-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AKdS4X0hznErW25WcU1kuIoo3iU6rkoMuBQrwyqddmRmE0hGRa1yz5chUzkKt7ie w68tNXZw9AdPv7NNmQ3mKQ== 0000950134-01-505061.txt : 20010814 0000950134-01-505061.hdr.sgml : 20010814 ACCESSION NUMBER: 0000950134-01-505061 CONFORMED SUBMISSION TYPE: 10SB12G/A PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20010813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOLUTIONNET INTERNATIONAL INC CENTRAL INDEX KEY: 0001093468 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER TERMINALS [3575] IRS NUMBER: 954749095 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10SB12G/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-27697 FILM NUMBER: 1705378 BUSINESS ADDRESS: STREET 1: 1594 CENTRE POINTE DR STREET 2: #102P CITY: MILPITAS STATE: CA ZIP: 95035 BUSINESS PHONE: 2488517400 MAIL ADDRESS: STREET 1: 31700 WEST 13 MILE RD STREET 2: STE 201 CITY: FARMINGTON HILLS STATE: MI ZIP: 48335 10SB12G/A 1 k64198e10sb12ga.txt AMENDMENT NO. 1 TO FORM 10-SB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 AMENDMENT NO. 1 TO FORM 10-SB GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934 SOLUTIONNET INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (Name of Small Business Issuer in its Charter) MINNESOTA 95-4749095 - -------------------------------------------------------------------------------- (State or Other jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 1594 CENTRE POINTE DRIVE, MILPITAS CA 95035 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) (408) 934-9748 - -------------------------------------------------------------------------------- (Registrant's Telephone Number, Including Area Code) Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which to be so registered each class is to be registered ------------------- ------------------------------ NA NA
Securities to be registered under Section 12(g) of the Act: COMMON STOCK, PAR VALUE $0.001 - -------------------------------------------------------------------------------- (Title of class) 2 TABLE OF CONTENTS
Page No. -------- Part I Item 1. Description of Business 4 Item 2. Management's Discussion and Analysis or Plan of Operation 13 Item 3. Description of Property 19 Item 4. Security Ownership of Certain Beneficial Owners and Management 20 Item 5. Directors, Executive Officers, Promoters and Control Persons 21 Item 6. Executive Compensation 23 Item 7. Certain Relationships and Related Transactions 25 Item 8. Description of Securities 26 Part II Item 1. Market Price of and Dividends on the Registrant's Common 28 Equity and Other Shareholder Matters Item 2. Legal Proceedings 30 Item 3. Changes in and Disagreements with Accountants 30 Item 4. Recent Sales of Unregistered Securities 30 Item 5. Indemnification of Directors and Officer 31 Part F/S Index to Financial Statements F - 1 Part III Item 1. Index to Exhibits 33 Item 2. Description of Exhibits 34
2 3 WITH THE EXCEPTION OF THE STATEMENTS REGARDING HISTORICAL MATTERS AND STATEMENTS REGARDING THE COMPANY'S CURRENT STATUS, CERTAIN MATTERS DISCUSSED HEREIN ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES AND EXCHANGE ACT OF 1934, AS AMENDED, THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES. SUCH-FORWARD LOOKING STATEMENTS MAY BE IDENTIFIED BY THE USE OF THE WORDS "ANTICIPATE", "BELIEVE", "ESTIMATE", "PLAN", "EXPECT", "INTEND" AND SIMILAR EXPRESSIONS. FORWARD LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE. ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM THESE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH MATERIAL DIFFERENCES INCLUDE FOREIGN EXCHANGE RATES, DEPENDENCE ON SKILLED AND KEY PERSONNEL, CLIENT CONCENTRATION AND COMPETITION AND THOSE OTHER RISKS DISCLOSED MORE FULLY UNDER "PART I - ITEM 1. DESCRIPTION OF BUSINESS" AND "ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION - RISK FACTORS." 3 4 PART I ITEM 1. DESCRIPTION OF BUSINESS. OVERVIEW SolutionNet International, Inc., a Minnesota corporation (the "Company" or "SolutionNet"), is a holding company, dedicated to the development and marketing of proprietary, multi-application internet information technology ("IT") solutions. SolutionNet develops and markets proprietary software products (Enet Internet Banking ("ENet Banking"), Intelligent Data Mapper ("IDM"), E-Business Kits and Electronic Medical Information ("EMI")) to the financial services, telecommunications and health care markets and provides consulting and software development services. SolutionNet owns 100% of the outstanding shares of SolutionNet Inc. - British Virgin Islands, incorporated under the laws of the British Virgin Islands in 1999 ("SolutionNet BVI"), which owns 100% of the outstanding shares of SolutionNet (Asia Pacific) Pte Ltd Singapore, incorporated under the laws of Singapore in 1994 ("SolutionNet (Asia Pacific")). SolutionNet (Asia Pacific) owns 100% of the shares of SolutionNet (Middle East) Ltd. ("SolutionNet (Middle East)"), a limited liability company formed under the laws of the United Arab Emirates. Neither the holding company, SolutionNet, or SolutionNet BVI, has any operations of its own. SolutionNet (Asia Pacific) is the principal operating subsidiary of SolutionNet. SolutionNet (Middle East) had no operations through December 31, 2000. COMPANY HISTORY SolutionNet was incorporated under the laws of the State of Minnesota under the name of ETG International, Inc. ("ETGI") on August 25, 1994. On October 11, 1994, an Iowa corporation (formerly Grason Industries, Inc. which was incorporated in August 1984) was merged into ETGI. Pursuant to an exchange agreement, in April 1999 ETGI (which had changed its name to SolutionNet, but was an inactive company) by way of exchange, issued (i) shares constituting a majority of its outstanding shares to Densmore Group Limited, a corporation incorporated under the laws of the British Virgin Islands ("Densmore") and (ii) acquired all of the outstanding shares of SolutionNet BVI, and thereby control of SolutionNet (Asia Pacific). Densmore had owned all of the outstanding shares of SolutionNet BVI. Suresh Venkatachari, the President of SolutionNet, owns all of the outstanding shares of Densmore. Densmore was formed by Mr. Venkatachari to acquire the shares of SolutionNet because it provided certain tax and estate planning advantages. Mr. Venkatachari does not believe such advantages are necessary at this time and, accordingly, Mr. Venkatachari caused Densmore to transfer all of its shares of SolutionNet to Mr. Venkatachari. See "Part I-Item 4. Security Ownership of Certain Beneficial Owners and Management." SOLUTIONNET PRODUCTS AND SERVICES SolutionNet focuses its efforts on the development and marketing of the products (ENet Banking, IDM, E-Business Kits and EMI) and IT services (consulting and software 4 5 development) described below. All of the products are written in Java and are capable of using smart card technology. A smart card, which is provided to the customer and end-users of SolutionNet's customers (banks, health care centers, etc.) is similar to a credit card, but includes a smart chip which stores the user's identification and password that is used to authenticate the user while he uses the system online on the Internet. A smart card is a security measure used to protect against tampering. ENET INTERNET BANKING ENet Banking is designed to be an Internet-based, fully secured online banking solution providing banks' corporate and retail customers with access to their accounts worldwide. ENet is designed to offer real-time interactive information solutions allowing clients to access information related to their accounts, make electronic payments, engage in foreign exchange transactions, and generally to transact and exchange information globally. ENet Banking also allows users to receive alerts on their banking transactions. ENet Banking permits banks to serve their clients by allowing information sharing between bank branches. ENet works with various local and international standards for communicating credit and debit instructions between parties. INTELLIGENT DATA MAPPER IDM is software designed to allow data interface over the Internet enabling the integration of multiple applications and platforms including UNIX, AS/400, NT and Windows 98. IDM provides an interface for different operating systems and thereby allows industry to integrate and communicate data globally. E-BUSINESS KITS E-Business Kits are designed for companies which want to develop a business to business and/or business to customer website on their own. E-Business Kits provide software for developing business to business and business to customer websites. E-Business Kits also include the availability of on-line invoicing and payment features. ELECTRONIC MEDICAL INFORMATION EMI is a software product that is designed to enable patients, doctors, healthcare centers and commercial organizations to interact via the Internet. EMI has been designed to ease the administrative burden of SolutionNet's target customers by permitting interactive on-line invoicing (including the coordination of payments with health insurance providers), delivery of prescriptions directly to pharmacists, and the coordination of laboratory tests with other medical providers. CONSULTING The Company operates as a full-service consulting and programming house providing end-user Internet technologies, Enterprise Resource Planning solutions, Multimedia applications, technology and systems integration, offshore resources and consultant 5 6 training. Consulting services accounted for approximately 57% and 84% of total SolutionNet revenues for the year ended December 31, 2000 and for the six months ended June 30, 2001, respectively. SolutionNet offers consulting services by supplying its staff as contractors to work at its clients' facilities. Consulting contracts vary in length, ranging generally from six months to a year, but may be extended as necessary. Among other things, the contracts generally require monthly fixed payments, describe the duties of the contractors, protect the confidentiality of the client and provide that work product and intellectual property rights belong to the client. Generally, the client has the right to terminate a contract on 30 days' notice. Some contracts provide that the client will not hire the contractors during the term of the contract and for a period thereafter. However, if SolutionNet agrees to allow the client to hire the contractor, the client is required to pay SolutionNet a fee (generally a percentage of annualized billings) depending on when the contractor is hired. SOFTWARE DEVELOPMENT SERVICES SolutionNet provides various software development services. SolutionNet may develop new software or develop new functions for existing software applications. The software development process generally includes defining the project parameters, designing, prototyping, pilots, programming, testing, installation and maintenance. In the early stage of a development project, SolutionNet personnel often work at a client's site to help determine the parameters of a project and to coordinate with the Singapore facilities where most of the design review, software programming and program testing is conducted. The software development services are generally provided on a fixed fee, fixed deadline basis, with SolutionNet responsible for delivering a completed product to its customer by the deadline. MARKETING AND DISTRIBUTION The Company uses a variety of marketing programs designed to stimulate demand for its products and services. The goal of the marketing activities is to create awareness of the Company brand and product offerings. Marketing activities include target marketing, an interactive Internet site, participation in industry-related activities, use of distributors, partnerships with IT companies and an in-house marketing department to promote its products in the Asia Pacific region, the Middle East and India. The Company targets its marketing efforts towards software solution decision-makers in large organizations. The Company also markets through its own Internet site. The Company makes many of its products available for evaluation through its website at solutionnet.net. The web site is used to collect certain customer information through an automated registration process. The Company uses the customer information as a springboard for targeting its marketing of upgrades, new products, add-on products, and merchandise. The Company seeks to increase its corporate profile by participating in exhibitions, trade fairs and other industry-related activities on a local, regional and global scale. In order to more fully develop and maintain a global presence, the Company has formed relationships with globally recognized companies. The Company currently maintains 6 7 technology and marketing relationships with Oracle Corporation ("Oracle"), Sun Microsystems ("Sun"), Microsoft Corporation ("Microsoft") and the Algorithm Research unit of Cylink Corporation ("Cylink"). SolutionNet has satisfied certain criteria and paid applicable fees to become a "partner" under certain partnership programs offered by Oracle and Microsoft. These programs offer SolutionNet the benefit of, among other things, using the applicable program logos, and obtaining licenses to use and reproduce certain of their products for internal business purposes, application development, testing, training and demonstration, and marketing purposes. In certain cases, SolutionNet can be involved in co-marketing or special campaigns with such program partners. Also, SolutionNet is included in such program partners' on-line referral directories and SolutionNet is provided certain on-line support services from such program partners. The relationships also permit SolutionNet to provide links to their websites. With respect to Sun, SolutionNet is a distributor specializing in reselling Sun's iPlanet e-Commerce solutions. In addition, SolutionNet is provided access to Sun's iPlanet Enterprise Partner website. With respect to Cylink, SolutionNet has an agreement under which it incorporates certain Cylink security-based technologies, including the "smart card" technology, into SolutionNet's products to protect the secure exchange of confidential information. SolutionNet also is a distributor of such Cylink security-based technologies. To grow its international presence, SolutionNet uses various distributors to market its products and services. Generally, distributors are given specific geographic regions on a non-exclusive basis to market SolutionNet's products and services. Payments for the products sold are to be made directly to SolutionNet by the distributor. The distributor is an independent contractor paid on commission, and appointed for a term, generally, of twelve months, with automatic renewal unless three months' prior notice of termination is provided. Typically, SolutionNet agrees, during the first six months of the relationship, not to appoint other distributors for the territory assigned if certain performance criteria are satisfied. The distributor generally markets the products by using its customer and prospect database, organizing industry related seminars and conferences, and advertising and participating in exhibitions and trade fairs, sometimes jointly with SolutionNet. SolutionNet trains the personnel of the distributor and provides necessary technical support. Distributors must also agree, for a period ranging from six months to one year, not to compete with SolutionNet's products, and undertake to keep SolutionNet's proprietary information confidential. The Company has current marketing relationships with Cybersign, Fujitsu, NCR and Tata Infotech to sell the product in the (Asia Pacific region), the Middle East and India. The Company is currently attempting to locate and appoint suitable distributors in the United States, United Kingdom and Australia. 7 8 COMPANY-SPONSORED PRODUCT DEVELOPMENT ACTIVITIES Our objective is to be a leading provider of financial and ebusiness solutions. In order to achieve this objective, we are continuously investing in product development activities to enhance our core technology and incorporating industry leading application components into our products. The following is an estimate of the amount spent during each of the last two fiscal years on product development activities:
2000 1999 ---- ---- $ 524,630 $ 394,411
COMPETITION We are a very small player in the industry, however, with proprietary products like E-Net Banking, EMI, IDM and E-Business Kits, the Company believes it has built a solid foundation upon which to grow and expand the size and scope of its business. We also plan to compete by using our distribution network and partner relationships to help penetrate the market for the initial sale and by maintaining customer relationships through solid customer support. However, the market for software and services for intranets, extranets, and the Internet is relatively new, intensely competitive, and subject to rapid technological change. We expect competition to continue and increase in the future. Such competition could impair our finances or business prospects. Our primary competition currently includes: - In-house development efforts by prospective customers or partners; - Other vendor of application software or application development platforms and tools directed at interactive and financial services, such as Brodvision, Security First, Brokat, Infosys; - Web content developers that develop custom software or integrate other application software into custom solutions and - International Business Machines Corporation. The principal competitive factors affecting the market for our products are: - Depth and breadth of functionality offered; - Ease of application development; - Reliance on industry standards; - Product reliability; - Proven track record; - Scalability; - Maintainability; - Personalization and other features; - Product quality; - Price and - Customer support. 8 9 Compared to us, many of these and other current and future competitors have longer operating histories and significantly greater financial, technical, marketing and other resources. As a result, they may be able to respond more quickly to new or changing opportunities, technologies and customer requirements. Many of these companies also can use their greater name recognition and more extensive customer base to gain market share at our expense. Current and potential competitors may bundle their products to discourage users from purchasing our products. Competitive pressures may make it difficult for us to acquire and retain customers and may require us to reduce the price of our products. COMPLIANCE WITH ENVIRONMENTAL LAWS The Company believes that it is in compliance with applicable material environmental laws and regulations. GOVERNMENT REGULATION AND INTELLECTUAL PROPERTY RIGHTS Except indirectly with respect to the U.S. government regulation on the export of encryption technology (discussed below) and government regulation of visas (also see below), the Company is not aware of any required governmental approvals of the Company's products and services. The Company relies upon a combination of nondisclosure and other contractual arrangements and trade secret, copyright and trademark laws to protect its proprietary rights and the proprietary rights of third parties from whom the Company licenses intellectual property. The Company intends to file trademark applications in the United States and Singapore. The Company does not have any patents or registered copyrights. Ownership of software and associated deliverables created for clients is generally retained by or assigned to the client, and the Company does not retain an interest in such software and deliverables. The Company enters into confidentiality agreements with its employees, consultants and vendors and limits distribution of proprietary information. We also control access to and distribution of our software, documents and other proprietary information. Notwithstanding these precautions, there can be no assurance that the steps taken by the Company in this regard will be adequate to deter misappropriation of proprietary information or that the Company will be able to detect unauthorized use and take appropriate steps to enforce its intellectual property rights. The laws of other countries may afford us little or no effective protection of our intellectual property. A breach of the encryption technology that we use could expose the Company to liability and harm our reputation, causing a loss of customers. A significant barrier to online commerce and communication is the secure exchange of valuable and confidential information over public networks. We rely on encryption and authentication technology, 9 10 including public key cryptography technology licensed from Cylink Corporation, to provide the security and authentication necessary to effect the secure exchange of confidential information. Advances in computer capabilities, new discoveries in the field of cryptography or other events or developments could cause a breach of the RSA algorithm or other algorithms that we use to protect customer transaction data. The United States government regulates the export of technology, including encryption technology, which our products incorporate. Export regulations, either in their current form or as may be subsequently enacted, may limit our ability to distribute our software outside the United States. Any revocation or modification of our export authority or adoption of new laws or regulations relating to the export of software and encryption technology could limit our international operations. The unlawful export of our software could also harm our reputation. Although we take precautions against unlawful export of our software, the global nature of the Internet makes it difficult to effectively control the distribution of software. Although the Company's intellectual property has never been the subject of an infringement claim, there can be no assurance that third parties will not assert infringement claims against the Company in the future, that assertion of such claims will not result in litigation or that the Company would prevail is such litigation or be able to obtain a license for the use of any infringed intellectual property from a third party on commercially reasonable terms. Furthermore, litigation, regardless of its outcome, could result in substantial costs to, and diversion of effort by the Company. Any infringement claim or litigation against the Company could, therefore, materially and adversely affect the Company's business, operating results and financial condition. Singapore currently has no restrictions on the number of foreigners working in Singapore. If, however, the policy were to change, the Company's dependence on employees from India may be materially adversely affected. The United States does have strict restrictions on immigration. If the Company enters the U.S. market, it will have to compete with other companies for the limited visas available. CUSTOMERS The company derives its business and revenues from a large client base. Currently, the following customers provided more than 10% of the Company's annual revenues for the year ended December 31, 2000. Hewlett-Packard (Singapore) 15% Deutsche Bank (Singapore) 14% While we have in the past provided software development to Hewlett-Packard (Singapore) and Deutsche Bank (Singapore), we currently only provide them, pursuant to agreements with our IT staff as contractors at their facilities in Singapore. Under professional service agreements with both Deutsche Bank (Singapore) and Hewlett-Packard (Singapore), SolutionNet is to provide them with consultants as needed from time to time. Under the Deutsche Bank (Singapore) professional services agreement, Deutsche Bank (Singapore) pays SolutionNet a monthly fee for each 10 11 SolutionNet employee providing services under the agreement. The agreement may be terminated at any time upon 30 days written notice. If Deutsche Bank (Singapore) hires an employee of SolutionNet after such employee has completed its work for Deutsche Bank (Singapore), Deutsche Bank (Singapore) will reimburse SolutionNet in an amount equal to the fees of such employee for one month. Under the Hewlett-Packard (Singapore) professional services agreement, Hewlett-Packard (Singapore) pays a monthly fee for each SolutionNet employee providing services under the agreement as set forth in purchase orders. Purchase orders may be terminated on 30 days' notice. Under the Hewlett-Packard (Singapore) agreement, SolutionNet agrees not to solicit any Hewlett-Packard (Singapore) customers to whom services have been provided by SolutionNet's employees for one year after the performance of such services. To the extent that Hewlett-Packard and Deutsche Bank either determine to change their current practices and stop or significantly decrease doing business with us either because they select another vendor, hire employees directly rather than independent contractors or relocate their divisions to countries with lower labor costs, the Company's operations could be materially adversely affected. A sample list of our customers by industry as follows: - Financial Services : ABN Amro Bank, Bank of Bahrain and Kuwait, Citibank N.A., Deutsche Bank, HDFC Bank, Indian Bank and Qatar National Bank - Manufacturing / Services: BASF, Compaq, Hewlett-Packard, Siemens Components and Sun Microsystems. The volume of work performed for specific clients is likely to vary from year to year particularly since the Company is usually not the exclusive outside software service provider for its clients. Thus, a major client in one year may not provide the same level of revenues in a subsequent year. The loss of any large client could have a material adverse effect on the Company's results of operations and financial condition. Since many of the contracted projects are critical to the operations of its clients' businesses, any failure to meet client expectations could result in a cancellation or non-renewal of a contract. However, there are a number of factors other than the Company's performance that could cause the loss of a client, such as a client moving more work in-house. INTERNATIONAL SALES OPERATIONS The Company's customers and its distributors' territories are located in Bahrain, Brunei, India, Indonesia, Kuwait, Malaysia, Philippines, Qatar, Thailand and Vietnam. International sales operations expose the Company to a number of risks including the impact of recessions and/or political instability in one or more of the countries, unexpected changes in regulatory requirements, restrictions on the transfer of funds to or from foreign countries, seasonal reductions in business activities, certification requirements, trade restrictions and limited protection of intellectual property rights. In addition, international operations expose the Company to the risks of changes in foreign exchange rates. The Company's functional currency is the Singapore dollar although it transacts a major portion of its business in foreign currencies and accordingly has foreign currency exposure through its sales and purchases outside of Singapore. The Company currently does not actively hedge against exchange rate fluctuations, although it may 11 12 elect to do so in the future. Accordingly, changes in exchange rates may have a material adverse effect on the Company's net sales, cost of services sold, gross margin and net income, any of which alone or in the aggregate may in turn have a material adverse effect on the Company's business, operating results and financial condition. For the year ended December 31, 2000, approximately 87% of the Company's revenues were in Singapore dollars and 13% were in currencies other than the Singapore dollar, whereas 95% of the Company's expenses were in Singapore dollars and 5% were in currencies other than the Singapore dollar. Revenues generated in non-Singapore currencies are translated into Singapore dollars using the exchange rate prevailing on the dates revenues are recognized. Expenses of non-Singapore operations are incurred in foreign currencies and are translated into Singapore dollar at either the monthly average exchange rate or the exchange rate on the date the expense is incurred, depending on the source of payment. The financial statements are translated into U.S. dollars using the average monthly exchange rate for revenues and expenses and the period end rate for assets and liabilities in accordance with accounting principles generally accepted in the United States of America. The gains or losses from such translation are reported as "Accumulated other comprehensive income" or "Accumulated other comprehensive loss," a separate component of stockholders' equity. The Company expects that a portion of its revenues will continue to be generated in non-Singapore currencies for the foreseeable future and that most of the Company's expenses, including personnel costs as well as capital and operating expenditures, will continue to be denominated in Singapore dollars. Consequently, the Company's results of operations will be adversely affected to the extent that the Singapore dollar appreciates against the other currencies. As disclosed under "Marketing and Distribution," the Company intends to expand its customer base into the United States, the United Kingdom and Australia. In addition to expansion into these areas by marketing efforts, the Company may expand by acquisition. As of this date, however, the Company has no understanding, commitment or agreement with respect to any material future acquisition. Since the Company has not made any acquisitions in the past, there can be no assurance that the Company will be able to identify suitable acquisition candidates available for sale at reasonable prices, consummate any acquisition, or successfully integrate any acquired business into the Company's operations. Further, acquisitions may involve a number of special risks, including diversion of management's attention, failure to retain key acquired personnel and clients, unanticipated events or circumstances, legal liabilities and amortization of acquired intangible assets, some or all of which could have a material adverse effect on the assets, some or all of which could have a material adverse effect on the Company's results of operations and financial condition. EMPLOYEES As of June 30, 2001, the Company had 112 full-time employees. The Company believes its relationship with its employees is satisfactory. The Company's employees are not represented by any union. Given the Company's relatively early stage of development, the Company's success depends on the ability to attract, develop, motivate and retain highly qualified personnel. The Company's ability to execute project engagements and to obtain new clients 12 13 depends, in large part, on its ability to attract, train, motivate and retain highly skilled IT professionals, particularly project managers, software engineers and other senior technical personnel. An inability to hire and retain additional qualified personnel will impair the Company's ability to bid for or obtain new projects and to continue to expand its business. The Company believes that there is significant competition for IT professionals with the skills necessary to perform the services offered by the Company. There can be no assurance that the Company will be able to assimilate and manage new IT professionals effectively. Any increase in the attrition rates experienced by the Company, particularly the rate of attrition of experienced software engineers and project managers, would adversely affect the Company's results of operations and financial condition. There can be no assurance that the Company will be successful in recruiting and retaining a sufficient number of replacement IT professionals with the requisite skills to replace those IT professionals who leave. Further, there can be no assurance that the Company will be able to redeploy and retrain its IT professionals to keep pace with continuing changes in IT, evolving standards and changing client preferences. The Company's success depends to a significant degree upon continued contributions of members of the Company's senior management and other key research and development and sales and marketing personnel. The Company has not entered into employment agreements with its senior management and other key personnel that provide for restrictions on such persons leaving the Company. The loss of any of such persons could have a material adverse effect on the Company's business, financial condition and results of operations. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION OVERVIEW SolutionNet develops and markets proprietary multi-application IT solutions. Its proprietary software products include ENet Banking, IDM, E-Business Kits and EMI for the financial services, telecommunications and health care markets. Its IT services consist of consulting (generally providing SolutionNet staff to act as consultants at its customers' facilities) and developing new software or new functions for existing software applications for its customers. Revenue from the sale of the software product is recognized upon delivery to the customer, providing no significant Company obligations remain and collection of the resulting receivable is probable. Revenue from consulting services is recognized in the period in which the services are rendered. Revenue under distributor agreements is recognized upon shipment of the software products providing no significant Company obligations remain and collectibility is probable. Currently, SolutionNet markets its products and services in the Asia Pacific region, the Middle East and India. Future markets for SolutionNet products and services may include Australia, the United Kingdom and the United States. 13 14 RESULTS OF OPERATION-YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999 The following table sets forth certain items reflected in our consolidated statements of operation expressed as a percent of total revenues for the periods indicated.
Year Ended December 31, ----------------------- 1999 2000 Revenues: Software sales 29% 43% Services 71 57 ------ ------ Total revenues 100 100 ------ ------ Cost of Revenues: Cost of Software sales 25 8 Cost of Services 48 43 ------ ------ Total cost of revenues 73 51 ------ ------ Gross Profit 27 49 ------ ------ Operating expenses: Amortization of Product development 6 9 Sales and marketing 14 19 General and administrative 15 25 ------ ------ Total operating expenses 35 53 ------ ------ Operating (loss) income (8) (4) Others, net -- 1 ------ ------ (loss) Income before income taxes (8) (3) Income tax provision -- -- ------ ------ Net (loss) income (8) (3) ====== ======
14 15 2000 Compared to 1999 Revenues: Our total revenues increased 63% to $3.67 Million for 2000 from $2.25 Million for 1999 and consisted of an increase in software sales revenue of $919,418 or 142% and an increase in services revenue of $501,763 or 31%. The 142% increase in our software sales revenue is primarily a result of new customers for our ENet Banking product. The 31% increase in services revenue is a result of growth from both existing and new customers. For the year ended December 31, 2000, approximately 83% of our services revenues were generated from existing customers. Cost of Revenues: Our cost of software sales has decreased $282,593 or 49% on a year to year basis while revenues increased by 142%. The gross profit percentage is 82% in 2000 compared to 12% in 1999. The increased gross profit is due primarily to the timing of revenue recognition and more efficient implementation due to experience with our product. Cost of Services during 2000 increased $501,879 or 47% on a year to year basis. Cost of services as a percent of services revenue was 75% in 2000 compared to 67% in 1999. The increase in cost of services as a percentage of revenue is primarily attributed to an increase in personnel. Operating Expenses: Our cost of amortization of product development for the year was $343,849 in 2000 compared to $131,005 in 1999, which represents an increase of $212,844 or 162% on a year-to-year basis. The increase in the amortization is primarily because of enhancements to the products, the costs of which are added to the original cost of product development. Sales and Marketing expenses consist primarily of salaries, employee-related benefit costs and commissions of sales and marketing personnel, travel and entertainment and marketing related expenditures for exhibitions and trade shows. Sales and marketing expenses for the year were $708,927 in 2000 as compared to $315,835 in 1999, which represents an increase of $393,092 or 124% year to year. The increase in sales and marketing expense is primarily a result of the cost of additional sales and marketing personnel and travel. General and administrative expenses consist primarily of salaries and employee related benefits of management, administration and support staff, office and rental and professional service fees. General and administrative expenses for the year were $905,721 in 2000 as compared to $337,233 in 1999, which represents an increase of $568,488 or 169% year to year. The increase in general and administrative expense is primarily a result of expansion of the management team and new operations in the Middle East. 15 16 LIQUIDITY AND CAPITAL RESOURCES We have generally funded our operations through a combination of cash from operations, borrowings from related parties, and the issuance of shares of common stock. Net cash used in operating activities was ($2.45) million and ($896,039) for the years ended December 31, 2000 and 1999, respectively. The decrease in cash provided by operations in 2000 was primarily due to increased investments in marketing of our products and software development costs. The principal use of cash for investing activities during the two years ended December 31, 2000 was for the purchase of computer equipment. Net cash provided by financing activities was $3 Million and $963,000 for the years ended December 31, 2000 and 1999, respectively. The increase was primarily due to funds received from the issuance of common stock and borrowings from related parties. Most of our revenues are billed in Singapore dollars. We recognize transaction gains and losses in the period of occurrence. Foreign currency fluctuations in 2000 and 1999 did not have a material impact on income (loss) from operations as currency fluctuations on revenue denominated in a foreign currency were offset by currency fluctuations on expenses denominated in a foreign currency. There were no material operating trends or effects on liquidity as a result of fluctuations in the functional currency. We do not generally use any types of derivatives to hedge against foreign currency fluctuation, nor do we speculate in foreign currency. There is no assurance that exchange rate fluctuations may not cause significant fluctuations in SolutionNet's results of operations. Inflation did not have a material impact on our revenues or income (loss) from operations for the years ended December 31, 2000 and 1999. RESULTS OF OPERATION- SIX MONTHS ENDED JUNE 30, 2001 COMPARED WITH SIX MONTHS ENDED JUNE 30, 2000 The following tables set forth certain items reflected in our consolidated statements of operation expressed as a percent of total revenues for the periods indicated.
Six Months ended June 30, ------------------------- 2000 2001 Revenues: Software sales 19% 16% Services 81 84 ----- ----- Total revenues 100 100 ----- ----- Cost of Revenues: Cost of Software sales 7 8 Cost of Services 56 59 ----- ----- Total cost of revenues 63 67 ----- ----- Gross Profit 37 33 ----- ----- Operating expenses: Amortization of Product development 11 15 Sales and marketing 24 22 General and administrative 15 41 ----- ----- Total operating expenses 50 78 ----- ----- Operating (loss) income (13) (45) Others, net -- -- ----- ----- (loss) Income before income taxes (13) (45) Income tax provision -- -- ----- ----- Net (loss) income (13) (45) ===== =====
Revenues: Our total revenues increased 13% to $1.5 Million for the six months ended June 30, 2001 from $1.3 Million for the six months ended June 30, 2000 and consisted of a decrease in software sales revenue of $4,075 or 2% and an increase in services revenue of $175,991 or 16%. The 16% increase in service revenue is a result of growth from both existing and new customers. For the six months ended June 30, 2001, approximately 72% of our services revenue was generated from existing customers. Cost of Revenues: Our cost of software sales has increased $16,895 or 17% on a comparison of the six months ended June 30, 2001 to the six months ended June 30, 2000. The cost of software sales as a percent of software sales revenue was 16% for the six months ended June 30, 2001 compared to 19% for the six months ended June 30, 2000. The increase in cost of software sales was primarily due to delays in implementation of certain projects. 16 17 Cost of Services for the six months ended June 30, 2001 increased $144,248 or 19% over the six months ended June 30, 2000. Cost of services as a percent of services revenue was 70% for the six months ended June 30, 2001 compared to 68% for the six months ended June 30, 2000. The increase in cost of services as a percentage of revenue is primarily attributed to an increase in personnel. Operating Expenses: Our cost of amortization of product development for the six months ended June 30, 2001 was $226,989 compared to $148,218 for the six months ended June 30, 2000, which represents an increase of $78,771 or 53%. The increase in the amortization is primarily because of enhancements to the products, the costs of which are added to the original cost of product development. Sales and Marketing expenses consist primarily of salaries, employee-related benefit costs and commissions of sales and marketing personnel, travel and entertainment and marketing related expenditures for exhibitions and trade shows. Sales and marketing expenses for the six months ended June 30, 2001 were $332,898 as compared to $325,164 for the six months ended June 30, 2000, which represents an increase of $7,734 or 2%. The small increase in sales and marketing expense is primarily a result of the cost of additional marketing promotion expenses. General and administrative expenses consist primarily of salaries and employee related benefits of management, administration and support staff, office and rental and professional service fees. General and administrative expenses were $617,304 for the six months ended June 30, 2001 as compared to $195,187 for the six months ended June 30, 2000, which represents an increase of $422,117 or 216%. The increase in general and administrative expense is primarily due to increased professional fees and increased management expenses compared to the June 30, 2000. LIQUIDITY AND CAPITAL RESOURCES We have generally funded our operations through a combination of cash from operations, borrowings from related parties, and the issuance of shares of common stock. Net cash used in operating activities was ($409,607) and ($268,243) for the six months ended June 30, 2001 and 2000, respectively. The decrease in cash provided by operations for the six months ended June 30, 2001 is primarily due to increased investments in marketing of our products and software development costs. The principal use of cash for investing activities during the six months ended June 30, 2001 and 2000 was for the purchase of computer equipment. Net cash provided by financing activities was $35,005 and 798,493 for the six months ended June 30, 2001 and 2000, respectively. The decrease for the six months ended June 30, 2001 was due to no issuance of common stock and less funds received from related party borrowings. Most of our revenues are billed in Singapore dollars. We recognize transaction gains and losses in the period of occurrence. Foreign currency fluctuations for the six months ended June 30, 2001 and 2000 did not have a material impact on income (loss) from operations as currency fluctuations on revenue denominated in a foreign currency were offset by currency 17 18 fluctuations on expenses denominated in a foreign currency. There were no material operating trends or effects on liquidity as a result of fluctuations in the functional currency. We do not generally use any types of derivatives to hedge against foreign currency fluctuation, nor do we speculate in foreign currency. There is no assurance that exchange rate fluctuations may not cause significant fluctuations in SolutionNet's results of operations. Inflation did not have a material impact on our revenues or income (loss) from operations for the six months ended June 30, 2001 and 2000 FUTURE CAPITAL NEEDS Our ability to obtain cash adequate to fund our needs depends generally on the results of our operations and the availability of financing. Management believes that cash flow from operations, in conjunction with possible additional issuances of common stock will be sufficient to fund capital expenditures in the future. However, there can be no assurance in this regard or that we can successfully sell our shares of common stock or that the prices we can receive from the possible sale of our common stock will be favorable to SolutionNet. RISK FACTORS In addition to the risks discussed in "Part I-Description of Business," we are subject to the risks and uncertainties described below. The risks and uncertainties described below and in "Part I-Description of Business" are not the only ones facing us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations. If any of the following risks actually occur, our business could be harmed and the trading price of our common stock could decline. Product Risks. Our revenues and operating results can vary from quarter to quarter depending on a number of factors including: - the upgrading of our current products and introduction of new products; - the timing and introduction or enhancements of the products and services of our competitors; - the mix of products sold by us; - changes in our pricing policies or the pricing policies of our competitors; and - customer order deferrals in anticipation of new products or enhancements by us or our competitors. Macro-Economic Conditions. Our sales may be subject to macro-economic conditions that could have an effect on the willingness of our customers and prospects to make large capital spending decisions. The current macro-economic forecast for the United States, Singapore and some other countries indicate an economic slowdown. Many companies have issued public announcements regarding workforce and spending reductions. Because of these corporate pronouncements and economic conditions, our customers may defer capital spending decisions that could negatively affect our revenue and operating results. 18 19 Product and Service Marketplace. Our products and services facilitate online commerce and communication over public and private networks. The market for these products and services is in its relatively early stages of development. If Internet commerce does not continue to grow or grows more slowly than expected, it could negatively affect our revenue and operating results. International Operations. Our international activities expose us to additional risks. In the year ended December 31, 2000, all our revenues were derived from sales outside of North America. A key component of our business strategy is to expand our international activities. As we continue to expand internationally, we will be increasingly subject to risks of doing business internationally, including: - unexpected changes in regulatory requirements; - export controls relating to encryption technology and other export restrictions; - tariffs and other trade barriers; - difficulties in staffing and managing foreign operations; - political and economic instability; - fluctuations in currency exchange rates; - reduced protection for intellectual property rights in some countries; - cultural barriers; - seasonal reductions in business activity during the summer months in Middle East and certain other parts of the world; and - potentially adverse tax consequences. Product Defects. Sophisticated software products, like those sold by us, may contain undetected errors that will not become apparent until after the products are introduced or when the volume of provided services increases. It is possible that, despite testing by our prospective customers and us, errors will be found in our products. Product defects could result in all or any of the following consequences to our business: - loss of revenues; - delay in market acceptance; - diversion of development resources; - damage to our reputation; and - increased service and warranty costs. Dependence on Executive Officers and Key Employees. Our performance substantially depends on the performance of our executive officers and key employees. The loss of the services of any of our executive officers or key employees could cause us to incur increased operating expenses and divert senior management resources in searching for replacements. We do not carry "key person" life insurance policies on any of our employees. Our future success also depends on our continuing ability to identify, hire, train and retain other highly qualified technical and managerial personnel. Competition for these personnel is intense, especially in the Internet industry. We have in the past experienced, and may continue to experience, difficulty in hiring and retaining sufficient numbers of highly skilled employees. ITEM 3. DESCRIPTION OF PROPERTY. SolutionNet's principal U.S. office is located at 1594 Centre Pointe Drive, Milpitas, California 95035. The lease of this office expires in October 2001. SolutionNet's Singapore office is located at No. 1 Shenton Way, Number 22-06/09, Singapore 068803. The lease of this office, which is approximately 5,930 square feet, expires in August 2002. SolutionNet does not own any real estate properties and has no agreements to acquire any such properties at this time. 19 20 ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth the number and percentage of outstanding shares of Company Common Stock beneficially owned by (i) each person known by the Company to own more than 5.0% of its outstanding Common Stock; (ii) each of the directors of the Company; (iii) each of the named executive officers in Part I-Item 6; and (iv) all officers and directors as a group.
NAME AND ADDRESS AMOUNT OWNED PERCENT TITLE OF CLASS OF BENEFICIAL OWNER OF RECORD OF CLASS - -------------- ------------------- --------- ---------- Common Suresh Venkatachari 7,100,000 56.3% Blk 223 #06-475 Yishun St. 21 Singapore, 760223 Common Sampath Seshadri 200,000(1) 1.6% 6592 Burtonwood Dr. West Bloomfield, MI 48322 Common Murali Natarajan 0 0 No. 1 Shenton Way Number 22-06/09 Singapore, 068803 Common Karthikeyan Raman 5,000 -- (2) No. 1 Shenton Way Number 22-06/09 Singapore, 068803 Common Sara Hallitex Corporation(3) 1,730,000(4) 13.7% 4344 Promenade Way Suite 102P Marina del Rey, CA 90292 Officers and Directors as a Group (5 persons) 7,305,000(5) 57.9%(5)
- --------------- (1) Mr. Seshadri is the owner of record of 100,000 shares of common stock and his wife is also the owner of 100,000 shares of common stock. (2) Represents less than 1.0% of the outstanding shares. (3) It is the Company's belief that Sara Hallitex Corporation changed its name to Web Capital Ventures, Inc. ("Web Capital"). The Company is also of the belief that Garrett K. Krause, the President and Chief Executive Officer of Web Capital controls a majority of the outstanding shares of Web Capital. In addition, based on an SEC filing of Web Capital in January 2000, Mr. Krause controls an additional 541,000 shares (4.1%) of SolutionNet. (4) These shares are the subject of litigation brought by SolutionNet against Web Capital, Garrett K. Krause and others. See "Part II - Item 2. Legal Proceedings." (5)As disclosed below, officers and directors as a group hold options for 187,000 shares. 20 21 ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS The following is a list of the names and ages of all directors and executive officers of the Company: DIRECTORS AND EXECUTIVE OFFICERS
NAME AGE POSITION HELD SINCE Suresh Venkatachari 33 Chairman of the Board, March 1999 President, Chief Executive Officer, Treasurer, Secretary and Director Sampath Seshadri 46 Vice-President and Director April 1999 Murali Natarajan 43 Vice President (Finance) April 2001 TRV Varadarajan 42 Head of Human Resources April 2001 and Administrator Karthikeyan Raman 27 Assistant Vice President April 2001 and Chief Technology Officer
SURESH VENKATACHARI has served as the Chairman of the Board, Director, President, and Chief Executive Officer of the Company since March 1999. Mr. Suresh founded SolutionNet (Asia Pacific) in 1994. Mr. Suresh is also the Director and Chief Executive Officer of SolutionNet (Asia Pacific). From April 1991 to May 1996, Mr. Venkatachari was a Project and Implementation Manager with Deutsche Bank, responsible for the development and implementation of electronic banking. From May 1988 to March 1991, Mr. Venkatachari was an independent IT consultant. Two of his clients included Singapore Airlines and Systime Corporation. Mr. Venkatachari obtained his bachelor's degree in electronics and instrumentation from Annamalai University, India in 1988. SAMPATH SESHADRI has served as Vice-President and Director of the Company since April 1999. Mr. Seshadri is responsible for strategic planning, financial and business operations. Since January 1996, Mr. Seshadri has also been the President and CEO of VED Software Services, Inc., a Michigan corporation (consulting and IT services). From June 1992 to December 1995, Mr. Seshadri was vice president of HTC Global Services, Inc., a Michigan corporation (formerly Hi-Tech Consultants, Inc.) (consulting and programming services). Prior to this time, Mr. Seshadri was a consultant in the IT field providing services to Fortune 1000 companies. 21 22 Mr. Seshadri holds a bachelors' and masters' degree from the University of Bombay. Mr. Seshadri and Mr. Venkatachari are brothers-in-law. MURALI NATARAJAN, has been serving as the Vice President of Financial Operations of the Company (since April 2001) and of SolutionNet ((Asia Pacific)) (since February 1999). He is responsible for all of the operational aspects of SolutionNet (Asia Pacific) and is part of the core management group that is responsible for strategic management of the Company. From July 1995 to February 1999, Mr. Natarajan worked for Interactive Media Services Pte Ltd as a Finance and Administrative Manager. From December 1993 to May 1995, Mr Natarajan worked for KM Oli Mohamed Pte Ltd (jewelry company). A management accountant by profession, Mr. Natarajan is a member of the Institute of Cost and Works Accountants of India and a Certified Internal Auditor, US. Mr. Natarajan received his Bachelor of Commerce Degree from Vivekananda College, Madras University, India. TRV VARADARAJAN, has been serving as the head of Human Resource and Administration of the Company (since April 2001) and of SolutionNet ((Asia Pacific)) (since August 1998). From June 1979 to June 1998, Mr. Varadarajan was employed by S&S Power Switchgear Ltd, Chennai, India in the areas of management control of finance and accounts, human resource management, commercial operation and general business administration. Mr. Varadarajan has obtained an Honors Degree in Commerce from Annamalai University, India. Mr. Varadarajan is also a Professional Cost Accountant and has received various certifications in Application Software Technology. KARTHIKEYAN RAMAN, has been serving the Company (since April 2001) and SolutionNet (Asia Pacific) since May 2000) as Assistant Vice President and Chief Technology Officer. In this capacity, he is responsible for strategic technology initiatives, standards, program management, and the design, development and operation of various SolutionNet products and new product research. Innovation is his top priority so that SolutionNet products incorporate state-of-the-art technology. From July 1995 to May 2000, Mr. Raman held key technical positions in the Electronic Banking Department of Deutsche Bank Regional Head office, Singapore. He has pioneered the design and development of the Electronic Banking software db-direct in both Client-Server and Web based Internet Architectures. From March 1993 to June 1995, Mr. Raman worked for Tata Consultancy Services, India as a systems analyst. Mr. Raman holds a Master's degree in Computer Science from Birla Institute of Technology and Science, Pilani, India and a Bachelor's degree in Computer Science from Bharathiyar University, India. 22 23 ITEM 6. EXECUTIVE COMPENSATION. The following table sets forth the aggregate annual remuneration of each of the three highest paid persons who are officers or directors during the Company's year ended December 31, 2000. ANNUAL COMPENSATION
CAPACITIES IN REMUNERATION 2000 AGGREGATE NAME OF INDIVIDUAL REMUNERATION WAS RECEIVED REMUNERATION - ------------------ ------------------------- ------------ Suresh Venkatachari Chairman of the Board, $100,000 President, Chief Executive Officer, Treasurer, Secretary and Director Murali Natarajan Vice President (Finance) $ 38,889 Karthikeyan Raman Assistant Vice President $ 25,679(1) and Chief Technology Officer Officers and Directors $191,260 As a Group (5 persons)
(1) Started employment with SolutionNet (Asia Pacific) in May 2000. EMPLOYMENT AGREEMENTS Mr. Suresh Venkatachari. SolutionNet and Mr. Venkatachari entered into a 2 year employment agreement which expires on May 1, 2003. The agreement provides that Mr. Venkatachari will serve as Chairman of the Board, President and Chief Executive Officer of SolutionNet at an annual salary of $100,000 in the first year and $150,000 in the second year plus, depending upon SolutionNet's performance, a minimum bonus at 50% of his annual salary and will receive options to purchase shares of common stock in numbers as determined by the Board of Directors. The employment agreement also provides that if Mr. Venkatachari's employment is terminated (with or without cause) or if he resigns because of a material change in the scope of his duties or because of a change in control of SolutionNet, he would be entitled to severance payments in an amount equal to his base salary plus his bonus for the preceding year or an imputed bonus of 50% of base salary if he is discharged or suffers a material change in his duties prior to a bonus being established for the prior year. Such severance payments shall be payable for the unexpired term of the agreement or twelve months, whichever is longer. Mr. Murali Natarajan. SolutionNet (Asia Pacific) and Murali Natarajan entered into an employment agreement dated February 1, 1999. Mr. Natarajan's annual salary is $38,889 (U.S.). Either party may terminate the contract by giving thirty (30) days' notice or equivalent salary in lieu thereof. In addition, SolutionNet (Asia Pacific) may terminate 23 24 the agreement without notice if Mr. Natarajan does not perform his duties or is found guilty of any personal misconduct or of any willful breach and continues to neglect the terms of his employment or any other duties or terms that SolutionNet (Asia Pacific) may from time to time assign. Mr. Karthikeyan Raman. SolutionNet (Asia Pacific) and Karthikeyan Raman entered into a letter of employment dated May 29, 2000. Mr. Raman's salary is $45,495 (U.S.) and is reviewed annually. Either party may terminate the contract by giving 30 days' notice or equivalent salary in lieu thereof. In addition, SolutionNet (Asia Pacific) may terminate the agreement without notice if Mr. Raman does not perform his duties or is found guilty of any personal misconduct or of any willful breach and continues to neglect the terms of his employment or any other duties or terms that SolutionNet (Asia Pacific) or its clients may from time to time assign. Mr. Raman also agrees that he will not directly or indirectly solicit and/or accept an offer for employment from the clients of SolutionNet (Asia Pacific) or join a competitor's company within one year after termination of his employment. 2001 EQUITY PARTICIPATION PLAN On April 26, 2001, the Board of Directors approved SolutionNet's 2001 Equity Participation Plan (the "Equity Participation Plan"). The Equity Participation Plan reserves 1,500,000 shares of Common Stock of the Company for issuance thereunder. The Equity Participation Plan authorizes the Compensation Committee or the Board of Directors ("Committee") to grant incentive and non-statutory stock options as well as restricted stock. Officers, consultants, and other employees (including employee directors) of SolutionNet and its subsidiaries and affiliates whom the Committee believes have the potential to contribute to the future success of SolutionNet, and those non-employee directors who the Board of Directors believes have the potential to contribute to the future success of SolutionNet, are eligible to receive awards under the Equity Participation Plan. In the event of a stock dividend, stock split, reorganization, merger, or similar corporate transaction (other than a change in control), the Committee is authorized to make appropriate adjustments to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Equity Participation Plan or with respect to an outstanding award. In the event of a change in control, each option granted shall become exercisable as to all shares covered thereby immediately prior to the consummation of such change in control and the restrictions included in any restricted stock grant shall be deemed rescinded and terminated. The Equity Participation Plan may be wholly or partially amended or modified, suspended or terminated at any time from time to time by the Committee. However, without approval of SolutionNet's shareholders given within twelve months before or after the action by the Committee, no action of the Committee may, except as otherwise provided in the Equity Participation Plan, be taken that would require shareholder approval as a matter of law, regulation or rule. No amendment, suspension or termination of the Equity Participation Plan shall, without the consent of the participants, alter or impair any rights or obligations under any award therefor granted, unless the award itself expressly so provides. 24 25 The Equity Participation Plan is administered by the Committee. Among other things, the Committee has the power to interpret the Equity Participation Plan, the stock option agreements issued thereunder and the agreements pursuant to which restricted stock awards are granted. Under stock option agreements entered into between SolutionNet and participants, stock options generally vest over a two and one-half year period; 33.3% six months from the date of grant, and 33.33% each year thereafter. OPTIONS, WARRANTS AND RIGHTS The following table sets forth the amount of options, warrants or rights held by the persons listed. Neither Densmore nor Garrett Krause own any outstanding options, warrants or rights. The Company terminated warrant rights previously provided to Sara Hallitex Corporation pursuant to contract, however, see "Part II - Item 2" with respect to the cross-complaint filed by Web Capital.
NAME TITLE AND AMOUNT OF DATE OF COMMON STOCK CALLED FOR BY EXERCISE OF HOLDER OPTIONS, WARRANTS OR RIGHTS PRICE EXERCISE ------ --------------------------- ----- -------- Suresh Venkatachari 100,000(1) $ 0.27 2 Sampath Seshadri 25,000 $ 0.27 2 Murali Natarajan 25,000(1) $ 0.27 2 Karthikeyan Raman 12,000(1) $ 0.27 2 Officers and Directors as a Group 187,000(1) $ 0.27 2 (5 persons)
- ------------------------------- (1) Options granted under 2001 Equity Participation Plan. (2) Options vest as follows: one-third on October 27, 2001, one-third on October 27, 2002 and one-third on October 27, 2003 ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. During the year ended December 31, 2000, SolutionNet (Asia Pacific) entered into a consulting agreement dated as of March 1, 2000 (which replaced an earlier agreement entered into in April 1999) with Netsavvy Solutions PVT LTD, a corporation organized under the laws of the Commonwealth of India ("Netsavvy"), and also entered into a "recruitment" agreement with Netsavvy dated October 1, 2000. Under the consulting agreement, Netsavvy agrees to design, develop and support certain software (including Enet - Corporate Internet Banking and EMI - Electronic Medical Info and to provide technical support for and maintenance of the software. The agreement was for a one-year period, but remains in effect on a month to month basis. Under the recruitment agreement, Netsavvy agrees to retain recruiters to recruit IT consultants. The recruitment agreement is in effect for one year and may be extended upon the agreement of the parties. Either party may terminate the recruitment agreement on one month's notice. Also, on May 2, 2000 SolutionNet and Netsavvy entered into a distributorship agreement pursuant to which Netsavvy acts as non-exclusive distributor for India and South Asian countries. The terms of the distributorship agreement are generally the same as those disclosed in "Part I - Item 1. Description of Business - Marketing and Distribution. Suresh Venkatachari, the CEO of the Company, is a director of Netsavvy and owns 35% of the outstanding shares of NetSavvy. During the years ended December 31, 2000 and 1999, the Company paid Netsavvy $199,394 (U.S.) and $401,771 (U.S.), respectively, for such services. 25 26 During the year ended December 31, 2000, SolutionNet (Asia Pacific) entered into a supply agreement dated August 31, 2000, with GVMS Online Pte Ltd., a corporation organized under the laws of the Republic of Singapore ("GVMS"). Under the supply agreement, SolutionNet (Asia Pacific) developed a global voice mails system for GVMS. Murali Natarajan and TRV Varadarajan are directors and each owns 50% of the outstanding shares of GVMS. The terms of the contract require payment of $102,773 (U.S.). Through December 31, 2000, SolutionNet (Asia Pacific) has received $27,266 (U.S.) from GVMS. Management believes that the terms and conditions of the engagements are fair and comparable to those which could have been obtained from independent parties. In 1999, Suresh Venkatachari, the President and CEO of the Company, made an interest-free loan of $119,000 to the Company. The loan arrangement is not in writing and the loan is still outstanding. On October 1, 1999, SolutionNet and SolutionNet (Europe), a corporation organized under the laws of the United Kingdom entered into a loan agreement. Under the agreement, SolutionNet is to provide a three-year interest-free loan of not more than $150,000 (U.S.) to SolutionNet Europe. Under the agreement, SolutionNet (Europe) is to provide assistance to SolutionNet in business development, marketing and the sales of SolutionNet's products in the United Kingdom and Europe during the first two years of the agreement without cost to SolutionNet. No loans were made under the agreement in 1999. The largest aggregate amount outstanding during the year ended December 31, 2000 was $93,827 (U.S.). The loan has been and is being used for working capital purposes. Suresh Venkatachari is a director and owner of 50% of the outstanding shares of SolutionNet (Europe). The Company and SolutionNet (Europe) may consider some type of business combination in the future. ITEM 8. DESCRIPTION OF SECURITIES. GENERAL MATTERS The authorized capital stock of SolutionNet consists of 20,000,000 shares of Common Stock, $0.001 par value per share, and 5,000,000 shares of Preferred Stock, $0.001 par value per share ("Preferred Stock"). As of July 19, 2001, there were 12,618,009 shares of Common Stock outstanding and 551 holders of record. No shares of Preferred Stock are issued and outstanding. The following summary of certain provisions of the Company's capital stock describes certain material provisions of, but does not purport to be complete and is subject to, and qualified in its entirety by, the Articles of Incorporation, as amended, and the Bylaws, as amended, of SolutionNet and by the provisions of applicable law. COMMON STOCK Subject to the prior rights of the holders of any Preferred Stock, the holders of outstanding shares of Common Stock are entitled to receive dividends out of assets legally available therefor at such times and in such amounts as the Board may from time to time determine. The shares of Common Stock are not redeemable or convertible, and the holders thereof will have no preemptive rights or subscription rights to purchase any securities of the Company. Upon liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to receive pro rata the assets of the Company 26 27 which are legally available for distribution, after payment of all debts and other liabilities and subject to prior rights of any holders of Preferred Stock then outstanding. Each outstanding share of Common Stock is entitled to vote on all matters submitted to a vote of stockholders. PREFERRED STOCK The Board may, without further action by the Company's stockholders, from time to time, direct the issuance of shares of Preferred Stock in series and may, at the time of issuance, determine the rights, preferences and limitations of each series. Satisfaction of any dividend preferences of outstanding shares of Preferred Stock would reduce the amount of funds available for the payment of dividends on shares of Common Stock. Holders of shares of Preferred Stock may be entitled to receive a preference payment in the event of any liquidation, dissolution or winding up of the Company before any payment is made to the holders of shares of Common Stock. Under certain circumstances, the issuance of shares of Preferred Stock while providing desirable flexibility in connection with possible acquisitions, financing and other corporate transactions, may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of the Company's securities or the removal of incumbent management. The Board, without stockholder approval, may issue shares of Preferred Stock with voting and conversion rights which could adversely affect the holders of shares of Common Stock. 27 28 PART II ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND OTHER SHAREHOLDER MATTERS. The Company's common stock was quoted on the OTC Bulletin Board ("OTCBB") under the symbol "SLNN" until November 18, 1999. The Company's common stock is currently quoted on the Pink Sheets. The Company's common stock is no longer quoted on the OTCBB because only SEC reporting companies are permitted to be quoted on the OTCBB. The Company intends to have its common stock quoted on the OTCBB after it becomes an SEC reporting company, and to apply to have its common stock quoted for listing on Nasdaq as soon as it satisfies Nasdaq requirements. The following table sets forth for the periods indicated, the range of high and low closing bid quotations per share. The Company considers its Common Stock to be thinly traded and that any reported bid or sale prices may not be a true market-based valuation of the Common Stock. These quotations represent inter-dealer prices, without retail markups, markdowns or commissions and may not necessarily represent actual transactions. These bid quotations have been adjusted retroactively by the 1 for 40 reverse stock split during the first quarter of the year ended December 31, 1999.
PRICE PER SHARE --------------- HIGH LOW ---- --- Year Ended December 31, 1999 First Quarter .....................................$ 10.00 $ 1.00 Second Quarter ....................................$ 24.50 $ 0.35 Third Quarter .....................................$ 12.00 6.75 Fourth Quarter .................................... 6.75 2.50 Year Ended December 31, 2000 First Quarter .....................................$ 11.50 $ 2.75 Second Quarter .................................... 6.20 4.00 Third Quarter ..................................... 4.00 1.35 Fourth Quarter .................................... 1.75 0.27 Year Ended December 31, 2001 First Quarter .....................................$ 0.78 $ 0.09 Second Quarter ....................................$ 0.90 $ 0.16
On July 19, 2001, there were approximately 551 shareholders of record. Penny stock regulation broker-dealer practices in connection with transactions in "penny stocks" are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. Penny stocks generally are equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or 28 29 quoted on the NASDAQ system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risk associated with the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer must make a written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. At the time the Registration Statement becomes effective and the Company's securities become registered, the common stock may continue to have a trading price of less than $5.00 per share. If the Company's Stock is subject to the penny stock rules, investors may find it more difficult to sell their securities, should they desire to do so. The Company has not paid, nor does it anticipate paying dividends in the foreseeable future. The Company has never declared or paid any cash dividends on the Common Stock. The Company currently intends to retain any earnings to finance operations and expansion and, therefore, does not anticipate declaring or paying any cash dividends on the Common Stock in the foreseeable future. Future cash dividends, if any, will be determined by the Board and will be based upon the Company's earnings, capital requirements, financial conditions and other factors deemed relevant by the Board. There are currently 629,750 shares of Common Stock which are subject to outstanding options to purchase the Company's Common Stock under the 2001 Equity Participation Plan. There are 12,618,009 shares of Common Stock of the Company outstanding, of which approximately 10,981,184 shares are restricted Common Stock of the Company, of which approximately 10,981,184 restricted shares are more than two years old that may be able to be sold under Rule 144(k) under the Securities Act by non-affiliates of the Company. Additionally 440,500 shares are subject to a registration rights agreement which permits the holders to cause the Company to register their shares for sale pursuant to a registration statement filed by the Company under the Securities Act at any time after the Company becomes a reporting company under the Securities Exchange Act of 1934. Except with respect to those shares subject to a registration rights agreement, there is currently no Common Stock that is being or is proposed to be publicly offered by the Company, the offering of which could have a material effect on the market price of the Company's Common Stock. The Transfer Agent for the shares of common voting stock of the Company is Corporate Stock Transfer, 3200 Cherry Creek Drive, Suite 430, Denver, CO 80201. 29 30 ITEM 2. LEGAL PROCEEDINGS. The Company is, from time to time, a party to litigation arising in the normal course of its business. Management believes that none of these actions, including the cross-complaint disclosed below, individually or in the aggregate, will have a material adverse effect on the financial position or result of operations of the Company. On December 4, 2000, the Company brought an action entitled SolutionNet International, Inc. v. Garrett Krause, FutureVest Corporation, Omnimark, Ltd., Rancho La Playa Investment Ltd., Wilmington Partners XI LLC, Wilmington Rexford, Inc., Web Capital Ventures, Inc. and WorldVest Holding Corporation in the Superior Court of the State of California. On March 29, 2001, the Court dismissed FutureVest Corporation, Omnimark, Ltd., Rancho La Playa Investment Ltd. and WorldVest Holding Corporation for lack of jurisdiction. In this litigation, the Company has alleged that, among other things, Krause breached fiduciary duties to the Company by issuing 920,000 Company shares and 1,730,000 Company shares to Web Capital (formerly Sara Hallitex) and by issuing 1,500,000 shares of stock to five companies. At the time of the exchange agreement (See "Item 1: Description of Business - Company History"), Mr. Krause was an officer and director of SolutionNet and the President of Web Capital. (He was removed as an officer and director of SolutionNet in August 2000.) Prior to the exchange agreement, Densmore had entered into an agreement with Web Capital pursuant to which, among other things, (1) Web Capital was to receive 920,000 restricted shares of SolutionNet common stock for providing certain services and (2) Web Capital was to receive 1,730,000 restricted shares of SolutionNet common stock in connection with arranging the placement of 1,000,000 shares of the Company's common stock at $2.00 per share. Instead, the Company has alleged that Web Capital did not provide the requisite services and placed 1,500,000 shares at $0.66 per share. The Company is seeking the return of the 920,000 and the 1,730,000 shares and compensation from Web Capital and Garrett Krause for selling more shares for a lower price than was agreed to. Garrett Krause, Web Capital and certain of the defendants have filed an answer denying their liability, and Garrett Krause and Web Capital have filed a cross-complaint for breach of contract and misrepresentation and are seeking damages in an amount to be determined and punitive damages. The Company believes such cross-complaint is without merit and intends to defend itself vigorously. ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS. None. ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES. During the past three years, the Company has sold securities which were not registered under the Securities Act of 1933 as follows: On March 4, 1999, the Company privately placed 44,700 restricted shares (1,788,000 shares prior to 1 for 40 reverse stock split) to seven persons (two individuals and 30 31 five entities for an aggregate of $26,600. The two individuals were spouses of former officers and directors of SolutionNet, which officers and directors also controlled the five entities receiving shares. There were no underwriters involved in the sales and no commissions were paid in connection with the private placement. The issuer relied on the exemption from registration under Section 4(2) of the Securities Act of 1933 (the "Securities Act"). On March 31, 1999, the Company privately placed 10,500,000 shares to four persons. 7,750,000 restricted shares were issued to Densmore in connection with an exchange agreement resulting in Densmore and its 100% owner, Suresh Venkatachari, obtaining control of the Company. See "Part I - Item 1. Description of Business - Company History." In connection with the exchange agreement, Web Capital received 920,000 restricted shares. As noted above, Web Capital also received 1,730,000 shares in connection with the sale of the 1,502,500 shares. These shares are subject to the litigation described in "Part II - Item 2. Legal Proceedings." The balance of the shares were issued to two individuals who were already previous equity investors in the Company. The issuer relied on the exemption from registration under Section 4(2) of the Securities Act. On April 1 and April 5, 1999, the Company sold 1,502,500 shares to five persons: FutureVest Corporation, (500,000 shares), Wilmington Partners XI LLC (500,000 shares), WSY Ltd (250,000 shares), Omnimark Ltd. (250,000 shares), Omnimark Ltd. (250,000 shares) and Iwona Alami (2,500 shares) for an aggregate of $991,650. The issuer relied on the exemption from registration under Section 504 of Regulation D of the Securities Act. The shares were placed by Web Capital. In its litigation against Garrett Krause and Web Capital (See "Part II - Item 2. Legal Proceedings"), the Company has alleged that Garrett Krause, the President of Web Capital, breached his fiduciary duty to the Company by causing the Company, in his capacity as an officer of the Company, to issue Web Capital 1,730,000 shares in connection with the sale of the 1,502,500 shares. During the year ended December 31, 2000, the Company privately placed 440,500 restricted shares to five accredited investors who are not U.S. residents or citizens for an aggregate of $1,762,000. The placement took place outside of the United States. Commissions of $176,200 were paid to a non-U.S. person for such placement. The issuer relied on the exemption from registration under Regulation S and Section 4(2) of the Securities Act. ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS. LIMITATIONS ON LIABILITIES AND INDEMNIFICATION OF OFFICERS AND DIRECTORS The Articles of Incorporation provide that no director shall be liable to the Company or any shareholder for monetary damages for breach of fiduciary duty as a director, except: (a) for any breach of the director's duty of loyalty or its shareholders; (b) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law; (c) under Section 302A.559 or 80.A.23 of the Minnesota Business Corporation Act; (d) for any transaction from which the director derived an improper personal benefit; or (e) for any act or omission occurring prior to August 25, 1994. 31 32 The Company's Bylaws provide, consistent with Minnesota statutory law, that the Company shall indemnify a person made or threatened to be made a party to a proceeding by reason of the former or present official capacity of the person, against judgments, penalties, fines, including, without limitation, settlements and reasonable expenses, including attorneys' fees and disbursements, incurred by the person in connection with the proceeding, if with respect to the acts or omissions complained of in the proceeding, the person: (a) has not been indemnified by another organization with respect to the same acts or omissions; (b) acted in good faith; (c) received no improper personal benefit and Section 302A.255 of the Minnesota Business Corporation Act, if applicable, has been satisfied; (d) in the case of a criminal proceeding, had no reasonable cause to believe the conduct was unlawful; and (e) in the case of acts or omissions occurring in the official capacity of a person, such person, depending on the capacity, must reasonably believe that the conduct was in the best interest of the Company or must reasonably believe that the conduct was not opposed to the best interest of the Company. The termination of a proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent does not, of itself, establish that the person does not meet the criteria set forth herein. If a person is made or threatened to be made a party to a proceeding, the person is entitled, upon written request to the Company, to payment or reimbursement by the Company of reasonable expenses, including attorneys' fees and disbursements, incurred by the person in advance of the final disposition of the proceeding: (a) upon receipt by the Company of a written affirmation by the person of a good faith belief that the criteria for indemnification set forth herein have been satisfied and a written undertaking by the person to repay all amounts so paid or reimbursed by the Company, if it is ultimately determined that the criteria for indemnification have not been satisfied, and (b) after making a determination that the facts then known to those making the determination would not preclude indemnification. PART F/S INDEX TO FINANCIAL STATEMENTS The financial statements of the Company appearing in this Registration Statement for the years ended December 31, 2000 and 1999 have been audited by the Company's certified public accountants, KPMG, LLP. 32 33 INDEX TO FINANCIAL STATEMENTS SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES
PAGE Independent Auditors' Report F-2 Consolidated Balance Sheets as of December 31, 2000 and June 30, 2001 (unaudited) F-3 Consolidated Statements of Operations for the years ended December 31, 1999 and 2000 and the six-month periods ended June 30, 2000 and 2001 (unaudited) F-5 Consolidated Statements of Stockholders' Equity and Comprehensive Loss for the years ended December 31, 1999 and 2000 and the six-month periods ended June 30, 2000 and 2001 (unaudited) F-6 Consolidated Statements of Cash Flows for the years ended December 31, 1999 and 2000 and the six-month periods ended June 30, 2000 and 2001 (unaudited) F-7 Notes to Consolidated Financial Statements F-8
F-1 34 INDEPENDENT AUDITORS' REPORT The Board of Directors and Stockholders SolutionNet International, Inc. and Subsidiaries: We have audited the accompanying consolidated balance sheet of SolutionNet International, Inc. and subsidiaries as of December 31, 2000, and the related consolidated statements of operations, stockholders' equity and comprehensive loss, and cash flows for each of the years in the two year period then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of SolutionNet International, Inc. and subsidiaries as of December 31, 2000, and the results of their operations and their cash flows each of the years in the two year period then ended, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Detroit, Michigan May 31, 2001 F-2 35 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Balance Sheet December 31, 2000
(UNAUDITED) DECEMBER 31, June 30, 2000 2001 ------------ ----------- ASSETS Current assets: Cash and cash equivalents $ 521,808 $ 93,005 Accounts receivable - trade, less allowance for doubtful accounts of $212,780 and $218,723 at December 31, 2000 and June 30, 2001, respectively 1,418,986 1,504,660 Due from related parties (note 6) 585,318 428,110 Deposits and other assets 128,956 109,888 ------------ ----------- Total current assets 2,655,068 2,135,663 Property, plant and equipment (note 1): Computers and office equipment 205,658 216,156 Leasehold improvements 29,081 27,921 Furniture and fixtures 19,448 41,826 ------------ ----------- 254,187 285,903 Less accumulated depreciation and amortization 157,417 190,504 ------------ ----------- Net property, plant, and equipment 96,770 95,399 ------------ ----------- Software development costs, less accumulated amortization (note 3) 773,285 726,437 ------------ ----------- $ 3,525,123 2,957,499 ============ ===========
See accompanying notes to consolidated financial statements. F-3 36 SOLUTIONNET INTERNATIONAL INC. AND SUBSIDIARIES Consolidated Balance Sheet December 31, 2000
(UNAUDITED) DECEMBER 31, June 30, 2000 2001 ------------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Bank overdraft $ 63,819 126,297 Current installments of obligations under capital leases (note 2) 34,654 16,553 Trade accounts payable 265,165 283,720 Accrued expenses 136,114 286,498 Income taxes payable (note 4) 1,843 -- Deferred revenue 114,928 117,230 Due to related parties (note 6) 492,540 368,657 ----------- ----------- Total current liabilities 1,109,063 1,198,955 Obligations under capital leases, excluding current installments (note 2) 23,079 22,159 Deferred income taxes (note 4) 577 554 ----------- ----------- Total liabilities 1,132,719 1,221,668 ----------- ----------- Stockholders' equity: Preferred stock, $0.001 par value, 5,000,000 shares authorized; none issued and outstanding -- -- Common stock, $0.001 par value, 20,000,000 shares authorized; 12,618,009 shares issued and outstanding 12,618 12,618 Paid-in capital 2,608,182 2,608,182 Accumulated deficit (230,211) (900,558) Accumulated other comprehensive income -- foreign currency translation adjustment 1,815 15,589 ----------- ----------- Total stockholders' equity 2,392,404 1,735,831 ----------- ----------- $ 3,525,123 2,957,499 =========== ===========
F-4 37 SOLUTIONNET INTERNATIONAL INC. AND SUBSIDIARIES Consolidated Statements of Operations Years ended December 31, 1999 and 2000
(UNAUDITED) YEAR ENDED DECEMBER 31 SIX MONTH PERIOD ENDED JUNE 30 ---------------------- ------------------------------ 1999 2000 2000 2001 ---- ---- ---- ---- Revenues: Software sales 648,973 1,568,391 282,725 243,473 Consulting services 1,604,352 2,106,115 1,085,845 1,261,836 --------- --------- --------- --------- Total revenues 2,253,325 3,674,506 1,368,570 1,505,309 Costs of revenues: Costs of software sales 572,829 290,235 98,244 115,139 Costs of consulting services 1,074,047 1,575,926 740,785 885,033 --------- --------- --------- --------- Total cost of revenues 1,646,876 1,866,161 839,029 1,000,172 --------- --------- --------- --------- Gross profit 606,449 1,808,345 529,541 505,137 Operating expenses Amortization of software development costs 131,005 343,849 148,218 226,989 Sales and marketing 315,835 708,927 325,164 332,898 General and administrative 337,233 905,722 195,197 617,296 --------- --------- --------- --------- Total operating expenses 784,073 1,958,498 668,579 1,177,183 --------- --------- --------- --------- Operating loss (177,624) (150,153) (139,028) (672,046) Other income (expense) Interest income (expense) (562) (3,805) 86 1,699 Other income (expense) 5,194 24,532 (4,728) - --------- --------- --------- --------- Loss before income taxes (172,992) (129,426) (143,670) (670,347) Income tax expense (benefit) 10,676 (5,211) - - --------- --------- --------- --------- Net loss (183,668) (124,215) (143,670) (670,347) ========= ========= ========= ========= Basic loss per share (0.02) (0.01) (0.01) (0.05) ========= ========= ========= ========= Diluted loss per share (0.02) (0.01) (0.01) (0.05) ========= ========= ========= =========
See accompanying notes to consolidated financial statements. F-5 38 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Statements of Stockholders' Equity and Comprehensive Loss Years ended December 31, 1999 and 2000
PREFERRED COMMON PAID-IN STOCK SUBSCRIPTION STOCK STOCK CAPITAL RECEIVABLE ---------- ---------- ---------- ------------------ Balances at December 31, 1998 $ -- 7,880 72,751 -- Net loss -- -- -- -- Foreign currency translation loss -- -- -- -- Comprehensive loss -- -- -- -- Issuance of 1,547,200 shares, net of cash expenses of $323,881 -- 1,547 952,822 (260,000) Issuance of 2,750,000 shares in connection with ETGI merger (note 7) -- 2,750 (2,750) -- ---------- ---------- ---------- ---------- Balances at December 31, 1999 -- 12,177 1,022,823 (260,000) Net loss -- -- -- -- Foreign currency translation gain -- -- -- -- Comprehensive loss -- -- -- -- Stock subscription payment received 0 -- -- 260,000 Issuance of 440,500 shares, net of cash commission paid of $176,200 -- 441 1,585,359 -- ---------- ---------- ---------- ---------- Balances at December 31, 2000 $ -- 12,618 2,608,182 -- Net loss (unaudited) -- -- -- -- Foreign currency translation gain (unaudited) -- -- -- -- Comprehensive loss (unaudited) -- -- -- -- ---------- ---------- ---------- ---------- Balances at June 30, 2001 (unaudited) $ -- 12,618 2,608,182 -- ========== ========== ========== ==========
ACCUMULATED RETAINED OTHER EARNINGS COMPREHENSIVE TOTAL (ACCUMULATED INCOME STOCKHOLDERS' DEFICIT) (LOSS) EQUITY ------------ ------------- ------------- Balances at December 31, 1998 77,672 1,047 159,350 Net loss (183,668) -- (183,668) Foreign currency translation loss -- (2,566) (2,566) ---------- Comprehensive loss -- -- (186,234) ---------- Issuance of 1,547,200 shares, net of cash expenses of $323,881 -- -- 694,369 Issuance of 2,750,000 shares in connection with ETGI merger (note 7) -- -- -- ---------- ---------- ---------- Balances at December 31, 1999 (105,996) (1,519) 667,485 Net loss (124,215) -- (124,215) Foreign currency translation gain -- 3,334 3,334 ---------- Comprehensive loss -- -- (120,881) ---------- Stock subscription payment received -- -- 260,000 Issuance of 440,500 shares, net of cash commission paid of $176,200 -- -- 1,585,800 ---------- ---------- ---------- Balances at December 31, 2000 (230,211) 1,815 2,392,404 Net loss (unaudited) (670,347) -- (670,347) Foreign currency translation gain (unaudited) -- 13,774 13,774 ---------- Comprehensive loss (unaudited) -- -- (656,573) ---------- ---------- ---------- Balances at June 30, 2001 (unaudited) (900,558) 15,589 1,735,831 ========== ========== ==========
See accompanying notes to consolidated financial statements. F-6 39 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1999 and 2000
(UNAUDITED) SIX MONTHS ENDED YEAR ENDED JUNE 30, ------------------------ ------------------------- 1999 2000 2000 2001 ---------- ---------- ------------------------- Net loss (183,668) (124,215) (143,670) (670,347) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 163,357 414,551 26,359 267,229 Deferred taxes 5,931 (5,211) -- Change in operating assets: Accounts receivable-trade (684,957) (573,838) 110,868 (138,646) Inventories 2,213 -- -- Deposits and other current assets (56,495) (59,034) 23,787 15,793 Software development costs (394,411) (524,630) (138,491) (210,620) Trade accounts payable 336,006 (1,771,363) (123,644) 27,260 Accrued expenses (75,956) 90,304 37,085 159,704 Deferred revenue -- 115,321 -- 7,037 Income taxes payable (8,059) (7,074) 535 (3,865) ---------- ---------- ---------- ----------- Net cash used in operating activities (896,039) (2,445,189) (207,171) (546,455) ---------- ---------- ---------- ----------- Cash flows from investing activities: Purchase of equipment (54,362) (40,388) (15,477) (42,784) ---------- ---------- ---------- ----------- Net cash used in investing activities (54,362) (40,388) (15,477) (42,784) Cash flows from financing activities: Cash overdraft 29,160 34,641 (29,296) 66,470 Principal payments of capital lease obligations (3,930) (25,882) 22,496 (17,091) Borrowing from (payments to) related parties 243,954 1,141,493 744,221 122,474 Payment received for stock subscription -- 260,000 -- -- Proceeds from issuance of common stock 694,369 1,585,800 -- -- ---------- ---------- ---------- ----------- Net cash provided by (used in) financing activities 963,553 2,996,052 737,421 171,853 ---------- ---------- ---------- ----------- Net effect of changes in foreign currency on cash flows 173 (1,992) (3,443) (11,417) ---------- ---------- ---------- ----------- Net increase (decrease) in cash and cash equivalents 13,325 508,483 511,330 (171,853) Cash and cash equivalents at beginning of period -- 13,325 13,325 521,808 ---------- ---------- ---------- ----------- Cash and cash equivalents at end of period $ 13,325 521,808 524,655 93,005 ========== ========== ========== =========== Supplemental disclosures of cash flow information: Cash paid for interest $ 562 3,805 2,115 2,882 ========== ========== ========== =========== Cash paid for income taxes $ 12,953 7,641 7,050 3,865 ========== ========== ========== ===========
See accompanying notes to consolidated financial statements. F-7 40 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (A) DESCRIPTION OF BUSINESS SolutionNet International, Inc., a Minnesota corporation (the "Company" or "SolutionNet"), is a holding company with investee companies dedicated to the development and marketing of proprietary, multi-application internet information technology ("IT") solutions. SolutionNet owns 100% of the outstanding shares of SolutionNet Inc. - British Virgin Islands, incorporated under the laws of the British Virgin Islands in 1999 ("SolutionNet BVI"), which owns 100% of the outstanding shares of SolutionNet (Asia Pacific) Pte. Ltd. Singapore, incorporated under the laws of Singapore in 1994 ("SolutionNet (Asia Pacific)"). SolutionNet (Asia Pacific) owns 100% of the shares of SolutionNet (Middle East) Ltd. ("SolutionNet (Middle East)"), incorporated in the United Arab Emirates. Neither the holding company, SolutionNet or SolutionNet BVI, has any operations of its own. SolutionNet (Asia Pacific) is the principal operating subsidiary of SolutionNet. SolutionNet (Middle East) had no operations through December 31, 2000. The Company develops and markets proprietary IT solutions. Its services consist of consulting (generally providing Company staff to act as consultants at its customers' facilities) and developing new software or functions for its customers. The Company markets its products and services in the Asia Pacific region, the Middle East and India. (B) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION The consolidated financial statements include the financial statements of SolutionNet International, Inc. and its wholly owned subsidiaries, SolutionNet BVI, and indirect wholly owned subsidiaries SolutionNet (Asia Pacific) and SolutionNet (Middle East). All significant intercompany balances and transactions have been eliminated in consolidation. The statements here are presented in United States dollars to comply with United States Securities and Exchange Commission reporting requirements. For purposes of applying Statement of Financial Accounting Standards No. 52, Foreign Currency Translation, the functional currency of the Company is the Singapore dollar. As the effect is substantially the same as using the current rate as of the dates transactions took place, a weighted average exchange rate of 0.59309 and 0.57900 United States dollars to one Singapore dollar has been used to translate the statements of cash flows and statements of operations for the years ended December 31, 1999 and 2000, respectively. The current exchange rate as of December 31, 2000 has been used to translate the assets and liabilities of the Company. The cumulative translation difference is shown as accumulated other comprehensive gain on the accompanying consolidated balance sheet. The accompanying financial statements as of June 30, 2001 and for the six-month period then ended were not audited. These unaudited financial statements include, in the opinion of management, all adjustments, consisting of only normal recurring adjustments, necessary for a fair presentation of the financial statements of the period covered. (C) CASH EQUIVALENTS For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments with original maturities of three months or less to be cash equivalents. (D) PROPERTY, PLANT, AND EQUIPMENT Property, and equipment are stated at cost. Equipment under capital leases is stated at the present value of minimum lease payments. F-8 41 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 Depreciation on equipment is calculated on the straight-line method over the estimated useful lives of the assets. Equipment held under capital leases and leasehold improvements are amortized straight line over the shorter of the lease term or estimated useful life of the asset. Useful lives of assets are as follows: Computers and office equipment 3 years Leasehold improvements 3 years Furniture and fixtures 5 years (E) IMPAIRMENT OF LONG-LIVED ASSETS The Company accounts for long-lived assets in accordance with the provisions of SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. This Statement requires long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. (F) SOFTWARE DEVELOPMENT COSTS Costs incurred internally in creating a computer software product are charged to expense when incurred as research and development until technological feasibility has been established for the product. Technological feasibility is established upon completion of a detail program design or, in its absence, completion of a working model. Thereafter, all software production costs are capitalized and subsequently reported at the lower of unamortized cost or net realizable value. Capitalized costs are amortized based on current and projected future revenue for each product with an annual minimum equal to the straight-line amortization over the remaining estimated economic life of the product (three years). Amortization of capitalized software development costs was $131,005 and $343,849 in 1999 and 2000, respectively. (G) REVENUE RECOGNITION The Company recognizes revenue in accordance with Statement of Position 97-2 (SOP 97-2), Software Revenue Recognition, and Staff Accounting Bulletin 101 (SAB 101), Revenue Recognition. Revenue from software license sales is recognized upon delivery to the customer, providing no significant Company obligations remain and collection of the resulting receivable is probable. In instances where a significant Company obligation does exist, recognition is deferred until the obligation has been satisfied. Maintenance revenue is deferred and recognized on a pro rata basis over the life of the related agreement. The unrecognized portion of maintenance revenue is included in deferred revenue. Revenue from other sources, principally training and consulting, is recognized in the period in which the services are rendered. Revenue under reseller agreements is recognized upon shipment of licenses, providing no significant Company obligations remain and collectibility is probable. (H) ADVERTISING Advertising is expensed as incurred. Expenses relating to advertising were $22,418 and $15,242 in 1999 and 2000, respectively. (I) INCOME TAXES Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the F-9 42 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. (J) FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of cash equivalents, accounts receivable, trade accounts payable, and related-party receivables/payables approximates fair value because of the short-term maturity of these instruments. The fair value of long-term debt approximate their carrying value as determined by company management using available market information. (K) EARNINGS PER SHARE In accordance with SFAS No. 128, Earnings Per Share, the calculation of basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. The Company had no dilutive options, warrants or other convertible securities outstanding as of December 31, 2000. Stock options issued on April 26, 2001 do not impact diluted earnings per share as they were anti-dilutive. (L) USE OF ESTIMATES Management of the Company has made estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates. (2) LEASES The Company is obligated under various capital leases for certain computer equipment. At December 31, 2000, the gross amounts of equipment and related accumulated amortization recorded under capital leases were as follows: Computer equipment $ 92,159 Less accumulated amortization 32,880 ---------- $ 59,279 ==========
Amortization of assets held under capital leases is included with depreciation expense. The Company also has noncancelable operating leases primarily for office space. Rental expense for operating leases (except those with lease terms of a month or less that were not renewed) during 1999 and 2000 was approximately $66,068 and $130,239, respectively. F-10 43 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) and future minimum capital lease payments as of December 31, 2000 are:
CAPITAL OPERATING YEAR ENDING DECEMBER 31: LEASES LEASES --------- ----------- 2001 $ 39,305 143,715 2002 26,483 95,810 --------- ----------- Total minimum lease payments 65,788 $ 239,525 =========== Less amount representing interest 8,055 --------- Present value of net minimum capital lease payments 57,733 Less current installments of obligations under capital leases 34,654 --------- Obligations under capital leases, excluding current installments $ 23,079 =========
(3) COMPUTER SOFTWARE DEVELOPMENT COSTS The following represents costs capitalized and amortized related to software developed for sale to outside customers which has demonstrated technological feasibility:
1999 2000 ---------- ---------- Balance at beginning of year $ 353,256 617,717 Additions 394,411 524,630 Amortization expense (131,005) (343,849) Foreign currency adjustment included in other comprehensive income 1,055 (25,213) ---------- ---------- Balance at end of year $ 617,717 773,285 ========== ==========
F-11 44 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 (4) INCOME TAXES Total income tax (benefit) expense for the years ended December 31, 1999 and 2000 were allocated as follows: Income tax expense (benefit) consists of:
1999 2000 ----------- ---------- Current - foreign $ 4,666 222 Deferred - foreign 6,010 (5,433) ----------- ---------- $ 10,676 (5,211) =========== ==========
Income tax expense (benefit) was $10,676 and $(5,211) for the years ended December 31, 1999 and 2000, respectively, and differed from the amounts computed by applying the U.S. Federal income tax rate of 34% to loss before income taxes as a result of the following:
1999 2000 ---------- ----------- o Computed "expected" tax expense (benefit) $ (58,817) (42,233) Increase (reduction) in income taxes resulting from: Permanent Differences 6,635 26,180 Increase in valuation allowance 51,492 12,490 Other 6 (1,405) Foreign tax rate differential 11,360 (243) ---------- ----------- $ 10,676 (5,211) ========== ===========
F-12 45 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2000 are presented below. Deferred tax assets: Net operating loss carryforwards $ 78,271 Less valuation allowance (78,271) ---------- Net deferred tax assets - ---------- Deferred tax liabilities: Property and equipment depreciation differences 577 ---------- Total gross deferred liabilities 577 ---------- Net deferred tax liability $ 577 ==========
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax assets, the Company will need to generate future taxable income. Utilization of net operating loss carryforwards may be limited under provisions of the Internal Revenue Code. (5) BUSINESS AND CREDIT CONCENTRATIONS During the years ended December 31, 1999 and 2000, respectively, the Company generated approximately 42% and 29% of revenues from two customers. Accounts receivable due from these customers at December 31, 2000 were $138,436 representing approximately 7.4% of the total. (6) RELATED PARTY TRANSACTIONS During the year ended December 31, 2000, SolutionNet (Asia Pacific) entered into a consulting agreement (which replaced an earlier agreement entered into in April 1999) with Netsavvy Solutions PVT LTD, a corporation organized under the laws of the Commonwealth of India ("Netsavvy"), and also entered into a "recruitment" agreement with Netsavvy dated October 1, 2000. Under the consulting agreement, Netsavvy agrees to design, develop and support certain software (including Enet - Corporate Internet Banking and EMI - Electronic Medical Info and to provide technical support for and maintenance of the software. Under the recruitment agreement, Netsavvy agrees to retain recruiters to recruit IT consultants. The CEO of the Company is a director of Netsavvy and owns 35% of the outstanding shares of NetSavvy. In addition, the Company performs development services for and has sold software (for resale to a third party customer) to Netsavvy. F-13 46 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 During the year ended December 31, 2000, SolutionNet (Asia Pacific) entered into a supply agreement with GVMS Online Pte. Ltd., a corporation organized under the laws of the Republic of Singapore ("GVMS"). Under the supply agreement, SolutionNet (Asia Pacific) developed a global voice mail system for GVMS. Two employees of the Company are directors of GVMS and each owns 50% of the outstanding shares of GVMS. During the year ended December 31, 2000, SolutionNet (Asia Pacific) made interest-free loans to SolutionNet (Europe), a corporation organized under the laws of the United Kingdom. The CEO of the Company is a director and owner of 50% of the outstanding shares of SolutionNet (Europe). The following is a summary of related party amounts as of December 31, 2000 and for the two year period then ended:
December 31, June 30, 2000 2001 ------------- ---------- Receivable due from SolutionNet (Europe) $ 97,675 96,373 Due from GVMS 105,496 76,872 Due from Netsavvy 273,919 221,380 Due from other affiliated companies 108,228 33,485 ----------- --------- 585,318 428,110 =========== ========= Due to directors 4,753 12,588 Due to Netsavvy 461,497 356,069 Other amounts payable 26,290 -- ----------- -------- $ 492,540 368,657 =========== ========
Six month Year ended December 31 period ended ---------------------------- June 30 1999 2000 2000 2001 ------------ ----------- -------- -------- Sales to Netsavvy $ -- $ 173,700 -- 100,000 Services provided to Netsavvy -- 133,899 133,899 -- Services provided to GVMS -- 132,762 -- -- Product development charges and related recruiting and expenses from Netsavvy 80,317 137,711 61,300 -- Purchases from Netsavvy 321,457 297,000 137,000 182,682 ============ =========== ======= =======
(7) MERGER WITH ETG INTERNATIONAL, INC. SolutionNet was incorporated under the laws of the State of Minnesota under the name of ETG International, Inc. ("ETGI") on August 25, 1994. Pursuant to an exchange agreement, in April 1999 ETGI (which had changed its name to SolutionNet, but was an inactive company) by way of exchange, issued (i) shares constituting a majority of its outstanding shares to Densmore Group Limited, a corporation incorporated under the laws of the British Virgin Islands ("Densmore") and (ii) acquired all of the outstanding shares of SolutionNet BVI, and thereby control of SolutionNet (Asia Pacific). Densmore had owned all of the outstanding shares of SolutionNet BVI. For financial reporting purposes, the merger with ETGI described above was considered to be a reverse acquisition involving a shell company and accordingly, the operating entity, SolutionNet BVI, was determined to be the acquiring enterprise. F-14 47 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 The historical consolidated financial statements of SolutionNet BVI are presented as the historical financial statements of the Company for the period prior to the ETGI merger. The merger combination was accounted for under the purchase method of accounting. The results of operations of SolutionNet (ETGI) are included in the accompanying consolidated financial statements only from the date of the merger. The historical equity of SolutionNet BVI is reflected as the consolidated equity of the Company prior to the merger retroactively restated to reflect the number of shares received in the business combination. (8) LITIGATION The Company is, from time to time, a party to litigation arising in the normal course of its business. Management believes none of these actions, including the cross-complaint disclosed below, individually or in the aggregate, will have a material adverse effect on the financial position or result of operations of the Company. On December 4, 2000, the Company brought an action entitled SolutionNet International, Inc. v. Garrett Krause (Krause) et al in the Superior Court of the state of California. In this litigation, the Company has alleged that, among other things, Krause breached fiduciary duties to the Company by issuing without authority 2,650,000 Company shares to Web Capital (formerly known as Sara Hallitex Corporation) and by issuing 1,500,000 shares of stock to his affiliates without authorization. The Company has stated in its pleadings any Company stock in the possession of Krause and/or his affiliates and/or proceeds from the sale of such stock are impressed with a constructive trust for the benefit of the Company. The Company is seeking the return of the stock illegally issued and/or the proceeds from all sales of the stock illegally issued plus punitive damages. Garrett Krause, Web Capital and certain of the defendants have filed an answer denying their liability, and Garrett Krause and Web Capital have filed a cross-complaint for breach of contract and misrepresentation and are seeking damages in an amount to be determined and punitive damages. The Company believes such cross-complaint is without merit and intends to defend itself vigorously. There is no estimate which can be made at this time related to potential liability arising from this litigation and therefore none is reflected on the balance sheet. The outcome of the litigation could produce a material adverse financial statement impact. (9) BASIC LOSS PER SHARE Basic loss per share ("EPS") were computed by dividing net loss by 10,186,097 and 12,183,156, the weighted-average number of shares of common stock outstanding during the years ended December 31, 1999 and 2000, respectively. Diluted EPS would not differ from basic EPS, as the Company has no securities or other contracts to issue common stock that would have a potentially dilutive effect on the EPS calculation. (10) COMMON STOCK There are 12,618,009 shares of common stock of the Company outstanding as of December 31, 2000, and which, due to their issuance more than two years ago, could be sold under Rule 144(k) under the F-15 48 SOLUTIONNET INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000 Securities Act (except to the extent they are held by affiliates of the Company). Additionally 440,500 shares are subject to registration rights agreements which permit the holders to cause the Company to register their shares for sale pursuant to a registration statement filed by the Company under the Securities Act at any time after the Company becomes a reporting company under the Securities Exchange Act of 1934. (11) SUBSEQUENT ADOPTION OF EQUITY PARTICIPATION PLAN On April 26, 2001, the Board of Directors approved and adopted SolutionNet's 2001 Equity Participation Plan (the "Equity Participation Plan"). The Equity Participation Plan reserves 1,500,000 shares of Common Stock of the Company for issuance thereunder. The Equity Participation Plan authorizes the Compensation Committee or the Board of Directors ("Committee") to grant incentive and non-statutory stock options as well as restricted stock. Officers, consultants, and other employees (including employee directors) of SolutionNet and its subsidiaries and affiliates are eligible to receive awards under the Equity Participation Plan. In the event of a stock dividend, stock split, reorganization, merger, or similar corporate transaction (other than a change in control), the Committee is authorized to make appropriate adjustments to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Equity Participation Plan or with respect to an outstanding award. In the event of a change in control, each option granted shall become exercisable as to all shares covered thereby immediately prior to the consummation of such change in control and the restrictions included in any restricted stock grant shall be deemed rescinded and terminated. The Equity Participation Plan may be wholly or partially amended or modified, suspended or terminated at any time from time to time by the Committee, except as may be prohibited by laws or regulations governing such actions. On April 26, 2001, under the Equity Participation Plan, 629,750 options were granted to employees and officers of the Company. These options were issued at $0.27 per share which approximated market value on that date. The options vest over a 30 month period with 33.33% vesting six months after the grant date and the remainder vesting over the subsequent two years. F-16 49 PART III ITEM 1. INDEX TO EXHIBITS EXHIBIT NUMBER EXHIBIT NAME - -------------- ------------ 2.1 Articles of Incorporation, filed with the Minnesota Secretary of State on March 22, 1999 2.2 Articles of Merger dated September 20, 1994 + 2.3 Amended Articles of Incorporation, filed with the Minnesota Secretary of State on March 22, 1999 2.4 Bylaws of SolutionNet International, Inc. 3.1 Common Stock Certificate 6.1 Lease Agreement by and between SR Singapore, Pte., Ltd. and CLD Land Pte. Ltd., relating to property located at No. 1 Shenton Way, #22-06/09, Singapore 068803 6.2 2001 Equity Participation Plan 6.3 Form of Stock Option Agreement 6.4 Employment Agreement - Suresh Venkatachari 6.5 Employment Agreement - Murali Natarajan 6.6 Employment Agreement - Karthikeyan Raman 6.7 Form of Service Agreement between SolutionNet (Asia Pacific) and Deutsche Bank + 6.8 Professional Services Agreement between SolutionNet (Asia Pacific) and Deutsche Bank + 6.9 Professional Services Agreement between SolutionNet (Asia Pacific) and Hewlett-Packard Singapore Pte Ltd + 6.10 Supply Agreement between SolutionNet (Asia Pacific) and GVMS Online Pte Ltd. + 6.11 Distributorship Agreement between SolutionNet (Asia Pacific) and Netsavvy Solutions PVT LTD + 33 50 6.12 Consultancy Agreement between SR Singapore Pte Ltd and Netsavvy Solutions PVT LTD + 6.13 Loan Agreement between SolutionNet (Asia Pacific) and SolutionNet (Europe) + 8.1 Share-Exchange Agreement 8.2 Supplemental Agreement - ------------------- + Filed herewith. All other exhibits were filed with the original Form 10-SB ITEM 2. DESCRIPTION OF EXHIBITS. See Item 1 above. SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. SOLUTIONNET INTERNATIONAL, INC. Date: August 13, 2001 By: /s/ Suresh Venkatachari ------------------------------- Suresh Venkatachari, President 34 51 EXHIBIT INDEX EXHIBIT NUMBER EXHIBIT NAME - -------------- ------------ 2.1 Articles of Incorporation, filed with the Minnesota Secretary of State on March 22, 1999 2.2 Articles of Merger dated September 20, 1994 + 2.3 Amended Articles of Incorporation, filed with the Minnesota Secretary of State on March 22, 1999 2.4 Bylaws of SolutionNet International, Inc. 3.1 Common Stock Certificate 6.1 Lease Agreement by and between SR Singapore, Pte., Ltd. and CLD Land Pte. Ltd., relating to property located at No. 1 Shenton Way, #22-06/09, Singapore 068803 6.2 2001 Equity Participation Plan 6.3 Form of Stock Option Agreement 6.4 Employment Agreement - Suresh Venkatachari 6.5 Employment Agreement - Murali Natarajan 6.6 Employment Agreement - Karthikeyan Raman 6.7 Form of Service Agreement between SolutionNet (Asia Pacific) and Deutsche Bank + 6.8 Professional Services Agreement between SolutionNet (Asia Pacific) and Deutsche Bank + 6.9 Professional Services Agreement between SolutionNet (Asia Pacific) and Hewlett-Packard Singapore Pte Ltd + 6.10 Supply Agreement between SolutionNet (Asia Pacific) and GVMS Online Pte. Ltd. + 6.11 Distributorship Agreement between SolutionNet (Asia Pacific) and Netsavvy Solutions PVT LTD + 52 6.12 Consultancy Agreement between SR Singapore Pte Ltd and Netsavvy Solutions PVT LTD + 6.13 Loan Agreement between SolutionNet (Asia Pacific) and SolutionNet (Europe) + 8.1 Share-Exchange Agreement 8.2 Supplemental Agreement + Filed herewith. All other exhibits were filed with the original Form 10-SB EX-2.2 4 k64198ex2-2.txt ARTICLES OF MERGER DATED SEPTEMBER 20, 1994 1 EXHIBIT 2.2 ARTICLES OF MERGER MERGING ETG INTERNATIONAL, INC. (AN IOWA CORPORATION) INTO ETG INTERNATIONAL, INC. (A MINNESOTA CORPORATION) ARTICLES OF MERGER entered into this 20th day of September, 1994, by and between ETG International, Inc., an Iowa corporation and ETG International, Inc., a Minnesota corporation. THIS IS TO CERTIFY: FIRST: ETG International, Inc., a corporation organized and existing under the laws of the State of Iowa (hereinafter sometimes referred to as "ETG Iowa"), and ETG International, Inc., a corporation organized and existing under the laws of the State of Minnesota (hereinafter sometimes referred to as "ETG Minnesota"), agree that ETG Iowa shall be merged into ETG Minnesota. The terms and conditions of the merger and the mode of carrying the same into effect are as herein set forth in these Articles of Merger. SECOND: ETG Minnesota shall survive the merger and shall continue under the name of ETG International, Inc. THIRD: The parties to the Articles of Merger are ETG International, Inc., a corporation organized under the laws of the State of Iowa and ETG International, Inc., a corporation organized and existing under the laws of the State of Minnesota. FOURTH: No amendment is made to the Articles of Incorporation of the surviving corporation as part of the merger. FIFTH: The Plan of Merger is as set forth in the Plan of Merger, attached hereto and incorporated herein by this reference. SIXTH: The Plan of Merger was duly authorized and approved by each party in the manner required by Chapter 302A of the Minnesota Business Corporation Act and by Chapter 490 of the Iowa Business Corporation Act. SEVENTH: On the date of the vote of the stockholders of ETG Iowa, the number and designation of shares of ETG Iowa outstanding, entitled to vote, and held by the only voting group of ETG Iowa, were 4,025,003 shares of Common Stock, no par value, of which 3,252,481 shares voted in favor of the Plan of Merger, and 1,600 shares voted against the Plan of Merger. No shares of any other class of stock or voting group were outstanding. 2 EIGHTH: On the date of the vote of the stockholders of ETG Minnesota, the number and designation of shares of ETG Minnesota outstanding, entitled to vote, and held by the only voting group of ETG Minnesota, were 1 00 shares of Common Stock, $.001 par value, of which 1 00 shares voted in favor of the Plan of Merger, and -0- shares voted against the Plan of Merger. No shares of any other class of stock or voting group were outstanding. NINETH: ETG Minnesota, the surviving corporation of the merger, hereby appoints the Secretary of State of the State of Iowa as the agent for service of process in any proceedings to enforce any obligation or the rights of dissenting shareholders of ETG Iowa. TENTH: ETG Minnesota agrees that it will promptly pay to the dissenting shareholders of ETG Iowa, the amount, if any, to which they are entitled under Division XIII of the Iowa Business Corporation Act. IN WITNESS WHEREOF, the parties to the merger have caused these Articles of Merger to be signed in their respective corporate names and on their behalf by the respective presidents and witnessed or attested by their respective secretaries as of the 20th day of September, 1994. The undersigned certify that they are authorized to execute these Articles of Merger and that the information in these Articles of Merger is true and correct. The undersigned also understand that if any of this information is intentionally or knowingly misstated that criminal penalties will apply as if I had signed these Articles of Merger under oath. ATTEST: ETG INTERNATIONAL, INC. (a Minnesota Corporation) ___________________________ ________________________________ Thomas C. Saylor, Secretary Robert T. Reddall, President ATTEST: ETG INTERNATIONAL, INC. (an Iowa Corporation) ___________________________ ________________________________ Thomas C. Saylor, Secretary Robert T. Reddall, President STATE OF __________ ) )ss. COUNTY OF ________ ) 2 3 The foregoing instrument was acknowledged before me this 20th day of September, 1994, by Robert T. Reddall and Thomas C. Saylor, President and Secretary, respectively, of ETG International, Inc., an Iowa corporation, and by Robert T. Reddall and Thomas C. Saylor, President and Secretary, respectively, of ETG International, Inc., a Minnesota corporation. Witness my hand and official seal. My commission expires: _______________________________ Notary Public The name and telephone number of the person to be contacted if there is a question about the filing of these Articles of Merger is as follows: Jon D. Sawyer (303) 295-2355 3 4 PLAN OF MERGER BETWEEN ETG INTERNATIONAL, INC. (AN IOWA CORPORATION) AND ETG INTERNATIONAL, INC. (A MINNESOTA CORPORATION) PLAN OF MERGER made this 20th day of September, 1994, between ETG International, Inc., an Iowa corporation (hereinafter called "ETG Iowa"), and ETG International, Inc., a Minnesota corporation (hereinafter called "ETG Minnesota"). WHEREAS, ETG Minnesota has an authorized capital stock consisting of 20,000,000 shares of Common Stock, $.00l par value, of which 100 shares have been issued and are now outstanding, and 5,000,000 shares of Preferred Stock, $.l0 par value, of which no shares are issued and outstanding; and WHEREAS, ETG Iowa has an authorized capital stock consisting of 20,000,000 shares of Common Stock, no par value, of which 4,025,003 shares have been issued and are outstanding, and 5,000,000 shares of Preferred Stock, $.10 par value, of which no shares are issued and outstanding; and WHEREAS, the Boards of Directors of ETG Iowa and of ETG Minnesota, respectively, deem it advisable and to the advantage and welfare of the two corporate parties and their respective shareholders that ETG Iowa merge with ETG Minnesota under and pursuant to the provisions of the Iowa Business Corporation Act and the Minnesota Business Corporation Act; and WHEREAS, the shareholders of ETG Iowa and ETG Minnesota, respectively, have approved the merger as required by the Iowa Business Corporation Act and the Minnesota Business Corporation Act. NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained and of the mutual benefits hereby provided, it is agreed by and between the parties hereto as follows: 1. Merger. ETG Iowa shall be, and it hereby is, merged into ETG Minnesota. 2. Effective Date. This Plan of Merger shall become effective immediately upon compliance with the laws of the States of Iowa and Minnesota, the time of such effectiveness being hereinafter called the Effective Date. 3. Surviving Corporation. ETG Minnesota shall survive the merger herein contemplated aid shall continue to be governed by the laws of the State of Minnesota, but the separate corporate existence of ETG Iowa shall cease forthwith upon the Effective Date. 4. Articles of Incorporation. The present Articles of Incorporation of ETG Minnesota shall be the Articles of Incorporation of' ETG Minnesota following the Effective Date unless and until the same shall be amended or repealed in accordance with the provisions thereof 1 5 and the laws of the State of Minnesota. There are no amendments to the present Articles of Incorporation of ETG Minnesota proposed in connection with this merger. 5. Bylaws. The present Bylaws of ETG Minnesota shall be the Bylaws of ETG Minnesota following the Effective Date unless and until the same shall be amended or repealed in accordance with the provisions thereof. 6. Further Assurance of Title. If at any time ETG Iowa shall consider or be advised that any acknowledgments or assurances in law or other similar actions are necessary or desirable in order to acknowledge or confirm in and to ETG Minnesota any right, title or interest of ETG Iowa held immediately prior to the Effective Date, ETG Iowa and its proper officers and directors shall and will execute and deliver all such acknowledgments or assurances in law and do all things necessary or proper to acknowledge or confirm such right, title or interest in ETG Minnesota as shall be necessary to carry out the purposes of this Plan of Merger, and ETG Minnesota and the proper officers and directors thereof are fully authorized to take any and all such action in the name of the Company or otherwise. 7. Retirement of Organization Stock. Forthwith upon the Effective Date, each of the 100 shares of the Common Stock of ETG Minnesota presently issued and outstanding for purposes of organization shall be retired. 8. Conversion of Outstanding Stock. Forthwith upon the Effective Date, each of the issued and outstanding shares of Common Stock of ETG Iowa shall be converted into one (1) fully paid and nonassessable share of Common Stock of ETG Minnesota, and each certificate nominally representing shares of Common Stock of ETG Iowa shall be forthwith surrendered for cancellation and reissuance of share certificates in ETG Minnesota. 9. Termination. This Plan of Merger may be terminated and abandoned by action of the Board of Directors of ETG Iowa at any time prior to the Effective Date, whether before or after approval by the shareholders of the two corporate parties hereto. 10. Lawful Corporate Action. The undersigned warrant and represent that the execution of this Plan of Merger is the lawful corporate act of each Company. IN WITNESS WHEREOF, each of the parties hereto pursuant to authority duly granted by the Board of Directors has caused this Plan of Merger to be executed on the date and year first above written. ETG INTERNATIONAL, INC. ETG INTERNATIONAL, INC. (a Minnesota corporation) (an Iowa corporation) By:___________________________ By:___________________________ Robert T. Reddall, President Robert T. Reddall, President By:___________________________ By:___________________________ Thomas C. Saylor, Secretary Thomas C. Saylor, Secretary 2 EX-6.7 5 k64198ex6-7.txt FORM OF SERVICE AGREEMENT B/W DEUTSCHE BANK 1 EXHIBIT 6.7 FORM OF SERVICE AGREEMENT AGREEMENT NO: This Agreement (hereinafter referred to as "Agreement") is made this between DEUTSCHE BANK, 8, Shenton Way, #20-01, Temasek Tower, Singapore 068811 (hereinafter referred to as "DB") and SOLUTIONNET (ASIA PACIFIC) PTE LTD with its office located at No. 1 Shentonway, #22-06/09, Singapore 068803 (hereinafter referred to as "SLNN"). WHEREAS, SLNN agrees to use its best effort to supply DB with software engineering consultants to perform computer software programming, systems analysis, design, project management, consulting and / or education and training (the "Services") and DB desires to utilize the services of SLNN under the terms and conditions thereof: 1. PROFESSIONAL SERVICE FEE 1.1 SLNN CONSULTANT, will be assigned to DB to provide consulting services beginning . DB shall pay SLNN a sum of per calendar month of work. A calendar month for the consultant will consist of working days (excluding week ends and public holidays) as applicable to all permanent staff at DB. 1.2 If SLNN is unable to render the Professional Service, or if for some reasons the Professional Service are not carried out in accordance with clause 1.1, then the Professional Service Fee shall be pro-rated according to the actual Professional Service period completed. 1.3 SLNN is wholly responsible for the regular wages, medical insurance and CPF for the consultant and all employer-employee obligations in respect of the consultant. However, it is mutually understood and agreed that these rates are exclusive of any sales tax, duties, levies (including GST); any taxes levied as a result of use of these Services are the responsibility of DB. 2. DURATION The services of the consultant will be utilized by DB for a minimum period of 06 months from the date of commencement of work. PAGE 1 OF 5 2 3. EXTENSION The agreement period may be extended by 3 or 6 months with a minimum notice of one month, in which case the rates would be revised based on a mutual agreement. 4. CONDITIONS 4.1 SLNN shall ensure that the consultant 4.1.1 Follow and abide strictly to the rules and regulations of DB's, 4.1.2 Comply with the supervision and instructions of the Project Manager ("DB's Project Manager") arranged by DB. 4.2 It is expected that occasional overtime work may be requested and shall be included in the service fees set forth in section 1.1. In the event that consultant or SLNN considers such overtime to be excessive, the parties shall consider, and, if agreed by the parties, DB shall pay an agreed amount specified as overtime charges. 5. CONFIDENTIALITY AND OWNERSHIP 5.1 SLNN acknowledges and agrees that all information concerning business is "Confidential and Proprietary Information" and undertakes that it will not permit the DB duplication or disclosure of any such Confidential and Proprietary Information to any person other than the consultant who requires such information for the performance of its obligations hereunder. 5.2 SLNN acknowledges and agrees that the ownership and all intellectual property rights over any software developed by the consultant (including but not limited to its source code, listings, print-outs and all original material) shall belong to and vest absolutely in DB. 5.3 The clause shall survive any termination of this Agreement. 5.4 Without prejudice to the foregoing, SLNN shall take all such steps as shall from time to time be requested by DB to protect the Confidential and Proprietary Information and intellectual property rights of DB. 5.5 SLNN shall ensure that the consultant executes DB's standard Confidentiality Agreement. PAGE 2 OF 5 3 6. PAYMENT TERMS SLNN shall render its invoice monthly for Services provided and expenses incurred under this Agreement throughout the date of such invoice. The invoice will be raised on the last day of each calendar month. All invoices shall be payable within fifteen (15) days of the date of invoice. 7. LEAVE Consultant is entitled to 18 days of annual leave per annum and one day of medical leave (on production of medical certificate) per month of completion of every one month during the contract period from the DB AND PRORATE THEREOF. 8. TERMINATION OF ENGAGEMENT 8.1 The services of the consultant shall be terminated on the occurrence of the following conditions: 8.1.1 Death of the consultant. 8.1.2 Disability of the consultant due to serious sickness or major accident resulting in the absence from work of more than (7) calendar days. 8.1.3 Absence from work for five (5) consecutive working days without the prior written approval from DB. 8.2 On the occurrence of any of the events described in clause 8.1, SLNN shall ensure the replacement of the consultant within fifteen (15) calendar days after the said occurrence. 9. WAIVER The failure of either party to enforce at any time, or for any period of time, the provisions of this Agreement, shall not be construed as waiver of such provisions or of the right of such party thereafter to enforce and every such provision. PAGE 3 OF 5 4 10. ASSIGNMENT Neither party hereto shall assign or sub-contract the benefits of this Agreement to a third party without the prior written consent of the other party. 11. NOTICES Any notices required or permitted under the terms of this Agreement or required by statue, law or regulation shall be in writing and shall be sent by hand or by registered mail to the respective parties as follows: DEUTSCHE BANK 8, Shenton Way, #20-01, Temasek Tower, Singapore 068811. SOLUTIONNET (ASIA PACIFIC) PTE LTD No.1 Shentonway, #22-06/09, Singapore 068803. Any such notice shall be deemed to have duly served (if given or made by hand) immediately or (if given or made by registered mail) seventy-two (72) hours after posting. 12. OTHER CONTRACT MATTERS 12.1 DB agrees not to solicit, hire, contract with or engage directly or through any other entity, the employment or services of any consultant or former consultant of SLNN, who worked at DB's site, during the period of and for two years after the termination of this Agreement. If SLNN agrees in writing to permit its consultants to be employed by DB, DB shall pay SLNN a placement fee which is calculated as follows: if the consultant is employed within the first six months of his starting work with DB then the placement fee is equal to eighteen percent (18%) of SLNN's annualized billing; if after six months but before twelve months, the fee is fifteen percent (15%); and after one year, the fee is twelve percent (12%). 12.2 SLNN will apply the Employment pass for the consultant to work in DB in Singapore. However, for some unknown reasons if the Singapore Immigration does not grant the visa for the consultant, SLNN will not be liable for any loses or legal actions from the DB. PAGE 4 OF 5 5 13. GOVERNING LAW DB and SLNN intend this Agreement to be valid and subsisting legal instrument, and no provisions of this Agreement which may be deemed unenforceable shall be in any way invalidate any other provision or provisions of this Agreement, all of which shall remain in full force and effect. This Agreement shall be binding upon the parties, their successors, legal representatives and assigns, and it is mutually understood and expressly agreed that this Agreement shall be construed and interpreted to the laws of Singapore. 14. ENTIRE AGREEMENT This Agreement constitutes the entire agreement between SLNN and DB with respect to the subject matter hereof and supersedes all prior negotiations, proposals, consents, correspondences, pledges whether made orally or in writing. There are no understandings, representations or warranties of any kind except as expressly set forth herein. -------------------- ---------------------- ------------------ -------- Signed for & Behalf of Name & Designation Company Stamp Date DEUTSCHE BANK TRV RAJAN - -------------------- Asst. Vice President - HR ------------------ -------- & Admin Signed for & Behalf of Name & Designation Company Stamp Date SOLUTIONNET (ASIA PACIFIC) PTE LTD
PAGE 5 OF 5 EX-6.8 6 k64198ex6-8.txt PROFESSIONAL SERVICES AGREEMENT B/W DEUTSCHE BANK 1 EXHIBIT 6.8 PROFESSIONAL SERVICES AGREEMENT THIS AGREEMENT is made on the 24TH day of JULY, 2000 BETWEEN (1) SR SINGAPORE PTE LTD, of NO 1, SHENTON WAY, #22-06/09, SINGAPORE 068803 (referred to hereinafter as the "CONTRACTOR") AND (2) DEUTSCHE BANK AG, of 6 Shenton Way, DBS Tower 2, #07-07, Singapore 068803 (hereinafter referred to as the "BANK"). NOW IT IS AGREED THAT: 1. DEFINITIONS AND INTERPRETATION 1.1 "ACKNOWLEDGEMENT" means the "ACKNOWLEDGEMENT AND UNDERTAKING IN RELATION TO CONFIDENTIALITY AND INTELLECTUAL PROPERTY" (attached hereto as Annex A and B) and such other supplemental undertaking that the Bank may require from time to time. 1.2 "NORMAL WORKING DAYS" means the normal working days of the Bank or the entity (where services are required to be provided under this Agreement). 1.3 "NORMAL WORKING HOURS" means the normal working hours of the Bank or the entity (where services are required to be provided under this Agreement). 1.4 "PROFESSIONAL" means each person to be provided by the Contractor to the Bank, as listed in Schedule A. 1.5 "SCHEDULE" means a schedule to this Agreement (including any schedule that may replace another schedule from time to time by mutual agreement between the parties hereto). 1.6 "SCOPE OF SERVICES" means the scope of services to be provided by the Contractor to the Bank under this Agreement, as described in Schedule B. 2 1.7 Each Schedule shall form a part of this Agreement and the expression "Agreement" shall include each such Schedule. 2 DUTIES OF THE CONTRACTOR AND EACH PROFESSIONAL 2.1 The Contractor undertakes to provide to the Bank (promptly and as & when required by the Bank) the services of one or more Professionals for the purpose of supporting the Bank's information technology, computer and/or software related projects/services in accordance with and subject to the terms of this Agreement. 2.2 The Contractor warrants that each Professional shall have the necessary qualification, skill and experience to perform as per this Agreement and shall be proficient in both written and spoken English. 2.3 The Contractor warrants that it will ensure that each Professional will perform his/her obligations under this Agreement and that it will be responsible for any breach by each Professional of such obligations. 2.4 Each Professional shall: 2.4.1 Use his/her best efforts, skills and care to provide the services as required by the Bank, observe the terms in this Agreement and complete each job within the time frame that may be prescribed by the Bank; 2.4.2 Provide such services at the premises of the Bank or of such entity(ies) as the Bank may specify from time to time (including the Bank's subsidiaries); 2.4.3 Provide such services to the Bank during the prevailing Normal Working Days and Normal Working Hours (currently Monday to Friday, between 9am and 6pm), and such other days/hours as may be necessary in order to meet the requirements of the Bank; 2.4.4 Report to and be subject to the direction of the Bank while he/she is performing his/her obligations under this Agreement; 2.4.5 Keep a time sheet in such form as required by the Bank to record all time spent in performing his/her obligations under this Agreement and have the entries therein countersigned by the person(s) designated by the Bank for that purpose; 2.4.6 Allow duly authorised representatives of the Bank to inspect the said time sheet and to verify the entries therein at any time. 2 3 2.5 The Contractor shall, and will ensure that each Professional shall, observe and comply with all applicable laws and the Bank's relevant procedures, guidelines & standards (including those relating to dress code, conduct, security and restricted areas). 3 TERM OF AGREEMENT This Agreement will, unless earlier terminated pursuant to the terms of this Agreement, be in effect for the period as stated in Schedule C. 4 FEES, EXPENSES AND BENEFITS 4.1 In consideration of the services to be rendered by a Professional under this Agreement, the Bank shall pay to the Contractor a FEE as set out in Schedule D for the period (which may be calculated on a monthly, daily or other basis) in which services have been rendered by that Professional. If for any reason that Professional shall fail to provide services during the aforesaid period or any part thereof, the Bank shall be entitled to a proportionate deduction in the fee payable. 4.2 Where a Professional is required to perform services outside Singapore, the Bank will bear his/her reasonable overseas TRAVELLING EXPENSES in accordance with the Bank's prevailing travelling expenses guidelines applicable to an employee who is comparable to that Professional in terms of the levels of qualification, seniority and relevant experience. 4.3 On the 1st day of each month, the Contractor shall forward its INVOICE to the Bank for payment of the (a) fee due in respect of the preceding month and (b) expenses incurred in the preceding month, which invoice should show the breakdown for each Professional. Such invoice must be supported by the relevant time sheet and such documentary evidence as the Bank shall reasonably require. Subject to the invoice being in order, the Bank will make payment to the Contractor within thirty days from the date of the Bank's receipt of the invoice and the supporting documents. 4.4 Each Professional shall be entitled to such number of days of LEAVE as stated in Schedule E, provided that the consumption of each day of leave shall be subject to the approval of the Bank. 3 4 4.5 The Bank shall provide the normal basic OFFICE FACILITIES for the use of each Professional. 4.6 No other expenses, charges, costs, fees, remuneration or benefits of any kind shall be claimed by the Contractor or a Professional other than those expressly set out in this Agreement. 5 REPRESENTATION The Contractor represents that it has the power and approval to enter into this Agreement and that its obligations under this Agreement shall be legal, binding and enforceable against it. 6 NON-EMPLOYEE 6.1 Each Professional shall not be considered as the Bank's employee. 6.2 The Contractor shall be solely responsible, among other things, for: 6.2.1 The salary, over-time pay, allowance, bonus, Central Provident Fund (or other statutory) contribution, workmen, travel & any other insurance coverage, and medical/hospitalisation expenses of each Professional; 6.2.2 The visas, work permits and any government permits/documents that may be required for each Professional to perform the required services (whether in Singapore or elsewhere); 6.2.3 The acts, performance and good behaviour of each Professional. 7 OTHER EMPLOYMENT 7.1 The Contractor shall ensure that so long as this Agreement is still in effect, each Professional shall not engage in any other business or work without first obtaining the written consent of the Bank. 7.2 The Bank undertakes that it will not employ a Professional as its employee (whether on a full or part time basis) except in any of the following situations: 4 5 7.2.1 Where such employment is to commence after the date which is one month from the date of termination of that Professional's appointment under this Agreement. 7.2.2 Upon payment to the Contractor of an amount equivalent to the fee payable for the services of that Professional (as per the terms of this Agreement) for the one month period immediately preceding the termination of that Professional's appointment under this Agreement. 8 CONFIDENTIALITY AND INTELLECTUAL PROPERTY RIGHTS The Contractor shall, and will ensure that each Professional shall, execute and deliver to the Bank the Acknowledgement. 9 INDEMNITY The Contractor shall indemnify the Bank against all expenses, claims, damages, liabilities and losses ("LOSSES") which the Bank may suffer or incur (whether directly or indirectly) in connection with this Agreement or any act of the Contractor (including that of each Professional), save where such Losses are due to the fault of the Bank. 10 TERMINATION 10.1 This Agreement, and/or the appointment of any Professional, may be terminated at any time by either party giving at least 30 days written notice to the other. 10.2 This Agreement may be terminated immediately by written notice in any of the following events: 10.2.1 by the non-defaulting party if the other party commits a breach of any provision of this Agreement and such breach (if capable of being remedied) is not remedied within five days after written notice thereof has been given to the defaulting party; 10.2.2 by the Bank if the Contractor or any Professional commits a breach of any provision of the Acknowledgement and such breach (if capable of being remedied) is not remedied within five days after written notice thereof has been given to the Contractor or that Professional; 5 6 10.2.3 by the other party if one party shall enter into liquidation (not being a voluntary liquidation for the purpose of amalgamation or reconstruction) or have a receiver, liquidator or other similar officer appointed over it or its assets; 10.2.4 by the Bank if the Contractor is unable to perform to the satisfaction of the Bank any of the services under this Agreement (provided that five days notice of such unsatisfactory performance has been given to the Contractor). Upon termination of this Agreement, the appointment of each professional shall also be deemed to be terminated simultaneously. 10.3 The appointment of any Professional may be terminated immediately by the Bank by written notice in any of the following events: 10.3.1 if that Professional is unable to perform to the satisfaction of the Bank any of the services under this Agreement (provided that five days notice of such unsatisfactory performance has been given to the Contractor); 10.3.2 if that Professional by reason of illness, incapacity or otherwise, is prevented from providing the required services for a period of five or more working days, or if that Professional has passed away; 10.3.3 if that Professional is guilty of any act of negligence or misconduct in the provision of services under this Agreement. 10.4 Upon termination of (i) this Agreement or (ii) the appointment of a Professional (as the case may be): 10.4.1 all materials, works, documents, equipments or things (a) belonging to the Bank or (b) to be returned to the Bank pursuant to the terms of this Agreement or Acknowledgement, shall be returned in good order by the Contractor and each (or, as the case may be, that particular) Professional; 10.4.2 the Contractor shall be entitled to payment of fees and expenses (pursuant to the terms of this Agreement) for services rendered up to the date of termination only, without prejudice to any right or remedy which may have accrued to either party before the date of termination. 6 7 11 ASSIGNMENT This Agreement shall be binding on the successors and permitted assigns of the parties hereto, provided that neither party shall transfer or assign any of its rights or liabilities under this Agreement except with the prior written consent of the other party. 12. AMENDMENT This Agreement may only be amended by written agreement between the parties hereto. 13. RELATIONSHIP BETWEEN THE PARTIES HERETO The legal relationship of the parties shall be that of independent contractors. Nothing in this Agreement shall purport to constitute the Contractor a partner or agent of the Bank and the Contractor shall not represent itself as such or as having authority to act on behalf of the Bank. 14. NOTICES Any notice or communication shall be in writing and may be sent by hand or registered mail to the above mentioned address (or such other address as may be notified by one party to the other in the aforesaid manner). 15. GOVERNING LAW This Agreement shall be governed by the laws of Singapore and the parties hereto submit to the non-exclusive jurisdiction of the courts of Singapore. 7 8 IN WITNESS WHEREOF the parties hereto have executed this Agreement on the date above written. SIGNED for and on behalf of SR SINGAPORE PTE LTD ................................... .................................... Name: Vijaya Lachimi Name: T.R.Varadarajan Title: Director Title: Head- Administration & HR SIGNED for and on behalf of Deutsche Bank AG: .................................... .................................... Name: Name: Title: Title: 8 EX-6.9 7 k64198ex6-9.txt PROFESSIONAL SERVICES AGREEMT. B/W HEWLETT-PACKARD 1 EXHIBIT 6.9 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01 AGREEMENT NO HPSS/SLN/2001-01 PROFESSIONAL SERVICES AGREEMENT BETWEEN HEWLETT-PACKARD SINGAPORE (SALES) PTE LTD (HP CONSULTING) AND SOLUTIONNET (AP) PTE LTD DATE : 6 JULY 2001 2 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01 PROFESSIONAL SERVICES AGREEMENT This Services Agreement (hereinafter referred to as "this Agreement") is made on 1 July 2001 between SolutionNet (AP) Pte Ltd, a company incorporated in Singapore and having its registered office at 1 Shenton Way #22-06/09 Singapore 068803 (hereinafter referred to as "Contractor") and Hewlett-Packard Singapore (Sales) Pte Ltd having its registered office at 450 Alexandra Road, Singapore 119960 (hereinafter referred to as "HP"). Whereas HP is desirous of contracting suitably trained personnel with experience in software development from Contractor to work in Singapore and Contractor agrees to second its trained personnel to HP. NOW THEREFORE, in consideration of the promises and covenants contained herein the parties hereto have agreed and hereby do agree as follows: 1. DUTIES OF CONTRACTOR Contractor undertakes to perform the services (hereinafter called the "Services"), which include the following: (a) Contractor shall second its personnel (hereinafter referred to as "Contractor's Staff") to work with HP during the term of this Agreement. The name of the personnel, position, place of assignment, period of assignment, professional service fees, duties and responsibilities of the Contractor's Staff are set out in the relevant Purchase Order in Schedule A, which shall form an integral part of this Agreement. Contractor and HP will sign a separate Purchase Order for each project, which will be incorporated by reference into this Agreement upon execution by the parties. b) Contractor shall be responsible for the accommodation, welfare, medical examination/treatment and repatriation of all Contractor's Staff assigned, at its own cost. c) Contractor shall ensure that Contractor's Staff seconded to HP are suitably qualified with the necessary expertise and experience required by HP and that Contractor's Staff shall not engage in any work for or with any other party during the term of the relevant Purchase Order. d) Contractor shall ensure that Contractor's Staff seconded to HP shall report to work for the period mutually agreed to between Contractor and HP and that Contractor's Staff abide by the code of conduct and work hours stipulated in this Agreement. In the event that a Contractor's Staff could not be seconded for the entire agreed period, Contractor shall give one (1) month written notice to HP before the said staff shall cease work, failing which Contractor shall compensate HP a sum equivalent to one (1) month's professional fees of the said staff. e) Contractor shall at its own cost provide for all necessary insurance including but not limited to medical, accident and liability insurance for the assigned Contractor's Staff. CONFIDENTIAL Page 2 3 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01 f) Contractor shall provide backup services to HP including counselling of Contractor's Staff and replacement of such Contractor's Staff as and when required by HP. g) Contractor shall ensure that its staff possesses valid employment pass to work prior to the said staff being seconded to HP. Contractor undertakes to comply with all applicable regulations imposed by the authorities. h) Contractor undertakes to pay any applicable levy and contributions required by law. i) Contractor shall be responsible for the payment of any corporate, income taxes, levies, duties and any other sums as may be charged by the authorities. j) Contractor shall ensure that Contractor's Staff undergo all necessary pre-employment medical examinations including but not limited to medical examinations for tuberculosis, at its own cost. As a condition precedent to the commencement of work hereunder, Contractor shall furnish HP with a copy of such medical report for Contractor's Staff seconded to HP. k) Contractor shall provide the above Services in accordance with the terms and conditions of Purchase Orders to be issued from time to time by HP and accepted by Contractor. Such Purchase Orders shall constitute the only authorization for Contractor to commence provision of the Services. l) During the term of this Agreement, HP may lend HP equipment to the Contractor for use in performing the services. The equipment shall be returned upon the completion of the services or earlier upon request by HP. If required by HP, the aforesaid loan of equipment shall be documented in a separate equipment loan agreement. m) Contractor's Staff is required to sign the confidentiality disclosure agreement attached herein as Schedule C. 2. TERM This Agreement shall commence on the Effective Date and expires on 5 January 2002 unless otherwise extended by mutual agreement of the Parties hereto or terminated in accordance to the terms set forth in this Agreement. 3. REPLACEMENT (a) If HP is of the opinion that a Contractor's Staff is unable to provide the services specified in the Purchase Order, or has misconducted himself, or is incompetent, negligent or unsatisfactory in any way, HP reserves the right to forthwith terminate the service of the said staff. In such event, Contractor shall find suitable and immediate replacement, if so required by HP. HP shall not unreasonably exercise its rights under this clause. CONFIDENTIAL Page 3 4 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01 (b) In the event that a Contractor's Staff seconded to HP fails to report for work, HP reserves the right to forthwith terminate the service of the said staff. Contractor shall be liable to find immediate and suitable replacement for HP, if so required by HP. (c) HP shall have the right to require Contractor, by giving Contractor notice in writing, to replace any of the Contractor's Staff with a suitable replacement acceptable to HP in any of the above and following circumstances: (i) if the Contractor's Staff shall by reason of illness or incapacity be prevented from carrying out his duties for a period of seven (7) or more days; (ii) if HP's medical advisor is of the opinion that the said Contractor's Staff is likely to be so prevented for a period of seven (7) or more days. (d) In the event HP exercises its rights in accordance with the provisions of this clause, Contractor shall provide the replacement(s), at its own expense within fourteen (14) days of receipt of the aforementioned written notice from HP. (e) Fees for the services of the Contractor's Staff who will be or has been replaced, will be charged and due in full for all work performed. (f) If the Contractor fails to provide a suitable replacement(s) to HP fourteen (14) days after of receipt of the aforesaid written notice, Contractor shall be liable to pay HP liquidated damages of 1% of the monthly professional fees calculated on a daily basis until such time when a suitable replacement is found and accepted by HP provided always that the Contractor's liability for liquidated damages under this clause shall not exceed ten (10) per cent of the monthly professional fees per incident. Such remedy shall be in addition to other rights HP may have under the Agreement or at law. If the Contractor fails to provide a suitable replacement(s) to HP twenty-four (24) days after receipt of the aforesaid written notice, HP may terminate the Purchase Order or this Agreement forthwith. 4. WORKING CONDITIONS AND HOURS (a) HP shall provide adequate working facilities and a reasonable amount of stationary, secretarial and administrative services, computing, communication and photocopying facilities as may be reasonably required by the Contractor's Staff at no cost to the Contractor. (b) Contractor's Staff shall report to and be under the supervision, direction and control of HP or any project team that the Contractor's Staff is assigned to from time to time. The location at which the professional services are to be provided shall be at the HP' premises or such other locations as may be designated by HP. Contractor's Staff shall work in collaboration with the HP management. The day to day project reporting responsibility of Contractor's Staff shall be the Project Leader / Project Manager that the Contractor's Staff is assigned to. CONFIDENTIAL Page 4 5 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01 (c) HP shall be responsible for providing Contractor's Staff with individual time sheets, which shall be completed by the Contractor's Staff and submitted to HP at such times to be designated by HP. The time sheets shall be the basis for the computation, deduction or addition that may be made to the monthly fees. (d) Contractor's Staff when carrying out their services shall comply with such restrictions in respect of access, restricted areas, dress, conduct, safety and working conditions as applicable to the place of work or as stipulated by HP. (e) Except when so required by the nature of the project or HP's customers, the working hours of the Contractor's Staff shall be from 8.30 a.m. to 5.30 p.m. Mondays to Fridays. Contractor's Staff shall follow the gazetted public holidays of the locality where the Services are provided. (f) All vacation leave requests must be approved by HP. The number of leave-days taken shall be deducted accordingly from the monthly fee payable on a pro-rata basis. (g) Upon completion by the Contractor's Staff of the work duration specified in the Purchase Order, HP and Contractor may elect to extend the term of the Contractor's Staff assignment on the same terms and conditions. 5. CONFIDENTIALITY (a) All information (which includes Information communicated by HP or any of its customers to Contractor or Contractor's Staff, or information howsoever acquired by Contractor or Contractor's Staff in relation to HP including but not limited to its customers, documents, operations, accounts, the works, whether or not acquired during the course of work) shall be strictly confidential and shall not be disclosed in any manner or form by Contractor or Contractor's Staff to any other person or entity. The provisions of this Clause shall survive the termination of this Agreement. (b) In providing services under this Agreement, Contractor understands that HP does not wish to receive from Contractor any information which may be considered confidential and/or proprietary to Contractor and/or to any third party. (c) Contractor represents and warrants that any information disclosed by Contractor to HP is not confidential and/or proprietary and/or to any third party. (d) Contractor shall sign the Information Assets Access Agreement attached herein as Schedule B. CONFIDENTIAL Page 5 6 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01 6. PAYMENT (a) HP shall pay Contractor for services under this Agreement in accordance with fees specified in Purchase Order(s) issued hereunder by HP and accepted by Contractor. (b) If Contractor's Staff do not work the full month, the monthly fees payable to the Contractor shall be prorated using the formula: Number of working days worked in the month X Monthly fees - ------------------------------------------ Total number of working days in the month
(c) The fees for the Contractor's Staff as specified in the Purchase Order(s) are fixed and shall not be varied save as may be provided in the Purchase Order. No other charges such as hospitalization insurance, medical claims, Central Provident Fund, airfare & accommodation, etc. shall be claimed from HP in respect of the Contractor's Staff. (d) HP shall bear the cost of specialized product training or other training if required by HP or the project team that the Contractor's Staff is assigned to unless otherwise agreed. (e) Except otherwise agreed by HP, HP is not responsible for any local travel or other expenses of Contractor or Contractor's Staff. If HP, or the project team he is assigned to, requires Contractor's Staff to make any overseas travel, HP will only pay for (1) accommodation and (2) the transportation costs for official purposes. The Contractor's Staff shall comply with the terms for overseas travel of HP. (f) Contractor shall submit to HP an official invoice on the last working day of each month for the payment of the fees for Contractor's Staff. (g) Payment of each invoice shall be made by HP within thirty (30) days of the date of receipt. 7. INTELLECTUAL PROPERTY RIGHTS (a) "Work Product" means models, devices, reports, computer programs, tooling, schematics and other diagrams, instructional materials and anything else Contractor and/or its staff produce in connection with this Agreement. All Work Product will belong to HP. Contractor and/or its staff will deliver all Work Product to HP upon completion of services or upon request by HP. (b) Inventions: Contractor shall and shall cause its staff to promptly disclose to HP any inventions made in connection with this Agreement. HP will own all intellectual property rights in such inventions. Contractor shall and shall cause its staff to sign any necessary documents and will otherwise assist HP, at HP's expense, in obtaining patents or mask work registrations and otherwise protecting such inventions in any country CONFIDENTIAL Page 6 7 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01 (c) Works of Authorship: The Contractor shall and shall cause its staff to promptly disclose to HP any works of authorship created in connection with this Agreement, and the Contractor shall and shall cause its staff to assign to HP all copyrights in such works. To the extent permitted by law the Contractor and/or its staff waive any moral rights such as the right to be named as author, the right to modify, the right to prevent mutilation and the right to prevent commercial exploitation, whether arising under the Berne Convention or otherwise. The Contractor and/or its staff will sign any necessary documents and will otherwise assist HP, at HP's expense, in registering HP's copyrights and otherwise protecting HP rights in such works in any country. (d) Pre-existing Intellectual Property: (i) "Pre-existing Intellectual Property" means any trade secret, invention, work of authorship, mask work or protectable design that has already been conceived or developed by anyone other than HP before Contractor and/or its staff render any services under this Agreement. (ii) Contractor and/or its staff will not use any Pre-Existing Intellectual Property in connection with this Agreement unless Contractor and/or its staff has the right to use it for HP's benefit. If Contractor and/or its staff is not the owner of such Pre-Existing Intellectual Property, Contractor and/or its staff will obtain from the owner any rights necessary to enable the Contractor and/or its staff to comply with this Agreement. (iii) If the Contractor and/or its staff uses any Pre-existing Intellectual Property in connection with this Agreement, Contractor and/or its staff grant HP a non-exclusive, royalty-free, worldwide, perpetual license to make, have made, sell, use, reproduce, modify, adapt, display, distribute, make other versions of, and disclose the Property and to sublicense others to do these things. (e) The Contractor and/or its staff will give HP notice immediately if at any time the Contractor and/or its staff know or reasonably should know of any third party claim to any intellectual property provided by the Contractor and/or its staff to HP pursuant to this Agreement. The Contractor and/or its staff will indemnify and hold harmless HP from liability arising from HP's use of such intellectual property. (f) Continuing Obligations: The obligations under these "Intellectual Property" clauses continue perpetually and do not terminate upon completion of the services herein. 8. DESIGNATED OFFICERS HP and Contractor shall each from time to time appoint in writing one (1) designated officer to be responsible for feedback and communication between Contractor and HP. The designated officers are: CONFIDENTIAL Page 7 8 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01
FOR HPSS : FOR CONTRACTOR: - ------------------------------------------------------------------------------ Name : Moo Huey Bo Name: Amit Kapur Designation : Workforce Partner Manager Designation: Sales Manager Tel No: +65-374-3144 Tel No : 3244424 x 123 Fax No : +65-275-6382 Fax No : 3244425 Address : 450 Alexandra Road, Address : 1 Shenton Way Singapore 119960 #22-06/09 Singapore 068803
9. NOTICES a) Notices under this agreement may be delivered by hand, registered mail, or by fax to the addresses and numbers specified in Clause 8. b) Notices from the one party to the second party shall be deemed served by the first party, if sent by prepaid post to the second party's address stated herein, on the next business day after posting, and if sent by fax, upon receipt of answer-back and upon completion of transmission respectively. 10. NON-ASSIGNMENT Contractor shall not assign the benefits of this Agreement or subcontract or otherwise arrange for another party to discharge any of Contractor's obligations under this Agreement without HP's prior written consent. 11. TERMINATION (a) This Agreement may be terminated in any of the following events: (i) by the non-defaulting Party if the other Party commits a breach of this Agreement and such breach is not remedied within seven (7) days after written notice of such breach is given to the defaulting party; or (ii) if the other Party shall enter into liquidation whether compulsory or voluntary (not being a voluntary liquidation for the purpose of amalgamation or reconstruction) or have a receiver appointed for any of its assets or shall make any assignment for the benefit of its creditors or any of them or take or suffer any similar action. (b) In the event of cancellation, termination or expiration of any Purchase Order(s) issued hereunder, all work being performed thereunder in Contractor's Staff possession shall be forwarded to HP, and HP shall make payment at the specified rates for the satisfactory services performed up to the effective date of cancellation, termination and expiration. (c) HP shall have the right to terminate a Purchase Order or this Agreement without assigning any reason at any time by giving Contractor thirty (30) days prior written notice. On CONFIDENTIAL Page 8 9 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01 termination, the parties shall negotiate in good faith to determine the equitable allocation of any payments already made or due under a Purchase Order or this Agreement. (d) Contractor shall upon the termination of this Agreement for whatever reason, immediately deliver up to HP all correspondence, documents, specifications, papers and all materials belonging to HP which may be in the possession control of Contractor and/or its Staff. 12. INDEPENDENT CONTRACTOR Contractor is not authorized or empowered by this Agreement to act as an agent of HP. Contractor shall act as an independent contractor within the scope of those activities expressly provided under this Agreement. It is hereby understood and agreed that Contractor shall have no power of authority hereunder to negotiate or enter into any contract, agreement, bond or other instrument or undertaking whatsoever for and on behalf of HP or to acknowledge, deliver, cancel, revoke, vary, amend or otherwise effect any of the same. Nothing in this Agreement shall constitute or be construed to constitute or tend to establish a partnership or agency between HP and Contractor for any purpose whatsoever, and neither party shall be liable in any way for any promise, engagement, obligation, contract, debt, warranty or representation of the other party, or for any wilful or negligent act or omission by or on the part of such other party. 13. INDEMNITY The Contractor shall indemnify HP and keep HP fully and effectively indemnified against any and all losses, claims, damages, costs, charges, expenses, liabilities, demands, proceedings and actions which HP may sustain or incur or which may be brought or established against it by any person and which in any case arise out of or in relation to or by reason of: (1) the negligence, recklessness or wilful misconduct of the Contractor and/or its staff in the provision of the Services; (2) any unauthorised act or omission of the Contractor and/or its staff; or (3) any claim that may be made by any competent authority against HP in respect of any income tax, national insurance or similar contributions or any other taxation, in each case relating to the Contractor's Services under this Agreement. The Contractor also agree to indemnify HP against any damages or increase in costs incurred by HP to replace any Contractor's Staff who resigns or is unable for any reason to continue work during a Purchase Order issued by HP. CONFIDENTIAL Page 9 10 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01 14. EMPLOYER-EMPLOYEE RELATIONSHIP Nothing in this Agreement shall be construed or have effect as constituting any relationship of employer and employee between HP and Contractor Staff. Contractor's Staff assigned to HP during the term of this Agreement shall not be covered by any employee benefit plans maintained by HP, or any of its subsidiaries or affiliates. 15. NON-COMPETITION During this Agreement and for a period of one (1) years after the provision of services by the Contractor's Staff as specified in the last Purchase Order issued by HP pursuant to this Agreement, Contractor agrees not to compete with HP in quoting, tendering or offering services or solutions - whether by itself or with other firms, directly or indirectly - to existing customers of HP if the Contractor's Staff are already working on or will be assigned to any of HP' projects with these customers. 16. GOVERNING LAW This Agreement shall be governed by Laws of the Republic of Singapore and the parties hereby irrevocably submit to the non-exclusive jurisdiction of the Courts of the Republic of Singapore. 17. APPLICABLE TAXES The professional service fees set forth in Schedule A are: (1) exclusive of any Goods and Services Tax (GST), (2) inclusive of any service tax and other applicable duties, taxes and charges that are imposed by the Government of Singapore during the term of this Agreement. In no event shall HP be held responsible for the tax liability of Contractor or Contractor's Staff. Contractor authorises HP to make deductions from the amounts to be paid to Contractor pursuant to this Agreement and to remit to any governmental authority any amount on account of withholding taxes or any other taxes or levies of any kind if required under any applicable law. 18. GOVERNING LANGUAGE This Agreement is in English Language only, which language shall be controlling in all respects. No translation, if any, of this Agreement into any other language shall be of any force or effect in the interpretation of this Agreement in determination of the intent of either party hereto. 19. SEVERABILITY If any provision of this Agreement shall be declared void, the validity of any other provisions and of the entire Agreement shall not be affected thereby. CONFIDENTIAL Page 10 11 [HP LOGO] HP Professional Services Agreement INVENT HPSS/SLN/2001-01 20. NON-WAIVER Any failure of either party to enforce at any time, or for any period of time, any of the provisions of this Agreement or any right with respect thereto or to exercise any option herein provided, shall not constitute a waiver or such provision, rights or options or in any way affect validity of this Agreement. 21. COMPLETE AGREEMENT The provisions herein contained including the annexure herein, set forth the entire agreement between the parties with respect to the subject matter hereof and supersede all previous communications, representations or agreements, whether oral or written, with respect to the subject matter hereof, and no addition to or modification of this Agreement shall be binding upon either party unless reduced in writing and duly execute by the parties hereto in the same manner as the execution of this Agreement. The parties agree and understand all provisions herein and have hereunto set their hands. Accepted: Accepted : HEWLETT-PACKARD SINGAPORE SOLUTIONNET (AP) PTE LTD (SALES) PRIVATE LIMITED - ------------------------------- ----------------------------- Name : Diana Chong Name : Amit Kapur Designation : HPC Operations Designation : Sales Manager Manager Company Stamp : Company Stamp CONFIDENTIAL Page 11 EX-6.10 8 k64198ex6-10.txt SUPPLY AGREEMENT B/W GVMS ONLINE PTE. LTD. 1 EXHIBIT 6.10 SOLUTIONNET SUPPLY AGREEMENT THIS AGREEMENT made on 31st August, 2000, between: M/s. SolutionNet Asia Pacific Pte Ltd. ("SolutionNet") 1 Shenton Way Singapore 068803, Represented by Mr. V R Harikrishnan Manager - Eservices M/s. GVMS Online Pte Ltd. ("GVMS") 1 Shenton Way Singapore 068803 Represented by Mr. TRV Rajan India Director WHEREAS: GVMS wishes to buy the software and the IPR of GVMS Project from SolutionNET. Now this agreement bears witnesseth to and is hereby agreed between the parties as follows: 1. SUBJECT OF CONTRACT SolutionNet shall supply and transfer the ownership of the software produced under GVMS Product Development at the agreed rates as below: TYPE OF PRODUCT AMOUNT IN SINGAPORE $ GVMS Software S$177,500-00 (Global Voice Mail System-Software) 2. ITERATIONS: 1. GVMS HAS CONFIRMED THAT IT HAS TESTED THE SOFTWARE AND HAS NO COMMERCIAL SUBSCRIPTION PAYING CUSTOMERS USING THE SERVICES. 2. THE REVENUE MODEL FOR GVMS IS FRANCHISE FEE AND THE CUSTOMER SUBSCRIPTIONS AND THE CASH FLOW IS EXPECTED OVER MEDIUM TERM FROM ITS REVENUE. 3. SOLUTIONNET WILL PROVIDE THE TECHNICAL SUPPORT FOR THE PERIOD OF 1 YEAR AS PART OF THE CONTRACT. 2 3. PAYMENT TERMS: 1. In consideration for the supply of the products, GVMS shall pay SolutionNet the sums of money as agreed above within a period of 2 years from the date the Invoice raised. 2. The payment will be done on quarterly basis based on the cash flow position of GVMS and will be completed within the 2 years from the date of the invoice. 3. Payment by GVMS shall be without prejudice to any claims or rights which GVMS may have against SolutionNet. 4. TERMINATION: This agreement shall terminate automatically on full payment of the consideration by GVMS for the supply of the above License rights by SolutionNet. 5. APPLICABILITY OF LAW AND JURISDICTION: This agreement shall be construed and governed in accordance with the laws of Republic of Singapore. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on the day and the year first above written. Signed by: ------------------------------- ------------------------------- V R Harikrishnan RV Rajan Manager -Eservices Director SolutionNet (AP Pte Ltd GVMS Online Pte Ltd Date: 31st August, 2000 EX-6.11 9 k64198ex6-11.txt DISTRIBUTORSHIP AGREEMENT B/W 1 EXHIBIT 6.11 DISTRIBUTORSHIP AGREEMENT This Agreement is made the 2nd May, 2000. BETWEEN (1) SR Singapore Pte Ltd, a company incorporated in Singapore whose registered office is at No 1 Shenton Way, #22-06/09, Singapore 068803 ("the Company"); AND (2) Netsavvy Solutions Ltd, a company incorporated in India whose registered office is at 547, Anna Salai ,Teynampet, Chennai-600 018, India ("the Distributor"). PRELIMINARY STATEMENTS (1) The Company desires to appoint the Distributor to market and sell the Products as defined hereinafter in the Territory. (2) The Distributor desires to sell the Products in the Territory and understands that it is expected to widen the sales coverage for the Products in the Territory. THE PARTIES HEREBY AGREE AS FOLLOWS: ARTICLE I 1. DEFINITIONS 1.1 For the purposes of this Agreement, the following expressions bear the following meanings: "Effective Date" means the 2nd May, 2000 "Intellectual Property" means any patent copyright design trade name trade mark service mark or other intellectual property right (whether registered or not) including without limitation know-how and confidential information subsisting in the Territory in respect of the Products or any applications for any of the foregoing. 2 "Products" means the software products developed and commercially marketed by the Company which are more fully described in SCHEDULE 1 annexed hereto, which schedule may from time to time be amended by the addition or deletion of products by mutual agreement between the parties in writing. "Territory" means India and South Asian Countries ARTICLE II 2. RELATIONSHIP BETWEEN PARTIES APPOINTMENT 2.1 Subject to the terms and conditions of this Agreement and subject to such rules and instructions which the Company may issue from time to time, the Company hereby appoints the Distributor and the Distributor agrees to act as the exclusive distributor of Products in the Territory upon the terms and subject to the conditions of this Agreement. The Distributor undertakes not to sell or export or sell to any customer intending to export the Products outside the Territory and undertakes further to sell the Products only in the Territory. The Distributor shall during the continuance of this Agreement refer to all enquiries it receives for the Products for sale outside or export from the Territory to the Company. PARTIES AS INDEPENDENT CONTRACTORS 2.2 The relationship of the parties established by this Agreement shall be solely that of independent contractors. Nothing contained in this Agreement shall be construed to make one party the agent for the other for any purpose. Neither of the parties hereto shall have any right whatsoever to incur any obligations or liabilities on behalf of on the other party or to bind the other party. ARTICLE III 3. APPOINTMENT 3.1 The Distributor is appointed on a non-exclusive basis for a term of one (1) year with automatic renewal of the appointment subject to such revised terms and conditions as may be imposed by the Company, until the appointment is terminated by three (3) months' notice by either party. 3 ARTICLE IV 4. MARKETING AND TRAINING 4.1 The Distributor will use its best efforts to promote and develop the sales of the Products throughout the Territory. 4.2 In order to exercise its best efforts to promote and develop the sales of the Products throughout the Territory, the Distributor undertakes to comply with the following: 4.2.1 The Distributor shall throughout the duration of this Agreement ensure that its sales personnel regularly visit the business premises of all existing and potential customers for the Products in the Territory and attempt to obtain orders therefor and in addition, the Distributor agrees to visit and attempt to obtain orders for the Products from any persons to whom they may be directed by the Company. 4.2.2 The Distributor shall also make such presentations to existing and potential customers for the Products in the Territory to generate publicity and interest in the Products and to increase and develop sales in the Products. The Distributor shall also make such arrangements for the distribution of the Products within the Territory as it considers most suitable at its own expenses. 4.2.3 The Distributor shall make presentations and demonstrate the uses and functions of the Products in seminars, fairs, forums and exhibitions, both public and private, to promote sales of the Products, as well as over the Internet, subject to the prior approval of the Company and shall bear the expenses of participating in such seminars, fairs, forums and exhibitions and the demonstration costs thereof where the presentations are held on a local basis and for a local market. Where the presentations and demonstrations of use and functions of the Products are to customers and potential customers in a global market, the Company shall share the expenses of conducting such presentations with the Distributor on a scale agreed case by case basis by both parties. 4.2.4 Demonstration copy The Company shall supply the Distributor with a copy of the Products ("Demonstration Copy") for demonstration purposes and the Distributor shall provide the infrastructure for the demonstration of the use of the Products, such as a personal computer and equipment. The Distributor undertakes not to make copies of the Demonstration Copy and further undertakes to return the same upon the request of the Company without the Company having to assign a reason, or upon the termination or expiry of this Agreement whichever is earlier. 4.2.5 The Distributor shall be responsible for all media advertising and for the preparation of all advertising matter, sales literature, instructions and the like 4 relating to the Products PROVIDED that the Distributor shall regularly discuss its media advertising proposals with the Company and shall submit to the Company for prior approval all advertising matter, sales literature, instructions and the like (except for those supplied to it by the Company) and shall strictly observe the requirements of the Company in respect thereof. Subject to availability the Company will supply to the Distributor reasonable quantities of sales literature, instructions and the like relating to the Products for distribution to the Distributor's customers and potential customers in the Territory. 4.3 The Distributor shall obtain all necessary import licenses, pay any import duties applicable to the Products and comply (or where appropriate consult with the Company and provide all necessary information and assistance to enable the Company to comply) with all laws, bye-laws, regulations and governmental policies and directives in the promotion, sale, distribution and use of the Products. 4.4 The Distributor shall not alter, tamper, modify or remove any of the Specifications of the Products in its supply to the customers except as otherwise agreed in advance by the Company. 4.5 The Distributor shall not claim or represent directly or indirectly that the Products have any characteristics or qualities or are suitable for any purposes other than those claimed or represented for them by the Company from time to time and the Distributor undertakes (in addition to and not in substitution for its other obligations) to indemnify and hold the Company harmless from all claims and liabilities arising out of or consequent upon any unauthorised claims or representations made by the Distributor in respect of the Products. 4.6 The Distributor shall: 4.6.1 participate with the Company in product planning, training programs, sales forecasting and market research with respect to the Products; and 4.6.2 inform the Company promptly of any complaints or unusual comments (whether favourable or unfavourable or by way of requests for information) it may receive with regard to the Products. The Distributor will observe the Company's reasonable instructions with regard thereto and will if the Company wishes to deal with any such matters itself give the Company any assistance it may request in connection therewith. 4.7 The Distributor shall ensure that its staff are suitably trained and qualified to carry out their duties in an efficient and competent matter and that they are aware of and observe the obligations of the Distributor under this Agreement and otherwise so far as such obligations relate to the duties to be carried out by them. 5 4.8 The Distributor shall not solicit the sale of, or seek customers for the Products, outside the Territory and shall not establish any branch, or maintain any distribution depot for the Products. 4.9 In connection with the promotion and marketing of the Products, the Distributor shall: 4.9.1 make clear, in all dealings with customers and prospective customers, that it is acting as distributor of the Products and not as agent of the Company; 4.9.2 comply with all legal requirements from time to time in force relating to the storage and sale of the Products; 4.9.3 from time to time consult with the Company's representatives for the purpose of assessing the state of the market in the Territory and permit them to inspect any premises or documents used by the Distributor in connection with the sale of the Products; and 4.9.4 maintain an active and suitably trained sales force. MINIMUM SALES STAFF AND TRAINING 4.10 The Distributor shall maintain a minimum number of one full-time sales and marketing person who is suitably trained with a comprehensive knowledge of the Products. 4.11 The Company shall train the personnel of the Distributor at no cost to the Distributor to enable the personnel to demonstrate the Products and to equip such persons with the necessary skills and knowledge to conduct the marketing and sales of the Products as well as to provide the necessary post-sales support and maintenance to customers, provided that the training shall be provided at a location designated by the Company. The maximum number of persons to be trained shall be at the sole discretion of the Company. If the Distributor requests that additional persons be trained for the aforesaid purposes, the Distributor shall bear the expenses of such training and reimburse the Company's reasonable expenses in travel and related out of pocket expenses in providing such training. TECHNICAL SUPPORT 4.12 The Company shall provide technical support to the Distributor in all ways deemed reasonable by the Company regarding the functioning and use of the Products including Products demonstration support. If the Distributor requests that Company personnel to travel to the End User place for Products demonstration then the Distributor shall bear the expenses of Products demonstration and reimburse the Company's 6 reasonable expenses in travel and related out of pocket expenses in providing such Products demonstration. 4.13 The Distributor shall revert to the Company promptly upon receipt of any complaints from customers or requests concerning maintenance, quality and repair of the Products and use of the Products and the Company shall provide the necessary technical support to the Distributor and/or their customers to effect such repairs, maintenance or replacement of the Products or the functioning of the Products. VISA AND ENTRY REQUIREMENTS 4.14 The Distributor agrees to take responsibility for and to obtain or assist the Company to obtain all necessary visas, permits, approvals as required by the laws, bye-laws or regulations of the Territory in order to enable the Company's personnel to remain in the Territory to provide technical support and provide assistance to the Distributor in its marketing, promotion and sales activities. 4.15 The Distributor shall also provide the Company's personnel who are non-resident in the Territory with accommodation, transportation and all travel expenses and expenses reasonably incurred by the personnel in having to relocate to the Territory to provide the technical support and training. ARTICLE V 5. MINIMUM REQUIREMENTS SALES TARGETS 5.1 The Distributor shall meet the minimum sales targets as described in the minimum requirements set forth in SCHEDULE 2 attached hereto for each period of review ("the Minimum Requirements"). PERFORMANCE EVALUATION 5.2 The Company shall assess the Distributor's sales performance by conducting a performance evaluation within six (6) months from the Effective Date. In the event that the Minimum Requirements are not met for this period, the Company may terminate the Distributor's appointment herein and is free to appoint another distributor. The Company shall thereafter conduct a performance evaluation of the Distributor's sales performance on a six-monthly basis while this Agreement subsists and may review and revise the Minimum Requirements subject to the mutual written agreement of the parties. 7 PRICES AND PAYMENT 5.3 The prices at which the Products will be supplied to the Distributor together with the maintenance and service fees shall be contained in a price list given to the Distributor by the Company, which may be revised from time to time by the Company. 5.4 The Distributor shall provide the relevant feedback, conduct surveys and questionnaires and assist the Company in determining the price list which may fluctuate in accordance with market conditions. The Distributor agrees that: 5.4.1 there shall not be any discounts from the price list and the Distributor shall not offer any discounts; 5.5 Each order for the Products shall constitute a separate contract, and any default by the Company in relation to any one order shall not entitle the Distributor to treat this Agreement as terminated. 5.6 The Distributor shall in respect of each order for the Products to be supplied under this Agreement be responsible for: 5.6.1 ensuring the accuracy of the particulars of the order; 5.6.2 providing the Company with any information which is necessary in order to enable the Company to fulfil the order and to comply with all the labeling, marketing and other applicable legal requirements in the Territory; 5.6.3 promptly provide the Company with all information relating to the requirements and needs of customers and clients to enable the Company to fulfil the order for the Products and to carry out its responsibility for maintenance. 5.7 Payment for the Products shall be made directly to the Company by Distributor as per the payment schedules attached. 5.8 Maintenance fees All fees payable by customers for maintenance of the Products and related hardware or software shall be paid to the Company by the Distributor as per the payment schedules attached. ARTICLE VI 6. NON-COMPETITION 6.1 The Distributor shall not, during the continuance of this Agreement and for a period of 1 year thereafter, be engaged in or interested directly or indirectly whether as principal, agent, employee or otherwise howsoever in marketing, selling or otherwise dealing in any product which is directly competitive with the Products or any of the 8 Products ("Competitive Product"). If the Distributor markets, sells, promotes or represents a Competitive Product in the Territory, the Company shall have the right at its option, to : 6.1.1 terminate this Agreement; 6.1.2 consent in writing to the Distributor dealing in the Competitive Product subject to such conditions and terms as may be imposed by the Company; 6.1.3 convert this Agreement to a non-exclusive Agreement, which shall take effect upon written notice being given to the Company, PROVIDED ALWAYS that the Distributor shall provide an account of and pay to the Company on demand all the sales proceeds, profits, benefits and emoluments which it has received from its marketing, promoting, selling, representing or otherwise dealing with a Competitive Product. ARTICLE VII 7. CONFIDENTIALITY 7.1 The Distributor acknowledges that the Company has supplied and during the period of this Agreement will continue to supply to the Distributor technical and commercial information relating to the Products identified as Confidential as well as all information pertaining to the Company or any part of the Company's pricing, business or assets. 7.2 The Distributor undertakes to keep all such information is confidential and undertakes not to reproduce, distribute or disclose any such information until such information properly comes into the public domain. 7.3 The Distributor undertakes to comply with the following: 7.3.1 to return to the Company on the termination of this Agreement all material embodying information designated by the Company as confidential and all copies thereof; and 7.3.2 to ensure that its staff concerned with the Products are aware of and observe the provisions of Section 6 both during the subsistence of this Agreement and thereafter. 9 7.4 Neither party shall at any time during the continuance of this Agreement or thereafter disclose to any third party any confidential information concerning the affairs of the other party of which it has become aware. 7.5 The Distributor undertakes to ensure that any sub distributor or sub contractor appointed shall observe the provisions of Confidentiality described herein. ARTICLE VIII 8. FEES AND COMMISSIONS COMMISSIONS 8.1 The Distributor shall be remunerated under this Agreement by commissions computed in accordance with SCHEDULE 3 annexed hereto which may be amended from time to time upon the mutual agreement in writing by the parties. 8.2 The commissions shall apply to all Product orders solicited by the Distributor from the Territory that have been accepted by the Company and for which shipment has occurred. No commissions shall be paid on: 8.2.1 orders solicited by other third party sales representatives within the Territory; 8.2.2 orders solicited by the Company within the Territory in which the Distributor did not actively participate; 8.2.3 orders received from outside the Territory unless otherwise agreed in writing by the Company. ARTICLE IX 9. INTELLECTUAL PROPERTY RIGHTS 9.1 Any Intellectual Property shall be the property of the Company and the Distributor shall not acquire any right to them by execution of this Agreement, performance of the terms in this Agreement or otherwise. The Distributor acknowledges that all such Intellectual Property shall remain vested in the Company. The Distributor shall not use or exploit the Intellectual Property after the expiration or termination of this Agreement. 9.2 The Company shall not be liable to the Distributor for any liabilities, losses, expenses or damages which may be suffered or incurred by the Distributor as a result of infringement of any patent, trade mark, copyright or other industrial property rights of a 10 third party with respect to the Products sold hereunder. The Company shall not be under any obligation to defend or participate in the defense by the Distributor against any claim or suit alleging such infringement; provided, however, that in the event that the Distributor notifies the Company of the details of such claim or suit without delay, the Company shall use reasonable efforts to cooperate with and assist the Distributor in the defense of any such claim or suit to the extent mutually and previously agreed upon in each case. 9.3 Subject to Section 8.4 below, the Distributor undertakes not to display, present, print, disseminate, or use in any way: 9.3.1 the Company's name 9.3.2 the Company's logo unless prior written permission has been obtained from the Company. In applying for permission from the Company, the Distributor shall state clearly the purpose for which it intends to use the Company's name and/or logo. In the event that the Distributor has used the Company's name or logo for a purpose different from that on which approval was given, the Company shall have the right to terminate this Agreement without prejudice to its rights to claim against the Distributor for damages. 9.4 The Distributor may use the Company's logo and name for a range of the Products as described in Schedule [ ] attached hereto for the purpose of increasing sales and adding value to the Products. 9.5 The Distributor agrees not to grant a lease, license or sub-license of the Products or the use of the Products and copies thereof and further agrees not modify, disassemble, alter, tamper with, revise, re-programme, re-configure or make any changes to the Products and copies thereof. 9.6 The Distributor further agrees to fully and promptly notify the Company and in any event not later than five (5) days of: 9.6.1 any actual threatened or suspected infringement in the Territory of any Intellectual Property of the Company which comes to the Distributor's notice; 9.6.2 any claim by any third party coming to its notice that the promotion or licensing of the Products in the Territory infringes the rights of any other person. 9.7 The Distributor shall at the request and expense of the Company do all such things as may be reasonably required to assist the Company in taking or resisting any proceedings in relation to any infringement or claim referred to in Section [9.6] above. 11 ARTICLE X 10. TERMINATION TERMINATION FOR CAUSE 10.1 If either party defaults in the performance of any material provision of this Agreement, then the non-defaulting party may give written notice to the defaulting party that if the default is not cured within ninety (90) days from the date of such notice, the Agreement may be terminate for cause. If the non-defaulting party gives such notice and the default is not cured during such ninety (90) day period, then the non-defaulting party immediately may terminate this Agreement upon written notice. EFFECT OF TERMINATION 10.2 Upon the termination of this Agreement: 10.2.1 Additional Commissions Upon termination, subject to all the provisions of this Agreement, the Company shall pay to the Distributor on all orders for Products meeting all of the following requirements: (i) the purchase order was actively solicited by the Company during the period prior to termination of this Agreement; (ii) the purchase order is accepted by the Company within sixty (60) days after the effective termination date of this Agreement; and (iii) the Company receives payment with respect to all the Products ordered under such purchase order within twelve (12) months after the effective termination date of this Agreement, provided that the Company shall have the right to equitably divide such commissions with succeeding representatives to the extent such succeeding representatives render services with respect to such transactions. If the Company is owed any amounts by the Distributor, the Company shall have the right to offset any commission payable by such obligation owed to the Distributor. 10.2.2 Return of materials All trade marks, trade names, patent designs, copyrighted materials, software data and other data, financial information, business plans, product literature, brochures, catalogues, presentation materials, demonstration software programs and sales aids of every kind shall remain the property of the Company. Within thirty (30) days after the termination of this Agreement the Distributor shall prepare all such items in its possession for shipment, as the Company may direct, at the Company's expense. The Distributor shall not make or retain any copies of any confidential information and materials that may have been entrusted to it. ARTICLE XI 11. GENERAL PROVISIONS NOTICES 12 11.1 Notices and other communication required or called for under this Agreement shall be in writing, shall be transmitted by prepaid registered post (by airmail if sent between two different countries) or delivered personally to the intended recipient thereof at its address set out below: The Company: SolutionNET(Asia Pacific) Pte Ltd No.1 Shenton Way, #22-06/09 Singapore 068803 The Distributor: Netsavvy Solutions Ltd 547, Anna Salai Teynampet, Chennai-600 018 India. 11.2 Any such notice shall be deemed to have been duly served immediately if delivered by hand or five (5) days after such posting. NO WAIVER 11.3 The failure of either party to enforce at any time for any period any provision hereof shall not be construed to be a waiver of such provision or of the right of such party thereafter to enforce each such provision. SEVERABILITY 11.4 If any provision of this Agreement should be or become fully or partly invalid or unenforceable for any reason whatsoever or violate any applicable law, this Agreement is to be considered divisible as to such provision and such provision is to be deleted from this Agreement, and the remainder of this Agreement shall be deemed valid and binding as if such provision were not included. A suitable provision which, as far as legally possible, comes nearest to what the parties desired according to the sense and purpose of this Agreement had this point been considered when concluding this Agreement shall be substituted for any such provision deemed to be deleted. FORCE MAJEURE 11.5 Neither the Company nor the Distributor shall be liable for failure due to force majeure to perform its duties under this Agreement. As used herein, force majeure means acts of God; acts, regulations or laws of any government; war; civil commotion; strike; 13 lock-out or labor disturbance; destruction of production facilities or materials by fire, earthquake or storm; failure of public utilities or common carriers; failure of suppliers and any other causes beyond the reasonable control of that party. GOVERNING LAW AND JURISDICTION 11.6 This Agreement shall be governed by and construed in accordance with the laws of Singapore. 11.7 In relation to any legal action or proceedings arising out of or in connection with this Agreement ("Proceedings") the parties hereto irrevocably submit to the jurisdiction of the courts of Singapore and waive any objection to Proceedings in any such courts on the grounds of venue or on the grounds that the Proceedings have been brought in an inconvenient forum. 11.8 The parties agree that submission to the jurisdiction of the courts of Singapore shall not affect the right of any other party to take Proceedings in any other jurisdiction nor shall the taking of Proceedings in any other jurisdiction preclude any party from taking Proceedings in any other jurisdiction. HEADINGS 11.9 The Article and Section headings included in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement. ENTIRE AGREEMENT 11.10 This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter of this Agreement and no promises, representations, conditions, provisions or terms other than those set forth in this Agreement exist, and this Agreement overrides and supersedes any prior agreements, promises, representations or understandings between the parties, written or oral with respect to its subject matter. 11.11 No amendment or variation of this Agreement shall be effective unless made in writing and signed by and on behalf of the parties. ASSIGNMENT 11.12 The Distributor will not assign, transfer or part with possession of its rights or duties under this Agreement or any of them except with the prior written consent of the Company. 14 IN WITNESS WHEREOF the parties have hereunto set their hands the day and year first above written. SIGNED for and on behalf of) ) SR SINGAPORE PTE LTD ) ) in the presence of:- ) SIGNED for and on behalf of) ) Netsavvy Solutions Ltd ) ) in the presence of ) EX-6.12 10 k64198ex6-12.txt CONSULTANCY AGREEMENT 1 EXHIBIT 6.12 SR SINGAPORE PTE LTD A SolutionNet International Inc. Company CONSULTANCY AGREEMENT THIS AGREEMENT is made on 1st day of March, 2000. BETWEEN SR SINGAPORE PTE LTD having its registered place of business at No 1 Shenton Way, #22-06/09, Singapore 068803 ("SRS") AND NETSAVVY SOLUTIONS PVT LTD (Formerly called SR INDIA PVT LTD) having its registered place of business at 48, B.N. Road, A-3, Mahbubani Towers, T.Nagar, Chennai - 600017, India ("NSS"). WHEREAS: SRS wishes to appoint NSS to design, develop and support Enet-Corporate Internet Banking, EMI - Electronic Medical Info and other new systems (the "Software's") as well to provide technical support and maintenance to the Software (the "Services"). Now this agreement bears witness to and it is hereby agreed between the parties as follows: 1. FEE & DURATION 1.1 In consideration of the Services rendered to SRS, SRS will pay NSS based on the following rates: Programmer USD 750 per month Analyst Prog./Systems Analyst USD 1,000 per month Project Leader USD 1,250 per month Project Manager USD 2,000 per month 1.2 The actual fee will be calculated on monthly basis based on the actual work order (work order format is specified in the Exhibit A). NSS shall render its invoice monthly for Services provided and expenses incurred under this Agreement throughout the date of such invoice. The invoice will be raised on the last day of each calendar month. All invoices shall be payable with Thirty (30) days from the date of invoice. 2 1.3 For assignments in Overseas for project implementation or system study or deputation the following per-diem allowance will be paid to the staff.
USD$ - ------------------------------------------------------------------------------------------------------ PROGRAMMER ANALYST PROG/ PROJECT PROJECT MANAGER SYS. ANALYST LEADER - ------------------- ------------------- ---------------------- -------------- ------------------------ Asean $ 30.00 $ 30.00 $ 35.00 $ 40.00 - ------------------- ------------------- ---------------------- -------------- ------------------------ USA $ 40.00 $ 40.00 $ 50.00 $ 60.00 - ------------------- ------------------- ---------------------- -------------- ------------------------ Europe $ 50.00 $ 50.00 $ 60.00 $ 70.00 - ------------------- ------------------- ---------------------- -------------- ------------------------ Middle $ 50.00 $ 50.00 $ 60.00 $ 70.00 East - ------------------- ------------------- ---------------------- -------------- ------------------------
SRS will provide accommodation and reimburse actual air ticket/visa expenses. 1.4 This Agreement shall be deemed to have come into force on 1 March 2000 and remain in force for a period of 12 months from its effective date. 2. SOFTWARE AND THE SERVICES 2.1 SOFTWARE 2.1.1 SRS hereby appoints NSS who will render the Services as set forth in Exhibit A. 2.2 SOFTWARE SUPPORT 2.2.1 NSS shall provide software maintenance and support services which shall include the following:- 2.2.1.1 installing, testing, and implementing the Software; 2.2.1.2 investigating and correcting defects on the Software as reported by SRS; and 2.2.1.3 making temporary correction and bypass on defects to the Software until such time that a standard corrections and/or upgrades of the Software are available 2.2.2 NSS shall provide the Services in respect of clause 2.1 without any charge or expenses for a period of sixty (60) days from the date of delivery to SRS (the "Acceptance Cutover"). 2.2.3 Upon notification by SRS of any problem with the Software to NSS, NSS shall mobilize its personnel and fixed the problem: 2.2.3.1 within twelve working hours during the sixty (60) days of Acceptance Cutover. 3 2.2.3.2 any requirements for NSS's personnel to be at SRS's premises shall be at the expense of SRS. 2.3 REPRESENTATIVE Both parties shall each appoint a representative who will act as a communication link between SRS and NSS. 2.5 TESTING Upon notification by NSS that the Software is implemented at SRS, SRS will test whether the Software is in accordance with SRS's requirements. SRS will sign off as per Exhibit A if SRS's requirements are fully complied. 2.6 DELIVERY AND COMPLETION DATE NSS shall deliver the Software to SRS and install the Software on SRS's computer system as per the delivery scheduled agreed on each project. 3. NSS'S OBLIGATIONS 3.1 NSS shall: 3.1.1 provide analysis and design services for the Software; 3.1.2 provide programming and testing services of the Software; 3.1.3 compose technical documentation and user's guide, where necessary and applicable to the Software; 3.1.4 conduct user training and hand over briefings, where necessary and applicable to the Software; and 3.1.5 install the Software. 3.2 The central task of NSS is to design and develop the Software and to provide technical support for the Software as set forth in Exhibit A. 3.3 NSS shall be fully responsible for all activities connected with the proper and timely completion's of the Services. 3.4 NSS will inform SRS by [WEEKLY/BI-MONTHLY/MONTHLY] written report and whenever any need arises for information, investigation or analysis that is relevant to the Service included in this Agreement. 4. SRS'S OBLIGATIONS 4 4.1 SRS shall: 4.1.1 provide appropriate instructions, quality assurance procedures and security guideline where applicable to NSS and its employees on the Services; 4.1.2 provide functional inputs for the Software; 4.1.3 provide necessary functional and technical assistance for development if required; 4.1.4 sign off as and when appropriate as set forth in Exhibit A. 4.2 SRS will not instruct or direct third parties involved with the Services on matters under NSS's authority, without prior notice to NSS. 5. TERM AND TERMINATION 5.1 This Agreement shall enter into force on the date first written above and will expire automatically at the time of completion as laid down in the agreement. 5.2 SRS reserves the right, at any time and for any reason or no reason, to terminate the services provided under this Agreement. If this occurs NSS will be notified by giving NSS ninety(90) days written notice and SRS will pay for the Services up to the date of termination, unless the termination is a result of NSS's acts or omission to act. 5.3 Upon the termination of this Agreement for whatever reason by either party, NSS shall within seven (7) days of termination deliver up to SRS complete documents and documents recorded in any medium arising from or relating to this Agreement to SRS. SRS shall remain liable to pay to the Consultant all sums which have accrued due and wing to the NSS. 6. CONFIDENTIALITY 6.1 NSS agrees and undertakes that during the period of the appointment under this agreement and after the termination thereof:- (a) neither NSS or its employees shall directly or indirectly disclose to any person or use any Confidential Information other than for the purpose of and to the extent necessary for the performance of any of the Services; (b) neither NSS or its employees shall without the prior authority of SRS remove from SRS's premises or allow any person to copy the contents of any document, computer disk, tape or other tangible items which contains any Confidential Information or which belongs to SRS; 5 (c) NSS shall return to SRS upon request and in any event, upon the termination of this Agreement, all documents, computer disks and tapes and other tangible items in his possession or under his control which belong to SRS or which refer to or contain any Confidential Information; and 6.2 NSS shall keep the Confidential Information in strictest confidence at all times and shall comply with the obligations and undertakings as set forth in this Agreement. All obligations and undertakings of NSS specified under this clause with respect o Confidential Information shall survive the termination of this Agreement for whatever reason. 7. INTELLECTUAL PROPERTY 7.1 NSS agrees that all application software programme or similar material incorporating or being used in association with this Agreement, which may be created by NSS or its employees, agents, consultants or subcontractors, pursuant to this Agreement shall become the sole property of SRS, including copyrights. 7.2 NSS shall promptly disclose to SRS all intellectual property and shall hold them in trust for SRS until all rights title and interest in all intellectual property shall be fully and absolutely vested in SRS. 7.3 NSS shall at the request and expense of SRS, do all that are necessary or desirable to effect any transfer or absolute assignment of any and all rights in any and all intellectual property to SRS and to protect the interest of SRS in the intellectual property. 8. NOTICE, CONSENTS AND APPROVALS All notices, demands or other communications required or permitted to be given or made hereunder shall be in writing and delivered by hand or sent by prepaid registered post (by air-mail if to or from an address outside Singapore) with recorded delivery, or by telefax addressed to the intended recipient thereof at its address set out below (or to such other address, telex, or telefax number as any party may from time to time duly notify in writing to the other). The addresses and telefax numbers of the parties for the purposes of this Agreement are: SRS : SR SINGAPORE PTE LTD Attention: Mr. T.R. Varada Rajan No 1 Shenton Way, #22-06/09 Singapore 068803. Fax no. 65-3244425 NSS : NETSAVVY SOLUTIONS PVT LTD Attention: R. Venkatachari 48 B.N.Road, A-3 Mahbubani Towers, T. Nagar, Chennai - 600 017. India 6 Fax no. 91-44-4359948 9. EXHIBIT The Exhibits hereto shall be taken, read and construed as parts of this Agreement and the provisions thereof shall have the same force and effect as if expressly set out in the body of this Agreement. 10. ENTIRE AGREEMENT/AMENDMENTS This Agreement supersedes any other agreement, oral or in writing, between the parties hereto with respect to the subject hereof. This Agreement may not be amended or modified except by mutual consent in writing. 11. ASSIGNMENT Neither party hereto shall assign or sub-contract the benefits of this Agreement to a third party without the prior written consent of the other party. 12. WAIVER The failure of either party to enforce at any time, or for any period of time, the provisions of this Agreement, shall be construed as waiver of such provisions or of the right of such party thereafter to enforce and every such provision. 13. APPLICABLE LAW AND JURISDICTION This Agreement shall be construed and governed in accordance with the laws of Singapore and the parties hereby submit to the non-exclusive jurisdiction of the Courts of the Republic Singapore. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed on the day and the year first above written. NETSAVVY SOLUTIONS PVT. LTD SR SINGAPORE PTE LTD Signed Signed Name Name Designation Designation Signature Signature Date Date EX-6.13 11 k64198ex6-13.txt LOAN AGREEMENT 1 EXHIBIT 6.13 Loan Agreement THIS AGREEMENT made on 1st October 1999, between: M/s SR Singapore Pte Ltd, (SR) 1 Shenton Way Singapore 068803, Represented by Mr. Murali Natarajan VP(Finance) M/s. SolutionNet Europe Plc.(SolutionNet -Europe) The Lansdowne Building, 2 Lansdowne Road, Croydon, Surrey, CR9 2ER, UK Represented by Mr. Chris Patel Director WHEREAS: SolutionNet Europe is seeking working capital from SR to commence the IT consulting and software development services in United Kingdom and SR is desirous of setting up a marketing operation at Europe Now this agreement bears witnesseth to and is hereby agreed between the parties as follows: 1. SR will provide three-year interest free loan of not more than USD 150,000 to SolutionNet Europe. 2. SolutionNet Europe will provide assistance to SR in business development, marketing and selling of SR products and services in the United Kingdom and in Europe for the first two years without any cost to SR. 3. SolutionNet Europe will return the loan amount to SR before end of the loan due date. 4. The agreement shall be construed and governed in accordance with the laws of Republic of Singapore. SIGNED for and on behalf of SIGNED for and on behalf of SR Singapore Pte Ltd SolutionNet Europe Ltd Mr. Murali Natarajan Mr. Chris Patel Vice President - Finance Director -----END PRIVACY-ENHANCED MESSAGE-----