arbitration Association. The arbitrator may grant injunctions or other relief in
such dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court of competent jurisdiction. The
Company and Independent Contractor shall each pay one-half of the costs and
expenses of such arbitration, and each shall separately pay its respective
counsel fees and expenses.
(b) Independent Contractor agrees that it would be impossible or
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in Sections 2 or 3 herein. Accordingly, Independent
Contractor agrees that if Independent Contractor breaches Sections 2 or 3, the
Company will have available, in addition to any other right or remedy available,
the right to obtain from any court of competent jurisdiction an injunction
restraining such breach or threatened breach and specific performance of any
such provision. Independent Contractor further agrees that no bond or other
security shall be required in obtaining such equitable relief and Independent
Contractor hereby consents to the issuances of such injunction and to the
ordering of such specific performance.
4
<PAGE> 5
10. GOVERNING LAW
This Agreement shall be governed by the laws of the State of California.
11. ENTIRE AGREEMENT
This Agreement is the entire agreement of the parties and supersedes any
prior agreements between them with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
MILLENNIUM 3 DESIGN
By: /s/ COLIN CHILDERLEY
----------------------------
Name: Colin Childerley
---------------------------
Title: Owner
--------------------------
NETSTAFF, INC.
By: /s/ PATRICK RYLEE
-----------------------------
Name: Patrick Rylee
--------------------------
Title: President
-------------------------
5
<PAGE> 1
EXHIBIT 10.4
LICENSE AGREEMENT
THIS AGREEMENT made the 21st day of September, 1999.
BETWEEN:
NETSTAFF, INC.
(herein called "Licensor")
OF THE FIRST PART
AND:
COMMODORE SALES CORP.
(herein called "Licensee")
OF THE SECOND PART
WHEREAS:
A. The Licensor is the legal and beneficial owner of rights in certain computer
software programs, related documentation and know-how which facilitate the
operation of a multiple listing service for the professional staffing industry
over an electronic computer network (the "Rights");
B. The Licensor has agreed to grant to the Licensee a non-transferable,
non-sublicensable limited license for a term of Ten (10) years of the Rights for
the purposes of exploiting same for commercial purposes to be agreed upon within
South Africa exclusively (the "License").
NOW THEREFORE in consideration of the premises, covenants and obligations
contained herein and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by both of the parties, the parties
hereby agree as follows:
1. GRANT OF LICENSE
1.1 Licensor hereby agrees to grant to the Licensee the License on the terms
and conditions detailed herein.
<PAGE> 2
-2-
2. OBLIGATIONS OF LICENSEE
2.1 The consideration payable by the Licensee for the License is the gross sum
of Two Million Dollars (US $2,000,000) payable in installments as to:
2.2 $1,000,000 on December 30, 1999; $500,000 twenty days thereafter and the
balance of the gross sum less any expenses, forty five days thereafter, subject
to fulfilment of terms in Schedule "A" hereto. Should the terms in Schedule "A"
not be fulfilled within such time periods, both parties shall mutually agree in
writing to extend the date for fulfilment of terms in Schedule "A" hereto in
which event payment of any such installments shall also be postponed for
delivery on the next day's date(s) after the fulfilment of such terms.
2.3 In furtherance of its obligations in respect of the License, the License
will keep confidential all proprietary information in respect of the Rights to
which it becomes privy as a result of the granting of the License.
2.4 The Licensee's exploitation of the Rights shall be of the highest standard
and of such style, appearance, distinctiveness and quality as to protect and
enhance the prestige of Licensor, the Rights, and the goodwill pertaining
thereto. All aspects of Licensee's planned exploitation of the Rights shall be
subject to the prior written approval of the Licensor. Licensee shall be
responsible for any and all fees, disbursements and expenses incurred in respect
of exploiting the Rights in South Africa.
3. OWNERSHIP AND PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
3.1 As between the Licensor and the Licensee, the Licensor will continue to be
the sole legal and beneficial owner of the Rights, subject to the License
granted herein, and the Licensee agrees and acknowledges this.
3.2 Any materials created by or for Licensee or any parent, subsidiary or
affiliate of Licensee, relating to or embodying any of the Rights, including
without limitation, designs, computer software, derivations, artwork, or
otherwise shall be deemed to be works made for hire for Licensor under U. S.
copyright law. In the event any portion of such materials is not deemed not to
be a work made for hire, Licensee hereby assigns to Licensor all worldwide
right, title and interest in that material, including without limitation, all
proprietary rights (such as copyright and trademarks) together with the goodwill
derived from the use of those materials. Licensee hereby waives its "moral
rights" or similar rights to any materials created by it under this agreement.
3.3 Licensee covenants that all goodwill associated with any trademarks relating
to the Rights shall inure directly and exclusively to the benefit of Licensor.
All trademarks and service marks which, and/or the right to use which, arise out
of the license granted under this Agreement shall be and remain the sole
property of Licensor. Licensee shall not at any time acquire or claim any right,
title or interest in such trademarks or service marks other than the limited
license expressly granted. All right, title or interest in such trademarks and
service marks that come into existence as a result, or during the term of, of
the exercise by Licensee of any right granted to it hereunder shall immediately
vest in Licensor.
4. WARRANTIES AND REPRESENTATIONS OF THE LICENSOR
4.1 The Licensor hereby represents and warrants to the Licensee, and
acknowledges that the Licensee is relying thereon in entering into this
Agreement, as follows:
(a) the Licensor is the legal and beneficial owner of the Rights;
(b) the Licensor has the full right and authority and has taken all
necessary corporate steps and has obtained all consents and
approvals required to grant the License set out herein to the
Licensee; and
<PAGE> 3
-3-
(c) the Licensor has not previously sold, assigned, transferred,
encumbered, mortgaged, charged, pledge as security, or otherwise
disposed of any of its interest in and to the Rights nor has it
granted an option to any other party to acquire any interest in
and to the Rights so as to impair the grant of the License
herein.
4.2 Licensee represents and warrants to the Licensor, and acknowledges that the
Licensor is relying thereon in entering this Agreement as follows:
(a) the Licensee is duly incorporated, valid and existing and in
good standing under the laws of the jurisdiction in which it was
incorporated;
(b) the Licensee has the full right, power, legal capacity and
authority to enter into this Agreement, to carry out its terms,
and to receive the Rights, license and privileges granted in this
Agreement; and
(C) the Licensee has not and will not, assign, transfer, lease,
convey or grant a security interest in or otherwise similarly
dispose of the Rights, the License or any related materials.
5 INDEMNIFICATION
5.1 To the extent and in the amount that Licensor shall have received any
amounts from Licensee, the Licensor will defend, indemnify and hold harmless the
Licensee and its officers, employees and agents from and against all damages,
costs, liabilities, expenses, judgments, actions, demands, debts, commercial
losses and claims suffered or incurred by such persons, including reasonable
legal fees and disbursements as a result of any breach or default by the
Licensor of its representations, warranties, covenants, obligations and
agreements in this Agreement.
5.2 Licensee will protect, indemnify and hold harmless Licensor and its
officers, employees and agents from and against all damages, costs, liabilities,
expenses, judgments, actions, demands, debts, commercial losses and claims
suffered or incurred by such persons, including reasonable legal fees and
disbursements as a result of any breach or default by the Licensee of its
representations, warranties, covenants, obligations or agreements contained in
this Agreement.
6. TERM AND TERMINATION
6.1 The term of this Agreement will commence on the Effective Date and will
remain in effect for a term of 10 years unless earlier terminated as set forth
herein.
6.2 Licensor may terminate this Agreement at any time in the event that (a)
either Licensee is in material breach of its obligations under this agreement
and (b) that material breach continues unremedied for a cure period of thirty
(30) days after written notice of that breach is sent by Licensor. Moreover,
either party may terminate this Agreement after the Effective Date upon thirty
(30) days written notice for any reason whatsoever.
6.3. This Agreement shall immediately terminate with respect to Licensee,
without the requirement of any notice from Licensor, upon the occurrence of any
of the following:
a. if Licensee shall file a petition in bankruptcy or
make an assignment for the benefit of creditors, or if any bankruptcy proceeding
or assignment for the benefit of creditors shall be commenced against Licensee
and not be dismissed within sixty (60) days after the date of its commencement;
b. the insolvency of Licensee
<PAGE> 4
-4-
c. the cessation by Licensee of a substantial portion of
its business;
d. any act by Licensee or any agent which Licensor
reasonably believes is in violation of the Foreign Corrupt Practices Act (15
USCS 7dd-1), as amended from time to time; or
e. if Licensee intentionally permits any Rights to be
used illegally or outside the terms of this Agreement, including, without
limitation, using, reselling or exporting the Rights outside South Africa.
6.4. This Agreement shall immediately terminate, without the right to cure and
without notice from Licensor, in the event of any unauthorized use of the
Rights.
6.5 Upon the expiration or the termination of this Agreement, all rights granted
to Licensee shall terminate and revert to Licensor. Licensee shall execute all
instruments reasonably required to confirm that reversion of rights and
termination of this Agreement.
6.6. Upon expiration or earlier termination of the this Agreement, Licensor
shall immediately cease further exercise of any Rights and/or License granted
hereunder.
7. GENERAL
7.1 Except as herein otherwise provided, no subsequent alteration, amendment,
change, or addition to this Agreement will be binding upon the parties unless
reduced to writing and signed by the parties.
7.2 This Agreement represents the entire agreement of the parties with respect
to the subject matter referred to herein and there are no representations,
warranties, collateral agreements, or conditions except as herein specified.
7.3 The parties will execute and deliver all such further documents, do or cause
to be done all such further acts and things, and give all such further
assurances as may be necessary to give full effect to the provisions and intent
of this Agreement.
7.4 This Agreement will be governed by and construed exclusively in accordance
with the laws of the State of California without regard or application of its
conflicts or choice of law provisions.
7.5 This Agreement will inure to the benefit of and be binding upon the parties
and their respective successors and permitted assigns. Licensee shall not assign
this Agreement or any of its rights, licenses or privileges, without the prior
written permission and consent of Licensor. Licensor may assign this Agreement
without restriction.
7.6 If any covenant or other provision of this Agreement is invalid, illegal, or
incapable of being enforced by reason of any rule of law or public policy, then
such covenant or other provision will be severed from and will not affect any
other provision of this Agreement, and this Agreement will be construed as if
such invalid, illegal, or unenforceable provision had never been contained in
this Agreement. All other conditions and provisions of this Agreement will,
nevertheless, remain in full force and effect and no covenant or provision will
be deemed dependent upon any other covenant or provision unless so expressed
herein.
7.7 No waiver of any of the provisions of this Agreement by either party will
constitute a waiver of any other provision (whether or not similar), nor will
any waiver constitute a continuing waiver unless otherwise expressly agreed in
writing.
7.8 The Licensor and the Licensee will comply with all applicable laws, rules
and regulations of competent public authorities relating to their respective
covenants and obligations under this Agreement and will procure all applicable
licences and will pay all fees and other charges required thereby.
<PAGE> 5
-5-
7.9 Nothing contained herein will be deemed or construed to create between the
parties a partnership, joint venture or relationship of principal and agent or
employer and employee. Neither party will have the authority to act on behalf of
the other party or to commit the other party in any manner or cause whatsoever
or to use the other party's name in any way not specifically authorized by this
Agreement. Neither party will be liable for any act, omission, representation,
warranty, obligation or debt of the other party even if informed of such act,
omission, representation, warranty, obligation or debt.
7.10 Neither party shall be liable to the other for any loss, damage or default
occasioned by strike, civil disorder, governmental decree or regulation, acts of
God or any other force majeure. Notwithstanding the event of a force majeure,
all payments due to Licensor hereunder shall continue to be due and owing.
7.11 The section headings used in this agreement are for convenience only and
shall have no legal effect whatever.
7.12 Where appropriate in context throughout this agreement, the use of the
singular shall include the plural, any shall include all, and the disjunctive
shall include the conjunctive, and vice versa.
7.13 This agreement may be executed in several counterparts, each of which will
be deemed to be an original, and each of which alone and all of which together,
shall constitute one and the same instrument. This agreement may be transmitted
by facsimile, and it is the intent of the parties for the facsimile of any
signature printed by a receiving facsimile machine to be an original signature
and for the facsimile and any complete photocopy of the agreement to be deemed
an original counterpart.
IN WITNESS WHEREOF the parties have caused this Agreement to be
executed and delivered, to have effect as of the Effective Date.
NETSTAFF, INC.
BY: /S/ PATRICK RYLEE
TITLE: PRESIDENT, CEO
COMMODORE SALES CORP.
BY: /S/ DAVID GUEVARA
Title: President
<PAGE> 6
-6-
SCHEDULE "A"
Two days prior to the due payment date of the second instalment of license fee
of US$500,000, the Licensor shall produce a report to the Licensee demonstrating
the effectiveness of the MLS system used in US by providing a list of staffing
companies or corporations registered with NetStaff as members of the MLS
service, which list of staffing companies or corporations should be a minimum
number of Forty (40).
Two days prior to the due payment date of the third and final instalment of
license fee of the net balance (US$2,000,000 gross sum less agreed upon
expenses), the Licensor shall produce a report to the Licensee of a list of
staffing companies or corporations registered with NetStaff as members of the
MLS service, which list of staffing companies or corporations should be a
minimum number of One Hundred (100).
Any and all interest accruing on the above-said amounts pending Licensor's
fulfillment of the terms set forth above, shall belong exclusively to, and shall
be deemed to be the property of, NetStaff and shall be payable at the same time
that each of the principal installments is paid.
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 10.5
NETSTAFF, INC. STAFFING COMPANY AGREEMENT
This Agreement as of sets forth the agreement between NetStaff, Inc.
("NetStaff") and ________________________________ (the "Staffing Company")
whereby the Staffing Company will provide qualified candidates for employment
for placement on the NetStaff MLS database on the Internet.
DUTIES OF NETSTAFF. In consideration of the covenants contained herein, NetStaff
agrees to display on its NetStaff MLS database of qualified candidates (the
"Service") those candidates provided by the Staffing Company (the "Candidates",
each a "Candidate"). NetStaff shall display the information regarding each
Candidate provided by the Staffing Company electronically by remote,
password-protected access by the Staffing Company to the Service set forth (the
"Selected Information") on the Service for the earlier of (i) a term of ninety
(90) days, which days need not be successive and which term shall automatically
terminate unless either NetStaff or the Staffing Company provide notice of
renewal, (ii) the receipt by NetStaff of notice that the Candidate has accepted
a job assignment with any company, organization or enterprise which located such
Candidate through the Service (a "Hiring Company") or otherwise, (iii) the
election by NetStaff to remove any candidate from display on the Service, which
election shall be at the sole discretion of NetStaff. Further, NetStaff agrees
to provide Staffing Company a password (the "Password") through which Staffing
Company may access the Services for the sole and exclusive purpose of remotely
providing Candidates for the System and the administration of those records.
DUTIES OF STAFFING COMPANY. Staffing Company agrees: (i) to provide the
Candidates to NetStaff, (ii) to pay to NetStaff, the fee of 5% of the
Candidate's annual salary for a permanent hire; and a fee of 3% of the bill
rate up to one year of service for temporary or contract hire, after the
Candidate begins the assignment (the "NetStaff Fee"), which NetStaff Fee shall
not be reduced or otherwise affected by any agreement between the Staffing
Company and any third party; and (iii) to use its best efforts to interview and
screen each Candidate and to verify the Selected Information. NetStaff billing
for permanent hires will be issued upon candidates hire date; temporary or
contract hires will be billed on a weekly basis. Invoices are payable upon
receipt. If the candidate you place does not work out and you need to refund the
placement fee, NetStaff will credit (or refund if paid) the fee NetStaff
billed.
CONFIDENTIALITY. NetStaff agrees to use reasonable efforts to maintain the
confidentiality of each Candidate's name, address, telephone number, facsimile
number, electronic mail address as well as the Password. Furthermore, NetStaff
agrees not to directly market any Candidate for placement with any Hiring
Company except as provided in this Agreement.
INDEMNIFICATION. Staffing Company shall indemnify and hold harmless, NetStaff
for any claims related to or arising from any Candidate misrepresentations or
any act or omission by the Candidate in the course of the Candidate's employment
with the Hiring Company.
VERIFICATION RIGHT. Staffing Company shall keep accurate records related to the
employment of the Qualified Candidates. NetStaff shall retain the right to
review the records of the Staffing Company (either by its own act or by
engagement of an independent party selected by NetStaff in its sole discretion)
to ensure that Staffing Company has complied with its obligation to pay NetStaff
the NetStaff fee. In the event that any underpayment is revealed by such review,
Staffing Company shall immediately pay NetStaff the amount of underpayment, as
well as the costs of such verification.
GENERAL PROVISIONS. General Provisions in Exhibit "A" attached hereto constitute
one and the same of this instrument.
COUNTERPARTS. This Agreement may be executed in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.
IN WITNESS WHEREOF, the duly authorized representatives of each of the parties
hereto have executed this Agreement as of the day and year first written above.
The Staffing Company has the power and authority to enter into this Agreement to
fully perform its obligations hereunder, and that the execution of this
Agreement does not violate any agreement between Staffing Company and any
individual or entity. Staffing Company agrees to use reasonable efforts to keep
its Password secure and confidential. Any failure of Staffing Company to
successfully maintain the security and confidentiality of the Password shall be
the sole responsibility of Staffing Company. Staffing Company's obligations
hereunder attach irrespective of payment of any fee to Staffing Company by
Hiring Company.
<PAGE> 2
TERMINATION Either party may terminate this Agreement at any time, with written
notice to the other. In the event of termination, NetStaff shall, as soon as
practicably possible, remove the Candidates from the Service. The obligation of
the Staffing Company to pay any NetStaff Fee shall survive termination as will
the verification review right provided above.
ENTIRETY OF AGREEMENT This Agreement constitutes the complete understanding and
agreement between NetStaff and the Staffing Company with respect to the
transactions contemplated, and supersedes any and all prior or contemporaneous
oral or written representation, understanding, agreement or communication
between NetStaff and Staffing Company concerning the subject matter hereof.
Neither party is relying upon any warranties, representations, assurances or
inducements not expressly set forth herein.
NOTICES All notices which either party is required or may desire to serve upon
the other party shall be in writing and addressed to the party to be served as
follows:
NETSTAFF, INC. STAFFING COMPANY:
----------------------------------
168 South Park Address:
-------------------------------------------
San Francisco CA 94107 City/ST/ZIP:
---------------------------------------
Telephone: (415) 908-1000 Telephone:
-----------------------------------------
Facsimile: (415) 908-1010 Facsimile:
-----------------------------------------
Email: [email protected] Email:
---------------------------------------------
All amendments or modifications of this Agreement shall be binding upon the
parties so long as the same shall be in writing and executed by each of the
parties hereto. It is expressly understood and agreed that no usage of trade or
other regular practice or method of dealing between the parties hereto shall be
used to modify, interpret, supplement or alter in any manner the express terms
of this Agreement or any part hereof.
Nothing in this Agreement is intended or shall be construed to give any person,
other than the parties hereto, any legal or equitable right, remedy, or claim
under or in respect of this Agreement or any provision contained herein.
This Agreement and the Staffing Company's rights, duties and obligations
hereunder are personal to the Staffing Company and may not be assigned,
delegated or otherwise transferred by the Staffing Company, or by operation of
law, without the prior written consent of NetStaff, which consent may be granted
or withheld by NetStaff in its sole discretion. NetStaff may assign its rights,
duties and obligations to any successor for substantially all of NetStaff's
business.
This Agreement shall be governed by the laws of the State of California
applicable to contracts entered into and to be performed entirely within the
State of California.
NETSTAFF, INC. STAFFING COMPANY
By: By:
----------------------------- --------------------------------
Print Name: Print Name:
--------------------- ------------------------
Title: Title:
-------------------------- -----------------------------
2/29/00
<PAGE> 1
Exhibit 10.6
[Letterhead of NetStaff, Inc.]
December 2, 1999
Golden Horde Investments Ltd.
800-999 west Broadway
Vancouver, British Columbia
V5Z 1K5
Canada
Attention: Mr. Clive Bird
Re: Assignment of Promissory Notes
Dear Sirs:
This letter will serve to set forth and confirm our agreement whereby, as of
even date herewith, NetStaff, Inc. ("NetStaff') assigns to Golden Horde
Investments Ltd. ("Golden Horde"), and Golden Horde hereby accepts such
assignment and agrees to assume the obligations of NetStaff with respect to, the
following Promissory Notes, a copy of which are attached hereto for reference:
1. Promissory note, dated July 26, 1999, issued to Lori Hoffer for the sum of
$25,000, plus twelve percent interest per annum, due April 25, 2000;
2. Promissory note, dated July 26, 1999, issued to Wayne Sanders and Bette
Sanders, jointly, for the sum of $50,000, plus twelve percent interest per
annum, due April 25, 2000; and
3. Promissory note, dated June 16, 1999, issued to Sherrin Lim for the sum of
$25,000, plus twelve percent interest per annum, due on March 21, 2000.
In consideration of your accepting this assignment and assuming the repayment
obligations of NetStaff under the aforesaid Promissory Notes, NetStaff agrees
that after its merger and reorganization with a public reporting company, MAS
Acquisition VIII Corp., an Indiana corporation, NetStaff will use its best
efforts to ensure that the Board of the newly reorganized company, issues to
you, or at your direction, warrants to purchase up to an aggregate of two
hundred thousand (200,000) shares of common stock of the newly reorganized
company at a price of US$1.00 per share. Such common stock when issued shall be
duly and fully issued, fully-paid and nonassessable shares.
<PAGE> 2
The warrants will be exercisable at any time between sixty (60) days from the
date the shares of reorganized company are quoted for trading on the OTC
Bulletin Board and the third anniversary of such date (the "Applicable Term").
The aggregate amount of two hundred thousand (200,000) warrants may be
exercisable in whole, in part or in increments at any time during the Applicable
Term.
The shares underlying the warrants shall be entitled to "piggyback" registration
rights in the event that the newly reorganized company files or proposes to file
a registration statement under the US Securities Act of 1933, as amended (other
than a registration statement relating to an SEC Rule 145, or a successor rule,
or a registration on any form which does not permit secondary sales) at any time
during the Applicable Term; provided, however, that in the case of an
underwritten public offering, participation by the holder(s) of the warrants
shall be ratably limited to such number of shares determined by the managing
underwriter as is feasible for sale in such underwritten offering after taking
into account all securities that are to be sold on behalf of the company.
Accepting that the above accurately details our agreement, please execute this
letter agreement where indicated and fax back to me a fully executed copy.
Yours truly, NETSTAFF, INC.
Per:
/s/ PATRICK RYLEE
Patrick Rylee
President
ACKNOWLEDGED AND AGREED TO
THIS 2D DAY OF DECEMBER, 1999.
GOLDEN HORDE INVESTMENTS LTD.
Per:
/s/ CLIVE BIRD
Clive Bird.
<PAGE> 3
PROMISSORY NOTE
PRINCIPAL AMOUNT: USD$25,000 SAN FRANCISCO, CALIFORNIA
JULY 26, 1999
FOR THE VALUE RECEIVED, the undersigned, NETSTAFF, INC., promises to pay to the
order of LORI HOFFER at Edmonds, State of Washington, USA on April 25, 2000, the
sum of Twenty Five Thousand Dollars ($25,000) together with accrued interest at
the rate of Twelve (12) percent per annum from the date hereof. Presentment for
payment, demand, protest and notice of dishonour and protest hereof are hereby
waived.
NETSTAFF, INC.
Per:
/s/ PATRICK RYLEE
PATRICK L. RYLEE
Authorized Signatory
<PAGE> 4
PROMISSORY NOTE
PRINCIPAL AMOUNT: USD$50,000 SAN FRANCISCO, CALIFORNIA
JULY 26, 1999
FOR THE VALUE RECEIVED, the undersigned, NETSTAFF, INC., promises to pay to the
order of WAYNE SANDERS and BETTE SANDERS at Mukilteo, State of Washington, USA
on April 25, 2000, the sum of Fifty Thousand Dollars ($50,000) together with
accrued interest at the rate of Twelve (12) percent per annum from the date
hereof. Presentment for payment, demand, protest and notice of dishonour and
protest hereof are hereby waived.
NETSTAFF, INC.
Per:
/s/ PATRICK RYLEE
PATRICK L. RYLEE
Authorized Signatory
<PAGE> 5
PROMISSORY NOTE
PRINCIPAL AMOUNT: USD$25,000 SAN FRANCISCO, CALIFORNIA
JUNE 16, 1999
FOR THE VALUE RECEIVED, the undersigned, NETSTAFF, INC., promises to pay to the
order of SHERRIN LIM at the City of North vancouver, province of Britiish
Columbia, Canada, on March 21, 2000, the sum of Twenty Five Thousand Dollars
($25,000) together with accrued interest at the rate of Twelve (12) percent per
annum from the date hereof. Presentment for payment, demand, protest and notice
of dishonour and protest hereof are hereby waived.
NETSTAFF, INC.
Per:
/s/ PATRICK RYLEE
PATRICK L. RYLEE
Authorized Signatory
<PAGE> 1
EXHIBIT 10.7
[Each page initialled PR and SL]
THIS AGREEMENT is made effective as of the 15th day of May, 2000
BETWEEN:
NETSTAFF, INC.
(hereinafter referred to as the "Company")
OF THE FIRST PART
AND:
INTELLECTUAL CAPITAL INC.
(hereinafter referred to as the "Contractor")
OF THE SECOND PART
WHEREAS:
A. The Company desires to retain the Contractor to assist the Company in the
areas of strategic development, acquisitions and corporate finance and the
Contractor has agreed to so assist the Company on the terms and conditions of
this Agreement.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants and promises set forth herein, and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by
each, the parties hereto agree as follows:
ARTICLE 1
APPOINTMENT AND AUTHORITY OF CONTRACTOR
1.1 Appointment of Contractor
The Company hereby appoints the Contractor to perform certain services
for the benefit of the Company as hereinafter set forth, and the Company hereby
authorizes the Contractor to exercise such powers as provided under this
Agreement. The Contractor accepts such appointment on the terms and conditions
herein set forth.
<PAGE> 2
1.2 Delivery of Services
The Contractor shall cause the performance of its services hereunder to
be supervised by Sherrin Lim and in this regard the Contractor shall cause
Sherrin Lim to devote such time as shall be necessary to adequately supervise
and ensure the performance by the Contractor of its obligations hereunder.
1.3 Authority of Contractor
The Contractor shall have no right or authority, express or implied, to
commit or otherwise obligate the Company in any manner whatsoever.
1.4 Independent Contractor
In performing its services hereunder, the Contractor shall be an
independent contractor and not an employee or agent of the Company. Nothing in
this Agreement shall be deemed to require the Contractor to provide its services
exclusively to the Company and the Contractor hereby acknowledges that the
Company is not required and shall not be required to make any remittances and
payments required of employers by statute on the Contractor's behalf and the
Contractor or any of its agents or employees shall not be entitled to the fringe
benefits provided by the Company to its employees.
ARTICLE 2
CONTRACTOR'S AGREEMENTS
2.1 General
The services to be provided by the contractor to the Company shall
include the following:
(a) assisting the Company in its strategic planning and development;
(b) advising with respect to the launch of marketing and sales campaign
for the Company's MLS in the staffing industry;
(c) providing the Company with advice in connection with the raising of
capital and the Company's affairs generally;
(d) identifying potential acquisition targets for the Company and
assisting the Company in negotiating and consummating acquisitions;
and
(e) providing such other services as the Company may reasonably
request;
and in so assisting the Company, the Contractor shall at all times be subject to
the direction of the Company and shall keep the Company informed as to all
matters concerning the Contractor's activities.
-2-
<PAGE> 3
2.2 Expense Statements
The Contractor shall on or before the 15th day of each calendar month
during the term hereof, or if a Saturday, Sunday or holiday the next following
business day, render to the Company an itemized statement and accounting for the
previous calendar month, together with such supporting documents as and when the
Company may reasonably require, of all expenses which the Company is obligated
by this Agreement to reimburse, such monthly expenses in any event not to exceed
US$1,000.
The Contractor may incur expenses in the name of the Company in an
amount per month in excess of the limit of expenses set forth herein only upon
advance agreement in writing by the Company; such expenses to relate solely to
the carrying out of the Contractor's duties hereunder. The Contractor will
immediately forward all invoices for expenses incurred on behalf of and in the
name of the Company and the Company agrees to pay said invoices directly on a
timely basis.
ARTICLE 3
COMPANY'S AGREEMENTS
3.1 Compensation of Contractor
As compensation for the services rendered by the Contractor pursuant to
this Agreement, the Company shall pay to the Contractor monthly in advance, on
or before the fifteenth day of each month or if a Saturday, Sunday or holiday
the next following business day a fee of US$7,000 per month during the term
hereof, commencing January 15, 2000.
As further compensation for the services rendered by the Contractor
herein the Company, subject to approval to its Board of Directors, shall grant
to Contractor, options (the "Options") to acquire common shares in the capital
stock of the Company, said options having the terms and conditions as set out in
Schedule "A" hereto pursuant to the terms of an option plan being formulated at
the Company for its employees and contractors. The Company shall use its best
efforts to ensure that such options are included in any registration statement
filed to register the Plan.
-3-
<PAGE> 4
3.2 Indemnity by Company
The Company hereby agrees to indemnify, defend and hold harmless the
Contractor and Sherrin Lim, from and against any and all claims, demands,
losses, actions, lawsuits and other proceedings, judgments and awards, and costs
and expenses (including reasonable legal fees), arising directly or indirectly,
in whole or in part, out of any matter related to any action taken by the
Contractor within the scope of its duties or authority hereunder, excluding only
such of the foregoing as arise from the fraudulent, negligent, reckless or
wilful act or omission of the Contractor, its officers, directors, agents or
employees or as arise in respect of the Contractor's office overhead or the
Contractor's general administrative expenses, and the provisions of this Section
3.2 shall survive termination of this Agreement.
ARTICLE 4
DURATION, TERMINATION AND DEFAULT
4.1 Effective Date
This Agreement shall become effective as of the 15th day of January,
2000, and shall continue on subject to termination as provided for herein.
4.2 Termination
This Agreement may be terminated by either party by giving the other 30
days written notice of such termination provided that in circumstances where the
Contractor would otherwise have been entitled to receive a payment pursuant to
Section 3.1 herein within 30 days following termination of this Agreement the
Company shall make such payment to the Contractor as if the Agreement had not
been terminated.
4.3 Duties Upon Termination
Upon termination of this Agreement for any reason, the Contractor shall
promptly deliver the following to the CEO of the Company:
(a) a final accounting, reflecting the balance of expenses incurred on
behalf of the Company as of the date of termination; and
(b) all documents, copies of documents, notes based thereon, and any
other materials, in whatever media, including, but not limited to,
paper, electronic, disk-based, pertaining to the Company or this
Agreement, including but not limited to, all books of account,
correspondence and contracts, and Contractor shall not retain any
copies thereof.
(c) within ten (10) business days of any termination of this Agreement,
a certificate of compliance with the foregoing.
4.4 Compensation of Contractor on Termination
Upon termination of this Agreement, the Contractor shall be entitled to
receive as its full and sole compensation in discharge of obligations of the
Company to the Contractor under this Agreement all sums due and payable under
this Agreement to the date of termination
-4-
<PAGE> 5
and the Contractor shall have no right to receive any further payments;
provided, however, that the Company shall have the right to offset against any
payment owing to the Contractor under this Agreement any damages, liabilities,
costs or expenses suffered by the Company by reason of the fraud, negligence or
wilful act of the Contractor, to the extent such right has not been waived by
the Company.
ARTICLE 5
CONFIDENTIALITY
5.1 Confidentiality
The Contractor shall not, except as authorized or required by its
duties, reveal or divulge to any person or companies any of the trade secrets,
secret or confidential operations, processes or dealings or any information
concerning the organization, business, finances, transactions or other affairs
of the Company, which may come to its knowledge during the term of this
Agreement and shall keep in complete secrecy all confidential information
entrusted to it and shall not use or attempt to use any such information in any
manner which may injure or cause loss, either directly or indirectly, to the
Company's business or may be likely so to do. This restriction shall continue to
apply after the termination of this Agreement without limit in point of time but
shall cease to apply to information or knowledge which may come into the public
domain.
The Contractor shall comply, and shall cause its agents and employees to
comply, with such directions as the Company shall make to ensure the
safeguarding or confidentiality of all such information.
5.2 Devotion to Contract
During the term of this Agreement, the Contractor shall devote
sufficient time, attention, and ability to the business of the Company, and to
any associated company, as is reasonably necessary for the proper performance of
its services pursuant to this Agreement. Nothing contained herein shall be
deemed to require the Contractor to devote its exclusive time, attention and
ability to the business of the Company. During the term of this Agreement, the
Contractor shall, and shall cause each of its agents or employees assigned to
performance of the services on behalf of the Contractor to,:
(a) at all times perform its services faithfully, diligently, to the
best of its abilities and in the best interests of the Company;
(b) devote such of its time, labour and attention to the business of
the Company as is necessary for the proper performance of the
Contractor's services hereunder; and
(c) refrain from acting in any manner contrary to the best interests of
the Company or contrary to the duties of the Contractor as
contemplated herein.
-5-
<PAGE> 6
5.3 Other Activities
The Contractor shall not be precluded from acting in a function similar
to that contemplated under this Agreement for any other person, firm or company.
ARTICLE 6
MISCELLANEOUS
6.1 Waiver; Consents
No consent, approval or waiver, express or implied, by either party
hereto, to or of any breach of default by the other party in the performance by
the other party of its obligations hereunder shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance by
such other party of the same or any other obligations of such other party or to
declare the other party in default, irrespective of how long such failure
continues, shall not constitute a general waiver by such party of its rights
under this Agreement, and the granting of any consent or approval in any one
instance by or on behalf of the Company shall not be construed to waiver or
limit the need for such consent in any other or subsequent instance.
6.2 Governing Law
This Agreement and all matters arising thereunder shall be governed by
the laws of the State of California.
6.3 Successors, etc.
This Agreement shall enure to the benefit of and be binding upon each of
the parties hereto and their respective heirs, successors and permitted assigns.
6.4 Assignment
This Agreement may not be assigned by any party except with the written
consent of the other party hereto.
6.5 Entire Agreement and Modification
This Agreement constitutes the entire agreement between the parties
hereto and supersedes all prior agreements and undertakings, whether oral or
written, relative to the subject matter hereof. To be effective any modification
of this Agreement must be in writing and signed by the party to be charged
thereby.
6.6 Headings
The headings of the Sections and Articles of this Agreement are inserted
for convenience of reference only and shall not in any manner affect the
construction or meaning of anything herein contained or govern the rights or
liabilities of the parties hereto.
-6-
<PAGE> 7
6.7 Notices
All notices, requests and communications required or permitted hereunder
shall be in writing and shall be sufficiently given and deemed to have been
received upon personal delivery or, if mailed, upon the first to occur of actual
receipt or forty-eight (48) hours after being placed in the mail, postage
prepaid, registered or certified mail, return receipt requested, respectively
addressed to the Company or the Contractor as follows:
The Company:
Netstaff, Inc.
168 South Park
San Francisco, CA
USA
94108
Attention: Patrick Rylee
The Contractor:
Intellectual Capital Inc.
Suite 1555 - 1500 West Georgia Street
Vancouver, B.C.
V6G 2Z6
Canada
Attention: Sherrin Lim
or such other address as may be specified in writing to the other party, but
notice of a change of address shall be effective only upon the actual receipt.
6.8 Further Assurances
The parties hereto agree from time to time after the execution hereof to
make, do, execute or cause or permit to be made, done or executed all such
further and other lawful acts, deeds, things, devices and assurances in law
whatsoever as may be required to carry out the true intention and to give full
force and effect to this Agreement.
6.9 Counterparts
This Agreement may be executed in several counter-parts, each of which
will be deemed to be an original and all of which will together constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the day and year first above written.
-7-
<PAGE> 8
NETSTAFF, INC.
Per: /s/ PATRICK RYLEE
---------------------------
Authorized Signatory
INTELLECTUAL CAPITAL INC.
Per: /s/ SHERRIN LIM
---------------------------
Authorized Signatory
-8-
<PAGE> 9
SCHEDULE "A"
The Options to be granted pursuant to Section 3.1 of this Consulting Agreement
to Contractor or nominee shall be subject to the approval of the Company's Board
of Directors and have the following terms and conditions:
(a) The exercise price of the Options shall be $2.00 per share;
(b) The Options shall have a term of Ten (10) years;
(c) The Options shall be granted as follows:
(i) 300,000 options as of the date the Company completes one or
more business acquisitions, strategic alliances or mergers
having a combined acquisition cost or value in the range of
$3 - $5 million;
(ii) a further 200,000 options as of the date the Company
completes one or more business acquisitions, strategic
alliances or mergers having a combined acquisition cost or
value in the range of $6 - $10 million;
(iii) a further 200,000 options as of the date the Company
completes one or more business acquisitions, strategic
alliances or mergers having a combined acquisition cost or
value in the range of $11 - $15 million;
(iv) a further 200,000 options as of the date the Company
completes one or more business acquisitions, strategic
alliances or mergers having a combined acquisition cost or
value in the range of $16 - $20 million or in excess
thereof.
The options immediately vest in full upon such grant. The options are granted
pursuant to the schedule above upon occurrence of the triggering events set
forth and may aggregate and be effective upon completion of more than one of
such triggering events.
If during the term of this Agreement, a business acquisition, strategic alliance
or merger is closed without the direct assistance of Contractor, then such
transaction shall not be counted as a "triggering event" such as set forth
above.
Upon termination of the Agreement, any ungranted Options shall terminate.
/s/ PATRICK RYLEE 02/24/00
- -----------------------------------
/s/ SHERRIN LIM 02/24/00
- -----------------------------------
-9-
<PAGE> 1
EXHIBIT 10.8
PROFESSIONAL SERVICE AGREEMENT
between NetStaff, Inc., (referred to as "NTSF")
168 South Park,
San Francisco,
CA 94107
and Elliott, Lane & Associates, Inc., (referred to as "ELA")
31951 Sunset Ave,
Laguna Beach,
CA 92677
Whereas, NTSF desires to seek investor relations representation in Germany and
other European countries and,
Whereas, NTSF desires ELA to represent NTSF through its affiliations in Germany
("affiliates") and other European countries for disseminating investor relations
(I.R.) information and creating awareness of NTSF in the European financial
community.
NOW THEREFORE, in consideration of the foregoing and the mutual promises, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. ELA, through its German affiliates, will distribute and disseminate
information exclusively provided by NTSF to existing and potential
shareholders in Europe.
2. ELA, upon receipt of all documentation listed in Exhibit A attached
hereto, will use its best efforts to seek a listing of NTSF shares on
the Berlin OTC Exchange. Also, ELA, through its German affiliates, will
distribute and disseminate information exclusively provided by NTSF to
existing and potential shareholders in Europe. In addition ELA will
coordinate with and assist NTSF with the entity chosen by NTSF to
facilitate in the listing of NTSF shares on the Frankfurt OTC Exchange.
3. ELA will provide such services as listed in Exhibit B for a period of
six months, beginning on the date of this agreement provided the cash
and stock fee is received by ELA, pursuant to the terms of Section 6.
4. NTSF will make a good faith effort to keep ELA informed and advised
about all public information available about NTSF and that information
alone will be the source of information for dissemination and
translation to shareholders or other interested parties in Europe. ELA
will keep NTSF informed of its activities on behalf of NTSF including,
but not limited to, providing a monthly report if so requested by NTSF,
in English, of such activities performed in the prior thirty (30) day
period and activities projected for the next thirty (30) day period. All
materials prepared by ELA relating to NTSF will be subject to review and
modification by NTSF prior to their distribution by ELA. To facilitate
this process, NTSF will commit to a turn-around time of two (2) business
days from the time it receives the material for review.
Page 1 of 7
<PAGE> 2
5. NTSF will send to ELA three copies of all filings made by NTSF with the
Securities and Exchange Commission, NASD or other Stock Exchanges,
immediately upon filing. One copy of every filing/press release will be
faxed directly to the U.K. office of ELA. NTSF's personnel will be
available to ELA's affiliates for periodic updates, upon reasonable
notice. NTSF, as part its first press release relating to any European
Listing, will include a statement (to be approved by ELA) that ELA has
been retained for the European Investor Relations services mentioned
herein.
6. ELA's remuneration for the above services outlined will be as follows:
a) NTSF will pay ELA a total of $42,000 USD plus One Hundred
thousand (100,000) Cashless Stock Warrants. Such cash and stock
payment will be made to ELA as follows:-
b) An `initial amount' of $15,000 will be paid by NTSF coincident
with the signing of this agreement. Upon receipt of the `initial
amount', ELA will seek a listing for NTSF on the Berlin OTC
Exchange and provide services listed in Exhibit B item 1. A second
amount of $15,000 will be paid to ELA within two (2) business days
of NTSF shares being listed on the Berlin OTC Exchange and a third
amount of $12,000 (being the balance of the $12,000 cash fee) will
be paid to ELA within thirty business (30) days of NTSF shares
being listed on the Berlin OTC Exchange or five (5) business days
before the commencement date of the European Investor Relations
Roadshow, whichever is the sooner.
c) NTSF will, coincident with the signing of this agreement, issue
a Cashless Warrant to purchase 40,000 shares of NTSF's common stock
to ELA (or its assigns). The Cashless Warrant shall have a three
(3) year term and shall entitle the holder to purchase 40,000
shares at an exercise price of $4.50 per share and carry piggy-back
registration rights.
d) NTSF will, coincident with the listing of NTSF shares on the
Berlin OTC Exchange, issue a Cashless Warrant to purchase 30,000
shares of NTSF's common stock to ELA (or its assigns). The Cashless
Warrant shall have a three (3) year term and shall entitle the
holder to purchase 30,000 shares at an exercise price of $5.50 per
share and carry piggy-back registration rights.
e) NTSF will, coincident with the listing of NTSF shares on the
Berlin OTC Exchange, issue a Cashless Warrant to purchase 30,000
shares of NTSF's common stock to ELA (or its assigns). The Cashless
Warrant shall have a three (3) year term and shall entitle the
holder to purchase 30,000 shares at an exercise price of $6.50 per
share and carry piggy-back registration rights.
7. Special Conditions (Road-Show Presentations): All road show
presentations will be at the Company's request and billed separately at
$4,500 USD per location (Germany/Switzerland). Each presentation is
usually a luncheon for up to approximately 40 invited guests/investors.
Also, related cost such as travel and expenses are approximately $1,500
USD per presentation, for a total cost to the Company of $6,000 per
location. We highly recommend at least two (2) road-show presentations
per year.
Page 2 of 7
<PAGE> 3
8. Indemnification. The Company agrees to indemnify and hold ELA, its
attorneys and all of its officers, directors, employees, affiliates and
agents harmless from and against any and all manner of actions, causes
of action, claims, demands, costs, damages, liabilities, losses,
obligations and expenses (including actual attorney's fees) arising or
resulting from or related to ELA's performance of the services pursuant
hereunder, unless they are due to breach of this agreement or negligence
or misconduct of ELA.
9. Law, Forum and Jurisdiction. This agreement shall be construed and
interpreted in accordance with the laws of the State of California. The
parties agree that any dispute arising under or with respect to or in
connection with this agreement, whether during the term of this
agreement or at any subsequent time, shall be resolved fully and
exclusively by binding arbitration in accordance with the commercial
rules then in force of the American Arbitration Association and the
proceedings taking place in Santa Ana, California.
10. Attorney's Fees. In the event that any party institutes any action to
enforce this Agreement or to secure relief from any default hereunder or
breach hereof, the prevailing party shall be entitled to reimbursement
from the non-prevailing party for all costs, including reasonable
attorney's fees, incurred in connection therewith and in enforcing or
collecting any judgment rendered therein.
11. Confidentiality. The NTSF and ELA agree that unless and until mutually
agreed upon, they and their representatives will hold in strict
confidence all data and information obtained with respect to the other
party or any subsidiary thereof from any representative, consultant,
officer, director or employee, or from any books or records or from
personal inspection, of such other party, and shall not use such data or
information or disclose the same to others, except:
(i) to the extent such data or information are a matter of public
knowledge or are required by law to be published; and,
(ii) to the extent that such data or information must be used or
disclosed in order to consummate the transactions contemplated by
this Agreement.
12. Entire Agreement. This Agreement applies to transactions which involve
successors, assigns, affiliates or subsidiary companies or entities.
This agreement represents the entire agreement between the parties
hereto relating to the subject matter hereof. This agreement alone fully
and completely expresses the agreement of the parties relating to the
subject matter hereof and there are no other courses of dealing,
understandings, agreements, representations or warranties, written or
oral, except as set forth herein. This Agreement may not be amended or
modified, except by a written agreement signed by all parties hereto.
Page 3 of 7
<PAGE> 4
Wherefore, the parties have executed this Agreement this 31st day of March,
2000.
NETSTAFF, INC.,
By: /s/ PATRICK RYLEE
-----------------------------------
Patrick Rylee, CEO
ELLIOTT, LANE & ASSOCIATES, INC.,
By: /s/ H. ELI ELLIOTT
-----------------------------------
Eli Elliott, Principal
Page 4 of 7
<PAGE> 5
EXHIBIT A
INFORMATION REQUIRED FOR LISTING APPROVAL ON A GERMAN STOCK EXCHANGE:
1. The Company's latest Form 10K or Annual Report *
2. Corporate brochure or corporate overview (if available)
3. Last 6 months press releases *
4. Copies of any media or analyst reports (if available)
5. Standard & Poor listing sheet (if available)
6. Letter's on the Company's letterhead addressed as follows:*
* Mandatory
================================================================================
Dear Sirs,
We hereby apply for a listing on the Berlin OTC Exchange at as early a date as
possible. We are looking forward to being a participant in this market as soon
as possible.
Very truly yours,
NetStaff, Inc.,
By: Date:
------------------------------ -------------------------------
Patrick Rylee, CEO
================================================================================
Dear Sirs,
We hereby apply for a listing on the Frankfurt Exchange at as early a date as
possible. We are looking forward to being a participant in this market as soon
as possible.
Very truly yours,
NetStaff, Inc.,
By: Date:
------------------------------ -------------------------------
Patrick Rylee, CEO
Page 5 of 7
<PAGE> 6
EXHIBIT B
1. Research Report in German. This report is a summary and profile of your
Company (products, services, management-background, outlook, etc.) which gives
potential investors a scenario of your Company. This report will be sent to
about 1,500 potential investors, money managers, stock advisory groups,
journalists and publishers who have an interest in company's industry and
business. Interested parties will have the opportunity of requesting from us the
company's investor relation's kit. Such report will be subject to NTSF review
before it is disseminated or used.
2. Media Work. Articles will be strategically placed in the highest circulated
media that relates to your Company's business and the stock and financial
markets in general. Articles are subject to NTSF's review prior to placement and
NTSF will receive copies of such articles.
3. Permanent Presswork. Mailing and distribution on all company's press releases
and corporate news translated in German and sent out via e-mail and/or direct
mail.
4. Profile. Your corporate profile will be posted on the Internet via the
TeamWork Kommunikations GmbH directory. Your Company will have its own portrait
page with a link to your original homepage in the USA plus all corporate news
and press releases will be posted in English and German languages.
5. Internet. Create an Internet presence in Europe by exposing the Company's web
site to various financial and industry-related directories including one of
Germany's most visited financial sites (over 200,000 hit per day).
6. Strategy. Our primary focus is strategic communications -- generating
awareness and understanding of a company among members of the financial
community -- traders, analysts, portfolio managers, brokers and individual
investors; the business community, Press Editors and the general public. Our
goal is to get a company's stock fully valued, increase trading volume, increase
the number of foreign shareholders, expand analyst following and gain
international media publicity for your company.
Optional Services and Costs:
* Road Shows. After investors have received information about your Company,
it is recommended that we schedule breakfast and/or lunch meetings in 2 or 3
European cities (i.e., Hamburg, Frankfurt) with institutional investors, fund
managers and journalists (30 - 50 pre-qualified parties are usually invited).
* Special Conditions (Road-Show Presentations):
All road show presentations will be at the company's request and billed
separately at $4,500 USD per location (Germany/Switzerland). Each
presentation is a luncheon usually for up to approximately 40 qualified
invited guests/investors. Also, related cost such as travel and expenses
are approximately $1,500 USD per presentation, for a total cost to the
Company of $6,000 per location. We highly recommend at least two (2)
road-show presentations per year.
Page 6 of 7
<PAGE> 7
Advertisements. Several "Tombstone-Ads" should be booked to create interest in
your Company in a way that investors can get a free copy of the research report
and media kit mentioned above. This should be done in several different media
and should be over a period of 4 - 8 weeks at a time when your Company is in a
position to issue favorable corporate news and press releases:
We recommend running these ads in the following 4 German media: (DER AKTIONAR,
BorseOnline, Das Wertpapier, Euro am Sonntag) each with 5 ads over a 2 two month
period. This campaign would be a total of 20 ads with an average price per ad of
$1,000 to $1,500 plus a 16% VAT tax.
Page 7 of 7
<PAGE> 1
EXHIBIT 10.9
THESE WARRANTS WILL EXPIRE AND BECOME NULL AND VOID AT 4:00 P.M.
(PACIFIC STANDARD TIME) ON MARCH 31, 2003
WARRANTS TO PURCHASE COMMON SHARES OF NETSTAFF, INC.
THIS IS TO CERTIFY THAT ELLIOTT, LANE & ASSOCIATES, INC. (the
"Holder") has the right to purchase, upon and subject to the terms and
conditions hereinafter referred to, up to 40,000 fully paid and non-assessable
shares of common stock (the "Shares") in the capital of NETSTAFF, INC.
(hereinafter called the "Company") for a period of three years from April 1,
2000, until 4:00 p.m. (Pacific Standard Time) on March 31, 2003 (the "Expiry
Date") at a price of $4.50 per Share.
1. ONE WARRANT AND $4.50 ARE REQUIRED TO PURCHASE ONE SHARE. THIS
CERTIFICATE REPRESENTS 40,000 WARRANTS.
2. These Warrants are issued subject to the terms and conditions
attached to the Warrant issued by the Company (the "Terms and
Conditions") and dated April 1, 2000, and the Warrant Holder may
exercise the right to purchase Shares only in accordance with those
Terms and Conditions.
3. A copy of the Terms and Conditions may be obtained from the offices
of the Company in the City of San Francisco, California.
4. Nothing contained herein or in the Terms and Conditions will confer
any right upon the Holder hereof, or any other person, to subscribe
for, or purchase, any Shares at any time subsequent to the Expiry
Date, and from and after such time, these Warrants and all rights
hereunder will be void and of no value.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate
to be signed by the undersigned, its authorized signatory, this 1st day of
April, 2000.
NETSTAFF, INC.
Per: /s/ PATRICK RYLEE
-----------------------------------
Authorized Signatory
PLEASE NOTE THAT ALL SHARE CERTIFICATES ISSUED UPON EXERCISE OF THESE WARRANTS,
IN WHOLE OR IN PART, MUST BE LEGENDED AS FOLLOWS:
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
<PAGE> 2
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE SECURITIES ACT), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS.
<PAGE> 3
FORM OF SUBSCRIPTION
TO: NETSTAFF, INC.
The undersigned Holder of the within Warrants hereby subscribes for shares of
common stock (the "Shares") of Netstaff, Inc. (the "Company"), pursuant to the
attached Warrant certificate, at $4.50 per Share on the terms and conditions
specified therein.
The undersigned hereby directs that the Shares be registered as follows:
NAME(S) IN FULL ADDRESS(ES) NUMBER OF SHARES
- --------------- ----------- ----------------
TOTAL:
(Please print full name in which share certificates are to be issued, stating
whether Mr., Mrs. or Miss is applicable).
DATED this day of , 20___.
In the presence of:
Signature of Witness Signature of Warrant Holder
Please print below your name and address in full.
Name
------------------------------------------------------
Address
---------------------------------------------------
- ----------------------------------------------------------
<PAGE> 4
TERMS AND CONDITIONS DATED APRIL 1, 2000, ATTACHED TO THE WARRANTS ISSUED BY
NETSTAFF, INC. TO ELLIOTT, LANE & ASSOCIATES, INC.
ARTICLE 1 - INTERPRETATION
SECTION 1.1 - DEFINITIONS
In these Terms and Conditions, unless there is something in the subject matter
or context inconsistent therewith:
(a) "Company" means NETSTAFF, INC., until a successor corporation will
have become such as a result of consolidation, amalgamation or
merger with or into any other corporation or corporations, or as a
result of the conveyance or transfer of all or substantially all of
the properties and estates of the Company as an entirety to any
other corporation, and thereafter "Company" will mean such
successor corporation;
(b) "Company's Auditors" means an independent firm of accountants duly
appointed as auditors of the Company;
(c) "Director" means a director of the Company for the time being, and
reference, without more, to action by the directors means action by
the directors of the Company as a Board, or whenever duly
empowered, action by an executive committee of the Board;
(d) "herein," "hereby" and similar expressions refer to these Terms and
Conditions as the same may be amended or modified from time to
time; and the expression Article and Section, followed by a number
refer to the specified Article or Section of these Terms and
Conditions;
(e) "person" means an individual, corporation, partnership, trustee or
any unincorporated organization and words importing persons have a
similar meaning;
(f) "shares" means the common shares in the capital of the Company as
constituted at the date hereof and any shares resulting from any
subdivision or consolidation of the shares;
(g) "Warrant Holders" or "Holders" means the holders of the Warrants;
and
(h) "Warrants" means the warrants of the Company issued and presently
authorized, as set out in Section 2.01 hereof and for the time
being outstanding, to ELLIOTT, LANE & ASSOCIATES, INC.
SECTION 1.2 - GENDER
Words importing the singular number include the plural and vice versa and words
importing the masculine gender include the feminine and neuter genders.
<PAGE> 5
SECTION 1.3 - INTERPRETATION NOT AFFECTED BY HEADINGS
The division of these Terms and Conditions into Articles and Sections, and the
insertion of headings, are for convenience of reference only and will not affect
the construction or interpretation thereof.
SECTION 1.4 - APPLICABLE LAW
The Warrants will be construed in accordance with the laws of the State of
California applicable thereto and will be treated in all respects as California
contracts.
ARTICLE 2 - ISSUE OF WARRANTS
SECTION 2.1 - ISSUE OF WARRANTS
Warrants entitling the Holders thereof to purchase up to an aggregate of 40,000
shares have been authorized and are herewith issued by the Company. This Warrant
certificate represents 40,000 Warrants.
SECTION 2.2 - ADDITIONAL WARRANTS
The Company may, at any time, and from time to time, issue additional warrants
or grant options or similar rights to purchase shares of its capital stock.
SECTION 2.3 - WARRANTS TO RANK PARI-PASSU
These Warrants and additional warrants, options or similar rights to purchase
shares from time to time issued or granted by the Company, will rank pari-passu,
whatever may be the actual dates of issue or grant thereof, or of the dates of
the certificates by which they are evidenced.
SECTION 2.4 - ISSUE IN SUBSTITUTION FOR LOST WARRANTS
(1) In case a Warrant certificate becomes mutilated, lost, destroyed or
stolen, the Company, at its discretion, may issue and deliver a new
Warrant certificate of like date and tenor as the one mutilated,
lost, destroyed or stolen, in exchange for and in place of and upon
cancellation of such mutilated Warrant certificate, or in lieu of,
and in substitution for such lost, destroyed or stolen Warrant
certificate and the substituted Warrant certificate will be
entitled to the benefit hereof and rank equally in accordance with
its terms with all other Warrants issued or to be issued by the
Company.
(2) The applicant for the issue of a new Warrant certificate pursuant
hereto will bear the cost of the issue thereof and in case of loss,
destruction or theft furnish to the Company such evidence of
ownership and of loss, destruction, or theft of the Warrant
certificate so lost, destroyed or stolen as will be satisfactory to
the Company in its discretion and such applicant may also be
required to furnish indemnity in amount and form satisfactory to
the Company in its discretion, and will pay the reasonable charges
of the Company in connection therewith.
<PAGE> 6
SECTION 2.5 - WARRANT HOLDER NOT A SHAREHOLDER
The holding of a Warrant will not constitute the holder thereof a shareholder of
the Company, nor entitle him to any right or interest in respect thereof except
as in the Warrant expressly provided.
ARTICLE 3 - NOTICE
SECTION 3.1 - NOTICE TO WARRANT HOLDERS
Any notice to be given to the Holders shall be given in writing and will be
given by personal delivery, telecopied or sent by prepaid, registered post,
addressed to the Holders at the address of the Holders appearing on the Holder's
Warrant certificate or to such other address as the Holders may advise the
Company by notice in writing, or by electronic means of communication.
The date of receipt of such notice shall be the date of delivery thereof if
delivered or telecopied, or, if given by registered mail, shall be deemed to be
the fourth business day after the same shall have been so mailed, except in the
case of interruption of postal services for any reason whatever, in which case,
the date of receipt shall be the date on which the notice, demand or other
communication is actually received by the addressee.
SECTION 3.2 - NOTICE TO THE COMPANY
Any notice to be given to the Company shall be given in writing and will be
given by personal delivery, telecopied or sent by prepaid, registered post,
addressed to the Company, at its business office, or delivered to the Company,
at its business office or to such other address as the Company may advise the
Holders by notice in writing, or by electronic means of communication.
The date of receipt of such notice shall be the date of delivery thereof if
delivered or telecopied, or, if given by registered mail, shall be deemed to be
the fourth business day after the same shall have been so mailed except in the
case of interruption of postal services for any reason whatever, in which case
the date of receipt shall be the date on which the notice, demand or other
communication is actually received by the addressee.
ARTICLE 4 - EXERCISE OF WARRANTS
SECTION 4.1 - METHOD OF EXERCISE OF WARRANTS
The right to purchase shares conferred by the Warrants may be exercised by the
Holders of such Warrant surrendering it, with a duly completed and executed
subscription form and a bank draft, or certified check, payable to, or to the
order of, the Company, at par, in San Francisco, California, for the purchase
price applicable at the time of surrender in respect of the shares subscribed
for in lawful money of the United States of America, to the Company, at its
principal office in San Francisco, California.
<PAGE> 7
SECTION 4.2 - ALTERNATE METHOD OF EXERCISE
In lieu of exercising Warrants as provided for in Section 4.1 above, the Holders
may elect to receive shares equal to the value of the Warrants (or any portion
thereof) by surrendering the Warrant certificate, together with a notice of such
election, to the Company, at its principal office in San Francisco, California,
in which case the Holders shall be entitled to receive that number of shares of
the Company calculated as follows:
X = Y (A-B)
-------
A
where:
X = the number of shares of the Company to be issued to the
Holders
Y = the number of Warrants which are being exercised
A = the fair market value of one share of the Company as at
the date the notice of exercise is received by the
Company; and
B = the exercise price of the Warrants
and for the purposes of this section the "fair market values" of one share of
the Company shall be the average closing price of the Company's shares for the
five trading days immediately preceding the date the notice of exercise is
received by the Company where the Company's shares trade on a recognized stock
exchange or national market system and shall be the average of the mean of the
closing bid and ask prices for such shares for the five trading days immediately
preceding the date the notice of exercise is received by the Company where the
Company's shares trade over-the-counter.
SECTION 4.3 - EFFECT OF EXERCISE OF WARRANTS
(1) Upon exercise as aforesaid the shares so subscribed for will be
deemed to have been issued and such person or persons will be
deemed to have become the holder or holders of record of such
shares on the date of such surrender and payment, and such shares
will be issued at the subscription price in effect on the date of
such exercise.
(2) Within ten business days after exercise as aforesaid, the Company
will forthwith cause to be delivered to the person or persons in
whose name or names the shares so subscribed for are to be issued
as specified in such subscription or mailed to him or them at his
or their respective addresses specified in such subscription, a
certificate or certificates for the appropriate number of shares
not exceeding those which the Warrant Holder is entitled to
purchase pursuant to the Warrant Certificate surrendered.
<PAGE> 8
SECTION 4.4 - SUBSCRIPTION FOR LESS THAN ENTITLEMENT
The Holders of any Warrant certificate may subscribe for, and purchase, a number
of shares less than the number which the Holders are entitled to purchase,
pursuant to the surrendered Warrant. In the event of any purchase of a number of
shares less than the number which can be purchased pursuant to a Warrant
certificate, the Holders, upon exercise thereof, will, in addition, be entitled
to receive, on that same date (the "New Date"), a new Warrant certificate
effective as of the New Date, in respect of the balance of the shares which the
Holders were entitled to purchase pursuant to the surrendered Warrant
certificate and which were not then purchased.
SECTION 4.5 - WARRANTS FOR FRACTIONS OF SHARES
To the extent that the Holders of any Warrant are entitled to receive on the
exercise or partial exercise thereof a fraction of a common share, such right
may be exercised in respect of such fraction only in combination with another
Warrant or other Warrants which in the aggregate entitle the holder to receive a
whole number of such common shares.
SECTION 4.6 - EXPIRATION OF WARRANTS
After the expiration of the period within which a Warrant is exercisable, all
rights thereunder will wholly cease and terminate, and such Warrant will be void
and of no effect.
SECTION 4.7 -TIME OF ESSENCE
Time will be of the essence hereof.
SECTION 4.8 - SUBSCRIPTION PRICE
One Warrant and $4.50, during the term of the Warrants, are required to
subscribe for each share.
SECTION 4.9 - ADJUSTMENT OF EXERCISE PRICE
The exercise price and the number of common shares deliverable upon the exercise
of the Warrants will be subject to adjustment in the event and in the manner
following:
(1) If, and whenever, the shares at any time outstanding are subdivided
into a greater or consolidated into a lesser number of shares the
exercise price will be decreased or increased proportionately as
the case may be; upon any such subdivision or consolidation the
number of shares deliverable upon the exercise of the Warrants will
be increased or decreased proportionately as the case may be.
(2) (a) In case of any capital reorganization or of any reclassification of
the capital of the Company, or in the case of the consolidation,
merger or amalgamation of the Company with or into any other
Company (hereinafter collectively referred to as a
"Reorganization"), each Warrant will after such Reorganization
confer the right to purchase the number of shares or other
securities of the Company (or of the Company resulting from such
Reorganization) which the Warrant Holders would have been
<PAGE> 9
entitled to upon Reorganization if the Warrant Holders had been
shareholders at the time of such Reorganization.
(b) In any such case, if necessary, appropriate adjustments will be
made in the application of the provisions of this Article Four
relating to the rights and interest thereafter of the Holders of
the Warrants so that the provisions of this Article Four will be
made applicable as nearly as reasonably possible to any shares or
other securities deliverable after the Reorganization on the
exercise of the Warrants.
(c) The subdivision or consolidation of shares at any time
outstanding into a greater or lesser number of shares (whether with
or without par value) will not be deemed to be a Reorganization for
the purposes of this paragraph (2).
(3) The adjustments provided for in this Section are cumulative and
will become effective immediately after the record date or, if no
record date is fixed, the effective date of the event which results
in such adjustments.
SECTION 4.10 - DETERMINATION OF ADJUSTMENTS
If any questions will at any time arise with respect to the exercise price or
any adjustment provided for in Section 4.8, such questions will be conclusively
determined by the Company's Auditors, or, if they decline to so act, any other
firm of chartered accountants, in San Francisco, California that the Company may
designate and who will have access to all appropriate records, and such
determination will be binding upon the Company and the Holders of the Warrants.
ARTICLE 5 - COVENANTS BY THE COMPANY
SECTION 5.1 - RESERVATION OF SHARES
The Company will reserve, and there will remain unissued out of its authorized
capital, a sufficient number of shares to satisfy the rights of purchase
provided for herein and in the Warrants should the Holders of all the Warrants
from time to time outstanding determine to exercise such rights in respect of
all shares which they are or may be entitled to purchase pursuant thereto and
hereto.
SECTION 5.2 - COMPANY MAY PURCHASE
The Company may, from time to time, offer to purchase, and purchase, for
cancellation only, any Warrants in such manner, from such persons, and on such
terms and conditions as it determines.
SECTION 5.3 - REGISTRATION RIGHTS
(1) If the Company determines to register any of its securities for the account
of a shareholder or holders, other than in a registration relating solely to
employee benefit plans, a registration relating solely to a Rule 145
transaction, or a registration on any registration form that does not permit
secondary sales, the Company will (i) promptly give to each person who is a
Warrant Holder at the effective date notice and (ii) use its
<PAGE> 10
best efforts to include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registerable Securities of such shareholder, as requested, such
request to be made in writing and received by the Company within twenty (20)
days after it delivers its notice of the proposed registration. Such request may
specify all or part of the Holders' Registerable Securities. As used herein, the
term Registerable Securities means shares of the Company's common stock issued
or issuable to the Warrant Holders pursuant hereto.
(2) If any shares issuable as a result of the exercise of Warrants hereunder
cannot be registered as a result of limitations of the aggregate number of
shares of Registerable Securities that may be so included, the number of shares
of Registerable Securities that may be included shall be allocated among the
Holders requesting inclusion of shares, pro rata, on the basis of the number of
shares of Registerable Securities, provided that such allocation shall not
operate to reduce the aggregate number of Registerable Securities that may be
included in such registration if any Holder does not request inclusion of the
maximum number of shares of Registerable Securities allocated to it pursuant to
the procedure described in this section, and the remaining portion of its
allocation shall be reallocated among those requesting Holders whose allocation
did not satisfy the request pro rata on the basis of the number of shares of
Registerable Securities which will be held by such Holders and any selling
shareholders.
(3) Notwithstanding the rights set forth herein, the Company shall have no
registration obligation to any Holder in the event that the Company is advised
by its underwriter or other selling agent that the underwriter is not willing to
register shares issuable pursuant to the Warrants by reason of market conditions
or any other reason relating to the primary obligation of such underwriter or
agent to sell the shares of the Company, its being the intention of the parties
that the Company's ability to sell all of the shares that it wishes to sell
pursuant to any registration statement shall be paramount to, and shall
supersede, the rights of any Holder hereunder.
ARTICLE 6 - WAIVER OF CERTAIN RIGHTS
SECTION 6.1 - IMMUNITY OF SHAREHOLDERS, ETC.
The Warrant Holders, as part of the consideration for the issue of the Warrants,
waive and will not have any right, cause of action or remedy now or hereafter
existing in any jurisdiction against any past, present or future incorporator,
shareholder, Director or Officer (as such) of the Company, for the issue of
shares, pursuant to any Warrant or on any covenant, agreement, representation or
warranty by the Company herein contained or in the Warrant.
<PAGE> 11
ARTICLE 7 - MODIFICATION OF TERMS, MERGER, SUCCESSORS
SECTION 7.1 - MODIFICATION OF TERMS AND CONDITIONS FOR CERTAIN PURPOSES
From time to time, the Company may, subject to the provisions of these presents,
modify the Terms and Conditions hereof, for the purpose of correction or
rectification of any ambiguities, defective provisions, errors or omissions
herein.
SECTION 7.2 - TRANSFERABILITY
The Warrants and all rights attached to them are not transferable or assignable.
DATED this 1st day of April, 2000.
NETSTAFF, INC.
By: /s/ PATRICK RYLEE
------------------------------------
Authorized Signatory
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 928,655
<SECURITIES> 0
<RECEIVABLES> 50,351
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<CURRENT-ASSETS> 986,706
<PP&E> 199,324
<DEPRECIATION> 18,700
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<CURRENT-LIABILITIES> 304,691
<BONDS> 0
0
0
<COMMON> 1,931,301
<OTHER-SE> (1,053,895)
<TOTAL-LIABILITY-AND-EQUITY> 1,182,142
<SALES> 500
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 370,908
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<INCOME-PRETAX> (311,003)
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