<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 14, 1996
REGISTRATION STATEMENT NO. 333-03521
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
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 JUNE 14, 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. The Common Stock has been approved for quotation on the Nasdaq National
Market, upon notice of issuance, 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
ENTERPRISE SOFTWARE TO HELP ORGANIZATIONS MORE EFFICIENTLY
ACQUIRE AND DEPLOY THEIR WORKFORCE
[GRAPHIC OF A BULLSEYE]
"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
ENTERPRISE 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]
Software Engineer [GRAPHIC OF A PERSON]
[ARROW]
Plant Manager [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
<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
Non-recurring charge(2)...................... -- -- -- -- 1,011 -- --
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(3)............. $ .06 $ .08
Pro forma weighted average number of common
and common equivalent shares outstanding... 6,949 6,938
</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) Related to the buy-out of certain product distribution rights. Income (loss)
from operations before non-recurring charge for the year ended September 30,
1995 totalled $1,548,000. See Note 2 of Notes to Financial Statements.
(3) Computed on the basis described in Note 1 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 (see
"Business -- Sales and Marketing"), the relatively large size of a typical
product sale (see "Business -- Products"), 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 (which is based in
part on annual sales targets) and general economic conditions. Historically,
revenue in each of the first two fiscal quarters 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. 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
revenue 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."
RISK OF INTERNATIONAL EXPANSION
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 DEPENDENCE ON 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 5,241,624
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 4,823,357 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) actual capitalization, (ii) 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 (iii) 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
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Short-term debt (including current portion of long-term
debt)................................................... $ 11 $ 11 $ 11
======= ====== =======
Long-term debt (excluding current portion)................ $ 6 $ 6 $ 6
------- ------ -------
Convertible Preferred Stock, $1.00 par value, 1,000,000
shares authorized, 556,155 shares issued at March 31,
1996 and none issued or outstanding at March 31, 1996
pro forma and pro forma as adjusted..................... 3,983 -- --
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, 4,558,587 shares issued at March 31,
1996; 7,061,283 shares issued pro forma; 8,561,283
shares issued pro forma as adjusted.................. 46 71 86
Additional paid-in capital.............................. 221 3,700 21,220
Treasury stock, at cost, 686,900 shares................. (831) (831) (831)
Retained earnings....................................... 627 557 557
------- ------ -------
Total stockholders' equity........................... 63 3,497 21,032
------- ------ -------
Total capitalization............................ $ 69 $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
<TABLE>
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:
<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 $317,000 increase in the allowance for doubtful accounts
in fiscal 1995. To date the Company has not experienced any significant
writeoffs of uncollectible accounts; however, given the increased level of
revenue and the large dollar amount of the Company's revenue transactions,
management deemed it appropriate at the end of fiscal 1995 to increase the level
of the reserves.
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 attributable to the utilization of
research and development tax credits in fiscal 1994. The Company had a valuation
allowance of $258,550 and $171,672 against its gross deferred tax asset at
September 30, 1994 and 1995, respectively. The valuation allowance at September
30, 1994 and 1995 was established due to management's estimate that it was more
likely than not that a benefit of certain deferred tax assets would not be
realized in the future. In assessing the realizability of these assets,
management has taken into consideration historical levels of taxable income, the
volatile nature of the industry in which it competes and the potential levels of
future taxable income.
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,
19
<PAGE> 24
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.
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 and the utilization of
research and development tax credits during fiscal 1994.
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 each of the first two fiscal quarters 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. 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
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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 customer's
implementation cycle, 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.
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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
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additional 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
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coordinated by a Restrac project manager. The customer'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.
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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. While the sales cycle varies from customer to customer,
it typically spans four to nine months from generation of a lead from one of
these sources to execution of a license agreement. 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.
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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 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
Lucent Technologies CONSUMER
Aetna Life and Casualty Lockheed
Blue Cross/Blue Shield Oracle Anheuser-Busch
Cigna Sequent Computers Canadian Tire
John Hancock Stratus Computers Cargill
Nationwide Vanstar Delco
Occidental Insurance Levi Strauss
Phoenix Home Life ENGINEERING/CONSULTING Mattel Toys
Prudential Overnite Transportation
Brown & Root Reebok
PUBLISHING/ENTERTAINMENT CH2M Hill Starbucks
Logica the good guys!
Blockbuster Entertainment Mason & Hanger Toys R' Us
Conde Nast Publications Modern Engineering
Gannett
Paramount Pictures
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
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information systems infrastructure to allow for greater productivity and to
assist in the integration of the additional employees.
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,
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(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 a material adverse effect on
the Company's business, financial condition and operating results.
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EMPLOYEES
As of April 30, 1996, the Company had 125 full time employees consisting of
39 in sales and marketing, 16 in product development, 48 in client services and
22 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.
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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..................... 29 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.................... 34 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.
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 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. The Company
anticipates that options to purchase 70,000 shares of Common Stock will be
granted to the Company's employees upon pricing of this offering at an exercise
price equal to the public offering price. 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."
Since the Company's inception in 1982, Costello & Company, Inc.
("Costello") has been permitted to use the Company's software products and
documentation thereto which is part of the Company's standard offering to its
customers. To formalize this arrangement, on January 1, 1993, the Company
entered into a License Agreement with 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.
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. John P. Costello III, J. Paul
Costello's son, performs general consulting services for the Company on behalf
of J. Paul Costello Associates, Inc. ("JPC Associates"). J. Paul Costello is the
President and principal shareholder of both Costello and JPC Associates, and 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
41
<PAGE> 46
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 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 believes that all transactions with the TA Investors, the
Chestnut Investors, JPC Associates and the Borwick entities were made on terms
no less favorable to the Company than would have been obtained from unaffiliated
third parties. 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................ 1,446,626 22.7% 216,000 1,230,626 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............. 354,634(15) 5.5% 136,000 218,634(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. Advent VII L.P.,
Advent Atlantic and Pacific II L.P., Advent New York L.P., Advent
Industrial II L.P. and TA Venture Investors Limited Partnership are part of
an affiliated group of investment partnerships referred to, collectively,
as the TA Investors. The general partner of Advent VII L.P. is TA
Associates VII, L.P.
</TABLE>
43
<PAGE> 48
The general partner of Advent Atlantic and Pacific II L.P. is TA Associates
AAP II Partners, L.P. The general partner of each of Advent New York L.P.
and Advent Industrial II L.P. is TA Associates VI, L.P. The general parner
of each of TA Associates VII, L.P., TA Associates AAP II Partners, L.P. and
TA Associates VI, L.P. is TA Associates, Inc. In such capacity, TA
Associates, Inc. exercises sole voting and investment power with respect to
all of the shares held of record by the named investment partnerships, with
the exception of those shares held by TA Venture Investors Limited
Partnership; individually no stockholder, director or officer of TA
Associates, Inc. is deemed to have or share such voting or investment
power. Principals and employees of TA Associates, Inc. (including A. Bruce
Johnston, a director of the Company) comprise the general partners of TA
Venture Investors Limited Partnership. In such capacity, Mr. Johnston may
be deemed to share voting and investment power with respect to the 25,029
shares held of record by TA Venture Investors Limited Partnership. Mr.
Johnston disclaims beneficial ownership of such shares, except as to 3,642
shares as to which he holds a pecuniary interest.
(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.
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<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
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<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 4,826,394 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 102,759 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
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<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."
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<PAGE> 54
UNDERWRITING
<TABLE>
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.
<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."
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<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.
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<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
Provision for doubtful accounts........ 9,714 -- 317,080 15,091 129,131
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.................. (483,670) (885,961) (1,650,069) (237,879) 283,131
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)
<TABLE>
The deferred tax amounts as of September 30, 1994 and 1995 are as follows:
<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>
The Company had a valuation allowance of $258,550 and $171,672 against its
gross deferred tax asset at September 30, 1994 and 1995, respectively. The
valuation allowance at September 30, 1994 and 1995 was established due to
management's estimate that it was more likely than not that a benefit of certain
deferred tax assets would not be realized in the future. In assessing the
realizability of these assets, management has taken into consideration
historical levels of taxable income, the volatile nature of the industry in
which it competes and the potential levels of future taxable income.
<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
Settlement of IRS examination.................................. 10.7 -- --
Utilization of R&D tax credits................................. -- (4.0) --
Other, net..................................................... 3.3 (0.4) .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 SIX MONTHS
FOR THE YEARS ENDED ENDED
SEPTEMBER 30, 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>
-----------------------------
TABLE OF CONTENTS
-----------------------------
<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
- ----------- -----------
<C> <S>
*1 Form of Underwriting Agreement among the Underwriters named therein and the
Company
3.1 Form of Second Amended and Restated Certificate of Incorporation of the Company
3.2 Form of Third 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 and all amendments thereto
*+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>
<C> <S>
*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>
- ---------------
* Previously filed.
+ Confidential treatment requested as to portions of this document.
</TABLE>
(b) Financial Statement Schedules.
SCHEDULE NO. DESCRIPTION
- ------------ -----------
Schedule II Valuation and Qualifying Accounts
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. 2 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 14th day of June, 1996.
RESTRAC, INC.
By: /s/ LARS D. PERKINS
------------------------------------
Lars D. Perkins
President and Chief Executive
Officer
<TABLE>
Pursuant to the requirements of the Securities Act, this Amendment No. 2 to
Registration Statement has been signed below by the following persons on behalf
of the Registrant in the capacities and on the dates indicated.
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ LARS D. PERKINS Director, Chief Executive Officer June 14, 1996
- ------------------------------------------ and President (Principal
Lars D. Perkins Executive Officer)
* Chief Financial Officer June 14, 1996
- ------------------------------------------ (Principal Financial Officer and
Cynthia G. Eades Principal Accounting Officer)
* Director June 14, 1996
- ------------------------------------------
Russell J. Campanello
* Director June 14, 1996
- ------------------------------------------
J. Paul Costello
* Director June 14, 1996
- ------------------------------------------
A. Bruce Johnston
</TABLE>
*By: /s/ LARS D. PERKINS
------------------------------
(Lars D. Perkins, as
Attorney-in-Fact for the
persons indicated)
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
<TABLE>
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994, 1995
<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
<TABLE>
EXHIBIT INDEX
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- -------- ----------- ----
<C> <S>
*1 Form of Underwriting Agreement among the Underwriters named therein and the
Company
3.1 Form of Second Amended and Restated Certificate of Incorporation of the
Company
3.2 Form of Third 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 and all amendments thereto
*+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>
*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>
- ---------------
* Previously filed.
+ Confidential treatment requested as to portions of this document.
</TABLE>
<PAGE> 1
EXHIBIT 3.1
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 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
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<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
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<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;
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<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
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<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.
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<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
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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;
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(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
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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 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.
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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 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.
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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 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.
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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.
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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 31 day of May, 1996.
/s/ Lars D. Perkins
-----------------------------------
Lars D. Perkins, President
269908.c4
22
<PAGE> 1
EXHIBIT 3.2
THIRD 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 Third Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Second 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 Second 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.
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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 Third Amended and
Restated Certificate of Incorporation, as it may be amended from time to time.
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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:
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(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
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(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
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<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 Third 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 Third 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
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<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 Third 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
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<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 Third
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.
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ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
-----------------------------------------
The Corporation reserves the right to amend or repeal this Third
Amended and Restated Certificate of Incorporation in the manner now or hereafter
prescribed by statute and this Third 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 Third 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 Third Amended and Restated Certificate of Incorporation, and in addition
to any other vote of holders of voting stock that is required by this Third
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 Third 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 Third Amended
and Restated Certificate of Incorporation.
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<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
269900.c2
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<PAGE> 1
EXHIBIT 3.3
AMENDED AND RESTATED
BY-LAWS
OF
RESTRAC, INC.
ARTICLE I
---------
Stockholders
------------
SECTION 1. ANNUAL MEETING. The annual meeting of stockholders shall be
held at the hour, date and place within or without the United States which is
fixed by the majority of the Board of Directors, the Chairman of the Board, if
one is elected, or the President, which time, date and place may subsequently be
changed at any time by vote of the Board of Directors. If no annual meeting has
been held for a period of thirteen months after the Corporation's last annual
meeting of stockholders, a special meeting in lieu thereof may be held, and such
special meeting shall have, for the purposes of these By-Laws or otherwise, all
the force and effect of an annual meeting. Any and all references hereafter in
these By-Laws to an annual meeting or annual meetings also shall be deemed to
refer to any special meeting(s) in lieu thereof.
SECTION 2. MATTERS TO BE CONSIDERED AT ANNUAL MEETINGS. At any annual
meeting of stockholders or any special meeting in lieu of annual meeting of
stockholders (the "Annual Meeting"), only such business shall be conducted, and
only such proposals shall be acted upon, as shall have been properly brought
before such Annual Meeting. To be considered as properly brought before an
Annual Meeting, business must be: (a) specified in the notice of meeting, (b)
otherwise properly brought before the meeting by, or at the direction of, the
Board of Directors, or (c) otherwise properly brought before the meeting by any
holder of record (both as of the time notice of such proposal is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of capital stock of the Corporation entitled to vote
at such Annual Meeting who complies with the requirements set forth in this
Section 2.
In addition to any other applicable requirements, for business to be
properly brought before an Annual Meeting by a stockholder of record of any
shares of capital stock entitled to vote at such Annual Meeting, such
stockholder shall: (i) give timely notice as required by this Section 2 to the
Secretary of the Corporation and (ii) be present at such meeting, either in
<PAGE> 2
person or by a representative. For the first Annual Meeting following the
initial public offering of common stock of the Corporation, a stockholder's
notice shall be timely if delivered to, or mailed to and received by, the
Corporation at its principal executive office not later than the close of
business on the later of (A) the 75th day prior to the scheduled date of such
Annual Meeting or (B) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation. For all subsequent Annual Meetings, a stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not less than 75 days nor more than 120 days prior to
the anniversary date of the immediately preceding Annual Meeting (the
"Anniversary Date"); provided, however, that in the event the Annual Meeting is
scheduled to be held on a date more than 30 days before the Anniversary Date or
more than 60 days after the Anniversary Date, a stockholder's notice shall be
timely if delivered to, or mailed to and received by, the Corporation at its
principal executive office not later than the close of business on the later of
(A) the 75th day prior to the scheduled date of such Annual Meeting or (B) the
15th day following the day on which public announcement of the date of such
Annual Meeting is first made by the Corporation.
For purposes of these By-Laws, "public announcement" shall mean: (i)
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or comparable national news service, (ii) a report or other document filed
publicly with the Securities and Exchange Commission (including, without
limitation, a Form 8-K), or (iii) a letter or report sent to stockholders of
record of the Corporation at the time of the mailing of such letter or report.
A stockholder's notice to the Secretary shall set forth as to each
matter proposed to be brought before an Annual Meeting: (i) a brief description
of the business the stockholder desires to bring before such Annual Meeting and
the reasons for conducting such business at such Annual Meeting, (ii) the name
and address, as they appear on the Corporation's stock transfer books, of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation's capital stock beneficially owned by the stockholder proposing such
business, (iv) the names and addresses of the beneficial owners, if any, of any
capital stock of the Corporation registered in such stockholder's name on such
books, and the class and number of shares of the Corporation's capital stock
beneficially owned by such beneficial owners, (v) the names and addresses of
other stockholders known by the stockholder proposing such business to support
such proposal, and the class and number of shares of the Corporation's capital
stock beneficially owned by such other stockholders, and (vi) any material
interest of the stockholder proposing to bring such business before such meeting
(or any other stockholders known to be supporting such proposal) in such
proposal.
If the Board of Directors or a designated committee thereof determines
that any stockholder proposal was not made in a timely fashion in accordance
with the provisions of this Section 2 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2 in any material respect, such proposal shall not be
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<PAGE> 3
presented for action at the Annual Meeting in question. If neither the Board of
Directors nor such committee makes a determination as to the validity of any
stockholder proposal in the manner set forth above, the presiding officer of the
Annual Meeting shall determine whether the stockholder proposal was made in
accordance with the terms of this Section 2. If the presiding officer determines
that any stockholder proposal was not made in a timely fashion in accordance
with the provisions of this Section 2 or that the information provided in a
stockholder's notice does not satisfy the information requirements of this
Section 2 in any material respect, such proposal shall not be presented for
action at the Annual Meeting in question. If the Board of Directors, a
designated committee thereof or the presiding officer determines that a
stockholder proposal was made in accordance with the requirements of this
Section 2, the presiding officer shall so declare at the Annual Meeting and
ballots shall be provided for use at the meeting with respect to such proposal.
Notwithstanding the foregoing provisions of this By-Law, a stockholder
shall also comply with all applicable requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
thereunder with respect to the matters set forth in this By-Law, and nothing in
this By-Law shall be deemed to affect any rights of stockholders to request
inclusion of proposals in the Corporation's proxy statement pursuant to Rule
14a-8 under the Exchange Act.
SECTION 3. SPECIAL MEETINGS. Except as otherwise required by law and
subject to the rights, if any, of the holders of any series of Preferred Stock
of the Corporation, special meetings of the stockholders of the Corporation may
be called only by the Board of Directors pursuant to a resolution approved by
the affirmative vote of a majority of the Directors then in office.
SECTION 4. MATTERS TO BE CONSIDERED AT SPECIAL MEETINGS. Only those
matters set forth in the notice of the special meeting may be considered or
acted upon at a special meeting of stockholders of the Corporation, unless
otherwise provided by law.
SECTION 5. NOTICE OF MEETINGS; ADJOURNMENTS. A written notice of all
Annual Meetings stating the hour, date and place of such Annual Meetings shall
be given by the Secretary or an Assistant Secretary (or other person authorized
by these By-Laws or by law) not less than 10 days nor more than 60 days before
the Annual Meeting, to each stockholder entitled to vote thereat and to each
stockholder who, by law or under the Amended and Restated Certificate of
Incorporation of the Corporation (as the same may hereafter be amended and/or
restated, the "Certificate") or under these By-Laws, is entitled to such notice,
by delivering such notice to him or by mailing it, postage prepaid, addressed to
such stockholder at the address of such stockholder as it appears on the
Corporation's stock transfer books. Such notice shall be deemed to be delivered
when hand delivered to such address or deposited in the mail so addressed, with
postage prepaid.
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Notice of all special meetings of stockholders shall be given in the
same manner as provided for Annual Meetings, except that the written notice of
all special meetings shall state the purpose or purposes for which the meeting
has been called.
Notice of an Annual Meeting or special meeting of stockholders need not
be given to a stockholder if a written waiver of notice is signed before or
after such meeting by such stockholder or if such stockholder attends such
meeting, unless such attendance was for the express purpose of objecting at the
beginning of the meeting to the transaction of any business because the meeting
was not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any Annual Meeting or special meeting of stockholders need
be specified in any written waiver of notice.
The Board of Directors may postpone and reschedule any previously
scheduled Annual Meeting or special meeting of stockholders and any record date
with respect thereto, regardless of whether any notice or public disclosure with
respect to any such meeting has been sent or made pursuant to Section 2 of this
Article I or Section 3 of Article II hereof or otherwise. In no event shall the
public announcement of an adjournment, postponement or rescheduling of any
previously scheduled meeting of stockholders commence a new time period for the
giving of a stockholder's notice under Section 2 of Article I and Section 3 of
Article II of these By-Laws.
When any meeting is convened, the presiding officer may adjourn the
meeting if (a) no quorum is present for the transaction of business, (b) the
Board of Directors determines that adjournment is necessary or appropriate to
enable the stockholders to consider fully information which the Board of
Directors determines has not been made sufficiently or timely available to
stockholders, or (c) the Board of Directors determines that adjournment is
otherwise in the best interests of the Corporation. When any Annual Meeting or
special meeting of stockholders is adjourned to another hour, date or place,
notice need not be given of the adjourned meeting other than an announcement at
the meeting at which the adjournment is taken of the hour, date and place to
which the meeting is adjourned; provided, however, that if the adjournment is
for more than 30 days, or if after the adjournment a new record date is fixed
for the adjourned meeting, notice of the adjourned meeting shall be given to
each stockholder of record entitled to vote thereat and each stockholder who, by
law or under the Certificate or these By-Laws, is entitled to such notice.
SECTION 6. QUORUM. The holders of shares of voting stock representing a
majority of the voting power of the outstanding shares of voting stock issued,
outstanding and entitled to vote at a meeting of stockholders, represented in
person or by proxy at such meeting, shall constitute a quorum; but if less than
a quorum is present at a meeting, the holders of voting stock representing a
majority of the voting power present at the meeting or the presiding officer may
adjourn the meeting from time to time, and the meeting may be held as adjourned
without further notice, except as provided in Section 5 of this Article I. At
such adjourned meeting at which a quorum is present, any business may be
transacted which might have been
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transacted at the meeting as originally noticed. The stockholders present at a
duly constituted meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough stockholders to leave less than a
quorum.
SECTION 7. VOTING AND PROXIES. Stockholders shall have one vote for
each share of stock entitled to vote owned by them of record according to the
books of the Corporation, unless otherwise provided by law or by the
Certificate. Stockholders may vote either in person or by written proxy, but no
proxy shall be voted or acted upon after three years from its date, unless the
proxy provides for a longer period. Proxies shall be filed with the Secretary of
the meeting before being voted. Except as otherwise limited therein or as
otherwise provided by law, proxies shall entitle the persons authorized thereby
to vote at any adjournment of such meeting, but they shall not be valid after
final adjournment of such meeting. A proxy with respect to stock held in the
name of two or more persons shall be valid if executed by or on behalf of any
one of them unless at or prior to the exercise of the proxy the Corporation
receives a specific written notice to the contrary from any one of them. A proxy
purporting to be executed by or on behalf of a stockholder shall be deemed
valid, and the burden of proving invalidity shall rest on the challenger.
SECTION 8. ACTION AT MEETING. When a quorum is present, any matter
before any meeting of stockholders shall be decided by the vote of a majority of
the voting power of shares of voting stock, present in person or represented by
proxy at such meeting and entitled to vote on such matter, except where a larger
vote is required by law, by the Certificate or by these By-Laws. Any election by
stockholders shall be determined by a plurality of the votes cast, except where
a larger vote is required by law, by the Certificate or by these By-Laws. The
Corporation shall not directly or indirectly vote any shares of its own stock;
provided, however, that the Corporation may vote shares which it holds in a
fiduciary capacity to the extent permitted by law.
SECTION 9. STOCKHOLDER LISTS. The Secretary or an Assistant Secretary
(or the Corporation's transfer agent or other person authorized by these By-Laws
or by law) shall prepare and make, at least 10 days before every Annual Meeting
or special meeting of stockholders, a complete list of the stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing the address
of each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least 10 days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the hour, date and place of
the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
SECTION 10. PRESIDING OFFICER. The Chairman of the Board, if one is
elected, or if not elected or in his or her absence, the President, shall
preside at all Annual Meetings or
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<PAGE> 6
special meetings of stockholders and shall have the power, among other things,
to adjourn such meeting at any time and from time to time, subject to Sections 5
and 6 of this Article I. The order of business and all other matters of
procedure at any meeting of the stockholders shall be determined by the
presiding officer.
SECTION 11. VOTING PROCEDURES AND INSPECTORS OF ELECTIONS. The
Corporation shall, in advance of any meeting of stockholders, appoint one or
more inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a
meeting of stockholders, the presiding officer shall appoint one or more
inspectors to act at the meeting. Any inspector may, but need not, be an
officer, employee or agent of the Corporation. Each inspector, before entering
upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the
best of his or her ability. The inspectors shall perform such duties as are
required by the General Corporation Law of the State of Delaware, as amended
from time to time (the "DGCL"), including the counting of all votes and ballots.
The inspectors may appoint or retain other persons or entities to assist the
inspectors in the performance of the duties of the inspectors. The presiding
officer may review all determinations made by the inspector(s), and in so doing
the presiding officer shall be entitled to exercise his or her sole judgment and
discretion and he or she shall not be bound by any determinations made by the
inspector(s). All determinations by the inspector(s) and, if applicable, the
presiding officer shall be subject to further review by any court of competent
jurisdiction.
ARTICLE II
----------
Directors
---------
SECTION 1. POWERS. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors except as otherwise
provided by the Certificate or required by law.
SECTION 2. NUMBER AND TERMS. 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 shall hold office in the manner provided in the
Certificate.
SECTION 3. DIRECTOR NOMINATIONS. Nominations of candidates for election
as directors of the Corporation at any Annual Meeting may be made only (a) by,
or at the direction of, a majority of the Board of Directors or (b) by any
holder of record (both as of the time notice of such nomination is given by the
stockholder as set forth below and as of the record date for the Annual Meeting
in question) of any shares of the capital stock of the Corporation entitled to
vote at such Annual Meeting who complies with the timing,
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informational and other requirements set forth in this Section 3. Any
stockholder who has complied with the timing, informational and other
requirements set forth in this Section 3 and who seeks to make such a
nomination, or his, her or its representative, must be present in person at the
Annual Meeting. Only persons nominated in accordance with the procedures set
forth in this Section 3 shall be eligible for election as directors at an Annual
Meeting.
Nominations, other than those made by, or at the direction of, the
Board of Directors, shall be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Section 3. For the first
Annual Meeting following the initial public offering of common stock of the
Corporation, a stockholder's notice shall be timely if delivered to, or mailed
to and received by, the Corporation at its principal executive office not later
than the close of business on the later of (A) the 75th day prior to the
scheduled date of such Annual Meeting or (B) the 15th day following the day on
which public announcement of the date of such Annual Meeting is first made by
the Corporation. For all subsequent Annual Meetings, a stockholder's notice
shall be timely if delivered to, or mailed to and received by, the Corporation
at its principal executive office not less than 75 days nor more than 120 days
prior to the Anniversary Date; provided, however, that in the event the Annual
Meeting is scheduled to be held on a date more than 30 days before the
Anniversary Date or more than 60 days after the Anniversary Date, a
stockholder's notice shall be timely if delivered to, or mailed and received by,
the Corporation at its principal executive office not later than the close of
business on the later of (i) the 75th day prior to the scheduled date of such
Annual Meeting or (ii) the 15th day following the day on which public
announcement of the date of such Annual Meeting is first made by the
Corporation.
A stockholder's notice to the Secretary shall set forth as to each
person whom the stockholder proposes to nominate for election or re-election as
a director: (i) the name, age, business address and residence address of such
person, (ii) the principal occupation or employment of such person, (iii) the
class and number of shares of the Corporation's capital stock which are
beneficially owned by such person on the date of such stockholder notice, and
(iv) the consent of each nominee to serve as a director if elected. A
stockholder's notice to the Secretary shall further set forth as to the
stockholder giving such notice: (i) the name and address, as they appear on the
Corporation's stock transfer books, of such stockholder and of the beneficial
owners (if any) of the Corporation's capital stock registered in such
stockholder's name and the name and address of other stockholders known by such
stockholder to be supporting such nominee(s), (ii) the class and number of
shares of the Corporation's capital stock which are held of record, beneficially
owned or represented by proxy by such stockholder and by any other stockholders
known by such stockholder to be supporting such nominee(s) on the record date
for the Annual Meeting in question (if such date shall then have been made
publicly available) and on the date of such stockholder's notice, and (iii) a
description of all arrangements or understandings between such stockholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
stockholder.
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If the Board of Directors or a designated committee thereof determines
that any stockholder nomination was not made in accordance with the terms of
this Section 3 or that the information provided in a stockholder's notice does
not satisfy the informational requirements of this Section 3 in any material
respect, then such nomination shall not be considered at the Annual Meeting in
question. If neither the Board of Directors nor such committee makes a
determination as to whether a nomination was made in accordance with the
provisions of this Section 3, the presiding officer of the Annual Meeting shall
determine whether a nomination was made in accordance with such provisions. If
the presiding officer determines that any stockholder nomination was not made in
accordance with the terms of this Section 3 or that the information provided in
a stockholder's notice does not satisfy the informational requirements of this
Section 3 in any material respect, then such nomination shall not be considered
at the Annual Meeting in question. If the Board of Directors, a designated
committee thereof or the presiding officer determines that a nomination was made
in accordance with the terms of this Section 3, the presiding officer shall so
declare at the Annual Meeting and ballots shall be provided for use at the
meeting with respect to such nominee.
Notwithstanding anything to the contrary in the second sentence of the
second paragraph of this Section 3, in the event that the number of directors to
be elected to the Board of Directors of the Corporation is increased and there
is no public announcement by the Corporation naming all of the nominees for
director or specifying the size of the increased Board of Directors at least 75
days prior to the Anniversary Date, a stockholder's notice required by this
Section 3 shall also be considered timely, but only with respect to nominees for
any new positions created by such increase, if such notice shall be delivered
to, or mailed to and received by, the Corporation at its principal executive
office not later than the close of business on the 15th day following the day on
which such public announcement is first made by the Corporation.
No person shall be elected by the stockholders as a Director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section. Election of Directors at the annual meeting need not be by written
ballot, unless otherwise provided by the Board of Directors or presiding officer
at such annual meeting. If written ballots are to be used, ballots bearing the
names of all the persons who have been nominated for election as Directors at
the annual meeting in accordance with the procedures set forth in this Section
shall be provided for use at the annual meeting.
SECTION 4. QUALIFICATION. No Director need be a stockholder of the
Corporation.
SECTION 5. VACANCIES. Subject to the rights, if any, of the holders of
any series of Preferred Stock of the Corporation 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
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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 of the
Corporation 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 6. REMOVAL. Directors may be removed from office in the
manner provided in the Certificate.
SECTION 7. RESIGNATION. A Director may resign at any time by giving
written notice to the Chairman of the Board, if one is elected, the President
or the Secretary. A resignation shall be effective upon receipt, unless the
resignation otherwise provides.
SECTION 8. REGULAR MEETINGS. The regular annual meeting of the Board of
Directors shall be held, without notice other than this By-Law, on the same date
and at the same place as the Annual Meeting following the close of such meeting
of stockholders. Other regular meetings of the Board of Directors may be held at
such hour, date and place as the Board of Directors may by resolution from time
to time determine without notice other than such resolution.
SECTION 9. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called, orally or in writing, by or at the request of a majority of the
Directors, the Chairman of the Board, if one is elected, or the President. The
person calling any such special meeting of the Board of Directors may fix the
hour, date and place thereof.
SECTION 10. NOTICE OF MEETINGS. Notice of the hour, date and place of
all special meetings of the Board of Directors shall be given to each Director
by the Secretary or an Assistant Secretary, or in case of the death, absence,
incapacity or refusal of such persons, by the Chairman of the Board, if one is
elected, or the President or such other officer designated by the Chairman of
the Board, if one is elected, or the President. Notice of any special meeting of
the Board of Directors shall be given to each Director in person, by telephone,
or by telex, telecopy, telegram, or other written form of electronic
communication, sent to his or her business or home address, at least 24 hours in
advance of the meeting, or by written notice mailed to his or her business or
home address, at least 48 hours in advance of the meeting. Such notice shall be
deemed to be delivered when hand delivered to such address, read to such
Director by telephone, deposited in the mail so addressed, with postage thereon
prepaid if
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mailed, dispatched or transmitted if telexed or telecopied, or when delivered to
the telegraph company if sent by telegram.
When any Board of Directors meeting, either regular or special, is
adjourned for 30 days or more, notice of the adjourned meeting shall be given as
in the case of an original meeting. It shall not be necessary to give any notice
of the hour, date or place of any meeting adjourned for less than 30 days or of
the business to be transacted thereat, other than an announcement at the meeting
at which such adjournment is taken of the hour, date and place to which the
meeting is adjourned.
A written waiver of notice signed before or after a meeting by a
Director and filed with the records of the meeting shall be deemed to be
equivalent to notice of the meeting. The attendance of a Director at a meeting
shall constitute a waiver of notice of such meeting, except where a Director
attends a meeting for the express purpose of objecting at the beginning of the
meeting to the transaction of any business because such meeting is not lawfully
called or convened. Except as otherwise required by law, by the Certificate or
by these By-Laws, neither the business to be transacted at, nor the purpose of,
any meeting of the Board of Directors need be specified in the notice or waiver
of notice of such meeting.
SECTION 11. QUORUM. At any meeting of the Board of Directors, a
majority of the Directors then in office shall constitute a quorum for the
transaction of business, but if less than a quorum is present at a meeting, a
majority of the Directors present may adjourn the meeting from time to time, and
the meeting may be held as adjourned without further notice, except as provided
in Section 10 of this Article II. Any business which might have been transacted
at the meeting as originally noticed may be transacted at such adjourned meeting
at which a quorum is present.
SECTION 12. ACTION AT MEETING. At any meeting of the Board of Directors
at which a quorum is present, a majority of the Directors present may take any
action on behalf of the Board of Directors, unless otherwise required by law, by
the Certificate or by these By-Laws.
SECTION 13. ACTION BY CONSENT. Any action required or permitted to be
taken at any meeting of the Board of Directors may be taken without a meeting if
all members of the Board of Directors consent thereto in writing. Such written
consent shall be filed with the records of the meetings of the Board of
Directors and shall be treated for all purposes as a vote at a meeting of the
Board of Directors.
SECTION 14. MANNER OF PARTICIPATION. Directors may participate in
meetings of the Board of Directors by means of conference telephone or similar
communications equipment by means of which all Directors participating in the
meeting can hear each other, and participation in a meeting in accordance
herewith shall constitute presence in person at such meeting for purposes of
these By-Laws.
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SECTION 15. COMMITTEES. The Board of Directors, by vote of a majority
of the Directors then in office, may elect from its number one or more
committees, including, without limitation, an Executive Committee, a
Compensation Committee, a Stock Option Committee and an Audit Committee, and may
delegate thereto some or all of its powers except those which by law, by the
Certificate or by these By-Laws may not be delegated. Except as the Board of
Directors may otherwise determine, any such committee may make rules for the
conduct of its business, but unless otherwise provided by the Board of Directors
or in such rules, its business shall be conducted so far as possible in the same
manner as is provided by these By-Laws for the Board of Directors. All members
of such committees shall hold such offices at the pleasure of the Board of
Directors. The Board of Directors may abolish any such committee at any time.
Any committee to which the Board of Directors delegates any of its powers or
duties shall keep records of its meetings and shall report its action to the
Board of Directors. The Board of Directors shall have power to rescind any
action of any committee, to the extent permitted by law, but no such rescission
shall have retroactive effect.
SECTION 16. COMPENSATION OF DIRECTORS. Directors shall receive such
compensation for their services as shall be determined by a majority of the
Board of Directors provided that Directors who are serving the Corporation as
employees and who receive compensation for their services as such, shall not
receive any salary or other compensation for their services as Directors of the
Corporation.
ARTICLE III
-----------
Officers
--------
SECTION 1. ENUMERATION. The officers of the Corporation shall consist
of a President, a Treasurer, a Secretary and such other officers, including,
without limitation, a Chairman of the Board of Directors and one or more Vice
Presidents (including Executive Vice Presidents or Senior Vice Presidents),
Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as
the Board of Directors may determine.
SECTION 2. ELECTION. At the regular annual meeting of the Board
following the annual meeting of stockholders, the Board of Directors shall elect
the President, the Treasurer and the Secretary. Other officers may be elected by
the Board of Directors at such regular annual meeting of the Board of Directors
or at any other regular or special meeting.
SECTION 3. QUALIFICATION. No officer need be a stockholder or a
Director. Any person may occupy more than one office of the Corporation at any
time. Any officer may be required by the Board of Directors to give bond for the
faithful performance of his or her duties in such amount and with such sureties
as the Board of Directors may determine.
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SECTION 4. TENURE. Except as otherwise provided by the Certificate or
by these ByLaws, each of the officers of the Corporation shall hold office until
the regular annual meeting of the Board of Directors following the next annual
meeting of stockholders and until his or her successor is elected and qualified
or until his or her earlier resignation or removal.
SECTION 5. RESIGNATION. Any officer may resign by delivering his or her
written resignation to the Corporation addressed to the President or the
Secretary, and such resignation shall be effective upon receipt unless it is
specified to be effective at some other time or upon the happening of some other
event.
SECTION 6. REMOVAL. Except as otherwise provided by law, the Board of
Directors may remove any officer with or without cause by the affirmative vote
of a majority of the Directors then in office.
SECTION 7. ABSENCE OR DISABILITY. In the event of the absence or
disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. VACANCIES. Any vacancy in any office may be filled for the
unexpired portion of the term by the Board of Directors.
SECTION 9. PRESIDENT. Unless otherwise provided by the Board of
Directors or the Certificate, the President shall be the Chief Executive Officer
of the Corporation and shall, subject to the direction of the Board of
Directors, have general supervision and control of the Corporation's business.
If there is no Chairman of the Board or if he or she is absent, the President
shall preside, when present, at all meetings of stockholders and of the Board of
Directors. The President shall have such other powers and perform such other
duties as the Board of Directors may from time to time designate.
SECTION 10. CHAIRMAN OF THE BOARD. The Chairman of the Board, if one is
elected, shall preside, when present, at all meetings of the stockholders and of
the Board of Directors. The Chairman of the Board shall have such other powers
and shall perform such other duties as the Board of Directors may from time to
time designate.
SECTION 11. VICE PRESIDENTS AND ASSISTANT VICE PRESIDENTS. Any Vice
President (including any Executive Vice President or Senior Vice President) and
any Assistant Vice President shall have such powers and shall perform such
duties as the Board of Directors or the Chief Executive Officer may from time to
time designate.
SECTION 12. TREASURER AND ASSISTANT TREASURERS. The Treasurer shall,
subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general
charge of the financial affairs of the Corporation and shall cause to be kept
accurate books of account. The Treasurer shall have
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custody of all funds, securities, and valuable documents of the Corporation. He
or she shall have such other duties and powers as may be designated from time to
time by the Board of Directors or the Chief Executive Officer.
Any Assistant Treasurer shall have such powers and perform such duties
as the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 13. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall
record all the proceedings of the meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose. In
his or her absence from any such meeting, a temporary secretary chosen at the
meeting shall record the proceedings thereof. The Secretary shall have charge of
the stock ledger (which may, however, be kept by any transfer or other agent of
the Corporation). The Secretary shall have custody of the seal of the
Corporation, and the Secretary, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his or her signature or that of an Assistant Secretary. The
Secretary shall have such other duties and powers as may be designated from time
to time by the Board of Directors or the Chief Executive Officer. In the absence
of the Secretary, any Assistant Secretary may perform his or her duties and
responsibilities.
Any Assistant Secretary shall have such powers and perform such duties
as the Board of Directors or the Chief Executive Officer may from time to time
designate.
SECTION 14. OTHER POWERS AND DUTIES. Subject to these By-Laws and to
such limitations as the Board of Directors may from time to time prescribe, the
officers of the Corporation shall each have such powers and duties as generally
pertain to their respective offices, as well as such powers and duties as from
time to time may be conferred by the Board of Directors or the Chief Executive
Officer.
ARTICLE IV
----------
Capital Stock
-------------
SECTION 1. CERTIFICATES OF STOCK. Each stockholder shall be entitled to
a certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the Chairman of the Board of Directors, the President or a Vice
President and by the Treasurer or an Assistant Treasurer, or the Secretary or an
Assistant Secretary. The Corporation seal and the signatures by Corporation
officers, the transfer agent or the registrar may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed on such certificate shall have ceased to be such officer,
transfer agent or registrar before such certificate is issued, it may be issued
by the Corporation with the same effect as if he or she
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were such officer, transfer agent or registrar at the time of its issue. Every
certificate for shares of stock which are subject to any restriction on transfer
and every certificate issued when the Corporation is authorized to issue more
than one class or series of stock shall contain such legend with respect thereto
as is required by law.
SECTION 2. TRANSFERS. Subject to any restrictions on transfer and
unless otherwise provided by the Board of Directors, shares of stock may be
transferred only on the books of the Corporation by the surrender to the
Corporation or its transfer agent of the certificate theretofore properly
endorsed or accompanied by a written assignment or power of attorney properly
executed, with transfer stamps (if necessary) affixed, and with such proof of
the authenticity of signature as the Corporation or its transfer agent may
reasonably require.
SECTION 3. RECORD HOLDERS. Except as may otherwise be required by law,
by the Certificate or by these By-Laws, the Corporation shall be entitled to
treat the record holder of stock as shown on its books as the owner of such
stock for all purposes, including the payment of dividends and the right to vote
with respect thereto, regardless of any transfer, pledge or other disposition of
such stock, until the shares have been transferred on the books of the
Corporation in accordance with the requirements of these By-Laws.
It shall be the duty of each stockholder to notify the Corporation of
his or her post office address and any changes thereto.
SECTION 4. RECORD DATE. In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the Board of Directors, and which record date: (1) in the case of
determination of stockholders entitled to vote at any meeting of stockholders,
shall, unless otherwise required by law, not be more than sixty nor less than
ten days before the date of such meeting and (2) in the case of any other
action, shall not be more than sixty days prior to such other action. If no
record date is fixed: (1) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held and (2) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the
Board of Directors adopts the resolution relating thereto.
SECTION 5. REPLACEMENT OF CERTIFICATES. In case of the alleged loss,
destruction or mutilation of a certificate of stock, a duplicate certificate may
be issued in place thereof, upon such terms as the Board of Directors may
prescribe.
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ARTICLE V
---------
Indemnification
---------------
SECTION 1. DEFINITIONS. For purposes of this Article:
(a) "Director" means any person who serves or has served the
Corporation as a director on the Board of Directors of the Corporation;
(b) "Officer" means any person who serves or has served the Corporation
as an officer appointed by the Board of Directors of the Corporation;
(c) "Non-Officer Employee" means any person who serves or has served as
an employee of the Corporation, but who is not or was not a Director or Officer;
(d) "Proceeding" means any threatened, pending or completed action,
suit, arbitration, alternate dispute resolution mechanism, inquiry,
investigation, administrative hearing or other proceeding, whether civil,
criminal, administrative, arbitrative or investigative;
(e) "Expenses" means all reasonable attorneys' fees, retainers, court
costs, transcript costs, fees of expert witnesses, private investigators and
professional advisors (including, without limitation, accountants and investment
bankers), travel expenses, duplicating costs, printing and binding costs, costs
of preparation of demonstrative evidence and other courtroom presentation aids
and devices, costs incurred in connection with document review, organization,
imaging and computerization, telephone charges, postage, delivery service fees,
and all other disbursements, costs or expenses of the type customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, being or preparing to be a witness in, settling or otherwise
participating in, a Proceeding;
(f) "Corporate Status" describes the status of a person who (i) in the
case of a Director, is or was a director of the Corporation and is or was acting
in such capacity, (ii) in the case of an Officer, is or was an officer, employee
or agent of the Corporation or is or was a director, officer, employee or agent
of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such Officer is or was serving at the request of
the Corporation, and (iii) in the case of a Non-Officer Employee, is or was an
employee of the Corporation or is or was a director, officer, employee or agent
of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which such Non-Officer Employee is or was serving at
the request of the Corporation; and
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(g) "Disinterested Director" means, with respect to each Proceeding in
respect of which indemnification is sought hereunder, a Director of the
Corporation who is not and was not a party to such Proceeding.
SECTION 2. INDEMNIFICATION OF DIRECTORS AND OFFICERS. Subject to the
operation of Section 4 of this Article V, each Director and Officer shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the DGCL, as the same exists or may hereafter be amended (but, in
the case of any such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide prior to such amendment) against any and
all Expenses, judgments, penalties, fines and amounts reasonably paid in
settlement that are incurred by such Director or Officer or on such Director or
Officer's behalf in connection with any threatened, pending or completed
Proceeding or any claim, issue or matter therein, which such Director or Officer
is, or is threatened to be made, a party to or participant in by reason of such
Director or Officer's Corporate Status, if such Director or Officer acted in
good faith and in a manner such Director or Officer reasonably believed to be in
or not opposed to the best interests of the Corporation and, with respect to any
criminal proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The rights of indemnification provided by this Section 2 shall
continue as to a Director or Officer after he or she has ceased to be a Director
or Officer and shall inure to the benefit of his or her heirs, executors,
administrators and personal representatives. Notwithstanding the foregoing, the
Corporation shall indemnify any Director or Officer seeking indemnification in
connection with a Proceeding initiated by such Director or Officer only if such
Proceeding was authorized by the Board of Directors of the Corporation.
SECTION 3. INDEMNIFICATION OF NON-OFFICER EMPLOYEES. Subject to the
operation of Section 4 of this Article V, each Non-Officer Employee may, in the
discretion of the Board of Directors of the Corporation, be indemnified by the
Corporation to the fullest extent authorized by the DGCL, as the same exists or
may hereafter be amended, against any or all Expenses, judgments, penalties,
fines and amounts reasonably paid in settlement that are incurred by such
Non-Officer Employee or on such Non-Officer Employee's behalf in connection with
any threatened, pending or completed Proceeding, or any claim, issue or matter
therein, which such Non-Officer Employee is, or is threatened to be made, a
party to or participant in by reason of such Non-Officer Employee's Corporate
Status, if such Non-Officer Employee acted in good faith and in a manner such
Non-Officer Employee reasonably believed to be in or not opposed to the best
interests of the Corporation and, with respect to any criminal proceeding, had
no reasonable cause to believe his or her conduct was unlawful. The rights of
indemnification provided by this Section 3 shall continue as to a Non-Officer
Employee after he or she has ceased to be a Non-Officer Employee and shall inure
to the benefit of his or her heirs, personal representatives, executors and
administrators. Notwithstanding the foregoing, the Corporation may indemnify any
Non-Officer Employee seeking indemnification in connection with a Proceeding
initiated by such Non-Officer
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Employee only if such Proceeding was authorized by the Board of Directors of the
Corporation.
SECTION 4. GOOD FAITH. Unless ordered by a court, no indemnification
shall be provided pursuant to this Article V to a Director, to an Officer or to
a Non-Officer Employee unless a determination shall have been made that such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Corporation and, with respect to
any criminal Proceeding, such person had no reasonable cause to believe his or
her conduct was unlawful. Such determination shall be made by (a) a majority
vote of the Disinterested Directors, even though less than a quorum of the Board
of Directors, (b) if there are no such Disinterested Directors, or if a majority
of Disinterested Directors so direct, by independent legal counsel in a written
opinion, or (c) by the stockholders of the Corporation.
SECTION 5. ADVANCEMENT OF EXPENSES TO DIRECTORS PRIOR TO FINAL
DISPOSITION. The Corporation shall advance all Expenses incurred by or on behalf
of any Director in connection with any Proceeding in which such Director is
involved by reason of such Director's Corporate Status within ten days after the
receipt by the Corporation of a written statement from such Director requesting
such advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably
evidence the Expenses incurred by such Director and shall be preceded or
accompanied by an undertaking by or on behalf of such Director to repay any
Expenses so advanced if it shall ultimately be determined that such Director is
not entitled to be indemnified against such Expenses.
SECTION 6. ADVANCEMENT OF EXPENSES TO OFFICERS AND NON-OFFICER
EMPLOYEES PRIOR TO FINAL DISPOSITION. The Corporation may, in the discretion of
the Board of Directors of the Corporation, advance any or all Expenses incurred
by or on behalf of any Officer or Non- Officer Employee in connection with any
Proceeding in which such Officer or Non-Officer Employee is involved by reason
of such Officer or Non-Officer Employee's Corporate Status upon the receipt by
the Corporation of a statement or statements from such Officer or Non- Officer
Employee requesting such advance or advances from time to time, whether prior to
or after final disposition of such Proceeding. Such statement or statements
shall reasonably evidence the Expenses incurred by such Officer or Non-Officer
Employee and shall be preceded or accompanied by an undertaking by or on behalf
of such Officer or Non-Officer Employee to repay any Expenses so advanced if it
shall ultimately be determined that such Officer or Non-Officer Employee is not
entitled to be indemnified against such Expenses.
SECTION 7. CONTRACTUAL NATURE OF RIGHTS. The foregoing provisions of
this Article V shall be deemed to be a contract between the Corporation and each
Director and Officer who serves in such capacity at any time while this Article
V is in effect, and any repeal or modification thereof shall not affect any
rights or obligations then existing with respect to any state of facts then or
theretofore existing or any Proceeding theretofore or
17
<PAGE> 18
thereafter brought based in whole or in part upon any such state of facts. If a
claim for indemnification or advancement of Expenses hereunder by a Director or
Officer is not paid in full by the Corporation within (a) 60 days after the
Corporation's receipt of a written claim for indemnification, or (b) in the case
of a Director, 10 days after the Corporation's receipt of documentation of
Expenses and the required undertaking, such Director or Officer may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of
the claim, and if successful in whole or in part, such Director or Officer shall
also be entitled to be paid the expenses of prosecuting such claim. The failure
of the Corporation (including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) to make a determination concerning
the permissibility of such indemnification or advancement of Expenses (in the
case of a Director) under this Article V shall not be a defense to the action
and shall not create a presumption that such indemnification or advancement is
not permissible.
SECTION 8. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and
advancement of Expenses set forth in this Article V shall not be exclusive of
any other right which any Director, Officer or Non-Officer Employee may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
or these By-Laws, agreement, vote of stockholders or Disinterested Directors or
otherwise.
SECTION 9. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any Director, Officer or Non-Officer Employee
against any liability of any character asserted against or incurred by the
Corporation or any such Director, Officer or Non-Officer Employee, or arising
out of any such person's Corporate Status, whether or not the Corporation would
have the power to indemnify such person against such liability under the DGCL or
the provisions of this Article V.
ARTICLE VI
----------
Miscellaneous Provisions
------------------------
SECTION 1. FISCAL YEAR. Except as otherwise determined by the Board of
Directors, the fiscal year of the Corporation shall end on the last day of
September of each year.
SECTION 2. SEAL. The Board of Directors shall have power to adopt and
alter the seal of the Corporation.
SECTION 3. EXECUTION OF INSTRUMENTS. All deeds, leases, transfers,
contracts, bonds, notes and other obligations to be entered into by the
Corporation in the ordinary course of its
18
<PAGE> 19
business without Director action may be executed on behalf of the Corporation by
the Chairman of the Board, if one is elected, the President or the Treasurer or
any other officer, employee or agent of the Corporation as the Board of
Directors or Executive Committee may authorize.
SECTION 4. VOTING OF SECURITIES. Unless the Board of Directors
otherwise provides, the Chairman of the Board, if one is elected, the President
or the Treasurer may waive notice of and act on behalf of this Corporation, or
appoint another person or persons to act as proxy or attorney in fact for this
Corporation with or without discretionary power and/or power of substitution, at
any meeting of stockholders or shareholders of any other corporation or
organization, any of whose securities are held by this Corporation.
SECTION 5. RESIDENT AGENT. The Board of Directors may appoint a
resident agent upon whom legal process may be served in any action or proceeding
against the Corporation.
SECTION 6. CORPORATE RECORDS. The original or attested copies of the
Certificate, By-Laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock transfer books, which
shall contain the names of all stockholders, their record addresses and the
amount of stock held by each, may be kept outside the State of Delaware and
shall be kept at the principal office of the Corporation, at the office of its
counsel or at an office of its transfer agent or at such other place or places
as may be designated from time to time by the Board of Directors.
SECTION 7. CERTIFICATE. All references in these By-Laws to the
Certificate shall be deemed to refer to the Amended and Restated Certificate of
Incorporation of the Corporation, as amended and in effect from time to time.
SECTION 8. AMENDMENT OF BY-LAWS.
(a) AMENDMENT BY DIRECTORS. Except as provided otherwise by law, these
By-laws may be amended or repealed by the Board of Directors.
(b) AMENDMENT BY STOCKHOLDERS. These By-Laws 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.
Adopted May 8, 1996 and effective as of , 1996.
---------------------
19
<PAGE> 1
EXHIBIT 4.1
<TABLE>
<S> <C> <C> <C>
COMMON STOCK COMMON STOCK
NUMBER RESTRAC SHARES
RESTRAC, INC. SEE REVERSE FOR CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CUSIP 76126W 10 8
THIS CERTIFIES THAT
is the owner of
FULLY-PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE OF ONE CENT ($.01) EACH OF THE COMMON STOCK OF
RESTRAC, INC., transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney, upon
surrender of this certificate properly endorsed. This certificate and the shares represented hereby are issued and shall be held
subject to the laws of the State of Delaware and the Certificate of Incorporation and the By-Laws of the Corporation, as the same
may be from time to time amended, to all of which the holder by acceptance hereof assents. This certificate is not valid unless
countersigned by the Transfer Agent and Registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers.
Dated:
/s/ Rachael Shanahan [RESTRAC, INC. /s/ Lars D. Perkins
-------------------- CORPORATE SEAL -------------------
Secretary 1993 DELAWARE] President and Chief
Executive Officer
COUNTERSIGNED AND REGISTERED:
FLEET NATIONAL BANK
TRANSFER AGENT AND REGISTRAR
BY
AUTHORIZED SIGNATURE
</TABLE>
<PAGE> 2
<TABLE>
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<S> <C>
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with rights
of survivorship and not as
tenants in common UNIF GIFT MIN ACT - ............Custodian...............
(Cust) (Minor)
Under Uniform Gifts to Minors
Act........................
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ___________________________________________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- ---------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------- Shares
of the Capital Stock represented by the within Certificate, and do hereby irrevocably constitute and appoint
- ------------------------------------------------------------------------------------------------------------------------ Attorney
to transfer the said stock on the books of the within-named Corporation with full power of substitution in the premises.
Dated
--------------------------------------
--------------------------------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON
THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT,
OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
By:
- -----------------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
</TABLE>
<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
June 13, 1996
