<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 17, 1996
REGISTRATION STATEMENT NO. 333-03521
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
RESTRAC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7371 04-2935271
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
------------------------
RESTRAC, INC.
3 ALLIED DRIVE
DEDHAM, MA 02026
(617) 320-5600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
------------------------
LARS D. PERKINS
RESTRAC, INC.
3 ALLIED DRIVE
DEDHAM, MA 02026
(617) 320-5600
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
JOHN J. EGAN III, ESQ. PATRICK J. RONDEAU, ESQ.
GOODWIN, PROCTER & HOAR LLP HALE AND DORR
EXCHANGE PLACE 60 STATE STREET
BOSTON, MA 02109 BOSTON, MA 02109
(617) 570-1000 (617) 526-6000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /____________.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE> 2
RESTRAC, INC.
<TABLE>
CROSS REFERENCE SHEET
<CAPTION>
ITEM NUMBER OF CAPTION LOCATION OR HEADING IN PROSPECTUS
------------------------------------------ --------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Page of Registration Statement
and Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page and Outside Back
Cover Page of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........ Prospectus Summary, Risk Factors and
Selected Financial Data
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page of Prospectus and
Underwriting
6. Dilution.................................. Dilution
7. Selling Security Holders.................. Principal and Selling Stockholders
8. Plan of Distribution...................... Outside Front Cover Page of Prospectus and
Underwriting
9. Description of Securities to be
Registered................................ Outside Front Cover Page of Prospectus,
Prospectus Summary and Description of
Capital Stock
10. Interest of Named Experts and Counsel..... Not Applicable
11. Information With Respect to the
Registrant................................ Prospectus Summary, Risk Factors, Dividend
Policy, Capitalization, Selected Financial
Data, Management's Discussion and Analysis
of Financial Condition and Results of
Operations, Business, Management, Certain
Transactions, Principal and Selling
Stockholders, Description of Capital Stock,
Shares Eligible for Future Sale and
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</TABLE>
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor
may offers to buy be accepted prior to the time the registration statement
becomes effective. This prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws
of any such State.
SUBJECT TO COMPLETION, DATED MAY 17, 1996
2,500,000 SHARES
LOGO
COMMON STOCK
Of the 2,500,000 shares of Common Stock offered hereby, 1,500,000 shares
are being sold by the Company and 1,000,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders. See "Principal and Selling Stockholders."
Prior to this offering, there has been no public market for the Common Stock of
the Company. It is currently estimated that the initial public offering price
will be between $12.00 and $14.00 per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol RTRK.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==================================================================================================
Proceeds to
Price to Underwriting Proceeds to Selling
Public Discount(1) Company(2) Stockholders
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------
Per Share................. $ $ $ $
Total(3).................. $ $ $ $
==================================================================================================
<FN>
(1) See "Underwriting" for information concerning indemnification of the
Underwriters and other matters.
(2) Before deducting expenses payable by the Company estimated at $600,000.
(3) Certain of the Selling Stockholders have granted to the Underwriters a
30-day option to purchase up to 375,000 additional shares of Common Stock
solely to cover over-allotments, if any. If the Underwriters exercise this
option in full, the Price to Public will total $ , the Underwriting
Discount will total $ , the Proceeds to Company will total
$ and the Proceeds to Selling Stockholders will total $ .
See "Underwriting."
</TABLE>
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1996.
------------------------
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON
ADAMS, HARKNESS & HILL, INC.
, 1996
<PAGE> 4
RESTRAC
HUMAN RESOURCE STAFFING SOFTWARE
[GRAPHIC OF A BULLSEYE]
FOR
THE STRATEGIC MANAGEMENT OF HUMAN CAPITAL
"Restrac" is a registered trademark of the Company and all of the Company's
logos and product names are trademarks of the Company. This Prospectus also
contains trademarks of other companies.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 5
1. CAPTURE CANDIDATE
INFORMATION
Restrac provides organizations with multi- [PICTURE OF A COMPUTER SCREEN]
ple methods for automating the collection
of candidate skills. These include resume
scanning, e-mail, fax, employment kiosks
and the Internet. These capabilities reduce
administrative tasks and allow companies
to access a broader candidate pool.
E-mail/ Scan
Internet [GRAPHIC OF A SCANNER]
[GRAPHIC OF A COMPUTER]
[ARROWS] Automated Input
Fax Kiosk
[GRAPHIC OF A PIECE OF PAPER] [GRAPHIC OF A COMPUTER]
[ARROWS]
[GRAPHIC OF A PERSON AT A DESK]
CLIENT/SERVER, WINDOWS-BASED SYSTEMS
Restrac's client/server software supports Microsoft Windows on the desktop,
industry standard SQL databases on the server and TCP/IP protocol - providing
high performance, scalable implementation on local area networks, wide area
networks, the Internet and Intranets.
<PAGE> 6
RESTRAC
CLIENT/SERVER STAFFING SOFTWARE
2. CREATE CANDIDATE POOL
Organizations create a comprehensive
re-usable pool of candidates. This
repository can then be searched by [GRAPHIC OF A
recruiters throughout the enterprise SPHERE]
who have open positions to fill
or projects to staff. Candidate Skills Repository
Automated Input
3. FIND CANDIDATES
Based on user-defined job
requirements, Restrac provides a
ranked list of qualified candi- [GRAPHIC OF A
dates and displays their resumes COMPUTER SCREEN]
with key skills highlighted.
Spelling
4. EXPEDITE STAFFING PROCESS
Restrac provides database man-
agement and workflow functional-
ity to automate the workflow of [GRAPHIC OF A
the staffing process. Its process- COMPUTER SCREEN]
oriented design enables users to
coordinate the staffing process
across the enterprise.
5. CONNECT STAFFING TEAM
Restrac facilitates communications between
human resources, hiring managers and appli-
cants. Resumes can be reviewed via e-mail. [GRAPHIC OF A PERSON
Interactive voice response capabilities enable IN A CHAIR]
managers to review requisition status using a
telephone to access the system directly.
6. REPORT
After candidates are hired and
deployed, Restrac's reporting
capabilities enable the organi-
zation to analyze staffing
effectiveness and demonstrate
compliance with Equal
Employment Opportunity
(EEO) requirements.
Hire and Deploy
[ARROW]
Review and Interview
[ARROW]
Regional Sales Manager [GRAPHIC OF A PERSON]
[ARROW]
Plant Manager [GRAPHIC OF A PERSON]
[ARROW]
Software Engineer [GRAPHIC OF A PERSON]
[ARROW]
Job Requirements
<PAGE> 7
- -------------------------------------------------------------------------------
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information, including "Risk Factors" and the financial statements and notes
thereto, appearing elsewhere in this Prospectus. Unless otherwise indicated, all
information in this Prospectus (i) assumes no exercise of the Underwriters'
over-allotment option and the automatic conversion of all outstanding shares of
Convertible Preferred Stock into an aggregate of 2,502,696 shares of Common
Stock upon the closing of this offering and (ii) has been adjusted to reflect a
three-for-one stock split of the Common Stock effected as a stock dividend in
May 1995 and a three-for-two stock split of the Common Stock effected as a stock
dividend in May 1996.
THE COMPANY
Restrac, Inc. ("Restrac" or the "Company") designs, develops, markets,
implements and supports human resource ("HR") staffing software to automate the
recruitment, selection and placement of an organization's workforce. The
Company's staffing software enables organizations to strategically manage their
human capital by reducing hiring and placement costs, decreasing time to fill
positions and providing more effective skills management and worker deployment.
The Company's products -- Restrac Hire and Resume Reader for PeopleSoft --
provide HR departments with client/server solutions to quickly and efficiently
build and search comprehensive "pools" of resume skills data to find the
workers they need, while also managing the workflow of the staffing process.
The management of human capital is increasingly being viewed as a business
imperative and has emerged in recent years as a key element of corporate
strategy. Recruiting and deploying the most qualified employees is now being
recognized as critical to an organization's long-term success. In addition, the
development of distributed client/server computing and the emergence of the
Internet have provided the technological framework for organizations to automate
and disseminate a process that was historically centralized on systems designed
for other record-keeping functions, such as payroll processing, accounting and
reporting. As a result, demand has grown for a new generation of HR staffing
systems that provide HR departments with the ability to rapidly build and search
comprehensive pools of candidate skills data and automate the staffing process.
The Company's current software offerings are open, client/server
applications that utilize standard industry communications protocols, such as
TCP/IP, allowing for high performance, scalable implementations across local
area networks, wide area networks, the Internet and Intranets (Internet-based
networks within an enterprise). The Company's software supports industry
standards, such as Microsoft Windows and most leading relational databases
(including Oracle, Microsoft SQLServer and Sybase), server platforms (including
Windows NT and many UNIX variants), e-mail systems (including Microsoft Mail and
Lotus cc:Mail) and desktop productivity tools (including Lotus Notes). This open
architecture has facilitated integration with other systems providing customers
with integrated, multi-vendor solutions to meet their specific needs.
Since the introduction of Restrac Hire in 1993, the Company has licensed
its client/server, Windows-based staffing software to approximately 200
customers. Approximately 250 other organizations continue to license the
Company's earlier DOS-based recruiting and succession planning products. Within
these 450 organizations, there are over 4,000 licensed users of the Company's
products. The Company's products are primarily licensed by large corporate
employers experiencing accelerated growth, significant reorganization or
downsizing or a scarcity of skilled labor, or by companies reengineering their
HR function to reduce costs. Due to its flexible skills management and search
capabilities, the Company's software is also licensed by consulting firms and
providers of full-time, contract or temporary labor. Twenty-eight of the 50 most
profitable U.S. companies cited in Fortune magazine's 1996 "Fortune 1000" report
use the Company's software. The Company's customer base includes
Hewlett-Packard, American Express, British Telecom, AT&T, Intel, Johnson &
Johnson and Levi Strauss.
- -------------------------------------------------------------------------------
3
<PAGE> 8
- -------------------------------------------------------------------------------
<TABLE>
THE OFFERING
<CAPTION>
<S> <C>
Common Stock offered by the Company................. 1,500,000 shares
Common Stock offered by the Selling Stockholders.... 1,000,000 shares
Common Stock to be outstanding after this
Offering.......................................... 7,874,383 shares(1)
Use of Proceeds..................................... Working capital and other
general corporate purposes
Proposed Nasdaq National Market symbol.............. RTRK
</TABLE>
<TABLE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------- ---------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................... $2,325 $3,879 $5,670 $ 9,737 $15,014 $6,211 $9,903
Income (loss) from operations................ (189) 54 172 871 537 583 835
Net income (loss)............................ (213) 13 89 606 401 387 527
Pro forma net income per common
and common equivalent share(2)............. $ .06 $ .08
Pro forma weighted average number of common
and common equivalent shares outstanding... 6,949 6,938
OTHER DATA:
Income (loss) from operations before
non-recurring charge(3).................... (189) 54 172 871 1,548 583 835
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------
PRO FORMA
PRO FORMA(4) AS ADJUSTED(4)(5)
------------ -----------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 4,313 $21,299
Working capital..................................................... 2,094 19,629
Total assets........................................................ 10,084 27,070
Total liabilities................................................... 6,587 6,038
Stockholders' equity................................................ 3,497 21,032
<FN>
- ---------------
(1) Based upon shares outstanding as of May 8, 1996. Excludes 641,844 shares of
Common Stock which were subject to outstanding options under the Company's
1994 Stock Option Plan (the "1994 Stock Option Plan") as of May 8, 1996 at a
weighted average exercise price of approximately $2.65 per share. See
"Capitalization," "Management -- Stock Option Plans" and Note 6 of Notes to
Financial Statements.
(2) Computed on the basis described in Note 1 of Notes to Financial Statements.
(3) Determined before non-recurring charge in fiscal 1995 related to the buy-out
of certain product distribution rights. See Note 2 of Notes to Financial
Statements.
(4) Gives effect to the conversion of all then outstanding shares of Convertible
Preferred Stock into an aggregate of 2,502,696 shares of Common Stock upon
the closing of this offering and the accrual of accumulated dividends due
upon conversion of the Convertible Preferred Stock.
(5) Adjusted to give effect to the receipt of the net proceeds from the sale of
the 1,500,000 shares of Common Stock offered by the Company hereby (at an
assumed initial public offering price of $13.00 per share), after deducting
the estimated underwriting discount and offering expenses and the payment of
dividends due upon conversion of the Convertible Preferred Stock. See "Use
of Proceeds" and "Capitalization."
</TABLE>
------------------------
The Company was incorporated in Massachusetts in 1982 and reincorporated in
Delaware in 1993. The Company's principal executive offices are located at 3
Allied Drive, Dedham, Massachusetts 02026, and its telephone number is (617)
320-5600. The Company's home page is located at www.restrac.com.
- --------------------------------------------------------------------------------
4
<PAGE> 9
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered in evaluating the Company and its business before
purchasing the Common Stock offered hereby.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's results of operations have been, and may in the future be,
subject to significant quarterly fluctuations, due to a variety of factors,
including the relatively lengthy sales cycle for the Company's products, the
relatively large size of a typical product sale, the timing of contracts, the
introduction of new products by the Company or its competitors, capital spending
patterns of customers, the Company's sales incentive strategy and general
economic conditions. Historically, revenue in the first fiscal quarter has been
lower than in the preceding fourth fiscal quarter (which typically has the
highest revenue and net income), due largely to sales incentive programs focused
on annual operating results. A substantial portion of the Company's revenue
occurs during the last few weeks of each quarter; therefore, any delays in
orders or shipments are more likely to result in revenue not being recognized
until the following quarter. The Company's current expense levels are based in
part on its expectations of future revenue and, as a result, net income for a
given period could be disproportionately affected by any reduction in revenue.
There can be no assurance that the Company will be able to achieve significant
revenue, that the level of revenue in the future will not decrease from past
levels or that in some future quarter the Company's revenue or operating results
will not be below the expectations of stock market securities analysts and
investors. In such event, the Company's profitability and price of its Common
Stock would likely be materially and adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EMERGING MARKETS
The market for automated human resource staffing solutions is relatively
new and undeveloped. The Company's future success is substantially dependent on
broader recognition of the potential benefits afforded by automated staffing
software and the growth in demand for such solutions. Because the market for
such software is only beginning to develop, it is difficult to assess the size
of the market, the customer demands that will evolve and the competition that
may emerge. There can be no assurance that the market for automated staffing
software will continue to grow or that the introduction of new technologies or
services will not render the Company's existing software obsolete or
unmarketable.
The market for automated staffing solutions is undergoing rapid changes,
including continuing advances in technology and changes in customer requirements
and preferences. These market dynamics have been exacerbated by the emergence of
the Internet as a communications medium for staffing solutions. The Company's
future success will depend in significant part on its ability to continually
improve the performance, features and reliability of its software in response to
the evolving demands of the marketplace and competitive product offerings, and
there can be no assurance that the Company will be successful in doing so. In
addition, an element of the Company's business strategy is the development and
introduction of new products, functionalities and other staffing solutions that
capitalize on the increasing use of the Internet as a communications medium. The
development process for the Company's new products, functionalities and other
staffing solutions which target the Internet may be significantly different and
longer than the development process for the Company's current software, and this
may result in higher development costs, longer development cycles or a loss in
market acceptance. There can be no assurance that the Company will be successful
in developing and marketing products, functionalities and other staffing
solutions for the Internet, that its future offerings will keep pace with
technological changes in the market or new technologies introduced by
competitors or that it will satisfy evolving consumer preferences. Development
of Internet-based products, functionalities and other staffing solutions will
also depend on increased acceptance of the Internet for staffing solutions and
the development of the necessary infrastructure to facilitate commercial
applications on the Internet. There can be no assurance of such acceptance or
infrastructure development. Failure to develop and introduce new products,
functionalities and other staffing solutions in a timely fashion could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Product Development."
5
<PAGE> 10
DEPENDENCE ON PRINCIPAL PRODUCT
The Company currently derives most of its revenue from its Restrac Hire
product. As a result, any factor adversely affecting sales of this product would
have a material adverse effect on the Company. The future success of the Company
also depends, in part, on achieving broader market acceptance of Restrac Hire,
as well as the ability to continue to enhance Restrac Hire to meet the evolving
needs of its customers. Moreover, the Company anticipates that its existing and
new competitors will introduce additional competitive products. This competition
may reduce future market acceptance of Restrac Hire. The market acceptance of
the Company's software is difficult to estimate due in large measure to the
effect of new products, applications or product enhancements, technological
changes in the marketplace for staffing solutions and future competition. There
can be no assurance that the Company will maintain and expand acceptance of
Restrac Hire. The failure of the Company to maintain and expand its market
acceptance as a result of competition, technological change or other factors,
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Products."
MANAGEMENT OF GROWTH
The Company's business has grown rapidly in recent periods, with total
revenues increasing from $5.7 million in fiscal 1993 to $15 million in fiscal
1995. The growth of the Company's business and expansion of the Company's
customer base has resulted in substantial growth in the number of its employees,
the scope of its operating and financial systems and the geographic area of its
operations, resulting in increased responsibility for management personnel. The
Company's future results of operations will depend on the ability of its
officers and other key employees to continue to implement its operational,
customer support and financial control systems and to expand, train and manage
its employee base. Although the Company currently has no agreements, commitments
or understandings relating to any acquisitions, the Company may undertake
acquisitions in the future. Any such transactions would place additional strains
upon the Company's management resources. There can be no assurance that the
Company will be able to manage any future expansion successfully, and any
inability to do so would have a material adverse effect on the Company's
business, financial condition and results of operations.
COMPETITION
The marketplace for staffing solutions is intensely competitive and is
rapidly changing. The Company encounters direct competition from a number of
companies providing staffing solutions, including (i) other human resource
staffing software companies, (ii) providers of general human resource
information systems, (iii) agencies providing or sourcing full-time, contract
and temporary labor, (iv) information systems departments of potential prospects
that develop custom software, and (v) providers of other client/server
application software or document management systems.
The Company's primary direct competitor is Resumix, Inc., which was
acquired by Ceridian, Inc. in 1995. The Company also competes directly against
other providers of human resource staffing software, most of which are small
privately held companies providing less functional products at lower prices. In
addition, vendors of general human resource information systems generally
include applicant tracking modules in their offerings which can compete with the
Company's products. Moreover, there can be no assurance that such vendors will
not develop and market products in direct competition with the Company. Some of
the Company's current and many of its potential competitors, including
PeopleSoft and many other providers of general human resource information
systems, are large, publicly traded organizations with access to significantly
greater financial, technical, marketing and other resources. As a result, they
may be able to respond to market changes, emerging technologies or changes in
customer requirements more rapidly and devote more resources to the development,
marketing and sales of their products than the Company. Competition may increase
from new market entrants (particularly if the market for automated staffing
solutions continues to develop) or through consolidations in the software
industry and/or cooperative relationships among companies. Although the Company
believes that at the present time its products are competitively priced, an
increase in competition could result in price reductions and loss of market
share. Such
6
<PAGE> 11
competition and any resulting price reductions could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Competition."
DEPENDENCE ON THIRD PARTIES
A key element of the Company's business strategy is to develop
relationships with leading industry organizations in order to increase the
Company's market presence, expand distribution channels and broaden the
Company's product line. For example, the Company generated approximately 18% of
its product revenue during the first six months of fiscal 1996 from the sale of
Resume Reader for PeopleSoft, a product jointly marketed by the Company and
PeopleSoft which integrates the high volume resume-scanning, skills management
and search capabilities found in the Company's Restrac Hire product with
PeopleSoft's HRMS product. The Company believes that its continued success
depends in large part on its ability to maintain such relationships and
cultivate additional relationships. There can be no assurance that the Company's
existing strategic partners such as PeopleSoft or future strategic partners will
not develop and market products in direct competition with the Company or
otherwise discontinue their relationships with the Company, or that the Company
will be able to successfully develop additional strategic relationships.
In addition, certain technology incorporated in the Company's software,
including Verity's text search technology and TASC's imaging technology, is
licensed from third parties on a nonexclusive basis. The Company believes that
there are alternative sources for each of the material components of technology
licensed by the Company from third parties. However, the termination of any of
such licenses, or the failure of the third party licensors to adequately
maintain or update their products, could result in delay in the Company's
ability to ship certain of its products while it seeks to implement technology
offered by alternative sources. In addition, any required replacement licenses
could prove more costly than the Company's current license relationships and
might not provide technology as powerful and functional as the third-party
technology currently licensed by the Company. Also, any such delay, to the
extent it becomes extended or occurs at or near the end of a fiscal quarter,
could have a material adverse effect on the Company's results of operations for
that quarter. While it may be necessary or desirable in the future to obtain
other licenses relating to one or more of the Company's products or relating to
current or future technologies, there can be no assurance that the Company will
be able to do so on commercially reasonable terms or at all. See "Business --
Strategic Relationships."
RISK OF NEW PRODUCT INTRODUCTIONS; RISK OF PRODUCT DEFECTS
As the marketplace for staffing solutions continues to evolve, the Company
plans to develop and introduce new products to enable it to effectively address
the changing needs of that market. There is no guarantee that the Company will
be able to develop new products or that such products will achieve market
acceptance or, if market acceptance is achieved, that the Company will be able
to maintain such acceptance for a significant period of time. Any inability of
the Company to quickly develop products that address changes in technology or
customer demands may require the Company to substantially increase development
expenditures or result in a loss of market share to a competitor.
Products as complex as those offered by the Company may contain undetected
errors when first introduced or when new versions are released. The Company has
in the past discovered software errors in certain of its product offerings after
their introduction. There can be no assurance that, despite testing by the
Company, errors will not occur in new products or releases after commencement of
commercial shipments, resulting in adverse publicity, in loss of or delay in
market acceptance, or in claims by the customer against the Company, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Products."
7
<PAGE> 12
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends to a significant extent on its senior
management and other key employees, including its Chief Executive Officer, Lars
D. Perkins. The Company also believes that its future success will depend in
large part on its ability to attract and retain additional key employees.
Competition for such personnel in the computer software industry is intense, and
there can be no assurance that the Company will be successful in attracting and
retaining such personnel. Furthermore, although the Company is a party to
non-competition agreements with each of its senior executives, the laws
governing such agreements are in continual flux and the enforceability of such
agreements in each jurisdiction in which enforcement might be sought is
uncertain. The Company's inability to attract and retain additional key
employees or the loss of one or more of its current key employees could
materially adversely affect the Company's business, financial condition and
results of operations. See "Management" and "Business -- Employees."
INTERNATIONAL SALES
Although international sales have been insignificant to date, an important
element of the Company's business strategy is the expansion of its existing
international operations and entry into additional international markets, which
will require significant management attention and financial resources. The
Company established a regional sales and services office in Reading, England in
March 1995. In order to successfully expand international sales, the Company
must establish additional foreign operations and hire additional personnel. To
the extent that the Company is unable to do so in a timely manner, the Company's
growth, if any, in international sales will be limited, and the Company's
business, financial condition and results of operations could be materially
adversely affected. In addition, there can be no assurance that the Company will
be able to maintain or increase international market demand for its products.
Additional risks inherent in the Company's international business activities
generally include currency fluctuations, unexpected changes in regulatory
requirements, tariffs and other trade barriers, costs and difficulties
associated with localizing products for foreign countries, lack of acceptance of
localized products in foreign countries, longer accounts receivable payment
cycles, difficulties in managing international operations, potentially adverse
tax consequences, restrictions on the repatriation of earnings, the burdens of
complying with a wide variety of foreign laws and political and economic
instability. There can be no assurance that such factors will not have a
material adverse effect on the Company's future international sales or the
Company's overall business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Strategy."
LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS; RISK OF
LITIGATION
The Company relies on a combination of copyright and trade secret laws,
employee and third party non-disclosure agreements and other methods to protect
its proprietary rights. There can be no assurance that the measures taken by the
Company to protect its proprietary rights will be adequate to prevent
misappropriation of its technology or independent development by others of
similar technology. In addition, the Company may be subject to additional risk
as it enters into transactions in countries where intellectual property laws are
not well developed or are poorly enforced. The Company's inability to protect
its proprietary rights would have a material adverse effect on the Company's
business, financial condition and results of operations.
As the number of human resource application software products in the
industry increases and the functionality of these products further overlaps,
software developers and publishers may increasingly become subject to
infringement claims. There can be no assurance that third parties will not
assert infringement claims against the Company in the future with respect to
current or future products. Although the Company is not currently the subject of
any intellectual property litigation, there has been substantial litigation
regarding copyright, patent and other intellectual property rights involving
computer software companies. Any claims or litigation, with or without merit,
could be costly and could result in a diversion of management's attention, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. Adverse determinations in such claims or
litigation may require the Company to obtain a license and/or pay damages, which
could also have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Intellectual Property."
8
<PAGE> 13
NO PRIOR PUBLIC MARKET; MARKET VOLATILITY
Prior to this offering, there has been no public market for the Company's
Common Stock. Although the Company's Common Stock has been approved for
quotation on the Nasdaq National Market, there can be no assurance that an
active trading market will develop or be sustained following this offering. The
initial public offering price of the Common Stock will be determined in
negotiations among the Company, the Selling Stockholders and the Representatives
of the Underwriters, and may not be indicative of future market prices. In
addition, in recent years the stock market in general, and the market for shares
of small capitalization companies in particular, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
affected companies. There can be no assurance that the market price of the
Company's Common Stock will not experience significant fluctuations in the
future, including fluctuations that are unrelated to the Company's performance.
General market price declines or market volatility in the future could adversely
affect the market price of the Common Stock. See "Underwriting."
CONCENTRATION OF SHARE OWNERSHIP
Based on the number of shares of Common Stock that will be outstanding upon
completion of this offering, directors and officers of the Company, together
with entities affiliated with them, will own 62.6% of the Company's outstanding
Common Stock in the aggregate (57.9% assuming the exercise in full of the
Underwriters' over-allotment option). As a result, these stockholders will
retain the voting power required to elect all directors and to approve other
matters requiring approval by the stockholders of the Company. See
"Management -- Executive Officers and Directors" and "Principal and Selling
Stockholders."
POTENTIAL IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market following
the offering could have an adverse effect on the market price of the Common
Stock. Approximately 2,530,000 shares (including the 2,500,000 shares offered
hereby) will be eligible for sale in the public market immediately following the
effective date of the Registration Statement, and approximately 5,240,814
additional shares will become eligible for sale in the public market upon the
expiration of agreements with the Underwriters not to sell such shares until 180
days after the date of this Prospectus. Holders of 4,822,547 shares have
contractual rights to have those shares registered with the Securities and
Exchange Commission for resale to the public. In addition, 30 days after the
effective date of the Registration Statement, the Company intends to file a
registration statement covering the 1,750,000 shares of Common Stock issued or
reserved for issuance under the 1994 Stock Option Plan, the Company's 1996 Stock
Option and Grant Plan (the "1996 Stock Option Plan") and the Company's 1996
Employee Stock Purchase Plan (the "Employee Stock Purchase Plan"), and upon
filing any shares subsequently issued under such Plans will be eligible for sale
in the public market, subject to compliance with Rule 144 in the case of
affiliates of the Company. See "Shares Eligible for Future Sale."
EFFECT OF CERTAIN CHARTER PROVISIONS
The Company's Board of Directors has the authority to issue shares of
Preferred Stock and to determine the price, rights, preferences, privileges and
restrictions of those shares without any further vote or action by the
stockholders. The rights of the holders of Common Stock will be subject to, and
may be adversely affected by, the rights of the holders of any Preferred Stock
that may be issued in the future. The issuance of Preferred Stock, while
providing desirable flexibility in connection with possible acquisitions and
other corporate purposes, could have the effect of making it more difficult for
a third party to acquire a majority of the outstanding voting stock of the
Company. The Company has no present plans to issue shares of Preferred Stock. In
addition, the Company is subject to the anti-takeover provisions of Section 203
of the Delaware General Corporation Law. In general, this statute prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years after the date of
the transaction in which the person became an interested stockholder, unless the
business combination is approved in a prescribed manner. For purposes of Section
203, a "business combination" includes a merger, asset sale or other transaction
resulting in a financial benefit to the interested stockholder, and an
"interested stockholder" is generally a person who, together with affiliates and
associates, owns (or within three years
9
<PAGE> 14
prior, did own) 15% or more of the corporation's voting stock. Furthermore,
certain provisions of the Company's Certificate of Incorporation and By-laws,
such as the classification of the Board of Directors and prohibitions against
stockholders acting by written consent or calling special meetings of
stockholders, may have the effect of delaying or preventing changes in control
or management of the Company, which could adversely affect the market price of
the Company's Common Stock and deprive stockholders of an opportunity to receive
a premium for their shares. See "Management" and "Description of Capital Stock."
DILUTION
Purchasers of the Common Stock offered hereby will experience immediate and
substantial dilution of the net tangible book value of the Common Stock. See
"Dilution."
10
<PAGE> 15
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,500,000 shares of
Common Stock offered by the Company hereby at an assumed initial public offering
price of $13.00 per share are estimated to be approximately $17,535,000. The
Company will not receive any proceeds from the sale of shares of Common Stock by
the Selling Stockholders. See "Principal and Selling Stockholders."
The principal reasons for this offering are to increase the Company's
equity capital and to create a public market for the Company's Common Stock,
which will facilitate future access by the Company to public equity markets and
enhance the ability of the Company to use its Common Stock as consideration for
acquisitions and as a means for attracting and retaining key employees.
The Company intends to use the net proceeds of this offering primarily for
working capital and other general corporate purposes, including expansion of the
Company's product development and sales and marketing efforts, payment of an
estimated $548,733 of accumulated dividends due upon conversion of the
Convertible Preferred Stock, and potential acquisitions, including the purchase
or license of new technologies. The amounts actually expended by the Company for
working capital purposes will vary significantly depending upon a number of
factors, including future revenue growth, the amount of cash generated by the
Company's operations and the progress of the Company's product development
efforts. In addition, the Company may make one or more acquisitions of
complementary technologies, products or businesses which broaden or enhance the
Company's current product offerings. However, the Company has no specific
agreements, commitments or understandings with respect to any such acquisition.
Pending the uses described above, the net proceeds will be invested in
interest-bearing, investment grade securities.
DIVIDEND POLICY
The Company has never paid cash dividends on its Common Stock. In April and
July, 1994, the Company paid aggregate dividends of $146,871 to the holders of
Convertible Preferred Stock, in accordance with the terms and conditions of that
certain Stock Purchase Agreement dated January 5, 1994 (the "1994 Financing
Agreement"). In connection with the conversion of the Convertible Preferred
Stock into Common Stock upon the closing of this offering, the Company will be
required to pay an estimated $548,733 of dividends to the holders of Convertible
Preferred Stock. The Company currently intends to retain any earnings for future
growth and, therefore, does not anticipate paying any cash dividends in the
foreseeable future. In addition, the Company is restricted by its bank credit
agreement from paying cash dividends without the prior written consent of the
bank (which has been obtained with respect to the dividends described above).
11
<PAGE> 16
CAPITALIZATION
<TABLE>
The following table sets forth, as of March 31, 1996, the Company's
unaudited (i) pro forma capitalization after giving effect to the conversion of
all outstanding shares of Convertible Preferred Stock into an aggregate of
2,502,696 shares of Common Stock upon the closing of this offering, and (ii) pro
forma as adjusted capitalization to reflect the sale by the Company of the
1,500,000 shares of Common Stock offered hereby and the receipt by the Company
of the estimated net proceeds therefrom, based upon an assumed initial public
offering price of $13.00 per share, and after deducting the estimated
underwriting discount and offering expenses and the payment of accumulated
dividends due upon conversion of the Convertible Preferred Stock. The
capitalization information set forth in the table below is qualified by the more
detailed Financial Statements and Notes thereto appearing elsewhere in this
Prospectus and should be read in conjunction with such Financial Statements and
Notes.
<CAPTION>
MARCH 31, 1996(1)
-------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Short-term debt (including current portion of long-term debt)....... $ 11 $ 11
====== =======
Long-term debt (excluding current portion).......................... $ 6 $ 6
------ -------
Convertible Preferred Stock, $1.00 par value, 1,000,000 shares
authorized, none issued or outstanding............................ -- --
Stockholders' equity(2):
Preferred Stock, $.01 par value, 5,000,000 shares authorized,
no shares issued or outstanding................................ -- --
Common Stock, $.01 par value, 30,000,000 shares authorized,
7,061,283 shares issued pro forma; 8,561,283 shares issued pro
forma as adjusted.............................................. 71 86
Additional paid-in capital........................................ 3,700 21,220
Treasury stock, at cost, 686,900 shares........................... (831) (831)
Retained earnings................................................. 557 557
------ -------
Total stockholders' equity..................................... 3,497 21,032
------ -------
Total capitalization...................................... $3,503 $21,038
====== =======
<FN>
- ---------------
(1) The Company's Board of Directors and the stockholders have approved the
amendment and restatement of the Company's Certificate of Incorporation to
increase the number of authorized shares of Common Stock and Preferred Stock
to 30,000,000 and 5,000,000 shares, respectively. See "Description of
Capital Stock" and Note 6 of Notes to Financial Statements.
(2) Excludes 517,919 shares of Common Stock which were subject to outstanding
stock options under the Company's 1994 Stock Option Plan as of March 31,
1996 at a weighted average exercise price of approximately $1.01 per share.
See "Management -- Stock Option Plans" and Note 6 of Notes to Financial
Statements.
</TABLE>
12
<PAGE> 17
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1996
was approximately $3,496,935, or $0.55 per share, after giving effect to the
conversion of all outstanding shares of Convertible Preferred Stock into an
aggregate of 2,502,696 shares of Common Stock upon the closing of this offering.
Pro forma net tangible book value per share represents the amount of the
Company's total tangible assets less total liabilities, including the accrual of
accumulated dividends on the Convertible Preferred Stock, divided by the pro
forma number of shares of Common Stock outstanding, including the shares of
Common Stock resulting from the conversion of the Convertible Preferred Stock.
Without taking into account any other changes in the net tangible book value
after March 31, 1996, other than to give effect to the receipt by the Company of
the net proceeds from the sale of the 1,500,000 shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of $13.00 per
share and after deducting the estimated underwriting discount and offering
expenses and the payment of accumulated dividends due upon conversion of the
Convertible Preferred Stock, the pro forma net tangible book value of the
Company as of March 31, 1996 would have been approximately $21,031,935, or $2.67
per share. This represents an immediate increase in pro forma net tangible book
value of $2.12 per share to existing stockholders and an immediate dilution of
$10.33 per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $13.00
------
Pro forma net tangible book value per share as of March 31,
1996........................................................... $0.55
-----
Increase per share attributable to new investors.................. 2.12
-----
Pro forma net tangible book value per share as of March 31, 1996.... 2.67
------
Dilution per share to new investors................................. $10.33
======
</TABLE>
<TABLE>
The following table summarizes, as of March 31, 1996, after giving effect
to the conversion of all outstanding shares of Convertible Preferred Stock into
an aggregate of 2,502,696 shares of Common Stock upon the closing of this
offering, the differences between existing stockholders and purchasers of shares
in this offering (at an assumed initial public offering price of $13.00 per
share) with respect to the number of shares of Common Stock purchased from the
Company, the total consideration paid and the average price per share paid:
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ----------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1).... 6,374,383 81.0% $ 3,546,887 15.4% $ 0.56
New investors(1)............ 1,500,000 19.0 19,500,000 84.6 13.00
--------- ----- ----------- -----
Total............. 7,874,383 100.0% $23,046,887 100.0%
========= ===== =========== =====
<FN>
- ---------------
(1) Sales by Selling Stockholders in this offering will reduce the number of
shares held by existing stockholders to 5,374,383 or approximately 68.3% and
will increase the number of shares held by new investors to 2,500,000 or
approximately 31.7% of the total number of shares of Common Stock
outstanding after this offering.
</TABLE>
The foregoing computations do not give effect to the exercise of any stock
options outstanding as of March 31, 1996. As of March 31, 1996, 517,919 shares
of Common Stock were subject to outstanding options under the Company's 1994
Stock Option Plan at a weighted average exercise price of approximately $1.01
per share. To the extent that any outstanding options are exercised, there will
be further dilution to new investors. See "Capitalization," "Management -- Stock
Option Plans" and Note 6 of Notes to Financial Statements.
13
<PAGE> 18
SELECTED FINANCIAL DATA
The selected financial data set forth below with respect to the Company's
statements of operations for the three fiscal years ended September 30, 1993,
1994 and 1995 and the balance sheets at September 30, 1994 and 1995 are derived
from the financial statements of the Company included elsewhere in this
Prospectus that have been audited by Arthur Andersen LLP, independent public
accountants. The selected balance sheet data as of September 30, 1993 are
derived from the Company's financial statements, not included in this
Prospectus, which have been audited by Arthur Andersen LLP, independent public
accountants. The statement of operations data for the two fiscal years ended
September 30, 1991 and 1992 and the balance sheet data as of September 30, 1991
and 1992 are derived from the Company's unaudited financial statements not
included herein. The statement of operations data for the six months ended March
31, 1995 and 1996 and the balance sheet at March 31, 1996 are derived from
unaudited financial statements included elsewhere in this Prospectus. The
unaudited financial statements include all adjustments, consisting only of
normal recurring adjustments, that the Company considers necessary for a fair
presentation of the financial position and results of operations for these
periods. Operating results for the six months ended March 31, 1996 are not
necessarily indicative of the results that may be expected for the entire fiscal
year ending September 30, 1996. The data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements and Notes thereto
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
----------------------------------------------- -----------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------ ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue:
Product revenue.................................. $1,150 $2,365 $3,776 $6,816 $10,024 $4,133 $6,100
Services revenue................................. 1,175 1,514 1,894 2,921 4,990 2,078 3,803
------ ------ ------ ------ ------- ------ ------
Total revenue................................ 2,325 3,879 5,670 9,737 15,014 6,211 9,903
Cost of revenue:
Product revenue.................................. 154 325 719 1,350 1,425 713 932
Services revenue................................. 653 746 1,362 1,589 2,984 1,148 2,192
------ ------ ------ ------ ------- ------ ------
Total cost of revenue........................ 807 1,071 2,081 2,939 4,409 1,861 3,124
------ ------ ------ ------ ------- ------ ------
Gross margin....................................... 1,518 2,808 3,589 6,798 10,605 4,350 6,779
Operating expenses:
Research and development......................... 54 515 674 1,343 1,365 593 864
Sales and marketing.............................. 897 1,145 1,553 3,335 5,661 2,395 3,758
General and administrative....................... 756 1,094 1,190 1,249 2,031 779 1,322
Non-recurring charge............................. -- -- -- -- 1,011 -- --
------ ------ ------ ------ ------- ------ ------
Total operating expenses..................... 1,707 2,754 3,417 5,927 10,068 3,767 5,944
------ ------ ------ ------ ------- ------ ------
Income (loss) from operations...................... (189) 54 172 871 537 583 835
Other income (expense), net........................ (24) (26) 24 73 138 63 101
------ ------ ------ ------ ------- ------ ------
Income (loss) before provision for income taxes.... (213) 28 196 944 675 646 936
Provision for income taxes......................... -- 15 107 338 274 259 409
------ ------ ------ ------ ------- ------ ------
Net income (loss).................................. $ (213) $ 13 $ 89 $ 606 $ 401 $ 387 $ 527
====== ====== ====== ====== ======= ====== ======
Pro forma net income per common and
common equivalent share.......................... $ .06 $ .08
======= ======
Pro forma weighted average number of common and
common equivalent shares outstanding............. 6,949 6,938
======= ======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------------------------- MARCH 31,
1991 1992 1993 1994 1995 1996
------ ------ ------ ------ ------ ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents.......................... $ 331 $ 272 $ 200 $2,735 $2,967 $ 4,313
Working capital.................................... (233) (227) (315) 2,466 2,079 2,642
Total assets....................................... 1,204 1,616 2,609 6,150 9,139 10,084
Total liabilities.................................. 1,235 1,587 2,430 6,629 9,498 10,021
Stockholders' equity (deficit)..................... (31) 29 179 (479) (359) 63
</TABLE>
14
<PAGE> 19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company's products and the markets it serves have evolved and expanded
in concert with the rapid advancements in technology and the elevated focus on
human resource management. From its inception in 1982 through the first half of
fiscal 1993, the Company's product sales consisted primarily of DOS-based
applicant tracking and succession planning systems. In June 1993, the Company
introduced a new generation of Windows-based, client/server staffing software,
which incorporates high-volume resume-scanning, skills management and search
capabilities. From its inception though fiscal 1993, the Company was essentially
self-financed. In January 1994, the Company raised approximately $3.2 million in
net proceeds from a preferred equity financing from various venture capital
funds, of which approximately $800,000 was used to redeem certain outstanding
shares of Common Stock.
At March 31, 1996, the Company had approximately 450 licensed customers,
approximately 200 of which were using its client/server, Windows-based software.
Prior to fiscal 1995, the Company focused primarily on the North American
market. To date, revenue from outside of North America has not exceeded 4% of
total revenue for any fiscal year.
Total revenue consists of product revenue and services revenue. In recent
years, product revenue has represented approximately two-thirds of total
revenue, with services revenue accounting for approximately one-third. Product
revenue is primarily derived from perpetual licenses to use the Company's
products. Through September 30, 1995, the Company's product revenue included
revenue from the resale of third-party scanning hardware. In October 1995, the
Company stopped serving as a reseller of hardware. Scanning hardware resale
revenue ranged from 11% to 21% of total product revenue for fiscal 1993, 1994
and 1995. Royalty income is also included in product revenue and accounted for
less than 1% of total product revenue in all periods presented except for fiscal
1994 when it was 4%. Royalty income consisted primarily of royalties paid to the
Company by PeopleSoft, Inc., in connection with PeopleSoft's distribution of one
of the Company's software products. The relationship was restructured in 1994 so
that for periods subsequent to fiscal 1994, the product is licensed to
PeopleSoft customers directly by the Company, and the Company makes royalty
payments to, rather than receiving royalty payments from, PeopleSoft. Services
revenue consists of revenue from product support and maintenance and
installation, training and consulting services.
Product revenue is recognized upon delivery, provided there are no
significant Company obligations remaining and collectibility is probable. Prior
to fiscal 1994, the Company recognized product revenue upon installation rather
than delivery, as its then current product releases required extensive
customization subsequent to delivery. Fiscal 1994 product revenue included
$1,262,000 in software license fees for products delivered in fiscal 1993 but
for which revenue was deferred until installation under this former business
practice. Revenue from product support and maintenance contracts is recognized
ratably over the applicable 12-month maintenance period. Since October 1, 1995,
the Company has included first year maintenance with the purchase of a system
license; however, for accounting purposes, 15% of the software license fee is
treated as a maintenance fee and is recognized ratably over the 12-month
maintenance period. Services revenue from installation, training and consulting
is recognized as the related services are performed. Deferred revenue represents
cash received by the Company in advance of product delivery or service
performance.
In accordance with SFAS No. 86, Accounting for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed, the Company is required to
capitalize software development costs incurred after the establishment of the
technological feasibility of a project. Generally, the Company's products are
released soon after technological feasibility has been established.
Consequently, the Company has not capitalized any software development costs
since costs qualifying for capitalization have not been material.
15
<PAGE> 20
RESULTS OF OPERATIONS
<TABLE>
The following table sets forth, for the periods indicated, the percentage
of total revenue represented by each item reflected in the Company's Statements
of Income.
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED MARCH 31,
---------------------- ---------------
AS A PERCENTAGE OF TOTAL REVENUE: 1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue:
Product revenue....................................... 67% 70% 67% 67% 62%
Services revenue...................................... 33 30 33 33 38
--- --- --- --- ---
Total revenue................................. 100 100 100 100 100
--- --- --- --- ---
Cost of revenue:
Product revenue....................................... 13 14 9 11 10
Services revenue...................................... 24 16 20 19 22
--- --- --- --- ---
Total cost of revenue......................... 37 30 29 30 32
--- --- --- --- ---
Gross margin............................................ 63 70 71 70 68
--- --- --- --- ---
Operating expenses:
Research and development.............................. 12 14 9 10 9
Sales and marketing................................... 27 34 38 39 38
General and administrative............................ 21 13 14 12 13
Non-recurring charge.................................. -- -- 7 -- --
--- --- --- --- ---
Total operating expenses...................... 60 61 68 61 60
--- --- --- --- ---
Income from operations.................................. 3 9 3 9 8
Other income, net....................................... -- 1 1 1 1
--- --- --- --- ---
Income before provision for income taxes................ 3 10 4 10 9
Provision for income taxes.............................. 2 4 2 4 4
--- --- --- --- ---
Net income.............................................. 1% 6% 2% 6% 5%
=== === === === ===
</TABLE>
SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO SIX MONTHS ENDED MARCH 31, 1995
REVENUE
Product Revenue. Product revenue increased 48% to $6,100,000 for the six
months ended March 31, 1996 from $4,133,000 for the six months ended March 31,
1995. Approximately $1,000,000 of the growth in product revenue was attributable
to the purchase of additional user licenses by existing customers and
approximately $1,000,000 was attributable to proportionately larger initial
licenses for the six months ended March 31, 1996. There can be no assurances
that the Company will sustain these levels of revenue growth.
Services Revenue. Services revenue increased 83% to $3,803,000 for the six
months ended March 31, 1996 from $2,078,000 for the six months ended March 31,
1995. Installation, training and consulting services accounted for approximately
$950,000, or 55%, of this increase, with the remainder attributable to
maintenance revenue. Throughout fiscal 1995, the Company significantly enhanced
its service offerings, adding project management and standardized training and
education programs. These enhancements, combined with a higher number of larger
implementations and price increases, resulted in a 60% increase in average
services revenue per system license, accounting for over $500,000 of the revenue
increase. The remainder of the increase in installation, training and consulting
revenue was largely attributable to additional services sold to existing
customers. Maintenance revenue increased approximately 53% for the six months
ended March 31, 1996 as compared to the six months ended March 31, 1995 due to
the increase in the installed base of client/server, Windows-based customers.
16
<PAGE> 21
COST OF REVENUE
Cost of Product Revenue. Cost of product revenue includes third-party
hardware costs (through fiscal 1995), royalty payments for third-party software
embedded in the Company's products, royalty payments to PeopleSoft, Inc.
(beginning in fiscal 1995) and costs of documentation and shipping. Cost of
product revenue increased 31% to $932,000 for the six months ended March 31,
1996 from $713,000 for the six months ended March 31, 1995. Cost of product
revenue decreased as a percentage of product revenue to approximately 15% for
the six months ended March 31, 1996 from approximately 17% for the six months
ended March 31, 1995. This decrease is primarily attributable to the Company's
decision to discontinue reselling scanning hardware, which represented over 60%
of cost of product revenue for the six months ended March 31, 1995. This
reduction has been partially offset by the increase in royalty payments to
PeopleSoft resulting from a proportional increase in sales of Resume Reader for
PeopleSoft during the six months ended March 31, 1996.
Cost of Services Revenue. Cost of services revenue includes royalty
payments for third-party hardware and software maintenance and all costs of
maintaining the client services organization, including salaries and
personnel-related expenses, travel, outside consulting services and facilities
costs. Cost of services revenue increased 91% to $2,192,000 for the six months
ended March 31, 1996 from $1,148,000 for the six months ended March 31, 1995.
Cost of services revenue increased as a percentage of services revenue to 58%
for the six months ended March 31, 1996 from 55% for the six months ended March
31, 1995 due largely to the increase in service personnel and the addition of a
dedicated account management group which is not revenue generating, offset in
part by increased services revenue. Cost of services revenue for the six months
ended March 31, 1996 also included overhead costs associated with a training
facility at the Company's corporate headquarters that was opened in June 1995.
OPERATING EXPENSES
Research and Development. Research and development expenses include all
costs associated with the product engineering and quality functions, including
salaries and personnel-related expenses, travel, outside consulting services and
facilities costs. Research and development expenses increased 46% to $864,000
for the six months ended March 31, 1996 from $593,000 for the six months ended
March 31, 1995. As a percentage of total revenue, research and development
expenses decreased slightly to 9% for the six months ended March 31, 1996 from
10% for the six months ended March 31, 1995. The increase in total expenses was
largely attributable to an increase in personnel and in consulting costs. The
product engineering and quality staff is expected to continue to increase in
size during the remainder of fiscal 1996.
Sales and Marketing. Sales and marketing expenses include promotional
costs and trade shows and costs associated with personnel involved in sales and
marketing functions, including salaries, commissions and other personnel-related
expenses, travel, outside consulting services and facilities costs. Sales and
marketing expenses increased 57% to $3,758,000 for the six months ended March
31, 1996 from $2,395,000 for the six months ended March 31, 1995. As a
percentage of total revenue, sales and marketing expenses were 38% for the six
months ended March 31, 1996 and 39% for the six months ended March 31, 1995.
Approximately 20% of the dollar increase related to increased marketing program
costs in support of the Company's sales efforts. The remainder was largely
attributable to increases in the number of sales and marketing personnel and
increased commissions as a result of higher total revenue.
General and Administrative. General and administrative expenses consist
principally of costs for corporate operations personnel (executive, finance and
accounting, information technology, human resources, legal and administrative),
professional fees and other general corporate expenses. General and
administrative expenses increased 70% to $1,322,000 for the six months ended
March 31, 1996 from $779,000 for the six months ended March 31, 1995. As a
percentage of total revenue, general and administrative expenses were 13% for
the six months ended March 31, 1996 and 12% for the six months ended March 31,
1995. These increases were principally due to personnel increases to support the
Company's growth and infrastructure.
17
<PAGE> 22
OTHER INCOME, NET
Other income consists primarily of interest income from cash and cash
equivalents. The Company generally invests its cash balances in
interest-bearing, investment grade securities. Other income increased 62% to
$101,000 for the six months ended March 31, 1996 from $63,000 for the six months
ended March 31, 1995, due to an increase in average funds available for
investment.
PROVISION FOR INCOME TAXES
The Company's effective tax rate increased to 44% for the six months ended
March 31, 1996 from 40% for the six months ended March 31, 1995 due primarily to
equity related compensation not benefited for financial statement purposes.
FISCAL 1995 COMPARED TO FISCAL 1994
REVENUE
Product Revenue. Product revenue increased 47% to $10,024,000 for fiscal
1995 from $6,816,000 for fiscal 1994. The increase would have been 80%, after
deducting $1,262,000 in fiscal 1994 product revenue resulting from recognizing
revenue upon shipment rather than upon installation. The increase in fiscal 1995
product revenue was due principally to an increase in the number of systems
licensed and the number of licensed users per system. The Company experienced a
40% increase in the number of new systems licensed in fiscal 1995, due largely
to the growth of the sales force, which provided broader and deeper geographical
coverage, and to increased acceptance of its principal product, Restrac Hire.
Services Revenue. Services revenue increased 71% to $4,990,000 for fiscal
1995 from $2,921,000 for fiscal 1994. Approximately half of the services revenue
increase was attributable to greater revenue for installation, training and
consulting, with the remaining half associated with increased maintenance
revenue. These increases resulted from the expansion of the client services
organization to service the new accounts and from the growing installed customer
base.
COST OF REVENUE
Cost of Product Revenue. Cost of product revenue increased slightly to
$1,425,000 for fiscal 1995 from $1,350,000 for fiscal 1994. The cost of product
revenue decreased as a percentage of product revenue to 14% in fiscal 1995 from
20% in fiscal 1994 primarily due to low-margin scanning hardware becoming a
proportionately lower component of total product revenue. Customers can
generally operate one scanning station for an unlimited number of users.
Consequently, as the average number of licensed users has increased, the
hardware needs of customers and, therefore, hardware revenue have remained
relatively constant. In addition, more customers purchased scanning hardware
directly rather than through the Company as the ease of use and reliability of
this technology was enhanced over time. The Company discontinued reselling
scanning hardware in October 1995.
Cost of Services Revenue. Cost of services revenue increased 88% to
$2,984,000 for fiscal 1995 from $1,589,000 for fiscal 1994. The cost of services
revenue also increased as a percentage of services revenue to 60% in fiscal 1995
from 54% in fiscal 1994. Personnel increases accounted for a substantial portion
of these increases. The client services staff increased to 46 at September 30,
1995 from 28 employees at September 30, 1994, respectively. Cost of services
revenue for fiscal 1995 also included overhead costs associated with a training
facility at the Company's corporate headquarters that was opened in June 1995.
OPERATING EXPENSES
Research and Development. Research and development expenses increased 2%
to $1,365,000 for fiscal 1995 from $1,343,000 for fiscal 1994. As a percentage
of total revenue, research and development expenses decreased to 9% for fiscal
1995 from 14% for fiscal 1994. While the development organization grew from 10
employees at the end of fiscal 1994 to 17 employees at the end of fiscal 1995,
the relatively flat level of expenses and reduction in costs as a percentage of
revenue was attributable in part to expenses related to beta
18
<PAGE> 23
testing performed by client services personnel in fiscal 1994 which were charged
to research and development expense. In fiscal 1995, these services were
performed by product development personnel.
Sales and Marketing. Sales and marketing expenses increased 70% to
$5,661,000 for fiscal 1995 from $3,335,000 for fiscal 1994. As a percentage of
total revenue, sales and marketing expenses increased to 38% for fiscal 1995
from 34% for fiscal 1994. These increases were largely attributed to increases
in the number of sales and marketing personnel, which increased from 22
employees at the end of fiscal 1994 to 38 employees at the end of fiscal 1995,
and increases in commissions as a result of higher revenue. The Company also
increased its participation in trade shows, seminars and other promotional
activities. In addition, the Company positioned sales personnel in Sacramento,
Chicago, Dallas and Orlando (now Atlanta) in fiscal 1995, and the Palo Alto
office, which opened in fiscal 1993, was also expanded in fiscal 1995.
General and Administrative. General and administrative expenses increased
63% to $2,031,000 for fiscal 1995 from $1,249,000 for fiscal 1994. As a
percentage of total revenue, general and administrative expenses remained the
same at 13% for both fiscal 1995 and fiscal 1994. Corporate operations staff
increased from 13 employees at the end of fiscal 1994 to 20 employees at end of
fiscal 1995. While the Company experienced economies of scale in the
productivity of the corporate operations staff in fiscal 1995, this positive
impact was offset by a $283,000 increase in balance sheet reserves in fiscal
1995.
Non-recurring Charge. The Company entered the succession planning market
through its acquisition of SuccessPlan, a DOS-based product, from Borwick
International, Inc. in 1991. As part of the 1991 agreement, Borwick
International was granted the exclusive right to distribute SuccessPlan outside
of North America, and the Company was prohibited from selling any competitive
products in those territories. On September 30, 1995, the Company entered into
an agreement that terminated the remaining distribution rights of Borwick
International to SuccessPlan and removed any restrictions on the Company's
ability to sell competitive products. As a result of that agreement, the Company
recorded a non-recurring charge to operations of $1,010,952 in fiscal 1995,
representing the present value of payments made and owed under the terms of the
agreement. The Company does not have established distribution channels to
license and support its products outside of North America. Accordingly, the cost
of the distribution rights was expensed currently, as management is of the
opinion that the realizability of such cost is uncertain.
OTHER INCOME, NET
Other income increased 89% to $138,000 in fiscal 1995 from $73,000 in
fiscal 1994, due to an increase in average funds available for investment.
PROVISION FOR INCOME TAXES
The Company's effective tax rate increased to 40.6% in fiscal 1995 from
35.9% in fiscal 1994. This increase was due to a reduction of income tax
reserves in fiscal 1994.
FISCAL 1994 COMPARED TO FISCAL 1993
REVENUE
Product Revenue. Product revenue increased 81% to $6,816,000 in fiscal
1994 from $3,776,000 in fiscal 1993. The increase would have been 47%, after
deducting $1,262,000 in fiscal 1994 product revenue resulting from the change to
recognizing revenue upon shipment rather than upon installation. The increase
was largely attributable to the shift in sales from the DOS-based products to
the more functionally-rich client/server, Windows-based software solutions, with
an approximate 80% higher average price per system licensed due primarily to
price increases. Royalty income, consisting primarily of payments to the Company
by PeopleSoft in connection with PeopleSoft's distribution of certain of the
Company's products, added 4% to product revenue in fiscal 1994.
Services Revenue. Services revenue increased 54% to $2,921,000 in fiscal
1994 from $1,894,000 in fiscal 1993. This increase is primarily due to both
higher maintenance fees, commensurate with the higher license fees of its new
client/server, Windows-based software and improved revenue realization on
implementation and training services.
19
<PAGE> 24
COST OF REVENUE
Cost of Product Revenue. Cost of product revenue increased 88% to
$1,350,000 for fiscal 1994 from $719,000 for fiscal 1993. Cost of product
revenue increased as a percentage of product revenue to 21% in fiscal 1994 from
19% in fiscal 1993. These increases were primarily due to the fact that scanning
hardware was a larger component of cost of product revenue as the Company began
reselling scanners in conjunction with its client/server, Windows-based
software.
Cost of Services Revenue. Cost of services revenue increased 17% to
$1,589,000 in fiscal 1994 from $1,362,000 in fiscal 1993. Cost of services
revenue decreased as a percentage of services revenue to 54% in fiscal 1994 from
72% in fiscal 1993 due primarily to the Company's efforts to enhance the
productivity of its client services personnel in fiscal 1994, which resulted in
average revenue per billable person increasing by 63%.
OPERATING EXPENSES
Research and Development. Research and development expenses increased 99%
to $1,343,000 in fiscal 1994 from $674,000 in fiscal 1993. As a percentage of
total revenue, research and development expenses increased to 14% for fiscal
1994 from 12% for fiscal 1993. An increase in development personnel and costs
incurred by the client services department for beta testing activity on the new
client server products accounted for these increases.
Sales and Marketing. Sales and marketing expenses increased 115% to
$3,335,000 in fiscal 1994 from $1,553,000 in fiscal 1993. As a percentage of
total revenue, sales and marketing expenses increased to 34% for fiscal 1994
from 27% for fiscal 1993. The Company doubled the average number of personnel
dedicated to sales and marketing efforts in fiscal 1994 as compared to fiscal
1993. These personnel increases were made to build the direct sales force and
enhance the Company's marketing capabilities to support the anticipated demand
for its new client/server, Windows-based software.
General and Administrative. General and administrative expenses increased
5% to $1,249,000 in fiscal 1994 from $1,190,000 in fiscal 1993, but decreased as
a percentage of total revenue to 13% for fiscal 1994 from 21% for fiscal 1993.
This reduction was largely the result of economies of scale realized as revenues
increased.
OTHER INCOME, NET
Other income increased 204% to $73,000 in fiscal 1994 from $24,000 in
fiscal 1993, due to an increase in average funds available for investment.
PROVISION FOR INCOME TAXES
The Company's effective tax rate decreased to 35.9% in fiscal 1994 from
54.3% in fiscal 1993 due to the settlement of an Internal Revenue Service audit
that resulted in an assessment recorded in fiscal 1993.
20
<PAGE> 25
SELECTED QUARTERLY OPERATING RESULTS
<TABLE>
The following tables set forth the unaudited quarterly results of
operations for each of the ten most recent fiscal quarters, as well as the
percentage of the Company's total revenue by each item. In management's opinion,
this unaudited quarterly information has been prepared on the same basis as the
annual financial statements and includes all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the
information for the quarters presented when read in conjunction with the audited
Financial Statements and Notes thereto included elsewhere in this Prospectus.
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1993 1994 1994 1994 1994 1995 1995 1995 1995 1996
-------- -------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Product
revenue....... $1,573 $1,680 $1,366 $ 2,197 $2,012 $2,121 $2,498 $3,393 $3,151 $2,949
Services
revenue....... 578 729 698 916 992 1,087 1,370 1,541 1,677 2,126
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
revenue... 2,151 2,409 2,064 3,113 3,004 3,208 3,868 4,934 4,828 5,075
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Cost of revenue:
Product
revenue....... 309 385 257 399 357 356 303 409 484 448
Services
revenue....... 398 433 395 363 553 595 805 1,031 1,061 1,131
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total cost
of
revenue. 707 818 652 762 910 951 1,108 1,440 1,545 1,579
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Gross margin...... 1,444 1,591 1,412 2,351 2,094 2,257 2,760 3,494 3,283 3,496
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Operating
expenses:
Research and
development... 316 353 333 341 265 328 381 391 380 484
Sales and
marketing..... 559 827 836 1,113 934 1,461 1,566 1,700 1,847 1,911
General and
administrative 342 297 325 285 398 382 441 810 669 653
Non-recurring
charge........ -- -- -- -- -- -- -- 1,011 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
operating
expenses. 1,217 1,477 1,494 1,739 1,597 2,171 2,388 3,912 2,896 3,048
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
operations...... 227 114 (82) 612 497 86 372 (418) 387 448
Other income,
net............. -- 20 29 24 26 36 35 41 46 55
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss)
before provision
for income
taxes........... 227 134 (53) 636 523 122 407 (377) 433 503
Provision for
income taxes.... 81 48 (19) 228 209 49 163 (147) 208 201
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net income
(loss).......... $ 146 $ 86 $ (34) $ 408 $ 314 $ 73 $ 244 $ (230) $ 225 $ 302
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1993 1994 1994 1994 1994 1995 1995 1995 1995 1996
-------- -------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Product
revenue....... 73.1% 69.7% 66.2% 70.6% 67.0% 66.1% 64.6% 68.8% 65.3% 58.1%
Services
revenue....... 26.9 30.3 33.8 29.4 33.0 33.9 35.4 31.2 34.7 41.9
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
revenue... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Cost of revenue:
Product
revenue....... 14.4 16.0 12.5 12.8 12.2 11.1 7.8 8.1 10.0 8.8
Services
revenue....... 18.5 18.0 19.1 11.7 18.1 18.5 20.8 21.1 22.0 22.3
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total cost
of
revenue. 32.9 34.0 31.6 24.5 30.3 29.6 28.6 29.2 32.0 31.1
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Gross margin...... 67.1 66.0 68.4 75.5 69.7 70.4 71.4 70.8 68.0 68.9
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Operating
expenses:
Research and
development... 14.7 14.7 16.1 11.0 8.8 10.2 9.9 7.9 7.9 9.5
Sales and
marketing..... 26.0 34.3 40.6 35.7 31.1 45.6 40.5 34.5 38.2 37.7
General and
administrative 15.9 12.3 15.7 9.2 13.2 11.9 11.4 16.4 13.9 12.9
Non-recurring
charge........ -- -- -- -- -- -- -- 20.5 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
operating
expenses. 56.6 61.3 72.4 55.9 53.1 67.7 61.8 79.3 60.0 60.1
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
operations...... 10.5 4.7 (4.0) 19.6 16.6 2.7 9.6 (8.5) 8.0 8.8
Other income,
net............. 0.0 0.8 1.4 0.8 0.9 1.1 0.9 0.8 0.9 1.1
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss)
before provision
for income
taxes........... 10.5 5.5 (2.6) 20.4 17.5 3.8 10.5 (7.7) 8.9 9.9
Provision for
income taxes.... 3.8 1.9 (0.9) 7.3 7.0 1.5 4.2 (3.0) 4.3 4.0
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net income
(loss).......... 6.7% 3.6% (1.7)% 13.1% 10.5% 2.3% 6.3% (4.7)% 4.6% 5.9%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
21
<PAGE> 26
The Company's results of operations have been, and may in the future be,
subject to significant quarterly fluctuations, due to a variety of factors,
including the relatively lengthy sales cycle for the Company's products, the
relatively large size of a typical product sale, the timing of contracts, the
introduction of new products by the Company or its competitors, capital spending
patterns of customers, the Company's sales incentive strategy and general
economic conditions. These uncertainties make the estimation of revenues and
results of operations on a quarterly basis difficult and increase the potential
margin for error in performance forecasts derived from such estimates. As a
result, the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as any
indication of future performance.
Product revenue is difficult to forecast quarter to quarter, as no
significant backlog exists at the end of any quarter. Revenues are substantially
dependent on deliveries related to new contracts executed in that quarter.
Additionally, a significant portion of the Company's revenue in a quarter is
typically received in the last few weeks of that quarter. Historically, revenue
in the first fiscal quarter has been lower than in the preceding fourth fiscal
quarter (which typically has the highest revenue and net income), due largely to
sales incentive programs focused on annual sales goals. Management believes that
this trend may continue.
A substantial portion of the Company's operating expenses is related to
personnel, facilities and marketing programs. The level of spending for such
expenses cannot be adjusted quickly and is, therefore, relatively fixed in the
short term. The Company's expense levels are based on expectations of future
revenue. If actual revenue levels on a quarterly basis are below management's
expectations, results of operations are likely to be disproportionately
adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has primarily financed its operations and
capital expenditures through internally generated cash flow and $3,233,549 of
net proceeds from the issuance of Convertible Preferred Stock in January 1994.
The Company generated cash from operations of $1,774,545 for the six months
ended March 31, 1996 and $1,414,094, $678,939 and $576,240 for fiscal 1995, 1994
and 1993, respectively. Cash and cash equivalents were $4,312,773 at March 31,
1996 and $2,966,637, $2,734,772 and $200,264 at September 30, 1995, 1994 and
1993, respectively. In each period, the Company experienced significant growth
in accounts receivable, accompanying increased sales volumes. Deferred revenue
also increased for the six months ended March 31, 1996 and in fiscal 1993 and
fiscal 1995, representing cash received on contracts pending delivery of product
or performance of services. Accrued expenses reflected a significant increase
for fiscal 1995 due to bonuses and commissions associated with the increased
sales volume and employee base.
Investing activities have consisted principally of the acquisition of
property and equipment, most notably computer equipment to support the growing
employee base and corporate infrastructure. The Company expects to continue its
purchases of property and equipment as part of its infrastructure growth.
The other notable financing activities were the repurchases by the Company
of Common Stock. In January 1994, the Company repurchased 607,500 shares of
Common Stock at $1.32 per share or an aggregate price of $799,470. In November
1995, the Company repurchased 56,900 shares of Common Stock for $2.00 per share
or an aggregate purchase price of $113,799.
The Company has available a bank revolving line of credit. Borrowings
outstanding under the line are limited to the lesser of $1 million or 70% of
eligible accounts receivable, as defined, bear interest at the bank's corporate
base rate plus 1% and are collateralized by all corporate assets. There were no
borrowings outstanding as of March 31, 1996 or as of September 30, 1995. This
revolving line of credit expires on March 1, 1997.
To date, the Company has not invested in derivative securities or any other
financial instruments that involve a high level of complexity or risk. Cash has
been and the Company contemplates that it will continue to be invested in
interest-bearing, investment grade securities.
From time to time, the Company evaluates potential acquisitions of
products, businesses and technologies that may complement or expand the
Company's business. The Company currently does not have any
22
<PAGE> 27
understandings, commitments or agreements with respect to any such acquisitions.
Any such transactions consummated may use a portion of the Company's working
capital or require the issuance of equity or debt.
The Company believes that the net proceeds from this offering, together
with its current cash balances and cash provided by future operations, will be
sufficient to meet its working capital and anticipated capital expenditure
requirements for at least the next twelve months. Although operating activities
may provide cash in certain periods, to the extent the Company experiences
growth in the future, its operating and investing activities may use cash.
Consequently, any such future growth may require the Company to obtain
additional equity or debt financing.
23
<PAGE> 28
BUSINESS
OVERVIEW
Restrac designs, develops, markets, implements and supports HR staffing
software to automate the recruitment, selection and placement of an
organization's workforce. The Company's staffing software enables organizations
to strategically manage their human capital by reducing hiring and placement
costs, decreasing time to fill positions and providing more effective skills
management and worker deployment. The Company's products -- Restrac Hire and
Resume Reader for PeopleSoft -- provide HR departments with client/server
solutions to quickly and efficiently build and search comprehensive "pools" of
resume skills data to find the workers they need, while also managing the
workflow of the staffing process.
The Company's current software offerings are open, client/server
applications that utilize standard industry communications protocols, such as
TCP/IP, allowing for high performance, scalable implementations across local
area networks, wide area networks, the Internet and Intranets. The Company's
software supports industry standards, such as Microsoft Windows and most leading
relational databases (including Oracle, Microsoft SQLServer and Sybase), server
platforms (including Windows NT and many UNIX variants), e-mail systems
(including Microsoft Mail and Lotus cc:Mail) and desktop productivity tools
(including Lotus Notes). This open architecture has facilitated integration with
other systems providing customers with integrated, multi-vendor solutions to
meet their specific needs.
Since the introduction of Restrac Hire in 1993, the Company has licensed
its client/server, Windows-based staffing software to approximately 200
customers. Approximately 250 other organizations continue to license the
Company's earlier DOS-based recruiting and succession planning products. Within
these 450 organizations, there are over 4,000 licensed users of the Company's
products. The Company's products are primarily licensed by large corporate
employers experiencing accelerated growth, significant reorganization or
downsizing or a scarcity of skilled labor, or by companies reengineering their
HR function to reduce costs. Due to its flexible skills management and search
capabilities, the Company's software is also licensed by consulting firms and
providers of full-time, contract or temporary labor. Twenty-eight of the 50 most
profitable U.S. companies cited in Fortune magazine's 1996 "Fortune 1000" report
use the Company's software. The Company's customer base includes
Hewlett-Packard, American Express, British Telecom, AT&T, Intel, Johnson &
Johnson and Levi Strauss.
INDUSTRY BACKGROUND
The management of human capital is increasingly being viewed as a business
imperative and has emerged in recent years as a key element of corporate
strategy. Recruiting and deploying the most qualified employees is now being
recognized as critical to an organization's long-term success. In addition,
intensifying global competition, shortened product lifecycles and the need to
improve operating efficiencies have caused organizations to search for more
efficient ways to employ and deploy a more dynamic and skilled workforce. As a
result, HR departments have come under pressure to improve the quality of the
candidates they hire, to shorten the time to fill open positions and to reduce
the costs associated with staffing.
Historically, the recruitment, hiring and deployment of an organization's
workforce has been an inefficient, expensive and time-consuming process.
Industry sources estimate that the average cost to hire a salaried exempt
employee from outside the company in 1994 was $8,566 and ranged as high as
$15,766 in skilled industries such as electronics. In recent years, the average
company hired approximately 14% of its workforce externally and redeployed
approximately 7% of its internal workforce annually. The complexities and
inefficiencies inherent in the hiring process have resulted in a plethora of
recruiting and employment agencies charging fees representing as much as 30% of
an employee's starting annual salary, contributing to the hiring costs described
above. Despite the widespread use of such agencies, in 1994, companies took an
average of 41 days to hire an employee and approximately 26% of employees were
out of the job within one year of joining the company. The inefficiencies and
costs associated with the hiring process are particularly acute problems for
large organizations with 1,000 or more employees, of which there are estimated
to be more than 15,000 in the United States.
24
<PAGE> 29
These costs and inefficiencies are due in large part to the difficulty that
organizations have in managing data on workers' skills and to a complex staffing
process which typically involves significant data collection, numerous manual
functions and the coordination of activities among many participants both within
and outside the organization. Organizations need to collect and manage extensive
skills data on their own employees as well as an even larger applicant pool in
order to manage hiring, redeployment, attrition, turnover and growth.
Historically, organizations seeking to fill a position would receive numerous
applications and resumes that were, once the position had been filled, either
discarded or stored in a manner that did not allow the organization to
effectively access and search this data when it sought to fill additional
positions in the future.
The typical staffing process is initiated by a hiring manager who fills out
a job requisition form to define the job's skill requirements, duties, pay and
other parameters. Copies of the requisition are routed to finance and accounting
and a compensation specialist for budget and salary approvals. An internal
recruiter then generates applicants through job advertising, requiring the
coordination of recruitment advertising firms, employment agencies, outplacement
companies and college placement offices. Recruiters must read and categorize
incoming resumes and, with the aid of administrators, copy, file and distribute
the appropriate resumes to managers. Follow-up letters are typically sent to
applicants. Recruiters and administrators then coordinate and track the
selection process with the applicants, hiring manager and an interviewing team.
This process typically requires the completion of multiple forms for interview
scheduling, skills assessment and feedback, reference checking, testing, equal
opportunity compliance and job offers and may involve the coordination of
outside suppliers for credit checking, testing and assessment and relocation.
Each division within an organization may have its own staffing process,
resulting in further inefficiencies and complicating the creation of
consolidated governmental compliance and management reports.
In order to address the challenges of hiring and deploying workers, HR
departments have begun to automate the staffing process. Until recently, the
only staffing software applications available were applicant tracking systems,
which were primarily designed to perform record-keeping functions and did not
offer automated workflow or resume searching capabilities. These applicant
tracking applications traditionally operated on centralized mainframe or
mini-computer systems, although such applications today are also being deployed
with client/server-based human resource information systems. These applications,
however, are ill-suited for capturing and managing the vast amount, variety and
diverse formatting of skills, experience and education information supplied by
candidates. Coding this information is generally a manual process which is
cumbersome, time-consuming and costly. Moreover, because the candidate
information is recorded in an oversimplified format, searches of this
information typically yield poor results. A more effective solution would allow
organizations to easily collect and manage large amounts of unstructured skills
and experience data on both job candidates and their current workforce and
perform sophisticated structured searches on this data to select the best
candidates.
The development of distributed client/server computing and enabling
technologies such as document scanning, optical character recognition (OCR) and
concept-based text searching have created a technological framework for the
efficient collection of staffing information and its dissemination among
recruiters, managers and, with the emergence of the Internet, other members of
the extended enterprise. Client/server technology not only permits any member of
the organization to effectively collect information relating to a particular
job, applicant or employee, but also gives other members of the organization in
geographically dispersed locations rapid access to that information and enables
them to participate in the hiring process. In addition, the proliferation of
Internet career sites is a dramatic recent development which creates a
significant new forum for the exchange of candidate and job information. These
new technologies, together with the increased emphasis on the strategic
management of human capital, have created a demand for a new generation of human
resource staffing systems.
THE RESTRAC SOLUTION
The Company's staffing software enables organizations to strategically
manage their human capital by reducing hiring and placement costs, decreasing
time to fill positions and providing more effective skills management and worker
deployment. The Company's software provides HR departments with client/server
25
<PAGE> 30
solutions to quickly and efficiently build and search comprehensive electronic
pools of resume skills data to find the workers they need, while also managing
the workflow of the staffing process. Key attributes of the Restrac solution are
as follows:
Sophisticated Skills Management and Selection. The Company's software uses
a sophisticated search process to rapidly identify and rank qualified candidates
based on skills criteria determined by the user. User searches are enhanced by
the Company's integrated skills library, which translates high-level job
requirements into the words and synonyms commonly used by candidates on resumes.
These same capabilities facilitate the quick and efficient management and
redeployment of an organization's existing workforce in response to job
openings, downsizings and restructurings.
More Efficient Staffing Process. The Company's software incorporates a
user-friendly, process-oriented GUI and is designed to reduce the time required
to fill positions by prompting users to advance candidates through the staffing
process. Such automatic workflow notifications reduce delays typical to the
staffing process and eliminate redundancies. The Company's software also
integrates with e-mail and interactive voice response technologies to facilitate
access to and participation in the staffing process. The Company's software can
be easily adapted by the customer to its own staffing requirements without
extensive customization. In addition, the Company's software eliminates the time
and expense associated with maintaining multiple parallel databases to track
different aspects of the staffing process.
Comprehensive, Reusable Candidate Pools. The Company's software uses
resume scanning and integrated e-mail input from Intranets or the Internet to
create consolidated, reusable candidate pools that can be shared throughout the
organization. Manual input is virtually eliminated, allowing organizations to
collect and store skills and experience data on hundreds of thousands of
candidates. The Company's software is designed to provide a shared, re-useable
pool of candidates, limiting the need for organizations to use employment
agencies and advertising to source candidates.
Open, Rapidly Deployable and Scalable Technology. The Company's software
is based on an open, client/server architecture that supports industry
standards, such as Microsoft Windows and most leading relational databases,
server platforms, e-mail systems and desktop productivity tools. The
implementation cycle for the Company's software, including hardware
implementation and basic process reengineering, is typically less than three
months. The Company's software is scalable from the departmental level to
multi-site, enterprise-wide implementations and is designed to easily
incorporate new technologies as they become available.
Reduced Costs. By providing an easily-accessible, shared, re-useable pool
of candidates, the Company's software allows organizations to significantly
reduce recruitment advertising costs and employment agency fees. In addition,
the Company's software is designed to reduce HR headcount and increase recruiter
productivity through the elimination of manual entry of resume information and
by increasing the efficiency of the hiring process.
STRATEGY
The Company's objective is to become the leading provider of human resource
staffing software. To achieve this objective, the Company has adopted the
following strategies:
Expand Presence in Principal Markets. The Company's Restrac Hire product
has achieved a leading market position among large organizations (1,000+
employees), which are estimated to represent over 15,000 companies in the United
States alone. The Company believes that only a small portion of such large
organizations currently use automated staffing software, and the Company plans
to expand its established market position among such organizations by leveraging
its existing customer base and expanding its sales and marketing efforts.
Offer Self-Service Solutions. The Company's software is currently used
primarily by HR departments. In response to the increasing dispersion of the
staffing process outside of HR departments, the Company intends to enhance its
software to allow line managers, employees and job candidates to directly access
staffing information. Such self-service solutions should significantly expand
the Company's potential user-base while further reducing the administrative
demand on HR departments.
26
<PAGE> 31
Expand Markets to Include Smaller Organizations. The Company intends to
expand the markets for its software to smaller organizations with 100 to 1,000
employees (of which there are estimated to be over 100,000 in the United States)
by unbundling its current software offerings and marketing discrete modules to
customers. The Company also intends to offer customers access to staffing
solutions on a transaction-fee basis. Such unbundling of modules and
transaction-fee offerings should allow smaller organizations to take advantage
of the Company's technologies without the associated infrastructure investment
necessary to support a client/server application.
Pursue Internet Opportunities. The Company believes that the emergence of
the Internet creates opportunities to streamline the connection between job
seekers and employers. By enabling a new, more efficient channel of
communication, the Internet can allow information about jobs to be more widely
distributed and permit easy, on-line application by job seekers. The Company
believes that its high-volume, unstructured search technologies and the
utilization of TCP/IP, the Internet communications protocol, in its software
should facilitate the Company's development of staffing solutions which are
accessible across Intranets and over the Internet. The Company is currently
developing an enhancement to its software that allows users to directly post
jobs and receive applications via Internet career sites. In conjunction with the
development of this enhancement, the Company has entered into strategic
relationships with The Monster Board, Intellimatch and the Online Career Center,
three of the largest Internet career sites, and intends to enter into similar
arrangements with other career sites. In addition, the Company is currently
exploring other strategies to capitalize on opportunities offered by the
Internet.
Leverage Strategic Relationships. The Company has established a number of
relationships both to leverage marketing channels and complementary technologies
and to meet customer demands for open, integrated, multi-vendor solutions. The
Company's partners include leading technology vendors such as Verity, which, as
part of an OEM relationship, provides its text search software for integration
with the Company's internally-developed skills library. The Company also has a
relationship with PeopleSoft, a leading HR management system vendor, under which
PeopleSoft jointly markets the Company's Resume Reader for PeopleSoft product as
an integrated solution with its HRMS product. The Company believes that its
strategic relationships allow it to bring products to market more quickly and
enhance its image as a provider of industry standard automated staffing
products. The Company intends to continue to pursue the establishment of such
relationships to take advantage of emerging technologies and marketing
opportunities.
Develop International Presence. The Company believes that the growing
globalization of the workforce combined with the increasing standardization of
regulations across the European Community will provide it with significant
opportunities to continue its international expansion. The Company markets its
software in Canada and the United Kingdom and recently established a sales
office in the United Kingdom. In addition, the Company is currently developing a
localized version of its software specifically for the United Kingdom and
intends to develop additional localized versions to accommodate different
business practices and foreign languages.
PRODUCTS
The Company's principal products are Restrac Hire and Resume Reader for
PeopleSoft, which is sold in conjunction with PeopleSoft's HRMS product.
RESTRAC HIRE
The Company's primary product, Restrac Hire, automates the applicant
sourcing and selection functions in the staffing process and supports industry
standards such as Microsoft Windows and most leading relational databases
(including Oracle, Microsoft SQLServer and Sybase), server platforms (including
Windows NT and many UNIX variants), e-mail systems (including Microsoft's Mail
and Lotus cc:Mail) and desktop productivity tools (including Lotus Notes). The
license fee for a four-user Restrac Hire system is $91,000 and system prices
range from approximately $70,000 to over $1 million, depending on the number of
licensed users. Implementation services, which are not included in the license
fee, generally amount to an additional
27
<PAGE> 32
25% of the license fee. Maintenance for the first year is included in the
license fee and is renewable on an annual basis thereafter, at approximately 15%
of the license fee.
Restrac Hire is comprised of three bundled functional modules: Skill
Server, Candidate Finder and Recruiting Workbench.
Skill Server. The Company's Skill Server module automates the collection
of worker skills data by integrating scanning and OCR technologies for the
processing of paper or faxed resumes. Using Skill Server, electronic resumes can
also be received and input through e-mail, commonly available World-Wide Web
("Web") browsers and PC-based kiosk stations. Skill Server retains an electronic
image of the original resume as well as a text file which is made available for
searching the candidate pool. Managers can conduct a comprehensive search of
this candidate pool by using Candidate Finder before seeking candidates from
external sources.
Candidate Finder. The Company's Candidate Finder module provides users
with a search capability to rapidly identify and rank qualified job candidates
based upon skills criteria determined by the user, using the Company's extensive
skills library and Verity's text search software. Candidate Finder presents
users with an intuitive, flexible GUI for defining job requirements by clicking
on relevant skills from the Company's extensive skills library and reviewing
selected candidates' resumes and skills. Once a candidate is selected, Candidate
Finder automatically initiates the staffing process in the Recruiting Workbench
module.
Recruiting Workbench. The Company's Recruiting Workbench, which provides
database management and workflow functionality, automates the staffing process,
including: requisition management for job openings, job advertising, candidate
screening, interview scheduling, reference checking, correspondence, cost
tracking and government compliance reporting. Recruiting Workbench is designed
to guide users through each step in the staffing process. Activity history,
current status and pending actions are displayed for each candidate. Integrated
business rules and workflow processes help prevent common errors and delays
which can often result in poor selection results and extended placement times.
Recruiting Workbench also contains a report writer which allows users to
generate management reports, including standard reports used to benchmark
effectiveness or demonstrate compliance with Equal Employment Opportunity (EEO)
requirements.
RESUME READER FOR PEOPLESOFT
The Company's open architecture, which accommodates integration with other
HR software solutions, has allowed the Company to create a plug-in product that
offers high volume resume-scanning, skills management and search capabilities to
users of PeopleSoft's HRMS product. Resume Reader for PeopleSoft incorporates
the Skill Server and Candidate Finder modules of Restrac Hire. The license fee
for a four-user system is $87,000.
CUSTOMER SERVICES
The Company believes that superior customer service and support are
critical to customer satisfaction. As of April 30, 1996, the Company's customer
service organization was led by a Vice President and included 44 other people
who were assigned to one of four groups -- Account Management, Professional
Services, Training and Education and Technical Support -- as well as three
administrative personnel.
Account Management. As of April 30, 1996, the Company had six Account
Managers who were responsible for coordinating the corporate resources necessary
to ensure customer satisfaction. An Account Manager is assigned to each new
Restrac customer and oversees all aspects of the customer relationship. The
Company believes that its Account Manager program has helped it establish a high
degree of customer satisfaction.
Professional Services. The Professional Services Group, which was
comprised of 17 people as of April 30, 1996, manages system implementation and
provides additional services such as process design and system tailoring. In
order to ensure an effective and timely implementation, the implementation
process is
28
<PAGE> 33
coordinated by a Restrac project manager. The Company's implementation cycle is
typically less than three months, including hardware implementation and basic
process reengineering.
Training and Education. The Training and Education Group, which was
comprised of 10 people as of April 30, 1996, provides basic and advanced
training both on-site during system implementation and at the Company's
Corporate Training Center throughout the year.
Technical Support. The Technical Support Group, which was comprised of 11
people as of April 30, 1996, provides daily assistance to customers with
maintenance agreements through the Company's support help line. Approximately
98% of customers who have purchased the Company's client/server, Windows-based
products since their introduction are currently under maintenance agreements.
The Company provides support Monday through Friday from 8:00 a.m.-8:30 p.m.
Eastern Time as well as 4:00 a.m.-8:00 a.m. Eastern Time to support the
Company's European customers.
TECHNOLOGY
In 1993, the Company introduced Restrac Hire, the industry's first
Windows-based client/server staffing system. The Company's Restrac Hire software
is based on the Company's unique client/server development platform, which can
accommodate changing customer needs and technical infrastructure, simplify the
deployment of the Company's client/server software, and enable the rapid
integration of leading edge technologies and other innovations. Key aspects of
the Company's development platform are as follows:
Development Toolset. The Company's development platform includes a unique
application toolset which allows it to create and change its interfaces through
high level "screen painting" rather than low level programming. This toolset
also accommodates the creation and editing of business and workflow rules.
Applications developed with the Company's toolset inherit its full
functionality, including features critical to sophisticated, mission-critical,
enterprise-wide applications. The Company also includes in its software a
scaled-down version of the Company's application development tool, which allows
customers to make interface changes to accommodate their specific staffing
processes without compromising the integrity of the system.
Data Model. The Company's software includes an open, flexible and
extensible model for enterprise staffing that can operate in multiple standard
SQL databases. The model incorporates the Company's expertise in staffing
process modeling and allows for effective workflow and third-party integration.
Centralized Administration and Security. The Company's development
platform includes functionality for application deployment and version control,
reducing costs through centralized management by allowing the application to be
configured and updated automatically from a central location. The Company's
products also include security features to control user access. Access to
information and functionality is configured based on the user's login, allowing
users to access their recruiting desktop from anywhere in the system and further
securing against unauthorized access.
Support for Heterogeneous Computing Environments. The Company's
development platform is designed to enable applications developed on the
platform to operate in diverse computing environments. The platform supports
Microsoft Windows on the client as well as most leading relational databases
(including Oracle, Microsoft SQLServer and Sybase) and server platforms
(including Windows NT and many UNIX variants). The Company's products use the
industry-standard TCP/IP protocol, which allows the Company to develop
applications which operate over local area networks, wide area networks,
Intranets and the Internet.
Advanced Technology Integration. The Company has designed its development
platform to facilitate the integration of advanced technologies while insulating
the user from the complexities associated with multiple interfaces,
import/export utilities and switching between different applications. The
Company's products take advantage of Verity's text search software, TASC's
imaging technology and Caere's OCR technology.
29
<PAGE> 34
PRODUCT DEVELOPMENT
The Company believes that its future success will depend upon its ability
to enhance its existing software and develop and introduce new products and
functionalities which keep pace with rapid changes in the marketplace. The
Company has made increasing investments in its engineering and quality groups to
enhance product functionality, improve performance and expand the ability of its
software to interoperate with third-party software. While the Company expects
that certain of its new products and functionalities will be developed
internally, the Company may, based on timing and cost considerations, expand its
product offerings through acquisitions or strategic relationships. Software
products as complex as those currently under development by the Company are
subject to frequent delays and there can be no assurance that the Company will
not encounter difficulties that could delay or prevent the successful and timely
development, introduction and marketing of these potential new products.
The Company is currently developing several potential new products and
functionalities, including an enhancement of its software that allows users to
directly post jobs and receive applications via Internet career sites and a
localized version of Restrac Hire 3.0 to accommodate different business
practices in the United Kingdom. The Company also is planning to integrate
foreign language capabilities into its products. In addition, the Company is
currently developing new versions of Recruiting Workbench which will allow
organizations to deploy Restrac Hire in Lotus Notes and over an Intranet, with
access provided via a standard Web browser. The Company is also considering the
enhancement of a version of its software that is used for succession planning.
In addition, the Company is exploring the unbundling of certain of the
functionalities in its current software in order to offer discrete applications
to smaller organizations. The Company also intends to offer customers access to
staffing solutions on a transaction-fee basis. Such unbundling of modules and
transaction-fee offerings should allow smaller organizations to take advantage
of the Company's technologies without the associated infrastructure investment
necessary to support a client/server application. The Company is evaluating
extensions of its Candidate Finder module that would allow organizations to
access external candidate pools, such as the growing number of candidate
information bases being developed at career sites on the Internet, college and
graduate school databases and professional organization databases. In addition,
the Company is evaluating the unbundling of the Skill Server module for
organizations that want to publish candidate or job information on the Internet,
such as Internet career sites. The Company does not expect these products to
generate material revenue in fiscal 1996.
SALES AND MARKETING
The Company currently markets its products and services through a direct
sales force in North America and the United Kingdom and also markets its Resume
Reader for PeopleSoft product through a joint marketing arrangement with
PeopleSoft. The Company supports its sales force through comprehensive marketing
programs which include telemarketing, public relations, direct mail,
advertising, seminars, trade shows, ongoing customer communication programs and
strategic relationships. The Company's sales force is structured regionally and
includes three area directors -- two domestic and one international. The sales
staff is managed through sales and service offices in Dedham, Massachusetts,
Palo Alto, California and Reading, England and through sales personnel located
in Sacramento, California, Chicago, Illinois, Dallas, Texas, Flemington, New
Jersey and Atlanta, Georgia. As of April 30, 1996, the Company's sales and
marketing organization consisted of 39 employees, including 11 sales
representatives.
Restrac seeks to build goodwill with its customers by playing an active
role in its user community. Since 1994, the Company has hosted an annual Users
Conference, a three-day event that provides an environment of extensive learning
and peer networking. In addition, five user-hosted conferences are conducted
annually, organized regionally into East, South, Midwest, West and UK user
groups. The Company recently formed a Client Advisory Board to further guide
product strategy.
CUSTOMERS
Since the introduction of Restrac Hire in 1993, the Company has licensed
its client/server, Windows-based staffing software to approximately 200
customers. Approximately 250 other organizations continue to
30
<PAGE> 35
license the Company's earlier DOS-based recruiting and succession planning
products. Within these 450 organizations, there are over 4,000 licensed users of
the Company's products. Twenty-eight of the 50 most profitable U.S. companies
cited in Fortune magazine's 1996 "Fortune 1000" report use the Company's
software. In fiscal 1995, no customer accounted for more than 10% of the
Company's total revenue.
<TABLE>
The following is a partial listing of the Company's customers as of April
30, 1996:
<S> <C> <C>
FINANCIAL SERVICES TECHNOLOGY/COMMUNICATIONS HEALTHCARE/PHARMACEUTICALS
American Express AT&T Abbott Laboratories
Bank of America Amdahl Baxter International
Banc One British Telecom Bristol Myers Squibb
Fleet Bank Cellular One Johnson & Johnson
Merrill Lynch Cray Computers The Mayo Clinic
M&T Bank EMC Memorial Sloan Kettering
Union Bank Genentech PacifiCare
Hewlett-Packard SmithKline Beecham
INSURANCE
Intel CONSUMER
Aetna Life and Casualty
Blue Cross/Blue Shield Lucent Technologies Anheuser-Busch
Cigna Lockheed Canadian Tire
John Hancock Oracle Cargill
Nationwide Sequent Computers Delco
Occidental Insurance Stratus Computers Levi Strauss
Phoenix Home Life Vanstar Mattel Toys
Prudential Overnite Transportation
ENGINEERING/CONSULTING Reebok
PUBLISHING/ENTERTAINMENT Starbucks
Brown & Root the good guys!
Blockbuster Entertainment CH2M Hill Toys R' Us
Conde Nast Publications Logica
Gannett Mason & Hanger
Paramount Pictures Modern Engineering
The Washington Post
</TABLE>
Examples of how the Company's customers have used Restrac software
successfully to address their needs are described below. The benefits achieved
by these customers will not necessarily be achieved by every customer.
Overnite Transportation, a Union-Pacific company, employs 15,000 workers in
44 states. Overnite's decentralized organizational structure and reliance on
paper-based recruiting resulted in multiple redundant staffing efforts being
conducted in different offices. Prior to implementing the Company's products,
managers in the field would often initiate a new recruitment effort every time a
position opened, incurring advertising, agency and administrative expenses that
could have been avoided. Overnite implemented Restrac Hire at its corporate
office in 1994. Since then, Overnite has streamlined its recruiting process,
reduced advertising and relocation expenses by 20%, eliminated manual tabulation
of government reporting data and cut agency fees by 80%, reporting annual
savings of $300,000 per year.
Amdahl Corporation, a provider of hardware/software solutions and
consulting services to help organizations achieve productivity improvements in
information technology, employs more than 8,000 people worldwide. Amdahl's
growing consulting business places demand on staffing to find specialized
skills. In addition, a recent acquisition will add 2,000 employees to its
current employee base. Amdahl replaced its previous resume scanning system with
Restrac Hire in 1995, and has linked the Restrac product to its information
systems infrastructure to allow for greater productivity and to assist in the
integration of the additional employees.
31
<PAGE> 36
Logica plc, an international systems integrator with over 3,600 employees
in 18 countries, implemented Restrac products in the United States, the United
Kingdom and the Netherlands in 1995 to manage its global consulting business.
Resumes are collected from offices throughout the world and consolidated to
provide shared access for bidding on upcoming jobs and staffing projects for
which Logica has been engaged. Logica also has used the Restrac system to direct
projects to offices where the most appropriate skill sets exist to increase
effectiveness and reduce expenses.
Brown & Root, a worldwide engineering and construction company which
employs 40,000 engineers, used Restrac Hire to identify and quickly deploy more
than 1,000 engineers in connection with the U.S. Department of Defense's Bosnian
recruitment effort. These engineers were needed to establish five military base
camps in and around Tuzla. Brown & Root was able to compile a list of personnel
with disparate skills such as telecommunications, construction, computer system
management and armored vehicle maintenance.
STRATEGIC RELATIONSHIPS
The Company has established a number of relationships both to leverage
marketing channels and complementary technology and to meet customer demands for
open, integrated, multi-vendor solutions. Strategic partners are categorized
into three groups: Technology Partners, who provide the Company with innovative
technologies that are integrated into the Company's products; Joint Marketing
Partners, who provide the Company's customers with value-added software,
consulting or other services that are complementary to the Company's software
and services and that enable the Company's customers to better utilize the
Company's software; and ConnecTeam Partners, who develop and deliver integrated
products and/or services that are designed specifically for Restrac systems and
for which the Company receives a royalty. Examples of the Company's strategic
partners include:
Verity, Inc. The Company's software incorporates the text search software
tools developed by Verity, Inc., a Technology Partner, which allows Restrac
clients to search through vast amounts of candidate and job data, delivering
only the most relevant information directly to the desktop.
PeopleSoft, Inc. PeopleSoft, Inc., a leading worldwide provider of human
resource software, is a Joint Marketing Partner. In conjunction with the
Company's sales force, PeopleSoft markets the Company's Resume Reader for
PeopleSoft product, which integrates the Company's high-volume resume-scanning,
skills management and search technology with PeopleSoft's HRMS product. The
Company makes a royalty payment to PeopleSoft for each Resume Reader for
PeopleSoft product licensed.
The Monster Board. The Company is currently developing an enhancement to
its software that allows users to directly post jobs and receive applications
via Internet career sites. In conjunction with the development of this
enhancement, the Company has entered into a strategic relationship with The
Monster Board, one of the largest Internet career sites, pursuant to which the
Company will receive a portion of the fees paid to The Monster Board in
connection with such postings.
ESSENSE Systems, Inc. ESSENSE Systems, Inc., a Restrac ConnecTeam Partner,
has developed a suite of kiosk and interactive voice response self-service
applications called Restrac ExprESS, which are specifically designed to operate
with the Company's software. Through the use of its advanced development
environment and server system and Edify Corporation's interactive voice response
technology, ESSENSE offers a complete multi-platform self-service solution for
Restrac customers, including desktop PC, kiosk and touch-tone telephone.
COMPETITION
The marketplace for staffing solutions is intensely competitive and is
rapidly changing. The Company encounters direct competition from a number of
companies providing human resource staffing solutions, including (i) other human
resource staffing software companies, (ii) providers of general human resource
information systems, (iii) agencies providing or sourcing full-time, contract
and temporary labor,
32
<PAGE> 37
(iv) information systems departments of potential prospects that develop custom
software, and (v) providers of other client/server application software or
document management systems.
The Company's primary direct competitor is Resumix, Inc., which was
acquired by Ceridian, Inc. in 1995. The Company also competes directly against
other providers of human resource staffing software, most of which are small
privately held companies providing less functional products at lower prices. In
addition, vendors of general human resource information systems generally
include applicant tracking modules in their offerings which can compete with the
Company's products. Moreover, there can be no assurance that such vendors will
not develop and market products in direct competition with the Company. Some of
the Company's current and many of the Company's potential competitors, including
PeopleSoft and many other providers of general human resource information
systems, are large, publicly traded organizations with long operating histories
and access to significantly greater financial, technical, marketing and other
resources. As a result, they may be able to respond to market changes, emerging
technologies or changes in customer requirements more rapidly and devote more
resources to the development, marketing and sales of their products than the
Company. Competition may increase from new market entrants (particularly if the
market for automated staffing solutions continues to develop) or through
consolidations in the software industry and/or cooperative relationships among
companies or with third parties.
The Company believes that the principal competitive factors affecting its
market include product functionality, breadth, ease of use, scalability and
flexibility, integration and interoperability with standard platforms and
operating systems and other software products, price, product reputation,
customer service and support, sales and marketing effectiveness and company
reputation. Although the Company believes it competes favorably with respect to
such factors, there can be no assurance that the Company can maintain this
position against current and potential competitors.
INTELLECTUAL PROPERTY
The Company relies on a combination of copyright and trade secret laws,
employee and third-party non-disclosure agreements and other methods to protect
its proprietary rights. The Company believes that, due to the rapid pace of
technological innovation within its industry, the Company's ability to establish
and maintain a position of technology leadership in the industry is dependent
more upon the skills of its development personnel and its existing skills
library than upon the legal protections afforded its existing technology.
The Company's success is dependent in part upon its proprietary software.
There can be no assurance that the Company's agreements with employees,
consultants and others who participate in the development of its software will
not be breached, that the Company will have adequate remedies for any breach, or
that the Company's trade secrets will not otherwise become known. Furthermore,
there can be no assurance that the measures taken by the Company to protect its
proprietary rights will be adequate to prevent misappropriation of its
technology or independent development by others of similar technology.
The Company is not aware of any patent infringement charge or any violation
of other proprietary rights claimed by any third party relating to the Company
or the Company's products. However, the computer technology market is
characterized by frequent and substantial intellectual property litigation.
Intellectual property litigation is complex and expensive, and the outcome of
such litigation is difficult to predict.
The Company relies on Verity for text search software, TASC for image
compression and Caere for OCR technology. The Company's success will depend in
part on its continued ability to obtain and use licensed technology that is
important to the functionality of its products. An inability to continue to
procure or use such technology would likely have an adverse effect on the
Company's business, financial condition and operating results.
33
<PAGE> 38
EMPLOYEES
As of April 30, 1996, the Company had 125 full time employees consisting of
39 in sales and marketing, 16 in product development, 49 in client services and
21 in corporate operations. The Company's employees are not represented by any
collective bargaining organizations, and the Company has never experienced any
work stoppages. The Company considers its relations with its employees to be
good.
FACILITIES
The Company's corporate headquarters are located in Dedham, Massachusetts,
where it currently occupies approximately 24,000 square feet of office space
under a lease expiring in December 1996. The Company expects that additional
space will be available when needed by the Company. The Company has regional
sales and service offices on the West Coast and in the United Kingdom. The
Company occupies approximately 2,200 square feet of office space in Palo Alto,
California under a lease expiring in September 1997 and 400 square feet of
office space in Reading, England under a lease expiring in October 1996. The
Company also leases office space for its sales representatives in Chicago and
Dallas.
34
<PAGE> 39
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
<TABLE>
The executive officers and directors of the Company, their ages and their
positions with the Company are as follows:
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
Lars D. Perkins........................... 36 President, Chief Executive Officer and
Chairman of the Board
Michael L. Amato.......................... 38 Vice President of Client Services
Charles A. Borwick........................ 33 Vice President of Marketing
Raymond M. Desrochers..................... 28 Vice President of Product Development and
Quality
Cynthia G. Eades.......................... 39 Chief Financial Officer, Vice President of
Finance and Treasurer
Martin J. Fahey........................... 42 Vice President and Chief Operating Officer
Thomas J. McCarthy III.................... 33 Vice President of Sales
Rachael T. Shanahan....................... 29 Vice President of Business Development,
General Counsel and Secretary
Russell J. Campanello(1)(2)............... 40 Director
J. Paul Costello.......................... 57 Director
A. Bruce Johnston(1)(2)................... 36 Director
<FN>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
</TABLE>
Lars D. Perkins, co-founder of the Company, has served as President, Chief
Executive Officer and Chairman of the Board of the Company since 1986. Prior to
such time, he was the Company's Vice President. Prior to founding the Company,
Mr. Perkins held sales and hardware and software engineering positions with
several local companies.
Michael L. Amato has been the Company's Vice President of Client Services
since November 1994. From November 1988 to October 1994, Mr. Amato was Area
Manager for the Northeast Region of Innovative Information Systems, Inc., a
client/server systems integration company.
Charles A. Borwick was elected Vice President of Marketing of the Company
in October 1995. From August 1993 to September 1995, Mr. Borwick served as the
Company's Vice President of Business Development; from June 1992 to July 1993,
he served as its Vice President of Client Services; and from January 1991 to May
1992, he served as Vice President of the Company's SuccessPlan product line.
Prior to joining the Company, Mr. Borwick co-founded Borwick International,
Inc., an international consulting firm. At Borwick International, Mr. Borwick
headed the human resource planning software division, where he directed sales,
marketing and operations.
Raymond M. Desrochers was elected to the position of Vice President of
Product Development and Quality of the Company in October 1995. From April 1995
to October 1995, he served as the Company's Director of Product Development and
from October 1994 to March 1995, he served as the Company's Manager of Software
Development. Mr. Desrochers was a senior software engineer for the Company from
July 1992 to September 1994. Prior to joining the Company in July 1992, he had
been Software Project Manager for New England Business Service, Inc., a company
that provides accounting software solutions to both small and medium-sized
businesses, from October 1991 to June 1992. In addition, Mr. Desrochers was
Software Development Manager for Multi Tasking Systems, Inc., a leasing software
provider, from September 1989 to September 1991.
Cynthia G. Eades joined the Company as Chief Financial Officer, Vice
President of Finance and Treasurer in December 1994. From February 1993 to
February 1994, she was Vice President and Chief
35
<PAGE> 40
Financial Officer of Virtual World Entertainment, a developer and operator of
virtual reality entertainment centers. Prior to such time, Ms. Eades was
employed by Dun & Bradstreet Software Services, Inc., a business applications
software company, as Controller from October 1991 to February 1993 and Director
of Finance from June 1990 to October 1991. Ms. Eades is a Certified Public
Accountant and was employed by Price Waterhouse from June 1978 to June 1990,
most recently as a Senior Manager in Audit and Accounting.
Martin J. Fahey joined the Company as Vice President and Chief Operating
Officer in May 1996. From January 1995 to May 1996, Mr. Fahey was an independent
consultant for a variety of software companies. From July 1991 to December 1994,
he was Chief Executive Officer of Vertigo Development, a multimedia company
which Mr. Fahey co-founded. Mr. Fahey was employed by Lotus Development
Corporation, a software company, from January 1983 to June 1991, most recently
as the Director of Spreadsheet Marketing.
Thomas J. McCarthy III joined the Company as Vice President of Sales in
February 1995. From October 1994 to January 1995, Mr. McCarthy was Vice
President and General Manager of Padcom Inc., a clinical studies software
company, where he was responsible for all North American operations. Prior to
joining Padcom, Mr. McCarthy had been employed by Software 2000, Inc., a
business applications software company, as a regional manager from May 1993 to
September 1994, a district manager from September 1992 to April 1993 and an
account executive from January 1992 to August 1992. Mr. McCarthy was an account
executive at Dun & Bradstreet Software Services, Inc., a business applications
software company, from December 1989 to December 1991.
Rachael T. Shanahan was elected Vice President of Business Development of
the Company in October 1995 and has served as the Company's Secretary since
January 1994 and its General Counsel since August 1993. Prior to such time, she
had been the Company's Contract Administrator/Legal Assistant since December
1990. Ms. Shanahan first joined the Company in 1988 as a systems specialist.
Russell J. Campanello was elected as a director of the Company in October
1994. He has been Vice President of Human Development and Organizational
Productivity at Industry.Net, a facilitator of electronic commerce on the
Internet, since February 1996. Prior to joining Industry.Net, Mr. Campanello
spent eight years as the Vice President of Human Resources of Lotus Development
Corporation.
J. Paul Costello co-founded the Company in 1982 with Lars D. Perkins and
has been a director of the Company since its founding. Mr. Costello has served
as President of J. Paul Costello Associates, Inc., a consulting company, since
1969 and of Costello & Company, Inc., a contract recruiting company, since 1979.
In December 1992, he also was named President of Corporate Staffing Center,
Inc., a provider of outsourced staffing services to large corporate clients. Mr.
Costello has been a human resource management consultant for over thirty years.
A. Bruce Johnston was elected as a director of the Company in January 1994.
Since January 1996, Mr. Johnston has been a Principal of TA Associates, Inc., a
private equity firm. From June 1992 to January 1996, Mr. Johnston was a Vice
President of TA Associates. Prior to such time, Mr. Johnston was a General
Manager of Lotus Development Corporation from June 1988 to June 1992. Mr.
Johnston also serves on the Boards of Directors of Expert Software, Inc. and
Trident International, Inc., both Nasdaq-traded public companies, as well as on
the Boards of Directors of several private companies.
BOARD OF DIRECTORS
Effective upon the closing of this offering, the Company's Board of
Directors will be divided into three classes, whose members will serve for
staggered three-year terms. The Board will be comprised of one Class I Director
(Mr. Campanello), one Class II Director (Mr. Johnston) and two Class III
Directors (Messrs. Perkins and Costello) whose initial terms will expire upon
the election and qualification of directors at the annual meetings of
stockholders to be held following fiscal 1996, 1997 and 1998, respectively. At
each annual meeting of stockholders, directors will be reelected or elected for
a full term of three years to succeed those directors whose terms are expiring.
36
<PAGE> 41
Each of Messrs. Perkins, Costello and Johnston has been nominated and
elected to the Board of Directors pursuant to a voting agreement among certain
stockholders of the Company. This agreement will terminate upon consummation of
this offering.
The Company has entered into Indemnity Agreements with its directors which
provide a contractual right to indemnification for certain expenses incurred by
such directors arising from suits brought against them in their capacities as
directors of the Company, to the extent permitted by Delaware law and the
Company's Certificate of Incorporation.
The Company's Board of Directors has established an Audit Committee (the
"Audit Committee") and a Compensation Committee (the "Compensation Committee").
The Audit Committee recommends the firm to be appointed as independent
accountants to audit the Company's financial statements and to perform services
related to the audit, reviews the scope and results of the audit with the
independent accountants, reviews with management and the independent accountants
the Company's year-end operating results and considers the adequacy of the
Company's internal accounting procedures. The Audit Committee consists of
Messrs. Campanello and Johnston. The Compensation Committee, which also consists
of Messrs. Campanello and Johnston, reviews and recommends the compensation
arrangements for all directors and officers and approves such arrangements for
other senior level employees. The Compensation Committee also administers and
takes such other action as may be required in connection with the incentive
plans of the Company, including the 1994 Stock Option Plan and the 1996 Stock
Option Plan.
DIRECTOR COMPENSATION
Prior to this offering, non-employee directors of the Company received an
annual directors' fee equal to 5% of the total compensation paid to the chief
executive officer of the Company for the period in question, which fee amounted
to $13,500 in fiscal 1995. Upon completion of this offering, non-employee
directors will receive $5,000 per year for services rendered as directors, plus
a per meeting fee of $1,000 for each directors' meeting attended in person after
the fifth meeting, up to a maximum additional amount of $5,000 per fiscal year.
In addition, all directors of the Company are reimbursed for travel expenses
incurred in attending meetings of the Board of Directors and its committees.
Each non-employee director will automatically receive an option to purchase
5,000 shares of Common Stock when such director is first elected to the Board of
Directors, with such option shares vesting proportionately over four years,
under the Company's 1996 Stock Option Plan. In addition, each non-employee
director will automatically receive an option to purchase 2,500 shares of Common
Stock on each October 1 that such director is a member of the Board of
Directors, with such option shares vesting proportionately over four years. All
option grants to non-employee directors will be at a per share exercise price
equal to the fair market value of the Common Stock at the time of grant. See
"Stock Option Plans."
EXECUTIVE COMPENSATION
The following table shows compensation paid to the Chief Executive Officer
and the other executive officers of the Company whose salary plus bonus exceeded
$100,000 for services rendered to the Company in all capacities during the
fiscal year ended September 30, 1995 (collectively, the "Named Executives").
37
<PAGE> 42
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(1) SALARY BONUS OPTIONS COMPENSATION
- ------------------------------ -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Lars D. Perkins............................ $135,000 $136,450 -- $5,135(2)
President and Chief Executive Officer
Michael L. Amato........................... 92,051(3) 16,550 35,460 596(4)
Vice President of Client Services
Charles A. Borwick......................... 104,582 30,770 70,875 984(4)
Vice President of Marketing
Cynthia G. Eades........................... 87,083(5) 16,778 53,190 383(4)
Chief Financial Officer
David G. Fisher(6)......................... 130,769 66,714 -- 8,305(7)
Vice President of Marketing
Thomas J. McCarthy III..................... 83,333(8) 133,202 141,840 350(4)
Vice President of Sales
<FN>
- ---------------
(1) Martin J. Fahey was named Vice President and Chief Operating Officer of the
Company in May 1996. His annual salary is $135,000.
(2) Includes a car allowance of $4,133 and a matching contribution of $1,002
made by the Company on behalf of Mr. Perkins under the Company's 401(k)
savings plan.
(3) Based on 11 months of service with the Company during the fiscal year ended
September 30, 1995. Mr. Amato's salary would have totaled $100,000 had he
been employed by the Company for the entire fiscal year.
(4) Represents a matching contribution made by the Company on behalf of the
Named Executive under the Company's 401(k) savings plan.
(5) Based on 9.5 months of service with the Company during the fiscal year ended
September 30, 1995. Ms. Eades' salary would have totaled $110,000 had she
been employed by the Company for the entire fiscal year.
(6) Mr. Fisher resigned from the Company, effective October 1995. In connection
with his resignation, Mr. Fisher is receiving severance payments which will
aggregate approximately $111,600 from the Company.
(7) Includes a moving allowance of $6,847 and a matching contribution of $1,458
made by the Company on behalf of Mr. Fisher under the Company's 401(k)
savings plan.
(8) Based on eight months of service with the Company during the fiscal year
ended September 30, 1995. Mr. McCarthy's salary would have totaled $125,000
had he been employed by the Company for the entire fiscal year.
</TABLE>
38
<PAGE> 43
<TABLE>
The following table provides information on option grants made during the
fiscal year ended September 30, 1995 to the Named Executives.
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------- ANNUAL RATES OF
PERCENT OF STOCK PRICE
NUMBER OF TOTAL OPTIONS APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM(1)
UNDERLYING EMPLOYEES IN PRICE PER EXPIRATION ------------------
NAME OPTIONS GRANTED FISCAL YEAR SHARE DATE 5% 10%
---- --------------- ------------- --------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Lars D. Perkins............... -- -- -- -- -- --
Michael L. Amato.............. 35,460 7.86% $0.44 10/31/04 $ 9,812 $ 24,866
Charles A. Borwick............ 70,875 15.71% 0.44 10/1/04 19,612 49,701
Cynthia G. Eades.............. 53,190 11.79% 0.44 12/12/04 14,718 37,299
David G. Fisher............... -- -- -- -- -- --
Thomas J. McCarthy III........ 70,920 15.72% 0.44 2/1/05 19,625 49,732
70,920 15.72% 2.00 9/15/05 89,202 226,056
<FN>
- ---------------
(1) This column shows the hypothetical gains or "option spreads" of the options
granted based on assumed annual compound stock appreciation rates of 5% and
10% over the full 10-year term of the options. The 5% and 10% assumed rates
of appreciation are mandated by the rules of the Securities and Exchange
Commission and do not represent the Company's estimate or projection of
future Common Stock prices. The gains shown are net of the option exercise
price, but do not include deductions for taxes or other expenses associated
with the exercise of the option or the sale of the underlying shares. The
actual gains, if any, on the exercises of stock options will depend on the
future performance of the Common Stock, the option holder's continued
employment through the option period and the date on which the options are
exercised.
</TABLE>
<TABLE>
The following table sets forth for each of the Named Executives certain
information concerning options held as of September 30, 1995. No Named
Executives exercised stock options during fiscal 1995.
AGGREGATE OPTION EXERCISES IN FISCAL 1995 AND YEAR-END OPTION VALUES
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR END FISCAL YEAR END(2)
NAME EXERCISABLE/UNEXERCISABLE(1) EXERCISABLE/UNEXERCISABLE
---- -------------------------------- --------------------------
<S> <C> <C> <C> <C>
Lars D. Perkins.............................. -- -- -- --
Michael L. Amato............................. 35,460(3) / -- $ 55,318/ --
Charles A. Borwick........................... 70,875(4) / -- 110,565/ --
Cynthia G. Eades............................. 53,190(3) / -- 82,976/ --
David G. Fisher.............................. 130,054(5) / -- 202,884/ --
Thomas J. McCarthy III....................... 141,840(3) / -- 110,635/ --
<FN>
- ---------------
(1) Under the 1994 Stock Option Plan, all options are exercisable upon grant,
but the underlying shares vest over time. The Company reserves the right to
repurchase, upon termination of employment, all shares issued upon exercise
(unvested shares at the exercise price and vested shares at the then current
fair market value).
(2) These values have been calculated on the basis of the fair market value per
share of the Common Stock at September 30, 1995 as determined by the Board
of Directors ($2.00), less the applicable exercise price.
(3) At fiscal year end, none of the shares were vested.
(4) At fiscal year end, all of the shares were vested.
(5) Mr. Fisher resigned from the Company, effective October 1995. In November
1995, Mr. Fisher exercised his option to purchase 56,900 vested shares of
Common Stock and the Company repurchased those shares at a negotiated price
pursuant to the terms of a separation agreement for an aggregate purchase
</TABLE>
39
<PAGE> 44
price of $113,799. Mr. Fisher's remaining option to purchase 73,154 shares
of Common Stock terminated in November 1995.
STOCK OPTION PLANS
Each of the 1994 Stock Option Plan and the 1996 Stock Option Plan permits
the grant of (i) options to purchase shares of Common Stock intended to qualify
as incentive stock options under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) options that do not so qualify and (iii)
shares of Common Stock. The 1994 Stock Option Plan and the 1996 Stock Option
Plan are designed and intended as a performance incentive for officers,
directors, employees, consultants and other key persons performing services for
the Company to encourage such persons to acquire or increase a proprietary
interest in the success of the Company. As of May 8, 1996, options to purchase
641,844 shares of Common Stock pursuant to the 1994 Stock Option Plan were
outstanding. No further option grants will be made under the 1994 Stock Option
Plan. Stock options granted under the 1994 Stock Option Plan are exercisable
upon grant, subject to the Company's right to repurchase, upon termination of
employment, shares of Common Stock issued upon exercise.
On May 8, 1996, the Board of Directors and stockholders of the Company
approved the adoption of the 1996 Stock Option Plan, which provides for the
issuance of options to purchase 958,156 shares of Common Stock. Under the 1996
Stock Option Plan, each non-employee director first joining the Board of
Directors in the future will automatically receive an option to purchase 5,000
shares of Common Stock when such director is first elected or appointed to the
Board of Directors, with option shares vesting proportionately over four years.
In addition, each non-employee director will automatically receive an option to
purchase 2,500 shares of Common Stock on each October 1 that such director is a
member of the Board of Directors, with option shares vesting proportionately
over four years. All option grants to non-employee directors will be at a per
share exercise price equal to the fair market value of the Common Stock at the
time of grant. The 1996 Stock Option Plan is administered by the Compensation
Committee as appointed by the Board of Directors from time to time.
EMPLOYEE STOCK PURCHASE PLAN
The Employee Stock Purchase Plan was adopted by the Board of Directors and
approved by the stockholders of the Company in May 1996. The Company has
reserved a total of 150,000 shares of Common Stock for issuance under the
Employee Stock Purchase Plan. The Employee Stock Purchase Plan, which is
intended to qualify under Section 423(b) of the Code, permits eligible employees
of the Company to purchase Common Stock through payroll deductions of up to ten
percent of their compensation. The price of Common Stock purchased under the
Employee Stock Purchase Plan will be 85% of the lower of the fair market value
of the Common Stock on the first or last day of each six month purchase period.
The Employee Stock Purchase Plan will be administered by the Compensation
Committee of the Board of Directors. Employees are eligible to participate if
they are customarily employed by the Company or any designated subsidiary for at
least 20 hours per week and for more than six months.
SAVINGS PLAN
The Company's savings plan (the "Restrac 401(k) Plan") was adopted by the
Company in 1994 and amended, effective October 1995. All United States full-time
employees of the Company are eligible to participate in the Restrac 401(k) Plan
without regard to age or length of service. Participants may elect to have their
compensation reduced by up to 20% and have such reduced amount contributed to
the Restrac 401(k) Plan. The Company made discretionary matching contributions
under the Restrac 401(k) Plan aggregating approximately $14,000 and $33,000
during fiscal 1994 and fiscal 1995, respectively.
NON-COMPETITION AGREEMENTS
The Company has entered into a non-competition agreement with each
executive officer which generally (i) restricts such executive officer from
engaging in any "competitive business" (as defined in the agreement) for a
period of up to two years following termination of employment, subject to
payment by the Company of
40
<PAGE> 45
up to 30% of the executive officer's base salary; (ii) requires the executive
officer to assign to the Company all rights in all works, ideas and inventions
made by such executive officer during the term of employment which directly
relate to the Company's actual or proposed business; and (iii) requires the
executive officer to keep confidential, both during the term of employment and
for a defined period thereafter, all confidential or proprietary information of
the Company.
1996 MANAGEMENT INCENTIVE COMPENSATION PLANS
The Company's 1996 Management Incentive Compensation Plans allow senior
managers to receive up to 20% of annual salary in an annual bonus and other
managers to receive up to 15% of annual salary in an annual bonus, 50% of which
is based upon the achievement of individual goals and 50% of which is based upon
the Company's achievement of its annual financial goals. These plans do not
apply to sales personnel, who are covered by separate incentive plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to May 8, 1996, all matters concerning executive officer compensation
were addressed by a Compensation Committee comprised of Messrs. Costello and
Johnston. Since May 8, 1996, the Compensation Committee has been comprised of
Messrs. Campanello and Johnston. Neither Mr. Campanello nor Mr. Johnston is an
employee of the Company. Mr. Campanello has been a director of the Company since
October 1994. Mr. Johnston has been a director of the Company since January
1994.
CERTAIN TRANSACTIONS
Pursuant to the 1994 Financing Agreement, on January 5, 1994, the Company
sold 517,546 shares of Convertible Preferred Stock to investment funds
associated with TA Associates, Inc. (the "TA Investors"), 28,951 shares of
Convertible Preferred Stock to Chestnut III Limited Partnership ("CLP") and
9,658 shares of Convertible Preferred Stock to Chestnut Capital International
III Limited Partnership ("CCILP") (CLP and CCILP collectively, the "Chestnut
Investors"). The purchase price per share of Convertible Preferred Stock was
$6.30. Upon the closing of this offering, the shares of Convertible Preferred
Stock will convert into an aggregate of 2,502,696 shares of Common Stock as
provided by a formula set forth in the Company's Certificate of Incorporation.
Mr. Johnston, a director of the Company, is a Principal of TA Associates, Inc.,
the indirect general partner of each of the TA Investors other than TA Venture
Investors Limited Partnership. Mr. Johnston is a general partner of TA Venture
Investors Limited Partnership. Approximately $800,000 of the proceeds were used
by the Company to repurchase shares of Common Stock, including 225,000 shares
from Lars D. Perkins, the President and Chief Executive Officer of the Company,
and 225,000 shares from J. Paul Costello, a director of the Company, at a per
share price of $1.32.
For a description of certain registration rights held by the TA Investors
and the Chestnut Investors, see "Description of Capital Stock -- Registration
Rights."
On January 1, 1993, the Company entered into a License Agreement with
Costello & Company, Inc. ("Costello") pursuant to which the Company granted
Costello a fully-paid, perpetual license to use the Company's then current
software products and all replacement products developed and/or marketed by the
Company, with certain limited exceptions, and documentation thereto which is
part of the Company's standard offering to its customers. Pursuant to the terms
of the License Agreement, Costello does not acquire any rights of ownership in
the software or documentation and said software and documentation may only be
used by Costello and J. Paul Costello, his wife, children and any business
entity at least 51% owned by any of them, each of whom Costello may grant rights
to use the software. J. Paul Costello, the President and principal shareholder
of Costello, is a director of the Company.
On January 1, 1991, the Company purchased certain assets from Borwick
International, Inc., an international consulting firm, pursuant to that certain
Agreement for Purchase and Sale of Assets dated January 1, 1991 (the "Asset
Agreement"). The Asset Agreement contains a non-competition clause pursuant to
which the Company agreed not to sell software used for "succession planning"
anywhere outside of North
41
<PAGE> 46
America. On September 30, 1995, the Company executed a Termination Agreement
with Borwick International and Irving P. Borwick and a Finder's Fee and
Non-Competition Agreement with Irving P. Borwick. Pursuant to these two
agreements, the Company agreed to pay (i) $550,951.77 to Borwick International
in return for the termination of the Company's non-competition agreement under
the Asset Agreement and a five-year non-competition covenant from Borwick
International and (ii) $500,000 to Irving P. Borwick over a three-year period in
exchange for a five-year non-competition covenant from Irving P. Borwick. In
connection with this transaction, Borwick International has paid $137,738 to
Charles A. Borwick and Irving P. Borwick has agreed to pay $125,000 to Charles
A. Borwick. The Finder's Fee and Non-Competition Agreement also provides for the
payment of a finder's fee to Mr. Borwick in the event that certain entities
purchase a license to certain Restrac software on or before September 30, 1997.
Irving P. Borwick is the father of Charles A. Borwick, the Company's Vice
President of Marketing. Charles A. Borwick is a consultant to Borwick
International.
The Company has adopted a policy that transactions between the Company and
its officers, directors or other affiliates shall be reviewed on an ongoing
basis and be submitted to the Audit Committee or other comparable body for
review where appropriate.
42
<PAGE> 47
PRINCIPAL AND SELLING STOCKHOLDERS
<TABLE>
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock as of May 8, 1996, and as
adjusted to reflect the sale by the Company and the Selling Stockholders of the
shares offered hereby, (i) by each person who is known by the Company to own
beneficially five percent or more of the outstanding shares of Common Stock,
(ii) by each of the Company's directors, (iii) by each of the Named Executives,
(iv) by each of the Selling Stockholders, and (v) by all current directors and
executive officers of the Company as a group.
<CAPTION>
SHARES BENEFICIALLY SHARES TO SHARES BENEFICIALLY
OWNED PRIOR TO BE SOLD OWNED AFTER
OFFERING(1) IN OFFERING OFFERING(1)
------------------------ ----------- --------------------------
NAME AND ADDRESS NUMBER PERCENT(2) NUMBER PERCENT(2)
- ------------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
TA Investors................... 2,328,956(3) 36.5% 360,134(4) 1,968,822(5) 25.0%
c/o TA Associates, Inc.
125 High Street
Boston, MA 02110
Chestnut Investors............. 173,740(6) 2.7% 26,866(7) 146,874(8) 1.9%
c/o MVP Ventures
45 Milk Street
Boston, MA 02109
Lars D. Perkins................ 1,445,816 22.7% 216,000 1,229,816 15.6%
J. Paul Costello............... 1,685,385(9) 26.4% 252,000 1,433,385(9) 18.2%
Russell J. Campanello.......... 11,250(10) * -- 11,250(10) *
A. Bruce Johnston.............. 4,307(11) * 665(12) 3,642(13) *
Michael L. Amato............... 53,190(14) * -- 53,190(14) *
Charles A. Borwick............. 355,444(15) 5.5% 136,000 219,444(15) 2.8%
Cynthia G. Eades............... 53,190(16) * -- 53,190(16) *
Martin J. Fahey................ 80,000(17) 1.2% -- 80,000(17) 1.0%
David G. Fisher................ -- -- -- -- --
Thomas J. McCarthy III......... 141,840(18) 2.2% -- 141,840(18) 1.8%
John P. Jopling................ 52,650 * 9,000 43,650 *
All directors and executive
officers as a group (11
persons)..................... 3,901,109(19) 56.9% 604,665 3,296,444(19) 39.5%
<FN>
- ---------------
* Represents less than 1% of the outstanding shares
(1) Each stockholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise indicated. In accordance with the
rules of the Securities and Exchange Commission, each stockholder is deemed
to beneficially own any shares subject to stock options which are currently
exercisable or which become exercisable within 60 days after May 8, 1996;
and any reference in these footnotes to shares subject to stock options
held by the person or entity in question refers to stock options which are
currently exercisable or which become exercisable within 60 days after May
8, 1996. The inclusion herein of shares listed as beneficially owned does
not constitute an admission of beneficial ownership.
(2) Number of shares deemed outstanding includes any shares subject to stock
options held by the person or entity in question that are currently
exercisable or exercisable within 60 days following May 8, 1996. Number of
shares deemed outstanding after this offering includes the additional
1,500,000 shares of Common Stock which are being offered by the Company
hereby.
(3) Includes 1,668,465 shares owned by Advent VII L.P., 344,439 shares owned by
Advent Atlantic and Pacific II L.P., 166,846 shares owned by Advent New
York L.P., 124,177 shares owned by Advent Industrial II L.P. and 25,029
shares owned by TA Venture Investors Limited Partnership. TA Associates,
Inc. acts as the indirect general partner of each of these entities and
certain of their affiliates, except for TA Venture Investors Limited
Partnership, and exercises sole investment and voting power
</TABLE>
43
<PAGE> 48
with respect to such shares. Principals and employees of TA Associates,
Inc. (including A. Bruce Johnston) comprise the general partners of TA
Venture Investors Limited Partnership.
(4) Includes 258,000 shares to be sold by Advent VII L.P., 53,262 shares to be
sold by Advent Atlantic and Pacific II L.P., 25,800 shares to be sold by
Advent New York L.P., 19,202 shares to be sold by Advent Industrial II L.P.
and 3,870 shares to be sold by TA Venture Investors Limited Partnership.
(5) Includes 1,410,465 shares owned by Advent VII L.P., 291,177 shares owned by
Advent Atlantic and Pacific II L.P., 141,046 shares owned by Advent New
York L.P., 104,975 shares owned by Advent Industrial II L.P. and 21,159
shares owned by TA Venture Investors Limited Partnership.
(6) Includes 130,279 shares owned by Chestnut III Limited Partnership and
43,461 shares owned by Chestnut Capital International III Limited
Partnership. Messrs. Jonathan J. Fleming, Michael F. Schiavo, Peter A.
Schober and John G. Turner are the general partners of Chestnut III
Management Limited Partnership ("CMLP") and MVP Capital Limited Partnership
("MVP"). CMLP has voting and investment power to act for Chestnut III
Limited Partnership. MVP has voting and investment power to act for
Chestnut Capital International III Limited Partnership.
(7) Includes 20,145 shares to be sold by Chestnut III Limited Partnership and
6,721 shares to be sold by Chestnut Capital International III Limited
Partnership.
(8) Includes 110,134 shares owned by Chestnut III Limited Partnership and
36,740 shares owned by Chestnut Capital International III Limited
Partnership.
(9) Includes 403,164 shares of Common Stock beneficially owned by Joseph A.
Bartoloni and Paul D. Spiro as trustees of trusts for the benefit of Mr.
Costello's children, John P. Costello III and Brett Ann Costello. Mr.
Costello disclaims beneficial ownership of such shares.
(10) Represents 11,250 shares subject to options held by Mr. Campanello.
(11) Represents 4,307 shares of Common Stock beneficially owned by A. Bruce
Johnston through TA Venture Investors Limited Partnership, which are
included in the shares described in footnote (3) above as being owned by TA
Venture Investors Limited Partnership. Does not include any shares
beneficially owned by Advent VII L.P., Advent Atlantic and Pacific II L.P.,
Advent New York L.P. or Advent Industrial II L.P. or the remainder of the
shares described in footnote (3) above as being owned by TA Venture
Investors Limited Partnership, as to which Mr. Johnston disclaims
beneficial ownership.
(12) Represents 665 shares of Common Stock to be sold by TA Venture Investors
Limited Partnership which are included in footnote (4) above as being sold
by TA Venture Investors Limited Partnership.
(13) Represents 3,642 shares of Common Stock in which A. Bruce Johnston has a
pecuniary interest through TA Venture Investors Limited Partnership which
are included in footnote (5) above as being owned by TA Venture Investors
Limited Partnership.
(14) Represents 53,190 shares subject to options held by Mr. Amato.
(15) Includes 70,875 shares subject to options held by Mr. Borwick.
(16) Represents 53,190 shares subject to options held by Ms. Eades.
(17) Represents 80,000 shares subject to options held by Mr. Fahey.
(18) Represents 141,840 shares subject to options held by Mr. McCarthy.
(19) Includes 481,032 shares subject to options held by directors and executive
officers as a group.
44
<PAGE> 49
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company upon completion of the offering
and the conversion of all of the Convertible Preferred Stock into Common Stock
will consist of 30,000,000 shares of Common Stock, of which 7,874,383 shares
will be outstanding, and 5,000,000 shares of undesignated preferred stock
issuable in series by the Board of Directors (the "Preferred Stock"), of which
no shares will be issued and outstanding. There were 17 stockholders of record
as of May 8, 1996. The following summary description of the capital stock of the
Company is qualified in its entirety by reference to the Company's Certificate
of Incorporation and Amended and Restated By-laws, copies of which are filed as
exhibits to the Registration Statement of which this Prospectus is a part. The
Certificate of Incorporation and the Amended and Restated By-laws have been
adopted by the stockholders and the Board of Directors of the Company.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted on by stockholders. Holders of Common Stock are not entitled to
cumulative voting rights. Therefore, the holders of a majority of the shares
voted in the election of directors can elect all of the directors then standing
for election, subject to the rights of the holders of Preferred Stock, if and
when issued. The holders of Common Stock have no preemptive or other
subscription rights.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors from funds
legally available therefor, with each share of Common Stock sharing equally in
such dividends. The possible issuance of Preferred Stock with a preference over
Common Stock as to dividends could impact the dividend rights of holders of
Common Stock.
There are no redemption or sinking fund provisions with respect to the
Common Stock. All outstanding shares of Common Stock, including the shares
offered hereby, are, or will be upon completion of the offering, fully paid and
non-assessable.
The By-laws provide, subject to the rights of the holders of the Preferred
Stock, if and when issued, that the number of directors shall be fixed by the
Board of Directors. The directors, other than those who may be elected by the
holders of Preferred Stock, if and when issued, are divided into three classes,
as nearly equal in number as possible, with each class serving for a three-year
term, except with respect to the initial term of each class of directors which
shall be for the period described under "Management -- Board of Directors."
Subject to any rights of the holders of Preferred Stock, if and when issued, to
elect directors, and to remove any director whom the holders of any such stock
had the right to elect, any director of the Company may be removed from office
only with cause and by the affirmative vote of at least two-thirds of the total
votes which would be eligible to be cast by stockholders in the election of such
director.
UNDESIGNATED PREFERRED STOCK
The Board of Directors of the Company is authorized, without further action
of the stockholders of the Company, to issue up to 5,000,000 shares of Preferred
Stock in classes or series and to fix the designations, powers, preferences and
the relative, participating, optional or other special rights of the shares of
each series and any qualifications, limitations and restrictions thereon as set
forth in the Certificate of Incorporation. Any such Preferred Stock issued by
the Company may rank prior to the Common Stock as to dividend rights,
liquidation preference or both, may have full or limited voting rights and may
be convertible into shares of Common Stock.
The purpose of authorizing the Board of Directors to issue Preferred Stock
is, in part, to eliminate delays associated with a stockholder vote on specific
issuances. The issuance of Preferred Stock could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring or seeking to acquire, a significant portion of the outstanding
stock of the Company.
45
<PAGE> 50
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BY-LAWS
A number of provisions of the Company's Certificate of Incorporation and
By-laws concern matters of corporate governance and the rights of stockholders.
Certain of these provisions, as well as the ability of the Board of Directors to
issue shares of Preferred Stock and to set the voting rights, preferences and
other terms thereof, may be deemed to have an anti-takeover effect and may
discourage takeover attempts not first approved by the Board of Directors
(including takeovers which certain stockholders may deem to be in their best
interests). These provisions, together with the classified Board of Directors
and the ability of the Board of Directors to issue Preferred Stock without
further stockholder action, also could delay or frustrate the removal of
incumbent Directors or the assumption of control by stockholders, even if such
removal or assumption would be beneficial to stockholders of the Company. These
provisions also could discourage or make more difficult a merger, tender offer
or proxy contest, even if they could be favorable to the interests of
stockholders, and could potentially depress the market price of the Common Stock
and deprive stockholders of an opportunity to receive a premium for their
shares. The Board of Directors of the Company believes that these provisions are
appropriate to protect the interests of the Company and all of its stockholders.
The Board of Directors has no present plans to adopt any other measures or
devices which may be deemed to have an "anti-takeover effect."
Meetings of Stockholders. The Company's By-laws provide that a special
meeting of stockholders may be called only by the Board of Directors unless
otherwise required by law. The Company's By-laws provide that only those matters
set forth in the notice of the special meeting may be considered or acted upon
at that special meeting, unless otherwise provided by law. In addition, the
Company's By-laws set forth certain advance notice and informational
requirements and time limitations on any director nomination or any new business
which a stockholder wishes to propose for consideration at an annual meeting of
stockholders.
No Stockholder Action by Written Consent. The Certificate of Incorporation
provides that any action required or permitted to be taken by the stockholders
of the Company at an annual or special meeting of stockholders must be effected
at a duly called meeting and may not be taken or effected by a written consent
of stockholders in lieu thereof.
Indemnification and Limitation of Liability. The By-laws of the Company
provide that directors and officers of the Company shall be, and in the
discretion of the Board of Directors non-officer employees may be, indemnified
by the Company to the fullest extent authorized by Delaware law, as it now
exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with service for or on behalf of the Company.
The By-laws of the Company also provide that the right of directors and officers
to indemnification shall be a contract right and shall not be exclusive of any
other right now possessed or hereafter acquired under any by-law, agreement,
vote of stockholders or otherwise. The Certificate of Incorporation contains a
provision permitted by Delaware law that generally eliminates the personal
liability of directors for monetary damages for breaches of their fiduciary
duty, including breaches involving negligence or gross negligence in business
combinations, unless the director has breached his or her duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or a knowing
violation of law, paid a dividend or approved a stock repurchase in violation of
the Delaware General Corporation Law or obtained an improper personal benefit.
This provision does not alter a director's liability under the federal
securities laws. In addition, this provision does not affect the availability of
equitable remedies, such as an injunction or rescission, for breach of fiduciary
duty.
Amendment of the Certificate. The Certificate of Incorporation provides
that an amendment thereof must first be approved by a majority of the Board of
Directors and (with certain exceptions) thereafter approved by the holders of a
majority of the total votes eligible to be cast by holders of voting stock with
respect to such amendment or repeal; provided, however, that the affirmative
vote of 80% of the total votes eligible to be cast by holders of voting stock,
voting together as a single class, is required to amend the provisions described
above.
Amendment of By-laws. The Certificate of Incorporation provides that the
By-laws may be amended or repealed by the Board of Directors or by the
stockholders. Such action by the Board of Directors requires the affirmative
vote of a majority of the directors then in office. Such action by the
stockholders requires the
46
<PAGE> 51
affirmative vote of the holders of at least two-thirds of the total votes
eligible to be cast by holders of voting stock with respect to such amendment or
repeal at an annual meeting of stockholders or a special meeting called for such
purpose, unless the Board of Directors recommends that the stockholders approve
such amendment or repeal at such meeting, in which case such amendment or repeal
shall only require the affirmative vote of a majority of the total votes
eligible to be cast by holders of voting stock with respect to such amendment or
repeal.
STATUTORY BUSINESS COMBINATION PROVISION
Upon completion of the offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person or affiliate or associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved by
the board of directors of the corporation before the person becomes an
interested stockholder, (ii) the interested stockholder acquired 85% or more of
the outstanding voting stock of the corporation in the same transaction that
makes it an interested stockholder (excluding shares owned by persons who are
both officers and directors of the corporation, and shares held by certain
employee stock ownership plans); or (iii) on or after the date the person
becomes an interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined (with certain limited exceptions) as any
person that is (i) the owner of 15% or more of the outstanding voting stock of
the corporation or (ii) an affiliate or associate of the corporation that was
the owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three-year period immediately prior to the date on which it
is sought to be determined whether such person is an interested stockholder. The
Board of Directors has agreed that Lars D. Perkins, J. Paul Costello and the TA
Investors, who would immediately after the offering be deemed to own 15% or more
of the Company's outstanding Common Stock, and their affiliates and associates
will not be considered "interested stockholders" for purposes of Section 203 and
that the provisions of Section 203 do not apply to transactions between the
Company and any of the above-referenced stockholders or their affiliates and
associates.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action of
its stockholders to exempt itself from coverage, provided that such charter or
by-law amendment shall not become effective until 12 months after the date it is
adopted. Neither the Certificate of Incorporation nor the By-laws contains any
such exclusion.
REGISTRATION RIGHTS
Upon consummation of the offering, Lars D. Perkins, J. Paul Costello and
John P. Jopling (collectively the "Management Stockholders") and the TA
Investors and the Chestnut Investors (collectively the "Venture Investors") will
have "piggy-back" registration rights under the Securities Act pursuant to the
Registration Rights Agreement and the 1994 Financing Agreement, respectively. If
the Company proposes to effect certain registrations of its securities under the
Securities Act, such holders are entitled to notice of such registration and to
include their shares of Common Stock in such registration, subject to the right
of an underwriter participating in the offering to limit the number of shares
included in such registration. In addition, at any time at least six months
after the effective date of the Company's initial public offering, the Venture
Investors shall have the right to demand two registrations on Form S-1, but no
more than one in any consecutive twelve-month period. At such time as the
Company has qualified for use of Form S-3, the Venture Investors shall each have
the right to request an unlimited number of registrations on Form S-3, except
that the Company shall not be obligated to file and cause to become effective
more than one registration statement on Form S-3 in any one twelve-month period
or where the proposed aggregate offering price of the securities proposed to be
registered is less than $1,000,000. The Management Stockholders are entitled to
participate in any registration demanded by the Venture Investors, subject to
the right of an
47
<PAGE> 52
underwriter participating in the offering, or in certain circumstances the right
of the Venture Investors, to limit the ability of the Management Stockholders to
include their shares in the offering. All expenses relating to the filing of
such registration statements (other than the second demand registration on Form
S-1), excluding underwriting discounts and selling expenses relating to the
filing of such registration statements and in some instances the fees for
counsel for the Venture Investors and/or the Management Stockholders, will be
paid by the Company. Except to the extent the Selling Stockholders have
exercised their registration rights with respect to the shares of Common Stock
offered hereby, the holders of such registration rights have waived such rights
in connection with the offering and have also agreed with the Underwriters not
to exercise such rights with respect to any shares subject to the lock-up
restrictions described below for a period of 180 days following the date of this
Prospectus.
TRANSFER AGENT AND REGISTRAR
The Company has selected Fleet National Bank as the transfer agent and
registrar for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have a total of 7,874,383
shares of Common Stock outstanding. Of these shares, the 2,500,000 shares of
Common Stock offered hereby will be freely tradable without restriction or
registration under the Securities Act by persons other than "affiliates" of the
Company, as defined in the Securities Act, who would be required to sell under
Rule 144 under the Securities Act. The remaining 5,374,383 shares of Common
Stock outstanding will be "restricted securities" as that term is defined by
Rule 144 (the "Restricted Shares"). The Restricted Shares were issued and sold
by the Company in private transactions in reliance upon exemptions from
registration under the Securities Act.
Of the Restricted Shares, 186,480 shares will be eligible for sale in the
public market in reliance on Rule 144(k) immediately following the commencement
of this offering and 258,750 shares will be eligible for sale in the public
market in reliance on Rule 144(k) within one month of the commencement of this
offering; 415,230 of these shares are subject to the lock-up agreements
described below. An additional 4,825,584 Restricted Shares will be eligible for
sale in the public market pursuant to Rule 144 and Rule 701 under the Securities
Act beginning 90 days after the date of this Prospectus; all of these shares are
subject to the lock-up agreements described below. The remaining 103,569 shares
will become eligible for sale in the public market under Rule 144 at various
times; all of these shares are subject to the lock-up agreements described
below.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least two years (including the holding period of any prior owner except
an affiliate), including persons who may be deemed "affiliates" of the Company,
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of one percent of the number of shares of Common
Stock then outstanding (approximately 78,744 shares upon completion of the
offering) or the average weekly trading volume of the Common Stock during the
four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements, and to the availability of current public information
about the Company. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least three
years (including the holding period of any prior owner except an affiliate),
would be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. Rule 144 also provides that affiliates who are
selling shares that are not Restricted Shares must nonetheless comply with the
same restrictions applicable to Restricted Shares with the exception of the
holding period requirement.
Rule 701 promulgated under the Securities Act provides that shares of
Common Stock acquired on the exercise of outstanding options may be resold by
persons other than affiliates, beginning 90 days after the date of this
Prospectus, subject only to the manner of sale provisions of Rule 144, and by
affiliates, beginning
48
<PAGE> 53
90 days after the date of this Prospectus, subject to all provisions of Rule 144
except its two-year minimum holding period.
The Company's executive officers and directors, the Selling Stockholders
and certain other stockholders of the Company (who in the aggregate will hold
5,344,383 Restricted Shares upon completion of the offering) have agreed,
subject to certain limited exceptions, not to sell or offer to sell or otherwise
dispose of any shares of Common Stock currently held by them, any right to
acquire any shares of Common Stock or any securities exercisable for or
convertible into any shares of Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of Montgomery
Securities. Montgomery Securities may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to these
lock-up agreements. In addition, the Company has agreed that for a period of 180
days after the date of this Prospectus it will not, without the prior written
consent of Montgomery Securities, issue, offer, sell, grant options to purchase
or otherwise dispose of any equity securities or securities convertible into or
exchangeable for equity securities except for shares of Common Stock offered
hereby and shares issued pursuant to the 1994 Stock Option Plan and the Employee
Stock Purchase Plan.
As of May 8, 1996, options to purchase a total of 641,844 shares of Common
Stock pursuant to the 1994 Stock Option Plan were outstanding with a weighted
average exercise price of $2.65 per share; an additional 958,156 shares of
Common Stock were available for future issuance under the 1996 Stock Option Plan
and 150,000 shares of Common Stock were available for purchase under the
Employee Stock Purchase Plan. The Company intends to file one or more
registration statements on Form S-8 under the Securities Act to register shares
of Common Stock issuable under the 1994 Stock Option Plan, the 1996 Stock Option
Plan and the Employee Stock Purchase Plan; however, the Company has agreed with
the Underwriters not to file any such registration statement on Form S-8 with
respect to, or otherwise register for resale with the Commission, shares of
Common Stock subject to stock options, for a period of 30 days after the date of
this Prospectus.
In addition, various holders of Common Stock have demand and "piggyback"
registration rights to require the Company to file one or more registration
statements to effect the registration under the Securities Act of the shares of
Common Stock held by such holders, which would permit such holders to resell
such shares without complying with Rule 144. Registration and sale of such
shares could have an adverse effect on the trading price of the Common Stock.
See "Description of Capital -- Stock Registration Rights."
Prior to the offering, there has been no public market for the Common Stock
and no predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts of
such shares in the public market, or the perception that such sales could occur,
could materially and adversely affect the market price of the Common Stock and
could impair the Company's future ability to raise capital through an offering
of its equity securities. See "Risk Factors -- Shares Eligible for Future Sale."
49
<PAGE> 54
UNDERWRITING
The underwriters named below (the "Underwriters"), represented by
Montgomery Securities, Wessels, Arnold & Henderson, L.L.C. and Adams, Harkness &
Hill, Inc. (the "Representatives"), have severally agreed, subject to the terms
and conditions set forth in the Underwriting Agreement, to purchase from the
Company and the Selling Stockholders the number of shares of Common Stock
indicated below opposite their respective names at the initial public offering
price less the underwriting discount set forth on the cover page of this
Prospectus. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of such shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ----------
<S> <C>
Montgomery Securities.....................................................
Wessels, Arnold & Henderson, L.L.C........................................
Adams, Harkness & Hill, Inc...............................................
---------
Total........................................................... 2,500,000
=========
</TABLE>
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters initially propose to offer the Common Stock to the public
on the terms set forth on the cover page of this Prospectus. The Underwriters
may allow to selected dealers a concession of not more than $ per
share; and the Underwriters may allow, and such dealers may reallow, a
concession of not more than $ per share to certain other dealers. After
the initial public offering, the offering price and other selling terms may be
changed by the Representatives. The Common Stock is offered subject to receipt
and acceptance by the Underwriters, and to certain other conditions, including
the right to reject orders in whole or in part.
Certain of the Selling Stockholders have granted an option to the
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to a maximum of 375,000 additional shares of Common
Stock to cover over-allotments, if any, at the same price per share as the
initial 2,500,000 shares to be purchased by the Underwriters. To the extent that
the Underwriters exercise this option, each of the Underwriters will be
committed, subject to certain conditions, to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with this offering.
Each director and officer of the Company, the Selling Stockholders and
certain other holders of Common Stock prior to this offering have agreed,
subject to certain limited exceptions, not to sell or offer to sell or otherwise
dispose of any shares of Common Stock currently held by them, any right to
acquire any shares of Common Stock or any securities exercisable for or
convertible into any shares of Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of Montgomery
Securities. Montgomery Securities may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to these
lock-up agreements. In addition, the Company has agreed that for a period of 180
days after the date of this Prospectus it will not, without the prior written
consent of Montgomery Securities, issue, offer, sell, grant options to purchase
or otherwise dispose of any equity securities or securities convertible into or
exchangeable for equity securities except for shares of Common Stock offered
hereby and shares issued pursuant to the 1994 Stock Option Plan, the 1996 Stock
Option Plan and the Employee Stock Purchase Plan. See "Management -- Stock
Option Plans" and "-- Employee Stock Purchase Plan."
50
<PAGE> 55
The Underwriting Agreement provides that the Company and the Selling
Stockholders will indemnify the Underwriters and their controlling persons
against certain liabilities, including civil liabilities under the Securities
Act, or will contribute to payments the Underwriters may be required to make in
respect thereof.
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority in excess of 5% of the number of shares of Common Stock offered
hereby.
Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price will be determined
through negotiations between the Company, the Selling Stockholders and the
Representatives. Among the factors to be considered in such negotiations will be
the history of, and prospects for, the Company and the industry in which it
competes, an assessment of the Company's management, the Company's past and
present operations and financial performance, its past and present earnings and
the trend of such earnings, the prospects for future earnings of the Company,
the present state of the Company's development, the general condition of the
securities markets at the time of the offering and the market prices of publicly
traded common stocks of comparable companies in recent periods.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of Common
Stock offered hereby will be passed upon for the Company by Goodwin, Procter &
Hoar LLP, Boston, Massachusetts. Hale and Dorr, Boston, Massachusetts, will pass
upon certain legal matters relating to the offering for the Underwriters.
EXPERTS
The financial statements and schedule included in this Prospectus and
elsewhere in the Registration Statement, to the extent and for the periods
indicated in their reports, have been audited by Arthur Andersen LLP,
independent public accountants, and are included herein in reliance upon the
authority of said firm as experts in giving said reports.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (including all amendments thereto, the "Registration Statement") under the
Securities Act with respect to the Common Stock offered hereby. As permitted by
the rules and regulations of the Securities and Exchange Commission (the
"Commission"), this Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the Registration
Statement and the exhibits and schedules thereto. Statements contained in this
Prospectus as to the contents of any agreement or other document referred to are
not necessarily complete. With respect to each such agreement or other document
filed as an exhibit to the Registration Statement, reference is made to the
exhibit for a more complete description of the matter involved, and each such
statement shall be deemed qualified in all respects by such reference.
The Registration Statement, including the exhibits and schedules thereto,
may be inspected at the public reference facilities maintained by the Commission
at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and
at the following regional offices of the Commission: Seven World Trade Center,
New York, New York 10048, and 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials may be obtained from the public
reference section of the Commission at its Washington address upon payment of
the prescribed fees.
Upon completion of the offering, the Company will be subject to the
informational reporting requirements of the Exchange Act and, in accordance
therewith, will file reports, proxy statements and other information with the
Commission.
The Company intends to furnish its stockholders with annual reports
containing financial statements audited by the Company's independent accountants
and quarterly reports for the first three fiscal quarters of each fiscal year
containing unaudited interim financial information.
51
<PAGE> 56
RESTRAC, INC.
<TABLE>
INDEX TO FINANCIAL STATEMENTS
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................................. F-2
Balance Sheets as of September 30, 1994 and 1995, March 31, 1996 (unaudited) and Pro
Forma March 31, 1996 (unaudited).................................................... F-3
Statements of Income for the Years Ended September 30, 1993, 1994 and 1995 and for the
Six Months Ended March 31, 1995 and 1996 (unaudited)................................ F-4
Statements of Redeemable Convertible Preferred Stock and Stockholders' Equity
(Deficit) for the Years Ended September 30, 1993, 1994 and 1995 and for the Six
Months Ended March 31, 1996 (unaudited) and Pro Forma March 31, 1996 (unaudited).... F-5
Statements of Cash Flows for the Years Ended September 30, 1993, 1994 and 1995 and for
the Six Months Ended March 31, 1995 and 1996 (unaudited)............................ F-6
Notes to Financial Statements......................................................... F-7
</TABLE>
F-1
<PAGE> 57
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders and Board of Directors of
Restrac, Inc.:
We have audited the accompanying balance sheets of Restrac, Inc. (formerly
MicroTrac Systems, Inc.) as of September 30, 1994 and 1995, and the related
statements of income, redeemable convertible preferred stock and stockholders'
equity (deficit) and cash flows for each of the three years in the period ended
September 30, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Restrac, Inc. as of
September 30, 1994 and 1995, and the results of its operations and its cash
flows for each of the three years in the period ended September 30, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 30, 1995 (except with respect
to Note 6, as to which the date
is May 8, 1996)
F-2
<PAGE> 58
RESTRAC, INC.
<TABLE>
BALANCE SHEETS
<CAPTION>
SEPTEMBER 30, PRO FORMA
------------------------ MARCH 31, MARCH 31, 1996
1994 1995 1996 ---------------
---------- ---------- ----------- (UNAUDITED)
(UNAUDITED) (NOTE 1)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................... $2,734,772 $2,966,637 $ 4,312,773 $ 4,312,773
Accounts receivable, less allowance for doubtful
accounts of approximately $17,000, $300,000 and
$350,000, at September 30, 1994 and 1995 and
March 31, 1996, respectively.................... 2,152,755 3,485,744 3,073,482 3,073,482
Other current assets.............................. 157,290 454,470 379,350 379,350
Deferred income taxes............................. 302,569 718,254 835,831 835,831
---------- ---------- ----------- -----------
Total current assets............................ 5,347,386 7,625,105 8,601,436 8,601,436
---------- ---------- ----------- -----------
Property and Equipment, net......................... 788,571 1,452,548 1,408,906 1,408,906
---------- ---------- ----------- -----------
Deferred Income Taxes............................... -- 46,328 46,328 46,328
---------- ---------- ----------- -----------
Other Assets, net................................... 13,891 14,832 27,430 27,430
---------- ---------- ----------- -----------
$6,149,848 $9,138,813 $10,084,100 $10,084,100
========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of long-term debt................. $ 65,387 $ 14,367 $ 10,714 $ 10,714
Accounts payable.................................. 539,889 585,471 643,800 643,800
Accrued expenses.................................. 705,565 2,180,479 2,426,882 2,975,615
Deferred revenue.................................. 996,294 2,526,073 2,669,664 2,669,664
Accrued income taxes.............................. 574,048 239,900 207,998 207,998
---------- ---------- ----------- -----------
Total current liabilities....................... 2,881,183 5,546,290 5,959,058 6,507,791
---------- ---------- ----------- -----------
Deferred Income Taxes............................... 53,777 63,777 63,777 63,777
---------- ---------- ----------- -----------
Other Liabilities................................... 132,068 45,119 15,597 15,597
---------- ---------- ----------- -----------
Commitments (Note 4)
Redeemable Convertible Preferred Stock.............. 3,562,172 3,842,474 3,982,625 --
---------- ---------- ----------- -----------
Stockholders' Equity (Deficit) (Note 6):
Preferred stock, $.01 par value -- Authorized --
5,000,000 shares, Issued and
outstanding -- none............................. -- -- -- --
Common stock, $.01 par value -- Authorized --
30,000,000 shares, Issued -- 4,500,000 shares at
September 30, 1994 and 1995, 4,558,587 shares at
March 31, 1996 and 7,061,283 shares pro forma... 45,000 45,000 45,586 70,613
Additional paid-in capital........................ 160,618 160,618 221,197 3,699,946
Treasury stock, at cost........................... (804,970) (804,970) (830,764) (830,764)
Retained earnings................................. 120,000 240,505 627,024 557,140
---------- ---------- ----------- -----------
Total stockholders' equity (deficit)............ (479,352) (358,847) 63,043 3,496,935
---------- ---------- ----------- -----------
$6,149,848 $9,138,813 $10,084,100 $10,084,100
========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 59
RESTRAC, INC.
<TABLE>
STATEMENTS OF INCOME
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
--------------------------------------- ------------------------
1993 1994 1995 1995 1996
---------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Product revenue......................... $3,775,551 $6,816,249 $10,023,919 $4,132,744 $6,100,352
Services revenue........................ 1,894,131 2,921,248 4,989,965 2,078,413 3,802,646
---------- ---------- ----------- ---------- ----------
Total revenue.................... 5,669,682 9,737,497 15,013,884 6,211,157 9,902,998
---------- ---------- ----------- ---------- ----------
Cost of Revenue:
Product revenue......................... 718,803 1,350,318 1,424,847 713,006 932,293
Services revenue........................ 1,362,518 1,588,778 2,983,931 1,148,486 2,191,806
---------- ---------- ----------- ---------- ----------
Total cost of revenue............ 2,081,321 2,939,096 4,408,778 1,861,492 3,124,099
---------- ---------- ----------- ---------- ----------
Gross Margin.............................. 3,588,361 6,798,401 10,605,106 4,349,665 6,778,899
---------- ---------- ----------- ---------- ----------
Operating Expenses:
Research and development................ 673,701 1,342,692 1,364,542 592,695 863,487
Sales and marketing..................... 1,552,675 3,335,599 5,661,133 2,394,527 3,758,042
General and administrative.............. 1,190,034 1,248,630 2,031,079 779,166 1,322,397
Non-recurring charge (Note 2)........... -- -- 1,010,952 -- --
---------- ---------- ----------- ---------- ----------
Total operating expenses......... 3,416,410 5,926,921 10,067,706 3,766,388 5,943,926
---------- ---------- ----------- ---------- ----------
Income From Operations.................... 171,951 871,480 537,400 583,277 834,973
Other Income, net......................... 23,910 73,063 137,707 62,596 101,380
---------- ---------- ----------- ---------- ----------
Income Before Provision for Income
Taxes................................... 195,861 944,543 675,107 645,873 936,353
Provision for Income Taxes................ 106,417 338,835 274,300 258,737 409,683
---------- ---------- ----------- ---------- ----------
Net Income................................ $ 89,444 $ 605,708 $ 400,807 $ 387,136 $ 526,670
========== ========== =========== ========== ==========
Pro Forma Net Income per Common and Common
Equivalent Share........................ $ 0.06 $ 0.08
=========== ==========
Pro Forma Weighted Average Number of
Common and Common Equivalent Shares
Outstanding............................. 6,949,273 6,937,578
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 60
RESTRAC, INC.
<TABLE>
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
(NOTE 6)
<CAPTION>
STOCKHOLDERS' EQUITY (DEFICIT)
-------------------------------------------------------------------------------------
REDEEMABLE CONVERTIBLE COMMON STOCK
PREFERRED STOCK ------------------- TREASURY STOCK TOTAL
------------------------ $.01 ADDITIONAL ---------------------- RETAINED STOCKHOLDERS'
NUMBER CARRYING NUMBER PAR PAID-IN NUMBER EARNINGS EQUITY
OF SHARES VALUE OF SHARES VALUE CAPITAL OF SHARES COST (DEFICIT) (DEFICIT)
---------- ----------- --------- ------- ---------- ---------- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
September 30,
1992......... -- $ -- 4,072,500 $40,725 $ 87,778 -- $ -- $ (99,658) $ 28,845
Exercise of
common
stock
options.... -- -- 427,500 4,275 (4,180) -- -- -- 95
Purchase of
treasury
stock...... -- -- -- -- -- 22,500 (5,500) -- (5,500)
Amortization
of deferred
compensation
expense.... -- -- -- -- 20,267 -- -- -- 20,267
Tax benefit
from stock
options
exercised.. -- -- -- -- 45,417 -- -- -- 45,417
Net income... -- -- -- -- -- -- -- 89,444 89,444
-------- ----------- --------- ------- ---------- ------- --------- -------- ----------
Balance,
September 30,
1993......... -- -- 4,500,000 45,000 149,282 22,500 (5,500) (10,214) 178,568
Issuance of
preferred
stock, less
issuance
costs of
$270,227... 556,155 3,503,776 -- -- -- -- -- (270,227) (270,227)
Purchase of
treasury
stock...... -- -- -- -- -- 607,500 (799,470) -- (799,470)
Amortization
of deferred
compensation
expense.... -- -- -- -- 11,336 -- -- -- 11,336
Dividends
paid on
redeemable
convertible
preferred
stock...... -- -- -- -- -- -- -- (146,871) (146,871)
Accretion of
dividends... -- 58,396 -- -- -- -- -- (58,396) (58,396)
Net income... -- -- -- -- -- -- -- 605,708 605,708
-------- ----------- --------- ------- ---------- ------- --------- -------- ----------
Balance,
September 30,
1994......... 556,155 3,562,172 4,500,000 45,000 160,618 630,000 (804,970) 120,000 (479,352)
Accretion of
dividends... -- 280,302 -- -- -- -- -- (280,302) (280,302)
Net income... -- -- -- -- -- -- -- 400,807 400,807
-------- ----------- --------- ------- ---------- ------- --------- -------- ----------
Balance,
September 30,
1995......... 556,155 3,842,474 4,500,000 45,000 160,618 630,000 (804,970) 240,505 (358,847)
Exercise of
common
stock
options.... -- -- 58,587 586 25,579 -- -- -- 26,165
Purchase of
treasury
stock...... -- -- -- -- -- 56,900 (25,794) -- (25,794)
Accretion of
dividends... -- 140,151 -- -- -- -- -- (140,151) (140,151)
Tax benefit
from stock
options
exercised.. -- -- -- -- 35,000 -- -- -- 35,000
Net income... -- -- -- -- -- -- -- 526,670 526,670
-------- ----------- --------- ------- ---------- ------- --------- -------- ----------
Balance, March
31, 1996
(Unaudited).. 556,155 3,982,625 4,558,587 45,586 221,197 686,900 (830,764) 627,024 63,043
Pro Forma
Effect of
Conversion of
Redeemable
Convertible
Preferred
Stock into
Common Stock
(Unaudited).. (556,155) (3,982,625) 2,502,696 25,027 3,478,749 -- -- (69,884) 3,433,892
-------- ----------- --------- ------- ---------- ------- --------- -------- ----------
Pro Forma
Balance,
March 31,
1996
(Unaudited).. -- $ -- 7,061,283 $70,613 $3,699,946 686,900 $(830,764) $ 557,140 $ 3,496,935
======== =========== ========= ======= ========== ======= ========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 61
RESTRAC, INC.
<TABLE>
STATEMENTS OF CASH FLOWS
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
-------------------------------------- ------------------------
1993 1994 1995 1995 1996
--------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income............................... $ 89,444 $ 605,708 $ 400,807 $ 387,136 $ 526,670
Adjustments to reconcile net income to
net cash provided by operating
activities --
Depreciation and amortization.......... 214,849 243,948 430,597 159,044 491,171
Deferred income taxes, net............. (53,000) (153,669) (448,000) (96,759) (117,577)
Amortization of deferred compensation
expense.............................. 20,267 11,336 -- -- --
Loss on disposal of property and
equipment............................ 7,333 -- 9,061 11,219 --
Deferred rent.......................... 86,364 23,124 (64,329) (50,659) (29,522)
Changes in assets and liabilities --
Accounts receivable.................. (473,956) (885,961) (1,332,989) (222,788) 412,262
Prepaid expenses and other current
assets............................ (162,354) 66,425 (297,180) (41,452) 75,120
Accounts payable..................... 178,680 118,502 45,582 503,340 58,329
Accrued expenses..................... 275,889 251,088 1,474,914 276,649 246,403
Accrued taxes........................ (6,187) 507,118 (334,148) (466,941) (31,902)
Deferred revenue..................... 398,911 (108,680) 1,529,779 450,660 143,591
--------- ---------- ----------- ---------- ----------
Net cash provided by operating
activities...................... 576,240 678,939 1,414,094 909,449 1,774,545
--------- ---------- ----------- ---------- ----------
Cash Flows from Investing Activities:
Purchases of property and equipment...... (432,551) (285,088) (1,115,455) (400,590) (447,529)
Proceeds from sale of property and
equipment.............................. -- -- 7,770 -- --
Increase in other assets................. -- (4,255) (941) (1,851) (12,598)
--------- ---------- ----------- ---------- ----------
Net cash used in investing
activities........................ (432,551) (289,343) (1,108,626) (402,441) (460,127)
--------- ---------- ----------- ---------- ----------
Cash Flows from Financing Activities:
Payments on capital lease obligations.... (68,685) (74,182) (26,936) (44,216) (3,653)
Payments of bank notes payable........... (89,299) (40,000) (46,667) -- --
Payments of note payable................. (73,014) -- -- -- --
Payment of promissory note payable to a
related party.......................... (24,000) (28,114) -- -- --
Proceeds from issuance of redeemable
convertible preferred stock, net of
$270,227 of issuance costs............. -- 3,233,549 -- -- --
Proceeds from exercise of common stock
options................................ 95 -- -- -- 26,165
Tax benefit of stock option exercises.... 45,417 -- -- -- 35,000
Dividends paid........................... -- (146,871) -- -- --
Purchase of treasury stock............... (5,500) (799,470) -- -- (25,794)
--------- ---------- ----------- ---------- ----------
Net cash (used in) provided by
financing activities.............. (214,986) 2,144,912 (73,603) (44,216) 31,718
--------- ---------- ----------- ---------- ----------
Net (Decrease) Increase in Cash and Cash
Equivalents.............................. (71,297) 2,534,508 231,865 462,792 1,346,136
--------- ---------- ----------- ---------- ----------
Cash and Cash Equivalents, beginning of
period................................... 271,561 200,264 2,734,772 2,734,772 2,966,637
--------- ---------- ----------- ---------- ----------
Cash and Cash Equivalents, end of period... $ 200,264 $2,734,772 $ 2,966,637 $3,197,564 $4,312,773
========= ========== =========== ========== ==========
Supplemental Disclosure of Cash Flow
Information:
Cash paid during the period for
Interest............................... $ 29,560 $ 23,000 $ 9,683 $ 6,412 $ 927
========= ========== =========== ========== ==========
Income taxes........................... $ 166,851 $ 105,241 $ 1,280,025 $ 789,767 $ 386,764
========= ========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 62
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS)
(1) OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Restrac, Inc. (formerly MicroTrac Systems, Inc.) (the Company) designs,
develops, markets, implements and supports human resource staffing software to
automate the recruitment, selection and placement of an organization's
workforce. The Company's staffing software enables organizations to
strategically manage their human capital by reducing hiring and placement costs,
decreasing time to fill positions and providing more effective skills management
and worker deployment. The Company's products -- Restrac Hire and Resume Reader
for PeopleSoft -- provide human resource departments with client/server
solutions to quickly and efficiently build and search comprehensive "pools" of
resume skills data to find the workers they need, while also managing the
workflow of the staffing process.
In 1982 the Company was incorporated under the laws of the Commonwealth of
Massachusetts. On January 5, 1994, the Company was reincorporated as a Delaware
corporation. On June 15, 1995, the Company amended its Certificate of
Incorporation to effect a name change from MicroTrac Systems, Inc. to Restrac,
Inc.
The Company is subject to risks common to rapidly growing, technology-based
companies, including dependence on key personnel, rapid technological change,
competition from substitute products and larger companies, and the successful
development and marketing of new commercial products and services.
The accompanying financial statements reflect the application of certain
significant accounting policies as described below and elsewhere in the notes to
financial statements.
(a) Unaudited Pro Forma Presentation
The unaudited pro forma balance sheet and unaudited statement of redeemable
convertible preferred stock and stockholders' equity as of March 31, 1996
reflect the automatic conversion of the redeemable convertible preferred stock
into 2,502,696 shares of common stock and the accrual of $548,733 of estimated
accumulated dividends payable to the redeemable convertible preferred
stockholders upon the closing of the Company's proposed initial public offering
(see Note 5).
(b) Interim Financial Statements
The accompanying balance sheet as of March 31, 1996, the statements of
income and cash flows for the six months ended March 31, 1995 and 1996 and the
statement of redeemable convertible preferred stock and stockholders' equity for
the six months ended March 31, 1996 are unaudited but, in the opinion of
management, include all adjustments (consisting only of normal, recurring
adjustments) necessary for a fair presentation of results for these interim
periods. The results of operations for the six months ended March 31, 1996 are
not necessarily indicative of results to be expected for the fiscal year ending
September 30, 1996.
(c) Revenue Recognition
Product revenue includes software license fees, third-party hardware and
royalty revenue. Services revenue includes customer maintenance fees, training,
installation and consulting. The Company recognizes product and services revenue
in accordance with the provisions of Statement of Position No. 91-1 (SOP No.
91-1), Software Revenue Recognition.
Product revenue from software license fees and hardware is recognized upon
delivery provided there are no significant Company obligations remaining and
collectibility of the revenue is probable. If an acceptance period is required,
revenues are recognized upon the earlier of customer acceptance or the
expiration of the acceptance period, as defined in the applicable software
license agreement. Prior to fiscal 1994, the Company recognized software license
fees upon installation rather than delivery, as its then current product
releases
F-7
<PAGE> 63
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
required extensive customization subsequent to delivery. Software license fees
for fiscal 1994 included $1,262,000 related to this former business practice.
Royalty revenue is recognized as earned.
Services revenue from customer maintenance fees for postcontract support is
recognized ratably over the maintenance term, which is typically 12 months. When
customer maintenance fees are included in an initial software license fee, the
Company allocates 15% of the software license fee to the first year's
maintenance. The amount allocated to customer maintenance fees for the first
year is comparable to customer maintenance fees charged separately by the
Company. Other services revenue from training, installation and consulting is
recognized as the related services are performed.
Deferred revenue represents payments received by the Company in advance of
product delivery or service performance.
(d) Research and Development Costs
Research and development costs are generally charged to operations as
incurred. Statement of Financial Accounting Standards (SFAS) No. 86, Accounting
for the Costs of Computer Software To Be Sold, Leased or Otherwise Marketed,
requires capitalization of certain software development costs subsequent to the
establishment of technological feasibility. Based on the Company's product
development process, technological feasibility is established upon completion of
a working model. Costs incurred by the Company between completion of the working
model and the point at which the product is ready for general release have not
been material. Through March 31, 1996, all research and development costs have
been expensed.
(e) Cash and Cash Equivalents
Cash equivalents consist of highly liquid investment grade securities with
original maturities of 90 days or less. The Company adopted SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities, effective
October 1, 1994. Under SFAS No. 115, the Company's cash equivalents are
classified as held-to-maturity securities. At September 30, 1994 and 1995 and
March 31, 1996, cash equivalents consisted primarily of investments in money
market funds.
(f) Other Current Assets
Other current assets primarily consist of prepaid operating expenses and
inventories. The Company capitalizes prepaid expenses and amortizes them over
the applicable period. Prepaid expenses amounted to $119,968 and $330,238 at
September 30, 1994 and 1995, respectively, and $315,373 at March 31, 1996.
Inventories are stated at the lower of cost, as determined on a first-in,
first-out (FIFO) basis, or market. Inventories consist primarily of equipment
that has been purchased for resale. Also included in other current assets are
refundable income taxes of approximately $73,000 at September 30, 1995 and
$32,000 at March 31, 1996.
F-8
<PAGE> 64
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
(g) Property and Equipment
<TABLE>
The Company records property and equipment at cost and provides for
depreciation and amortization on a straight-line basis over the estimated useful
lives of the assets, as follows:
<CAPTION>
SEPTEMBER 30, MARCH 31,
ESTIMATED ----------------------- ----------
ASSET CLASSIFICATION USEFUL LIFE 1994 1995 1996
------------------------------------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Office equipment..................... 3 -- 5 Years $ 932,291 $1,854,638 $2,244,481
Furniture and fixtures............... 3 -- 7 Years 143,322 307,423 365,108
Leasehold improvements............... 5 Years 127,804 133,129 133,129
Equipment under capital lease........ Life of Lease 123,098 123,098 123,098
---------- ---------- ----------
1,326,515 2,418,288 2,865,816
Less -- Accumulated depreciation and
amortization....................... 537,944 965,740 1,456,910
---------- ---------- ----------
$ 788,571 $1,452,548 $1,408,906
========== ========== ==========
</TABLE>
(h) Income Taxes
The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. Under SFAS No. 109, a deferred tax asset or
liability is measured by the enacted tax rates expected to be in effect when the
differences between the financial statement and tax bases of assets and
liabilities reverse.
(i) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
(j) Concentration of Credit Risk
The Company has no significant off-balance-sheet concentration of credit
risk such as foreign exchange contracts, option contracts or other foreign
hedging arrangements. The Company's accounts receivable credit risk is not
concentrated within any geographical area, and no single customer accounts for
greater than 10% of total revenue or represents a significant credit risk to the
Company.
(k) Postretirement Benefits
The Company has no obligations for postretirement benefits.
(l) Pro Forma Net Income per Common and Common Equivalent Share
For the fiscal year ended September 30, 1995 and for the six-month period
ended March 31, 1996, pro forma net income per common and common equivalent
share was based on the weighted average number of common and common equivalent
shares outstanding during the period, computed in accordance with the treasury
stock method, plus the number of shares of common stock issuable upon conversion
of the redeemable convertible preferred stock and the number of shares of common
stock issued pursuant to the proposed initial public offering sufficient to
generate proceeds for the payment of $548,733 of estimated accumulated
redeemable convertible preferred stock dividends payable upon the closing of the
proposed initial
F-9
<PAGE> 65
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
public offering. The pro forma weighted average number of common and common
equivalent shares assumes that common stock options granted and shares issued
one year prior to the initial filing of a registration statement for the
Company's proposed initial public offering are outstanding for the periods
presented, computed in accordance with the treasury stock method. Historical net
income per share data has not been presented, as such information is not
considered to be relevant or meaningful.
(m) New Accounting Standards
During March 1995, the Financial Accounting Standards Board (FASB) issued
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets To Be Disposed Of, which is effective for fiscal years
beginning after December 15, 1995. The Company elected early adoption of SFAS
No. 121 in the fiscal year ended September 30, 1995. The adoption of this
standard did not have a material effect on its financial position or results of
operations.
In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. The Company has determined that it will continue to account for
employee stock-based compensation under Accounting Principles Board No. 25 and
elect the disclosure-only alternative under SFAS No. 123. The Company will be
required to disclose the pro forma net income or loss and per share amounts in
the notes to the financial statements using the fair value based method
beginning in the fiscal year ending September 30, 1997 with comparable
disclosures for the fiscal year ending September 30, 1996. The Company has not
determined the impact of these pro forma adjustments.
(n) Financial Instruments
The estimated fair value of the Company's financial instruments, which
include cash equivalents, accounts receivable and long-term debt, approximates
their carrying value.
(o) Noncash Investing and Financing Activities
Noncash investing and financing activities include dividend accretion in
the amount of $58,396 and $280,302 for the fiscal years ended September 30, 1994
and 1995, respectively, and $128,480 and $140,151 for the six months ended March
31, 1995 and 1996, respectively. Additional noncash investing and financing
activities during the fiscal year ended September 30, 1994 include a $31,174
increase in equipment under capital leases and a $100,000 increase in property
and equipment under a note payable.
(2) BUYOUT OF DISTRIBUTION RIGHTS
On January 1, 1991, the Company acquired certain of the assets of Borwick
International, Inc. (Borwick), an international consulting firm which developed
and marketed related software known as SuccessPlan (the Product). As part of
this 1991 agreement, Borwick was granted the exclusive right to distribute the
Product outside of North America, and the Company was prohibited from selling
any competitive products in these territories.
On September 30, 1995, the Company entered into an agreement that
terminated Borwick's remaining distribution rights to the Product and removed
any restrictions on the Company's ability to sell competitive products. As a
result of this agreement, the Company recorded a non-recurring charge to
operations of $1,010,952 in the fiscal year ended September 30, 1995,
representing the present value of payments made and payable under the terms of
this agreement. The Company does not have established distribution channels to
license and support its products outside of North America. Accordingly, the cost
of the distribution rights was charged to operations, as management is of the
opinion that the realizability of such cost is uncertain.
F-10
<PAGE> 66
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
(3) LINE OF CREDIT
At March 31, 1996, the Company had a $1,000,000 revolving line of credit
with a bank. Borrowings outstanding under the line are limited to 70% of
eligible accounts receivable, as defined, bear interest at the bank's prime rate
(8.25% at March 31, 1996) plus 1%, and are collateralized by all corporate
assets. There were no borrowings outstanding as of September 30, 1994 and 1995
or as of March 31, 1996. As part of the loan agreement, the Company is required
to maintain certain restrictive financial covenants, as defined. This revolving
line of credit expires on March 1, 1997.
(4) LONG TERM OBLIGATIONS AND COMMITMENTS
(a) Note Payable to Bank
Included in other liabilities at September 30, 1994, is a note payable to a
bank with interest at prime (7.75%) plus 2%. During 1995, the Company paid all
amounts outstanding under the note payable to the bank.
(b) Leases
The Company leases its facilities and certain equipment under operating
leases and certain equipment under capital leases that expire through 1997.
<TABLE>
Future minimum rental payments as of March 31, 1996 under both the
operating and capital leases are as follows:
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1996 (six months as of March 31)................................ $ 5,507 $279,642
1997............................................................ 5,343 163,211
------- --------
10,850 $442,853
========
Less -- Amount representing interest.................. 897
-------
Present value of minimum lease payments......................... 9,953
Less -- Current portion............................... 3,967
-------
$ 5,986
=======
</TABLE>
Aggregate net rental expense included in the accompanying statements of
income for the fiscal years ended September 30, 1993, 1994 and 1995 and the six
months ended March 31, 1995 and 1996 is approximately $159,000, $188,000,
$330,200, $108,000 and $255,500, respectively.
Leases with escalating rents or free rent periods are expensed on a
straight-line basis over the fixed term of the lease. Deferred rent arises when
expense recorded exceeds actual payments. Deferred rent of approximately
$109,000, $45,000 and $15,000 is included in other liabilities in the
accompanying balance sheets at September 30, 1994 and 1995 and March 31, 1996,
respectively.
(5) REDEEMABLE CONVERTIBLE PREFERRED STOCK
On January 5, 1994, the Company amended its Certificate of Incorporation to
authorize the issuance of 1,000,000 shares of Preferred Stock with a par value
of $1.00 per share and issued 556,155 shares of redeemable convertible preferred
stock (Preferred Stock) for a purchase price of $6.30 per share for proceeds of
$3,233,549, net of $270,227 of issuance costs. The Company has reserved
2,502,696 shares of common stock for the conversion of Preferred Stock into
common stock.
F-11
<PAGE> 67
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
The rights, preferences and privileges of the Preferred Stock are as
follows:
(a) Redemption
At the request of any holder of Preferred Stock at any date within 30
days following November 5, 1998 (the Redemption Date), the Company is
required to redeem the Preferred Stock 60 days following the Redemption
Date. The redemption price for the Preferred Stock is $6.30 plus any
accrued but unpaid dividends.
(b) Conversion
Each share of Preferred Stock is convertible based on a conversion
rate of four and one-half shares of common stock for each share of
Preferred Stock, subject to adjustment for certain dilutive events.
Conversion is at the option of the holder; however, conversion of all the
Preferred Stock is automatic upon the closing of a qualified public
offering of the Company's common stock at an offering price of at least
$4.20 per share and aggregating net proceeds to the Company of at least
$10,000,000. In connection with the Company's proposed initial public
offering, the outstanding shares of Preferred Stock will automatically
convert into 2,502,696 shares of common stock.
(c) Liquidation Preferences and Voting Rights
Preferred stockholders have a preference in liquidation over common
stockholders of $6.30 per share plus any accrued and unpaid dividends
whether or not declared. The total liquidation preference as of September
30, 1994 and 1995 and March 31, 1996 was $3,562,172, $3,842,474, and
$3,982,625, respectively. Preferred stockholders are entitled to vote as if
the Preferred Stock had been converted into common stock.
(d) Dividends
Dividends accrue on the conversion value of the Preferred Stock at 8%
per annum whether or not declared. The conversion value of the Preferred
Stock is equal to $6.30 per share. The dividend rate will increase to 12%
per annum if net operating income, as defined, in the prior year is less
than $800,000. This increase has been waived for fiscal 1996 due to the
impact of the non-recurring charge recorded in fiscal 1995, as discussed in
Note 2. In addition, the dividends are payable quarterly, if declared, or
upon liquidation or automatic conversion of the Preferred Stock. During the
fiscal years ended September 30, 1994 and 1995 and the six months ended
March 31, 1996, the carrying value of the Preferred Stock has been
increased by accreted dividends of $58,396, $280,302 and $140,151,
respectively. In fiscal 1994, dividends of $146,871 were declared and paid;
no dividends were either declared or paid in fiscal 1995 and fiscal 1996.
Both accreted and paid dividends were charged to retained earnings in the
accompanying financial statements. Upon the closing of the proposed initial
public offering of common stock, accumulated dividends of $548,733, which
includes approximately $70,000 of dividends accrued from April 1, 1996
through the estimated date of closing, will be paid to the preferred
stockholders.
(6) STOCKHOLDERS' EQUITY (DEFICIT)
(a) Authorized Capital Stock
On May 8, 1996, the stockholders of the Company approved an increase in the
authorized number of shares of $.01 par value common stock to 30,000,000 shares
and the authorization of 5,000,000 shares of $.01 par value preferred stock.
F-12
<PAGE> 68
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
(b) Stock Dividends
On May 22, 1995, the Company's Board of Directors declared a three-for-one
stock split, effected in the form of a stock dividend, payable on May 22, 1995.
On May 8, 1996, the Board of Directors approved a three-for-two stock split,
effected in the form of a stock dividend. Accordingly, all shares of common
stock, options to purchase common stock and the conversion ratio of the
Preferred Stock have been retroactively adjusted to reflect these stock splits
for all periods presented in the accompanying balance sheets and statements of
changes in redeemable convertible preferred stock and stockholders' equity
(deficit).
(c) Stock Option Plans
All of the outstanding options under the 1990 Stock Option Plan (the 1990
Plan) were exercised prior to the establishment of the 1994 Stock Option Plan
(the 1994 Plan). The 1994 Plan enables the Company's Board of Directors to grant
nonqualified and incentive stock options (ISOs) and shares of common stock. ISOs
are granted at the then fair market value as determined by the Company's Board
of Directors. On May 8, 1996, the 1994 Plan was amended to decrease the maximum
number of statutory and nonstatutory options to purchase to 641,844 shares of
common stock. The Company has reserved 641,844 shares of common stock for the
exercise of stock options under the 1994 Plan. No further option grants will be
made under the 1994 Plan. Under the terms of the 1994 Plan, options generally
are exercisable at the date of grant, vest over four years and expire ten years
after the date of grant. Upon termination of employment, exercised but unvested
options are repurchasable by the Company at the exercise price, while exercised
and vested options are repurchasable by the Company at the then current fair
market value of the common stock.
<TABLE>
Stock option activity for the 1990 Plan and 1994 Plan were as follows:
<CAPTION>
NUMBER OF OPTION PRICE
SHARES PER SHARE
--------- --------------
<S> <C> <C>
Outstanding, September 30, 1992........................... 405,000 $ 0.0002
Granted................................................. 22,500 0.0002
Exercised............................................... (427,500) 0.0002
Outstanding, September 30, 1993........................... -- --
Granted................................................. 325,134 0.44
-------- --------------
Outstanding, September 30, 1994........................... 325,134 0.44
Granted................................................. 471,313 0.44 -- 2.00
Canceled................................................ (195,079) 0.44
-------- --------------
Outstanding, September 30, 1995........................... 601,368 0.44 -- 2.00
Granted................................................. 54,480 2.00 -- 3.00
Exercised............................................... (58,587) 0.44 -- 2.00
Canceled................................................ (79,342) 0.44 -- 2.00
-------- --------------
Outstanding, March 31, 1996............................... 517,919 $0.44 -- $3.00
======== ==============
Vested, March 31, 1996.................................... 158,143 $ 0.44
======== ==============
</TABLE>
In October 1995, an employee exercised options under the 1994 Plan to
purchase 56,900 shares of common stock at an exercise price of $0.44 per share.
The Company repurchased these shares at $2.00 per share for an aggregate of
$113,799. The Company recorded the difference between the aggregate exercise
price and the amount paid to the former employee as compensation expense
included in sales and marketing expense for the six months ended March 31, 1996.
F-13
<PAGE> 69
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
In April and May 1996, the Company granted 28,425 and 95,500 options under
the 1994 Plan to purchase common stock at $4.67 and $11.00 per share,
respectively.
On May 8, 1996, the Board of Directors and stockholders of the Company
approved the adoption of the 1996 Stock Option and Grant Plan (the 1996 Plan),
which provides for the issuance of options to purchase 958,156 shares of Common
Stock. The 1996 Plan permits the grant of (i) options to purchase shares of
Common Stock intended to qualify as incentive stock options under Section 422 of
the Internal Revenue Code of 1986, as amended, (ii) options that do not so
qualify and (iii) shares of Common Stock. The 1996 Plan is administered by the
Compensation Committee as appointed by the Board of Directors from time to time.
(d) Employee Stock Purchase Plan
On May 8, 1996, the Board of Directors authorized the 1996 Employee Stock
Purchase Plan (the Employee Plan). Under the Employee Plan, the Company may
issue up to an aggregate of 150,000 shares of common stock to employees at 85%
of the lower of the fair market value of the common stock on the first or last
day of each six-month purchase period.
(7) INCOME TAXES
<TABLE>
The provision for income taxes in the accompanying statements of income
consists of the following for the fiscal years ended September 30, 1993, 1994
and 1995:
<CAPTION>
1993 1994 1995
-------- --------- ---------
<S> <C> <C> <C>
Current --
Federal........................................ $123,811 $ 378,475 $ 541,200
State.......................................... 35,606 114,029 181,100
-------- --------- ---------
159,417 492,504 722,300
-------- --------- ---------
Deferred --
Federal........................................ (9,000) (117,417) (354,250)
State.......................................... (44,000) (36,252) (93,750)
-------- --------- ---------
(53,000) (153,669) (448,000)
-------- --------- ---------
Total provision........................ $106,417 $ 338,835 $ 274,300
======== ========= =========
</TABLE>
F-14
<PAGE> 70
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
The deferred tax amounts as of September 30, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Deferred tax asset --
Current --
Nondeductible reserves.................................... $154,119 $197,254
Deferred revenue.......................................... 399,000 521,000
-------- --------
553,119 718,254
-------- --------
Long-term --
Buyout of distribution rights............................. -- 188,000
Nondeductible reserves.................................... 8,000 30,000
-------- --------
8,000 218,000
-------- --------
Total gross deferred tax asset....................... 561,119 936,254
-------- --------
Less -- Valuation allowance.................................. 258,550 171,672
-------- --------
Net deferred tax asset............................... $302,569 $764,582
======== ========
Deferred tax liability --
Long-term --
Differences between book and tax depreciation............. $ 53,777 $ 63,777
======== ========
</TABLE>
Due to the uncertainty surrounding the realizability of the benefits of its
favorable tax attributes in future tax returns, the Company has placed a
valuation allowance of approximately $259,000 and $172,000 against its otherwise
recognizable net deferred tax asset at September 30, 1994 and 1995,
respectively.
<TABLE>
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate as follows:
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Provision at federal statutory rate............................ 34.0% 34.0% 34.0%
State income tax, net of federal benefit....................... 6.3 6.3 6.3
Other, net..................................................... 14.0 (4.4) .3
---- ---- ----
Effective tax rate................................... 54.3% 35.9% 40.6%
==== ==== ====
</TABLE>
For the six months ended March 31, 1995 and 1996, the Company provided for
income taxes at an effective rate of 40.1% and 43.8%, respectively.
(8) EMPLOYEE BENEFIT PLAN
The Company maintains an employee benefit plan (the Benefit Plan) under
Section 401(k) of the Internal Revenue Code. The Benefit Plan is available to
all full-time U.S. employees. The Benefit Plan allows for employees to make
contributions up to a specified percentage of their compensation. Under the
Benefit Plan, the Company makes discretionary contributions, which for the
fiscal years ended September 30, 1994 and 1995 was a match of 20% of the
employees' contributions up to a maximum annual match of 1% of each employee's
salary. The Company contributed approximately $14,000 and $33,000 during the
fiscal years ended September 30, 1994 and 1995, respectively.
F-15
<PAGE> 71
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
(9) ACCRUED EXPENSES
<TABLE>
Accrued expenses at September 30, 1994 and 1995 and at March 31, 1996
consist of the following:
<CAPTION>
1994 1995 1996
-------- ---------- ----------
<S> <C> <C> <C>
Payroll and payroll-related costs............... $286,164 $1,338,855 $ 947,497
Buyout of distribution rights (Note 2).......... -- 310,000 310,000
Customer deposits............................... -- -- 395,000
Other accrued expenses.......................... 419,401 531,624 774,385
-------- ---------- ----------
$705,565 $2,180,479 $2,426,882
======== ========== ==========
</TABLE>
(10) OTHER INCOME
<TABLE>
Other income consists of the following:
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS
SEPTEMBER 30, ENDED MARCH 31,
-------------------------------- ----------------------
1993 1994 1995 1995 1996
-------- -------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Interest income.............. $ 3,655 $ 70,592 $163,003 $71,149 $ 88,485
Interest expense............. (29,560) (23,028) (9,683) (6,412) (927)
Other........................ 49,815 25,499 (15,613) (2,141) 13,822
-------- -------- -------- ------- --------
$ 23,910 $ 73,063 $137,707 $62,596 $101,380
======== ======== ======== ======= ========
</TABLE>
F-16
<PAGE> 72
================================================================================
No dealer, sales representative or any other person has been authorized to
give any information or to make any representations in connection with this
offering other than those contained in this Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Company, any Selling Stockholder or any of the Underwriters.
This Prospectus does not constitute an offer to sell or a solicitation of any
offer to buy any securities other than the shares of Common Stock to which it
relates or an offer to, or a solicitation of, any person in any jurisdiction
where such offer or solicitation would be unlawful. Neither the delivery of this
Prospectus nor any sale made hereunder shall, under any circumstances, create an
implication that there has been no change in the affairs of the Company or that
the information contained herein is correct as of any time subsequent to the
date hereof.
-----------------------------
TABLE OF CONTENTS
-----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 11
Dividend Policy....................... 11
Capitalization........................ 12
Dilution.............................. 13
Selected Financial Data............... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 24
Management............................ 35
Certain Transactions.................. 41
Principal and Selling Stockholders.... 43
Description of Capital Stock.......... 45
Shares Eligible for Future Sale....... 48
Underwriting.......................... 50
Legal Matters......................... 51
Experts............................... 51
Additional Information................ 51
Index to Financial Statements......... F-1
</TABLE>
--------------------------------
Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock, whether or not participating
in this distribution, may be required to deliver a Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus when acting as
Underwriters and with respect to their unsold allotments or subscriptions.
================================================================================
================================================================================
2,500,000 SHARES
LOGO
COMMON STOCK
-----------------------------
PROSPECTUS
-----------------------------
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON
ADAMS, HARKNESS & HILL, INC.
, 1996
================================================================================
<PAGE> 73
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
Set forth below is an estimate of the fees and expenses payable by the
Company in connection with the issuance and distribution of the shares of Common
Stock, including fees and expenses attributable to shares to be sold on behalf
of the Selling Stockholders:
<S> <C>
Securities and Exchange Commission registration fee....................... $ 13,880
NASD filing fee........................................................... 4,525
NASDAQ listing fee........................................................ 20,000
Blue Sky fees and expenses................................................ 20,000
Printing expenses......................................................... 100,000
Legal fees and expenses................................................... 200,000
Accounting fees and expenses.............................................. 200,000
Transfer Agent fees....................................................... 10,000
Miscellaneous............................................................. 31,595
--------
Total................................................................... $600,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subsection (a) of Section 145 of the General Corporation Law of the State
of Delaware (the "GCLD") empowers a corporation to indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation or is or was serving at the request of the corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him or her in connection with such action, suit or proceeding if he
or she acted in good faith and in a manner that he or she reasonably believed to
be in or not opposed to the best interests of the corporation, and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his or
her conduct was unlawful. Under subsection (a), the termination of any action,
suit or proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere or its equivalent, shall not, of itself, create a presumption
that the person did not act in good faith and in a manner which he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
Subsection (b) of Section 145 of the GCLD empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he or
she is or was a director, officer, employee or agent of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection with the defense or settlement
of such action or suit if he or she acted in good faith and in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been found to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
II-1
<PAGE> 74
Subsection (d) of Section 145 of the GCLD permits indemnification under
subsections (a) and (b) of Section 145 only if authorized in the specific case
following a determination that the individual seeking indemnification has met
the standard of conduct required by the applicable subsection. Such
determination shall be made (1) by a majority vote of the directors who are not
parties to such action, suit or proceeding, even though less than a quorum, or
(2) if there are not such directors, or if such directors so direct, by
independent legal counsel in a written opinion, or (3) by the stockholders.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of Section 145
in the defense of any claim, issue or matter therein, he or she shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by him or her in connection therewith; that indemnification provided
for by Section 145 shall not be deemed exclusive of any other rights to which
the indemnified party may be entitled; that indemnification provided for by
Section 145 shall, unless otherwise provided when authorized or ratified,
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of such person's heirs, executors and
administrators; and that the corporation has the power to purchase and maintain
insurance on behalf of a director or officer of the corporation against any
liability asserted against him or her and incurred by him or her in any such
capacity, or arising out of his or her status as such whether or not the
corporation would have the power to indemnify him or her against such
liabilities under Section 145.
Section 102(b)(7) of the GCLD provides that a certificate of incorporation
may contain a provision eliminating or limiting the personal liability of a
director or the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director provided that such provision shall not eliminate
or limit the liability of a director (i) for any breach of a director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
the law, (iii) under Section 174 of the GCLD, or (iv) for any transaction from
which the director derived an improper personal benefit.
Reference is made to Article V of the Amended and Restated By-laws of the
Company which provides for indemnification by the Company of its directors and
officers under certain circumstances against expenses (including attorneys'
fees, judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened, pending
or completed legal proceeding in which any such person is involved by reason of
the fact that such person is or was a director or officer of the Company if such
person acted in good faith and in a manner he or she reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to
criminal actions or proceedings, if such person had no reasonable cause to
believe that his or her conduct was unlawful.
Reference is made to the form of Underwriting Agreement (to be attached as
Exhibit 1 to this Registration Statement) which provides for indemnification by
the Underwriters of the directors and officers of the Company signing the
Registration Statement and certain controlling persons of the Company against
certain liabilities, including those arising under the Securities Act.
The Company has entered into Indemnity Agreements with its directors which
provide contractual rights to indemnification for certain expenses incurred by
such directors arising from suits brought against them in their capacities as
directors of the Company, to the extent permitted by Delaware law and the
Company's Certificate of Incorporation.
The Company intends to purchase directors' and officers' liability
insurance covering its directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has issued unregistered securities
to a limited number of persons, as described below. No underwriters or
underwriting discounts or commissions were involved. There was no public
offering in any such transaction, and the Company believes that each
transaction, unless otherwise noted, was exempt from registration requirements
of the Securities Act of 1933 as amended (the
II-2
<PAGE> 75
"Securities Act"), by reason of Section 4(2) thereof, based on the private
nature of the transactions and the financial sophistication of the purchasers,
all of whom had access to complete information concerning the Company and
acquired the securities for investment and not with a view to the distribution
thereof.
Pursuant to a Stock Purchase Agreement, on January 5, 1994, the Company
issued 517,546 shares of Convertible Preferred Stock to investment funds
associated with TA Associates, Inc., 28,951 shares of Convertible Preferred
Stock to Chestnut III Limited Partnership and 9,658 shares of Convertible
Preferred Stock to Chestnut Capital International III Limited Partnership, for
an aggregate purchase price of $3,503,776.50.
From October 1, 1992 to May 8, 1996, the Company issued options to purchase
997,352 shares of Common Stock to employees and consultants of the Company
pursuant to the Company's Stock Option Plans. During such period, 486,087 shares
of Common Stock were issued to option holders upon exercise of options. The
Company believes that the transactions described in this paragraph are exempt
from the registration requirements of the Securities Act by reason of Rule 701
promulgated thereunder because the issuance of the options described was
pursuant to a written compensatory benefit plan of the Company, a copy of which
was given to each participant in the plan, and the aggregate offering price did
not exceed the limit prescribed by Rule 701.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
(a) Exhibits. The following is a complete list of Exhibits filed as part of
this Registration Statement.
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<S> <C>
**1 Form of Underwriting Agreement among the Underwriters named therein and the
Company
3.1 Form of First Amended and Restated Certificate of Incorporation of the Company
3.2 Form of Second Amended and Restated Certificate of Incorporation of the Company
**3.3 Amended and Restated By-laws of the Company
*4.1 Specimen certificate for shares of Common Stock, $.01 par value, of the Company
5 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the shares of the
Company's Common Stock
**10.1 Stock Purchase Agreement dated January 5, 1994, as amended, by and between the
Company and the Purchasers identified therein
**10.2 Stock Redemption Agreement dated January 5, 1994 between the Company and J. Paul
Costello, Lars D. Perkins and John P. Jopling
**10.3 Registration Rights Agreement dated January 5, 1994 between the Company and Lars
D. Perkins, J. Paul Costello and John P. Jopling
10.4 Restrac, Inc. 1994 Stock Option Plan
10.5 Restrac, Inc. 1996 Stock Option and Grant Plan
10.6 Restrac, Inc. 1996 Employee Stock Purchase Plan
**10.7 Paid-up Software License dated as of January 1, 1993 by and between the Company
and Costello and Company, Inc.
**+10.8 VAR Agreement dated November 27, 1991 between the Company and Verity, Inc. and all
amendments thereto
**+10.9 Value Added Reseller License Agreement dated August 31, 1992 by and between
The Analytic Sciences Corporation and the Company
**+10.10 Joint Marketing Agreement with Referral Fee Payments dated as of October 1, 1994
between the Company and PeopleSoft, Inc.
10.11 Lease Agreement dated March 31, 1993 by and between Dedham Place Office Associates
Limited Partnership and the Company and all amendments thereto
10.12 Form of Director's Indemnification Agreements
10.13 Form of Employment Agreement with Senior Management
10.14 Form of Addendum to Employment Agreement with Senior Management
</TABLE>
II-3
<PAGE> 76
<TABLE>
<S> <C>
10.15 Agreement Pertaining to the Election of Directors dated January 5, 1994 by Lars D.
Perkins, J. Paul Costello and the Purchasers identified therein
10.16 Shareholder Agreement dated January 5, 1994 by and among the Company and the
Shareholders identified therein
10.17 Agreement Pertaining to Certain Activities dated January 5, 1994 by and between
Lars D. Perkins and the Company
10.18 Termination Agreement dated September 30, 1995 by and among the Company and
Borwick International, Inc. and Irving P. Borwick
10.19 Finder's Fee and Non-Competition Agreement dated September 30, 1995 between the
Company and Irving P. Borwick
**11.1 Statement regarding computation of earnings per share
23.1 Consent of Goodwin, Procter & Hoar LLP (included in their opinion filed as Exhibit
5 hereto)
23.2 Consent of Arthur Andersen LLP
**24 Power of Attorney (included on signature page of Registration Statement as
originally filed)
**27 Financial Data Schedule
<FN>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment requested as to portions of this document.
</TABLE>
(b) Financial Statement Schedules.
<TABLE>
<CAPTION>
SCHEDULE NO. DESCRIPTION
- ------------ -----------
<S> <C>
Schedule II Valuation and Qualifying Accounts
</TABLE>
Other financial schedules have not been included because they are not
applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 77
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Amendment No. 1 to Registration Statement to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Dedham,
Commonwealth of Massachusetts on the 17th day of May, 1996.
RESTRAC, INC.
By: /s/ LARS D. PERKINS
------------------------------------
Lars D. Perkins
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act, this Amendment No. 1 to
Registration Statement has been signed below by the following persons on behalf
of the Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------- -------------
<S> <C> <C>
/s/ LARS D. PERKINS Director, Chief Executive Officer May 17, 1996
- ------------------------------------------ and President (Principal
Lars D. Perkins Executive Officer)
* Chief Financial Officer May 17, 1996
- ------------------------------------------ (Principal Financial Officer and
Cynthia G. Eades Principal Accounting Officer)
* Director May 17, 1996
- ------------------------------------------
Russell J. Campanello
* Director May 17, 1996
- ------------------------------------------
J. Paul Costello
* Director May 17, 1996
- ------------------------------------------
A. Bruce Johnston
*By: /s/ LARS D. PERKINS
------------------------------
(Lars D. Perkins, as
Attorney-in-Fact for the
persons indicated)
</TABLE>
II-5
<PAGE> 78
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Restrac, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the balance sheets of Restrac, Inc. as of September 30, 1994 and 1995 and the
related statements of operations, changes in convertible redeemable preferred
stock and stockholders' equity (deficit) and cash flows for each of the three
years in the period ended September 30, 1995, included in this Registration
Statement, and have issued our report thereon dated November 30, 1995 (except
with respect to the matters discussed in Note 6, as to which the date is May 8,
1996). Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in S-2 is the
responsibility of the Company's management and is presented for the purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly states in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 30, 1995 (except with respect to the
matters discussed in Note 6, as to which
the date is May 8, 1996)
S-1
<PAGE> 79
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994, 1995
<TABLE>
<CAPTION>
BALANCE,
BEGINNING OF CHARGED BALANCE,
ALLOWANCE FOR DOUBTFUL ACCOUNTS YEAR TO EXPENSE WRITE-OFFS END OF YEAR
- ---------------------------------------------------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended September 30, 1993....................... $29,000 $ 9,714 $ 15,714 $ 23,000
Year ended September 30, 1994....................... 23,000 0 6,000 17,000
Year ended September 30, 1995....................... 17,000 317,080 34,080 300,000
</TABLE>
S-2
<PAGE> 80
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- -------- ----------- ----
<C> <S> <C>
**1 Form of Underwriting Agreement among the Underwriters named therein and the
Company
3.1 Form of First Amended and Restated Certificate of Incorporation of the
Company
3.2 Form of Second Amended and Restated Certificate of Incorporation of the
Company
**3.3 Amended and Restated By-laws of the Company
*4.1 Specimen certificate for shares of Common Stock, $.01 par value, of the
Company
5 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the shares of
the Company's Common Stock
**10.1 Stock Purchase Agreement dated January 5, 1994, as amended, by and between
the Company and the Purchasers identified therein
**10.2 Stock Redemption Agreement dated January 5, 1994 between the Company and J.
Paul Costello, Lars D. Perkins and John P. Jopling
**10.3 Registration Rights Agreement dated January 5, 1994 between the Company and
Lars D. Perkins, J. Paul Costello and John P. Jopling
10.4 Restrac, Inc. 1994 Stock Option Plan
10.5 Restrac, Inc. 1996 Stock Option and Grant Plan
10.6 Restrac, Inc. 1996 Employee Stock Purchase Plan
**10.7 Paid-up Software License dated as of January 1, 1993 by and between the
Company and Costello and Company, Inc.
**+10.8 VAR Agreement dated November 27, 1991 between the Company and Verity, Inc.
and all amendments thereto
**+10.9 Value Added Reseller License Agreement dated August 31, 1992 by and between
The Analytic Sciences Corporation and the Company
**+10.10 Joint Marketing Agreement with Referral Fee Payments dated as of October 1,
1994 between the Company and PeopleSoft, Inc.
10.11 Lease Agreement dated March 31, 1993 by and between Dedham Place Office
Associates Limited Partnership and the Company and all amendments thereto
10.12 Form of Director's Indemnification Agreements
10.13 Form of Employment Agreement with Senior Management
10.14 Form of Addendum to Employment Agreement with Senior Management
10.15 Agreement Pertaining to the Election of Directors dated January 5, 1994 by
Lars D. Perkins, J. Paul Costello and the Purchasers identified therein
10.16 Shareholder Agreement dated January 5, 1994 by and among the Company and the
Shareholders identified therein
10.17 Agreement Pertaining to Certain Activities dated January 5, 1994 by and
between Lars D. Perkins and the Company
10.18 Termination Agreement dated September 30, 1995 by and among the Company and
Borwick International, Inc. and Irving P. Borwick
10.19 Finder's Fee and Non-Competition Agreement dated September 30, 1995 between
the Company and Irving P. Borwick
**11.1 Statement regarding computation of earnings per share
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- -------- ----------- ----
<C> <S> <C>
23.1 Consent of Goodwin, Procter & Hoar LLP (included in their opinion filed as
Exhibit 5 hereto)
23.2 Consent of Arthur Andersen LLP
**24 Power of Attorney (included on signature page of Registration Statement as
originally filed)
**27 Financial Data Schedule
<FN>
- ---------------
* To be filed by amendment.
** Previously filed.
+ Confidential treatment requested as to portions of this document.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RESTRAC, INC.
Restrac, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Restrac, Inc. The date of the filing
of its original Certificate of Incorporation with the Secretary of State of the
State of Delaware was November 8, 1993. The name under which the Corporation
filed its original Certificate of Incorporation was MicroTrac Systems, Inc.
2. This First Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Restated Certificate of
Incorporation of the Corporation filed with the Secretary of State of the State
of Delaware on January 5, 1994, as heretofore amended (the "Certificate of
Incorporation"), and was duly adopted by the written consent of the stockholders
of the Corporation, with written notice thereof having been given to all
stockholders of the Corporation who have not given their written consent, all in
accordance with the applicable provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware (the "DGCL").
3. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to provide as herein set forth in full.
ARTICLE I
NAME
The name of the Corporation is RESTRAC, INC.
<PAGE> 2
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
PURPOSES
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
The total number of shares of capital stock which the Corporation shall
have the authority to issue is Thirty-Five Million Five Hundred Fifty-Six
Thousand One Hundred Fifty- Five (35,556,155) shares of which (i) Thirty Million
(30,000,000) shares shall be Common Stock, par value $.01 per share (the "Common
Stock"), (ii) Five Hundred Fifty-Six Thousand One Hundred Fifty-Five (556,155)
shares shall be Convertible Preferred Stock, par value $1.00 per share (the
"Convertible Preferred Stock"), and (iii) Five Million (5,000,000) shares shall
be undesignated preferred stock, par value $.01 per share (the "Undesignated
Preferred Stock," and, collectively with the Convertible Preferred Stock, the
"Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, preferences, voting powers (or no voting powers), relative,
participating, optional or other special rights and privileges and the
qualifications, limitations and restrictions of the Preferred Stock and Common
Stock are as follows:
2
<PAGE> 3
A. COMMON STOCK
Subject to all of the rights, powers and preferences of the Preferred
Stock, and except as provided by law or in this Article IV (or in any
certificate of designation of any series of Preferred Stock) or by the Board of
Directors or any authorized committee thereof pursuant to this Article IV,
(a) the holders of the Common Stock shall have the exclusive
right to vote for the election of Directors and on all other matters requiring
stockholder action, each share being entitled to one vote;
(b) dividends may be declared and paid or set apart for
payment upon the Common Stock out of any assets or funds of the Corporation
legally available for the payment of dividends, but only when and as declared by
the Board of Directors or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with their
respective rights and interests.
B. CONVERTIBLE PREFERRED STOCK
Section 1. Dividends. The holders of Convertible Preferred Stock shall
be entitled to receive, when and as declared by the directors of the
Corporation, out of funds legally available for the purpose, quarterly,
cumulative dividends per share payable in cash on the fifteenth business day of
each calendar quarter (a "Dividend Payment Date") at the annual rate of the
product of the Cumulative Dividend Rate (as hereinafter defined) and the
Conversion Value (as defined in subsection 4(a)) of the Convertible Preferred
Stock. As used herein, the term "Cumulative Dividend Rate" shall mean eight
percent (8%) per annum; provided, that if for any fiscal year of the Corporation
commencing on or after October 1, 1993, the Operating Profit (as hereinafter
defined) is less than $800,000, then the Cumulative Dividend Rate for the next
succeeding fiscal year of the Corporation shall be twelve percent (12%) per
annum. Such dividends on shares of Convertible Preferred Stock shall accumulate
daily from the date on which the Corporation originally issues such shares and
shall be payable to holders of Convertible Preferred Stock of record at the
close of business on the fifth business day next preceding the Dividend Payment
Date in question. As used herein, the term "Operating Profit" shall mean the
consolidated operating income, if any, of the Corporation and its subsidiaries,
computed in accordance with generally accepted accounting principles
consistently applied, but without deductions for amortization of acquisition
costs for any business acquisition occurring after December 31, 1993 and
approved by the board of directors of the Corporation. If and to the extent that
dividends are not paid in full to the holders of Convertible Preferred Stock on
a Dividend Payment Date, then such dividends shall accrue and be cumulative from
such Dividend Payment Date whether or not such dividends
3
<PAGE> 4
shall have been declared and whether or not the Corporation has or had
sufficient funds legally available for the purpose. Interest will not be payable
with respect to accrued but unpaid dividends. The Convertible Preferred Stock
shall also have the special dividend rights set forth in Section 5(b). No
dividends shall be paid or set aside for payment (other than dividends payable
solely in shares of Common Stock) to the holders of Common Stock until and
unless all dividends then payable to the holders of Convertible Preferred Stock
shall have been paid or declared and set aside for payment in full.
Section 2. Liquidation Preference.
(a) Preference.
(i) In the event of any liquidation, dissolution
or winding up of the Corporation, either voluntarily or involuntarily, the
holders of the Convertible Preferred Stock shall be entitled to receive prior
and in preference to any distribution of any of the assets or surplus funds of
the Corporation to the holders of Common Stock of the Corporation, an amount
equal to (A) the consideration per share paid for such Convertible Preferred
Stock (which shall be $6.30 per share) plus (B) a further amount equal to any
dividends accrued but unpaid, whether or not declared, on such shares. If, upon
such liquidation, dissolution or winding up of the Corporation, the assets of
the Corporation available for distribution to the shareholders of the
Corporation are insufficient to provide for the payment of the full aforesaid
preferential amount, such assets as are so available shall be distributed among
the holders of the Convertible Preferred Stock in proportion to the relative
aggregate liquidation preferences of the Convertible Preferred Stock so held.
(ii) After the payment or the setting apart for
payment to the holders of the Convertible Preferred Stock of the preferential
amounts so payable to them, if assets remain in the Corporation the holders of
the Common Stock of the Corporation shall receive all of the remaining assets of
the Corporation pro rata in accordance with the number of shares of Common Stock
held by them.
(iii) The amount per share set forth in Section
2(a)(i) shall be appropriately adjusted for any stock splits, stock
combinations, stock dividends or similar recapitalizations with respect to the
Convertible Preferred Stock.
(b) Noncash Distributions. If any of the assets of the
Corporation are to be distributed other than in cash under this Section 2 or for
any purpose, then the Board of Directors of the Corporation shall promptly
engage independent competent appraisers to determine the value of the assets to
be distributed to the holders of Convertible Preferred Stock or Common Stock.
The Corporation shall, upon receipt of such appraiser's valuation, give prompt
written notice to each holder of shares of Convertible Preferred Stock and
Common Stock of the appraiser's valuation.
4
<PAGE> 5
(c) Consolidation or Merger. A consolidation or merger of the
Corporation with or into any other corporation or corporations (other than a
consolidation or merger following which the holders of 51% or more of the
capital stock of the resulting or surviving entity, based on voting power in the
election of directors, are persons or entities who were shareholders of the
Corporation immediately prior to such consolidation or merger), or a sale of all
or substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this Section 2,
unless in any such particular event the holders of more than 80% of the then
outstanding shares of Convertible Preferred Stock, voting together as a single
class, determine that such particular event shall not, for purposes of this
Section 2, be deemed a liquidation, dissolution or winding up.
Section 3. Voting Rights. The holder of each share of Convertible
Preferred Stock shall be entitled to the number of votes equal to the number of
shares of Common Stock into which each share of Convertible Preferred Stock
could be converted on the record date for the vote or written consent of
shareholders and, except as otherwise required by law, shall have voting rights
and powers equal to the voting rights and powers of the Common Stock. The holder
of each share of Convertible Preferred Stock shall be entitled to notice of any
shareholders' meeting in accordance with the bylaws of the Corporation and shall
vote with holders of the Common Stock upon all other matters submitted to a vote
of shareholders, except those matters required to be submitted to a class vote
pursuant to Section 6 or by law. Fractional votes shall not, however, be
permitted and any fractional voting rights resulting from the above formula
(after aggregating all shares of Common Stock into which shares of Convertible
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half rounded upward to one). The holders of
Convertible Preferred Stock shall also have the special voting rights set forth
in Sections 5(b) and 6.
Section 4. Conversion. Convertible Preferred Stock shall be
convertible into Common Stock, as follows:
(a) Right to Convert. Each share of Convertible Preferred
Stock shall be convertible, at the option of the holder thereof, at any time
after the date of issuance of such share at the office of the Corporation. Each
share of Convertible Preferred Stock shall be convertible into the number of
shares of Common Stock which results from dividing the "Conversion Value" by the
"Conversion Price" per share in effect at the time of conversion. The number of
shares of Common Stock into which a share of Convertible Preferred Stock is
convertible is hereinafter referred to as the "Conversion Rate." The Conversion
Price per share of Convertible Preferred Stock (the "Conversion Price")
initially in effect shall be $6.30. The Conversion Value per share of
Convertible Preferred Stock (the "Conversion Value") shall be equal to $6.30 per
share of Convertible Preferred Stock. The initial Conversion Price of
Convertible Preferred Stock shall be subject to adjustment as hereinafter
provided (including without limitation for stock splits, stock combinations,
stock dividends or similar recapitalizations effective after January 5, 1994).
In the event of any conversion of shares of Convertible Preferred Stock pursuant
to this Section 4(a), the Corporation shall
5
<PAGE> 6
declare for payment and pay, within 60 days or as soon thereafter as is legally
permissible, any and all dividends accrued but unpaid on such shares through the
date of such conversion.
(b) Automatic Conversion. Each share of Convertible Preferred
Stock shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering any of the Corporation's securities (as that term is
defined under the Securities Act of 1933, as then in effect) with aggregate net
proceeds to the Corporation, at the public offering price, of at least
$10,000,000 and an equivalent public offering price per share of Common Stock of
at least $18.90 (such amount to be appropriately adjusted in the event of stock
splits, stock combinations, stock dividends or similar recapitalizations
effective after January 5, 1994); provided, that no such shares shall be
automatically converted pursuant to this Section 4(b) unless the Corporation
shall have declared for payment, within 60 days or as soon thereafter as is
legally permissible, any and all dividends accrued but unpaid on such shares
through the date of such conversion, and the Corporation shall thereafter pay
the dividends so declared.
(c) Mechanics of Conversion. Before any holder of Convertible
Preferred Stock shall be entitled to convert the same into shares of Common
Stock as provided in Section 4(a), such holder shall surrender the certificate
or certificates therefor, duly endorsed, at the office of the Corporation and
shall give written notice to the Corporation at such office that he elects to
convert the same. The Corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Convertible Preferred Stock a
certificate or certificates for the number of shares of Common Stock to which he
shall be entitled as aforesaid. Such conversion shall be deemed to have been
made immediately prior to the close of business on the date of such surrender of
the shares of Convertible Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock on such date.
In the event of an automatic conversion pursuant to Section
4(b), the outstanding shares of Convertible Preferred Stock shall be converted
automatically without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
Corporation; provided, however, that the Corporation shall not be obligated to
issue certificates evidencing the shares of Common Stock issuable upon such
automatic conversion unless the certificates evidencing such shares of
Convertible Preferred Stock are either delivered to the Corporation as provided
above, or the holder notifies the Corporation that such certificates have been
lost, stolen or destroyed and executes an agreement satisfactory to the
Corporation to indemnify the Corporation from any loss incurred by it in
connection with such certificates. The Corporation shall, as soon as practicable
after such delivery, or such agreement and indemnification in the case of a lost
certificate, issue and deliver at such office to such holder of Convertible
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which he shall be
6
<PAGE> 7
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common Stock. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of closing of the offering, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(d) Fractional Shares. No fractional shares of Common Stock
shall be issued upon conversion of Convertible Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the Conversion
Price.
(e) Adjustment of Conversion Price. The Conversion Price of
the Convertible Preferred Stock shall be subject to adjustment from time to time
as follows:
(i) If the Corporation shall issue any Common Stock
or options or rights to acquire Common Stock or other securities of the
Corporation convertible into or exchangeable for Common Stock (other than
"Excluded Stock," as defined below, or stock dividends, subdivisions, split-ups,
combinations or dividends, which such events are covered by subsections
4(e)(iii), (iv), and (v)), for a consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such Common
Stock (or options or rights to acquire Common Stock or other securities
convertible into or exchangeable for Common Stock), then the Conversion Price
shall forthwith be decreased immediately after such issuance to a price equal to
the quotient obtained by dividing:
(A) an amount equal to the sum of
(x) the total number of
shares of Common Stock outstanding
(including any shares of Common
Stock deemed to have been issued
pursuant to subdivision (3) of this
subsection (i)) immediately prior to
such issuance multiplied by the
Conversion Price in effect
immediately prior to such issuance,
plus
(y) the consideration
received by the Corporation upon
such issuance, by
(B) the total number of shares of Common
Stock outstanding (including any shares of Common
Stock deemed to have been issued pursuant to
subdivision (3) of this subsection (i)) immediately
after the issuance of such Common Stock (or
7
<PAGE> 8
other securities convertible into or exchangeable for
Common Stock).
For purposes of making any such calculation pursuant
to this subsection (i), the shares of Common Stock
issuable upon conversion of the outstanding shares of
Convertible Preferred Stock, together with any other
shares of Common Stock deemed issued and outstanding
pursuant to subdivision (3) of this subsection (i),
shall be deemed issued and outstanding at all times.
For the purposes of this subsection (i), the
following provisions shall also be applicable:
(1) In the case of the issuance of
Common Stock for cash, the consideration received
therefor shall be deemed to be the amount of cash
paid therefor without deducting any discounts or
commissions paid or incurred by the Corporation in
connection with the issuance and sale thereof.
(2) In the case of the issuance of
Common Stock for a consideration in whole or in part
other than cash, the consideration other than cash
shall be deemed to be the fair value thereof as
determined in good faith by the Board of Directors of
the Corporation.
(3) In the case of the issuance of
(i) options to purchase or rights to subscribe for
Common Stock, (ii) securities by their terms
convertible or exchangeable for Common Stock, or
(iii) options to purchase or rights to subscribe for
such convertible or exchangeable securities:
(A) the aggregate maximum
number of shares of Common Stock deliverable
upon exercise of such options to purchase or
rights to subscribe for Common Stock shall
be deemed to be issuable for a consideration
equal to the consideration (determined in
the manner provided in subdivisions (1) and
(2) above), if any, received by the
Corporation upon the issuance of such
options or rights plus the minimum purchase
price provided in such options or rights for
the Common Stock covered thereby;
(B) the aggregate maximum
number of shares of Common Stock deliverable
upon conversion of
8
<PAGE> 9
or in exchange for any such convertible or
exchangeable securities, or upon the
exercise of options to purchase or rights to
subscribe for such convertible or
exchangeable securities and subsequent
conversion or exchange thereof, shall be
deemed to be issuable for a consideration
equal to the consideration received by the
Corporation for any such securities and
related options or rights, plus the
additional consideration, if any, to be
received by the Corporation upon the
conversion or exchange of such securities or
the exercise of any related options or
rights (the consideration in each case to be
determined in the manner provided in
subdivisions (1) and (2) above);
(C) the aggregate maximum
number of shares of Common Stock deliverable
upon exercise of such options or rights or
upon conversion of or in exchange for such
convertible or exchangeable securities upon
the exercise of options to purchase or
rights to subscribe for such convertible or
exchangeable securities and subsequent
conversion or exchange thereof, shall be
deemed to have been issued at the time such
options or rights or securities were issued
(or, if later, in the case of options or
other rights to purchase Excluded Stock, at
the time or times at which such shares are
both purchasable by the optionee or other
right holder and are no longer subject to
repurchase by the Corporation) provided that
the consideration for which such Common
Stock is deemed to be issuable does not
exceed the issuance price of securities
issued in the latest bona fide round of
financing by the Corporation;
(D) on any change in the
number of shares of Common Stock deliverable
upon exercise of any such options or rights
or conversion of or exchange for such
convertible or exchangeable securities, or
on any change in the minimum purchase price
of such options, rights or securities, other
than a change resulting from the
antidilution provisions of such options,
rights or securities, the Conversion Price
shall forthwith be readjusted to such
Conversion Price as would have been obtained
had the adjustment (and any subsequent
adjustments) made upon (x) the issuance of
such options, rights or securities not
exercised, converted or exchanged
9
<PAGE> 10
prior to such change, as the case may be,
been made upon the basis of such change or
(y) the options or rights related to such
securities not converted or exchanged prior
to such change, as the case may be, been
made upon the basis of such change; and
(E) on the expiration of
any such options or rights, the termination
of any such rights to convert or exchange or
the expiration of any options or rights
related to such convertible or exchangeable
securities, the Conversion Price shall
forthwith be readjusted to such Conversion
Price as would have obtained had the
adjustment (and any subsequent adjustments)
made upon the issuance of such options,
rights, convertible or exchangeable
securities or options or rights related to
such convertible or exchangeable securities,
as the case may be, been made upon the basis
of the issuance of only the number of shares
of Common Stock actually issued upon the
exercise of such options or rights, upon the
conversion or exchange of such convertible
or exchangeable securities or upon the
exercise of the options or rights related to
such convertible or exchangeable securities,
as the case may be.
(ii) "Excluded Stock" shall mean:
(A) all shares of Common Stock issued
and outstanding on January 5, 1994;
(B) all shares of Common Stock into
which shares of Convertible Preferred Stock are
convertible;
(C) up to 1,750,000 shares of Common
Stock issued or issuable upon exercise of options or
other purchase rights granted to employees, officers,
directors or consultants of the Corporation and
approved by the Board of Directors of the Corporation
(and any reissuance of such shares after repurchase
thereof); and
(D) all shares of Common Stock or other
securities issued or to be issued to employees,
officers, directors or consultants of the Corporation
after receipt of written consent to
10
<PAGE> 11
such issuance from the holders of 60% of the then
outstanding shares of Convertible Preferred Stock and
approval of such issuance by the Board of Directors
of the Corporation.
Shares of Excluded Stock described in (C) and (D) of this subsection
4(e)(ii) shall not be deemed to be outstanding for purposes of the computations
of subsection 4(e)(i) above until actually issued or deemed issued pursuant to
subdivision (3) of subsection (i) above.
(iii) If the number of shares of Common Stock
outstanding at any time after January 5, 1994 is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, on the date such payment is made or such change is
effective, the Conversion Price shall be appropriately decreased so that the
number of shares of Common Stock issuable on conversion of the Convertible
Preferred Stock shall be increased in proportion to such increase of outstanding
shares.
(iv) If the number of shares of Common Stock
outstanding at any time after January 5, 1994 is decreased by a combination of
the outstanding shares of Common Stock, then, on the effective date of such
combination, the Conversion Price shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of the Convertible
Preferred Stock shall be decreased in proportion to such decrease in outstanding
shares.
(v) In case the Corporation shall declare a cash
dividend upon its Common Stock payable otherwise than out of retained earnings
or shall distribute to holders of its Common Stock shares of its capital stock
(other than Common Stock), stock or other securities of other persons, evidences
of indebtedness issued by the Corporation or other persons, assets (excluding
cash dividends) or options or rights (excluding options to purchase and rights
to subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), other than distributions in the event of
a liquidation, dissolution or winding up of the Corporation, for which provision
is made in Section 2, then, in such case, the holders of shares of Convertible
Preferred Stock shall, concurrent with the distribution to holders of Common
Stock, receive a like distribution based upon the number of shares of Common
Stock into which such Convertible Preferred Stock is then convertible.
(vi) In case, at any time after January 5, 1994, of
any capital reorganization, or any reclassification of the stock of the
Corporation (other than a change in par value or as a result of a stock dividend
or subdivision, split-up or combination of shares), or the consolidation or
merger of the Corporation with or into another person (other than a
consolidation or merger in which the Corporation is the continuing entity and
which does not result in any change in the Common Stock), or of the sale or
other disposition of all or substantially all the properties and assets of the
Corporation as an entirety to any other person, the shares of Convertible
Preferred Stock shall, if such event is not deemed a liquidation for
11
<PAGE> 12
purposes of Section 2(c), after such reorganization, reclassification,
consolidation, merger, sale or other disposition, be convertible into the kind
and number of shares of stock or other securities or property of the Corporation
or of the entity resulting from such consolidation or surviving such merger or
to which such properties and assets shall have been sold or otherwise disposed
to which such holder would have been entitled if immediately prior to such
reorganization, reclassification, consolidation, merger, sale or other
disposition he had converted his shares of Convertible Preferred Stock into
Common Stock. The provisions of this subsection (vi) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales or
other dispositions.
(vii) All calculations under this Section 4 shall
be made to the nearest cent or to the nearest one hundredth (1/100) of a share,
as the case may be.
(f) Minimal Adjustments. No adjustment in a Conversion Price
need be made if such adjustment would result in a change in a Conversion Price
of less than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in a Conversion Price.
(g) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Convertible Preferred Stock a certificate setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon written request
at any time of any holder of Convertible Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) such adjustments
and readjustments, (ii) the Conversion Price and Rate at the time in effect for
the Convertible Preferred Stock held, and (iii) the number of shares of Common
Stock and the amount if any, of other property which at the time would be
received upon the conversion of the Convertible Preferred Stock.
(h) Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, the Corporation
shall mail to each holder of Convertible Preferred Stock at least twenty (20)
days prior to the date specified herein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend or distribution.
(i) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Convertible Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Convertible Preferred Stock;
12
<PAGE> 13
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Convertible Preferred Stock, the Corporation will take such corporate
action as may, in the opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose.
(j) Notices. Any notice required by the provisions of this
Section 4 to be given to the holder of shares of Convertible Preferred Stock
shall be deemed given if deposited in the United States mail, postage prepaid,
and addressed to each holder of record at his latest address appearing on the
books of the Corporation.
Section 5. Redemption of Convertible Preferred Stock.
(a) On the 60th day following the Preferred Redemption Date,
as defined below, and so long as any shares of Convertible Preferred Stock shall
be outstanding, the Corporation shall at the request of any holder of
Convertible Preferred Stock sent on or before the 30th day following such
Preferred Redemption Date (unless otherwise prevented by law and, if so
prevented, as soon thereafter as is permissible) redeem, at an amount per share
equal to the Conversion Value of such Convertible Preferred Stock plus any
dividends accrued but unpaid, whether or not declared, with respect thereto
through the period ending on the 60th day following the Preferred Redemption
Date, the number of shares of such Convertible Preferred Stock held by such
holder specified in such request for redemption. The total sum payable for
shares of Convertible Preferred Stock on the Preferred Redemption Date is
hereinafter referred to as the "Preferred Redemption Price." As used herein, the
term "Preferred Redemption Date" shall mean November 5, 1998.
(b) If upon any redemption the assets of the Corporation
legally available for redemption shall be insufficient to pay the holders of
Convertible Preferred Stock the full amounts to which they shall be entitled,
the holders of shares of Convertible Preferred Stock, shall share ratably in any
such redemption according to the respective amounts which would be payable in
respect of shares specified in their respective requests for redemption upon
such redemption if all amounts payable on or with respect to said shares were
paid in full. Notwithstanding the foregoing, if any amount to be paid on the
60th day following the Preferred Redemption Date pursuant to this Section 5 is
not paid on such date (whether or not such payment is at the time prevented by
law), the following special dividend and voting provisions shall apply during
the period (the "Redemption Default Period") measured from the date of such
failure until the date on which such amount and any payments referred to in (i)
of this Section 5(b) have been paid in full:
(i) Increased Cumulative Dividend Rate during
Redemption Default Period. During the Redemption Default Period, the holders of
Convertible Preferred Stock shall be entitled to receive, when and as declared
by the directors of the Corporation, out of funds legally available for the
purpose, quarterly, cumulative dividends per share payable in
13
<PAGE> 14
cash on each Dividend Payment Date and on the last day of the Redemption Default
Period, at the annual rate of the product of the applicable default dividend
rate (as hereinafter defined) and the Conversion Value of the Convertible
Preferred Stock. As used herein, the term "applicable default dividend rate"
shall mean the Cumulative Dividend Rate determined in accordance with Section 1
for the period in question, plus an increment which is one percent (1%) per
annum during the first six months of the Redemption Default Period and increases
by one percent (1%) per annum for each additional six months or fraction thereof
of the Redemption Default Period. The foregoing dividends shall cease to
accumulate on the day on which the Redemption Default Period ends.
(ii) Election of Majority of Directors. If at
any time or times during the Redemption Default Period the Corporation shall not
have declared and paid in full the cumulative dividends specified both in
Section 1 and in subsection 5(b)(i) (a "Dividend Default Period"), the holders
of Convertible Preferred Stock may call a special meeting of the stockholders
for the purpose of increasing the number of directors and electing additional
directors sufficient in number such that, following such election, a majority of
the directors of the Corporation shall be designees of such holders of
Convertible Preferred Stock. In any such election, the holders of the
Convertible Preferred Stock shall possess the full voting powers (to the
exclusion of the holders of all other classes and series of capital stock of the
Corporation) to elect such additional number of directors. Upon termination of
the Dividend Default Period, the voting rights described in this subsection
5(b)(ii) shall cease, the term of office of all directors elected in accordance
with this subsection shall terminate, and only the incumbent directors otherwise
elected by the holders of Convertible Preferred Stock or Common Stock shall
constitute the duly elected directors of the Corporation.
(c) Any request for redemption as herein provided shall be
mailed by first class certified mail, return receipt requested, postage prepaid,
to the Corporation at its then current address. At any time on or after the
sixteenth day following the Preferred Redemption Date, the holders of the shares
of Convertible Preferred Stock to be redeemed shall be entitled to receive the
applicable Preferred Redemption Price upon actual delivery to the Corporation or
its agent of the certificates representing the shares to be redeemed.
(d) The Corporation will not, and will not permit any
subsidiary of the Corporation to, purchase or acquire any shares of Convertible
Preferred Stock otherwise than pursuant to the terms of this Section 5 or
pursuant to an offer made on the equivalent terms to all holders of Convertible
Preferred Stock at the time outstanding.
(e) Once redeemed pursuant to the provisions of this Section
5, shares of Convertible Preferred Stock shall be canceled and not subject to
reissuance.
(f) No Convertible Preferred Stock shall be entitled to the
benefit of a sinking fund or purchase fund.
14
<PAGE> 15
Section 6. Protective Provisions.
(a) Approval of Convertible Preferred Stock. So long as any of
the Convertible Preferred Stock shall be outstanding, the Corporation shall not
without obtaining the approval (by vote or written consent, as provided by law)
of the holders of not less than 51% of the outstanding shares of Convertible
Preferred Stock:
(i) Change of Rights. Materially and adversely alter
or change the rights, preferences or privileges of the Convertible Preferred
Stock; or
(ii) Create a New Class. Create any new class or
series of shares having preferences over any outstanding shares of Convertible
Preferred Stock as to dividends or assets, or authorize or issue shares of stock
of any class or series or any bonds, debentures, notes or other obligations
convertible into or exchangeable for, or having option rights to purchase, any
shares of stock of this Corporation having any preference or priority as to
dividends or assets superior to or on a parity (other than parity as to dividend
or voting rights) with any such preference or priority of any outstanding shares
of Convertible Preferred Stock; or
(iii) Reclassification. Reclassify any class or
series of any Common Stock into shares having any preference or priority as to
dividends or assets superior to or on a parity with any such preference or
priority of Convertible Preferred Stock; or
(iv) Dividends; Redemptions. Declare or pay any
dividend (other than a dividend payable in shares of Common Stock) with respect
to the Common Stock, or repurchase any shares of Common Stock, other than
pursuant to vesting or first refusal provisions of agreements with employees,
officers, directors or consultants of the Corporation; or
(v) Merger, Consolidation, Sale, etc. of Assets.
Merge or consolidate with, or permit any of its subsidiaries to merge or
consolidate with, any entity, except that any such subsidiary may be merged into
the Corporation or any other such subsidiary; sell, lease, license or otherwise
dispose of, or permit any such subsidiary to sell, lease, license or otherwise
dispose of, all or substantially all of the consolidated assets of the
Corporation in any twelve-month period; or
(vi) Amendments. Adopt, amend or repeal any provision
of this Certificate of Incorporation or the bylaws of the Corporation.
C. UNDESIGNATED PREFERRED STOCK
Subject to any limitations prescribed by law, the Board of Directors or
any authorized committee thereof is expressly authorized to provide for the
issuance of the shares of
15
<PAGE> 16
Undesignated Preferred Stock in one or more series of such stock, and by filing
a certificate pursuant to applicable law of the State of Delaware, to establish
or change from time to time the number of shares to be included in each such
series, and to fix the designations, powers, preferences and the relative,
participating, optional or other special rights of the shares of each series and
any qualifications, limitations and restrictions thereof. Any action by the
Board of Directors or any authorized committee thereof under this paragraph C
shall require the affirmative vote of a majority of the Directors then in office
or a majority of the members of such committee. The Board of Directors or any
authorized committee thereof shall have the right to determine or fix one or
more of the following with respect to each series of Undesignated Preferred
Stock to the extent permitted by law:
(a) The distinctive serial designation and the number of
shares constituting such series;
(b) The dividend rates or the amount of dividends to be paid
on the shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares
of such series;
(d) Whether the shares of such series shall be redeemable and,
if so, the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
(e) The amount or amounts payable upon the shares of such
series and any preferences applicable thereto in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such fund and the
manner of its application, including the price or prices at which such shares
may be redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the Corporation
and, if so convertible or exchangeable, the conversion price or prices, or the
rate or rates of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions of such
conversion or exchange;
16
<PAGE> 17
(h) The price or other consideration for which the shares of
such series shall be issued;
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of Preferred
Stock (or series thereof) and whether such shares may be reissued as shares of
the same or any other class or series of stock; and
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
ARTICLE V
STOCKHOLDER ACTION
Meetings of the stockholders may be taken within or without the State
of Delaware, as the bylaws may provide.
ARTICLE VI
DIRECTORS
Section 1. General.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors except as otherwise provided
herein or required by law.
Section 2. Election of Directors.
Election of Directors need not be by written ballot unless the By-laws
of the Corporation shall so provide.
Section 3. Terms of Directors.
The number of Directors of the Corporation shall be fixed by resolution
duly adopted from time to time by the Board of Directors. The Directors, other
than those who may be elected by the holders of any series of Preferred Stock of
the Corporation, shall be classified, with respect to the term for which they
severally hold office, into three classes, as nearly equal in number as
possible. The initial Class I Director of the Corporation shall be Russell J.
Campanello; the initial Class II Director of the Corporation shall be A. Bruce
Johnston; and
17
<PAGE> 18
the initial Class III Directors of the Corporation shall be Lars D. Perkins and
J. Paul Costello. The initial Class I Director shall serve for a term expiring
at the annual meeting of stockholders to be held following the fiscal year
ending September 30, 1996, the initial Class II Director shall serve for a term
expiring at the annual meeting of stockholders to be held following the fiscal
year ending September 30, 1997, and the initial Class III Directors shall serve
for a term expiring at the annual meeting of stockholders to be held following
the fiscal year ending September 30, 1998. At each annual meeting of
stockholders, the successor or successors of the class of Directors whose term
expires at that meeting (other than Directors elected by any series of Preferred
Stock) shall be elected by a plurality of the votes cast at such meeting and
shall hold office for a term expiring at the annual meeting of stockholders held
in the third year following the year of their election. The Directors elected to
each class (other than Directors elected by any series of Preferred Stock) shall
hold office until their successors are duly elected and qualified or until their
earlier resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this First Amended and Restated Certificate of Incorporation, the
holders of any one or more series of Preferred Stock shall have the right,
voting separately as a series or together with holders of other such series, to
elect Directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of this First Amended and Restated Certificate of
Incorporation and any certificate of designations applicable thereto, and such
Directors so elected shall not be divided into classes pursuant to this Section
3.
During any period when the holders of any series of Preferred Stock
have the right to elect additional Directors as provided for or fixed pursuant
to the provisions of Article IV hereof, then upon commencement and for the
duration of the period during which such right continues: (i) the then otherwise
total authorized number of Directors of the Corporation shall automatically be
increased by such specified number of Directors, and the holders of such
Preferred Stock shall be entitled to elect the additional Directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional Director
shall serve until such Director's successor shall have been duly elected and
qualified, or until such Director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier, subject to such
Director's earlier death, disqualification, resignation or removal. Except as
otherwise provided by the Board in the resolution or resolutions establishing
such series, whenever the holders of any series of Preferred Stock having such
right to elect additional Directors are divested of such right pursuant to the
provisions of such stock, the terms of office of all such additional Directors
elected by the holders of such stock, or elected to fill any vacancies resulting
from the death, resignation, disqualification or removal of such additional
Directors, shall forthwith terminate and the total and authorized number of
Directors of the Corporation shall be reduced accordingly.
18
<PAGE> 19
Section 4. Vacancies.
Subject to the rights, if any, of the holders of any series of
Preferred Stock to elect Directors and to fill vacancies in the Board of
Directors relating thereto, any and all vacancies in the Board of Directors,
however occurring, including, without limitation, by reason of an increase in
size of the Board of Directors, or the death, resignation, disqualification or
removal of a Director, shall be filled solely by the affirmative vote of a
majority of the remaining Directors then in office, even if less than a quorum
of the Board of Directors. Any Director appointed in accordance with the
preceding sentence shall hold office for the remainder of the full term of the
class of Directors in which the new directorship was created or the vacancy
occurred and until such Director's successor shall have been duly elected and
qualified or until his or her earlier resignation or removal. Subject to the
rights, if any, of the holders of any series of Preferred Stock to elect
Directors, when the number of Directors is increased or decreased, the Board of
Directors shall determine the class or classes to which the increased or
decreased number of Directors shall be apportioned; provided, however, that no
decrease in the number of Directors shall shorten the term of any incumbent
Director. In the event of a vacancy in the Board of Directors, the remaining
Directors, except as otherwise provided by law, may exercise the powers of the
full Board of Directors until the vacancy is filled.
Section 5. Removal.
Subject to the rights, if any, of any series of Preferred Stock to
elect Directors and to remove any Director whom the holders of any such stock
have the right to elect, any Director (including persons elected by Directors to
fill vacancies in the Board of Directors) may be removed from office (i) only
with cause and (ii) only by the affirmative vote of at least two-thirds of the
total votes which would be eligible to be cast by stockholders in the election
of such Director. At least 30 days prior to any meeting of stockholders at which
it is proposed that any Director be removed from office, written notice of such
proposed removal shall be sent to the Director whose removal will be considered
at the meeting. For purposes of this First Amended and Restated Certificate of
Incorporation, "cause," with respect to the removal of any Director shall
include (i) conviction of a felony, (ii) declaration of unsound mind by order of
court, (iii) gross dereliction of duty, (iv) commission of any action involving
moral turpitude, or (v) commission of an action which constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
Corporation.
19
<PAGE> 20
ARTICLE VII
LIMITATION OF LIABILITY
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL or (iv) for any
transaction from which the Director derived an improper personal benefit. If the
DGCL is amended after the effective date of this First Amended and Restated
Certificate of Incorporation to authorize corporate action further eliminating
or limiting the personal liability of Directors, then the liability of a
Director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Section 1. Amendment by Directors.
Except as otherwise provided by law, the By-laws of the Corporation may
be amended or repealed by the Board of Directors.
Section 2. Amendment by Stockholders.
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
20
<PAGE> 21
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend or repeal this First
Amended and Restated Certificate of Incorporation in the manner now or hereafter
prescribed by statute and this First Amended and Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation. No amendment or repeal of this First Amended and
Restated Certificate of Incorporation shall be made unless the same is first
approved by the Board of Directors pursuant to a resolution adopted by the Board
of Directors in accordance with Section 242 of the DGCL, and, except as
otherwise provided by law, thereafter approved by the stockholders. Whenever any
vote of the holders of voting stock is required to amend or repeal any provision
of this First Amended and Restated Certificate of Incorporation, and in addition
to any other vote of holders of voting stock that is required by this First
Amended and Restated Certificate of Incorporation, or by law, the affirmative
vote of a majority of the total votes eligible to be cast by holders of voting
stock with respect to such amendment or repeal, voting together a single class,
at a duly constituted meeting of stockholders called expressly for such purpose
shall be required to amend or repeal any provisions of this First Amended and
Restated Certificate of Incorporation; provided, however, that the affirmative
vote of not less than 80% of the total votes eligible to be cast by holders of
voting stock, voting together a single class, shall be required to amend or
repeal any of the provisions of Article VI or Article IX of this First Amended
and Restated Certificate of Incorporation.
21
<PAGE> 22
I, Lars D. Perkins, President of the Corporation, for the purpose of
amending and restating the Corporation's Certificate of Incorporation pursuant
to the General Corporation Law of the State of Delaware, do make this
certificate, hereby declaring and certifying that this is my act and deed on
behalf of the Corporation this day of May, 1996.
----
-------------------------------------
Lars D. Perkins, President
22
<PAGE> 1
EXHIBIT 3.2
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RESTRAC, INC.
Restrac, Inc., a corporation organized and existing under the laws of
the State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Restrac, Inc. The date of the filing
of its original Certificate of Incorporation with the Secretary of State of the
State of Delaware was November 8, 1993. The name under which the Corporation
filed its original Certificate of Incorporation was MicroTrac Systems, Inc.
2. This Second Amended and Restated Certificate of Incorporation
amends, restates and integrates the provisions of the First Amended and Restated
Certificate of Incorporation of the Corporation filed with the Secretary of
State of the State of Delaware on May , 1996, and was duly adopted by the
written consent of the stockholders of the Corporation, with written notice
thereof having been given to all stockholders of the Corporation who have not
given their written consent, all in accordance with the applicable provisions of
Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware (the "DGCL").
3. The text of the First Amended and Restated Certificate of
Incorporation is hereby amended and restated in its entirety to provide as
herein set forth in full.
ARTICLE I
NAME
The name of the Corporation is RESTRAC, INC.
1
<PAGE> 2
ARTICLE II
REGISTERED OFFICE
The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, in the City of Wilmington, County of New Castle,
Delaware 19801. The name of its registered agent at such address is The
Corporation Trust Company.
ARTICLE III
PURPOSES
The nature of the business or purposes to be conducted or promoted by
the Corporation is to engage in any lawful act or activity for which
corporations may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
Section 1. Number of Shares.
The total number of shares of capital stock which the Corporation shall
have the authority to issue is Thirty-Five Million (35,000,000) shares, of which
(i) Thirty Million (30,000,000) shares shall be Common Stock, par value $.01 per
share (the "Common Stock"), and (ii) Five Million (5,000,000) shares shall be
Preferred Stock, par value $.01 per share (the "Preferred Stock"). As set forth
in this Article IV, the Board of Directors or any authorized committee thereof
is authorized from time to time to establish and designate one or more series of
Preferred Stock, to fix and determine the variations in the relative rights and
preferences as between the different series of Preferred Stock in the manner
hereinafter set forth in this Article IV, and to fix or alter the number of
shares comprising any such series and the designation thereof to the extent
permitted by law.
The number of authorized shares of the class of Preferred Stock may be
increased or decreased (but not below the number of shares outstanding) by the
affirmative vote of the holders of a majority of the Common Stock, without a
vote of the holders of the Preferred Stock, pursuant to the resolution or
resolutions establishing the class of Preferred Stock or this Second Amended and
Restated Certificate of Incorporation, as it may be amended from time to time.
2
<PAGE> 3
Section 2. General.
The designations, powers, preferences and rights of, and the
qualifications, limitations and restrictions upon, each class or series of stock
shall be determined in accordance with, or as set forth below in, Sections 3 and
4 of this Article IV.
Section 3. Common Stock.
Subject to all of the rights, powers and preferences of the Preferred
Stock, and except as provided by law or in this Article IV (or in any
certificate of designation of any series of Preferred Stock) or by the Board of
Directors or any authorized committee thereof pursuant to this Article IV,
(a) the holders of the Common Stock shall have the exclusive
right to vote for the election of Directors and on all other matters requiring
stockholder action, each share being entitled to one vote;
(b) dividends may be declared and paid or set apart for
payment upon the Common Stock out of any assets or funds of the Corporation
legally available for the payment of dividends, but only when and as declared by
the Board of Directors or any authorized committee thereof; and
(c) upon the voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the net assets of the Corporation shall be
distributed pro rata to the holders of the Common Stock in accordance with their
respective rights and interests.
Section 4. Preferred Stock.
Subject to any limitations prescribed by law, the Board of Directors or
any authorized committee thereof is expressly authorized to provide for the
issuance of the shares of Preferred Stock in one or more series of such stock,
and by filing a certificate pursuant to applicable law of the State of Delaware,
to establish or change from time to time the number of shares to be included in
each such series, and to fix the designations, powers, preferences and the
relative, participating, optional or other special rights of the shares of each
series and any qualifications, limitations and restrictions thereof. Any action
by the Board of Directors or any authorized committee thereof under this Section
4 shall require the affirmative vote of a majority of the Directors then in
office or a majority of the members of such committee. The Board of Directors or
any authorized committee thereof shall have the right to determine or fix one or
more of the following with respect to each series of Preferred Stock to the
extent permitted by law:
3
<PAGE> 4
(a) The distinctive serial designation and the number of
shares constituting such series;
(b) The dividend rates or the amount of dividends to be paid
on the shares of such series, whether dividends shall be cumulative and, if so,
from which date or dates, the payment date or dates for dividends, and the
participating and other rights, if any, with respect to dividends;
(c) The voting powers, full or limited, if any, of the shares
of such series;
(d) Whether the shares of such series shall be redeemable and,
if so, the price or prices at which, and the terms and conditions on which, such
shares may be redeemed;
(e) The amount or amounts payable upon the shares of such
series and any preferences applicable thereto in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation;
(f) Whether the shares of such series shall be entitled to the
benefit of a sinking or retirement fund to be applied to the purchase or
redemption of such shares, and if so entitled, the amount of such fund and the
manner of its application, including the price or prices at which such shares
may be redeemed or purchased through the application of such fund;
(g) Whether the shares of such series shall be convertible
into, or exchangeable for, shares of any other class or classes or of any other
series of the same or any other class or classes of stock of the Corporation
and, if so convertible or exchangeable, the conversion price or prices, or the
rate or rates of exchange, and the adjustments thereof, if any, at which such
conversion or exchange may be made, and any other terms and conditions of such
conversion or exchange;
(h) The price or other consideration for which the shares of
such series shall be issued;
(i) Whether the shares of such series which are redeemed or
converted shall have the status of authorized but unissued shares of Preferred
Stock (or series thereof) and whether such shares may be reissued as shares of
the same or any other class or series of stock; and
4
<PAGE> 5
(j) Such other powers, preferences, rights, qualifications,
limitations and restrictions thereof as the Board of Directors or any authorized
committee thereof may deem advisable.
ARTICLE V
STOCKHOLDER ACTION
Any action required or permitted to be taken by the stockholders of the
Corporation at any annual or special meeting of stockholders of the Corporation
must be effected at a duly called annual or special meeting of stockholders and
may not be taken or effected by a written consent of stockholders in lieu
thereof.
ARTICLE VI
DIRECTORS
Section 1. General.
The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors except as otherwise provided
herein or required by law.
Section 2. Election of Directors.
Election of Directors need not be by written ballot unless the By-laws
of the Corporation shall so provide.
Section 3. Terms of Directors.
The number of Directors of the Corporation shall be fixed by resolution
duly adopted from time to time by the Board of Directors. The Directors, other
than those who may be elected by the holders of any series of Preferred Stock of
the Corporation, shall be classified, with respect to the term for which they
severally hold office, into three classes, as nearly equal in number as
possible. The initial Class I Director of the Corporation shall be Russell J.
Campanello; the initial Class II Director of the Corporation shall be A. Bruce
Johnston; and the initial Class III Directors of the Corporation shall be Lars
D. Perkins and J. Paul Costello. The initial Class I Director shall serve for a
term expiring at the annual meeting of stockholders to be held following the
fiscal year ending September 30, 1996, the initial Class II Director shall serve
for a term expiring at the annual meeting of stockholders to be
5
<PAGE> 6
held following the fiscal year ending September 30, 1997, and the initial Class
III Directors shall serve for a term expiring at the annual meeting of
stockholders to be held following the fiscal year ending September 30, 1998. At
each annual meeting of stockholders, the successor or successors of the class of
Directors whose term expires at that meeting (other than Directors elected by
any series of Preferred Stock) shall be elected by a plurality of the votes cast
at such meeting and shall hold office for a term expiring at the annual meeting
of stockholders held in the third year following the year of their election. The
Directors elected to each class (other than Directors elected by any series of
Preferred Stock) shall hold office until their successors are duly elected and
qualified or until their earlier resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Second Amended and Restated Certificate of Incorporation, the
holders of any one or more series of Preferred Stock shall have the right,
voting separately as a series or together with holders of other such series, to
elect Directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Second Amended and Restated Certificate
of Incorporation and any certificate of designations applicable thereto, and
such Directors so elected shall not be divided into classes pursuant to this
Section 3.
During any period when the holders of any series of Preferred Stock
have the right to elect additional Directors as provided for or fixed pursuant
to the provisions of Article IV hereof, then upon commencement and for the
duration of the period during which such right continues: (i) the then otherwise
total authorized number of Directors of the Corporation shall automatically be
increased by such specified number of Directors, and the holders of such
Preferred Stock shall be entitled to elect the additional Directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional Director
shall serve until such Director's successor shall have been duly elected and
qualified, or until such Director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier, subject to such
Director's earlier death, disqualification, resignation or removal. Except as
otherwise provided by the Board in the resolution or resolutions establishing
such series, whenever the holders of any series of Preferred Stock having such
right to elect additional Directors are divested of such right pursuant to the
provisions of such stock, the terms of office of all such additional Directors
elected by the holders of such stock, or elected to fill any vacancies resulting
from the death, resignation, disqualification or removal of such additional
Directors, shall forthwith terminate and the total and authorized number of
Directors of the Corporation shall be reduced accordingly.
Section 4. Vacancies.
Subject to the rights, if any, of the holders of any series of
Preferred Stock to elect Directors and to fill vacancies in the Board of
Directors relating thereto, any and all vacancies
6
<PAGE> 7
in the Board of Directors, however occurring, including, without limitation, by
reason of an increase in size of the Board of Directors, or the death,
resignation, disqualification or removal of a Director, shall be filled solely
by the affirmative vote of a majority of the remaining Directors then in office,
even if less than a quorum of the Board of Directors. Any Director appointed in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors in which the new directorship was
created or the vacancy occurred and until such Director's successor shall have
been duly elected and qualified or until his or her earlier resignation or
removal. Subject to the rights, if any, of the holders of any series of
Preferred Stock to elect Directors, when the number of Directors is increased or
decreased, the Board of Directors shall determine the class or classes to which
the increased or decreased number of Directors shall be apportioned; provided,
however, that no decrease in the number of Directors shall shorten the term of
any incumbent Director. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
Section 5. Removal.
Subject to the rights, if any, of any series of Preferred Stock to
elect Directors and to remove any Director whom the holders of any such stock
have the right to elect, any Director (including persons elected by Directors to
fill vacancies in the Board of Directors) may be removed from office (i) only
with cause and (ii) only by the affirmative vote of at least two-thirds of the
total votes which would be eligible to be cast by stockholders in the election
of such Director. At least 30 days prior to any meeting of stockholders at which
it is proposed that any Director be removed from office, written notice of such
proposed removal shall be sent to the Director whose removal will be considered
at the meeting. For purposes of this Second Amended and Restated Certificate of
Incorporation, "cause," with respect to the removal of any Director shall
include (i) conviction of a felony, (ii) declaration of unsound mind by order of
court, (iii) gross dereliction of duty, (iv) commission of any action involving
moral turpitude, or (v) commission of an action which constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its
7
<PAGE> 8
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174 of
the DGCL or (iv) for any transaction from which the Director derived an improper
personal benefit. If the DGCL is amended after the effective date of this Second
Amended and Restated Certificate of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of Directors, then the
liability of a Director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Section 1. Amendment by Directors.
Except as otherwise provided by law, the By-laws of the Corporation may
be amended or repealed by the Board of Directors.
Section 2. Amendment by Stockholders.
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
8
<PAGE> 9
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend or repeal this Second
Amended and Restated Certificate of Incorporation in the manner now or hereafter
prescribed by statute and this Second Amended and Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation. No amendment or repeal of this Second Amended and
Restated Certificate of Incorporation shall be made unless the same is first
approved by the Board of Directors pursuant to a resolution adopted by the Board
of Directors in accordance with Section 242 of the DGCL, and, except as
otherwise provided by law, thereafter approved by the stockholders. Whenever any
vote of the holders of voting stock is required to amend or repeal any provision
of this Second Amended and Restated Certificate of Incorporation, and in
addition to any other vote of holders of voting stock that is required by this
Second Amended and Restated Certificate of Incorporation, or by law, the
affirmative vote of a majority of the total votes eligible to be cast by holders
of voting stock with respect to such amendment or repeal, voting together a
single class, at a duly constituted meeting of stockholders called expressly for
such purpose shall be required to amend or repeal any provisions of this Second
Amended and Restated Certificate of Incorporation; provided, however, that the
affirmative vote of not less than 80% of the total votes eligible to be cast by
holders of voting stock, voting together a single class, shall be required to
amend or repeal any of the provisions of Article VI or Article IX of this Second
Amended and Restated Certificate of Incorporation.
9
<PAGE> 10
I, Lars D. Perkins, President of the Corporation, for the purpose of
amending and restating the Corporation's Certificate of Incorporation pursuant
to the General Corporation Law of the State of Delaware, do make this
certificate, hereby declaring and certifying that this is my act and deed on
behalf of the Corporation this ___ day of , 1996.
-----------------------------------
Lars D. Perkins, President
10
<PAGE> 1
EXHIBIT 5
[GOODWIN, PROCTER & HOAR LLP LETTERHEAD]
May 17, 1996
Restrac, Inc.
3 Allied Drive
Dedham, MA 02026
Re: Legality of Securities to be Registered Under
Registration Statement on Form S-1
File No. 333-03521
---------------------------------------------
Ladies and Gentlemen:
This opinion is furnished in connection with the filing of a
Registration Statement on Form S-1, File No. 333-03521 (the "Registration
Statement"), pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), of 2,875,000 shares (the "Shares") of common stock, par
value $.01 per share (the "Common Stock"), of Restrac, Inc., a Delaware
corporation (the "Company"), that are being registered by the Company for its
account and the account of certain stockholders.
In connection with rendering this opinion, we have examined the
Certificate of Incorporation of the Company, as amended and restated to the
date hereof and on file with the Delaware Secretary of State; the By-laws of
the Company; such records of the corporate proceedings of the Company as we
deem appropriate for the purposes of this opinion; the Registration Statement
and the exhibits thereto.
We are attorneys admitted to practice in The Commonwealth of
Massachusetts. We express no opinion concerning the laws of any jurisdictions
other than the laws of the United States of America, the laws of The
Commonwealth of Massachusetts and the Delaware General Corporation Law.
Based upon the foregoing, we are of the opinion that when and as the
Shares have been issued and paid for pursuant to the Underwriting Agreement,
such Shares will be duly authorized, validly issued and fully paid and
non-assessable.
The foregoing assumes that all requisite steps will be taken to comply
with the requirements of the Securities Act and applicable requirements of
state laws regulating the offer and sale of securities.
<PAGE> 2
GOODWIN, PROCTER & HOAR LLP
Restrac, Inc.
May 17, 1996
Page 2
We hereby consent to being named as counsel to the Company in the
Registration Statement, to the references therein to our firm under the caption
"Legal Matters" and to the inclusion of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ GOODWIN, PROCTER & HOAR LLP
GOODWIN, PROCTER & HOAR LLP
<PAGE> 1
EXHIBIT 10.4
As adopted 12/30/93
RESTRAC, INC.
RESTRAC 1994 STOCK PLAN
1. Purpose. The purpose of this Restrac 1994 Stock Plan (the "Plan") is to
advance the interests of Restrac, Inc., a Delaware corporation (the "Company"),
by strengthening the ability of the Company to attract, retain and motivate key
employees, consultants and other individual contributors of or to the Company or
any present or future parent or subsidiary of the Company (the "Company Group")
by providing them with an opportunity to purchase or receive as bonuses stock of
the Company and thereby permitting them to share in the Company's success. It is
intended that this purpose will be effected by granting (i) incentive stock
options ("Incentive Options") which are intended to qualify under the provisions
of Section 422 of the Internal Revenue Code of 1986, as heretofore and hereafter
amended (the "Code"), and non-statutory stock options ("Nonqualified Options")
which are not intended to meet the requirements of Section 422 of the Code and
which are intended to be taxed under Section 83 of the Code (both Incentive
Options and Nonqualified Options shall be collectively referred to as
"Options"), (ii) stock purchase authorizations ("Purchase Authorizations") and
(iii) stock bonus awards ("Bonuses").
2. Effective Date. This Plan was adopted by the Board of Directors of the
Company (the "Board") on December 30, 1993 (the "effective date" of the Plan)
and approved by the stockholders on December 30, 1993.
3. Stock Covered by the Plan. Subject to adjustment as provided in
Sections 9 and 10 below, the shares that may be made subject to Options,
Purchase Authorizations or Bonuses under this Plan ("Shares") shall not exceed
in the aggregate 100,000 shares of the common stock, $.01 par value, of the
Company ("Common Stock"). Any Shares subject to an Option or Purchase
Authorization which for any reason expires or is terminated unexercised as to
such Shares and any Shares reacquired by the Company pursuant to forfeiture or a
repurchase right hereunder may again be the subject of an Option, Purchase
Authorization or Bonus under the Plan. The Shares purchased pursuant to Purchase
Authorizations or the exercise of Options under this Plan or issued as Bonuses
may, in whole or in part, be either authorized but unissued Shares or issued
Shares reacquired by the Company.
4. Administration. This Plan shall be administered by the Board, whose
construction and interpretation of the Plan's terms and provisions shall be
final and conclusive. The Board shall have authority, subject to the express
provisions of the Plan, to construe the Plan and the respective Options,
Purchase Authorizations, Bonuses and related agreements, to prescribe, amend and
rescind rules and regulations relating to the Plan, to determine the terms and
provisions of the respective Options, Purchase Authorizations, Bonuses and
related agreements, and to make all other determinations in the judgment of the
Board necessary or desirable for the administration of the Plan. The Board may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any Option, Purchase Authorization, Bonus, or related agreement in
the manner and to the extent it shall deem expedient to carry the Plan into
effect, and it shall be the sole and final judge of director shall be liable for
any action or determination made in good faith. The Board may, to the full
extent permitted by law, delegate any or all of its powers under the Plan to a
committee (the "Committee") appointed by the Board, and if the Committee is so
appointed and to the extent such powers are delegated, all references to the
Board in the Plan shall mean and relate to such Committee.
5. Eligible Recipients. Options, Purchase Authorizations and Bonuses may
be granted to such key employees, consultants or other individual contributors
of or to the Company Group, including
<PAGE> 2
without limitation members of the Board and members of any scientific or
technical advisory boards, as are selected by the Board (a "Participant");
provided, that only employees of the Company Group shall be eligible for grant
of an Incentive Option.
6. Duration of the Plan. This Plan shall terminate ten (10) years from the
effective date hereof, unless terminated earlier pursuant to Section 13
hereafter, and no Options, Purchase Authorizations or Bonuses may be granted or
made thereafter.
7. Terms and Conditions of Options, Purchase Authorizations and Bonuses.
Options, Purchase Authorizations and Bonuses granted or made under this Plan
shall be evidenced by agreements in such form and containing such terms and
conditions as the Board shall determine; provided, however, that such agreements
shall evidence among their terms and conditions the following:
(a) Price. The purchase price per Share payable upon the exercise of
each Option or the purchase pursuant to each Purchase Authorization granted or
made hereunder shall be determined by the Board at the time the Option or
Purchase Authorization is granted or made. Subject to the condition of paragraph
7(j)(i), if applicable, the purchase price per Share payable upon the exercise
of each Incentive Option granted hereunder shall not be less than one hundred
percent (100%) of the fair market value per Share of the Common Stock on the day
the Incentive Option is granted or made. Fair market value shall be determined
in accordance with procedures to be established in good faith by the Board.
Bonus Shares shall be issued in consideration of services previously rendered,
which shall be valued for such purposes by the Board or the Committee, as the
case may be.
(b) Number of Shares. Each agreement shall specify the number of Shares
to which it pertains.
(c) Exercise of Options. Each Option shall be exercisable for the full
amount or for any part thereof and at such intervals or in such installments as
the Board may determine at the time it grants such Option; provided, however,
that no Option shall be exercisable with respect to any Shares later than ten
(10) years after the date of the grant of such Option (or five (5) years in the
case of Incentive Options to which paragraph 7(j)(ii) applies). An Option shall
be exercisable only by delivery of a written notice to the Company's Treasurer,
or any other officer of the Company designated by the Board to accept such
notices on its behalf, specifying the number of Shares for which the Option is
exercised and accompanied by either (i) payment or (ii) if permitted by the
Board, irrevocable instructions to a broker to promptly deliver to the Company
full payment in accordance with paragraph 7(d)(ii) below of the amount necessary
to pay the aggregate exercise price. With respect to an Incentive Option, the
permission of the Board referred to in clause (ii) of the preceding sentence
must be granted at the time the Incentive Option is granted.
(d) Payment. Payment shall be made in full (i) at the time the Option
is exercised, (ii) promptly after the Participant forwards the irrevocable
instructions referred to in paragraph 7(c)(ii) above to the appropriate broker,
if exercise of an Option is made pursuant to paragraph 7(c)(ii) above, or (iii)
at the time the purchase pursuant to a Purchase Authorization is made. Payment
shall be made either (a) in cash, (b) by check, (c) if permitted by the Board
(with respect to an Incentive Option, such permission to have been granted at
the time of the Incentive Option grant), by delivery and assignment to the
Company of shares of Company stock having a fair market value (as determined by
the Board) equal to the exercise or purchase price, (d) if permitted by the
Board, stated in the agreement evidencing the Option or Purchase Authorization,
and to the extent permitted by any applicable law, by the Participant's recourse
promissory note, which note must be five (5) years after the date the Option or
Purchase Authorization is exercised, or (e) by a combination of (a), (b), (c)
and/or (d). If shares of Company stock are to be used to pay the exercise price
of an Incentive Option, the Company prior to such payment must be furnished with
evidence satisfactory to it that the acquisition of such shares and their
transfer in payment of the exercise price satisfy the requirements of Section
422 of the Code and other applicable laws.
<PAGE> 3
(e) Withholding Taxes; Delivery of Shares. The Company's obligation to
deliver Shares upon exercise of an Option or upon purchase pursuant to a
Purchase Authorization or issuance pursuant to a Bonus shall be subject to the
Participant's satisfaction of all applicable federal, state and local income and
employment tax withholding obligations. Without limiting the generality of the
foregoing, the Company shall have the right to deduct from payments of any kind
otherwise due to the Participant any federal, state or local taxes of any kind
required by law to be withheld with respect to any Shares issued upon exercise
of Options or purchased or issued pursuant to Purchase Authorizations or
Bonuses. The Participant may elect to satisfy such obligation(s), in whole or in
part, by (i) delivering to the Company a check for the amount required to be
withheld or (ii) if the Board in its sole discretion approves in any specific or
general case, having the Company withhold Shares or delivering to the Company
already-owned shares of Common Stock, having a value equal to the amount
required to be withheld, as determined by the Board.
(f) Non-Transferability. No Option or Purchase Authorization shall be
transferable by the Participant otherwise than by will or the laws of descent or
distribution, and each Option or Purchase Authorization shall be exercisable
during the Participant's lifetime only by the Participant.
(g) Termination of Purchase Authorizations and Options. Each Purchase
Authorization shall terminate and may no longer be exercised if the Participant
ceases for any reason to provide services to a member of the Company Group.
Except to the extent the Board provides specifically in an agreement evidencing
an Option for a lesser period (or a greater period, in the case of Nonqualified
Options only), each Option shall terminate and may no longer be exercised if the
Participant ceases for any reason to provide services to a member of the Company
Group in accordance with the following provisions:
(i) if the Participant ceases to perform services for any reason
other than death or disability (as defined in Section 22(e)(3) of the Code), the
Participant may, at any time within a period of one month after the date of such
cessation of the performance of services, exercise the Option to the extent that
the Option was exercisable on the date of such cessation;
(ii) if the Participant ceases to perform services because of
disability (as defined in Section 22(e)(3) of the Code), the Participant may, at
any time within a period of six months after the date of such cessation of the
performance of services, exercise the Option to the extent that the Option was
exercisable on the date of such cessation; and
(iii) if the Participant ceases to perform services because of
death, the Option, to the extent that the Participant was entitled to exercise
it on the date of death, may be exercised within a period of six months after
the Participant's death by the person or persons to whom the Participant's
rights under the Option pass by will or by the laws of descent or distribution;
provided, however, that no Option or Purchase Authorization may be exercised to
any extent by anyone after the date of its expiration; and provided, further,
that Options and Purchase Authorizations may be exercised only as to Vested
Shares (as defined in the applicable agreement with the Participant) after the
Participant has ceased to perform services for any member of the Company Group.
(h) Rights as Stockholder. A Participant shall have no rights as a
stockholder with respect to any Shares covered by an Option, Purchase
Authorization or Bonus until the date of issuance of a stock certificate in the
Participant's name for such Shares.
(i) Repurchase of Shares by the Company. Any Shares purchased or
acquired upon exercise of an Option or pursuant to a Purchase Authorization or
Bonus may in the discretion of the Board be subject to repurchase by or
forfeiture to the Company if and to the extent and at the repurchase price, if
any, specifically set forth in the option, purchase or bonus agreement pursuant
to which the Shares were purchased or acquired. Certificates representing Shares
subject to such repurchase or forfeiture may be
<PAGE> 4
subject to such escrow and stock legending provisions as may be set forth in the
option, purchase or bonus agreement pursuant to which the Shares were purchased
or acquired.
(j) 10% Stockholder. If any Participant to whom an Incentive Option is
granted pursuant to the provisions of the Plan is on the date of grant the owner
of stock (as determined under Section 424(d) of the Code) possessing more than
10% of the total combined voting power or value of all classes of stock of the
Company, its parent, if any, or subsidiaries, then the following special
provisions shall be applicable:
(i) The exercise price per Share subject to such Option shall not
be less than 110% of the fair market value of each Share on the date of grant;
and (ii) The Option shall not have a term in excess of five years from the date
of grant.
(k) Confidentiality Agreements. Each Participant shall execute, prior
to or contemporaneously with the grant of any Option, Purchase Authorization or
Bonus hereunder, the Company's then standard form of agreement relating to
nondisclosure of confidential information, assignment of inventions and related
matters.
8. Restrictions on Incentive Options. Incentive Options granted under this
Plan shall be specifically designated as such and shall be subject to the
additional restriction that the aggregate fair market value, determined as of
the date the Incentive Option is granted, of the Shares with respect to which
Incentive Options are exercisable for the first time by a Participant during any
calendar year shall not exceed $100,000. If an Incentive Option which exceeds
the $100,000 limitation of this paragraph 8 is granted, the portion of such
Option which is exercisable for shares in excess of the $100,000 limitation
shall be treated as a Nonqualified Option pursuant to Section 422(d) of the
Code. In the event that such Participant is eligible to participate in any other
stock incentive plans of the Company, its parent, if any, or a subsidiary which
are also intended to comply with the provisions of Section 422 of the Code, such
annual limitation shall apply to the aggregate num es for which options may be
granted under all such plans.
9. Stock Dividends; Stock Splits; Stock Combinations; Recapitalizations.
Appropriate adjustment shall be made by the Board in the maximum number of
Shares subject to the Plan and in the number, kind, and exercise or purchase
price of Shares covered by outstanding Options and Purchase Authorizations
granted hereunder to give effect to any stock dividends, stock splits, stock
combinations, recapitalizations and other similar changes in the capital
structure of the Company after the effective date of the Plan.
10. Merger; Sale of Assets. In the event of a change of the Common Stock
resulting from a merger or similar reorganization as to which the Company is the
surviving corporation, the number and kind of Shares which thereafter may be
purchased pursuant to an Option or Purchase Authorization under the Plan and the
number and kind of Shares then subject to Options or Purchase Authorizations
granted hereunder and the price per Share thereof shall be appropriately
adjusted in such manner as the Board may deem equitable to prevent dilution or
enlargement of the rights available or granted hereunder. Except as otherwise
determined by the Board, a merger or a similar reorganization which the Company
does not survive, or a sale of all or substantially all of the assets of the
Company, shall cause every Option and Purchase Authorization hereunder to
terminate, to the extent not then exercised, unless any surviving entity agrees
to assume the obligations hereunder; provided, however, that, in the case of
such a merger or similar reorganization, or such a sale of all or substantially
all of the assets of the Company, if there is no such assumption, the Board may
provide that some or all of the unexercised portion of any one or more of the
outstanding Options or Purchase Authorizations and some or all of the unvested
Shares acquired upon exercise of any one or more of such Options or Purchase
Authorizations or acceptance of any one or more of the outstanding Bonuses shall
be immediately exercisable and vested or no longer subject to repurchase rights
as of such date prior to such merger, similar reorganization or sale of assets
as the Board determines.
<PAGE> 5
11. Investment Representations; Transfer Restrictions. The Company may
require Participants, as a condition of purchasing Shares pursuant to the
exercise of an Option or to a Purchase Authorization or receipt of shares as a
Bonus, to give written assurances in substance and form satisfactory to the
Company to the effect that such person is acquiring the Shares for the
Participant's own account for investment and not with any present intention of
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate (including without limitation
confirmation that the Participant is aware of any applicable restrictions on
transfer of the Shares, as specified in the by-laws of the Company or otherwise)
in order to comply with federal and applicable state securities laws.
12. Definitions.
(a) The term "employee" shall have, for purposes of this Plan, the
meaning ascribed to "employee" under Section 3401(c) of the Code and the
regulations promulgated thereunder.
(b) The term "Exchange Act" shall mean the Securities Exchange Act of
1934, as heretofore and hereafter amended.
(c) The term "parent" shall have, for purposes of this Plan, the
meaning ascribed to it under Section 424(e) of the Code and the regulations
promulgated thereunder.
(d) The term "subsidiary" shall have, for all purposes under this
Plan, the meaning ascribed to it under Section 424(f) of the Code and the
regulations promulgated thereunder.
13. Termination or Amendment of Plan. The Board may at any time terminate
the Plan or make such changes in or additions to the Plan as it deems advisable
without further action on the part of the stockholders of the Company, provided:
(a) that no such termination or amendment shall adversely affect or
impair any then outstanding Option, Purchase Authorization, Bonus or related
agreement without the consent of the Participant holding such Option, Purchase
Authorization, Bonus or related agreement; and
(b) that no such amendment which (i) increases the maximum number of
Shares subject to this Plan (except to the extent provided in Section 3), (ii)
materially increases the benefits accruing to Participants, or (iii) materially
modifies the requirements as to eligibility for participation in the Plan may be
made without obtaining, or being conditioned upon, stockholder approval.
With the consent of the Participant affected, the Board may amend
outstanding Options, Purchase Authorizations, Bonuses or related agreements in a
manner not inconsistent with the Plan. The Board shall have the right to amend
or modify the terms and provisions of the Plan and of any outstanding Incentive
Options granted under the Plan to the extent necessary to qualify any or all
such Options for such favorable federal income tax treatment (including deferral
of taxation upon exercise) as may be afforded incentive stock options under
Section 422 of the Code.
<PAGE> 1
EXHIBIT 10.5
RESTRAC, INC.
1996 STOCK OPTION AND GRANT PLAN
AS OF MAY 8, 1996
1. PURPOSE
This Stock Option and Grant Plan (the "Plan") is intended as a performance
incentive for officers, employees, directors, consultants and other key persons
of Restrac, Inc. (the "Company") or its Subsidiaries (as hereinafter defined) to
enable the persons to whom options are granted (the "Optionees") or to whom
shares of common stock are granted (the "Grantees") to acquire or increase a
proprietary interest in the success of the Company. The Company intends that
this purpose will be effected by the granting of "incentive stock options"
("Incentive Options") as defined in Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), nonqualified stock options ("Nonqualified
Options"), including, without limitation, grants of Nonqualified Options to
members of the Board of Directors of the Company and consultants and other key
persons who provide services to the Company or its Subsidiaries (regardless of
whether they are also employees), and outright grants of common stock under the
Plan. The term "Subsidiaries" includes any corporations in which stock
possessing fifty percent or more of the total combined voting power of all
classes of stock is owned directly or indirectly by the Company.
<PAGE> 2
2. OPTIONS TO BE GRANTED AND ADMINISTRATION
(a) Options granted under the Plan may be either Incentive Options or
Nonqualified Options, and shall be designated as such at the time of grant. To
the extent that any option intended to be an Incentive Option shall fail to
qualify as an "incentive stock option" under the Code, such option shall be
deemed to be a Nonqualified Option.
(b) The Plan shall be administered by a committee (the "Compensation
Committee") of not less than two directors of the Company appointed by the Board
of Directors of the Company (the "Board of Directors") each of whom is (1) not
an employee of the Company or any of its Subsidiaries and a "disinterested
person" within the meaning of Rule 16b-3(c)(2)(i) promulgated under the
Securities Exchange Act of 1934, as amended (the "Act"), and (2) an "outside
director" within the meaning of Section 162(m) of the Code.
(c) Subject to the terms and conditions of the Plan, the Compensation
Committee shall have the power:
(i) To determine from time to time the options or stock to be granted to
eligible persons under the Plan, to prescribe the terms and provisions (which
need not be identical) of options or stock granted under the Plan to such
persons and to approve the grant of options or stock, as the case may be;
(ii) To construe and interpret the Plan and grants thereunder and to
establish, amend, and revoke rules and regulations for administration of the
Plan. In this connection, the Compensation Committee may correct any defect
or supply any omission, or reconcile any inconsistency in the Plan, in any
option agreement, or in
2
<PAGE> 3
any related agreements, in the manner and to the extent it shall deem
necessary or expedient to make the Plan fully effective;
(iii) to accelerate the exercisability or vesting of all or any portion
of any option;
(iv) subject to the provisions of Section 5(a), to extend the period in
which options may be exercised;
(v) generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company
with respect to the Plan.
All decisions and determinations by the Compensation Committee in the exercise
of its powers shall be final and binding upon the Company, the Optionees and the
Grantees.
3. STOCK
(a) The stock granted under the Plan, or subject to the options granted under
the Plan, shall be shares of the Company's authorized but unissued common stock,
par value $.01 per share (the "Common Stock"). The total number of shares that
may be issued under the Plan shall not exceed an aggregate of 958,156 shares of
Common Stock (which such number reflects a three-for-two stock split effected as
a stock dividend on or prior to the date hereof) and no more than 400,000
options may be granted to any one individual during any one calendar year
period. Such numbers shall be subject to adjustment as provided in Section 7
hereof.
3
<PAGE> 4
(b) Whenever any outstanding option under the Plan expires, is canceled or is
otherwise terminated (other than by exercise), the shares of Common Stock
allocable to the unexercised portion of such option may again be the subject of
options or grants of Common Stock under the Plan.
4. ELIGIBILITY
(a) Incentive Options may be granted only to officers or other employees of
the Company or its Subsidiaries, including members of the Board of Directors who
are also employees of the Company or its Subsidiaries. Nonqualified Options may
be granted to officers or other employees of the Company or its Subsidiaries,
members of the Board of Directors and consultants and other key persons who
provide services to the Company or its Subsidiaries (regardless of whether they
are also employees). Grants of Common Stock may be made to any officer,
director, employee, consultant or other key person of the Company or its
Subsidiaries.
(b) No person shall be eligible to receive any Incentive Option under the
Plan if, at the date of grant, such person beneficially owns stock representing
in excess of 10% of the voting power of all outstanding capital stock of the
Company (a "Ten Percent Stockholder") unless notwithstanding anything in this
Plan to the contrary (i) the purchase price for the Common Stock subject to such
option is at least 110% of the fair market value of such stock at the time of
the grant and (ii) the option by its terms is not exercisable more than five
years from the date of grant thereof.
4
<PAGE> 5
(c) Notwithstanding any other provision of the Plan, to the extent that the
aggregate fair market value of the stock with respect to which Incentive Options
are exercisable for the first time by any individual during any calendar year
(under all plans of the Company and its parent and Subsidiaries) exceeds
$100,000, the options attributable to the excess over $100,000 shall be treated
as Nonqualified Options under the Plan. Such annual limitation shall be applied
by taking Incentive Options into account in the order in which they were
granted.
(d) Each individual who first joins the Board of Directors as a non-employee
Director shall automatically be granted a Nonqualified Option to acquire 5,000
shares of Common Stock on the first day such individual serves as a non-employee
Director. Each non-employee Director who is serving as Director of the Company
on each October 1, beginning with October 1, 1996, shall automatically be
granted on such day a Nonqualified Option to acquire 2,500 shares of Common
Stock. The exercise price per share for the Common Stock covered by an option
granted hereunder shall be equal to the "fair market value" (determined pursuant
to the formula set forth in Section 5(d) hereof) of the Common Stock on the date
the option is granted, and except as otherwise provided in this Section 4(d),
any options granted hereunder shall be subject to the other provisions of this
Plan.
An option granted under this Section 4(d) shall be exercisable with respect
to one-fourth of the total shares to which the option relates on each
anniversary of the grant date; provided, however, that any option so granted
shall become immediately exercisable in full upon the termination of service of
the non-employee Director because of disability or death. No option issued under
this Section 4(d) shall be exercisable after the expiration of ten years
5
<PAGE> 6
from the date upon which such option is granted. For purposes of this Section
4(d), "disability" means an individual's inability to perform his normal
required services for the Company and its Subsidiaries for a period of six
consecutive months by reason of the individual's mental or physical disability,
as determined by the Compensation Committee in good faith in its sole
discretion.
The provisions of this Section 4(d) shall apply only to options granted or to
be granted to non-employee Directors, and shall not be deemed to modify, limit
or otherwise apply to any other provision of this Plan or to any option issued
under this Plan to an Optionee who is not an non-employee Director of the
Company. To the extent inconsistent with the provisions of any other Section of
this Plan, the provisions of this Section 4(d) shall govern the rights and
obligations of the Company and non-employee Directors respecting options granted
or to be granted to non-employee Directors. The provisions of this Section 4(d)
which affect the price, date of exercisability, option period or amount of
shares of Common Stock under an option shall not be amended more than once in
any six-month period, other than to comport with changes in the Code.
5. TERMS OF THE OPTION AGREEMENTS
Subject to the terms and conditions of the Plan, each option agreement shall
contain such provisions as the Compensation Committee shall from time to time
deem appropriate. Option agreements need not be identical, but each option
agreement by appropriate language shall include the substance of all of the
following provisions:
6
<PAGE> 7
(a) Expiration; Termination of Employment. Notwithstanding any other
provision of the Plan or of any option agreement, each option shall expire on
the date specified in the option agreement, which date in the case of any
Incentive Option shall not be later than the tenth anniversary of the date on
which the option was granted; provided, however, that if such Incentive Option
is held by a Ten Percent Stockholder, the expiration date of such Incentive
Option shall not be later than five years from the date of grant thereof. If an
Optionee's employment or service as a director with the Company and its
Subsidiaries terminates for any reason, the Compensation Committee may in its
discretion provide, at any time, that any outstanding option granted to such
Optionee under the Plan shall be exercisable, subject to the expiration date of
such option, for such period following termination of employment as may be
specified by the Compensation Committee, which period for purposes of Incentive
Options shall not exceed three months where such termination is not due to death
or disability (within the meaning of Section 22(e)(3) of the Code) or one year
where such termination is due to death or disability. If an Optionee's
employment or service as a director with the Company and its Subsidiaries
terminates due to the Optionee's willful actions against the interests of the
Company, the option may be terminated upon written notice to the Optionee; in
such a case, the option will cease to be exercisable immediately upon the
Optionee's receipt of such written notice.
(b) Minimum Shares Exercisable. The minimum number of shares with respect to
which an option may be exercised at any one time shall be fifty (50) shares, or
such lesser
7
<PAGE> 8
number as is subject to exercise under the option at the time, provided that no
fractional shares may be issued.
(c) Exercise. Each option shall be exercisable in such installments (which
need not be equal) and at such times as may be designated by the Compensation
Committee. To the extent not exercised, installments shall accumulate and be
exercisable, in whole or in part, at any time after becoming exercisable, but
not later than the date the option expires.
(d) Purchase Price. The purchase price per share of Common Stock subject to
each option shall be determined by the Compensation Committee; provided,
however, that the purchase price per share of Common Stock subject to each
Incentive Option shall be not less than the fair market value of the Common
Stock on the date such Incentive Option is granted. For the purposes of the
Plan, the fair market value of the Common Stock shall be determined in good
faith by the Compensation Committee; provided, however, that (i) if the Common
Stock is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") Small-Cap Market on the date the option is
granted, the fair market value shall not be less than the average of the highest
bid and lowest asked prices of the Common Stock on NASDAQ reported for such date
or, if no prices were reported for such date, for the last date preceding such
date on which prices were reported, (ii) if the Common Stock is admitted to
trading on a national securities exchange or the NASDAQ National Market System
on the date the option is granted, the fair market value shall not be less than
the closing price reported for the Common Stock on such exchange or system for
such date or, if no sales were reported for such date, for the last date
preceding such date for which a sale
8
<PAGE> 9
was reported, and (iii) the fair market value of the Common Stock on the
effective date of the registration statement for the Company's initial public
offering shall be the initial offering price.
(e) Rights of Optionees. No Optionee shall be deemed for any purpose to be
the owner of any shares of Common Stock subject to any option unless and until
(i) the option shall have been exercised pursuant to the terms thereof, (ii) all
requirements under applicable law and regulations shall have been complied with
to the satisfaction of the Company, (iii) the Company shall have issued and
delivered the shares to the Optionee, and (iv) the Optionee's name shall have
been entered as a stockholder of record on the books of the Company. Thereupon,
the Optionee shall have full voting, dividend and other ownership rights with
respect to such shares of Common Stock.
(f) Transfer. No option granted hereunder shall be transferable by the
Optionee other than by will or by the laws of descent and distribution, and such
option may be exercised during the Optionee's lifetime only by the Optionee, or
his or her guardian or legal representative.
6. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
(a) Any option granted under the Plan may be exercised by the Optionee in
whole or, subject to Section 5(b) hereof, in part by delivering to the Company
on any business day a written notice specifying the number of shares of Common
Stock the Optionee then desires to purchase (the "Notice"). As a condition
precedent to the exercise of any option, the Optionee
9
<PAGE> 10
shall pay or make arrangements for the payment of all taxes to be withheld, in
accordance with Section 9 of the Plan.
(b) Payment for the shares of Common Stock purchased pursuant to the exercise
of an option shall be made either: (i) in cash, or by certified or bank check or
other payment acceptable to the Company, equal to the option exercise price for
the number of shares specified in the Notice (the "Total Option Price"); (ii) if
authorized by the applicable option agreement and if permitted by law, by
delivery of shares of Common Stock that the Optionee has beneficially owned for
more than six months and which the Optionee may freely transfer having a fair
market value, determined by reference to the provisions of Section 5(d) hereof,
equal to or less than the Total Option Price, plus cash in an amount equal to
the excess, if any, of the Total Option Price over the fair market value of such
shares of Common Stock; or (iii) by the Optionee delivering the Notice to the
Company together with irrevocable instructions to a broker to promptly deliver
the Total Option Price to the Company in cash or by other method of payment
acceptable to the Company; provided, however, that the Optionee and the broker
shall comply with such procedures and enter into such agreements of indemnity or
other agreements as the Company shall prescribe as a condition of payment under
this clause (iii).
(c) The delivery of certificates representing shares of Common Stock to be
purchased pursuant to the exercise of an option will be contingent upon the
Company's receipt of the Total Option Price and of any written representations
from the Optionee required by the
10
<PAGE> 11
Compensation Committee, and the fulfillment of any other requirements contained
in the option agreement or applicable provisions of law.
7. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
(a) If the shares of the Company's Common Stock as a whole are increased,
decreased, changed into or exchanged for a different number or kind of shares or
securities of the Company, whether through merger, consolidation,
reorganization, recapitalization, reclassification, stock dividend, stock split,
combination of shares, exchange of shares, change in corporate structure or the
like, an appropriate and proportionate adjustment shall be made in the number
and kind of shares subject to the Plan, and in the number, kind, and per share
exercise price of shares subject to unexercised options or portions thereof
granted prior to any such change. In the event of any such adjustment in an
outstanding option, the Optionee thereafter shall have the right to purchase the
number of shares under such option at the per share price, as so adjusted, which
the Optionee could purchase at the total purchase price applicable to the option
immediately prior to such adjustment.
(b) Adjustments under this Section 7 shall be determined by the Compensation
Committee and such determinations shall be conclusive. The Compensation
Committee shall have the discretion and power in any such event to determine and
to make effective provision for acceleration of the time or times at which any
option or portion thereof shall become exercisable. No fractional shares of
Common Stock shall be issued under the Plan on account of any adjustment
specified above.
11
<PAGE> 12
8. EFFECT OF CERTAIN TRANSACTIONS
In the case of (i) the dissolution or liquidation of the Company, (ii) a
reorganization, merger, consolidation or other business combination in which the
Company is acquired by another entity (other than a holding company formed by
the Company) or in which the Company is not the surviving entity, or (iii) the
sale of all or substantially all of the assets of the Company to another entity,
the Plan and the options issued hereunder shall terminate upon the effectiveness
of any such transaction or event, unless provision is made in connection with
such transaction for the assumption of options theretofore granted, or the
substitution for such option of new options of the successor entity or parent
thereof, with appropriate adjustment as to the number and kind of shares and the
per share exercise prices, as provided in Section 7. In the event of such
termination, (A) all outstanding options which are then currently exercisable
for shares of Common Stock and (B) such percentage between twenty-five percent
(25%) and one hundred percent (100%) of any outstanding options that are not
then currently exercisable for shares of Common Stock as shall have been
determined by the Compensation Committee at the time of grant of the applicable
options shall be exercisable for at least fifteen (15) days prior to the date of
such termination whether or not otherwise exercisable during such period;
provided, however, that in the absence of any express determination by the
Compensation Committee as to the percentage of any options that shall be
accelerated under clause (B) above, the percentage shall be twenty-five percent
(25%).
12
<PAGE> 13
9. TAX WITHHOLDING
(a) Each Optionee shall, no later than the exercise date of any option, pay
to the Company, or make arrangements satisfactory to the Compensation Committee
regarding payment of any Federal, state, or local taxes of any kind required by
law to be withheld with respect to such income. The Company and its Subsidiaries
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment of any kind otherwise due to the Optionee.
(b) An Optionee may elect to have his tax withholding obligation satisfied,
in whole or in part, by (i) authorizing the Company to withhold from shares of
Common Stock to be issued pursuant to any option number of shares with an
aggregate fair market value (determined by reference to the provisions of
Section 5(d) hereof), that would satisfy the withholding amount due, or (ii)
transferring to the Company shares of Common Stock owned by the Optionee with an
aggregate fair market value (determined by reference to the provisions of
Section 5(d) hereof) that would satisfy the withholding amount due. With respect
to any Optionee who is subject to Section 16 of the Act, the following
additional restrictions shall apply:
(i) the election to satisfy tax withholding obligations relating to an
option in the manner permitted by this Section 9(b) shall be made (1) at
least six months prior to the date as of which the receipt of such an option
first becomes a taxable event for Federal income tax purposes or (2) after
the Company has been subject to the reporting requirements of Section 13(a)
of the Act for at least one year, during the period
13
<PAGE> 14
beginning on the third business day following the date of release of
quarterly or annual summary statements of sales and earnings of the Company
and ending on the twelfth business day following such date.
(ii) such election shall be irrevocable;
(iii) such election shall be subject to the consent or disapproval of the
Compensation Committee; and
(iv) the Common Stock withheld to satisfy tax withholding must pertain to
an option which has been held by the Optionee for at least six months from
the date of grant of the option.
10. CONDITION TO GRANTS OF COMMON STOCK
As a condition precedent to the grant of Common Stock to any Grantee under
the Plan, the Grantee shall grant to the Company such repurchase and first
refusal rights on the Common Stock which is the subject of the grant as the
Compensation Committee shall deem necessary or appropriate. The Compensation
Committee may also impose such other terms and conditions on the grant of any
Common Stock under the Plan as it may determine.
11. AMENDMENT OF THE PLAN
The Board of Directors may discontinue the Plan or amend the Plan at any
time, and from time to time, subject to any required regulatory approval and the
limitation that, except as provided in Sections 7 and 8 hereof, no amendment
shall be effective unless approved by
14
<PAGE> 15
the stockholders of the Company in accordance with applicable law and
regulations at an annual or special meeting held within twelve months before or
after the date of adoption of such amendment, where such amendment will:
(a) increase the number of shares of Common Stock as to which options may be
granted under the Plan;
(b) change in substance Section 4 hereof relating to eligibility to
participate in the Plan;
(c) change the minimum option exercise price; or
(d) otherwise materially increase the benefits accruing to individuals under
the Plan.
In addition to the foregoing, other Plan amendments shall be subject to
approval by the Company stockholders if and to the extent determined by the
Compensation Committee to be required by the Act to ensure that options or
grants granted under the Plan are exempt under Rule 16b-3 promulgated under the
Act, or that Incentive Stock Options granted under the Plan are qualified under
Section 422 of the Code.
Except as provided in Sections 7 and 8 hereof, rights and obligations under
any option granted before any amendment of the Plan shall not be altered or
impaired by such amendment, except with the consent of the Optionee.
15
<PAGE> 16
12. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the submission
of the Plan to the stockholders of the Company for approval shall be construed
as creating any limitations on the power of the Board of Directors to adopt such
other incentive arrangements as it may deem desirable, including, without
limitation, the granting of stock or stock options otherwise than under the
Plan, and such arrangements may be either applicable generally or only in
specific cases. Neither the Plan nor any option granted hereunder shall be
deemed to confer upon any employee any right to continued employment with the
Company or its Subsidiaries.
13. GOVERNMENT AND OTHER REGULATIONS; GOVERNING LAW
(a) The obligation of the Company to sell and deliver shares of Common Stock
with respect to options granted under the Plan shall be subject to all
applicable laws, rules and regulations, including all applicable federal and
state securities laws, and the obtaining of all such approvals by governmental
agencies as may be deemed necessary or appropriate by the Compensation
Committee.
(b) The Plan shall be governed by Delaware law, except to the extent that
such law is preempted by federal law.
16
<PAGE> 17
14. EFFECTIVE DATE OF PLAN RESTATEMENT; STOCKHOLDER APPROVAL
This Plan shall become effective upon the date that it is approved by the
Board of Directors of the Company; provided, however, that the Plan shall be
subject to the approval of the Company's stockholders in accordance with
applicable laws and regulations at an annual or special meeting held within
twelve months of such effective date. No options granted under the Plan prior to
such stockholder approval may be exercised until such approval has been
obtained. No options may be granted under the Plan after the tenth anniversary
of the effective date of the Plan.
* * *
Approved by Board of Directors: May 8, 1996
Approved by Stockholders: May 8, 1996
17
<PAGE> 1
EXHIBIT 10.6
RESTRAC, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The purpose of the Restrac, Inc. 1996 Employee Stock Purchase Plan
("the Plan") is to provide eligible employees of Restrac, Inc. (the "Company")
and certain of its subsidiaries with opportunities to purchase shares of the
Company's common stock, $.01 par value (the "Common Stock"). One hundred fifty
thousand (150,000) shares of Common Stock in the aggregate have been approved
for this purpose. The Plan is intended to constitute an "employee stock purchase
plan" within the meaning of Section 423(b) of the Internal Revenue Code of 1986,
as amended (the "Code"), and shall be interpreted in accordance with that
intent.
1. Administration. The Plan will be administered by the Company's Board
of Directors (the "Board") or by a committee appointed by the Board for such
purpose (the "Committee"). The Board or the Committee has authority to make
rules and regulations for the administration of the Plan, and its
interpretations and decisions with regard thereto shall be final and conclusive.
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
hereunder.
2. Offerings. The Company will make one or more offerings to eligible
employees to purchase Common Stock under the Plan ("Offerings"). The initial
Offering will begin on July 1, 1996 [the effective date of the IPO] and will end
on September 30, 1996 (the "Initial Offering"). Thereafter, an Offering will
begin on the first business day
<PAGE> 2
occurring on or after each October 1 and April 1 and will end on the last
business day occurring on or before the following March 31 and September 30,
respectively.
3. Eligibility. All employees of the Company (including employees who
are also directors of the Company) and all employees of each Designated
Subsidiary (as defined in Section 11) are eligible to participate in any one or
more of the Offerings under the Plan, provided that as of the first day of the
applicable Offering (the "Offering Date") they are customarily employed by the
Company or a Designated Subsidiary for more than twenty (20) hours a week and
have completed at least six (6) months of employment.
4. Participation. An employee eligible on any Offering Date may
participate in such Offering by submitting an enrollment form to his appropriate
payroll location at least ten (10) business days before the Offering Date (or by
such other deadline as shall be established for the Offering). The form will (a)
state the percentage to be deducted from his Compensation (as defined in Section
11) per pay period, (b) authorize the purchase of Common Stock for him in each
Offering in accordance with the terms of the Plan and (c) specify the exact name
or names in which shares of Common Stock purchased for him are to be issued
pursuant to Section 10. An employee who does not enroll in accordance with these
procedures will be deemed to have waived his right to participate. Unless an
employee files a new enrollment form or withdraws from the Plan, his deductions
and purchases will continue at the same percentage of Compensation for future
Offerings, provided he remains eligible. Notwithstanding the foregoing,
participation in the Plan will neither be permitted nor be denied contrary to
the requirements of the Code.
2
<PAGE> 3
5. Employee Contributions. Each eligible employee may authorize payroll
deductions at a minimum of one percent (1%) up to a maximum of ten percent (10%)
of his Compensation for each pay period. The Company will maintain book accounts
showing the amount of payroll deductions made by each participating employee for
each Offering. No interest will accrue or be paid on payroll deductions.
6. Deduction Changes. An employee may not increase or decrease his
payroll deduction during any Offering, but may increase or decrease his payroll
deduction with respect to the next Offering (subject to the limitations of
Section 5) by filing a new enrollment form at least ten (10) business days
before the next Offering Date (or by such other deadline as shall be established
for the Offering).
7. Withdrawal. An employee may withdraw from participation in the Plan
by delivering a written notice of withdrawal to his appropriate payroll
location. The employee's withdrawal will be effective as of the next business
day. Following an employee's withdrawal, the Company will promptly refund to him
his entire account balance under the Plan (after payment for any Common Stock
purchased before the effective date of withdrawal). Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Offering, but may enroll in a subsequent Offering in accordance with
Section 4.
8. Grant of Options. On each Offering Date, the Company will grant to
each eligible employee who is then a participant in the Plan an option
("Option") to purchase on the last day of such Offering (the "Exercise Date"),
at the Option Price hereinafter provided for, whole shares of Common Stock
reserved for the purposes of the Plan up to a maximum determined by dividing ten
percent (10%) of such employee's projected
3
<PAGE> 4
Compensation for the period of the Offering by eighty five percent (85%) of the
Fair Market Value of the Common Stock (as defined in Section 11) on the Offering
Date. The purchase price for each share purchased under such Option (the "Option
Price") will be 85% of the Fair Market Value of the Common Stock on the Offering
Date or the Exercise Date, whichever is less.
Notwithstanding the foregoing, no employee may be granted an option
hereunder if such employee, immediately after the option was granted, would be
treated as owning stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
Parent or Subsidiary (as defined in Section 11). For purposes of the preceding
sentence, the attribution rules of Section 424(d) of the Code shall apply in
determining the stock ownership of an employee, and all stock which the employee
has a contractual right to purchase shall be treated as stock owned by the
employee. In addition, no employee may be granted an Option which permits his
rights to purchase stock under the Plan, and any other employee stock purchase
plan of the Company and its Parents and Subsidiaries, to accrue at a rate which
exceeds $25,000 of the fair market value of such stock (determined on the option
grant date or dates) for each calendar year in which the Option is outstanding
at any time. The purpose of the limitation in the preceding sentence is to
comply with Section 423(b)(8) of the Code.
9. Exercise of Option and Purchase of Shares. Each employee who
continues to be a participant in the Plan on the Exercise Date shall be deemed
to have exercised his Option on such date and shall acquire from the Company
such number of whole shares of Common Stock reserved for the purpose of the Plan
as his accumulated
4
<PAGE> 5
payroll deductions on such date will purchase at the Option Price, subject to
any other limitations contained in the Plan. Any balance remaining in an
employee's account at the end of an Offering will be refunded to the employee
promptly; provided that any balance remaining in an employee's account at the
end of an Offering solely by reason of the inability to purchase a fractional
share will be carried forward to the next Offering.
10. Issuance of Certificates. Certificates representing shares of
Common Stock purchased under the Plan may be issued only in the name of the
employee, in the name of the employee and another person of legal age as joint
tenants with rights of survivorship, or in the name of a broker authorized by
the employee to be his, or their, nominee for such purpose.
11. Definitions.
The term "Compensation" means the amount of total cash compensation,
prior to salary reduction pursuant to either Section 125 or 401(k) of the Code,
including base pay, commissions, overtime, and incentive and bonus awards, but
excluding allowances and reimbursements for expenses such as relocation
allowances or travel expenses, income or gains on the exercise of Company stock
options, and similar items.
The term "Designated Subsidiary" means any present or future Subsidiary
(as defined below) that is designated from time to time by the Board or the
Committee to participate in the Plan. Subsidiaries may be so designated either
before or after the Plan is approved by the stockholders.
The term "Fair Market Value of the Common Stock" means the last
reported sale price of the Common Stock on the Nasdaq National Market ("NASDAQ")
on a given day
5
<PAGE> 6
or, if no sales of Common Stock were made on that day, the last reported sale
price of the Common Stock on the next preceding day on which sales were made.
The term "Parent" means a "parent corporation" with respect to the
Company, as defined in Section 424(e) of the Code.
The term "Subsidiary" means a "subsidiary corporation" with respect to
the Company, as defined in Section 424(f) of the Code.
12. Rights on Retirement, Death, or Other Termination of Employment. If
a participating employee's employment terminates for any reason before the
Exercise Date for any Offering, no payroll deduction will be taken from any pay
due and owing to the employee and the balance in his account will be paid to him
or, in the case of his death, to his designated beneficiary as if he had
withdrawn from the Plan under Section 7. An employee will be deemed to have
terminated employment, for this purpose, if the corporation that employs him,
having been a Designated Subsidiary, ceases to be a Subsidiary, or if the
employee is transferred to any corporation other than the Company or a
Designated Subsidiary.
13. Optionees Not Stockholders. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under the Plan
until such shares have been purchased by and issued to him.
14. Rights Not Transferable. Rights under the Plan are not transferable
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
6
<PAGE> 7
15. Application of Funds. All funds received or held by the Company
under the Plan may be combined with other corporate funds and may be used for
any corporate purpose.
16. Adjustment in Case of Changes Affecting Common Stock. In the event
of a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for the Plan, and the
share limitation set forth in Section 8, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
17. Amendment of the Plan. The Board or the Committee may at any time,
and from time to time, amend the Plan in any respect, except that without the
approval, within twelve (12) months of such Board or Committee action, by the
holders of a majority of the shares of stock of the Company present or
represented and entitled to vote at a meeting of stockholders, no amendment
shall be made (a) increasing the number of shares approved for the Plan or (b)
redefining the class of corporations whose employees are eligible to receive
Options under the Plan.
18. Insufficient Shares. If the total number of shares of Common Stock
that would otherwise be purchased on any Exercise Date plus the number of shares
purchased under previous Offerings under the Plan exceeds the maximum number of
shares issuable under the Plan, the shares then available shall be apportioned
among participants in proportion to the amount of payroll deductions accumulated
on behalf of
7
<PAGE> 8
each participant that would otherwise be used to purchase Common Stock on such
Exercise Date.
19. Termination of the Plan. The Plan may be terminated at any time by
the Board or the Committee. Upon termination of the Plan, all amounts in the
accounts of participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and
deliver Common Stock under the Plan is subject to listing on NASDAQ (or other
national exchange) and obtaining all governmental approvals required in
connection with the authorization, issuance, or sale of such stock.
The Plan shall be governed by Delaware law except to the extent that
such law is preempted by federal law.
The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. Any provision
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan. To ensure compliance with such Rule, the Board or the
Committee may limit the right of covered employees to withdraw from the Plan or
to resume participation following withdrawal.
21. Issuance of Shares. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. Tax Withholding. Participation in the Plan is subject to any
required tax withholding on income of the participant in connection with the
Plan. Each employee agrees, by entering the Plan, that the Company and its
Subsidiaries shall have the right
8
<PAGE> 9
to deduct any such taxes from any payment of any kind otherwise due to the
employee, including shares issuable under the Plan.
23. Notification upon Sale of Shares. Each employee agrees, by entering
the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
24. Effective Date and Approval of Shareholders. The Plan shall take
effect on the first day of the Company's initial public offering, subject to
approval by the holders of a majority of the shares of stock of the Company
present or represented and entitled to vote at a meeting of stockholders, which
approval must occur within twelve (12) months of the adoption of the Plan by the
Board.
9
<PAGE> 1
EXHIBIT 10.11
DEDHAM PLACE
OFFICE LEASE
MICROTRAC SYSTEMS, INC.
Made this 31st day of March, in the year one thousand nine hundred and ninety
three by and between Dedham Place Office Associates Limited Partnership,
a Massachusetts limited partnership (hereinafter called the "Landlord", which
expression shall include his heirs, executors, successors and assigns where the
context so admits), and Micro Trac Systems, Inc., a Massachusetts corporation
(hereinafter called the "Tenant", which expression shall include its successors
and assigns or executors and administrators where the context so admits).
<PAGE> 2
WITNESSETH, that in consideration of the rent and covenants herein reserved and
contained on the part of Tenant to be paid, performed and observed, Landlord
does hereby demise and lease unto Tenant, and Tenant does hereby lease from
Landlord the premises described in Article II hereof.
W I T N E S S E T H :
ARTICLE 1
Reference Data and Definitions
1.01. Reference Data.
LANDLORD'S REPRESENTATIVE: Kurt W. Saraceno
LANDLORD'S ADDRESS (FOR PAYMENT OF RENT):
Dedham Place Office Associates
Limited Partnership
c/o Kurt Saracen
57 Wells Avenue
Newton, Massachusetts 02159
LANDLORD'S ADDRESS (FOR NOTICES AND COMMUNICATIONS):
Kurt-Saracen Associates
Attn: Amy Gough
57 Wells Avenue
Newton, Massachusetts 02159
TENANT'S ADDRESS (FOR NOTICE AND BILLING): Dedham Place, Dedham, MA 02026
TENANT'S REPRESENTATIVE: George Engdahl
Treasurer/CFO
PREMISES: One Dedham Place, Dedham, Massachusetts 02026
RENTABLE AREA OF PREMISES: 12,237 Square Feet
RENTABLE AREA OF THE BUILDING: 160,000 Square Feet
TENANT'S SPACE PLAN DELIVERY DATE: March 3, 1993
TERM COMMENCEMENT DATE: Later of April 15, 1993 or Substantial Completion Date
RENT COMMENCEMENT DATE: A date nine (9) months following the Term Commencement
Date.
LEASE TERMINATION DATE: See Section 3.02.
INITIAL TERM: Three (3) Years and Two (2) Months. Refer to Section 3.02
BASIC RENT: $17.00 PER SQUARE FOOT OF RENTABLE AREA PER YEAR
<PAGE> 3
$208,029.00 PER YEAR $17,335.75 PER MONTH
1% penalty automatically accessed if rent
not paid within ten (10) days of due date.
BASIC RENT CONCESSION: Nine (9) Months based upon Tenant's payment of Tenant's
share of the build-out described in Exhibit D.
OPERATING EXPENSE BASE: 1993 Actuals adjusted for Tenant's actual use based upon
partial year of occupancy (Landlord's contribution towards Tenant's Operating
Expenses). Tenant agrees to pay any operating expenses in excess of the
operating expense base.
Landlord will provide Tenant with five keys with no charge to Tenant. Additional
keys will be charged to Tenant.
OPTION TO EXTEND: One (1) Three (3) year option to renew at 90% of the then
market value. Refer to Section 3.03.
OPTION TO EXPAND: Refer to Section 2.03.
PARKING: Landlord shall provide Tenant with adequate parking in the covered
garage in the building below. Landlord shall also provide Tenant with seven (7)
exclusive parking spaces for the sole use.
DEDHAM HILTON USE: Landlord shall provide Tenant with five (5) health club
memberships to the Dedham Hilton Health Club. Landlord will provide a suitable
grass area at the Dedham Hilton for a volleyball court.
PERMITTED USES: GENERAL OFFICE, SALES, TRAINING AND RESEARCH AND DEVELOPMENT
CONSISTENT WITH A FIRST CLASS OFFICE BUILDING.
1.02. General Provisions. For all purposes of this Lease unless otherwise
expressed and provided herein or therein or unless the context otherwise
requires:
(a) The words herein, hereof, hereunder and other words of similar import
refer to this Lease as a whole and not to any particular article, section or
other subdivision of this Lease.
(b) A pronoun in one gender includes and applies to the other gender as
well.
(c) Each definition stated in Section 1.01 or 1.03 of this Lease applies
equally to the singular and the plural forms of the term or expression defined.
(d) Any reference to a document defined in Section 1.03 of this Lease is
to such document as originally executed, or, if modified, amended or
supplemented in accordance with the provisions of this Lease, to such document
as so modified, amended or supplemented and in effect at the relevant time of
reference thereto.
(e) All accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles.
(f) All references in Section 1.01 hereof are subject to the specific
definitions thereof (if any) in Section 1.03 hereof.
1.03. Terms Defined. Each term or expression set forth above in Section 1.01
hereof or below in this Section 1.03 has the meaning stated immediately after
it.
<PAGE> 4
Additional Rent. All sums and other charges (other than Basic Rent) due
from Tenant to Landlord or incurred by Landlord as the result of a Default.
Additional Services. Services provided to Tenant or in respect of the
Premises which are not described in Exhibit A hereto.
Adjusted Operating Expense Base. The amount determined by multiplying the
Operating Expense Base by the Adjustment Factor.
Adjustment Factor. With respect to the First Calendar Year and the Last
Calendar Year, the percentage computed by dividing (i) the number of days of
each such period falling within the Lease Term by (ii) 365.
Affiliate. With respect to any specified Person, any other person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition, the
term control when used with respect to any specified Person means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms controlling and controlled by have meanings correlative to the
foregoing.
Authorizations. All franchises, licenses, permits and other governmental
consents issued by Governmental Authorities pursuant to Legal Requirements which
are or may be required for the use and occupancy of the Premises and the conduct
or continuation of a Permitted Use therein.
Basic Rent. Rent agreed upon by Landlord and Tenant and referred to in
Section 1.01.
Basic Services. The services described in Exhibit A hereto.
Building. The building currently existing on the Land.
Business Day. A day which is not a Saturday, Sunday or other day on which
banks in Boston, Massachusetts, are authorized or required by law or executive
order to remain closed.
Calendar Year. The First Calendar Year, the Last Calendar Year and any
full calendar year (January 1 through December 31) occurring during the Lease
Term.
Common Areas. All areas devoted to the common use of occupants of the
Building or the provision of Services to the Building, including but not limited
to the atrium, all corridors, elevator foyers, air shafts, elevator shafts and
elevators, stairwells and stairs, restrooms, mechanical rooms, janitor closets,
vending areas and other similar facilities for the provision of Services or the
use of all occupants of multi-tenant floors or all occupants of the Building.
Control. As defined in the definition of Affiliate.
Corporation. A corporation, company, association, business trust or
similar organization wherever formed.
Extension Option. As set forth in Section 3.03.
Extension Period. The additional three (3) year period resulting from
Tenant's exercise of its Extension Option.
<PAGE> 5
First Calendar Year. The partial Calendar Year period commencing on the
Term Commencement Date and ending on the next succeeding December 31.
Force Majeure. Acts of God, strikes, lock outs, labor troubles, inability
to procure materials, failure of power, restrictive Legal Requirements, riots
and insurrection, acts of the public enemy, wars, earthquakes, hurricanes and
other natural disasters, fires, explosions, any act, failure to act or Default
of the other party to this Lease or any other reason beyond the control of any
party to this Lease; provided, however, lack of money shall not be deemed such a
cause.
Governmental Authority. United States of America, the Commonwealth of
Massachusetts, the Town of Westwood/Dedham, and any political subdivision
thereof and any agency, department, commission, board, bureau or instrumentality
of any of them.
Initial Term. The initial lease period beginning on the Term Commencement
Date and ending three (3) years and two (2) months later.
Insolvency. The occurrence with respect to any Person of one or more of
the following events: the death, dissolution, termination of existence (other
than by merger or consolidation), insolvency, appointment of a receiver for all
or substantially all of the property of such Person, or the execution of an
assignment or trust mortgage for the benefit of creditors by such Person, or the
filing of a petition of bankruptcy or the commencement of any proceedings by or
against such Person under a bankruptcy, insolvency or other law relating to the
relief or the adjustment of indebtedness, rehabilitation or reorganization of
debtors; provided that if such petition or commencement is involuntarily made
against such a Person and is dismissed within sixty (60) days of the date of
such filing or commencement, such events shall not constitute an insolvency
hereunder.
Insurance Requirements. All terms of any policy of insurance maintained by
Landlord or Tenant and applicable to (or affecting any condition, operation, use
or occupancy of) the Building or the Premises or any part or parts of either and
all requirements of the issuer of any such policy and all orders, rules,
regulations and other requirements of the National Board of Fire Underwriters
(or any other body exercising similar functions).
Land. The Land at One Dedham Place, in the Town of Westwood/Dedham,
Commonwealth of Massachusetts.
Landlord's Contribution. The amount contributed by Landlord as a credit
toward the cost of finishing the Premises shown on Exhibit D.
Landlord's Work. The work to be done by Landlord with respect to the
Premises described in the Work Letter (see Exhibit D).
Last Calendar Year. The partial Calendar Year commencing on January 1 of
the Calendar Year in which the Lease Termination Date occurs of the Lease Term
and ending on the Lease Termination Date.
Lease Term. The period commencing on the Term Commencement Date and ending
on the Lease Termination Date.
<PAGE> 6
Lease Termination Date. The earlier to occur of (1) the Stated Expiration
Date, (2) the termination of this Lease by Landlord as the result of an Event of
Default, (3) the termination of this Lease pursuant to Articles 17 (Damage or
Destruction) or 18 (Eminent Domain) hereof.
Lease Year. A period commencing on the Term Commencement Date (or an
anniversary thereof) and ending on the day before the next succeeding
anniversary thereof. For example, the first Lease Year is a period commencing on
the Term Commencement Date and ending on the day before the first anniversary
thereof. The last Lease Year shall end on the Lease Termination Date.
Legal Requirements. All statutes, codes, ordinances (and all rules and
regulations thereunder), all executive orders and other administrative orders,
judgments, decrees, injunctions and other judicial orders of or by any
Governmental Authority which may at any time be applicable to parts of
appurtenances of the Premises or Building or to any condition or use thereof and
the provisions of all Authorizations.
Occupancy Arrangement. With respect to the Premises or any portion thereof
or the Lease, and whether (a) written or unwritten or (b) for all or any portion
of the Lease Term, an assignment, a sublease, any tenancy at will, a tenancy at
sufferance, or any other arrangement (including but not limited to a license or
concession) pursuant to which a Person occupies the Premises for any purpose.
Operating Expense Base. Set forth in Section 1.01 as Landlord's
contribution towards the payment of Tenant's operating expenses. Tenant agrees
to pay any operating expenses on an annual basis in excess of the Operating
Expense Base.
Operating Expenses. All expenses, costs, and disbursements of every kind
and nature which Landlord shall pay or become obligated to pay in connection
with the ownership, operation and maintenance of the Building (including all
facilities in operation on the Term Commencement Date and such additional
facilities in subsequent years as may be reasonably determined by Landlord to be
necessary or beneficial for the operation of the Building) and Land and the
provision of Basic Services, including but not limited to (a) wages, salaries,
fees and cost to Landlord of all Persons engaged in connection therewith,
including all Taxes , insurance and benefits relating thereto, (b) the cost of
(i) all supplies and materials, electricity and lighting, (ii) water, heat, air
conditioning, and ventilating for the Building, (iii) all maintenance,
janitorial, and service agreements, (iv) all insurance, including the cost of
casualty and liability insurance applicable to the Building and onal property
used in connection therewith, (v) repairs, snow plowing and general maintenance,
(vi) capital items which are primarily for the purpose of reducing Operating
Expenses or which may be required by a Governmental Authority, amortized over
the reasonable life of the capital items with the reasonable life and
amortization schedule being determined by Landlord in accordance with generally
accepted accounting principles, (vii) all real estate taxes or other taxes
associated with the Building, (viii) pursuing an application for an abatement of
taxes pursuant to Section 6.06 hereof to the extent not deducted from the
abatement, if any, received, (ix) independent auditors, (x) Landlord's central
accounting functions, and (xi) office space for the manager of the Building, and
(c) management fees. Operating Expenses shall not include (i) capital items
except as provided above or (ii) specific costs billed to and paid by specific
tenants. Operating expenses shall be determined on the accrual basis in
accordance with generally accepted accounting principles which shall be
consistently applied.
Partial Taking. Any Taking which is not a Total Taking.
Permitted Exceptions. Any liens or encumbrances on the Premises in the
nature of (a) liens for Taxes assessed but not yet due and payable, (b)
easements, reservations, restrictions and rights of way encumbering or affecting
the Land on the date of this Lease, (c) the rights of Landlord, Tenant and any
other Persons to whom Landlord has granted such rights to exercise in common
with respect to the Land and the Common Areas the rights granted to Tenant
hereunder, (d) mortgages of record, and (e) Title Conditions.
<PAGE> 7
Person. An individual, a Corporation, a company, a voluntary association,
a partnership, a trust, an unincorporated organization or a government or any
agency, instrumentality or political subdivision thereof.
Premises. The space in the Building shown and outlined in Exhibit E
hereto.
Proceeds. With respect to any Taking or occurrence described in Article 17
hereof, with respect to which any Person is obligated to pay any amount to or
for the account of Landlord, the aggregate of (i) all sums payable or receivable
under or in respect of any insurance policy, and (ii) all sums or awards payable
in respect to a Taking.
Prohibited Occupancy Arrangement. An Occupancy Arrangement which provides
for any rent or other payment based in whole or in part on the net income or
profits derived by any Person from the Premises.
Rent. Basic Rent and all Additional Rent.
Rent Commencement Date. The date upon which rent payments begin being the
date following a period of nine (9) months following the Term Commencement Date.
Rentable Area of the Premises. The number of square feet stated in Section
1.01, whether the same should be more or less as a result of minor variations
resulting from actual construction and completion of the Building or Premises so
long as such work is done in accordance with the terms and provisions hereof.
The calculation was made according to the following formula:
(i) On single tenant floors, the usable area measured from the inside
surfaces of the outer glass of the Building, plus Tenant's Share of Common
Areas.
(ii) On multi-tenant floors, the usable area measured from the inside
surface of the outer glass of the Building to the midpoint of all demising walls
of the space being measured plus the area of each corridor adjacent to and
required as the result of the layout of the space being measured, measured from
the midpoint of the adjacent demising walls, plus Tenant's Share of Common
Areas.
Rules and Regulations. Reasonable Rules and Regulations promulgated by
Landlord and uniformly applicable to Persons occupying the Building regulating
the details of the operation and use of the Building. The initial Rules and
Regulations are attached hereto as Exhibit C.
Services. Basic Services and Additional Services.
Special Work. Work done in or with respect to the Premises which is not
part of Landlord's Work or the cost of which exceeds Landlord's Contribution.
Stated Expiration Date. The later to occur of (i) the last day of the
Initial Term or (ii) the last day of the Extension Period.
Substantial Completion Date. The date on which the Premises together with
the appurtenant areas of the Building necessary for access and service thereto,
have been completed in accordance with Article 7 hereof except for items of work
and adjustment of equipment and fixtures which are not necessary to make the
Premises reasonably tenantable for the Permitted Uses and because of season or
weather or nature of the item cannot practicably be done at the time.
<PAGE> 8
Taking. The taking or condemnation of title to all or any part of the Land
or the possession or use of the Building or the Premises by a competent Person
for any public use or purpose or any proceeding or negotiations which might
result in such taking or any sale or lease in lieu of or in anticipation of such
a taking.
Taxes. All taxes, special or general assessments, water rents, rates and
charges, sewer rents and other impositions and charges imposed by Governmental
Authorities of every kind and nature whatsoever, extraordinary as well as
ordinary and each and every installment thereof which shall or may during the
term of this Lease be charged, levied, laid, assessed, imposed, become due and
payable or become liens upon or for or with respect to the Land or any part
thereof and the Building or the Premises, appurtenances or equipment owned by
Landlord thereon or therein or any part thereof or on this Lease under or by
virtue of all present or future Legal Requirements and any tax based on a
percentage fraction or capitalized value of the Rent (whether in lieu of or in
addition to the taxes hereinbefore described). Taxes shall not include
inheritance, estate, excise, succession, transfer, gift, franchise, income,
gross receipt, or profit taxes except to the extent such are in lieu of or in
substitution for Taxes as now imposed on the Building, the Land, the Premises
or this Lease.
Tenant. As defined in the preamble hereof.
Tenant's Cost. The cost of work done in connection with the completion of
the Premises in excess of (i) the cost of Landlord's Work and (ii) Landlord's
Contribution.
Tenant's Share. The percentage of the Rentable Area of the Building
represented by the Rentable Area of Premises.
Term Commencement Date. The earlier of (a) April 15, 1993 or (b) the
Substantial Completion Date, (c) any other date for such commencement determined
in accordance with said Article 7.
Title Conditions. All covenants, agreements, restrictions, easements and
declarations of record on the date hereof so far as the same may be from time to
time in force and applicable.
Total Taking. (i) a Taking of: (a) the fee interest in all or
substantially all of the Building or (b) such title to or easement in, over,
under or such rights to occupy and use any part or parts of the Building to the
exclusion of Landlord as shall have the effect, in the good faith judgment of
the Landlord, of rendering the portion of the Building remaining after such
Taking (even if restoration were made) unsuitable for the continued use and
occupancy of the Building for the Permitted Uses or (ii) a Taking of all or
substantially all of the Premises or such title to or easement in, on or over
the Premises to the exclusion of Tenant which in the good faith judgment of the
Landlord prohibits access to the Premises or the exercise by Tenant of any
rights under this Lease.
Working Drawings. The Working Drawings for the finishing of the Premises
developed by Landlord and Tenant in accordance with the Work Letter, which shall
be substantially in the form attached hereto as Exhibit D.
Work Letter. The agreement between Landlord and Tenant with respect to the
finishing of the Premises, which shall be substantially in the form attached
hereto as Exhibit D.
ARTICLE 2
Premises; Appurtenances
2.01. Premises. Landlord hereby leases and lets to Tenant, and Tenant hereby
takes and hires from Landlord, upon and subject to the terms, conditions,
covenants and provisions hereof, the Premises subject to the Permitted
Exceptions. Landlord reserves the right to relocate within or without the
Premises pipes, ducts, vents, flues, conduits, wires and appurtenant fixtures
which service other parts of the Building;
<PAGE> 9
provided that such work is done in such a manner that it does not unreasonably
interfere with Tenant's use of the Premises.
2.02. Appurtenances. Tenant may use the Common Areas and the Land as appurtenant
to the Premises for the purposes for which they were designed.
2.03. Expansion Option. Tenant shall have right of first refusal offer on any
space on the same floor of the building as the Premises which becomes vacant
during the Lease Term.
ARTICLE 3
Term
3.01. Term Commencement. The Lease Term shall commence on the Term Commencement
Date.
3.02. Termination. The Lease Term shall end on the Lease Termination Date.
3.03. Extension Option. Tenant may, at its option, renew the lease for an
additional three (3) year period, and the Basic Rent shall be equal to 90% of
the Fair Rental Value of the Premises but not less than the current rent of the
lease. The Fair Rental Value of the Premises shall be determined as follows:
upon Tenant's request, at lease six months prior to the end of the Initial Term,
Landlord will provide Tenant a written estimate of the current Fair Market
Rental Value of the Premises. If Tenant disagrees with such estimate, and the
parties are unable to mutually agree upon the Fair Market Rental Value, the
parties will mutually agree upon an independent expert who will make the final
decision as to the current Fair Market Rental Value. Once the Fair Market Rental
Value of the Premises has been determined, Tenant shall have one (1) month to
exercise its option to renew by providing Landlord with written notice of
Tenant's intent to renew.
ARTICLE 4
Rent
4.01. Basic Rent. Tenant shall pay Landlord for the Premises, without offset or
deduction and without previous demand therefor, the Basic Rent as annual rent
for each Lease Year. Notwithstanding the preceding sentence, no Basic Rent shall
be due or payable hereunder prior to the Rent Commencement Date. Basic Rent
shall be paid in equal monthly installments in advance on the first day of each
calendar month during the Lease Term occurring after the Rent Commencement Date.
The first installment of Basic Rent shall be paid on the Rent Commencement Date.
Subsequent installments of Basic Rent shall be paid on the first day of every
calendar month thereafter. Basic Rent for partial months at the beginning or end
of the Lease Term shall be pro-rated and paid on the Rent Commencement Date and
the first day of the calendar month in which the Stated Expiration Date is to
occur.
4.02. Computation of Basic Rent. The Basic Rent for the Initial Term shall be as
stated in Article 1.01 hereof. Notwithstanding the preceding sentence , no Basic
Rent shall be due or payable hereunder, nor shall any Basic Rent accrue, prior
to the Rent Commencement Date. The Basic Rent for each Lease Year in the
Extension Period shall be as set forth in Section 3.03. Basic Rent so determined
shall be exclusive of (and in addition to) amounts due hereunder for Taxes,
Operating Expenses and estimated costs of electrical service.
4.03. Late Penalty. Tenant agrees to pay a late charge of one and one-half
(1-1/2%) percent per month of any monthly rental payment which is not made on or
before the 10th day of the month in which it is due. In addition, Tenant agrees
to pay Landlord's reasonable collection fees (including legal expenses) in the
event that Tenant fails to pay Rent when due.
ARTICLE 5
Use of Premises
<PAGE> 10
5.01. Use Restricted. The Premises may be used for the Permitted Uses and for no
other purpose. No improvements may be made in or to the Premises except as
otherwise provided in this Lease.
5.02 Hazardous Materials. Tenant shall not (either with or without negligence)
cause or permit the escape, disposal or release of any biologically or
chemically active or other hazardous substances, or materials. Tenant shall not
allow the storage or use of such substances or materials in any manner not
sanctioned by law or by the highest standards prevailing in the industry for the
storage and use of such substances or materials, nor allow to be brought into
the Building any such materials or substances except to use in the ordinary
course of Tenant's business, and then only after written notice is given to
Landlord of the identity of such substances or materials. Without limitation,
hazardous substances and materials shall include those described in the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery
Act, as amended, 42 U.S.C. Section 6901 et seq., any applicable or local laws
and the regulations adopted under these acts. If any lender or governmental
agency shall ever require testing to ascertain whether or not there has been any
release of hazardous materials, then the reasonable costs thereof, including but
not limited to engineering and legal fees, shall be paid by Tenant to Landlord
upon demand as additional charges if such requirement applies to the Premises.
In addition, Tenant shall execute affidavits, representations and the like from
time to time at Landlord's request concerning Tenant's best knowledge and belief
regarding the presence of hazardous substances or materials on the Premises. In
all events, Tenant shall indemnify Landlord in the manner elsewhere provided in
this lease from any release of hazardous materials on the Premises occurring
while Tenant is in possession, or elsewhere if caused by Tenant or persons
acting under Tenant. The within covenants shall survive the expiration or
earlier termination of the lease term.
ARTICLE 6
Operating Expenses;
6.01. Operating Expenses. If with respect to any Calendar Year, Tenant's Share
of Operating Expenses exceeds the Operating Expense Base, Tenant shall pay to
Landlord the amount of each such excess. Any amount due with respect to this
Section 6.01 shall be due on the date which is thirty (30) days after receipt by
the Tenant of the statement described in Section 6.02 hereof. If said payment is
not made within thirty (30) days Tenant agrees to pay a late charge of 1-1/2%
per month.
6.02. Annual Statement of Additional Rent Due. Within a reasonable time after
the end of each Calendar Year, Landlord shall render to Tenant a statement,
prepared in accordance with generally accepted accounting practices, showing (i)
for the Calendar Year just ended Operating Expenses and (ii) for the then
current Calendar Year, an estimate of (a) Operating Expenses and (b) Tenant's
obligation under Section 6.01.
6.03. Monthly Payments of Additional Rent. Tenant shall pay to Landlord in
advance for each calendar month of the Lease Term falling between receipt by
Tenant of the statement described in Section 6.02 and receipt by Tenant of the
next such statement, as Additional Rent an amount equal to 1/12th of Tenant's
estimated obligation under Section 6.01 shown thereon. Any amounts due shall be
paid in advance on the first day of each calendar month during the Lease Term.
Tenant agrees to pay a late charge of one and one half (1-1/2%) percent per
month of any Additional Rent payment which is not made on or before the 10th
day of the month in which it is due. In addition, Tenant agrees to pay
Landlord's reasonable collection fees (including legal expenses) in the event
that Tenant fails to pay any Additional Rent when due. The amount due under
this Section 6.03 shall be paid with Tenant's monthly payments of Basic Rent
and shall be credited by Landlord to Tenant's obligations under Section 6.01.
If the total amount paid hereunder exceeds the amount due under such Section,
such excess shall be credited by Landlord against the monthly installments of
Additional Rent next falling due or refunded to Tenant upon the expiration or
termination of this Lease (unless such expiration or termination is the result
of an Event of Default).
<PAGE> 11
6.04. Accounting Periods. Landlord shall have the right from time to time to
change the periods of accounting hereunder to any annual period other than a
Calendar Year, and upon any such change, all items referred to in this Article 6
shall be appropriately apportioned. In all statements rendered under Section
6.02, amounts for periods partially within and partially without the accounting
periods shall be appropriately apportioned, and any items which are not
determinable at the time of a statement shall be included therein on the basis
of Landlord's estimate and with respect thereof Landlord shall render promptly
after determination a supplemental statement and appropriate adjustment shall be
made according thereto.
6.05. Abatement of Taxes. Landlord may at any time and from time to time make
application to the appropriate Governmental Authority for an abatement of Taxes.
Landlord shall make such an application at any time tenants occupying more than
60% of the Rentable Area of the Building under written Occupancy Arrangements
directly with the Landlord request that Landlord do so. If (i) such an
application is successful and (ii) Tenant has made any payment in respect of
Taxes pursuant to this Article 6 for the period with respect to which the
abatement was granted, Landlord shall (a) deduct from the amount of the
abatement all expenses incurred by it in connection with the application (b) pay
to Tenant Tenant's Share (adjusted for any period for which Tenant had made a
partial payment) of abatement, with interest, if any, paid by the Governmental
Authority on such abatement and (c) retain the balance, if any. Landlord will
adjust the tax portion of the operating expense base to reflect any abatement.
ARTICLE 7
Improvements, Repairs, Additions, Replacements
7.01. Preparation of the Premises. Landlord shall do Landlord's Work. All other
work must be of a quality equal to or better than Landlord's work as approved by
Landlord's representative. Landlord shall also do the work described in the
Working Drawings, subject to the provisions of the Work Letter. If (i) the cost
of such work exceeds Landlord's Contribution or (ii) Landlord further agrees to
do, at Tenant's request, any Special Work, Tenant shall pay the amount of
Tenant's Cost to Landlord in accordance with the Work Letter. If Tenant delays
Landlord's work for any reason including but not limited to Tenants delays in
providing plans or change orders in work to be completed, then the rent
commencement date shall be adjusted to reflect said delays and rent shall
commence on an earlier date reflecting the number of days Tenant's delay has
caused.
7.02. Tenant's Access to the Premises. Tenant and Tenant's agents, at Tenant's
sole risk, may, with Landlord's prior consent, enter the Premises prior to the
Term Commencement Date in order to do such work as may be required to make the
Premises ready for Tenant's use and occupancy thereof. If Landlord permits such
entry prior to the Term Commencement Date, such permission shall be conditioned
upon Tenant and Tenant's agents, contractors, workmen, mechanics, suppliers and
invitees, working in harmony with Landlord and the general contractor and with
other tenants and occupants of the Building. If at any time such entry shall
cause or threaten to cause disharmony or otherwise interfere with the orderly
completion or operation of the Building, Landlord shall have the right to
withdraw such permission upon twenty-four (24) hours written notice to Tenant.
Any such entry into and occupation of the Premises shall be deemed to be under
all of the terms, covenants, conditions and pros of this Lease except the
covenant to pay Rent. Landlord shall not be liable in any way for any injury,
loss or damage which may occur to any of Tenant's work and installations made in
the premises or to properties placed therein prior to the Term Commencement
Date, the same being at Tenant's sole risk.
7.03. Alterations and Improvements. Landlord shall install a sign on the
Premises, in accordance with Landlord's signage program for the Building,
stating Tenant's name, and shall also list Tenant's name on
<PAGE> 12
the building directory. Tenant shall not make alterations or additions to the
Premises except in accordance with plans and specifications therefor first
approved by Landlord. Tenant shall not hang shades, curtains, signs, awnings or
other materials, attach any materials to or make any change in the appearance of
any glass visible from outside of the Premises, add any window treatment of any
kind or make improvements or install furniture visible from outside of the
Premises, without Landlord's prior written consent. Without limitation, Landlord
shall not be deemed unreasonable for withholding approval of any alterations or
additions which would (a) delay completion of the Premises or the Building, or
(b) require unusual expense to readapt the Premises to normal office use upon
termination of this Lease or increase (i) the cost of (a) construction or (b)
insurance or (ii) Taxes. All alterations and additions, made with Landlord's
consent, shall be part of the Premises except those alterations and additions
which are personal property of Tenant and are removable without damage to the
Premises. All of Tenant's alterations and additions and installation of
furnishings shall be coordinated with any work being performed by Landlord and
in such manner as to maintain harmonious labor relations and not to damage the
Building or the Premises or interfere with Building operation and, except for
installation of furnishings, shall be performed by contractors or workmen first
approved by Landlord.
7.04. Maintenance and Repair. (a) Landlord, at his sole cost and expense, shall
maintain and repair all structural portions of the Building, including, without
limitation, the roof, the foundation and all support walls, columns and exterior
facings, unless such repairs are due to the fault or negligence of Tenant or its
servants, agents, employees, licensees or invitees.
(b) Landlord shall maintain and repair all floors, ceilings, window and
door frames, conduits and pipes and the plumbing, electrical, heating and air
conditioning systems of the Building, unless such repairs are due to the fault
or negligence of Tenant or of its servants, agents, employees, licensees or
invitees.
(c) Landlord shall maintain and repair all exterior areas of the Property,
including the watering, cutting and pruning of grass and shrubs in landscaped
areas, the removal of snow, ice, refuse and debris from the sidewalks, walkways
and parking areas of the Property and the striping, repairing and lighting of
said parking and walkway areas, unless such repairs are due to the fault or
negligence of Tenant or its servants, agents, employees, licensees or invitees.
(d) Except for repairs which are Landlord's express responsibility as set
forth in Section 8.01, Tenant shall keep the Premises in the same condition and
repair as they were in at the beginning of the Term, reasonable wear and tear,
damage by fire or other casualty, or act or omission of Landlord or its
employees or agents and Taking by eminent domain excepted. Tenant shall replace
any glass which may be damaged or broken with glass of the same quality at
Tenant's expense (if caused by the action of Tenant or its employees or agents).
Tenant, prior to vacating the Premises, shall shampoo all carpets. Tenant
further agrees to clean and repair walls, ceilings and millwork.
(e) Tenant shall make no alterations, improvements, or additions to the
Premises of a structural nature. Tenant may make only non-structural alterations
and only after obtaining Landlord's prior written consent. All such alterations
by Tenant shall be done in good and workmanlike manner and by Landlord or its
Affiliates at competitive costs. Tenant agrees to pay for Landlord's reasonable
supervision expenses in the event that Tenant hires an outside contractor to
make any alterations or improvements to Tenant's Premises. At the expiration or
other termination of this Lease, the Premises shall remain in their altered
condition with all improvements and additions becoming the property of the
Landlord, except as to improvements or additions which are personal property of
Tenant and are removable without damage to the Premises.
(f) Tenant covenants that it will permit Landlord and its agents to
examine the Premises at reasonable times, and that it will permit Landlord to
enter the Premises without charge or reduction in rent to make such repairs,
improvements, alterations or additions as may be required in order to comply
with the requirements of this Lease or of any public authority having
jurisdiction, or to make repairs which
<PAGE> 13
Tenant may have failed promptly to make pursuant to Tenant's covenants
hereunder. If such work is not of an emergency nature, it shall be done only
after reasonable notice to Tenant and in such a manner as will least interfere
with Tenant's operations.
7.05. Redelivery. On the Lease Termination Date, Tenant shall quit and
surrender the Premises free and clear of all tenants, occupants, liens, and
encumbrances whatsoever except (i) Permitted Exceptions and (ii) encumbrances,
restrictions or reservations caused by or consented to by Landlord. Tenant
shall, subject to the provisions of Articles 17 and 18 hereof, surrender the
Premises to Landlord broom clean and in good condition and repair (ordinary wear
and tear, damage by fire or casualty only excepted) with all damages occasioned
by Tenant's removal of Tenant's fixtures or equipment repaired to Landlord's
satisfaction.
ARTICLE 8
Building Services
8.01. Building Services. Landlord shall furnish, or cause to be furnished,
during the Lease Term the Basic Services.
8.02. Other Janitors. No persons shall be employed by Tenant to do janitorial
work in the Premises and no persons other than the janitors of the Building
shall clean the Premises unless Landlord shall give its written consent thereto.
Any person employed by Tenant with Landlord's consent to do janitorial work
shall, while in the Building, either inside or outside the Premises, be subject
to and under the control and direction of the superintendent of the Building
(but not as agent or servant of said superintendent or of Landlord).
8.03. Additional Services. Tenant will pay the Landlord a reasonable charge for
any extra cleaning (including periodic shampooing of carpets as needed) of the
Premises required because of the carelessness or indifference of Tenant and for
any Additional Services rendered at the request of Tenant. If the cost of
cleaning the Premises shall be increased due to the installation in the
Premises, at Tenant's request, of any unique or special materials, finish or
equipment, Tenant shall pay the Landlord an amount equal to such increase in
cost. All charges for Additional Services shall be due and payable within thirty
(30) days of the date on which they are billed.
8.04. Limitations on Landlord's Liability. Landlord shall not be liable in
damages, nor in default hereunder, for any failure or delay in furnishing any
Basic Service or Additional Service when such failure or delay is occasioned by
Force Majeure or by the act or Default of Tenant. No such failure or delay shall
be held or pleaded as an eviction or disturbance in any manner whatsoever of
Tenant's possession or give Tenant any right to terminate this Lease or give
rise to any claim for set-off or any abatement of Rent or of any of Tenant's
obligations under this Lease.
ARTICLE 9
Tenant's Particular Covenants
9.01. Pay Rent. Tenant shall pay when due all Rent, Additional Rent and, all
charges of Landlord for Additional Services rendered to the Premises. In
addition, Tenant agrees to pay Landlord's reasonable collection fees (including
legal expenses) in the event that Tenant fails to pay rent when due.
9.02. Occupancy of the Premises. Tenant shall occupy the Premises continuously
from the Term Commencement Date for the Permitted Uses only. Tenant shall not
(i) injure or deface the Premises or the Building, (ii) install any sign in or
on any window, demising wall or Common Area, (iii) permit in the Premises any
inflammable fluids or chemicals not reasonably related to the Permitted Uses nor
(iv) permit any nuisance or any use thereof which is improper, offensive,
contrary to any Legal Requirement or Insurance Requirement or liable to render
necessary any alteration or addition to the Building. Tenant agrees to give
Landlord at least five (5) days prior written notice before moving any furniture
or equipment into the Building or prior to vacating the Premises.
<PAGE> 14
9.03. Rules and Regulations. Tenant shall not obstruct in any manner any portion
of the Building or the Land. Tenant will comply with all Rules and Regulations.
9.04. Equipment. Tenant shall not place a load upon the floor of the Premises
exceeding the live load for which the floor has been designed; and shall not
move any safe or other heavy equipment in, about or out of the Premises except
in such manner and at such time as Landlord shall in each instance authorize.
Tenant shall isolate and maintain all of Tenant's business machines and
mechanical equipment which cause or may cause air-borne or structure-borne
vibration or noise, whether or not it may be transmitted to any other premises
so as to eliminate such vibration or noise. (Live Load Limits: Seventy (70)
pounds per square foot)
9.05. Electrical Equipment. Tenant shall not, without prior written notice to
Landlord in each instance connect to the Building electric distribution system
anything other than normal office equipment for a software development company.
Tenant's use of electrical energy in the Premises shall not at any time exceed
the capacity of any of the electrical conductors or equipment in or otherwise
serving the Premises. Tenant shall not, without prior written notice to Landlord
in each instance, connect to the Building electric distribution system any
fixtures, appliances or equipment which operate on a voltage in excess of 120
volts nominal or make any alteration or addition to the electric system of the
Premises.
9.06. Pay Taxes. Tenant shall pay promptly when due all taxes upon its personal
property (including, without limitation, fixtures and equipment) in the Premises
to whomsoever assessed.
9.07. Tenant shall provide Landlord with its most recent audited financials
within ten (10) days of such request. Landlord shall treat such information as
strictly confidential.
ARTICLE 10
Requirements of Public Authority
10.01. Legal Requirements. Tenant shall, at its own cost and expense, promptly
observe and comply with all Legal Requirements and shall act in conformity with
all applicable laws, ordinances, by-laws, rules and regulations of the
appropriate governmental authorities. Tenant shall pay all costs, expenses,
liabilities, losses, damages, fines, penalties, claims and demands, that may in
any manner arise out of or be imposed because of the failure of Tenant to comply
with the covenants of this Article 10. Landlord represents and warrants that,
during the Term hereof, Tenant's permitted uses will not violate any Legal
Requirements.
10.02. Contests. Tenant shall have the right to contest by appropriate legal
proceedings diligently conducted in good faith, in the name of the Tenant, or
Landlord (if legally required), or both (if legally required), without cost,
expense, liability or damage to Landlord, the validity or application of any
Legal Requirement and, if compliance with any of the terms of any such Legal
Requirement may legally be delayed pending the prosecution of any such
proceeding, Tenant may delay such compliance therewith until the final
determination of such proceeding.
ARTICLE 11
Covenant Against Liens
11.01. Mechanics Liens. Landlord's right, title and interest in the Premises or
the Land or the Building shall not be subject to or liable for liens of
mechanics or materialmen for work done on behalf of Tenant in connection with
improvements to the Premises. Notwithstanding such restriction, if because of
any act or omission of Tenant, any mechanic's lien or other lien, charge or
order for payment of money shall be filed
<PAGE> 15
against any portion of the Premises or the Land or the Building, Tenant shall,
at its own cost and expense, cause the same to be discharged of record or bonded
within ninety (90) days after the filing thereof.
11.02. Right to Discharge. Without otherwise limiting any other remedy of
Landlord for default hereunder, if Tenant shall fail to cause such liens to be
discharged of record or bonded within the aforesaid ninety (90) day period or to
satisfy such liens within ninety (90) days after any judgment in favor of such
lien holders from which no further appeal might be taken then Landlord shall
have the right to cause the same to be discharged. All amounts paid by Landlord
to cause such liens to be discharged shall constitute Additional Rent.
ARTICLE 12
Access to Premises
12.01. Access. Landlord or Landlord's agents and designees shall have the right,
but not the obligation, to enter upon the Premises at all reasonable times
during ordinary business hours to examine same and to exhibit the Premises to
prospective purchasers and tenants, but in the latter case only during the last
nine (9) months of the Lease Term.
ARTICLE 13
Assignment and Subletting:
Occupancy Arrangements
13.01. Subletting and Assignment. Tenant shall not (either voluntarily or by
operation of law) enter (Nor may Landlord cause, suffer or permit Tenant to
enter) into a Prohibited Occupancy Arrangement, and any Prohibited Occupancy
Arrangement shall be absolutely void and ineffective for any purpose. Tenant
shall not enter into any other Occupancy Arrangement, either voluntarily or by
operation of law, (other than with a Person who is a Subsidiary Company or
Affiliate of Tenant) without the prior written consent of Landlord. Landlord may
withhold approval of any Subtenant if Tenant is in default under the Lease or if
the Subtenant is one of Landlord's existing Tenants.
If the Landlord consents to such Occupancy Arrangement Tenant shall remain
liable for the payment and performance of the terms and covenants of this
Lease. Tenant agrees to disclose the terms of any sublease arrangement to
Landlord prior to signing said sublease. Tenant agrees to pay Landlord's
reasonable legal fees associated with any sublease or assignment.
ARTICLE 14
Indemnity
14.01. Tenant's Indemnity. To the fullest extent permitted by law, Tenant shall
indemnify and save harmless Landlord from and against any and all liability,
damage, penalties or judgments and from and against any claims, actions,
proceedings and expenses and costs in connection therewith, including reasonable
counsel fees arising from injury to person or property sustained by anyone in
and about the Premises or the Building or the Land to the extent resulting from
any act or omission of Tenant, or Tenant's officers, agents, servants,
employees, contractors, sublessees or invitees provided that the Landlord
notifies Tenant promptly in writing of any such action, gives Tenant sole
control of the defense and/or settlement of such action, and cooperates fully in
any such defense or settlement. This indemnity obligation shall not apply to
claims resulting from the acts as set forth in Section 14.02. All merchandise,
furniture, fixtures and property of every kind, nature and description of
Tenant or Tenant's employees, agents, contractors, invitees, visitors or guests
which may be in or upon the Premises, the Land or the Building during the Lease
Term shall be at the sole risk and hazard of Tenant, and that if the whole or
any part thereof shall be damaged, destroyed, stolen or removed by reason of
any cause or reason whatsoever, other than the
<PAGE> 16
negligence or willful default of Landlord, no part of said damage or loss shall
be charged to or borne by Landlord.
14.02. Landlord's Liability. Except for its intentional acts or negligence or
the intentional acts or negligence of its officers, agents, servants, employees
or contractors, Landlord shall not be responsible or liable for any damage or
injury to any property, fixtures, buildings or improvements, or to any person or
persons, at any time while in the Premises, including any damage or injury to
Tenant or to any of Tenant's officers, agents, servants, employees, contractors,
invitees, customers or sublessees.
ARTICLE 15
Insurance
15.01. Liability Insurance. Tenant shall provide or cause to be provided at its
expense, and keep in force during the Lease Term, general comprehensive
liability insurance in a good and solvent insurance company or companies
licensed to do business in the Commonwealth of Massachusetts, selected by
Tenant, and reasonably satisfactory to Landlord, and in an amount not less than
One Million Dollars ($1,000,000.00) with respect to injury or death to any one
person and One Million Dollars ($1,000,000.00) with respect to injury or death
to more than one person in any one accident or other occurrence and One Hundred
Thousand Dollars ($100,000.00) with respect to damages to property. Such policy
or policies shall include Landlord as an additional insured. Tenant agrees to
deliver certificates of such insurance to Landlord prior to the Term
Commencement Date and thereafter not less than ten (10) days prior to the
expiration of any such policy. Such insurance shall not be cancelable without
ten (10) days' written notice to Landlord.
15.02. Casualty Insurance. Landlord agrees to maintain fire and casualty
insurance on the building at customary levels.
ARTICLE 16
Waiver of Subrogation
16.01. Waiver of Subrogation. All insurance policies carried by either party
covering the Premises, including but not limited to contents, fire and casualty
insurance, shall expressly waive any right on the part of the insurer to make
any claim against the other party. The parties hereto agree that their policies
will include such waiver clause or endorsement.
16.02. Waiver of Rights. Landlord and Tenant each hereby waive all claims,
causes of action and rights or recovery against the other and their respective
partners, agents, officers and employees, for any damage to or destruction of
persons, property or business which shall occur on or about the Premises and
shall result from any of the perils insured under any and all policies of
insurance maintained by Landlord and Tenant, regardless of cause, including the
negligence and intentional wrongdoing of either party and their respective
agents, officers and employees but only to the extent of recovery, if any, under
such policy or policies of insurance; provided, however, that this waiver shall
be null and void to the extent that any such insurance shall be invalidated by
reason of this waiver.
ARTICLE 17
Damage or Destruction
17.01. Substantial Damage. If the Building or any part thereof shall be damaged
by fire or other casualty to the extent that substantial alteration or
reconstruction of the Building shall, in Landlord's sole opinion, be required
(whether or not the Premises shall have been damaged) or if as a result any
mortgagee of the Building requires that Proceeds payable be used to retire the
mortgage debt, Landlord may, at its option, terminate this Lease by notifying
Tenant in writing of such termination within sixty (60) days after the date of
such damage. If this Lease is so terminated, Rent shall be abated as of the date
of such damage.
<PAGE> 17
17.02. Restoration. If Landlord does not terminate this Lease pursuant to
Section 17.01, Landlord shall, within seventy-five (75) days after such fire or
other casualty, proceed with reasonable diligence to repair and restore the
Building (subject to Force Majeure) to substantially the same condition in which
it was immediately prior to the occurrence of the casualty to the extent of
Landlord's Work and the value of Landlord's Contribution. Landlord shall not be
required to rebuild, repair, or replace any part of Tenant's furniture,
furnishings or fixtures or equipment. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant
resulting in any way from such damage or the repair thereof, except that,
Landlord shall allow Tenant a fair diminution of Rent during the time and to the
extent the Premises are unfit for occupancy. If the Premises are unfit for
occupancy for any consecutive sixty (60) day period , Tenant may terminate
Agreement.
ARTICLE 18
Eminent Domain
18.01. Total Taking. If the Premises or the Building should be the subject of a
Total Taking, then this Lease shall terminate as of the date when physical
possession of the Building or the Premises is taken by the condemning authority.
18.02. Partial Taking. If there occurs a Partial Taking, either party (whether
or not the Premises are affected thereby) may terminate this Lease by giving
written notice thereof to the other within sixty (60) days after the right of
election accrues, in which event this Lease shall terminate as of the date when
physical possession of such portion of the Building or Premises is taken by the
condemning authority. If upon any such Partial Taking this lease is not
terminated, Rent shall be abated by an amount representing that part of the Rent
allocated to the portion of the Premises so taken and Landlord shall, at
Landlord's sole expense, restore and reconstruct the Building and the Premises
to substantially their former condition to the extent that the same, in
Landlord's judgment, may be feasible, but such work shall not exceed the scope
of Landlord's Work and the value of Landlord's Contribution.
18.03. Awards and Proceeds. All Proceeds payable in respect of a Taking shall be
the property of Landlord. Tenant hereby assigns to Landlord all rights of Tenant
in or to such Proceeds, provided that Tenant shall be entitled to separately
petition the condemning authority for a separate award for its moving expenses
and trade fixtures but only if such a separate award will not diminish the
amount of Proceeds payable to Landlord.
18.04. Notice. Landlord shall provide Tenant with prompt notice upon receipt of
any information relating to the possibility of a Partial or Total Taking.
ARTICLE 19
Quiet Enjoyment
19.01. Landlord's Covenant. Provided that an Event of Default has not occurred
and is not then continuing, Tenant shall, subject to the Permitted Exceptions,
quietly have and enjoy the Premises during the Lease Term, without hindrance or
molestation from any Person lawfully claiming by, through or under Landlord.
19.02. Subordination. This Lease is and shall be subject and subordinate to any
mortgage now or hereafter on the Building and to each advance made or hereafter
to be made under any mortgage, and to all renewals, modifications,
consolidations, replacements and extensions thereof and all substitutions
therefor. This Section 19.02 shall be self-operative and no further instrument
of subordination shall be required. In confirmation of such subordination,
Tenant shall execute and deliver promptly any certificate that Landlord or any
mortgagee may request. In the event that any mortgagee shall succeed to the
interest of Landlord then this Lease shall nevertheless continue in full force
and effect and Tenant shall and does hereby agree to attorn to such mortgagee
and to recognize such mortgagee as its Landlord.
<PAGE> 18
19.03. Notice to Mortgagee. No act or failure to act on the part of Landlord
which would entitle Tenant under the terms of this Lease, or by law, to be
relieved of Tenant's obligations hereunder or to terminate this Lease, shall
result in a release or termination of such obligations or a termination of this
lease unless (i) Tenant shall have first given written notice of Landlord's act
or failure to act to Landlord's mortgagees of record, if any such mortgagees
exist and have previously been identified to Tenant, specifying the act or
failure to act on the part of Landlord which could or would give basis to
Tenant's rights; and (ii) such mortgagees, after receipt of such notice, have
failed or refused to correct or cure the condition complained of within a thirty
(30) days thereafter; but nothing contained in this Section 19.03 shall be
deemed to impose any obligation on any such mortgagees to correct or cure any
such condition.
19.04. Other Provisions Regarding Mortgagees. If this Lease or the Rent due
hereunder is assigned to a mortgagee as collateral security for a loan, no such
mortgagee shall be deemed to have assumed any of Landlord's obligations
hereunder solely as a result of said assignment. A mortgagee to whom this Lease
has been so assigned shall be deemed to have assumed such obligations only if
(i) by the terms of the instrument of assignment such mortgagee specifically
elects to assume such obligations or (ii) such mortgagee has (a) foreclosed its
mortgage (b) accepted a deed in lieu thereof, or (c) taken possession of the
Premises by entry or otherwise. Even if such mortgagee so assumes the
obligations of Landlord hereunder, (i) any such obligation under Section 24.01
to return the Security Deposit to the Tenant shall be limited to the amount
actually received by the mortgagee with respect thereto, and (ii) such mortgagee
will be liable for breaches of any of Landlord's obligations hereunder only to
the extent such breaches occur during the period of ownership by the mortgagee
after foreclosure (or any conveyance by a deed in lieu thereof), all as set
forth in Section 25.10 hereof.
ARTICLE 20
Defaults; Events of Default
20.01. Defaults. The following shall, if any requirement for notice or lapse of
time or both has not been met, constitute Defaults, and, if such conditions have
been met, constitute Events of Default hereunder:
(1) The occurrence of any event set forth in Article 21 hereof;
(2) The failure of Tenant to pay rent when the same shall be due and
payable and the continuance of such failure for a period of twenty (20) days
after receipt by Tenant of notice in writing from Landlord specifying such
failure;
(3) The failure of Tenant to observe any covenant made by it in Sections
13.01, 15.01 and 25.03 hereof; and
(4) The failure of Tenant to keep, observe or perform any of the other
covenants, conditions and agreements herein contained on Tenant's part to be
kept, observed or performed and the continuance of such failure without the
curing of same for a period of twenty (20) days after receipt by Tenant of
notice in writing from Landlord specifying in reasonable detail the nature of
such failure.
20.02. Tenant's Best Efforts. In the event that the Default of which Landlord
gives notice is of such a nature that it cannot be cured within such twenty (20)
day period, then such Default shall not be deemed to continue so long as Tenant,
after receiving such notice, proceeds to cure the Default as soon as reasonably
possible and continues to take all steps necessary to complete the same within a
period of time which, under all prevailing circumstances, shall be reasonable.
No Default shall be deemed to continue if and so long as Tenant shall be so
proceeding to cure the same in good faith or be delayed in or prevented from
curing the same by reason of Force Majeure.
ARTICLE 21
Insolvency
<PAGE> 19
21.01. Insolvency. If (1) there occurs with respect to Tenant an Insolvency or
(2) any execution or attachment is issued against Tenant or any of its property
and as a result thereof the Premises are taken or occupied by some Person other
than the Tenant, except as may herein be permitted, then an Event of Default
hereunder shall be deemed to have occurred so that the provisions of Article 22
hereof shall become effective and Landlord shall have the rights and remedies
provided for therein.
ARTICLE 22
Landlord's Remedies; Damages on Default
22.01. Landlord's Remedies. If an Event of Default shall occur and be
continuing, Landlord may, at its option, give to Tenant a notice terminating
this Lease upon a date specified in such notice, which date shall be not less
than seven (7) Business Days after the date of receipt by Tenant of such notice
from Landlord, and upon the date specified in said notice, the term and estate
hereby vested in Tenant shall cease and any and all other right, title and
interest of Tenant hereunder shall likewise cease without further notice or
lapse of time, as fully and with like effect as if the entire Lease Term has
elapsed, but Tenant shall continue to be liable to Landlord as hereinafter
provided.
If such Event of Default results from Tenant's failure to pay a charge for an
Additional Service pursuant to Section 8.03 hereof, Landlord may, without
further notice to Tenant, discontinue any or all of such Additional Services.
22.02. Surrender. Upon any termination of this Lease as the result of an Event
of Default, Tenant shall quit and peacefully surrender the Premises to Landlord.
Upon or at any time after any such termination, may without further notice,
enter the Premises and possess itself thereof by summary proceedings or
otherwise, and may dispossess Tenant and remove Tenant and all other Persons and
property from the Premises and may have, hold and enjoy the Premises and the
right to receive all rental income of and from the same.
22.03. Right to Relet. At any time or from time to time after any such
termination, Landlord may relet the Premises or any part thereof, in the name of
Landlord or otherwise, for such term or terms (which may be greater or less than
the period which would otherwise have constituted the balance of the Lease term)
and on such conditions (which may include concessions or free rent) as Landlord,
in its reasonable discretion, may determine and may collect and receive the
rents therefor. Landlord shall in no way be responsible or liable for any
failure to relet the Premises or any part thereof, or for any failure to collect
any rent due upon any such reletting as long as Landlord makes reasonable
efforts to relet on commercially reasonable terms. In the event of Tenant's
default, Tenant shall be liable to Landlord for all reasonable expenses
including but not limited to legal, brokerage expenses associated with
reletting, construction and rent differential.
22.04. Survival of Covenants. No such termination of this Lease shall relieve
Tenant of its liability and obligations under this Lease and such liability and
obligations shall survive any such termination. Tenant shall indemnify and hold
Landlord harmless from all loss, cost, expense, damage or liability arising out
or in connection with such termination.
In the event of any such termination, Tenant shall pay to the Landlord the Rent
up to the date of such termination. Tenant shall also pay to Landlord, on
demand, as and for liquidated and agreed damages for Tenant's Default:
(1) The aggregate Rent which would have been payable under this Lease by
Tenant from the date of such termination until the Stated Expiration Date,
discounted to present value at a reasonable rate plus;
(2) All of Landlord's reasonable estimate of expenses to be incurred in
connection with reletting the Premises, including, without limitation, all
repossession costs, brokerage commissions, legal expenses, reasonable attorneys'
fees, alteration costs, and expenses of preparation for such reletting; less
<PAGE> 20
(3) The fair and reasonable rental value for the same period.
If the Premises or any part thereof are relet by the Landlord before
presentation of proof of such liquidated damages to any court, commission or
tribunal, the amount of rent reserved upon such reletting shall be, prima facie,
the fair and reasonable rental value for the part or the whole of the Premises
so relet during the term of the reletting. Nothing herein contained shall limit
or prejudice the right of the Landlord to prove and obtain as liquidated damages
by reason of such termination, an amount equal to the maximum allowed by any
statute or rule of law in effect at the time when, and governing the proceedings
in which, such damages are to be proved, whether or not such amount be greater,
equal to, or less than the amount of the difference referred to above.
22.05. Right to Equitable Relief. If there shall occur a Default or threatened
Default, Landlord shall be entitled to enjoin such default or threatened Default
and shall have the right to invoke any right and remedy allowed at law or in
equity or by statute or otherwise as though re-entry, summary proceedings, and
other remedies were not provided for in this Lease.
22.06. Right to Self Help; Interest On Overdue Rent. If an Event of Default
shall occur and be continuing, Landlord shall have the right, but shall not be
obligated, to enter upon the Premises and to perform such obligation
notwithstanding the fact that no specific provision for such substituted
performance by Landlord is made in this Lease with respect to such Default. In
performing such obligation, Landlord may make any payment of money or perform
any other act. The aggregate of (i) all sums so paid by Landlord (ii) interest
(at the rate of 1-1/2% per month or the highest rate permitted by law, whichever
is less) on such sum plus all overdue unpaid Rent not paid when due and (iii)
all necessary incidental costs (including legal costs) and expenses in
connection with the performance of any such act by Landlord, shall be deemed to
be Rent under this Lease and shall be payable to Landlord immediately upon
demand. Landlord may exercise the foregoing rights without waiving any other of
its rights or releasing Tenant from any of its obligations under this Lease.
22.07. Further Remedies. Upon any termination of this Lease pursuant to Section
22.01, or at any time thereafter, Landlord may, in addition to and without
prejudice to any other rights and remedies Landlord shall have at law or in
equity, re-enter the Premises, and recover possession thereof and may dispossess
any or all occupants of the Premises in the manner prescribed by the statute
relating to summary proceedings, or similar statutes; but Tenant in such case
shall remain liable to Landlord as hereinbefore provided. In the event of
Tenant's default under Article 20 or 21, Tenant shall be liable to Landlord for
the legal expenses incurred in the event of Tenant's default.
ARTICLE 23
Waivers
23.01. No Waivers. Failure of Landlord to complain of any act or omission on the
part of Tenant no matter how long the same may continue, shall not be deemed to
be a waiver by said Landlord of any of its rights hereunder. No waiver by
Landlord at any time, expressed or implied, of any breach of any provision of
this Lease shall be deemed a waiver of a breach of any other provision of this
Lease or a consent to any subsequent breach of the same or any other provision.
No acceptance by Landlord of any partial payment shall constitute an accord or
satisfaction but shall only be deemed a partial payment on account.
ARTICLE 24
Security Deposit
<PAGE> 21
Tenant deposited N/A as security for the premises. Landlord may deduct late
penalties and past due Rent from this security deposit. The balance of said
Security Deposit shall be fully refunded to Tenant upon termination of this
Lease.
ARTICLE 25
General Provisions
25.01. Force Majeure. In the event that Landlord or Tenant shall be delayed,
hindered in or prevented from the performance of any act required hereunder by
reason of Force Majeure, then performance of such act shall be excused for the
period of the delay and the period for the performance of any such act shall be
extended for a period equivalent to the period of such delay.
25.02. Notices and Communications. All notices, demands, requests and other
communications provided for or permitted under this Lease shall be in writing,
either delivered by hand or sent by first-class mail, postage prepaid, to the
following addresses:
(a) if to Landlord at the address stated in Section 1.01 hereof, or at
such other address as the Landlord shall have designated in writing to the
Tenant, with a copy to such Persons as Landlord shall have designated in writing
to Tenant, or
(b) if to Tenant at the address stated in Section 1.01 hereof, or at such
other address as the Tenant shall have designated in writing to the Landlord,
with a copy to such Persons as Tenant shall have designated in writing to
Landlord.
Any notice provided for herein shall become effective only upon and at the time
of receipt by the Person to whom it is given, unless such notice is mailed by
first-class registered or certified mail, in which case it shall be deemed to be
received on (i) the third Business Date following the mailing thereof or (ii)
the day of its receipt, if a Business Date, or the next succeeding Business Day,
whichever of (i) or (ii) shall be the earlier.
25.03. Certificates, Estoppel Letter. Either party shall, without charge, at any
time and from time to time hereafter, within ten (10) days after written request
of the other, certify by written instrument duly executed and acknowledged to
any mortgagee or purchaser, or proposed mortgagee or proposed purchaser, or any
other Person specified in such request: (a) as to whether this Lease has been
supplemented or amended, and if so, the substance and manner of such supplement
or amendment, (b) as to the validity and force and effect of this Lease, in
accordance with its tenor as then constituted, (c) as to the existence of any
Default or Event of Default, (d) as to the existence of any offsets,
counterclaims or defenses thereto on the part of such other party, (e) as to the
Term Commencement Date and Stated Expiration Date, and (f) as to any other
matters as may reasonably be so requested. Any such certificate may be relied
upon by the party requesting it and any other Person to whom the same may be
exhibited or delivered, and the contents of such certificate shall be binding on
the party executing same.
Tenant shall in addition, within five (5) Business Days of the Term Commencement
Date, execute and deliver to Landlord a tenant estoppel letter substantially in
the form attached hereto as Exhibit B.
25.04. Holding Over. If Tenant occupies the Premises after the Lease Termination
Date without having entered into a new lease of the Premises with Landlord,
Tenant shall be a tenant-at-sufferance only subject to all of the terms and
provisions of this Lease at one and one half (1 1/2) times the then effective
Basic Rent. Such a holding over, even if with the consent of Landlord, shall not
constitute an extension or renewal of this Lease.
25.05. Governing Law. This Lease and the performance thereof shall be governed,
interpreted, construed and regulated by the laws of the Commonwealth of
Massachusetts.
<PAGE> 22
25.06. Partial Invalidity. If any term, covenant, condition or provision of this
Lease or the application thereof to any person or circumstance shall, at any
time or to any extent, be invalid or unenforceable, the remainder of this Lease,
or the application of such term or provision to persons or circumstances other
than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant, condition and provision of this Lease
shall be valid and be enforced to the fullest extent permitted by law.
25.07. Notice of Lease. The parties will at any time, at the request of either
one, promptly execute duplicate originals of an instrument, in recordable form,
which will constitute a Notice of Lease, setting forth a description of the
Premises, the Lease Term and any other portions thereof, excepting the rental
provisions, as either party may request.
25.08. Interpretation; Consents. The section headings used herein are for
reference and convenience only, and shall not enter into the interpretation
hereof. This Lease may be executed in several counterparts, each of which shall
be an original, but all of which shall constitute one and the same instrument.
The term "Landlord" whenever used herein, shall mean only the owner at the time
of Landlord's interest herein and upon any sale or assignment (other than as
collateral security for a loan) of the interest of Landlord herein, its
respective successors in interest and/or assigns shall, during the term of
ownership of its respective estates herein, be deemed to be Landlord and the
liability of Landlord, if any, hereunder shall in any event be limited to the
Landlord's interest in the Building. Consents of approvals required or requested
of either Landlord or Tenant shall not be unreasonably withheld or delayed.
25.09 Entire Agreement. No oral statement or prior written matter shall have any
force or effect. This Agreement shall not be modified or canceled except by a
writing executed by all parties.
25.10. Parties. Except as herein otherwise expressly provided, the covenants,
conditions and agreements contained in this Lease shall be binding upon the
heirs, successors and assigns of the parties hereto.
25.11. Brokers. Tenant warrants that it has had no dealings with any broker or
agent in connection with this Lease other than Carleton G. Tarpinian of Kurt
Saracen Associates and Austin Smith of Whittier Partners. Landlord and Tenant
covenant to hold harmless and indemnify each other from and against any and all
cost, expense or liability for any compensation, commission or charges claimed
by any other broker or agent with respect to or in connection with this Lease or
the negotiation thereof.
25.12 Tenant agrees to pay for any plans, copies of plans or keys requested
after Tenant's occupancy of the Premises.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as an
instrument under seal as of the day and year first above written.
LANDLORD: DEDHAM PLACE OFFICE ASSOCIATES
LIMITED PARTNERSHIP
BY: /s/ Dominic J. Saraceno
Dominic J. Saraceno, General Partner
of Dedham Place Office Associates
Limited Partnership But Not Individually
<PAGE> 23
TENANT: MicroTrac Systems, Inc.
BY: George E. Engdahl
TITLE: Treasurer/CFO
DATE: March 29, 1993
EXHIBIT A
DEDHAM PLACE
LANDLORD'S SERVICES
I. CLEANING
A. Lobby and Common Areas (nightly)
1. Empty all trash receptacles; clean receptacle as needed.
2. Empty and wipe clean all cigarette urns and ashtrays; replace sand and
water as needed.
3. Vacuum all carpets.
4. Vacuum all floor mats.
5. Clean all entrance doors.
6. Clean and shine all mullions and metal work.
7. Dust all picture frames.
8. Dust all architectural or sculpted works or art.
9. Dust all furniture.
10. Clean building directory.
11. Clean all baseboards.
12. Vacuum elevator carpets; remove stains as needed.
13. Vacuum and wash all elevator tracks.
<PAGE> 24
14. Clean, wash and shine all doors, walls, and metal work in elevators.
15. Clean all exit signs, and hanging fixtures.
B. Office Areas (nightly)
1. Remove trash; replace liners as needed.
2. Wash out trash basket as needed.
3. Empty and damp wipe all ashtrays.
4. Clean all blackboards when requested.
5. Dust all clothing closets, shelving and coat racks.
6. Clean all glass furniture tops, and display cases.
7. Remove fingerprints from doors, walls, light switches.
8. Vacuum all carpeting.
9. Vacuum all floor mats.
10. Dry mop all tile floors.
11. Remove waste to designated area.
12. Upon completion of work shut off lights and secure doors.
C. Office Areas (weekly or as needed)
1. Dust all desk tops, office furniture, picture frames, window sills,
horizontal surfaces.
2. Remove fingerprints from doors, walls, light switches.
3. Damp mop kitchen and eating area floors.
D. Office Areas (yearly)
1. Strip and wax kitchen and eating area floors.
2. Window cleaning twice yearly.
E. Lavatories (nightly)
1. Sweep and wash floors using a disinfectant cleaner.
2. Wash and polish all mirrors, shelves, brightwork, and enameled
surfaces.
3. Wash and shine all flushometers, piping, and toilet seat hinges.
4. Wash and wipe dry both sides of all toilet seats.
<PAGE> 25
5. Wash and disinfect all basins, bowls, and urinals.
6. Wipe down all tile walls, partitions, dispensers and receptacles.
7. Dust and clean all powder room fixtures.
8. Empty and clean paper towel and sanitary napkin receptacles.
9. Remove wastepaper and refuse from the premises.
10. Refill all toilet paper, paper towel, soap and sanitary napkin
dispensers, materials to be supplied by Landlord unless otherwise arranged with
Janitronics.
F. Offices will not be cleaned on the following Holidays:
New Years
Martin Luther King Day
Washington's Birthday
Memorial Day
July 4th
Labor Day
Columbus Day
Veterans Day
Thanksgiving
Christmas
If individual Tenants wish to arrange for additional cleaning services,
Tenant shall contact Jim Knights at (617) 965-8030.
II. HEATING, VENTILATING, AND AIR CONDITIONING
1. Heating, ventilating, and air conditioning ("HVAC") as required to
provide reasonably comfortable temperatures for normal occupancy on Business
Days (excepting holidays listed above); Monday through Friday from 8:00 a.m. to
6:00 p.m. and Saturday from 8:00 a.m. to 1:00 p.m.
2. Maintenance of any additional or special air conditioning equipment and
the associated operating cost will be at Tenant's expense.
III. WATER
Hot water for lavatory purposes and cold water for drinking, lavatory and
toilet purposes.
IV. ELEVATORS
Elevators for the use of all tenants and the general public for access to
and from all floors of the Building, Programming of elevators (including, but
not limited to, service elevators) shall be as Landlord from time to time
determines best for the Building as a whole.
V. RELAMPING OF LIGHT FIXTURES
Tenant will reimburse Landlord for the cost of replacement lamps, ballasts
and starters.
VI. CAFETERIA AND VENDING INSTALLATIONS
<PAGE> 26
1. Any space to be used primarily for lunchroom or cafeteria operation
within the Premises shall be Tenant's responsibility to keep clean and sanitary,
it being understood that Landlord's approval of such use must be first obtained
in writing.
2. Vending machines or refreshment service installations by Tenant must be
approved by Landlord in writing and shall be restricted to use to employees and
business callers. All cleaning necessitated by such installations shall be at
Tenant's expense.
VII. STRUCTURAL AND EXTERIOR MAINTENANCE
Landlord will maintain the structural components of the Building (roof,
elevators, HVAC system (other than the HVAC system dedicated to Tenant's
computer room, etc.) in good condition and working order. Landlord will remove
snow and maintain landscaped areas of the Land as necessary.
EXHIBIT B
DEDHAM PLACE
TENANT ESTOPPEL LETTER
Attached to and incorporated by reference into a Lease (the "Lease") between
Dedham Place ("Landlord") and ("Tenant"). Terms
defined in or by reference in the Lease not otherwise defined herein shall have
the same meanings herein as therein.
Gentlemen:
It is our understanding that you have committed to place a mortgage upon the
subject premises and as a condition precedent thereof have required this
certification by the undersigned.
Reference is made to our Lease dated , made with the
Landlord (the "Lease"). Terms defined in or by reference the Lease used herein
but not otherwise defined herein shall have the same meanings herein as therein.
The undersigned, as Tenant, hereby ratifies the Lease and certifies that:
1. the Term Commencement Date is ;
2. the undersigned presently occupies the Premises;
3. the Basic Rent of $ was (is) payable beginning ( ) months
after the Term Commencement Date;
4. the Lease is in full force and effect and has not been assigned by us,
modified, supplemented or amended in any way (except by agreement(s) dated ) and
neither party thereto is in default thereunder except as specified herein;
5. the Lease represents the entire agreement between Landlord and Tenant;
<PAGE> 27
6. the Stated Expiration Date is ;
7. all conditions under said Lease to be performed by the Landlord have
been performed satisfactorily;
8. Landlord's Contribution has been made and received;
9. on this date there are no existing defenses or offsets which the
undersigned has against the enforcement of said Lease by the Landlord;
10. no Rent has been paid in advance other than the Security Deposit; and,
11. Basic Rent for , 19, has been paid.
Very truly yours,
(Tenant)
By: (Title)
EXHIBIT C
DEDHAM PLACE
RULES AND REGULATIONS
Attached to and incorporated by reference into a Lease (the "Lease") between
Dedham Place ("Landlord") and ("Tenant"). Terms defined in or
by reference in the Lease not otherwise defined herein shall have the same
meanings herein as therein.
1. Sidewalks, doorways, vestibules, halls, stairways and other similar areas
shall not be obstructed by tenants or used by any tenant for any purpose other
than ingress and egress to and from the Premises and for going from one part of
the Building to another part of the Building.
2. Plumbing fixtures and appliances shall be used only for the purpose for which
designated, and no sweepings, rubbish, rags or other unsuitable material shall
be thrown or placed therein. Repairs resulting from such damage to any such
fixtures or appliances from misuse by a tenant shall be paid by him, and
Landlord shall not in any case be responsible therefor.
3. No signs, advertisements or notices shall be painted or affixed on or to any
windows, doors, corridors or other parts of the Building except as shall be
first approved by Landlord.
4. Landlord will provide and maintain an alphabetical directory board for all
tenants in the Building, and no other directory shall be permitted unless
previously consented to by Landlord in writing.
5. Movement of furniture or office equipment, or dispatch or receipt by tenants
of any bulky material, merchandise or materials which requires use of elevators
or stairways, or movement through the
<PAGE> 28
Building entrances or lobby, shall be restricted to such hours as Landlord may
designate, and such movement shall be subject to control of Landlord.
6. Landlord shall have the authority to prescribe the weight and manner that
safes, file cabinets and other heavy equipment are positioned.
7. All routine deliveries to a tenant's Premises shall be made through the
freight elevators. Passenger elevators are to be used only for the movement of
persons, unless an exception is approved by the Landlord in writing.
8. All locks for doors in each tenant's Premises shall be building standard and
no tenant shall place any additional lock or locks on any door in its leased
area without Landlord's written consent. Landlord agrees to furnish tenant five
(5) keys without charge.
9. Corridor doors, when not in use, shall be kept closed.
10. Tenants shall lock all office doors leading to corridors and turn out all
lights at the close of their working day.
11. Tenants shall not tamper with or attempt to adjust temperature control
thermostats in their respective Premises. Landlord shall adjust thermostats to
maintain required temperatures for heating, ventilating and air conditioning.
12. Tenants will comply with any measures instituted for the security of the
building which may include the signing in or out in a register in the building
lobby after hours and on weekends.
13. Tenants shall not make or permit any improper noises in the building or
otherwise interfere in any way with other tenants or persons having business
with them.
14. All freight elevator lobbies are to be kept neat and clean. The disposal of
trash or storage or materials in these areas is prohibited.
15. No vending machines of any type shall be allowed in tenant space without the
prior written consent of Landlord.
16. No birds or animals shall be brought into or kept in, on or about public or
tenant areas.
17. Landlord will not be responsible for lost or stolen personal property, money
or jewelry from tenant's Leased Premises or public areas regardless of whether
such loss occurs when area is locked against entry or not.
18. Landlord reserves the right to rescind any of these rules and regulations
and to make such other and further rules and regulations as in its judgment
shall from time to time, be required for the safety, protection, care and
cleanliness of the building, the operation thereof, the preservation of good
order therein and the protection and comfort of the tenants and their agent,
employees and invitees. Such rules and regulations, when made and written notice
thereof is given to a tenant, shall be binding upon it in like manner as if
originally herein prescribed.
19. These rules and regulations shall be uniformly applied to all tenants in the
Building.
20. Tenant shall not use extension cords for normal day-to-day electrical needs.
21. All build-out items which Tenant is unsatisfied with and wants addressed
after the Term Commencement Date must be brought to Landlord's attention in
writing within fourteen (14) days of
<PAGE> 29
Tenant's Term Commencement Date. If said list is not updated every fourteen (14)
days, Landlord will assume that all items have been completed and any additional
work will be billed to Tenant.
22. Tenant is responsible for the repair of any appliances located within
Tenant's office within the rentable area of Tenant's office.
EXHIBIT D
DEDHAM PLACE
WORK LETTER
Tenant will commit in advance to all costs and expenses required to make the
space ready for occupancy above Landlord's allowance as described in the
attached floor plan, including new carpeting, new paint, and new 2X4 parabolic
lighting in common areas and offices. In return, Landlord shall provide Tenant
with an additional seven month free rent period so that the total free rent
period is equal to nine (9) months.
<PAGE> 30
ONE DEDHAM PLACE
OFFICE LEASE
RESTRAC (Micro Trac Systems, Inc.)
AMENDMENT NO. 1
Reference is made to the Lease dated March 31, 1993 (the "Lease") by and between
Dedham Place Office Associates Limited Partnership, a Massachusetts limited
partnership (hereinafter "Lessor", which expression shall include its heirs,
executors, successors and assigns where the context so admits), and MicroTrac
Systems, Inc., a Massachusetts corporation (hereinafter "Lessee", which
expression shall include its successors and assigns or executors and
administrators where the context so admits). Terms defined in or by reference in
the Lease not otherwise defined herein shall have the same meaning herein as
therein.
MicroTrac Systems, Inc., a Delaware corporation, doing business as Restrac, is
the surviving corporation to a merger with Lessee and assumes all rights and
responsibilities thereof designated herein.
For a good and valuable consideration, the receipt and legal sufficiency of
which is hereby acknowledged, Lessor and Lessee hereby agree to amend the Lease
as follows:
1. ARTICLE 1 REFERENCE DATA is hereby amended as follows:
. Rentable Area
of Demised Premises: 23,774
12,237 + 11,537 (now Replica)
. Rent
Commencement Date: The later of March 15, 1995 or
Substantial Completion of Replica space.
. Term: 22 Months
. Lease Termination
Date: December 31, 1996
. Basic Rent: Existing space at $17.00 per square foot
New space at $18.00 per square foot
Total square feet at blended rate of $17.50 psf
Total: $416,045.00 per year
$34,670.41 per month
. Build-out: Lessor agrees to build-out Lessee's space
on a basis according to plan as
attached hereto.
. Operating Expense
Base: 1994 Actuals
. Tenant's
Representative: Cynthia G. Eades
Chief Financial Officer
<PAGE> 31
. Tenant's Space Plan
Delivery Date: February 17, 1995
* Right of First Refusal on space below, now occupied by Quebecor Printing Corp.
. Rent Build-out
Concession: Tenant to pay 1/2 rent until build out expense
is recaptured.
All other terms and conditions of the original Lease dated March 31, 1993 remain
unchanged and in full force and effect.
Executed as a sealed instrument this 24th day of February, 1995.
LESSOR: ONE DEDHAM PLACE
(signature)
Dominic J. Saraceno
General Partner of Dedham Place
Office Associates Limited
Partnership and not individually
LESSEE: Restrac
By: Cynthia G. Eades
Title: CFO
<PAGE> 1
EXHIBIT 10.12
DIRECTOR'S INDEMNIFICATION AGREEMENT
This Agreement is made as of January , 1994, between MicroTrac Systems, Inc.,
a Delaware corporation (the "Company"), and , who is a member
of the Company's Board of Directors (the "Director").
In consideration of the Director's agreement to serve as a member of the
Company's Board of Directors, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is hereby
AGREED:
1. Limitation of Liability. The personal liability of the Director to the
Company for monetary damages for breach of fiduciary duty as a director shall be
eliminated to the full extent provided in Article NINTH of the Company's
Certificate of Incorporation as in effect on the date of this Agreement. In the
event that the laws of Delaware are amended to permit such liability to be
limited to a greater extent than that provided above, the Company will make its
best efforts to cause its Certificate of Incorporation to be amended to provide
for the maximum limitation of such liability then permitted under the laws of
Delaware.
2. Indemnification.
(a) The Company shall indemnify the Director against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with any threatened, pending or
completed action, suit or proceeding by reason of the fact that he is or was a
director, officer, employee or agent of the Company, or is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation or enterprise, to the full extent provided in Article VIII of the
Company's By-Laws as in effect on the date of this Agreement, a copy of which is
attached hereto as Appendix 1, even if such Article VIII is subsequently amended
or changed; provided, that nothing herein shall require indemnification in any
respect that shall be absolutely prohibited by the laws of the State of Delaware
at the time at which such indemnification is sought. In the event that the laws
of Delaware are amended to permit such indemnification to be provided to a
greater extent than that provided above, the Company will make its best efforts
to cause its By-Laws to be amended to provide such indemnification to the
maximum extent then permitted under the laws of Delaware.
(b) The Director shall give notice to the Company promptly after the Director
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Company, at the Company's expense, to assume the defense of any such
claim or any litigation resulting therefrom, provided that counsel for the
Company, who shall conduct the defense of such claim or litigation, shall be
approved by the Director (whose approval shall not unreasonably be withheld),
and the Director may participate in such defense at the Director's expense
(except for the payment of fees, costs and expenses provided for below), and
provided further that the failure of the Director to give notice as provided
herein shall not relieve the Company of its obligations under this Agreement,
unless such failure to give
2
notice shall materially adversely affect the Company in the defense of any such
claim or any such litigation. The Company shall not, in the defense of any such
claim or litigation, except with the consent of the Director, consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to the
Director of a release from all liability in respect to such claim or litigation.
Notwithstanding the election of the Company to assume the defense of any such
claim or litigation, the Director shall have the right to employ separate
counsel and to participate in the defense of such claim or litigation, and the
Company shall bear the reasonable fees, costs and expenses of such separate
counsel.
(c) The Company will make its best efforts to obtain, within one year of the
date of this Agreement, and thereafter maintain in effect directors' liability
insurance in an amount of at least $1,000,000 per occurrence, provided the same
may be obtained at reasonable cost, as determined by the Company's Board of
Directors.
3. General.
<PAGE> 2
(a) This Agreement shall remain in effect until the expiration of three years
after the Director ceases to be a member of the Company's Board of Directors.
(b) This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have duly executed this
3
Agreement as of the date set forth above.
MICROTRAC SYSTEMS, INC.
Director_________________________ By_____________ Its____________
4
APPENDIX 1
property or in shares of the Corporation's capital stock. Before payment of any
dividend there may be set aside out of any funds of the Corporation available
for dividends such sum or sums as the Board of Directors from time to time, in
its absolute discretion, deems proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
Section 2. Disbursements. All checks or demands for money and notes of the
Corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
Section 4. Corporate Seal. The corporate seal shall have inscribed thereon the
name of the Corporation, the year of its organization and the words "Corporate
Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION
Section 1. Power to Indemnify in Actions, Suits or Proceedings Other Than Those
by or in the Right of the Corporation. Subject to Section 3 of this Article
VIII, the Corporation shall indemnify any person who was or is a party or
20
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal
<PAGE> 3
action or proceeding, had no, reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not of itself create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
Section 2. Power to Indemnify in Actions, Suits or Proceedings by or in the
Right of the Corporation. Subject to Section 3 of this Article VIII, the
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by
21
or in the right of the Corporation to procure a judgment in its favor by reason
of the fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation; except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
Section 3. Authorization of Indemnification. Any indemnification under this
Article VIII (unless ordered by a court) shall be made by the Corporation only
as authorized in the specific case upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances because
he has met the applicable standard of conduct set forth in Section 1 or Section
2 of this Article VIII, as the case may be. Such determination shall be made (i)
by the Board of Directors by a majority vote of a quorum consisting of
22
directors who were not parties to such action, suit or proceeding, or (ii) if
such a quorum is not obtainable, or, even if obtainable, a quorum of
disinterested directors so directs, by independent legal counsel in a written
opinion, or (iii) by the stockholders. To the extent, however, that a director,
officer, employee or agent of the Corporation has been successful on the merits
or otherwise in defense of any action, suit or proceeding described above, or in
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and re asonably incurred by him in
connection therewith, without the necessity of authorization in the specific
case.
Section 4. Good Faith Defined. For purposes of any 'determination under Section
3 of this Article VIII, a person shall be deemed to have acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Corporation, or, with respect to any criminal act ion or proceeding, to
have had no reasonable cause to believe his conduct was unlawful, if his action
is based on the records or books of account of the Corporation or another
enterprise, or on information supplied to him by the officers of the Corporation
or another enterprise in the course of their duties, or on the advice of legal
counsel for the Corporation or another enterprise or on information or records
given or reports made to the Corporation or another enterprise by an independent
certified public accountant or by an appraiser or other expert selected with
reasonable care by the Corporation or other enterprise. The term "another
enterprise" as used in this Section 4 shall mean any other corporation or any
partnership, joint venture, trust or
23
other enterprise of which such person is or was serving at the request of the
Corporation as a director, officer, employee or agent. The provisions of this
Section 4 shall not be deemed to be exclusive or to limit in any way the
circumstances in which a person may be deemed to have met the applicable
standard of conduct set forth in Sections I or 2 of this Article VIII, as the
case may be.
Section 5. Indemnification by a Court. Notwithstanding any contrary
determination in the specific case under Section 3 of this Article VIII, and
notwithstanding the absence of any determination thereunder, any director,
officer, employee or agent may apply to any court of competent jurisdiction in
the State of
<PAGE> 4
Delaware for indemnification to the extent otherwise permissible under Sections
1 and 2 of this Article VIII. The basis of such indemnification by a court shall
be a determination by such court that indemnification of the director, officer,
employee or agent is proper in the circumstances ounces because he has met the
applicable standards of conduct set forth in Sections 1 or 2 of this Article
VIII, as the case may be. Notice of any application for indemnification pursuant
to this Section 5 shall be given to the Corporation promptly upon the filing of
such application.
Section 6. Expenses Payable in Advance. Expenses incurred in defending or
investigating a threatened or pending action, suit or proceeding may be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case, upon
receipt of an undertaking to repay such amount by or on behalf of the director,
officer, employee or agent requesting such payment
24
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as authorized in this Article VIII
Section 7. Non-Exclusivity and Survival of Indemnification. The indemnification
provided by this Article VIII shall not be deemed exclusive of any other rights
to which those seeking indemnification may be entitled under any By-Law,
agreement, contract, vote of stockholders or disinterested directors or
pursuant to the direction (howsoever embodied) of any court of competent
jurisdiction or otherwise, both as to action in his official capacity and as to
action in another capacity while holding such office, it being the policy of the
Corporation that indemnification of the persons specified in Sections 1 and 2 of
this Article VIII shall be made to the fullest extent permitted by law. The
provisions of this Article VIII shall not be deemed to preclude the
indemnification of any person who is not specified in Sections 1 or 2 of this
Article VIII but whom the Corporation has the power or obligation to indemnify
under the provisions of the General Corporation Law of the State of Delaware or
otherwise. The indemnification provided by this Article VIII shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such
person.
Section 8. Insurance. The Corporation may purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
25
joint venture, trust or other enterprise, against any liability asserted against
him and incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power or the obligation to
indemnify him against such liability under the provisions of this Article VIII.
Section 9. Meaning of 'Corporation' for Purposes of Article VIII. For purposes
of this Article VIII, references to "the Corporation" shall include, in addition
to the resulting corporation, any constituent corporation (including any
constituent of a constituent) absorbed in a consolidation or merger which, if
its separate existence had continued, would have had power and authority to
indemnify its directors, officers, employees or agents, so that any person who
is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, shall stand in the same
position under the provisions of this Article VIII with respect to resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed, in whole or in
part, or new By-Laws may be adopted by
26
<PAGE> 1
EXHIBIT 10.13
RESTRAC
EMPLOYMENT AGREEMENT
This Agreement is made as of ______________ between Restrac, Inc., with a
principal place of business at One Dedham Place, Dedham, Massachusetts,
("Restrac") and __________________________, of
_______________________________________, (the "Employee").
1. Employment.
Restrac hereby employs the Employee, and the Employee accepts employment
with Restrac. While this Agreement remains in effect, the Employee will devote
his or her full time and best efforts to Restrac's business. The Employee will
perform such duties commensurate with his or her qualifications and experience
as are assigned from time to time by Restrac's designated representative.
2. Term of Employment.
The Employee's employment with Restrac will be at will, terminable by
either party effective upon written notice, with or without cause.
3. Compensation.
The Employee will receive minimum compensation and benefits as set forth
in the attached Compensation Schedule. The Employee will be reimbursed for his
or her reasonable expenses incurred in connection with Restrac's business in
accordance with Restrac's policies.
4. Non-Disclosure.
The Employee acknowledges that Restrac is the owner of valuable trade
secrets, computer programs and related materials and other data, concepts or
information which are not public and are proprietary or confidential ("Restrac's
Confidential Information"), and in order for Restrac to render services to its
clients, the clients furnish to Restrac information concerning business affairs,
finances, properties, methods of operation or other data which are not public
and are proprietary or confidential ("Client's Confidential Information").
Accordingly, the Employee agrees to maintain both Restrac's Confidential
Information and the Client's Confidential Information in strict confidence and
not to use either for his or her benefit, both during and after the term of this
Agreement. The Employee's obligation of confidentiality will not apply to
information which the Employee can clearly demonstrate to be or to have become
publicly known other than by a breach of the Employee's obligations hereunder.
5. Assignment of Rights.
The Employee agrees that all works, ideas and inventions made by him or
her during the term of his or her employment (including those made prior to the
date of this Agreement) which involve software whose primary purpose is
succession planning or applicant tracking, or which otherwise directly relate to
Restrac's actual or proposed business, and all proprietary rights therein,
including but not limited to rights of patent, copyright and trade secret, shall
be the exclusive property of Restrac and works for hire under the United States
Copyright Law.
6. Non-Competition.
<PAGE> 2
While the Employee continues to be employed by Restrac, the Employee shall
not render any direct or indirect assistance to any company or enterprise other
than Restrac which is in the business of software sales, development or support,
without the prior written consent of Restrac. However, this section shall not
prohibit volunteer work for any company or enterprise which is not in the
business of applicant tracking or succession planning, nor shall it prohibit
investments in any company whose securities are publicly traded. Unless waived
by a disinterested majority of the Board, the Employee shall not, during the
period of Employee's employment with the Company and (provided, in the case of a
Company Election as hereinafter described, that the Company pays the Employee
the Severance Payments (as hereinafter defined)), for the period specified in
the Company Election following the termination of such employment for any reason
whatsoever, (i) directly or indirectly engage in any competitive Business (as
hereinafter defined), whether such engagement shall be as an employer, officer,
director, owner, employee, consultant, stockholder, partner or other participant
in any Competitive Business, (ii) assist others in engaging in any Competitive
Business in the manner described in the foregoing clause (i), (iii) induce
employees of Restrac or its subsidiaries to terminate their employment with
Restrac or such affiliate or subsidiary or engage in any Competitive Business or
(iv) employ any employees of Restrac in any entity affiliated or associated with
the Employee. The term "Competitive Business" means and includes any business or
activity in which Restrac is at the time of such termination actively engaged
(or has been actively engaged at any time during Employee's employment with
Restrac, or at the time of such termination, has such engagement under active
consideration by the Board) within any geographic area in which Restrac is at
such time or during such employment has been actively conducting such business
or activity or within any geographic area as to which the Board is at the time
of such termination actively considering expansion of such business or activity;
provided, however, that the ownership of no more than 2% of the outstanding
capital stock of a corporation traded on a national securities exchange or the
over-the-counter market shall not be deemed engaging in a Competitive Business.
In the event of termination of Employee's employment for any reason, Restrac
may, at its option, within thirty (30) days make an election (the "Company
Election") specifying the number of months (not more than 24) during which the
Employee must refrain from the actions described in (i)-(iv) above, and so
notify the Employee; and Restrac shall make payments to the Employee, monthly in
arrears, at a rate equal to twenty percent (20%) of the base salary of the
Employee in effect at the time of such termination, and for the number of months
specified in the Company Election; provided, that the amount of the Severance
Payment for any such month may be offset by the amount, if any, of severance or
other termination payments by Restrac to the Employee with respect to such month
(with appropriate proration over a period of twelve (12) months of any lump sum
severance or other termination payments to the Employee).
7. General
(a) This Agreement (including the attached Compensation Schedule) is the
entire agreement of the parties, on the subject hereof, and supersedes all
previous communications. No waiver or modification of its provisions shall be
effective without a writing signed by the party against whom such waiver or
modification is sought to be enforced.
(b) The invalidity of any provision of this Agreement shall not affect the
validity of any other provision hereof. In the event that the non-competition
provision in Section 6 is determined by a court of competent jurisdiction to be
unenforceable, such provision shall be enforced to the extent that it is legally
enforceable.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
set forth above.
RESTRAC
<PAGE> 3
____________________ By ___________________ Its _______________
Employee
COMPENSATION SCHEDULE
Employee's Title:
Employee's Semi-Monthly Salary:
Benefits: Health, Life, Disability, Dental, Health Club, PC Purchase Plan
Vacation: 10 Paid Vacation Days/Year (Accrued)
2 Personal Days/Year
10 Paid Restrac Observed Holidays/Year
Reviews: Annual performance review on anniversary of start date. Salary may
be adjusted at that time.
Comments:
<PAGE> 1
EXHIBIT 10.14
ADDENDUM
TO
EMPLOYMENT AGREEMENT
This Addendum is made as of _______________________ by and between
____________________ ("Employee") and Restrac, Inc., with a principal place of
business at 3 Allied Drive, Dedham, Massachusetts, ("Restrac"), and modifies the
terms of the Employment Agreement dated ________________ between Employee and
Restrac ("Employment Agreement"). Except as specifically modified or amended by
this Addendum, all terms of the Employment Agreement remain in full force and
effect. All terms contained herein which are not otherwise defined shall have
the meanings set forth in the Employment Agreement.
For good and valuable consideration, the sufficiency of which is hereby
acknowledged, Employee and Restrac hereby agree as follows:
In the event that Employee's employment is terminated without cause (as
hereinafter defined), Restrac will make Severance Payments (as defined in
Section 6 of the Employment Agreement (hereinafter referred to as "Section 6"))
to Employee which aggregate an amount equal to six months of Employee's base
salary at the time of termination; provided that in the discretion of the
Company, this payment may be made over a period of time not to exceed twenty
four months, and provided further that, by executing this Addendum and agreeing
to the terms contained herein, the Company will be deemed to have made a Company
Election under Section 6 to restrict Employee's activities as provided by
Section 6 for a period of twenty four months following termination of Employee's
employment with the Company. Employee agrees that, in the event that Employee's
employment is terminated without cause, Employee will refrain from the
activities described in Section 6 for a period of twenty four months following
Employee's termination of employment, in return for the Severance Payments
described herein. For purposes of this Agreement, "cause" shall include, without
limitation, the Employee's failure to satisfactorily perform the duties and
responsibilities assigned to Employee or the willful misconduct of the Employee
in the performance of such duties.
Notwithstanding anything to the contrary contained in the Employment
Agreement or this Addendum, the total amount of the Severance Payments described
herein may be offset by the amount, if any, of severance or other termination
payments by Restrac to the Employee, whether made pursuant to the Employment
Agreement or otherwise.
Nothing in this Addendum shall be construed to limit the Company's right
to terminate Employee's employment at any time, with or without cause. Except as
specifically modified by the terms of this Addendum, all terms of the Employment
Agreement remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties have duly executed this Addendum as of
the date set forth above.
RESTRAC, INC.
____________________ By ___________________ Its _______________
Employee
<PAGE> 1
EXHIBIT 10.15
Agreement Pertaining to Election of Directors
January 5, 1994
Advent Atlantic and Pacific II L.P. ("Advent")
High Street Tower, Suite 2500
125 High Street
Boston, MA 02109
Re: Board of Directors Dear Sirs:
1. Reference is hereby made to the stock purchase agreement (the "Stock Purchase
Agreement") of even date herewith by and among Advent, certain other purchasers
affiliated with Advent and MicroTrac Systems, Inc. (the "Company") providing for
the purchase by Advent and such Advent affiliates (collectively, the
"Purchasers") from the Company of an aggregate of 556,155 shares of preferred
stock of the Company. To induce the Purchasers to enter into the Stock Purchase
Agreement, Lars D. Perkins ("Perkins") and J. Paul Costello ("Costello") hereby
agree with the Purchasers as follows. Each of Perkins, Costello and the
Purchasers is herein sometimes referred to as a "Party" (collectively, the
"Parties"); and each of Perkins, Costello and Advent is herein sometimes
collectively referred to as a Designating Party (collectively, the "Designating
Parties").
2. Each of the Parties agrees to use such Party's best efforts (including
without limitation the voting of a sufficient number of shares of capital stock
of the Company ("Capital Stock"), if any, held by such Party) (i) to cause the
number of members of the board
D-1
of directors of the Company (the "Board") to be fixed at not less than three nor
more than seven (it being understood that the number of directors currently
contemplated is five); (ii) to cause one person designated from time to time by
each of Perkins and Costello and two persons designated from time to time by
Advent (provided, that the Advent designated directors shall be reasonably
acceptable to no less than a majority of the Designating Parties, it being
agreed that A. Bruce Johnston is so acceptable) to be elected to serve on the
Board at all times from the date of this Agreement until this Agreement
terminates as provided below; (iii) to cause a majority of the members of the
Board to consist of persons (including the Advent designated directors or
persons designated in accordance with paragraph 3 below) who are disinterested
persons (as hereinafter defined) and who are reasonably acceptable to no less
than a majority of the Designating Parties; (iv) to cause the Advent designated
directors to be appointed, if they so request, to all committees of the Board;
(v) to cause the special dividend and voting provisions of subparagraphs 5(b)(i)
and (ii) of Article FOURTH of the certificate of incorporation of the Company to
be carried out when and if applicable; and (vi) to cause the provisions of
paragraph 3 below to be carried out. Until further notice from the Designating
Party in question, it is understood and agreed that the persons so designated by
Perkins and Costello and the first such person designated by Advent are,
respectively, Perkins, Costello and A. Bruce Johnston. As used herein, the
term "disinterested person"
D-2
shall mean a person who receives or is entitled to no payments for services, as
an employee, consultant or otherwise, other than payments for service on the
Board, from the Company or any of its subsidiaries.
3. Each of the Designating Parties may from time to time (provided there are
then fewer than seven members of the Board) propose for election to the Board
one or more persons in addition to those designated in accordance with clause
(ii) of paragraph 2 above. Each of the other Designating Parties shall determine
whether the proposed director is reasonably acceptable to such Designating Party
and shall so notify the proposing Designating Party. If a majority of the
Designating Parties accept such proposed director, the Designating Parties shall
use their respective best efforts to cause the proposed director promptly to be
elected to serve on the Board. In the event that less than a majority of the
Designating Parties accept such proposed director in accordance with said clause
(ii) of paragraph 2, the proposing Designating Party may, by written notice to
the Company and the other parties, request the Company to
<PAGE> 2
hold a special meeting of the stockholders of the Company for the purpose of
considering and acting upon the proposal to elect such person as an additional
member of the Board. The other Parties shall use their respective best efforts
to cause such meeting promptly to be called and to be held in accordance with
the by-laws of the Company within 60 days following receipt by the Company of
the foregoing notice.
4. This Agreement shall terminate on the earliest to occur of
(i) the completion of a Qualified Offering, as defined in Section
D-3
7.17 of the Stock Purchase Agreement, (ii) the merger or consolidation of the
Company with or into another corporation following which the Parties do not own
at least 51% of the capital stock of the surviving or resulting corporation, or
the sale of all or substantially all of the assets of the Company to a third
party, or (iii) the tenth anniversary of the date hereof. If not previously
terminated in accordance with this paragraph, all of the rights and obligations
of a Designating Party under this Agreement shall terminate and such
Designating Party shall cease to be a Designating Party for all purposes of
this Agreement when such Designating Party ceases to hold in the aggregate at
least 139,000 shares (such number to be appropriately adjusted in the event of
stock splits, stock combinations, stock dividends or similar recapitalizations)
of Capital Stock (treating for these purposes all such shares owned by the TA
Group (as defined in Section 7.17 of the Stock Purchase Agreement) as being
owned by Advent).
5. In the event of any inconsistency between the provisions of this Agreement
and those of paragraph 5(b) of Article FOURTH of the certificate of
incorporation of the Company, those of said paragraph 5(b) shall govern.
6. Each Party agrees not to transfer any shares of Capital Stock unless such
Party's transferee agrees in writing to be bound by the terms hereof applicable
to such Party.
7. This Agreement shall be construed and enforced as a contract under seal in
accordance with the laws of the State of Delaware. It
D-4
shall bind and inure to the benefit of the parties and their respective
executors, administrators, successors and assigns; provided, that a Designating
Party may assign all of its rights and obligations as a Designating Party under
this Agreement only to a single transferee (i) which is reasonably acceptable to
the holders of a majority of the Capital Stock then held by Parties and (ii)
which holds no less than 139,000 shares (such number to be appropriately
adjusted in the event of stock splits, stock combinations, stock dividends or
similar recapitalizations) of Capital Stock, and upon such an assignment, the
transferee shall be deemed to be a Designating Party in substitution for the
assigning Designated Party.
D-5
Very Truly Yours,
(Signature)
Lars D. Perkins
Agreed and accepted
this day of January, 1994
ADVENT NEW YORK L.P.
By: TA Associates VI L.P.,
its general partner
By: TA Associates, Inc.,
its general partner
<PAGE> 3
By : Brian J. Conway
Managing Director
ADVENT VII L.P.
By: TA Associates VII L.P.,
its general partner
By: TA Associates, Inc.,
its general partner
By: Brian J. Conway
Managing Director
ADVENT INDUSTRIAL II L.P. ADVENT ATLANTIC AND PACIFIC II L.P.
By: TA Associates VI L.P. By: TA Associates AAP II Partners
its general partner its general partner
By: TA Associates, Inc. By: TA Associates, Inc.
its general partner its general partner
By: Brian J. Conway By: Brian J. Conway
Managing Director Managing Director
TA VENTURE INVESTORS LIMITED CHESTNUT III LIMITED PARTNERSHIP
PARTNERSHIP By: TA Associates VI L.P.
Attorney-in-Fact
By: TA Associates, Inc.
its general partner
By: Brian J. Conway By: Brian J. Conway
General Partner Managing Director
CHESTNUT CAPITAL INTERNATIONAL
III LIMITED PARTNERSHIP
By: TA Associates VI L.P.
Attorney-in-Fact
By: TA Associates, Inc.,
its general partner
By: Brian J. Conway
Managing Director
<PAGE> 1
EXHIBIT 10.16
SHAREHOLDER AGREEMENT
This AGREEMENT is made as of this 5th day of January, 1994, by and among
MICROTRAC SYSTEMS, INC., a Delaware corporation (the "Company"), and those
persons or entities whose signatures appear below (collectively, the
"Shareholders"; individually, a "Shareholder").
RECITALS
WHEREAS, certain Shareholders, as indicated on the signature page below (the
"Common Shareholders"), currently own shares of the Company's common stock, $.O1
par value per share, (the "Common Stock") and the other Shareholders, as so
indicated (the "Preferred Shareholders") are purchasing on the date of this
Agreement shares of the Company's preferred stock, $1.00 par value per share
(the "Preferred Stock"), the Common Stock and the Preferred Stock being herein
referred to as the "Capital Stock";
WHEREAS, the Shareholders and the Company desire to enter into certain
arrangements regarding restrictions on the transfer of the Common Stock;
NOW, THEREFORE, in consideration of the mutual promises and covenants herein
contained, the receipt and sufficiency of which are acknowledged;
IT IS HEREBY AGREED AS FOLLOWS:
AGREEMENT
1. Restrictions on Transfer of Common Stock.
(a) General Prohibitions. No Common Shareholder may sell, transfer, assign,
pledge (except with the approval of the Board of
C-1
Directors of the Company) or otherwise dispose of, whether voluntarily or
involuntarily ("transfer"), any interest in any Common Stock, whether now owned
or hereafter acquired, except after compliance with the provisions of Section 5
of Article V of the bylaws of the Company (the "By-Laws"), which contemplate an
advance notice to the Company of such proposed transfer, and with the other
provisions of Sections 1 and 2 of this Agreement.
(b) Notice of Proposed Transfer; Right of First Offer. In the event of a
proposed transfer of Common Stock, the transferring Shareholder shall,
simultaneously with the notice to the Company required by the By-Laws (the "Sale
Notice"), deliver a copy of the Sale Notice to each Preferred Shareholder. To
the extent that the Company does not exercise in full the rights to repurchase
the shares to be transferred within the time period prescribed by the By-Laws,
then each Preferred Shareholder shall have the right to purchase a ratable
portion of such shares not so purchased upon the terms otherwise applicable to
the Company pursuant to the By-Laws. Such right shall be exercised by a
Preferred Shareholder by written notice to the selling Shareholder, the Company,
and the other Preferred Shareholders within 20 days following failure of the
Company to exercise such rights in full within the prescribed time period (or,
if earlier, within 20 days following notice from the Company to Preferred
Shareholders to the effect that such rights will not be exercised in full); and
the purchase of such shares by one or more Preferred Shareholders shall be
completed within 30 days following their notice. As used herein, the term
"ratable portion"
c-2
shall mean, as to a Preferred Shareholder, the product of (i) the number of
shares to be purchased and (ii) a fraction, the numerator of which is the number
of shares of capital stock of the Company ("Capital Stock") owned by the
Preferred Shareholder in question and the denominator of which is the aggregate
number of shares of Capital Stock owned by all Preferred Shareholders electing
to exercise such rights. Any such election by Preferred Shareholders to purchase
shares pursuant to this Section 1(b) must be as to all shares proposed to be
transferred and which are not purchased by the Company pursuant to the By-Laws.
To the extent that the Company and the Preferred Shareholders do not purchase
the shares specified in the Sale Notice in question within the prescribed time
period, the transferring shareholder shall be entitled, for a period of 90 days
following the expiration of such time period, to transfer any or all of the
remaining shares in question on terms no more favorable to the transferee than
those specified in the Sale Notice.
2. Right of Co-Sale in favor of Preferred Shareholders. In the event of any
proposed sale of Common Stock by a Common Shareholder (or more than one Common
Shareholder acting together in an integrated transaction) (i) as to which the
provisions of Section I have been complied with and (ii) which
<PAGE> 2
involves a proposed sale of more than 2% of the Common Stock owned by any such
Common Shareholder, in the transaction in question or a series of transactions
within any 12 month period, each Preferred Shareholder may elect to participate
in the sale contemplated by the Common Shareholder(s) by delivering written
notice to the Common
C-3
Shareholder(s) within 20 days after receipt of the Sale Notice. If any of the
Preferred Shareholders elects to participate in such proposed sale, each of the
selling Common Shareholder(s) and each of the electing Preferred Shareholders
will be entitled to sell in the contemplated sale, at the same price and on the
same terms, a number of shares of Capital Stock equal to the product of: (i) the
quotient determined by dividing (x) the percentage of the shares of Capital
Stock outstanding owned by such Common Shareholder or Preferred Shareholder
electing to participate by (y) the aggregate percentage of the shares of Capital
Stock outstanding owned by all of the selling Common Shareholder(s) and all of
the Preferred Shareholders electing to participate; and (ii) the number of
shares of Capital Stock to be sold in the contemplated transfer.
For example, if the Sale Notice contemplates a sale of 100,000 shares of Capital
Stock by the Common Shareholder, and if he is at the time the owner of 30% of
the Company's outstanding Capital Stock, and if two (2) of the Preferred
Shareholders elect to participate and they own 20% and 10%, respectively, of the
Company's Capital Stock outstanding, the Common Shareholder would be entitled to
sell 50,000 shares (30% + 60% x 100,000 shares) and the participating Preferred
Shareholders would be entitled to sell 33,333.33 shares (20% + 60% x 100,000
shares) and 16,666.67 shares (10% + 60% x 100,000 shares), respectively.
Each Common Shareholder will use his, her or its best efforts to obtain the
agreement of each prospective buyer to the participation of the Preferred
Shareholders in the contemplated sale and will not sell any shares of Capital
Stock to any prospective buyer if such buyer refuses to allow the
c-4
participation of the Preferred Shareholders. Nothing contained in this Section 2
shall be deemed to modify or waive compliance with Section 1 hereof.
3. Certain Permitted Transfers by Common Shareholders. Notwithstanding the
provisions of Sections 1 and 2, the restrictions contained in such Sections will
not apply with respect to transfers of shares to or in trust for benefit of such
Common Shareholder's family group (as defined herein); provided, however, that
all the restrictions and provisions contained in this Agreement will continue to
be applicable to the shares after any such transfer and prior to any such
transfer the transferees of such shares will be required to agree in writing to
be bound by the provisions of this Agreement. Any person acquiring shares in
accordance with this Section 3 will be deemed to be a Common Shareholder for all
purposes under this Agreement as of the date of such acquisition. An individual
Common Shareholder's "family group" means his or her spouse and his or her
descendants (whether natural or adopted) and any trust solely for the benefit of
such persons.
4. Endorsement on Certificates. Each certificate representing shares of Common
Stock now or hereafter outstanding and owned by the Common Shareholders shall be
stamped with the following legend indicating that the transfer of such shares is
restricted under the terms of this Agreement: "This security is subject to
transfer restrictions contained in a certain Shareholder Agreement, and no
transfer of the security shall be made unless the conditions specified in said
Agreement have been
C-5
<PAGE> 3
fulfilled. A copy of such Agreement is on file and available for inspection at
the principal offices of the Company."
5. Notices. Any and all notices, designations, consents, offers', acceptances,
or any other communication provided for herein shall be given in writing by
personal delivery to the person entitled to receive said notice, or by certified
mail or overnight courier service, and shall be addressed, in the case of the
Company, to its office at One Dedham Place, Dedham, Massachusetts 02026,
Attention: President; and, in the case of any Shareholder, to such Shareholder's
address set forth on Schedule A hereto, or to such other address as may be
designated in writing by such Shareholder and of which the Company and the other
Shareholders shall have received notice. Any such notice shall be deemed
effective when personally delivered, if delivered personally, or three business
days after mailing, if mailed, or one business day after delivery to the
courier, if delivered by overnight courier service.
6. Effect of Invalid Provision; Governing Law. The invalidity or
unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all
respects as if such invalid or unenforceable provision was omitted. This
Agreement shall be governed under the internal laws of the Commonwealth of
Massachusetts (regardless of such state's conflict of law provisions or
principles).
7. Benefit; Subsequent Common Shareholders. This Agreement
C-6
shall be binding upon and shall operate for the benefit of the parties hereto,
and their respective successors, assigns, executors and administrators;
provided, that this Agreement shall not be applicable to shares of Common Stock
after they have been transferred in compliance with the provisions of this
Agreement (other than transfers permitted by Section 3 hereof).
8. Counterparts. This Agreement may be executed in one or more counterparts no
one of which need contain the signatures of all parties hereto, and, each of
which shall be deemed an original; provided, however, that the total of such
counterparts shall contain the signatures of all parties hereto.
9. Termination. This Agreement shall terminate and thereafter be of no force and
effect upon the earliest to occur of (i) the closing of a Qualified Offering, as
defined in Section 7.17 of the stock purchase agreement, of even date herewith,
among the Company and the Preferred Shareholders, (ii) the sale of all or
substantially all of the assets of the Company, or the merger or consolidation
of the Company into or with any other corporation following which the
Shareholders own less than 51% of the capital stock of the surviving or
resulting corporation, or (iii) January 4 2000 (or, if later, the date on which
any Redemption Default Period, as defined in subparagraph 5(b) of Article FOURTH
of the certificate of incorporation of the Company (or successor provision of
similar effect), shall have ended).
10. Amendment. This Agreement may not be amended or modified orally or in any
manner other than by an agreement in
C-7
writing signed by the Company and a majority of the shares of Common Stock and
Preferred Stock then held by the Shareholders.
C-8
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
hereinabove set forth.
MICROTRAC SYSTEMS INC.
By: Lars D Perkins
Lars D. Perkins, President
Preferred Shareholders:
ADVENT NEW YORK L.P. ADVENT VII L.P.
By: TA Associates VI L.P., By: TA Associates VII L.P.,
its general partner its general partner
By: TA Associates, Inc., By: TA Associates, Inc.
its general partner its general partner
By: Brian J. Conway By: Brian J. Conway
Managing Director Managing Director
ADVENT INDUSTRIAL II L.P. ADVENT ATLANTIC AND PACIFIC II L.P.
By: TA Associates VI L.P., By: TA Associates AAP II Partners,
its general partner its general partner
By: TA Associates, Inc. By: TA Associates, Inc.,
its general partner its general partner
By: Brian J. Conway By: Brian J. Conway
Managing Director Managing Director
TA VENTURE INVESTORS LIMITED CHESTNUT III LIMITED PARTNERSHIP
PARTNERSHIP
By: TA Associates VI L.P. Attorney-in-Fact
By: TA Associates, Inc. its general partner
By: Brian J. Conway By: Brian J. Conway
General Partner Managing Director
CHESTNUT CAPITAL INTERNATIONAL
III LIMITED PARTNERSHIP
By: TA Associates VI L.P.
Attorney-in-Fact
By: TA Associates, Inc.,
its general partner
By: Brian J. Conway
Managing Director C-9
Common Shareholders
(Signature)
Lars D Perkins
(Signature)
J. Paul Costello
<PAGE> 5
(Signature)
John P Jopling
C-10
Schedule A to Shareholder Agreement
Addresses
Common Shareholders:
Lars D. Perkins
465 Washington Street
Brookline, MA 02146
J. Paul Costello
5 Old County Road
Hingham, MA 02043
John P. Jopling
187 Fisher Street
Needham, MA 02192
Preferred Shareholders:
Advent VII L.P.
High Street Tower, Suite 2500 125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Advent Atlantic and Pacific II L.P.
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Chestnut III Limited Partnership
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Chestnut Capital International III
Limited Partnership
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Schedule A (Continued)
<PAGE> 6
Advent New York L.P.
High Street Tower, Suite 2500 125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Advent Industrial II L.P.
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
TA Venture Investors Limited Partnership
High Street Tower, Suite 2500
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
- -2-
<PAGE> 1
EXHIBIT 10.17
Agreement Pertaining to Certain Activities
AGREEMENT made this 5th day of January, 1994 by and between MicroTrac Systems,
Inc., a Delaware corporation (the "Company"), and Lars D. Perkins, an individual
residing in Brookline, Massachusetts (the "Employee").
WITNESSETH:
WHEREAS, the Employee is the chief executive officer and chief technical officer
of the Company; and
WHEREAS, Advent VII L.P., Advent Atlantic and Pacific II L.P., Chestnut III
Limited Partnership, Chestnut Capital International III Limited Partnership,
Advent New York L.P., Advent Industrial II L.P., and TA Venture Investors
Limited Partnership (the "Purchasers") intend to make an equity investment in
the Company on the date hereof, provided that the Employee agrees to certain
undertakings, as more fully hereinafter provided;
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants hereinafter provided, the parties hereto hereby agree as follows:
1. Stipulated Activities. The Employee shall, within ten (10) days of the
occurrence thereof, provide the board of directors of the Company (the "Board")
with a list and description of each Stipulated Activity (as hereinafter defined)
in which the Employee is engaged or otherwise involved which has commenced,
expired or been modified since the Employee delivered the last such list and
description to the Board. As used herein, the term "Stipulated Activity" shall
mean any of the following as to the Employee:
(a) being the beneficial owner of (i) more than 5% of the outstanding equity
securities of any entity other than the Company or (ii) securities (including
debt securities and guarantees of indebtedness, but excluding securities traded
on a national securities exchange or in the over-the-counter market and
securities issued by money market or similar funds) of any entity other than the
Company with an original cost, fair market value and/or obligation on the part
of the Employee, contingent or otherwise (even if the obligation is evidenced by
non-recourse debt or guaranty), in excess of $100,000; or
(b) being an employee, officer, director, trustee, consultant or general partner
of any person or entity other than the Company.
For purposes of determining Stipulated Activities, any actions taken by entities
controlled by the Employee and any actions taken by the spouse or children of
the Employee and described in (a) above or related to a Competitive Business (as
defined in Section 2 below), will be imputed to be activities conducted by the
Employee. The Employee hereby represents that, except as listed on Schedule 1
hereto, the Employee is not presently engaged in, or contemplating the imminent
engagement in, any Stipulated Activity.
2. Non-Competition by Employee. Unless waived by a disinterested majority of the
Board, the Employee shall not, during the period of the Employee's employment by
the Company and for a period of 30 days thereafter and (provided, in the case of
a Company Election (as hereinafter defined)) that the Company pays the Employee
the Severance Payments (as hereinafter defined)) for the period specified in the
applicable Company Election following the termination of such employment by the
Company for any reason whatsoever, (i) directly or indirectly engage in any
Competitive Business (as hereinafter defined), whether such engagement shall be
as an employer, officer, director, owner, employee, consultant, stockholder,
partner or other participant in any Competitive Business, (ii) assist others in
engaging in any Competitive Business in the manner described in the foregoing
clause (i), (iii) induce employees of the Company or any of its subsidiaries to
terminate their employment with the Company or such subsidiary or to engage in
any Competitive Business or (iv) employ any employees of the Company in any
entity
<PAGE> 2
affiliated or associated with the Employee. The term "Competitive Business"
means and includes any business or activity in which the Company is at the time
of such termination actively engaged (or has been actively engaged at any time
during the Employee's employment with the Company or, at the time of such
termination, has such engagement under active consideration, by the Board)
within any geographic area in which the Company is at such time or during such
employment has been actively conducting such business or activity or within any
geographic area as to which the Board is at the time of such termination
actively considering expansion of such business or activity; provided, however,
that the ownership of no more than 2% of the outstanding capital stock of a
corporation traded on a national securities exchange or the over-the-counter
market shall not be deemed engaging in a Competitive Business. In the event of
termination of employment of the Employee for any reason, the Company may, at
its option, within 30 days make an election (the "Company Election") specifying
the number of months (not more than twenty-four) during which the Employee must
refrain from the actions described in clauses (i) through (iv) above, and so
notify the Employee; and the Company shall make payments to the Employee,
monthly in arrears, at the rate of 33% of the greater of the base salary of the
Employee in effect at the time of such termination or the base salary of the
Employee in effect on the date hereof (the "Severance Payments") and for the
number of months so specified in the Company Election; provided, that the amount
of the Severance Payment for any such month may be offset by the amount, if any,
of other severance or other termination payments by the Company to the Employee
with respect to such month (with appropriate proration over a period of 12
months of any lump sum severance or other termination payments to the Employee).
3. Term. The provisions of Section 1 shall continue in effect until the earlier
of (a) termination of the employment of the Employee with the Company or (b)
cessation by the Purchasers to own in the aggregate at least 25% of the shares
of Preferred Stock of the Company purchased by them on the date hereof. The
provisions of Section 2 shall continue in effect until the second anniversary of
the termination of the employment of the Employee with the Company.
4. General. This Agreement shall be construed and enforced as a contract under
seal in accordance with the laws of The Commonwealth of Massachusetts. It shall
bind and inure to the benefit of the Company and the Employee and their
respective successors, assigns and legal representatives. This Agreement
supersedes the noncompetition covenants contained in paragraph 4 of the
agreement between the Employee and the Company, Dated November 20, 1992.
MICROTRAC SYSTEMS, INC.
By: (Signature)
George Engdahl
(Signature)
Lars D. Perkins
Schedule 1 to Agreement Pertaining to Certain Activities
Current Stipulated Activities
President and director and principal stockholder for 77 Whiskey Corp.
(corporation that formerly held ownership of an aircraft)
K-4
<PAGE> 1
EXHIBIT 10.18
RESTRAC, INC.
BORWICK INTERNATIONAL, INC.
TERMINATION AGREEMENT
This AGREEMENT is made as of September 30, 1995 by and between Restrac, Inc., a
Delaware corporation with a principal place of business at One Dedham Place,
Dedham, Massachusetts, (the surviving corporation in a merger with MicroTrac
Systems, Inc., a Massachusetts corporation) ("Restrac"), and Borwick
International, Inc., a Delaware corporation with a principal place of business
at Rue Fernand Neuray 17, B-1060 Brussels, Belgium ("Borwick"), and Irving P.
Borwick, the sole stockholder of Borwick ("Dr. Borwick").
WHEREAS, Restrac and Borwick are parties to a certain Agreement for Purchase and
Sale of Assets dated January 1, 1991 ("1991 Agreement"), under which Restrac
acquired all right, title and interest in and to certain jointly developed
software known as SuccessPlan (the "Product"); and
WHEREAS, under the terms of the 1991 Agreement, Borwick was granted the
exclusive right to distribute the Product outside of the United States and
Canada and Restrac was prohibited from selling any competitive products in that
territory; and
WHEREAS, Restrac wishes to terminate Borwick's distribution rights to
SuccessPlan and remove the restriction on its ability to sell competitive
products;
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Definitions. For purposes of this Agreement, the following terms shall have
the meanings set forth below. All terms not otherwise defined shall have the
meaning set forth in the 1991 Agreement.
a. Product - The SuccessPlan software, as defined by Section 1(f) of the
1991 Agreement. For purposes of this Agreement and the 1991 Agreement, the
"Product" does not include Restrac's client server based succession
planning/employee development product, Restrac Plan.
b. Succession Planning Software - This term shall have the meaning set
forth in Section 1(d) of the 1991 Agreement.
c. Restrac Territory - The United States of America and Canada and all of
their possessions and territories.
d. Borwick Territory - All of the world excluding the Restrac Territory.
e. Borwick Clients - Those companies who have purchased a license to use
the Product in the Borwick Territory, as set forth on the Borwick Client List
attached hereto as Exhibit A.
f. Effective Date - September 30, 1995.
g. Restrac Plan - Restrac's client server based employee
development/succession planning software product.
h. Non-Competition Agreement - The Non-Competition Agreement between
Restrac and Dr. Borwick dated September 30, 1995 and executed contemporaneously
with this Agreement.
2. Termination of Distribution Rights and Non-Competition Covenants. In
consideration of the covenants set forth under this Agreement, all terms
contained in Section 4, Seller's Foreign Distribution Rights and Section 5, Non
Competition and Reciprocal Rights of the 1991 Agreement are hereby terminated in
all respects. All other terms of the 1991 Agreement, including but not limited
to Section 10, Confidentiality
<PAGE> 2
and Section 12, Proprietary Rights Indemnification, shall remain in effect to
the extent not superseded by the terms of this Agreement.
3. Non Competition by Borwick. For a period of five (5) years following the date
of this Agreement, Borwick shall not (directly, or indirectly through another
entity) develop, market, promote, sell or provide, or assist in the development,
marketing, promotion or sale of, software or outsourcing services which are used
to automate the staffing, employee development, or succession planning function
of an organization. This shall not preclude Borwick from continuing to make
available any management consulting services which are not related to the
provision of software or outsourcing services which are marketed for the purpose
of automating the staffing, employee development or succession planning
function.
4. Maintenance and Support of Borwick Clients. This Agreement does not include
any assumption of rights or liabilities by Restrac of any of Borwick's
agreements with its customers, including client maintenance agreements.
Notwithstanding anything to the contrary contained in Section 3, Non-Competition
by Borwick, it is understood that Borwick may continue to provide telephone
support and maintenance to any Borwick Clients to whom Borwick is currently
providing maintenance, for a period of up to one year following the Effective
Date.
5. Payment. Upon execution of this Agreement, Restrac will pay to Borwick
$550,951.77, in consideration of the covenants contained herein.
6. Representations and Warranties of Borwick and Dr. Borwick. Borwick and Dr.
Borwick hereby jointly and severally represent to Restrac that the following are
true and correct in all material respects:
(a) Organization and Standing of Borwick. Borwick is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Borwick has the power and authority (corporate and other) to enter
into, deliver and perform its obligations and undertakings under, this Agreement
and to conduct business in each of the jurisdictions in which such business is
now conducted.
(b) Litigation; Compliance with Law. To the best of his and its knowledge,
there is no litigation or proceeding pending, threatened against or relating to
Borwick and/or the Product, nor does Borwick or Dr. Borwick know of or have
reasonable grounds to know of any basis for any such action, or of any
governmental investigation relative to Borwick and/or the Product. There is no
litigation or proceeding pending or threatened against or relating to any
present or former employee of Borwick by reason of the past employment or
consulting relationships of any such employees. To the best of his and its
knowledge, there are no outstanding judgments against Borwick or against any of
its employees or stockholders. There are no claims pending by Borwick against
any of the Borwick Clients nor does Borwick intend to assert any such claim
after the date of this Agreement. Borwick has complied with all laws, rules,
regulations and orders applicable to its business, operations, prop ets,
products and service, and has all necessary permits licenses and other
authorizations required to conduct its business.
(c) Validity of this Agreement. The execution, delivery and performance by
Borwick of this Agreement have been duly authorized and approved by all
necessary corporate action; and this Agreement has been duly executed by Borwick
and constitutes the valid and binding obligation of Borwick, enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement will not conflict with, or result in a material breach of any of the
terms of, or constitute a material default under, any charter, by-law,
agreement, instrument or other restriction to which Borwick is a party or by
which it or any of its properties or assets is bound and to the best of his and
its knowledge will not violate any provision of federal or state law.
(d) Brokers. There is no contract, arrangement or understanding between
Borwick and/or Dr. Borwick and any broker, finder, or similar agent with respect
to the transaction hereunder.
<PAGE> 3
(e) Material Facts. Neither Borwick nor Dr. Borwick knows of any
information or fact not publicly known which has or would have a material
adverse effect on Restrac's ability to sell Succession Planning Software in the
Borwick Territory.
(f) Material Contracts. Both Borwick and Dr. Borwick have fully and
faithfully complied with all material agreements, including, but not limited to
all agreements with Borwick Clients, and neither Borwick nor Dr. Borwick have
entered into any agreements or taken any actions which could cause claims to be
asserted against Restrac. Without limiting the generality of the foregoing,
neither Borwick nor Dr. Borwick have:
i. failed to pay any amounts owed as sales commissions or
compensation to its employees;
ii. materially breached any agreement with a Borwick Client;
iii. entered into any customer agreements related to the Products
which have not been fully performed, other than agreements
with Borwick Clients to provide telephone support and
maintenance in the future;
iv. represented that the Products include capabilities or
features not described in their standard Product
documentation;
v. disparaged Restrac or its stockholders, directors, officers
or employees or do anything else which would, directly or
indirectly, cause or result in material damage to the
business, business prospects or reputation of a party to
this Agreement.
vi. failed to pay any taxes or governmental charges when due or
file any required returns.
(g) Conflicts. Neither Borwick or Dr. Borwick have entered into any
contract or made any commitment which could be binding upon or result in any
liability to Restrac, or which could require either Borwick or Dr. Borwick to
breach their obligations under this Agreement or the Non-Competition Agreement.
Without limiting the generality of the foregoing, neither Borwick nor Dr.
Borwick have entered into any contract or made any commitment which:
i. promises to provide or make available Product support after
September 30, 1996;
ii. grants any rights to distribute the Product;
iii. assigns any of Borwick's rights under the 1991 Agreement;
vi. grants rights to receive Product source code (and no Product
source code has been delivered to any third party);
v. purports to have been made on behalf of Restrac as Restrac's
agent.
(h) Proprietary Rights. Neither Borwick nor Dr. Borwick has made any
agreement or commitment or taken any action which could in any way diminish
Restrac's ownership of proprietary rights to the Product. Without limiting the
generality of the foregoing, neither Borwick nor Dr. Borwick has:
i. transferred ownership of copyrights, trade secrets or other
proprietary rights in and to the Product to a third party;
ii. granted any rights with respect to the Products other than
rights granted to the Borwick Clients to use a limited
number of copies of the Products by a limited number of
users in object code form to the Borwick Clients;
iii. developed (or allowed any employee, consultant or agent to
develop) any software which is based upon or complementary
to the Products with respect to which Borwick, Dr. Borwick,
or any employee, consultant or agent claims rights of
ownership;
iv. disclosed any trade secrets of Restrac to any third party or
taken any other actions which have caused the loss of
Restrac's proprietary rights to the Product;
v. taken any action which infringed the proprietary rights of
any third party (or received any notice claiming such
infringement).
<PAGE> 4
(i) Infringement. Neither Borwick nor Dr. Borwick is aware of any use of
the Products by Borwick's customers other than the uses permitted by the
licenses granted to them by Borwick, any infringement of Restrac's proprietary
rights by Borwick customers or any third party or any intention on the part of
any person to do any of the foregoing.
(j) Potential Claims. Neither Borwick nor Dr. Borwick has received notice
of any claim of damages arising from a defect in the Products, nor are they
aware of any intention of any person to assert such a claim or any facts that
could give rise to such a claim.
(k) Distribution of Succession Planning Software. Neither Borwick nor Dr.
Borwick has engaged in or asserted or made any contract or commitment to engage
or assist in, the distribution of Succession Planning Software other than the
Products.
The foregoing representations and warranties in this Section 6 shall be deemed
material and to have been relied upon by Restrac, and they shall survive the
execution and delivery of this Agreement for a period of three years following
the Effective Date.
7. Indemnification by Borwick. Upon and after the execution and delivery of this
Agreement, Borwick and Dr. Borwick shall, jointly and severally, indemnify and
hold harmless Restrac against and from all loss, cost, damage and expense,
including reasonable fees of counsel, either i) resulting from any
misrepresentation or breach of warranty made by them herein, or ii) arising out
of any claim made against Restrac by a third party, where the claim is based on
the actions or inactions of Borwick or Dr. Borwick either prior to, or within
thirteen (13) months following, the Effective Date; provided that both Borwick
and Dr. Borwick shall have the right to participate in the defense and/or
settlement of any claim. Dr. Borwick's personal liability under this
indemnification shall not exceed $350,000 for any claim made during the first
year following the Effective Date; $200,000 for any claim made during the second
year following the Effective Date; and $50,000 for any claim made during th e
third year following the Effective Date, and $0.00 thereafter.
8. Representations and Warranties of Restrac. Restrac represents to Borwick and
Dr. Borwick that the following are true and correct in all material respects:
(a) Organization and Standing of Restrac. Restrac is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Restrac has the power and authority (corporate and other) to enter
into, deliver and perform its obligations and undertakings under, this Agreement
and to conduct business in each of the jurisdictions in which such business is
now conducted.
(b) Validity of this Agreement. The execution, delivery and performance by
Restrac of this Agreement have been duly authorized and approved by all
necessary corporate action; and this Agreement has been duly executed by Restrac
and constitutes the valid and binding obligation of Restrac, enforceable in
accordance with its terms. The execution, delivery and performance of this
Agreement will not conflict with, or result in a material breach of any of the
terms of, or constitute a material default under, any charter, by-law,
agreement, instrument or other restriction to which Restrac is a party or by
which it or any of its properties or assets is bound and will not violate any
provision of federal or state law.
(d) Brokers. There is no contract, arrangement or understanding between
Restrac and any broker, finder, or similar agent with respect to the transaction
hereunder.
The foregoing representations and warranties in this Section 8 shall be deemed
material and to have been relied upon by Borwick, and they shall survive the
execution and delivery of this Agreement for a period of three years following
the Effective Date. Upon and after the execution and delivery of this Agreement,
Restrac shall indemnify and hold harmless Borwick and Dr. Borwick against and
from all loss, cost, damage and expense, including reasonable fees of counsel,
resulting from any misrepresentation or breach
<PAGE> 5
of warranty made by it herein; provided that Restrac shall have the right to
participate in the defense and/or settlement of any claim.
9. Transition of Borwick Clients. Borwick will collaborate with Restrac to
minimize the disruption to Borwick clients and to maximize Restrac's entry into
the European market. Borwick will reasonably cooperate with Restrac in its
efforts to sell its client server based Restrac Plan software to the Borwick
Clients and/or transition such clients to Restrac maintenance and support
agreements. Within fifteen (15) days following the execution of this Agreement,
Borwick will provide Restrac with a complete copy of all Borwick records
relating to the Borwick Clients, including, but not limited to, customer contact
information and customer license and maintenance agreements. Borwick agrees that
it will not initiate any lawsuit, arbitration, or other legal proceeding against
any Borwick Client with respect to any dispute arising out of or related to
Borwick's distribution of the Products, without Restrac's prior written consent,
which will not be unreasonably withheld.
10. Assignment of Rights. To the extent that Borwick has acquired any rights in
and to the SuccessPlan trademark or any other Product related proprietary rights
(including, without limitation all rights of copyright, patent, trademark, trade
secret) in its exercise of its distribution rights under the 1991 Agreement,
Borwick hereby assigns (to the extent necessary to transfer ownership) all such
rights to Restrac, and agrees to provide reasonable assistance (at Restrac's
expense) to Restrac to perfect such rights.
11. Mutual Release. Restrac, Borwick and Dr. Borwick each hereby release each
other from any and all claims either party may have against the other arising
under, or related to, the performance or non performance of the 1991 Agreement,
whether known or unknown, as of the Effective Date.
12. Non Disparagement. Restrac and Borwick each agree not to publish or
otherwise communicate any deleterious remark concerning any other party, or its
officers, employees or agents, or do anything else which would, directly or
indirectly, cause or result in material damage to the business, business
prospects or reputation of a party to this Agreement
13. Limitation of Liability. Dr. Borwick is a party to this Agreement solely for
the purposes of being bound by Section 6, Representations and Warranties,
Section 7, Indemnification, and Section 11, Mutual Release. Dr. Borwick is not
individually bound by or liable under any other Section of this Agreement. Dr.
Borwick's liability under this Agreement shall not exceed $1,000,000, and any
claims against Dr. Borwick under this Agreement must be brought, if at all,
within three (3) years following the Effective Date.
14. General.
(a) All notices, requests, demands, and other communications hereunder
shall be in writing, and sent by U.S. mail to a party's President at the address
set forth on the first page of this Agreement (attention: President), or to such
other address as shall have been designated in writing by any party.
(b) This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
(c) This Agreement supersedes the 1991 Agreement in all respects. In the
event of any conflict between the terms of this Agreement and the 1991
Agreement, this Agreement shall control.
(d) This Agreement sets forth the entire understanding of the parties on
the subject hereof. Any waiver or modification of the provisions of this
Agreement will be effective only if in writing and signed by both parties.
(e) This Agreement shall be considered an agreement made under seal in
Massachusetts and shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
their behalf by their duly authorized representatives as of the Effective Date.
<PAGE> 6
Restrac, Inc. Borwick International, Inc.
/S/ Lars D. Perkins 9/29/95 /S/ Irving P. Borwick 9/28/95
Signature Date Signature Date
Lars D. Perkins President Irving P. Borwick President
Name Title Name Title
/S/ Irving P. Borwick 9/28/95
Irving P. Borwick, Individually Date
<PAGE> 1
EXHIBIT 10.19
FINDER'S FEE AND
NON COMPETITION AGREEMENT
This AGREEMENT is made as of September 30, 1995 by and between Restrac, Inc., a
Delaware corporation with a principal place of business at One Dedham Place,
Dedham, Massachusetts, 02026 ("Restrac") and Irving P. Borwick, of Rue Fernand
Neuray 17, B-1060 Brussels, Belgium ("Dr. Borwick").
1. Finder's Fee. In consideration of Dr. Borwick's cooperation with Restrac's
efforts to sell Restrac Plan software licenses to the organizations set forth on
the Borwick International client list attached hereto as Exhibit A ("Borwick
Clients"), Restrac will compensate Dr. Borwick as follows. In the event a
license to Restrac Plan is sold to any of the Borwick Clients on or before
September 30, 1997, Restrac will pay Dr. Borwick a finder's fee ("Finder's Fee")
equal to eight percent (8%) of the Net Software License Fees paid by the Borwick
Client for the license. For purposes of this Agreement, Net Software License
Fees shall be the total software license fees paid, less any royalties or
commissions payable to third parties in connection with the sale. Net Software
License fees do not include fees for hardware or services.
2. Sale to Philip Morris. In the event that any Philip Morris company which is
based in the United States or Canada purchases a Restrac Plan license for
worldwide use on or before September 30, 1997, the Finder's Fee payable to Dr.
Borwick shall be equal to five percent (5%) of the Net Software License Fees
paid by such company, regardless of the extent of the planned use of the Restrac
Plan software in the Borwick Territory.
3. Reporting/Payment. Within thirty (30) days following the end of each calendar
quarter, Restrac will submit payment of all Finder's Fees which have accrued
during the previous calendar quarter, along with an explanation of the method of
calculation, including the number of Restrac Plan licenses sold to Borwick
Clients in the previous quarter, the Net Software License Fees received by
Restrac for each sale, and the resulting amount of any Finder's Fee payable to
Borwick in connection with each sale.
4. Non-Competition. In consideration of the fees set forth below, Dr. Borwick
agrees that for a period of five years, Dr. Borwick will not (either
individually or through another entity) develop, market, promote, sell or
provide, or assist in the development, marketing, promotion or provision of,
software or outsourcing services which are used to automate the staffing,
employee development, or succession planning function of an organization. This
will not preclude Dr. Borwick from continuing to provide any management
consulting services which are not related to the provision of software or
outsourcing services which are used to automate the staffing, employee
development, or succession planning function of an organization. This shall not
prevent Dr. Borwick from providing telephone maintenance and support services to
clients of Borwick International, Inc. to the extent expressly permitted under
the Termination Agreement between Restrac, Inc. and Borwick International, Inc.,
dated September 30, 1995 ("Termination Agreement"). In consideration of Dr.
Borwick's five year non-competition covenants, Restrac will pay Dr. Borwick
$500,000 ($100,000 per year for five years), payable in the following advance
installments:
$150,000 upon execution of this Agreement;
150,000 upon the first anniversary of the Effective Date;
150,000 upon the second anniversary of the Effective Date; and
50,000 upon the third anniversary of the Effective Date.
Said installments shall not be subject to a right of set off by Restrac against
Dr. Borwick with respect to Dr. Borwick's obligations under the Termination
Agreement.
5. General.
(a) All notices, requests, demands, and other communications hereunder
shall be in writing, and sent by U.S. mail to a party's President at the address
set forth on the first page of this Agreement (attention: President), or to such
other address as shall have been designated in writing by any party.
<PAGE> 2
(b) This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
(c) This Agreement sets forth the entire understanding of the parties on
the subject hereof. Any waiver or modification of the provisions of this
Agreement will be effective only if in writing and signed by the both parties.
(d) This Agreement shall be considered an agreement made under seal in
Massachusetts and shall be governed by and construed in accordance with the laws
of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed under
seal as of September 30, 1995.
Restrac, Inc. Irving P. Borwick
/S/ Lars D. Perkins 9/29/95 /S/ Irving P. Borwick 9/28/95
Signature Date Signature Date
Lars D. Perkins President Irving P. Borwick President
Name Title Name Title
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Restrac, Inc.:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 17, 1996
