<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 10, 1996
REGISTRATION STATEMENT NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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- -----------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE
- -----------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value....... 2,875,000 $14.00 $40,250,000 $13,880
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</TABLE>
(1) Includes 375,000 shares of Common Stock which the Underwriters have the
option to purchase solely to cover over-allotments, if any.
(2) Estimated solely for purposes of calculating the registration fee, pursuant
to Rule 457 under the Securities Act of 1933, as amended.
-----------------------------
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.
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<PAGE> 2
RESTRAC, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM NUMBER OF CAPTION LOCATION OR HEADING IN PROSPECTUS
------------------------------------------ --------------------------------------------
<C> <S> <C>
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Page of Registration Statement
and Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front Cover Page and Outside Back
Cover Page of Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........ Prospectus Summary, Risk Factors and
Selected Financial Data
4. Use of Proceeds........................... Use of Proceeds
5. Determination of Offering Price........... Outside Front Cover Page of Prospectus and
Underwriting
6. Dilution.................................. Dilution
7. Selling Security Holders.................. Principal and Selling Stockholders
8. Plan of Distribution...................... Outside Front Cover Page of Prospectus and
Underwriting
9. Description of Securities to be
Registered................................ Outside Front Cover Page of Prospectus,
Prospectus Summary and Description of
Capital Stock
10. Interest of Named Experts and Counsel..... Not Applicable
11. Information With Respect to the
Registrant................................ Prospectus Summary, Risk Factors, Dividend
Policy, Capitalization, Selected Financial
Data, Management's Discussion and Analysis
of Financial Condition and Results of
Operations, Business, Management, Certain
Transactions, Principal and Selling
Stockholders, Description of Capital Stock,
Shares Eligible for Future Sale and
Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
</TABLE>
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED MAY 10, 1996
2,500,000 SHARES
LOGO
COMMON STOCK
Of the 2,500,000 shares of Common Stock offered hereby, 1,500,000 shares
are being sold by the Company and 1,000,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
shares by the Selling Stockholders. See "Principal and Selling Stockholders."
Prior to this offering, there has been no public market for the Common Stock of
the Company. It is currently estimated that the initial public offering price
will be between $12.00 and $14.00 per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. Application has been made for quotation of the Common Stock on the Nasdaq
National Market under the symbol RTRK.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 5 FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C> <C>
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- --------------------------------------------------------------------------------------------------
</TABLE>
<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).................. $ $ $ $
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</TABLE>
(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."
The shares of Common Stock are offered by the several Underwriters named
herein, subject to receipt and acceptance by them and subject to their right to
reject any order in whole or in part. It is expected that delivery of the
certificates representing such shares will be made against payment therefor at
the office of Montgomery Securities on or about , 1996.
------------------------
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON
ADAMS, HARKNESS & HILL, INC.
, 1996
<PAGE> 4
RESTRAC
HUMAN RESOURCE STAFFING SOFTWARE
[GRAPHIC OF A BULLSEYE]
FOR
THE STRATEGIC MANAGEMENT OF HUMAN CAPITAL
[ART WORK]
"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
RESTRAC
CLIENT/SERVER STAFFING SOFTWARE
2. CREATE CANDIDATE POOL
Organizations create a comprehensive
re-usable pool of candidates. This
repository can then be searched by [GRAPHIC OF A
recruiters throughout the enterprise SPHERE]
who have open positions to fill
or projects to staff. Candidate Skills Repository
Automated Input
3. FIND CANDIDATES
Based on user-defined job
requirements, Restrac provides a
ranked list of qualified candi- [GRAPHIC OF A
dates and displays their resumes COMPUTER SCREEN]
with key skills highlighted.
Spelling
4. EXPEDITE STAFFING PROCESS
Restrac provides database man-
agement and workflow functional-
ity to automate the workflow of [GRAPHIC OF A
the staffing process. Its process- COMPUTER SCREEN]
oriented design enables users to
coordinate the staffing process
across the enterprise.
5. CONNECT STAFFING TEAM
Restrac facilitates communications between
human resources, hiring managers and appli-
cants. Resumes can be reviewed via e-mail. [GRAPHIC OF A PERSON
Interactive voice response capabilities enable IN A CHAIR]
managers to review requisition status using a
telephone to access the system directly.
6. REPORT
After candidates are hired and
deployed, Restrac's reporting
capabilities enable the organi-
zation to analyze staffing
effectiveness and demonstrate
compliance with Equal
Employment Opportunity
(EEO) requirements.
Hire and Deploy
[ARROW]
Review and Interview
[ARROW]
Regional Sales Manager [GRAPHIC OF A PERSON]
[ARROW]
Plant Manager [GRAPHIC OF A PERSON]
[ARROW]
Software Engineer [GRAPHIC OF A PERSON]
[ARROW]
Job Requirements
<PAGE> 6
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> 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 the products' flexible skills management and
search capabilities, the products are 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
THE OFFERING
<TABLE>
<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>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
-------------------------------------------- ---------------
1991 1992 1993 1994 1995 1995 1996
------ ------ ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue...................................... $2,325 $3,879 $5,670 $ 9,737 $15,014 $6,211 $9,903
Income (loss) from operations................ (189) 54 172 871 537 583 835
Net income (loss)............................ (213) 13 89 606 401 387 527
Pro forma net income per common
and common equivalent share(2)............. $ .06 $ .08
Pro forma weighted average number of common
and common equivalent shares outstanding... 6,949 6,938
OTHER DATA:
Income (loss) from operations before
non-recurring charge(3).................... (189) 54 172 871 1,548 583 835
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------------------------
PRO FORMA
PRO FORMA(4) AS ADJUSTED(4)(5)
------------ -----------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................... $ 4,313 $21,299
Working capital..................................................... 2,094 19,629
Total assets........................................................ 10,084 27,070
Total liabilities................................................... 6,587 6,038
Stockholders' equity................................................ 3,497 21,032
</TABLE>
- ---------------
(1) Based upon shares outstanding as of May 8, 1996. Excludes 641,844 shares of
Common Stock which were subject to outstanding options under the Company's
1994 Stock Option Plan (the "1994 Stock Option Plan") as of May 8, 1996 at a
weighted average exercise price of approximately $2.65 per share. See
"Capitalization," "Management -- Stock Option Plans" and Note 6 of Notes to
Financial Statements.
(2) Computed on the basis described in Note 1 of Notes to Financial Statements.
(3) Determined before non-recurring charge in fiscal 1995 related to the buy-out
of certain product distribution rights. See Note 2 of Notes to Financial
Statements.
(4) Gives effect to the conversion of all then outstanding shares of Convertible
Preferred Stock into an aggregate of 2,502,696 shares of Common Stock upon
the closing of this offering and the accrual of accumulated dividends due
upon conversion of the Convertible Preferred Stock.
(5) Adjusted to give effect to the receipt of the net proceeds from the sale of
the 1,500,000 shares of Common Stock offered by the Company hereby (at an
assumed initial public offering price of $13.00 per share), after deducting
the estimated underwriting discount and offering expenses and the payment of
dividends due upon conversion of the Convertible Preferred Stock. See "Use
of Proceeds" and "Capitalization."
------------------------
The Company was incorporated in Massachusetts in 1982 and reincorporated in
Delaware in 1993. The Company's principal executive offices are located at 3
Allied Drive, Dedham, Massachusetts 02026, and its telephone number is (617)
320-5600. The Company's home page is located at www.restrac.com.
4
<PAGE> 9
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered in evaluating the Company and its business before
purchasing the Common Stock offered hereby.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company's results of operations have been, and may in the future be,
subject to significant quarterly fluctuations, due to a variety of factors,
including the relatively lengthy sales cycle for the Company's products, the
relatively large size of a typical product sale, the timing of contracts, the
introduction of new products by the Company or its competitors, capital spending
patterns of customers, the Company's sales incentive strategy and general
economic conditions. Historically, revenue in the first fiscal quarter has been
lower than in the preceding fourth fiscal quarter (which typically has the
highest revenue and net income), due largely to sales incentive programs focused
on annual operating results. A substantial portion of the Company's revenue
occurs during the last few weeks of each quarter; therefore, any delays in
orders or shipments are more likely to result in revenue not being recognized
until the following quarter. The Company's current expense levels are based in
part on its expectations of future revenue and, as a result, net income for a
given period could be disproportionately affected by any reduction in revenue.
There can be no assurance that the Company will be able to achieve significant
revenue, that the level of revenue in the future will not decrease from past
levels or that in some future quarter the Company's revenue or operating results
will not be below the expectations of stock market securities analysts and
investors. In such event, the Company's profitability and price of its Common
Stock would likely be materially and adversely affected. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
EMERGING MARKETS
The market for automated human resource staffing solutions is relatively
new and undeveloped. The Company's future success is substantially dependent on
broader recognition of the potential benefits afforded by automated staffing
software and the growth in demand for such solutions. Because the market for
such software is only beginning to develop, it is difficult to assess the size
of the market, the customer demands that will evolve and the competition that
may emerge. There can be no assurance that the market for automated staffing
software will continue to grow or that the introduction of new technologies or
services will not render the Company's existing software obsolete or
unmarketable.
The market for automated staffing solutions is undergoing rapid changes,
including continuing advances in technology and changes in customer requirements
and preferences. These market dynamics have been exacerbated by the emergence of
the Internet as a communications medium for staffing solutions. The Company's
future success will depend in significant part on its ability to continually
improve the performance, features and reliability of its software in response to
the evolving demands of the marketplace and competitive product offerings, and
there can be no assurance that the Company will be successful in doing so. In
addition, an element of the Company's business strategy is the development and
introduction of new products, functionalities and other staffing solutions that
capitalize on the increasing use of the Internet as a communications medium. The
development process for the Company's new products, functionalities and other
staffing solutions which target the Internet may be significantly different and
longer than the development process for the Company's current software, and this
may result in higher development costs, longer development cycles or a loss in
market acceptance. There can be no assurance that the Company will be successful
in developing and marketing products, functionalities and other staffing
solutions for the Internet, that its future offerings will keep pace with
technological changes in the market or new technologies introduced by
competitors or that it will satisfy evolving consumer preferences. Development
of Internet-based products, functionalities and other staffing solutions will
also depend on increased acceptance of the Internet for staffing solutions and
the development of the necessary infrastructure to facilitate commercial
applications on the Internet. There can be no assurance of such acceptance or
infrastructure development. Failure to develop and introduce new products,
functionalities and other staffing solutions in a timely fashion could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Business -- Product Development."
5
<PAGE> 10
DEPENDENCE ON PRINCIPAL PRODUCT
The Company currently derives most of its revenue from its Restrac Hire
product. As a result, any factor adversely affecting sales of this product would
have a material adverse effect on the Company. The future success of the Company
also depends, in part, on achieving broader market acceptance of Restrac Hire,
as well as the ability to continue to enhance Restrac Hire to meet the evolving
needs of its customers. Moreover, the Company anticipates that its existing and
new competitors will introduce additional competitive products. This competition
may reduce future market acceptance of Restrac Hire. The market acceptance of
the Company's software is difficult to estimate due in large measure to the
effect of new products, applications or product enhancements, technological
changes in the marketplace for staffing solutions and future competition. There
can be no assurance that the Company will maintain and expand acceptance of
Restrac Hire. The failure of the Company to maintain and expand its market
acceptance as a result of competition, technological change or other factors,
would have a material adverse effect on the Company's business, financial
condition and results of operations. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Products."
MANAGEMENT OF GROWTH
The Company's business has grown rapidly in recent periods, with total
revenues increasing from $5.7 million in fiscal 1993 to $15 million in fiscal
1995. The growth of the Company's business and expansion of the Company's
customer base has resulted in substantial growth in the number of its employees,
the scope of its operating and financial systems and the geographic area of its
operations, resulting in increased responsibility for management personnel. The
Company's future results of operations will depend on the ability of its
officers and other key employees to continue to implement its operational,
customer support and financial control systems and to expand, train and manage
its employee base. Although the Company currently has no agreements, commitments
or understandings relating to any acquisitions, the Company may undertake
acquisitions in the future. Any such transactions would place additional strains
upon the Company's management resources. There can be no assurance that the
Company will be able to manage any future expansion successfully, and any
inability to do so would have a material adverse effect on the Company's
business, financial condition and results of operations.
COMPETITION
The marketplace for staffing solutions is intensely competitive and is
rapidly changing. The Company encounters direct competition from a number of
companies providing staffing solutions, including (i) other human resource
staffing software companies, (ii) providers of general human resource
information systems, (iii) agencies providing or sourcing full-time, contract
and temporary labor, (iv) information systems departments of potential prospects
that develop custom software, and (v) providers of other client/server
application software or document management systems.
The Company's primary direct competitor is Resumix, Inc., which was
acquired by Ceridian, Inc. in 1995. The Company also competes directly against
other providers of human resource staffing software, most of which are small
privately held companies providing less functional products at lower prices. In
addition, vendors of general human resource information systems generally
include applicant tracking modules in their offerings which can compete with the
Company's products. Moreover, there can be no assurance that such vendors will
not develop and market products in direct competition with the Company. Some of
the Company's current and many of its potential competitors, including
PeopleSoft and many other providers of general human resource information
systems, are large, publicly traded organizations with access to significantly
greater financial, technical, marketing and other resources. As a result, they
may be able to respond to market changes, emerging technologies or changes in
customer requirements more rapidly and devote more resources to the development,
marketing and sales of their products than the Company. Competition may increase
from new market entrants (particularly if the market for automated staffing
solutions continues to develop) or through consolidations in the software
industry and/or cooperative relationships among companies. Although the Company
believes that at the present time its products are competitively priced, an
increase in competition could result in price reductions and loss of market
share. Such
6
<PAGE> 11
competition and any resulting price reductions could have a material adverse
effect on the Company's business, financial condition and results of operations.
See "Business -- Competition."
DEPENDENCE ON THIRD PARTIES
A key element of the Company's business strategy is to develop
relationships with leading industry organizations in order to increase the
Company's market presence, expand distribution channels and broaden the
Company's product line. For example, the Company generated approximately 16% of
its revenue during the first six months of fiscal 1996 from the sale of Resume
Reader for PeopleSoft, a product jointly marketed by the Company and PeopleSoft
which integrates the high volume resume-scanning, skills management and search
capabilities found in the Company's Restrac Hire product with PeopleSoft's HRMS
product. The Company believes that its continued success depends in large part
on its ability to maintain such relationships and cultivate additional
relationships. There can be no assurance that the Company's existing strategic
partners such as PeopleSoft or future strategic partners will not develop and
market products in direct competition with the Company or otherwise discontinue
their relationships with the Company, or that the Company will be able to
successfully develop additional strategic relationships.
In addition, certain technology incorporated in the Company's software,
including Verity's text search technology and TASC's imaging technology, is
licensed from third parties on a nonexclusive basis. The Company believes that
there are alternative sources for each of the material components of technology
licensed by the Company from third parties. However, the termination of any of
such licenses, or the failure of the third party licensors to adequately
maintain or update their products, could result in delay in the Company's
ability to ship certain of its products while it seeks to implement technology
offered by alternative sources. In addition, any required replacement licenses
could prove more costly than the Company's current license relationships and
might not provide technology as powerful and functional as the third-party
technology currently licensed by the Company. Also, any such delay, to the
extent it becomes extended or occurs at or near the end of a fiscal quarter,
could have a material adverse effect on the Company's results of operations for
that quarter. While it may be necessary or desirable in the future to obtain
other licenses relating to one or more of the Company's products or relating to
current or future technologies, there can be no assurance that the Company will
be able to do so on commercially reasonable terms or at all. See "Business --
Strategic Relationships."
RISK OF NEW PRODUCT INTRODUCTIONS; RISK OF PRODUCT DEFECTS
As the marketplace for staffing solutions continues to evolve, the Company
plans to develop and introduce new products to enable it to effectively address
the changing needs of that market. There is no guarantee that the Company will
be able to develop new products or that such products will achieve market
acceptance or, if market acceptance is achieved, that the Company will be able
to maintain such acceptance for a significant period of time. Any inability of
the Company to quickly develop products that address changes in technology or
customer demands may require the Company to substantially increase development
expenditures or result in a loss of market share to a competitor.
Products as complex as those offered by the Company may contain undetected
errors when first introduced or when new versions are released. The Company has
in the past discovered software errors in certain of its product offerings after
their introduction. There can be no assurance that, despite testing by the
Company, errors will not occur in new products or releases after commencement of
commercial shipments, resulting in adverse publicity, in loss of or delay in
market acceptance, or in claims by the customer against the Company, which could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business -- Products."
7
<PAGE> 12
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends to a significant extent on its senior
management and other key employees, including its Chief Executive Officer, Lars
D. Perkins. The Company also believes that its future success will depend in
large part on its ability to attract and retain additional key employees.
Competition for such personnel in the computer software industry is intense, and
there can be no assurance that the Company will be successful in attracting and
retaining such personnel. Furthermore, although the Company is a party to
non-competition agreements with each of its senior executives, the laws
governing such agreements are in continual flux and the enforceability of such
agreements in each jurisdiction in which enforcement might be sought is
uncertain. The Company's inability to attract and retain additional key
employees or the loss of one or more of its current key employees could
materially adversely affect the Company's business, financial condition and
results of operations. See "Management" and "Business -- Employees."
INTERNATIONAL SALES
Although international sales have been insignificant to date, an important
element of the Company's business strategy is the expansion of its existing
international operations and entry into additional international markets, which
will require significant management attention and financial resources. The
Company established a regional sales and services office in Reading, England in
March 1995. In order to successfully expand international sales, the Company
must establish additional foreign operations and hire additional personnel. To
the extent that the Company is unable to do so in a timely manner, the Company's
growth, if any, in international sales will be limited, and the Company's
business, financial condition and results of operations could be materially
adversely affected. In addition, there can be no assurance that the Company will
be able to maintain or increase international market demand for its products.
Additional risks inherent in the Company's international business activities
generally include currency fluctuations, unexpected changes in regulatory
requirements, tariffs and other trade barriers, costs and difficulties
associated with localizing products for foreign countries, lack of acceptance of
localized products in foreign countries, longer accounts receivable payment
cycles, difficulties in managing international operations, potentially adverse
tax consequences, restrictions on the repatriation of earnings, the burdens of
complying with a wide variety of foreign laws and political and economic
instability. There can be no assurance that such factors will not have a
material adverse effect on the Company's future international sales or the
Company's overall business, financial condition and results of operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business -- Strategy."
LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS; RISK OF
LITIGATION
The Company relies on a combination of copyright and trade secret laws,
employee and third party non-disclosure agreements and other methods to protect
its proprietary rights. There can be no assurance that the measures taken by the
Company to protect its proprietary rights will be adequate to prevent
misappropriation of its technology or independent development by others of
similar technology. In addition, the Company may be subject to additional risk
as it enters into transactions in countries where intellectual property laws are
not well developed or are poorly enforced. The Company's inability to protect
its proprietary rights would have a material adverse effect on the Company's
business, financial condition and results of operations.
As the number of human resource application software products in the
industry increases and the functionality of these products further overlaps,
software developers and publishers may increasingly become subject to
infringement claims. There can be no assurance that third parties will not
assert infringement claims against the Company in the future with respect to
current or future products. Although the Company is not currently the subject of
any intellectual property litigation, there has been substantial litigation
regarding copyright, patent and other intellectual property rights involving
computer software companies. Any claims or litigation, with or without merit,
could be costly and could result in a diversion of management's attention, which
could have a material adverse effect on the Company's business, financial
condition and results of operations. Adverse determinations in such claims or
litigation may require the Company to obtain a license and/or pay damages, which
could also have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Intellectual Property."
8
<PAGE> 13
NO PRIOR PUBLIC MARKET; MARKET VOLATILITY
Prior to this offering, there has been no public market for the Company's
Common Stock. Although the Company's Common Stock has been approved for
quotation on the Nasdaq National Market, there can be no assurance that an
active trading market will develop or be sustained following this offering. The
initial public offering price of the Common Stock will be determined in
negotiations among the Company, the Selling Stockholders and the Representatives
of the Underwriters, and may not be indicative of future market prices. In
addition, in recent years the stock market in general, and the market for shares
of small capitalization companies in particular, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
affected companies. There can be no assurance that the market price of the
Company's Common Stock will not experience significant fluctuations in the
future, including fluctuations that are unrelated to the Company's performance.
General market price declines or market volatility in the future could adversely
affect the market price of the Common Stock. See "Underwriting."
CONCENTRATION OF SHARE OWNERSHIP
Based on the number of shares of Common Stock that will be outstanding upon
completion of this offering, directors and officers of the Company, together
with entities affiliated with them, will own 62.6% of the Company's outstanding
Common Stock in the aggregate (57.9% assuming the exercise in full of the
Underwriters' over-allotment option). As a result, these stockholders will
retain the voting power required to elect all directors and to approve other
matters requiring approval by the stockholders of the Company. See
"Management -- Executive Officers and Directors" and "Principal and Selling
Stockholders."
POTENTIAL IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of substantial amounts of Common Stock in the public market following
the offering could have an adverse effect on the market price of the Common
Stock. Approximately 2,530,000 shares (including the 2,500,000 shares offered
hereby) will be eligible for sale in the public market immediately following the
effective date of the Registration Statement, and approximately 5,240,814
additional shares will become eligible for sale in the public market upon the
expiration of agreements with the Underwriters not to sell such shares until 180
days after the date of this Prospectus. Holders of 4,822,547 shares have
contractual rights to have those shares registered with the Securities and
Exchange Commission for resale to the public. In addition, 30 days after the
effective date of the Registration Statement, the Company intends to file a
registration statement covering the 1,750,000 shares of Common Stock issued or
reserved for issuance under the 1994 Stock Option Plan, the Company's 1996 Stock
Option and Grant Plan (the "1996 Stock Option Plan") and the 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
The following table sets forth, as of March 31, 1996, the Company's
unaudited (i) pro forma capitalization after giving effect to the conversion of
all outstanding shares of Convertible Preferred Stock into an aggregate of
2,502,696 shares of Common Stock upon the closing of this offering, and (ii) pro
forma as adjusted capitalization to reflect the sale by the Company of the
1,500,000 shares of Common Stock offered hereby and the receipt by the Company
of the estimated net proceeds therefrom, based upon an assumed initial public
offering price of $13.00 per share, and after deducting the estimated
underwriting discount and offering expenses and the payment of accumulated
dividends due upon conversion of the Convertible Preferred Stock. The
capitalization information set forth in the table below is qualified by the more
detailed Financial Statements and Notes thereto appearing elsewhere in this
Prospectus and should be read in conjunction with such Financial Statements and
Notes.
<TABLE>
<CAPTION>
MARCH 31, 1996(1)
-------------------------
PRO FORMA
PRO FORMA AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Short-term debt (including current portion of long-term debt)....... $ 11 $ 11
======= =======
Long-term debt (excluding current portion).......................... $ 6 $ 6
------- -------
Convertible Preferred Stock, $1.00 par value, 1,000,000 shares
authorized, none issued or outstanding............................ -- --
Stockholders' equity(2):
Preferred Stock, $.01 par value, 5,000,000 shares authorized,
no shares issued or outstanding................................ -- --
Common Stock, $.01 par value, 30,000,000 shares authorized,
7,061,283 shares issued pro forma; 8,561,283 shares issued pro
forma as adjusted.............................................. 71 86
Additional paid-in capital........................................ 3,700 21,220
Treasury stock, at cost, 686,900 shares........................... (831) (831)
Retained earnings................................................. 557 557
------- -------
Total stockholders' equity..................................... 3,497 21,032
------- -------
Total capitalization...................................... $ 3,503 $ 21,038
======= =======
</TABLE>
- ---------------
(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.
12
<PAGE> 17
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1996
was approximately $3,496,935, or $0.55 per share, after giving effect to the
conversion of all outstanding shares of Convertible Preferred Stock into an
aggregate of 2,502,696 shares of Common Stock upon the closing of this offering.
Pro forma net tangible book value per share represents the amount of the
Company's total tangible assets less total liabilities, including the accrual of
accumulated dividends on the Convertible Preferred Stock, divided by the pro
forma number of shares of Common Stock outstanding, including the shares of
Common Stock resulting from the conversion of the Convertible Preferred Stock.
Without taking into account any other changes in the net tangible book value
after March 31, 1996, other than to give effect to the receipt by the Company of
the net proceeds from the sale of the 1,500,000 shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of $13.00 per
share and after deducting the estimated underwriting discount and offering
expenses and the payment of accumulated dividends due upon conversion of the
Convertible Preferred Stock, the pro forma net tangible book value of the
Company as of March 31, 1996 would have been approximately $21,031,935, or $2.67
per share. This represents an immediate increase in pro forma net tangible book
value of $2.12 per share to existing stockholders and an immediate dilution of
$10.33 per share to new investors. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share..................... $13.00
-------
Pro forma net tangible book value per share as of March 31,
1996........................................................... $0.55
------
-
Increase per share attributable to new investors.................. 2.12
------
-
Pro forma net tangible book value per share as of March 31, 1996.... 2.67
-------
Dilution per share to new investors................................. $10.33
=======
</TABLE>
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:
<TABLE>
<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%
========= ====== ========= ======
</TABLE>
- ---------------
(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.
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) 2,459 1,971 2,474
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 12% to 20% 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
certain of the Company's software products. The relationship was restructured in
1994 so that for periods subsequent to fiscal 1994, the products are 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
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.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED MARCH 31,
---------------------- ---------------
AS A PERCENTAGE OF TOTAL REVENUE: 1993 1994 1995 1995 1996
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue:
Product revenue....................................... 67 % 70 % 67 % 67 % 62 %
Services revenue...................................... 33 30 33 33 38
--- --- --- --- ---
Total revenue................................. 100 100 100 100 100
--- --- --- --- ---
Cost of revenue:
Product revenue....................................... 13 14 9 11 10
Services revenue...................................... 24 16 20 19 22
--- --- --- --- ---
Total cost of revenue......................... 37 30 29 30 32
--- --- --- --- ---
Gross margin............................................ 63 70 71 70 68
--- --- --- --- ---
Operating expenses:
Research and development.............................. 12 14 9 10 9
Sales and marketing................................... 27 34 38 39 38
General and administrative............................ 21 13 14 12 13
Non-recurring charge.................................. -- -- 7 -- --
--- --- --- --- ---
Total operating expenses...................... 60 61 68 61 60
--- --- --- --- ---
Income from operations.................................. 3 9 3 9 8
Other income, net....................................... -- 1 1 1 1
--- --- --- --- ---
Income before provision for income taxes................ 3 10 4 10 9
Provision for income taxes.............................. 2 4 2 4 4
--- --- --- --- ---
Net income.............................................. 1 % 6 % 2 % 6 % 5 %
=== === === === ===
</TABLE>
SIX MONTHS ENDED MARCH 31, 1996 COMPARED TO SIX MONTHS ENDED MARCH 31, 1995
REVENUE
Product Revenue. Product revenue increased 48% to $6,100,000 for the six
months ended March 31, 1996 from $4,133,000 for the six months ended March 31,
1995. Approximately $1,000,000 of the growth in product revenue was attributable
to the purchase of additional user licenses by existing customers and
approximately $1,000,000 was attributable to proportionately larger initial
licenses for the six months ended March 31, 1996. There can be no assurances
that the Company will sustain these levels of revenue growth.
Services Revenue. Services revenue increased 83% to $3,803,000 for the six
months ended March 31, 1996 from $2,078,000 for the six months ended March 31,
1995. Installation, training and consulting services accounted for approximately
$950,000, or 55%, of this increase, with the remainder attributable to
maintenance revenue. Throughout fiscal 1995, the Company significantly enhanced
its service offerings, adding project management and standardized training and
education programs. These enhancements, combined with a higher number of larger
implementations and price increases, resulted in a 60% increase in average
services revenue per system license, accounting for over $500,000 of the revenue
increase. The remainder of the increase in installation, training and consulting
revenue was largely attributable to additional services sold to existing
customers. Maintenance revenue increased approximately 53% for the six months
ended March 31, 1996 as compared to the six months ended March 31, 1995 due to
the increase in the installed base of client/server, Windows-based customers.
16
<PAGE> 21
COST OF REVENUE
Cost of Product Revenue. Cost of product revenue includes third-party
hardware costs (through fiscal 1995), royalty payments for third-party software
embedded in the Company's products, royalty payments to PeopleSoft, Inc.
(beginning in fiscal 1995) and costs of documentation and shipping. Cost of
product revenue increased 31% to $932,000 for the six months ended March 31,
1996 from $713,000 for the six months ended March 31, 1995. Cost of product
revenue decreased as a percentage of product revenue to approximately 15% for
the six months ended March 31, 1996 from approximately 17% for the six months
ended March 31, 1995. This decrease is primarily attributable to the Company's
decision to discontinue reselling scanning hardware, which represented over 60%
of cost of product revenue for the six months ended March 31, 1995. This
reduction has been partially offset by the increase in royalty payments to
PeopleSoft resulting from a proportional increase in sales of Resume Reader for
PeopleSoft during the six months ended March 31, 1996.
Cost of Services Revenue. Cost of services revenue includes royalty
payments for third-party hardware and software maintenance and all costs of
maintaining the client services organization, including salaries and
personnel-related expenses, travel, outside consulting services and facilities
costs. Cost of services revenue increased 91% to $2,192,000 for the six months
ended March 31, 1996 from $1,148,000 for the six months ended March 31, 1995.
Cost of services revenue increased as a percentage of services revenue to 58%
for the six months ended March 31, 1996 from 55% for the six months ended March
31, 1995 due largely to the increase in service personnel and the addition of a
dedicated account management group which is not revenue generating, offset in
part by increased services revenue. Cost of services revenue for the six months
ended March 31, 1996 also included overhead costs associated with a training
facility at the Company's corporate headquarters that was opened in June 1995.
OPERATING EXPENSES
Research and Development. Research and development expenses include all
costs associated with the product engineering and quality functions, including
salaries and personnel-related expenses, travel, outside consulting services and
facilities costs. Research and development expenses increased 46% to $864,000
for the six months ended March 31, 1996 from $593,000 for the six months ended
March 31, 1995. As a percentage of total revenue, research and development
expenses decreased slightly to 9% for the six months ended March 31, 1996 from
10% for the six months ended March 31, 1995. The increase in total expenses was
largely attributable to an increase in personnel and in consulting costs. The
product engineering and quality staff is expected to continue to increase in
size during the remainder of fiscal 1996.
Sales and Marketing. Sales and marketing expenses include promotional
costs and trade shows and costs associated with personnel involved in sales and
marketing functions, including salaries, commissions and other personnel-related
expenses, travel, outside consulting services and facilities costs. Sales and
marketing expenses increased 57% to $3,758,000 for the six months ended March
31, 1996 from $2,395,000 for the six months ended March 31, 1995. As a
percentage of total revenue, sales and marketing expenses were 38% for the six
months ended March 31, 1996 and 39% for the six months ended March 31, 1995.
Approximately 20% of the dollar increase related to increased marketing program
costs in support of the Company's sales efforts. The remainder was largely
attributable to increases in the number of sales and marketing personnel and
increased commissions as a result of higher total revenue.
General and Administrative. General and administrative expenses consist
principally of costs for corporate operations personnel (executive, finance and
accounting, information technology, human resources, legal and administrative),
professional fees and other general corporate expenses. General and
administrative expenses increased 70% to $1,322,000 for the six months ended
March 31, 1996 from $779,000 for the six months ended March 31, 1995. As a
percentage of total revenue, general and administrative expenses were 13% for
the six months ended March 31, 1996 and 12% for the six months ended March 31,
1995. These increases were principally due to personnel increases to support the
Company's growth and infrastructure.
17
<PAGE> 22
OTHER INCOME, NET
Other income consists primarily of interest income from cash and cash
equivalents. The Company generally invests its cash balances in
interest-bearing, investment grade securities. Other income increased 62% to
$101,000 for the six months ended March 31, 1996 from $63,000 for the six months
ended March 31, 1995, due to an increase in average funds available for
investment.
PROVISION FOR INCOME TAXES
The Company's effective tax rate increased to 44% for the six months ended
March 31, 1996 from 40% for the six months ended March 31, 1995 due primarily to
equity related compensation not benefited for financial statement purposes.
FISCAL 1995 COMPARED TO FISCAL 1994
REVENUE
Product Revenue. Product revenue increased 47% to $10,024,000 for fiscal
1995 from $6,816,000 for fiscal 1994. The increase would have been 80%, after
deducting $1,262,000 in fiscal 1994 product revenue resulting from recognizing
revenue upon shipment rather than upon installation. The increase in fiscal 1995
product revenue was due principally to an increase in the number of systems
licensed and the number of licensed users per system. The Company experienced a
40% increase in the number of new systems licensed in fiscal 1995, due largely
to the growth of the sales force, which provided broader and deeper geographical
coverage, and to increased acceptance of its principal product, Restrac Hire.
Services Revenue. Services revenue increased 71% to $4,990,000 for fiscal
1995 from $2,921,000 for fiscal 1994. Approximately half of the services revenue
increase was attributable to greater revenue for installation, training and
consulting, with the remaining half associated with increased maintenance
revenue. These increases resulted from the expansion of the client services
organization to service the new accounts and from the growing installed customer
base.
COST OF REVENUE
Cost of Product Revenue. Cost of product revenue increased slightly to
$1,425,000 for fiscal 1995 from $1,350,000 for fiscal 1994. The cost of product
revenue decreased as a percentage of product revenue to 14% in fiscal 1995 from
20% in fiscal 1994 primarily due to low-margin scanning hardware becoming a
proportionately lower component of total product revenue. Customers can
generally operate one scanning station for an unlimited number of users.
Consequently, as the average number of licensed users has increased, the
hardware needs of customers and, therefore, hardware revenue have remained
relatively constant. In addition, more customers purchased scanning hardware
directly rather than through the Company as the ease of use and reliability of
this technology was enhanced over time. The Company discontinued reselling
scanning hardware in October 1995.
Cost of Services Revenue. Cost of services revenue increased 88% to
$2,984,000 for fiscal 1995 from $1,589,000 for fiscal 1994. The cost of services
revenue also increased as a percentage of services revenue to 60% in fiscal 1995
from 54% in fiscal 1994. Personnel increases accounted for a substantial portion
of these increases. The client services staff increased to 46 at September 30,
1995 from 28 employees at September 30, 1994, respectively. Cost of services
revenue for fiscal 1995 also included overhead costs associated with a training
facility at the Company's corporate headquarters that was opened in June 1995.
OPERATING EXPENSES
Research and Development. Research and development expenses increased 2%
to $1,365,000 for fiscal 1995 from $1,343,000 for fiscal 1994. As a percentage
of total revenue, research and development expenses decreased to 9% for fiscal
1995 from 14% for fiscal 1994. While the development organization grew from 10
employees at the end of fiscal 1994 to 17 employees at the end of fiscal 1995,
the relatively flat level of expenses and reduction in costs as a percentage of
revenue was attributable in part to expenses related to beta
18
<PAGE> 23
testing performed by client services personnel in fiscal 1994 which were charged
to research and development expense. In fiscal 1995, these services were
performed by product development personnel.
Sales and Marketing. Sales and marketing expenses increased 70% to
$5,661,000 for fiscal 1995 from $3,335,000 for fiscal 1994. As a percentage of
total revenue, sales and marketing expenses increased to 38% for fiscal 1995
from 34% for fiscal 1994. These increases were largely attributed to increases
in the number of sales and marketing personnel, which increased from 22
employees at the end of fiscal 1994 to 38 employees at the end of fiscal 1995,
and increases in commissions as a result of higher revenue. The Company also
increased its participation in trade shows, seminars and other promotional
activities. In addition, the Company positioned sales personnel in Sacramento,
Chicago, Dallas and Orlando (now Atlanta) in fiscal 1995, and the Palo Alto
office, which opened in fiscal 1993, was also expanded in fiscal 1995.
General and Administrative. General and administrative expenses increased
63% to $2,031,000 for fiscal 1995 from $1,249,000 for fiscal 1994. As a
percentage of total revenue, general and administrative expenses remained the
same at 13% for both fiscal 1995 and fiscal 1994. Corporate operations staff
increased from 13 employees at the end of fiscal 1994 to 20 employees at end of
fiscal 1995. While the Company experienced economies of scale in the
productivity of the corporate operations staff in fiscal 1995, this positive
impact was offset by a $283,000 increase in balance sheet reserves in fiscal
1995.
Non-recurring Charge. The Company entered the succession planning market
through its acquisition of SuccessPlan, a DOS-based product, from Borwick
International, Inc. in 1991. As part of the 1991 agreement, Borwick
International was granted the exclusive right to distribute SuccessPlan outside
of North America, and the Company was prohibited from selling any competitive
products in those territories. On September 30, 1995, the Company entered into
an agreement that terminated the remaining distribution rights of Borwick
International to SuccessPlan and removed any restrictions on the Company's
ability to sell competitive products. As a result of that agreement, the Company
recorded a non-recurring charge to operations of $1,010,952 in fiscal 1995,
representing the present value of payments made and owed under the terms of the
agreement. The Company does not have established distribution channels to
license and support its products outside of North America. Accordingly, the cost
of the distribution rights was expensed currently, as management is of the
opinion that the realizability of such cost is uncertain.
OTHER INCOME, NET
Other income increased 89% to $138,000 in fiscal 1995 from $73,000 in
fiscal 1994, due to an increase in average funds available for investment.
PROVISION FOR INCOME TAXES
The Company's effective tax rate increased to 40.6% in fiscal 1995 from
35.9% in fiscal 1994. This increase was due to a reduction of income tax
reserves in fiscal 1994.
FISCAL 1994 COMPARED TO FISCAL 1993
REVENUE
Product Revenue. Product revenue increased 81% to $6,816,000 in fiscal
1994 from $3,776,000 in fiscal 1993. The increase would have been 47%, after
deducting $1,262,000 in fiscal 1994 product revenue resulting from recognizing
revenue upon shipment rather than upon installation. The increase was largely
attributable to the shift in sales from the DOS-based products to the more
functionally-rich client/server, Windows-based software solutions, with an 80%
higher average price per system licensed due primarily to price increases.
Royalty income, consisting primarily of payments to the Company by PeopleSoft in
connection with PeopleSoft's distribution of certain of the Company's products,
added 4% to product revenue in fiscal 1994.
Services Revenue. Services revenue increased 54% to $2,921,000 in fiscal
1994 from $1,894,000 in fiscal 1993. This increase is primarily due to both
higher maintenance fees, commensurate with the higher license fees of its new
client/server, Windows-based software and improved revenue realization on
implementation and training services.
19
<PAGE> 24
COST OF REVENUE
Cost of Product Revenue. Cost of product revenue increased 88% to
$1,350,000 for fiscal 1994 from $719,000 for fiscal 1993. Cost of product
revenue increased as a percentage of product revenue to 21% in fiscal 1994 from
19% in fiscal 1993. These increases were primarily due to the fact that scanning
hardware was a larger component of cost of product revenue as the Company began
reselling scanners in conjunction with its client/server, Windows-based
software.
Cost of Services Revenue. Cost of services revenue increased 17% to
$1,589,000 in fiscal 1994 from $1,362,000 in fiscal 1993. Cost of services
revenue decreased as a percentage of services revenue to 54% in fiscal 1994 from
72% in fiscal 1993 due primarily to the Company's efforts to enhance the
productivity of its client services personnel in fiscal 1994, which resulted in
average revenue per billable person increasing by 63%.
OPERATING EXPENSES
Research and Development. Research and development expenses increased 99%
to $1,343,000 in fiscal 1994 from $674,000 in fiscal 1993. As a percentage of
total revenue, research and development expenses increased to 14% for fiscal
1994 from 12% for fiscal 1993. An increase in development personnel and costs
incurred by the client services department for beta testing activity on the new
client server products accounted for these increases.
Sales and Marketing. Sales and marketing expenses increased 115% to
$3,335,000 in fiscal 1994 from $1,553,000 in fiscal 1993. As a percentage of
total revenue, sales and marketing expenses increased to 34% for fiscal 1994
from 27% for fiscal 1993. The Company doubled the average number of personnel
dedicated to sales and marketing efforts in fiscal 1994 as compared to fiscal
1993. These personnel increases were made to build the direct sales force and
enhance the Company's marketing capabilities to support the anticipated demand
for its new client/server, Windows-based software.
General and Administrative. General and administrative expenses increased
5% to $1,249,000 in fiscal 1994 from $1,190,000 in fiscal 1993, but decreased as
a percentage of total revenue to 13% for fiscal 1994 from 21% for fiscal 1993.
This reduction was largely the result of economies of scale realized as revenues
increased.
OTHER INCOME, NET
Other income increased 204% to $73,000 in fiscal 1994 from $24,000 in
fiscal 1993, due to an increase in average funds available for investment.
PROVISION FOR INCOME TAXES
The Company's effective tax rate decreased to 35.9% in fiscal 1994 from
54.3% in fiscal 1993 due to the settlement of an Internal Revenue Service audit
that resulted in an assessment recorded in fiscal 1993.
20
<PAGE> 25
SELECTED QUARTERLY OPERATING RESULTS
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.
<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....... $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........ $ 146 $ 86 $ (34) $ 408 $ 314 $ 73 $ 244 $ (230) $ 225 $ 302
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1993 1994 1994 1994 1994 1995 1995 1995 1995 1996
-------- -------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Product
revenue....... 73.1% 69.7% 66.2% 70.6% 67.0% 66.1% 64.6% 68.8% 65.3% 58.1%
Services
revenue....... 26.9 30.3 33.8 29.4 33.0 33.9 35.4 31.2 34.7 41.9
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
revenue... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Cost of revenue:
Product
revenue....... 14.4 16.0 12.5 12.8 12.2 11.1 7.8 8.1 10.0 8.8
Services
revenue....... 18.5 18.0 19.1 11.7 18.1 18.5 20.8 21.1 22.0 22.3
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total cost
of
revenue... 32.9 34.0 31.6 24.5 30.3 29.6 28.6 29.2 32.0 31.1
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Gross margin...... 67.1 66.0 68.4 75.5 69.7 70.4 71.4 70.8 68.0 68.9
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Operating
expenses:
Research and
development... 14.7 14.7 16.1 11.0 8.8 10.2 9.9 7.9 7.9 9.5
Sales and
marketing..... 26.0 34.3 40.6 35.7 31.1 45.6 40.5 34.5 38.2 37.7
General and
administrative... 15.9 12.3 15.7 9.2 13.2 11.9 11.4 16.4 13.9 12.9
Non-recurring
charge........ -- -- -- -- -- -- -- 20.5 -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total
operating
expenses... 56.6 61.3 72.4 55.9 53.1 67.7 61.8 79.3 60.0 60.1
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss) from
operations...... 10.5 4.7 (4.0) 19.6 16.6 2.7 9.6 (8.5) 8.0 8.8
Other income,
net............. 0.0 0.8 1.4 0.8 0.9 1.1 0.9 0.8 0.9 1.1
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income (loss)
before provision
for income
taxes........... 10.5 5.5 (2.6) 20.4 17.5 3.8 10.5 (7.7) 8.9 9.9
Provision for
income taxes.... 3.8 1.9 (0.9) 7.3 7.0 1.5 4.2 (3.0) 4.3 4.0
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net income
(loss).......... 6.7% 3.6% (1.7)% 13.1% 10.5% 2.3% 6.3% (4.7)% 4.6% 5.9%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
21
<PAGE> 26
The Company's results of operations have been, and may in the future be,
subject to significant quarterly fluctuations, due to a variety of factors,
including the relatively lengthy sales cycle for the Company's products, the
relatively large size of a typical product sale, the timing of contracts, the
introduction of new products by the Company or its competitors, capital spending
patterns of customers, the Company's sales incentive strategy and general
economic conditions. These uncertainties make the estimation of revenues and
results of operations on a quarterly basis difficult and increase the potential
margin for error in performance forecasts derived from such estimates. As a
result, the Company believes that period-to-period comparisons of its results of
operations are not necessarily meaningful and should not be relied upon as any
indication of future performance.
Product revenue is difficult to forecast quarter to quarter, as no
significant backlog exists at the end of any quarter. Revenues are substantially
dependent on deliveries related to new contracts executed in that quarter.
Additionally, a significant portion of the Company's revenue in a quarter is
typically received in the last few weeks of that quarter. Historically, revenue
in the first fiscal quarter has been lower than in the preceding fourth fiscal
quarter (which typically has the highest revenue and net income), due largely to
sales incentive programs focused on annual sales goals. Management believes that
this trend may continue.
A substantial portion of the Company's operating expenses is related to
personnel, facilities and marketing programs. The level of spending for such
expenses cannot be adjusted quickly and is, therefore, relatively fixed in the
short term. The Company's expense levels are based on expectations of future
revenue. If actual revenue levels on a quarterly basis are below management's
expectations, results of operations are likely to be disproportionately
adversely affected.
LIQUIDITY AND CAPITAL RESOURCES
Since its inception, the Company has primarily financed its operations and
capital expenditures through internally generated cash flow and $3,233,549 of
net proceeds from the issuance of Convertible Preferred Stock in January 1994.
The Company generated cash from operations of $1,744,545 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 the products' flexible skills management and
search capabilities, the products are also licensed by consulting firms and
providers of full-time, contract or temporary labor. Twenty-eight of the 50 most
profitable U.S. companies cited in Fortune magazine's 1996 "Fortune 1000" report
use the Company's software. The Company's customer base includes
Hewlett-Packard, American Express, British Telecom, AT&T, Intel, Johnson &
Johnson and Levi Strauss.
INDUSTRY BACKGROUND
The management of human capital is increasingly being viewed as a business
imperative and has emerged in recent years as a key element of corporate
strategy. Recruiting and deploying the most qualified employees is now being
recognized as critical to an organization's long-term success. In addition,
intensifying global competition, shortened product lifecycles and the need to
improve operating efficiencies have caused organizations to search for more
efficient ways to employ and deploy a more dynamic and skilled workforce. As a
result, HR departments have come under pressure to improve the quality of the
candidates they hire, to shorten the time to fill open positions and to reduce
the costs associated with staffing.
Historically, the recruitment, hiring and deployment of an organization's
workforce has been an inefficient, expensive and time-consuming process.
Industry sources estimate that the average cost to hire a salaried exempt
employee from outside the company in 1994 was $8,566 and ranged as high as
$15,766 in skilled industries such as electronics. In recent years, the average
company hired approximately 14% of its workforce externally and redeployed
approximately 7% of its internal workforce annually. The complexities and
inefficiencies inherent in the hiring process have resulted in a plethora of
recruiting and employment agencies charging fees representing as much as 30% of
an employee's starting annual salary, contributing to the hiring costs described
above. Despite the widespread use of such agencies, in 1994, companies took an
average of 41 days to hire an employee and approximately 26% of employees were
out of the job within one year of joining the company. The inefficiencies and
costs associated with the hiring process are particularly acute problems for
large organizations with 1,000 or more employees, of which there are estimated
to be more than 15,000 in the United States.
24
<PAGE> 29
These costs and inefficiencies are due in large part to the difficulty that
organizations have in managing data on workers' skills and to a complex staffing
process which typically involves significant data collection, numerous manual
functions and the coordination of activities among many participants both within
and outside the organization. Organizations need to collect and manage extensive
skills data on their own employees as well as an even larger applicant pool in
order to manage hiring, redeployment, attrition, turnover and growth.
Historically, organizations seeking to fill a position would receive numerous
applications and resumes that were, once the position had been filled, either
discarded or stored in a manner that did not allow the organization to
effectively access and search this data when it sought to fill additional
positions in the future.
The typical staffing process is initiated by a hiring manager who fills out
a job requisition form to define the job's skill requirements, duties, pay and
other parameters. Copies of the requisition are routed to finance and accounting
and a compensation specialist for budget and salary approvals. An internal
recruiter then generates applicants through job advertising, requiring the
coordination of recruitment advertising firms, employment agencies, outplacement
companies and college placement offices. Recruiters must read and categorize
incoming resumes and, with the aid of administrators, copy, file and distribute
the appropriate resumes to managers. Follow-up letters are typically sent to
applicants. Recruiters and administrators then coordinate and track the
selection process with the applicants, hiring manager and an interviewing team.
This process typically requires the completion of multiple forms for interview
scheduling, skills assessment and feedback, reference checking, testing, equal
opportunity compliance and job offers and may involve the coordination of
outside suppliers for credit checking, testing and assessment and relocation.
Each division within an organization may have its own staffing process,
resulting in further inefficiencies and complicating the creation of
consolidated governmental compliance and management reports.
In order to address the challenges of hiring and deploying workers, HR
departments have begun to automate the staffing process. Until recently, the
only staffing software applications available were applicant tracking systems,
which were primarily designed to perform record-keeping functions and did not
offer automated workflow or resume searching capabilities. These applicant
tracking applications traditionally operated on centralized mainframe or
mini-computer systems, although such applications today are also being deployed
with client/server-based human resource information systems. These applications,
however, are ill-suited for capturing and managing the vast amount, variety and
diverse formatting of skills, experience and education information supplied by
candidates. Coding this information is generally a manual process which is
cumbersome, time-consuming and costly. Moreover, because the candidate
information is recorded in an oversimplified format, searches of this
information typically yield results which are poorly matched with the need. 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 has 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 enabling more effective skills management and worker
deployment. The Company's software provides HR departments with client/server
solutions to quickly and efficiently build and search comprehensive electronic
pools of resume skills data to
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find the workers they need, while also managing the workflow of the staffing
process. Key attributes of the Restrac solution are as follows:
Sophisticated Skills Management and Selection. The Company's software uses
a sophisticated search process to rapidly identify and rank qualified candidates
based on skills criteria determined by the user. User searches are enhanced by
the Company's integrated skills library, which translates high-level job
requirements into the words and synonyms commonly used by candidates on resumes.
These same capabilities facilitate the quick and efficient management and
redeployment of an organization's existing workforce in response to job
openings, downsizings and restructurings.
More Efficient Staffing Process. The Company's software incorporates a
user-friendly, process-oriented GUI and is designed to reduce the time required
to fill positions by prompting users to advance candidates through the staffing
process. Such automatic workflow notifications reduce delays typical to the
staffing process and eliminate redundancies. The Company's software also
integrates with e-mail and interactive voice response technologies to facilitate
access to and participation in the staffing process. The Company's software can
be easily adapted by the customer to its own staffing requirements without
extensive customization. In addition, the Company's software eliminates the time
and expense associated with maintaining multiple parallel databases to track
different aspects of the staffing process.
Comprehensive, Reusable Candidate Pools. The Company's software uses
resume scanning and integrated e-mail input from Intranets or the Internet to
create consolidated, reusable candidate pools that can be shared throughout the
organization. Manual input is virtually eliminated, allowing organizations to
collect and store skills and experience data on hundreds of thousands of
candidates. The Company's software is designed to provide a shared, re-useable
pool of candidates, limiting the need for organizations to use employment
agencies and advertising to source candidates.
Open, Rapidly Deployable and Scalable Technology. The Company's software
is based on an open, client/server architecture that supports industry
standards, such as Microsoft Windows and most leading relational databases,
server platforms, e-mail systems and desktop productivity tools. The
implementation cycle for the Company's software, including hardware
implementation and basic process reengineering, is typically less than three
months. The Company's software is scalable from the departmental level to
multi-site, enterprise-wide implementations and is designed to easily
incorporate new technologies as they become available.
Reduced Costs. By providing an easily-accessible, shared, re-useable pool
of candidates, the Company's software allows organizations to significantly
reduce recruitment advertising costs and employment agency fees. In addition,
the Company's software is designed to reduce HR headcount and increase recruiter
productivity through the elimination of manual entry of resume information and
by increasing the efficiency of the hiring process.
STRATEGY
The Company's objective is to become the leading provider of human resource
staffing software. To achieve this objective, the Company has adopted the
following strategies:
Expand Presence in Principal Markets. The Company's Restrac Hire product
has achieved a leading market position among large organizations (1,000+
employees), which are estimated to represent over 15,000 companies in the United
States alone. The Company believes that only a small portion of such larger
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 additional
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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 optical character recognition
(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 Company's implementation cycle is
typically less than three months, including hardware implementation and basic
process reengineering.
Training and Education. The Training and Education Group, which was
comprised of 10 people as of April 30, 1996, provides basic and advanced
training both on-site during system implementation and at the Company's
Corporate Training Center throughout the year.
Technical Support. The Technical Support Group, which was comprised of 11
people as of April 30, 1996, provides daily assistance to customers with
maintenance agreements through the Company's support help line. Approximately
98% of customers who have purchased the Company's client/server, Windows-based
products since their introduction are currently under maintenance agreements.
The Company provides support Monday through Friday from 8:00 a.m.-8:30 p.m.
Eastern Time as well as 4:00 a.m.-8:00 a.m. Eastern Time to support the
Company's European customers.
TECHNOLOGY
In 1993, the Company introduced Restrac Hire, the industry's first
Windows-based client/server staffing system. The Company's Restrac Hire software
is based on the Company's unique client/server development platform, which can
accommodate changing customer needs and technical infrastructure, simplify the
deployment of the Company's client/server software, and enable the rapid
integration of leading edge technologies and other innovations. Key aspects of
the Company's development platform are as follows:
Development Toolset. The Company's development platform includes a unique
application toolset which allows it to create and change its interfaces through
high level "screen painting" rather than low level programming. This toolset
also accommodates the creation and editing of business and workflow rules.
Applications developed with the Company's toolset inherit its full
functionality, including features critical to sophisticated, mission-critical,
enterprise-wide applications. The Company also includes in its software a
scaled-down version of the Company's application development tool, which allows
customers to make interface changes to accommodate their specific staffing
processes without compromising the integrity of the system.
Data Model. The Company's software includes an open, flexible and
extensible model for enterprise staffing that can operate in multiple standard
SQL databases. The model incorporates the Company's expertise in staffing
process modeling and allows for effective workflow and third-party integration.
Centralized Administration and Security. The Company's development
platform includes functionality for application deployment and version control,
reducing costs through centralized management by allowing the application to be
configured and updated automatically from a central location. The Company's
products also include security features to control user access. Access to
information and functionality is configured based on the user's login, allowing
users to access their recruiting desktop from anywhere in the system and further
securing against unauthorized access.
Support for Heterogeneous Computing Environments. The Company's
development platform is designed to enable applications developed on the
platform to operate in diverse computing environments. The platform supports
Microsoft Windows on the client as well as most leading relational databases
(including Oracle, Microsoft SQLServer and Sybase) and server platforms
(including Windows NT and many UNIX variants). The Company's products use the
industry-standard TCP/IP protocol, which allows the Company to develop
applications which operate over local area networks, wide area networks,
Intranets and the Internet.
Advanced Technology Integration. The Company has designed its development
platform to facilitate the integration of advanced technologies while insulating
the user from the complexities associated with multiple interfaces,
import/export utilities and switching between different applications. The
Company's products take advantage of Verity's text search software, TASC's
imaging technology and Caere's OCR technology.
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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. The Company's sales force is structured regionally and
includes three area directors -- two domestic and one international. The sales
staff is managed through sales and service offices in Dedham, Massachusetts,
Palo Alto, California and Reading, England and through sales personnel located
in Sacramento, California, Chicago, Illinois, Dallas, Texas, Flemington, New
Jersey and Atlanta, Georgia. As of April 30, 1996, the Company's sales and
marketing organization consisted of 39 employees, including 11 sales
representatives.
Restrac seeks to build goodwill with its customers by playing an active
role in its user community. Since 1994, the Company has hosted an annual Users
Conference, a three-day event that provides an environment of extensive learning
and peer networking. In addition, five user-hosted conferences are conducted
annually, organized regionally into East, South, Midwest, West and UK user
groups. The Company recently formed a Client Advisory Board to further guide
product strategy.
CUSTOMERS
Since the introduction of Restrac Hire in 1993, the Company has licensed
its client/server, Windows-based staffing software to approximately 200
customers. Approximately 250 other organizations continue to
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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.
The following is a partial listing of the Company's customers as of April
30, 1996:
FINANCIAL SERVICES
American Express
Bank of America
Banc One
Fleet Bank
Merrill Lynch
M&T Bank
Union Bank
INSURANCE
Aetna Life and Casualty
Blue Cross/Blue Shield
Cigna
John Hancock
Nationwide
Occidental Insurance
Phoenix Home Life
Prudential
PUBLISHING/ENTERTAINMENT
Blockbuster Entertainment
Conde Nast Publications
Gannett
Paramount Pictures
The Washington Post
TECHNOLOGY/COMMUNICATIONS
AT&T
Amdahl
British Telecom
Cellular One
Cray Computers
EMC
Genentech
Hewlett-Packard
Lucent Technologies
Lockheed
Oracle
Sequent Computers
Stratus Computers
Vanstar
ENGINEERING/CONSULTING
Brown & Root
CH2M Hill
Logica
Mason & Hanger
Modern Engineering
HEALTHCARE/PHARMACEUTICALS
Abbott Laboratories
Baxter International
Bristol Myers Squibb
Johnson & Johnson
The Mayo Clinic
Memorial Sloan Kettering
PacifiCare
SmithKline Beecham
CONSUMER
Anheuser-Busch
Canadian Tire
Cargill
Delco
Levi Strauss
Mattel Toys
Overnite Transportation
Reebok
Starbucks
the good guys!
Toys R' Us
Examples of how the Company's customers have used Restrac software
successfully to address their needs are described below. The benefits achieved
by these customers will not necessarily be achieved by every customer.
Overnite Transportation, a Union-Pacific company, employs 15,000 workers in
44 states. Overnite's decentralized organizational structure and reliance on
paper-based recruiting resulted in multiple redundant staffing efforts being
conducted in different offices. Prior to implementing the Company's products,
managers in the field would often initiate a new recruitment effort every time a
position opened, incurring advertising, agency and administrative expenses that
could have been avoided. Overnite implemented Restrac Hire at its corporate
office in 1994. Since then, Overnite has streamlined its recruiting process,
reduced advertising and relocation expenses by 20%, eliminated manual tabulation
of government reporting data and cut agency fees by 80%, reporting annual
savings of $300,000 per year.
Amdahl Corporation, a provider of hardware/software solutions and
consulting services to help organizations achieve productivity improvements in
information technology, employs more than 8,000 people worldwide. Amdahl's
growing consulting business places demand on staffing to find specialized
skills. In addition, a recent acquisition will add 2,000 employees to its
current employee base. Amdahl replaced its previous resume scanning system with
Restrac Hire in 1995, and has linked the Restrac product to its information
systems infrastructure to allow for greater productivity and to assist in the
integration of the additional employees.
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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 an 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, 49 in client services and
21 in corporate operations. The Company's employees are not represented by any
collective bargaining organizations, and the Company has never experienced any
work stoppages. The Company considers its relations with its employees to be
good.
FACILITIES
The Company's corporate headquarters are located in Dedham, Massachusetts,
where it currently occupies approximately 24,000 square feet of office space
under a lease expiring in December 1996. The Company expects that additional
space will be available when needed by the Company. The Company has regional
sales and service offices on the West Coast and in the United Kingdom. The
Company occupies approximately 2,200 square feet of office space in Palo Alto,
California under a lease expiring in September 1997 and 400 square feet of
office space in Reading, England under a lease expiring in October 1996. The
Company also leases office space for its sales representatives in Chicago and
Dallas.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company, their ages and their
positions with the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------------ --- ------------------------------------------
<S> <C> <C>
Lars D. Perkins........................... 36 President, Chief Executive Officer and
Chairman of the Board
Michael L. Amato.......................... 38 Vice President of Client Services
Charles A. Borwick........................ 33 Vice President of Marketing
Raymond M. Desrochers..................... 28 Vice President of Product Development and
Quality
Cynthia G. Eades.......................... 39 Chief Financial Officer, Vice President of
Finance and Treasurer
Martin J. Fahey........................... 42 Vice President and Chief Operating Officer
Thomas J. McCarthy III.................... 33 Vice President of Sales
Rachael T. Shanahan....................... 29 Vice President of Business Development,
General Counsel and Secretary
Russell J. Campanello(1)(2)............... 40 Director
J. Paul Costello.......................... 57 Director
A. Bruce Johnston(1)(2)................... 36 Director
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Lars D. Perkins, co-founder of the Company, has served as President, Chief
Executive Officer and Chairman of the Board of the Company since 1986. Prior to
such time, he was the Company's Vice President. Prior to founding the Company,
Mr. Perkins held sales and hardware and software engineering positions with
several local companies.
Michael L. Amato has been the Company's Vice President of Client Services
since November 1994. From November 1988 to October 1994, Mr. Amato was Area
Manager for the Northeast Region of Innovative Information Systems, Inc., a
client/server systems integration company.
Charles A. Borwick was elected Vice President of Marketing of the Company
in October 1995. From August 1993 to September 1995, Mr. Borwick served as the
Company's Vice President of Business Development; from June 1992 to July 1993,
he served as its Vice President of Client Services; and from January 1991 to May
1992, he served as Vice President of the Company's SuccessPlan product line.
Prior to joining the Company, Mr. Borwick co-founded Borwick International,
Inc., an international consulting firm. At Borwick International, Mr. Borwick
headed the human resource planning software division, where he directed sales,
marketing and operations.
Raymond M. Desrochers was elected to the position of Vice President of
Product Development and Quality of the Company in October 1995. From April 1995
to October 1995, he served as the Company's Director of Product Development and
from October 1994 to March 1995, he served as the Company's Manager of Software
Development. Mr. Desrochers was a senior software engineer for the Company from
July 1992 to September 1994. Prior to joining the Company in July 1992, he had
been Software Project Manager for New England Business Service, Inc., a company
that provides accounting software solutions to both small and medium-sized
businesses, from October 1991 to June 1992. In addition, Mr. Desrochers was
Software Development Manager for Multi Tasking Systems, Inc., a leasing software
provider, from September 1989 to September 1991.
Cynthia G. Eades joined the Company as Chief Financial Officer, Vice
President of Finance and Treasurer in December 1994. From February 1993 to
February 1994, she was Vice President and Chief
35
<PAGE> 40
Financial Officer of Virtual World Entertainment, a developer and operator of
virtual reality entertainment centers. Prior to such time, Ms. Eades was
employed by Dun & Bradstreet Software Services, Inc., a business applications
software company, as Controller from October 1991 to February 1993 and Director
of Finance from June 1990 to October 1991. Ms. Eades is a Certified Public
Accountant and was employed by Price Waterhouse from June 1978 to June 1990,
most recently as a Senior Manager in Audit and Accounting.
Martin J. Fahey joined the Company as Vice President and Chief Operating
Officer in May 1996. From January 1995 to May 1996, Mr. Fahey was an independent
consultant for a variety of software companies. From July 1991 to December 1994,
he was Chief Executive Officer of Vertigo Development, a multimedia company
which Mr. Fahey co-founded. Mr. Fahey was employed by Lotus Development
Corporation, a software company, from January 1983 to June 1991, most recently
as the Director of Spreadsheet Marketing.
Thomas J. McCarthy III joined the Company as Vice President of Sales in
February 1995. From October 1994 to January 1995, Mr. McCarthy was Vice
President and General Manager of Padcom Inc., a clinical studies software
company, where he was responsible for all North American operations. Prior to
joining Padcom, Mr. McCarthy had been employed by Software 2000, Inc., a
business applications software company, as a regional manager from May 1993 to
September 1994, a district manager from September 1992 to April 1993 and an
account executive from January 1992 to August 1992. Mr. McCarthy was an account
executive at Dun & Bradstreet Software Services, Inc., a business applications
software company, from December 1989 to December 1991.
Rachael T. Shanahan was elected Vice President of Business Development of
the Company in October 1995 and has served as the Company's Secretary since
January 1994 and its General Counsel since August 1993. Prior to such time, she
had been the Company's Contract Administrator/Legal Assistant since December
1990. Ms. Shanahan first joined the Company in 1988 as a systems specialist.
Russell J. Campanello was elected as a director of the Company in October
1994. He has been Vice President of Human Development and Organizational
Productivity at Industry.Net, a facilitator of electronic commerce on the
Internet, since February 1996. Prior to joining Industry.Net, Mr. Campanello
spent eight years as the Vice President of Human Resources of Lotus Development
Corporation.
J. Paul Costello co-founded the Company in 1982 with Lars D. Perkins and
has been a director of the Company since its founding. Mr. Costello has served
as President of J. Paul Costello Associates, Inc., a consulting company, since
1969 and of Costello & Company, Inc., a contract recruiting company, since 1979.
In December 1992, he also was named President of Corporate Staffing Center,
Inc., a provider of outsourced staffing services to large corporate clients. Mr.
Costello has been a human resource management consultant for over thirty years.
A. Bruce Johnston was elected as a director of the Company in January 1994.
Since January 1996, Mr. Johnston has been a Principal of TA Associates, Inc., a
private equity firm. From June 1992 to January 1996, Mr. Johnston was a Vice
President of TA Associates. Prior to such time, Mr. Johnston was a General
Manager of Lotus Development Corporation from June 1988 to June 1992. Mr.
Johnston also serves on the Boards of Directors of Expert Software, Inc. and
Trident International, Inc., both Nasdaq-traded public companies, as well as on
the Boards of Directors of several private companies.
BOARD OF DIRECTORS
Effective upon the closing of this offering, the Company's Board of
Directors will be divided into three classes, whose members will serve for
staggered three-year terms. The Board will be comprised of one Class I Director
(Mr. Campanello), one Class II Director (Mr. Johnston) and two Class III
Directors (Messrs. Perkins and Costello) whose initial terms will expire upon
the election and qualification of directors at the annual meetings of
stockholders to be held following fiscal 1996, 1997 and 1998, respectively. At
each annual meeting of stockholders, directors will be reelected or elected for
a full term of three years to succeed those directors whose terms are expiring.
36
<PAGE> 41
Each of Messrs. Perkins, Costello and Johnston has been nominated and
elected to the Board of Directors pursuant to a voting agreement among certain
stockholders of the Company. This agreement will terminate upon consummation of
this offering.
The Company has entered into Indemnity Agreements with its directors which
provide a contractual right to indemnification for certain expenses incurred by
such directors arising from suits brought against them in their capacities as
directors of the Company, to the extent permitted by Delaware law and the
Company's Certificate of Incorporation.
The Company's Board of Directors has established an Audit Committee (the
"Audit Committee") and a Compensation Committee (the "Compensation Committee").
The Audit Committee recommends the firm to be appointed as independent
accountants to audit the Company's financial statements and to perform services
related to the audit, reviews the scope and results of the audit with the
independent accountants, reviews with management and the independent accountants
the Company's year-end operating results and considers the adequacy of the
Company's internal accounting procedures. The Audit Committee consists of
Messrs. Campanello and Johnston. The Compensation Committee, which also consists
of Messrs. Campanello and Johnston, reviews and recommends the compensation
arrangements for all directors and officers and approves such arrangements for
other senior level employees. The Compensation Committee also administers and
takes such other action as may be required in connection with the incentive
plans of the Company, including the 1994 Stock Option Plan and the 1996 Stock
Option Plan.
DIRECTOR COMPENSATION
Prior to this offering, non-employee directors of the Company received an
annual directors' fee equal to 5% of the total compensation paid to the chief
executive officer of the Company for the period in question, which fee amounted
to $13,500 in fiscal 1995. Upon completion of this offering, non-employee
directors will receive $5,000 per year for services rendered as directors, plus
a per meeting fee of $1,000 for each directors' meeting attended in person after
the fifth meeting, up to a maximum additional amount of $5,000 per fiscal year.
In addition, all directors of the Company are reimbursed for travel expenses
incurred in attending meetings of the Board of Directors and its committees.
Each non-employee director will automatically receive an option to purchase
5,000 shares of Common Stock when such director is first elected to the Board of
Directors, with such option shares vesting proportionately over four years,
under the Company's 1996 Stock Option Plan. In addition, each non-employee
director will automatically receive an option to purchase 2,500 shares of Common
Stock on each October 1 that such director is a member of the Board of
Directors, with such option shares vesting proportionately over four years. All
option grants to non-employee directors will be at a per share exercise price
equal to the fair market value of the Common Stock at the time of grant. See
"Stock Option Plans."
EXECUTIVE COMPENSATION
The following table shows compensation paid to the Chief Executive Officer
and the other executive officers of the Company whose salary plus bonus exceeded
$100,000 for services rendered to the Company in all capacities during the
fiscal year ended September 30, 1995 (collectively, the "Named Executives").
37
<PAGE> 42
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM
COMPENSATION
------------
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
--------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(1) SALARY BONUS OPTIONS COMPENSATION
- ------------------------------------------- -------- -------- ------------ ------------
<S> <C> <C> <C> <C>
Lars D. Perkins............................ $135,000 $136,450 -- $5,135(2)
President and Chief Executive Officer
Michael L. Amato........................... 92,051(3) 21,810 35,460 596(4)
Vice President of Client Services
Charles A. Borwick......................... 104,582 41,945 70,875 984(4)
Vice President of Marketing
Cynthia G. Eades........................... 85,550(5) 28,606 53,190 383(4)
Chief Financial Officer
David G. Fisher(6)......................... 130,769 80,589 130,054(7) 8,305(8)
Vice President of Marketing
Thomas J. McCarthy III..................... 83,333(9) 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) 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 price of $113,799. Mr. Fisher's remaining option to
purchase 73,154 shares of Common Stock terminated in November 1995 following
his resignation from the Company.
(8) 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.
(9) 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
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
<TABLE>
<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 7.93% $0.44 10/31/04 $ 9,812 $ 24,866
Charles A. Borwick............ 70,875 15.86% 0.44 10/1/04 19,612 49,701
Cynthia G. Eades.............. 53,190 11.90% 0.44 12/12/04 14,718 37,299
David G. Fisher............... -- -- -- -- -- --
Thomas J. McCarthy III........ 70,920 15.87% 0.44 2/1/05 19,625 49,732
70,920 15.87% 2.00 9/15/05 89,202 226,056
</TABLE>
- ---------------
(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.
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
<TABLE>
<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............................. 53,190(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/ --
</TABLE>
- ---------------
(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. Mr. Fisher's remaining option to purchase 73,154 shares of
Common Stock terminated in November 1995.
39
<PAGE> 44
STOCK OPTION PLANS
Each of the 1994 Stock Option Plan and the 1996 Stock Option Plan permits
the grant of (i) options to purchase shares of Common Stock intended to qualify
as incentive stock options under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) options that do not so qualify and (iii)
shares of Common Stock. The 1994 Stock Option Plan and the 1996 Stock Option
Plan are designed and intended as a performance incentive for officers,
directors, employees, consultants and other key persons performing services for
the Company to encourage such persons to acquire or increase a proprietary
interest in the success of the Company. As of May 8, 1996, options to purchase
641,844 shares of Common Stock pursuant to the 1994 Stock Option Plan were
outstanding. No further option grants will be made under the 1994 Stock Option
Plan. Stock options granted under the 1994 Stock Option Plan are exercisable
upon grant, subject to the Company's right to repurchase, upon termination of
employment, shares of Common Stock issued upon exercise.
On May 8, 1996, the Board of Directors and stockholders of the Company
approved the adoption of the 1996 Stock Option Plan, which provides for the
issuance of options to purchase 958,156 shares of Common Stock. Under the 1996
Stock Option Plan, each non-employee director first joining the Board of
Directors in the future will automatically receive an option to purchase 5,000
shares of Common Stock when such director is first elected or appointed to the
Board of Directors, with option shares vesting proportionately over four years.
In addition, each non-employee director will automatically receive an option to
purchase 2,500 shares of Common Stock on each October 1 that such director is a
member of the Board of Directors, with option shares vesting proportionately
over four years. All option grants to non-employee directors will be at a per
share exercise price equal to the fair market value of the Common Stock at the
time of grant. The 1996 Stock Option Plan is administered by the Compensation
Committee as appointed by the Board of Directors from time to time.
EMPLOYEE STOCK PURCHASE PLAN
The Company's 1996 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 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
40
<PAGE> 45
directly relate to the Company's actual or proposed business; and (iii) requires
the executive officer to keep confidential, both during the term of employment
and for a defined period thereafter, all confidential or proprietary information
of the Company.
1996 MANAGEMENT INCENTIVE COMPENSATION PLANS
The Company's 1996 Management Incentive Compensation Plans allow senior
managers to receive up to 20% of annual salary in an annual bonus and other
managers to receive up to 15% of annual salary in an annual bonus, 50% of which
is based upon the achievement of individual goals and 50% of which is based upon
the Company's achievement of its annual financial goals. These plans do not
apply to sales personnel, who are covered by separate incentive plans.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to May 8, 1996, all matters concerning executive officer compensation
were addressed by a Compensation Committee comprised of Messrs. Costello and
Johnston. Since May 8, 1996, the Compensation Committee has been comprised of
Messrs. Campanello and Johnston. Neither Mr. Campanello nor Mr. Johnston is an
employee of the Company. Mr. Campanello has been a director of the Company since
October 1994. Mr. Johnston has been a director of the Company since January
1994.
CERTAIN TRANSACTIONS
Pursuant to the 1994 Financing Agreement, on January 5, 1994, the Company
sold 517,546 shares of Convertible Preferred Stock to investment funds
associated with TA Associates, Inc. (the "TA Investors"), 28,951 shares of
Convertible Preferred Stock to Chestnut III Limited Partnership ("CLP") and
9,658 shares of Convertible Preferred Stock to Chestnut Capital International
III Limited Partnership ("CCILP") (CLP and CCILP collectively, the "Chestnut
Investors"). The purchase price per share of Convertible Preferred Stock was
$6.30. Upon the closing of this offering, the shares of Convertible Preferred
Stock will convert into an aggregate of 2,502,696 shares of Common Stock as
provided by a formula set forth in the Company's Certificate of Incorporation.
Mr. Johnston, a director of the Company, is a Principal of TA Associates, Inc.,
the indirect general partner of each of the TA Investors other than TA Venture
Investors Limited Partnership. Mr. Johnston is a general partner of TA Venture
Investors Limited Partnership. Approximately $800,000 of the proceeds were used
by the Company to repurchase shares of Common Stock, including 225,000 shares
from Lars D. Perkins, the President and Chief Executive Officer of the Company,
and 225,000 shares from J. Paul Costello, a director of the Company, at a per
share price of $1.32.
For a description of certain registration rights held by the TA Investors
and the Chestnut Investors, see "Description of Capital Stock -- Registration
Rights."
On January 1, 1993, the Company entered into a License Agreement with
Costello & Company, Inc. ("Costello") pursuant to which the Company granted
Costello a fully-paid, perpetual license to use the Company's then current
software products and all replacement products developed and/or marketed by the
Company, with certain limited exceptions, and documentation thereto which is
part of the Company's standard offering to its customers. Pursuant to the terms
of the License Agreement, Costello does not acquire any rights of ownership in
the software or documentation and said software and documentation may only be
used by Costello and J. Paul Costello, his wife, children and any business
entity at least 51% owned by any of them, each of whom Costello may grant rights
to use the software. J. Paul Costello, the President and principal shareholder
of Costello, is a director of the Company.
On January 1, 1991, the Company purchased certain assets from Borwick
International, Inc., an international consulting firm, pursuant to that certain
Agreement for Purchase and Sale of Assets dated January 1, 1991 (the "Asset
Agreement"). The Asset Agreement contains a non-competition clause pursuant to
which the Company agreed not to sell software used for "succession planning"
anywhere outside of North 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.
41
<PAGE> 46
Pursuant to these two agreements, the Company agreed to pay (i) $550,951.77 to
Borwick International ($137,738 of which were paid by Borwick International to
Charles A. Borwick) 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 ($125,000 of which will be paid by Mr. Borwick to Charles A. Borwick)
over a three-year period in exchange for a five-year non-competition covenant
from Irving P. Borwick. The Finder's Fee and Non-Competition Agreement also
provides for the payment of a finder's fee to Mr. Borwick in the event that
certain entities purchase a license to certain Restrac software on or before
September 30, 1997. Irving P. Borwick is the father of Charles A. Borwick, the
Company's Vice President of Marketing. Charles A. Borwick is a consultant to
Borwick International.
The Company has adopted a policy that transactions between the Company and
its officers, directors or other affiliates shall be reviewed on an ongoing
basis and be submitted to the Audit Committee or other comparable body for
review where appropriate.
42
<PAGE> 47
PRINCIPAL AND SELLING STOCKHOLDERS
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.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO SHARES BENEFICIALLY
OWNED PRIOR TO BE SOLD OWNED AFTER
OFFERING(1) IN OFFERING OFFERING(1)
------------------------ ----------- --------------------------
NAME AND ADDRESS NUMBER PERCENT(2) NUMBER PERCENT(2)
- ------------------------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
TA Investors................... 2,328,956(3) 36.5% 360,134(4) 1,968,822(5) 25.0%
c/o TA Associates, Inc.
125 High Street
Boston, MA 02110
Chestnut Investors............. 173,740(6) 2.7% 26,866(7) 146,874(8) 1.9%
c/o MVP Ventures
45 Milk Street
Boston, MA 02109
Lars D. Perkins................ 1,445,816 22.7% 216,000 1,229,816 15.6%
J. Paul Costello............... 1,685,385(9) 26.4% 252,000 1,433,385(9) 18.2%
Russell J. Campanello.......... 11,250(10) * -- 11,250(10) *
A. Bruce Johnston.............. 4,307(11) * 665(12) 3,642(13) *
Michael L. Amato............... 53,190(14) * -- 53,190(14) *
Charles A. Borwick............. 355,444(15) 5.5% 136,000 219,444(15) 2.8%
Cynthia G. Eades............... 53,190(16) * -- 53,190(16) *
Martin J. Fahey................ 80,000(17) 1.2% -- 80,000(17) 1.0%
David G. Fisher................ -- -- -- -- --
Thomas J. McCarthy III......... 141,840(18) 2.2% -- 141,840(18) 1.8%
John P. Jopling................ 52,650 * 9,000 43,650 *
All directors and executive
officers as a group (11
persons)..................... 3,901,109(19) 56.9% 604,665 3,296,444(19) 39.5%
</TABLE>
- ---------------
* Represents less than 1% of the outstanding shares
(1) Each stockholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise indicated. In accordance with the
rules of the Securities and Exchange Commission, each stockholder is deemed
to beneficially own any shares subject to stock options which are currently
exercisable or which become exercisable within 60 days after May 8, 1996;
and any reference in these footnotes to shares subject to stock options
held by the person or entity in question refers to stock options which are
currently exercisable or which become exercisable within 60 days after May
8, 1996. The inclusion herein of shares listed as beneficially owned does
not constitute an admission of beneficial ownership.
(2) Number of shares deemed outstanding includes any shares subject to stock
options held by the person or entity in question that are currently
exercisable or exercisable within 60 days following May 8, 1996. Number of
shares deemed outstanding after this offering includes the additional
1,500,000 shares of Common Stock which are being offered by the Company
hereby.
(3) Includes 1,668,465 shares owned by Advent VII L.P., 344,439 shares owned by
Advent Atlantic and Pacific II L.P., 166,846 shares owned by Advent New
York L.P., 124,177 shares owned by Advent Industrial II L.P. and 25,029
shares owned by TA Venture Investors Limited Partnership. TA Associates,
Inc. acts as the indirect general partner of each of these entities and
certain of their affiliates, except for TA Venture Investors Limited
Partnership, and exercises sole investment and voting power
43
<PAGE> 48
with respect to such shares. Principals and employees of TA Associates,
Inc. (including A. Bruce Johnston) comprise the general partners of TA
Venture Investors Limited Partnership.
(4) Includes 258,000 shares to be sold by Advent VII L.P., 53,262 shares to be
sold by Advent Atlantic and Pacific II L.P., 25,800 shares to be sold by
Advent New York L.P., 19,202 shares to be sold by Advent Industrial II L.P.
and 3,870 shares to be sold by TA Venture Investors Limited Partnership.
(5) Includes 1,410,465 shares owned by Advent VII L.P., 291,177 shares owned by
Advent Atlantic and Pacific II L.P., 141,046 shares owned by Advent New
York L.P., 104,975 shares owned by Advent Industrial II L.P. and 21,159
shares owned by TA Venture Investors Limited Partnership.
(6) Includes 130,279 shares owned by Chestnut III Limited Partnership and
43,461 shares owned by Chestnut Capital International III Limited
Partnership. Messrs. Jonathan J. Fleming, Michael F. Schiavo, Peter A.
Schober and John G. Turner are the general partners of Chestnut III
Management Limited Partnership ("CMLP") and MVP Capital Limited Partnership
("MVP"). CMLP has voting and investment power to act for Chestnut III
Limited Partnership. MVP has voting and investment power to act for
Chestnut Capital International III Limited Partnership.
(7) Includes 20,145 shares to be sold by Chestnut III Limited Partnership and
6,721 shares to be sold by Chestnut Capital International III Limited
Partnership.
(8) Includes 110,134 shares owned by Chestnut III Limited Partnership and
36,740 shares owned by Chestnut Capital International III Limited
Partnership.
(9) Includes 403,164 shares of Common Stock beneficially owned by Joseph A.
Bartoloni and Paul D. Spiro as trustees of trusts for the benefit of Mr.
Costello's children, John P. Costello III and Brett Ann Costello. Mr.
Costello disclaims beneficial ownership of such shares.
(10) Represents 11,250 shares subject to options held by Mr. Campanello.
(11) Represents 4,307 shares of Common Stock beneficially owned by A. Bruce
Johnston through TA Venture Investors Limited Partnership, which are
included in the shares described in footnote (3) above as being owned by TA
Venture Investors Limited Partnership. Does not include any shares
beneficially owned by Advent VII L.P., Advent Atlantic and Pacific II L.P.,
Advent New York L.P. or Advent Industrial II L.P. or the remainder of the
shares described in footnote (3) above as being owned by TA Venture
Investors Limited Partnership, as to which Mr. Johnston disclaims
beneficial ownership.
(12) Represents 665 shares of Common Stock to be sold by TA Venture Investors
Limited Partnership which are included in footnote (4) above as being sold
by TA Venture Investors Limited Partnership.
(13) Represents 3,642 shares of Common Stock in which A. Bruce Johnston has a
pecuniary interest through TA Venture Investors Limited Partnership which
are included in footnote (5) above as being owned by TA Venture Investors
Limited Partnership.
(14) Represents 53,190 shares subject to options held by Mr. Amato.
(15) Includes 70,875 shares subject to options held by Mr. Borwick.
(16) Represents 53,190 shares subject to options held by Ms. Eades.
(17) Represents 80,000 shares subject to options held by Mr. Fahey.
(18) Represents 141,840 shares subject to options held by Mr. McCarthy.
(19) Includes 481,032 shares subject to options held by directors and executive
officers as a group.
44
<PAGE> 49
DESCRIPTION OF CAPITAL STOCK
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
The authorized capital stock of the Company upon completion of the offering
and the conversion of all of the Convertible Preferred Stock into Common Stock
will consist of 30,000,000 shares of Common Stock, of which 7,874,383 shares
will be outstanding, and 5,000,000 shares of undesignated preferred stock
issuable in series by the Board of Directors (the "Preferred Stock"), of which
no shares will be issued and outstanding. There were 17 stockholders of record
as of May 8, 1996. The following summary description of the capital stock of the
Company is qualified in its entirety by reference to the Company's Certificate
of Incorporation and Amended and Restated By-laws, copies of which are filed as
exhibits to the Registration Statement of which this Prospectus is a part. The
Certificate of Incorporation and the Amended and Restated By-laws have been
adopted by the stockholders and the Board of Directors of the Company.
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters
to be voted on by stockholders. Holders of Common Stock are not entitled to
cumulative voting rights. Therefore, the holders of a majority of the shares
voted in the election of directors can elect all of the directors then standing
for election, subject to the rights of the holders of Preferred Stock, if and
when issued. The holders of Common Stock have no preemptive or other
subscription rights.
The holders of Common Stock are entitled to receive such dividends, if any,
as may be declared from time to time by the Board of Directors from funds
legally available therefor, with each share of Common Stock sharing equally in
such dividends. The possible issuance of Preferred Stock with a preference over
Common Stock as to dividends could impact the dividend rights of holders of
Common Stock.
There are no redemption or sinking fund provisions with respect to the
Common Stock. All outstanding shares of Common Stock, including the shares
offered hereby, are, or will be upon completion of the offering, fully paid and
non-assessable.
The By-laws provide, subject to the rights of the holders of the Preferred
Stock, if and when issued, that the number of directors shall be fixed by the
Board of Directors. The directors, other than those who may be elected by the
holders of Preferred Stock, if and when issued, are divided into three classes,
as nearly equal in number as possible, with each class serving for a three-year
term, except with respect to the initial term of each class of directors which
shall be for the period described under "Management -- Board of Directors."
Subject to any rights of the holders of Preferred Stock, if and when issued, to
elect directors, and to remove any director whom the holders of any such stock
had the right to elect, any director of the Company may be removed from office
only with cause and by the affirmative vote of at least two-thirds of the total
votes which would be eligible to be cast by stockholders in the election of such
director.
UNDESIGNATED PREFERRED STOCK
The Board of Directors of the Company is authorized, without further action
of the stockholders of the Company, to issue up to 5,000,000 shares of Preferred
Stock in classes or series and to fix the designations, powers, preferences and
the relative, participating, optional or other special rights of the shares of
each series and any qualifications, limitations and restrictions thereon as set
forth in the Certificate of Incorporation. Any such Preferred Stock issued by
the Company may rank prior to the Common Stock as to dividend rights,
liquidation preference or both, may have full or limited voting rights and may
be convertible into shares of Common Stock.
The purpose of authorizing the Board of Directors to issue Preferred Stock
is, in part, to eliminate delays associated with a stockholder vote on specific
issuances. The issuance of Preferred Stock could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring or seeking to acquire, a significant portion of the outstanding
stock of the Company.
45
<PAGE> 50
CERTAIN PROVISIONS OF THE COMPANY'S CHARTER AND BY-LAWS
A number of provisions of the Company's Certificate of Incorporation and
By-laws concern matters of corporate governance and the rights of stockholders.
Certain of these provisions, as well as the ability of the Board of Directors to
issue shares of Preferred Stock and to set the voting rights, preferences and
other terms thereof, may be deemed to have an anti-takeover effect and may
discourage takeover attempts not first approved by the Board of Directors
(including takeovers which certain stockholders may deem to be in their best
interests). These provisions, together with the classified Board of Directors
and the ability of the Board of Directors to issue Preferred Stock without
further stockholder action, also could delay or frustrate the removal of
incumbent Directors or the assumption of control by stockholders, even if such
removal or assumption would be beneficial to stockholders of the Company. These
provisions also could discourage or make more difficult a merger, tender offer
or proxy contest, even if they could be favorable to the interests of
stockholders, and could potentially depress the market price of the Common Stock
and deprive stockholders of an opportunity to receive a premium for their
shares. The Board of Directors of the Company believes that these provisions are
appropriate to protect the interests of the Company and all of its stockholders.
The Board of Directors has no present plans to adopt any other measures or
devices which may be deemed to have an "anti-takeover effect."
Meetings of Stockholders. The Company's By-laws provide that a special
meeting of stockholders may be called only by the Board of Directors unless
otherwise required by law. The Company's By-laws provide that only those matters
set forth in the notice of the special meeting may be considered or acted upon
at that special meeting, unless otherwise provided by law. In addition, the
Company's By-laws set forth certain advance notice and informational
requirements and time limitations on any director nomination or any new business
which a stockholder wishes to propose for consideration at an annual meeting of
stockholders.
No Stockholder Action by Written Consent. The Certificate of Incorporation
provides that any action required or permitted to be taken by the stockholders
of the Company at an annual or special meeting of stockholders must be effected
at a duly called meeting and may not be taken or effected by a written consent
of stockholders in lieu thereof.
Indemnification and Limitation of Liability. The By-laws of the Company
provide that directors and officers of the Company shall be, and in the
discretion of the Board of Directors non-officer employees may be, indemnified
by the Company to the fullest extent authorized by Delaware law, as it now
exists or may in the future be amended, against all expenses and liabilities
reasonably incurred in connection with service for or on behalf of the Company.
The By-laws of the Company also provide that the right of directors and officers
to indemnification shall be a contract right and shall not be exclusive of any
other right now possessed or hereafter acquired under any by-law, agreement,
vote of stockholders or otherwise. The Certificate of Incorporation contains a
provision permitted by Delaware law that generally eliminates the personal
liability of directors for monetary damages for breaches of their fiduciary
duty, including breaches involving negligence or gross negligence in business
combinations, unless the director has breached his or her duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or a knowing
violation of law, paid a dividend or approved a stock repurchase in violation of
the Delaware General Corporation Law or obtained an improper personal benefit.
This provision does not alter a director's liability under the federal
securities laws. In addition, this provision does not affect the availability of
equitable remedies, such as an injunction or rescission, for breach of fiduciary
duty.
Amendment of the Certificate. The Certificate of Incorporation provides
that an amendment thereof must first be approved by a majority of the Board of
Directors and (with certain exceptions) thereafter approved by the holders of a
majority of the total votes eligible to be cast by holders of voting stock with
respect to such amendment or repeal; provided, however, that the affirmative
vote of 80% of the total votes eligible to be cast by holders of voting stock,
voting together as a single class, is required to amend the provisions described
above.
Amendment of By-laws. The Certificate of Incorporation provides that the
By-laws may be amended or repealed by the Board of Directors or by the
stockholders. Such action by the Board of Directors requires the affirmative
vote of a majority of the directors then in office. Such action by the
stockholders requires the
46
<PAGE> 51
affirmative vote of the holders of at least two-thirds of the total votes
eligible to be cast by holders of voting stock with respect to such amendment or
repeal at an annual meeting of stockholders or a special meeting called for such
purpose, unless the Board of Directors recommends that the stockholders approve
such amendment or repeal at such meeting, in which case such amendment or repeal
shall only require the affirmative vote of a majority of the total votes
eligible to be cast by holders of voting stock with respect to such amendment or
repeal.
STATUTORY BUSINESS COMBINATION PROVISION
Upon completion of the offering, the Company will be subject to the
provisions of Section 203 of the Delaware General Corporation Law ("Section
203"). Section 203 provides, with certain exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person or affiliate or associate of such person, who is an "interested
stockholder" for a period of three years from the date that such person became
an interested stockholder unless: (i) the transaction resulting in a person
becoming an interested stockholder, or the business combination, is approved by
the board of directors of the corporation before the person becomes an
interested stockholder, (ii) the interested stockholder acquired 85% or more of
the outstanding voting stock of the corporation in the same transaction that
makes it an interested stockholder (excluding shares owned by persons who are
both officers and directors of the corporation, and shares held by certain
employee stock ownership plans); or (iii) on or after the date the person
becomes an interested stockholder, the business combination is approved by the
corporation's board of directors and by the holders of at least 66% of the
corporation's outstanding voting stock at an annual or special meeting,
excluding shares owned by the interested stockholder. Under Section 203, an
"interested stockholder" is defined (with certain limited exceptions) as any
person that is (i) the owner of 15% or more of the outstanding voting stock of
the corporation or (ii) an affiliate or associate of the corporation that was
the owner of 15% or more of the outstanding voting stock of the corporation at
any time within the three-year period immediately prior to the date on which it
is sought to be determined whether such person is an interested stockholder. The
Board of Directors has agreed that Lars D. Perkins, J. Paul Costello and the TA
Investors, who would immediately after the offering be deemed to own 15% or more
of the Company's outstanding Common Stock, and their affiliates and associates
will not be considered "interested stockholders" for purposes of Section 203 and
that the provisions of Section 203 do not apply to transactions between the
Company and any of the above-referenced stockholders or their affiliates and
associates.
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or by-laws by action of
its stockholders to exempt itself from coverage, provided that such charter or
by-law amendment shall not become effective until 12 months after the date it is
adopted. Neither the Certificate of Incorporation nor the By-laws contains any
such exclusion.
REGISTRATION RIGHTS
Upon consummation of the offering, Lars D. Perkins, J. Paul Costello and
John P. Jopling (collectively the "Management Stockholders") and the TA
Investors and the Chestnut Investors (collectively the "Venture Investors") will
have "piggy-back" registration rights under the Securities Act pursuant to the
Registration Rights Agreement and the 1994 Financing Agreement, respectively. If
the Company proposes to effect certain registrations of its securities under the
Securities Act, such holders are entitled to notice of such registration and to
include their shares of Common Stock in such registration, subject to the right
of an underwriter participating in the offering to limit the number of shares
included in such registration. In addition, at any time at least six months
after the effective date of the Company's initial public offering, the Venture
Investors shall have the right to demand two registrations on Form S-1, but no
more than one in any consecutive twelve-month period. At such time as the
Company has qualified for use of Form S-3, the Venture Investors shall each have
the right to request an unlimited number of registrations on Form S-3, except
that the Company shall not be obligated to file and cause to become effective
more than one registration statement on Form S-3 in any one twelve-month period
or where the proposed aggregate offering price of the securities proposed to be
registered is less than $1,000,000. The Management Stockholders are entitled to
participate in any registration demanded by the Venture Investors, subject to
the right of an
47
<PAGE> 52
underwriter participating in the offering, or in certain circumstances the right
of the Venture Investors, to limit the ability of the Management Stockholders to
include their shares in the offering. All expenses relating to the filing of
such registration statements (other than the second demand registration on Form
S-1), excluding underwriting discounts and selling expenses relating to the
filing of such registration statements and in some instances the fees for
counsel for the Venture Investors and/or the Management Stockholders, will be
paid by the Company. Except to the extent the Selling Stockholders have
exercised their registration rights with respect to the shares of Common Stock
offered hereby, the holders of such registration rights have waived such rights
in connection with the offering and have also agreed with the Underwriters not
to exercise such rights with respect to any shares subject to the lock-up
restrictions described below for a period of 180 days following the date of this
Prospectus.
TRANSFER AGENT AND REGISTRAR
The Company has selected Fleet National Bank as the transfer agent and
registrar for the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offering, the Company will have a total of 7,874,383
shares of Common Stock outstanding. Of these shares, the 2,500,000 shares of
Common Stock offered hereby will be freely tradable without restriction or
registration under the Securities Act by persons other than "affiliates" of the
Company, as defined in the Securities Act, who would be required to sell under
Rule 144 under the Securities Act. The remaining 5,374,383 shares of Common
Stock outstanding will be "restricted securities" as that term is defined by
Rule 144 (the "Restricted Shares"). The Restricted Shares were issued and sold
by the Company in private transactions in reliance upon exemptions from
registration under the Securities Act.
Of the Restricted Shares, 186,480 shares will be eligible for sale in the
public market in reliance on Rule 144(k) immediately following the commencement
of this offering and 258,750 shares will be eligible for sale in the public
market in reliance on Rule 144(k) within one month of the commencement of this
offering; 415,230 of these shares are subject to the lock-up agreements
described below. An additional 4,825,584 Restricted Shares will be eligible for
sale in the public market pursuant to Rule 144 and Rule 701 under the Securities
Act beginning 90 days after the date of this Prospectus; all of these shares are
subject to the lock-up agreements described below. The remaining 103,569 shares
will become eligible for sale in the public market under Rule 144 at various
times; all of these shares are subject to the lock-up agreements described
below.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted securities
for at least two years (including the holding period of any prior owner except
an affiliate), including persons who may be deemed "affiliates" of the Company,
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of one percent of the number of shares of Common
Stock then outstanding (approximately 78,744 shares upon completion of the
offering) or the average weekly trading volume of the Common Stock during the
four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale provisions
and notice requirements, and to the availability of current public information
about the Company. In addition, a person who is not deemed to have been an
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least three
years (including the holding period of any prior owner except an affiliate),
would be entitled to sell such shares under Rule 144(k) without regard to the
requirements described above. Rule 144 also provides that affiliates who are
selling shares that are not Restricted Shares must nonetheless comply with the
same restrictions applicable to Restricted Shares with the exception of the
holding period requirement.
Rule 701 promulgated under the Securities Act provides that shares of
Common Stock acquired on the exercise of outstanding options may be resold by
persons other than affiliates, beginning 90 days after the date of this
Prospectus, subject only to the manner of sale provisions of Rule 144, and by
affiliates, beginning
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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."
49
<PAGE> 54
UNDERWRITING
The underwriters named below (the "Underwriters"), represented by
Montgomery Securities, Wessels, Arnold & Henderson, L.L.C. and Adams, Harkness &
Hill, Inc. (the "Representatives"), have severally agreed, subject to the terms
and conditions set forth in the Underwriting Agreement, to purchase from the
Company and the Selling Stockholders the number of shares of Common Stock
indicated below opposite their respective names at the initial public offering
price less the underwriting discount set forth on the cover page of this
Prospectus. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters are committed to purchase all of such shares, if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------------------------------------- ----------
<S> <C>
Montgomery Securities.....................................................
Wessels, Arnold & Henderson, L.L.C........................................
Adams, Harkness & Hill, Inc...............................................
---------
Total........................................................... 2,500,000
=========
</TABLE>
The Representatives have advised the Company and the Selling Stockholders
that the Underwriters initially propose to offer the Common Stock to the public
on the terms set forth on the cover page of this Prospectus. The Underwriters
may allow to selected dealers a concession of not more than $ per
share; and the Underwriters may allow, and such dealers may reallow, a
concession of not more than $ per share to certain other dealers. After
the initial public offering, the offering price and other selling terms may be
changed by the Representatives. The Common Stock is offered subject to receipt
and acceptance by the Underwriters, and to certain other conditions, including
the right to reject orders in whole or in part.
Certain of the Selling Stockholders have granted an option to the
Underwriters, exercisable during the 30-day period after the date of this
Prospectus, to purchase up to a maximum of 375,000 additional shares of Common
Stock to cover over-allotments, if any, at the same price per share as the
initial 2,500,000 shares to be purchased by the Underwriters. To the extent that
the Underwriters exercise this option, each of the Underwriters will be
committed, subject to certain conditions, to purchase such additional shares in
approximately the same proportion as set forth in the above table. The
Underwriters may purchase such shares only to cover over-allotments made in
connection with this offering.
Each director and officer of the Company, the Selling Stockholders and
certain other holders of Common Stock prior to this offering have agreed,
subject to certain limited exceptions, not to sell or offer to sell or otherwise
dispose of any shares of Common Stock currently held by them, any right to
acquire any shares of Common Stock or any securities exercisable for or
convertible into any shares of Common Stock for a period of 180 days after the
date of this Prospectus without the prior written consent of Montgomery
Securities. Montgomery Securities may, in its sole discretion and at any time
without notice, release all or any portion of the securities subject to these
lock-up agreements. In addition, the Company has agreed that for a period of 180
days after the date of this Prospectus it will not, without the prior written
consent of Montgomery Securities, issue, offer, sell, grant options to purchase
or otherwise dispose of any equity securities or securities convertible into or
exchangeable for equity securities except for shares of Common Stock offered
hereby and shares issued pursuant to the 1994 Stock Option Plan, the 1996 Stock
Option Plan and the Employee Stock Purchase Plan. See "Management -- Stock
Option Plans" and "-- Employee Stock Purchase Plan."
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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.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<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.
BALANCE SHEETS
<TABLE>
<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.
STATEMENTS OF INCOME
<TABLE>
<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.
STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
(NOTE 6)
<TABLE>
<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.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
-------------------------------------- ------------------------
1993 1994 1995 1995 1996
--------- ---------- ----------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income.............................. $ 89,444 $ 605,708 $ 400,807 $ 387,136 $ 526,670
Adjustments to reconcile net income to
net cash provided by operating
activities --
Depreciation and amortization......... 214,849 243,948 430,597 159,044 491,171
Deferred income taxes, net............ (53,000) (153,669) (448,000) (96,759) (117,577)
Amortization of deferred compensation
expense............................. 20,267 11,336 -- -- --
Loss on disposal of property and
equipment........................... 7,333 -- 9,061 11,219 --
Deferred rent......................... 86,364 23,124 (64,329) (50,659) (29,522)
Changes in assets and liabilities --
Accounts receivable................. (473,956) (885,961) (1,332,989) (222,788) 412,262
Prepaid expenses and other current
assets........................... (162,354) 66,425 (297,180) (41,452) 75,120
Accounts payable.................... 178,680 118,502 45,582 503,340 58,329
Accrued expenses.................... 275,889 251,088 1,474,914 276,649 246,403
Accrued taxes....................... (6,187) 507,118 (334,148) (466,941) (31,902)
Deferred revenue.................... 398,911 (108,680) 1,529,779 450,660 143,591
--------- ---------- ----------- ---------- ----------
Net cash provided by operating
activities..................... 576,240 678,939 1,414,094 909,449 1,744,545
--------- ---------- ----------- ---------- ----------
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 work
force. 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 comprehensible "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 postdelivery obligations 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 the then current product
releases required
F-7
<PAGE> 63
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
extensive customization subsequent to delivery. Software license fees for fiscal
1994 include $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 service 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
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:
<TABLE>
<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
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.
Future minimum rental payments as of March 31, 1996 under both the
operating and capital leases are as follows:
<TABLE>
<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 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, 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 nonrecurring 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 1994, dividends of $146,871 were declared and paid; no
dividends were either declared or paid in 1995 and 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 which 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 641,884 shares of
common stock. The Company has reserved 641,884 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.
Stock option activity for the 1990 Plan and 1994 Plan were as follows:
<TABLE>
<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................................................. 494,446 0.44
-------- ----------
Outstanding, September 30, 1994........................... 494,446 0.44
Granted................................................. 302,001 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 (the "Code"), (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
The provision for income taxes in the accompanying statements of income
consists of the following for the years ended September 30, 1993, 1994 and 1995:
<TABLE>
<CAPTION>
1993 1994 1995
-------- --------- ---------
<S> <C> <C> <C>
Current --
Federal........................................ $123,811 $ 378,475 $ 541,200
State.......................................... 35,606 114,029 181,100
-------- --------- ---------
159,417 492,504 722,300
-------- --------- ---------
Deferred --
Federal........................................ (9,000) (117,417) (354,250)
State.......................................... (44,000) (36,252) (93,750)
-------- --------- ---------
(53,000) (153,669) (448,000)
-------- --------- ---------
Total provision........................ $106,417 $ 338,835 $ 274,300
======== ========= =========
</TABLE>
F-14
<PAGE> 70
RESTRAC, INC.
NOTES TO FINANCIAL STATEMENTS
(INCLUDING DATA APPLICABLE TO UNAUDITED PERIODS -- CONTINUED)
The deferred tax amounts as of September 30, 1994 and 1995 are as follows:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Deferred tax asset --
Current --
Nondeductible reserves.................................... $154,119 $197,254
Deferred revenue.......................................... 399,000 521,000
-------- --------
553,119 718,254
-------- --------
Long-term --
Buyout of distribution rights............................. -- 188,000
Nondeductible reserves.................................... 8,000 30,000
-------- --------
8,000 218,000
-------- --------
Total gross deferred tax asset....................... 561,119 936,254
-------- --------
Less -- Valuation allowance.................................. 258,550 171,672
-------- --------
Net deferred tax asset............................... $302,569 $764,582
======== ========
Deferred tax liability --
Long-term --
Differences between book and tax depreciation............. $ 53,777 $ 63,777
======== ========
</TABLE>
Due to the uncertainty surrounding the realizability of the benefits of its
favorable tax attributes in future tax returns, the Company has placed a
valuation allowance of approximately $259,000 and $172,000 against its otherwise
recognizable net deferred tax asset at September 30, 1994 and 1995,
respectively.
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Provision at federal statutory rate............................ 34.0% 34.0% 34.0%
State income tax, net of federal benefit....................... 6.3 6.3 6.3
Other, net..................................................... 14.0 (4.4) .3
---- ---- ----
Effective tax rate................................... 54.3% 35.9% 40.6%
==== ==== ====
</TABLE>
For the six months ended March 31, 1995 and 1996, the Company provided for
income taxes at an effective rate of 40.1% and 43.8%, respectively.
(8) EMPLOYEE BENEFIT PLAN
The Company maintains an employee benefit plan (the Benefit Plan) under
Section 401(k) of the Internal Revenue Code. The Benefit Plan is available to
all full-time U.S. employees. The Benefit Plan allows for employees to make
contributions up to a specified percentage of their compensation. Under the
Benefit Plan, the Company makes discretionary contributions, which for the
fiscal years ended 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
Accrued expenses at September 30, 1994 and 1995 and at March 31, 1996
consist of the following:
<TABLE>
<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
Other income consists of the following:
<TABLE>
<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 OF CONTENTS
-----------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 5
Use of Proceeds....................... 11
Dividend Policy....................... 11
Capitalization........................ 12
Dilution.............................. 13
Selected Financial Data............... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 15
Business.............................. 24
Management............................ 35
Certain Transactions.................. 41
Principal and Selling Stockholders.... 43
Description of Capital Stock.......... 45
Shares Eligible for Future Sale....... 48
Underwriting.......................... 50
Legal Matters......................... 51
Experts............................... 51
Additional Information................ 51
Index to Financial Statements......... F-1
</TABLE>
--------------------------------
Until , 1996 (25 days after the date of this Prospectus), all
dealers effecting transactions in the Common Stock, whether or not participating
in this distribution, may be required to deliver a Prospectus. This is in
addition to the obligation of dealers to deliver a Prospectus when acting as
Underwriters and with respect to their unsold allotments or subscriptions.
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
2,500,000 SHARES
LOGO
COMMON STOCK
-----------------------------
PROSPECTUS
-----------------------------
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON
ADAMS, HARKNESS & HILL, INC.
, 1996
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 73
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
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:
<TABLE>
<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.
(a) Exhibits. The following is a complete list of Exhibits filed as part of
this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<C> <S>
1 Form of Underwriting Agreement among the Underwriters named therein and the
Company
3.1 Form of First Amended and Restated Certificate of Incorporation of the Company
3.2 Form of Second Amended and Restated Certificate of Incorporation of the Company
3.3 Amended and Restated By-laws of the Company
* 4.1 Specimen certificate for shares of Common Stock, $.01 par value, of the Company
* 5 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the shares of the
Company's Common Stock
10.1 Stock Purchase Agreement dated January 5, 1994, as amended, by and between the
Company and the Purchasers identified therein
10.2 Stock Redemption Agreement dated January 5, 1994 between the Company and J. Paul
Costello, Lars D. Perkins and John P. Jopling
10.3 Registration Rights Agreement dated January 5, 1994 between the Company and Lars
D. Perkins, J. Paul Costello and John P. Jopling
* 10.4 Restrac, Inc. 1994 Stock Option Plan
* 10.5 Restrac, Inc. 1996 Stock Option and Grant Plan
10.6 Restrac, Inc. 1996 Employee Stock Purchase Plan
10.7 Paid-up Software License dated as of January 1, 1993 by and between the Company
and Costello and Company, Inc.
+10.8 VAR Agreement dated November 27, 1991 between the Company and Verity, Inc. and all
amendments thereto
+10.9 Value Added Reseller License Agreement dated August 31, 1992 by and between
The Analytic Sciences Corporation and the Company
+10.10 Joint Marketing Agreement with Referral Fee Payments dated as of October 1, 1994
between the Company and PeopleSoft, Inc.
11.1 Statement regarding computation of earnings per share
</TABLE>
II-3
<PAGE> 76
<TABLE>
<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 filed)
27 Financial Data Schedule
</TABLE>
- ---------------
* To be filed by amendment.
+ Confidential treatment requested as to portions of this document.
(b) Financial Statement Schedules.
<TABLE>
<CAPTION>
SCHEDULE NO. DESCRIPTION
- ------------ --------------------------------------------------------------------------------
<S> <C>
Schedule II Valuation and Qualifying Accounts
</TABLE>
Other financial schedules have not been included because they are not
applicable.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 14 above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 77
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Dedham, Commonwealth of
Massachusetts on the 10th day of May, 1996.
RESTRAC, INC.
By: /s/ LARS D. PERKINS
------------------------------------
Lars D. Perkins
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
Directors of Restrac, Inc., hereby severally constitute Lars D. Perkins and
Cynthia G. Eades and each of them singly, our true and lawful attorneys with
full power to them, and each of them singly, to sign for us and in our names in
the capacities indicated below, the Registration Statement filed herewith and
any and all amendments (including any post-effective amendments) to said
Registration Statement (or any other registration statement for the same
offering that is to be effective upon filing pursuant to Rule 462(b) under the
Securities Act), and generally to do all such things in our names and in our
capacities as officers and Directors to enable Restrac, Inc. to comply with the
provisions of the Securities Act of 1933, and all requirements of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys, or any of them, to said Registration
Statement and any and all amendments (including any post-effective amendments)
thereto (or any other registration statement for the same offering that is to be
effective upon filing pursuant to Rule 462(b) under the Securities Act).
Pursuant to the requirements of the Securities Act, this report has been
signed below by the following persons on behalf of the Registrant in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ----------------------------------- -------------
<S> <C> <C>
/s/ LARS D. PERKINS Director, Chief Executive Officer May 10, 1996
- ------------------------------------------ and President (Principal
Lars D. Perkins Executive Officer)
/s/ CYNTHIA G. EADES Chief Financial Officer May 10, 1996
- ------------------------------------------ (Principal Financial Officer and
Cynthia G. Eades Principal Accounting Officer)
/s/ RUSSELL J. CAMPANELLO Director May 10, 1996
- ------------------------------------------
Russell J. Campanello
/s/ J. PAUL COSTELLO Director May 10, 1996
- ------------------------------------------
J. Paul Costello
/s/ A. BRUCE JOHNSTON Director May 10, 1996
- ------------------------------------------
A. Bruce Johnston
</TABLE>
II-5
<PAGE> 78
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To Restrac, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the balance sheets of Restrac, Inc. as of September 30, 1994 and 1995 and the
related statements of operations, changes in convertible redeemable preferred
stock and stockholders' equity (deficit) and cash flows for each of the three
years in the period ended September 30, 1995, included in this Registration
Statement, and have issued our report thereon dated November 30, 1995 (except
with respect to the matters discussed in Note 6, as to which the date is May 8,
1996). Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in S-2 is the
responsibility of the Company's management and is presented for the purposes of
complying with the Securities and Exchange Commission's rules and is not part of
the basic financial statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial statements and, in our
opinion, fairly states in all material respects, the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
November 30, 1995 (except with respect to the
matters discussed in Note 6, as to which
the date is May 8, 1996)
S-1
<PAGE> 79
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994, 1995
<TABLE>
<CAPTION>
BALANCE,
BEGINNING OF CHARGED BALANCE,
ALLOWANCE FOR DOUBTFUL ACCOUNTS YEAR TO EXPENSE WRITE-OFFS END OF YEAR
- ---------------------------------------------------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year ended September 30, 1993....................... $ 29,000 $ 9,714 $ 15,714 $23,000
Year ended September 30, 1994....................... 23,000 0 6,000 17,000
Year ended September 30, 1995....................... 17,000 317,080 34,080 300,000
</TABLE>
S-2
<PAGE> 80
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ------ ------------------------------------------------------------------------------ ----
<C> <S> <C>
1 Form of Underwriting Agreement among the Underwriters named therein and the
Company.......................................................................
3.1 Form of First Amended and Restated Certificate of Incorporation of the
Company.......................................................................
3.2 Form of Second Amended and Restated Certificate of Incorporation of the
Company.......................................................................
3.3 Amended and Restated By-laws of the Company...................................
* 4.1 Specimen certificate for shares of Common Stock, $.01 par value, of the
Company.......................................................................
* 5 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the shares of the
Company's Common Stock........................................................
10.1 Stock Purchase Agreement dated January 5, 1994 by and between the Company
and the Purchasers identified therein.........................................
10.2 Stock Redemption Agreement dated January 5, 1994 between the Company and
J. Paul Costello, Lars D. Perkins and John P. Jopling.........................
10.3 Registration Rights Agreement dated January 5, 1994 between the Company and
Lars D. Perkins, J. Paul Costello and John P. Jopling.........................
*10.4 Restrac, Inc. 1994 Stock Option Plan..........................................
*10.5 Restrac, Inc. 1996 Stock Option and Grant Plan................................
10.6 Restrac, Inc. 1996 Employee Stock Purchase Plan...............................
10.7 Paid-up Software License dated as of January 1, 1993 by and between the
Company and Costello and Company, Inc.........................................
+10.8 VAR Agreement dated November 27, 1991 between the Company and Verity, Inc.
and all amendments thereto....................................................
+10.9 Value Added Reseller License Agreement dated August 31, 1992 by and between
The Analytic Sciences Corporation and the Company.............................
+10.10 Joint Marketing Agreement with Referral Fee Payments dated as of October 1,
1994 between the Company and PeopleSoft, Inc..................................
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
filed)........................................................................
27 Financial Data Schedule.......................................................
</TABLE>
- ---------------
* To be filed by amendment
+ Confidential treatment requested as to portions of this document.
<PAGE> 1
EXHIBIT 1
2,500,000 Shares
RESTRAC, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
, 1996
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON, L.L.C.
ADAMS, HARKNESS & HILL, INC.
As Representatives of the several Underwriters
c/o MONTGOMERY SECURITIES
600 Montgomery Street
San Francisco, California 94111
Dear Sirs:
SECTION 1. Introductory. Restrac, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell 1,500,000 shares of its authorized but
unissued Common Stock (the "Common Stock") and certain stockholders of the
Company named in Schedule B annexed hereto (the "Selling Stockholders") propose
to sell an aggregate of 1,000,000 shares of the Company's issued and
outstanding Common Stock to the several underwriters named in Schedule A
annexed hereto (the "Underwriters"), for whom you are acting as
Representatives. Said aggregate of 2,500,000 shares are herein called the
"Firm Common Shares." In addition, the Selling Stockholders propose to grant
to the Underwriters an option to purchase up to 375,000 additional shares of
Common Stock (the "Optional Common Shares"), as provided in Section 5 hereof.
The Firm Common Shares and, to the extent such option is exercised, the
Optional Common Shares are hereinafter collectively referred to as the "Common
Shares."
You have advised the Company and the Selling Stockholders that the
Underwriters propose to make a public offering of their respective portions of
the Common Shares on the effective date of the registration statement
hereinafter referred to, or as soon thereafter as in your judgment is
advisable.
<PAGE> 2
The Company and each of the Selling Stockholders hereby confirm their
respective agreements with respect to the purchase of the Common Shares by the
Underwriters as follows:
SECTION 2. Representations and Warranties of the Company. The
Company represents and warrants to the several Underwriters that:
(a) A registration statement on Form S-1 (File No.
333-_____) with respect to the Common Shares has been prepared by the
Company in conformity with, in all material respects, the requirements
of the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder, and has been filed
with the Commission. The Company has prepared and has filed or
proposes to file prior to the effective date of such registration
statement an amendment or amendments to such registration statement,
which amendment or amendments have been or will be similarly prepared.
There have been delivered to you two signed copies of such
registration statement and amendments, together with two copies of
each exhibit filed therewith. Conformed copies of such registration
statement and amendments (but without exhibits) and of the related
preliminary prospectus have been delivered to you in such reasonable
quantities as you have requested for each of the Underwriters. The
Company will next file with the Commission one of the following: (i)
prior to effectiveness of such registration statement, a further
amendment thereto, including the form of final prospectus, or (ii) a
final prospectus in accordance with Rules 430A and 424(b) of the Rules
and Regulations, or (iii) a term sheet (the "Term Sheet") as described
in and in accordance with Rules 434 and 424(b) of the Rules and
Regulations. As filed, the final prospectus, if one is used, or the
Term Sheet and Preliminary Prospectus, if a final prospectus not used,
shall include (i) all Rule 430A Information (as hereinafter defined)
and, except to the extent that you shall agree in writing to a
modification, shall be in all substantive respects in the form
furnished to you prior to the date and time that this Agreement was
executed and delivered by the parties hereto, or, to the extent not
completed at such date and time, shall contain only such specific
additional information and other changes (beyond that contained in the
latest Preliminary Prospectus) as the Company shall have previously
advised you in writing would be included or made therein.
-2-
<PAGE> 3
The term "Registration Statement" as used in this Agreement
shall mean such registration statement at the time such registration
statement becomes effective and, in the event any post-effective
amendment thereto becomes effective prior to the First Closing Date
(as hereinafter defined), shall also mean such registration statement
as so amended; provided, however, that such term shall also include
(i) all Rule 430A Information deemed to be included in such
registration statement at the time such registration statement becomes
effective as provided by Rule 430A of the Rules and Regulations and
(ii) any registration statement filed pursuant to Rule 462(b) of the
Rules and Regulations relating to the Common Shares. The term
"Preliminary Prospectus" shall mean any preliminary prospectus
referred to in the preceding paragraph and any preliminary prospectus
included in the Registration Statement at the time it becomes
effective that omits Rule 430A Information. The term "Prospectus" as
used in this Agreement shall mean either (i) the prospectus relating
to the Common Shares in the form in which it is first filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations or,
(ii) if a Term Sheet is not used and no filing pursuant to Rule 424(b)
of the Rules and Regulations is required, shall mean the form of final
prospectus included in the Registration Statement at the time such
registration statement becomes effective or (iii) if a Term Sheet is
used, the Term Sheet in the form in which it is first filed with the
Commission pursuant to Rule 424(b) of the Rules and Regulations,
together with the Preliminary Prospectus included in the Registration
Statement at the time it becomes effective. The term "Rule 430A
Information" means information with respect to the Common Shares and
the offering thereof permitted to be omitted from the Registration
Statement when it becomes effective pursuant to Rule 430A of the Rules
and Regulations.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus, and each Preliminary
Prospectus has conformed in all material respects to the requirements
of the Act and the Rules and Regulations and, as of its date, has not
included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and
at the time the Registration Statement becomes effective, and at all
times subsequent thereto up to and including each Closing Date
hereinafter mentioned, the Registration Statement and the Prospectus,
and any amendments or supplements thereto, will contain all material
statements and information required to be included therein by the Act
and
-3-
<PAGE> 4
the Rules and Regulations and will in all material respects conform to
the requirements of the Act and the Rules and Regulations, and neither
the Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, will include any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, no representation or warranty contained in this subparagraph
2(b) shall be applicable to information contained in or omitted from
any Preliminary Prospectus, the Registration Statement, the Prospectus
or any such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by or on behalf of
any Underwriter, directly or through the Representatives, specifically
for use in the preparation thereof.
(c) The Company does not own or control, directly or
indirectly, any corporation, association or other entity. The Company
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the state of Delaware, with full power
and authority (corporate and other) to own and lease its properties
and conduct its business as described in the Prospectus, except where
failure to be in good standing would not materially adversely affect
the condition (financial or otherwise), business, properties, results
of operations or prospects of the Company; the Company is in
possession of and operating in compliance with all authorizations,
licenses, permits, consents, certificates and orders material to the
conduct of its business, all of which are valid and in full force and
effect; the Company is duly qualified or licensed to do business and
in good standing as a foreign corporation in each jurisdiction in
which the ownership or leasing of properties or the conduct of its
business requires such qualification or license, except for
jurisdictions in which the failure to so qualify or be licensed would
not have a material adverse effect upon the Company; and no proceeding
has been instituted in any such jurisdiction, revoking, limiting or
curtailing, or seeking to revoke, limit or curtail, such power and
authority or qualification or license.
(d) The Company has an authorized and outstanding capital
stock as set forth under the heading "Capitalization" in the
Prospectus (provided that the currently outstanding capital stock
includes such additional number of shares as have been issued after
March 31, 1996 pursuant to the exercise of options disclosed in the
Prospectus as granted under the Company's 1994 Amended and Restated
Stock Option
-4-
<PAGE> 5
and Grant Plan); the issued and outstanding shares of Common Stock
have been duly authorized and validly issued, are fully paid and
nonassessable, have been issued in compliance with all federal and
state securities laws, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase
securities, and conform to the description thereof contained in the
Prospectus. Except as disclosed in or contemplated by the Prospectus
and the financial statements of the Company, and the related notes
thereto, included in the Prospectus, the Company has no outstanding
options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible
securities or obligations.
(e) The Firm Common Shares to be sold by the Company have
been duly authorized and, when issued, delivered and paid for in the
manner set forth in this Agreement, will be duly authorized, validly
issued, fully paid and nonassessable, and will conform to the
description thereof contained in the Prospectus. No preemptive rights
or other rights to subscribe for or purchase exist with respect to the
issuance and sale of the Firm Common Shares by the Company pursuant to
this Agreement. No stockholder of the Company has any right which has
not been waived to require the Company to register the sale of any
shares owned by such stockholder under the Act in the public offering
contemplated by this Agreement. No further approval or authority of
the stockholders or the Board of Directors of the Company will be
required for the transfer and sale of the Common Shares to be sold by
the Selling Stockholders or the issuance and sale of the Firm Common
shares to be sold by the Company as contemplated herein.
(f) The Company has full legal right, power and authority
to enter into this Agreement and perform the transactions contemplated
hereby. This Agreement has been duly authorized, executed and
delivered by the Company and constitutes a valid and binding
obligation of the Company in accordance with its terms. The making
and performance of this Agreement by the Company and the consummation
of the transactions herein contemplated will not violate any
provisions of the certificate of incorporation or bylaws, or other
organizational documents, of the Company, and will not conflict with,
result in the breach or violation of, or constitute, either by itself
or upon notice or the passage of time or both, a default under any
agreement, mortgage, deed
-5-
<PAGE> 6
of trust, lease, franchise, license, indenture, permit or other
instrument to which the Company is a party or by which the Company or
any of its properties may be bound or affected, any statute or any
authorization, judgment, decree, order, rule or regulation of any
court or any regulatory body, administrative agency or other
governmental body applicable to the Company or any of its properties.
No consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body is
required for the execution and delivery of this Agreement or the
consummation of the transactions contemplated by this Agreement,
except for compliance with the Act, the Blue Sky laws applicable to
the public offering of the Common Shares by the several Underwriters
and the clearance of such offering with the National Association of
Securities Dealers, Inc. (the "NASD").
(g) To the best of the Company's knowledge, Arthur
Andersen LLP who have expressed their opinion with respect to the
financial statements and schedules filed with the Commission as a part
of the Registration Statement and included in the Prospectus and in
the Registration Statement, are independent accountants as required by
the Act and the Rules and Regulations.
(h) The financial statements and schedules of the
Company, and the related notes thereto, included in the Registration
Statement and the Prospectus present fairly in all material respects
the financial position of the Company as of the respective dates of
such financial statements and schedules, and the results of
operations, cash flows and changes in stockholders' equity of the
Company for the respective periods covered thereby. Such statements,
schedules and related notes have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
as certified by the independent accountants named in subparagraph
2(g). No other financial statements or schedules are required to be
included in the Registration Statement. The selected financial data
set forth in the Prospectus under the captions "Capitalization" and
"Selected Financial Data" fairly present in all material respects the
information set forth therein on the basis stated in the Registration
Statement.
(i) Except as disclosed in the Prospectus, and except as
to defaults which individually or in the aggregate would not be
material to the Company, the Company is not in violation or default of
any provision of its certificate of incorporation or bylaws, or other
organizational documents,
-6-
<PAGE> 7
or is in material breach of or default with respect to any provision
of any agreement, judgment, decree, order, mortgage, deed of trust,
lease, franchise, license, indenture, permit or other instrument to
which it is a party or by which it or any of its properties are bound;
and there does not exist any state of facts known to the Company which
constitutes an event of default on the part of the Company as defined
in such documents or which, with notice or lapse of time or both,
would constitute such an event of default.
(j) There are no contracts or other documents required to
be described in the Registration Statement or to be filed as exhibits
to the Registration Statement by the Act or by the Rules and
Regulations which have not been described or filed as required. The
contracts so described in the Prospectus are in full force and effect
on the date hereof; and neither the Company, nor to the best of the
Company's knowledge, any other party is in breach of or default under
any of such contracts (except where such breach or default would not
have a material adverse effect on the Company).
(k) There are no legal or governmental actions, suits or
proceedings pending or, to the best of the Company's knowledge,
threatened to which the Company is or may be a party or of which
property owned or leased by the Company is or may be the subject, or
related to environmental or discrimination matters, which actions,
suits or proceedings might reasonably be foreseen to, individually or
in the aggregate, prevent the transactions contemplated by this
Agreement or result in a material adverse change in the condition
(financial or otherwise), properties, business, results of operations
or prospects of the Company; and no labor disturbance by the employees
of the Company exists or is imminent which might be expected to
materially adversely affect such condition, properties, business,
results of operations or prospects. The Company is not a party or
subject to the provisions of any material injunction, judgment, decree
or order of any court, regulatory body, administrative agency or other
governmental body.
(l) The Company has good and marketable title to all the
properties and assets reflected as owned in the financial statements
hereinabove described (or elsewhere in the Prospectus), subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except (i)
those, if any, reflected in such financial statements (or elsewhere in
the Prospectus), or (ii) those which are not material in amount. The
Company holds its leased properties under valid and binding leases,
with such exceptions as are not material in
-7-
<PAGE> 8
relation to the business of the Company. Except as disclosed in the
Prospectus, the Company owns or leases all such properties as are
necessary to its operations as now conducted or as proposed to be
conducted.
(m) Since the respective dates as of which information is
given in the Registration Statement and Prospectus, and except as
described in or specifically contemplated by the Prospectus: (i) the
Company has not incurred any material liabilities or obligations,
indirect, direct or contingent, or entered into any material verbal or
written agreement or other material transaction which is not in the
ordinary course of business; (ii) the Company has not sustained any
material loss or interference with its business or properties from
fire, flood, windstorm, accident or other calamity, whether or not
covered by insurance; (iii) the Company has not paid or declared any
dividends or other distributions with respect to its capital stock and
the Company is not in default in the payment of principal or interest
on any outstanding debt obligations; (iv) there has not been any
change in the capital stock (other than upon the sale of the Firm
Common Shares hereunder and upon the exercise of options described in
the Registration Statement) or indebtedness material to the Company
(other than in the ordinary course of business); and (v) there has not
been any material adverse change in the condition (financial or
otherwise), business, properties, results of operations or prospects
of the Company.
(n) Except as disclosed in or specifically contemplated
by the Prospectus, the Company has sufficient trademarks, trade names,
patent rights, mask works, copyrights, licenses, approvals and
governmental authorizations to conduct its business as now conducted;
and the Company has no knowledge of any material infringement by it of
trademark, trade name rights, patent rights, mask works, copyrights,
licenses, trade secret or other similar rights of others, and there is
no claim being made against the Company regarding trademark, trade
name, patent, mask work, copyright, license, trade secret or other
infringement which could have a material adverse effect on the
condition (financial or otherwise), business, properties, results of
operations or prospects of the Company.
(o) The Company has not been advised, and has no reason
to believe, that it is not conducting business in compliance with all
applicable laws, rules and regulations of the jurisdictions in which
it is conducting business, including, without limitation, all
applicable local, state and federal
-8-
<PAGE> 9
environmental laws and regulations, except where failure to be so in
compliance would not materially adversely affect the condition
(financial or otherwise), business, properties, results of operations
or prospects of the Company.
(p) The Company has filed all necessary federal, state
and foreign income and franchise tax returns and has paid (or has made
adequate reserves for, in accordance with generally accepted
accounting principles) all taxes shown as due thereon; and the Company
has no knowledge of any tax deficiency which has been or might be
asserted or threatened against the Company which could materially and
adversely affect the condition (financial or otherwise), business,
properties, results of operations or prospects of the Company.
(q) The Company is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(r) The Company has not distributed and will not
distribute prior to the First Closing Date any offering material in
connection with the offering and sale of the Common Shares other than
the Prospectus, the Registration Statement and the other materials
permitted by the Act.
(s) The Company maintains insurance of the types and in
the amounts generally deemed adequate for its business, all of which
insurance is in full force and effect.
(t) The Company has not at any time during the last five
years (i) made any unlawful contribution to any candidate for foreign
office, or failed to disclose fully any contribution in violation of
law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or
quasi-public duties, other than payments required or permitted by the
laws of the United States or any jurisdiction thereof.
(u) The Company has not taken and will not take, directly
or indirectly, any action designed to or that might be reasonably
expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the
Common Shares in violation of Rule 10b-6.
(v) The Company has filed a registration statement
pursuant to Section 12(g) of the Securities Exchange Act of 1934, as
amended, to register the Common Stock, has filed an
-9-
<PAGE> 10
application to list the Common Shares on the Nasdaq National Market,
and has received notification that such listing has been approved,
subject to notice of issuance and sale of the Common Shares.
SECTION 3. Representations, Warranties and Covenants of the Selling
Stockholders.
(a) Each of the Selling Stockholders represents and
warrants to, and agrees with, the several Underwriters that:
(i) Such Selling Stockholder has, and on the
First Closing Date and the Second Closing Date will have, good
and valid title to the Common Shares proposed to be sold by
such Selling Stockholder hereunder on such Closing Date and
full right, power and authority to enter into this Agreement
and to sell, assign, transfer and deliver such Common Shares
hereunder, free and clear of all voting trust arrangements,
liens, encumbrances, equities, security interests,
restrictions and other adverse claims whatsoever, subject, in
the case of such Selling Stockholder, to the rights of the
Company, as custodian; and upon delivery of and payment for
such Common Shares hereunder, the Underwriters will acquire
good title thereto, free and clear of all liens, encumbrances,
equities, claims, restrictions, security interests, voting
trusts or other adverse claims whatsoever.
(ii) Such Selling Stockholder has executed and
delivered a Power of Attorney and caused to be executed and
delivered on his behalf a Custody Agreement (hereinafter
collectively referred to as the "Stockholders Agreement") and
in connection herewith such Selling Stockholder further
represents, warrants and agrees that such Selling Stockholder
has deposited in custody, under the Stockholders Agreement,
with the agent named therein (the "Agent") as custodian,
certificates in negotiable form for the Common Shares to be
sold hereunder by such Selling Stockholder, for the purpose of
further delivery pursuant to this Agreement. Such Selling
Stockholder agrees that the Common Shares to be sold by such
Selling Stockholder on deposit with the Agent are subject to
the interests of the Company and the Underwriters, that the
arrangements made for such custody are to that extent
irrevocable, and that the obligations of such Selling
Stockholder hereunder shall not be terminated, except as
provided in this Agreement or in the Stockholders
-10-
<PAGE> 11
Agreement, by any act of such Selling Stockholder, by
operation of law, by the death or incapacity of such Selling
Stockholder or by the occurrence of any other event. If such
Selling Stockholder should die or become incapacitated, or if
any other event should occur, before the delivery of the
Common Shares hereunder, the documents evidencing Common
Shares then on deposit with the Agent shall be delivered by
the Agent in accordance with the terms and conditions of this
Agreement as if such death, incapacity or other event had not
occurred, regardless of whether or not the Agent shall have
received notice thereof. This Agreement and the Stockholders
Agreement have been duly executed and delivered by or on
behalf of such Selling Stockholder and the form of such
Stockholders Agreement has been delivered to you.
(iii) The performance of this Agreement and the
Stockholders Agreement and the consummation of the transactions
contemplated hereby and by the Stockholders Agreement will not
result in a breach or violation by such Selling Stockholder of
any of the terms or provisions of, or constitute a default by
such Selling Stockholder under, any indenture, mortgage, deed
of trust, trust (constructive or other), loan agreement, lease,
franchise, license or other agreement or instrument to which
such Selling Stockholder is a party or by which such Selling
Stockholder or any of its properties is bound, any statute, or
any judgment, decree, order, rule or regulation of any court or
governmental agency or body applicable to such Selling
Stockholder or any of its properties. No approval,
authorization, order or consent of any court, regulatory body,
administrative agency or other governmental body is required
for the execution and delivery of the Agreement and the
Stockholders Agreement, or the consummation by such Selling
Stockholder of the transactions contemplated by this Agreement
and the Stockholders Agreement, except such as have been
obtained and are in full force and effect under the Act and
such as may be required under the rules of the NASD and
applicable Blue Sky laws.
(iv) Such Selling Stockholder has not taken and
will not take, directly or indirectly, any action designed to
or which has constituted or which might reasonably be expected
to cause or result in stabilization or manipulation of the
price of any
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<PAGE> 12
security of the Company to facilitate the sale or resale of
the Common Shares.
(v) Each Preliminary Prospectus and the
Prospectus, insofar as it has related to such Selling
Stockholder, has conformed in all material respects to the
requirements of the Act and the Rules and Regulations and has
not included any untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading; and neither the Registration
Statement nor the Prospectus, nor any amendment or supplement
thereto, as it relates to such Selling Stockholder, will
include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
(b) Each of the Selling Stockholders agrees with the
Company and the Underwriters not to offer to sell, sell or contract to
sell or otherwise dispose of any shares of Common Stock or securities
convertible into or exchangeable for any shares of Common Stock which
are beneficially owned by such Selling Stockholder, for a period of 180
days after the first date that any of the Common Shares are released by
you for sale to the public (the "Release Date"), without the prior
written consent of Montgomery Securities, which consent may be withheld
at the sole discretion of Montgomery Securities.
SECTION 4. Representations and Warranties of the Underwriters. The
Representatives, on behalf of the several Underwriters, represent and warrant
to the Company and to the Selling Stockholders that the information set forth
(i) on the cover page of the Prospectus with respect to price, underwriting
discounts and commissions and terms of offering and (ii) under "Underwriting"
in the Prospectus was furnished to the Company by and on behalf of the
Underwriters for use in connection with the preparation of the Registration
Statement and the Prospectus and is correct in all material respects. The
Representatives represent and warrant that they have been authorized by each of
the other Underwriters as the Representatives to enter into this Agreement on
its behalf and to act for it in the manner herein provided.
SECTION 5. Purchase, Sale and Delivery of Common Shares. On the
basis of the representations, warranties and agreements herein contained, but
subject to the terms and conditions herein set forth, (i) the Company agrees to
issue and sell to the Underwriters 1,500,000 of the Firm Common Shares, and
(ii) the
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Selling Stockholders agree, severally and not jointly, to sell to the
Underwriters in the respective amounts set forth in Schedule B hereto, an
aggregate of 1,000,000 of the Firm Common Shares. The Underwriters agree,
severally and not jointly, to purchase from the Company and the Selling
Stockholders, respectively, the number of Firm Common Shares described below.
The purchase price per share to be paid by the several Underwriters to the
Company and to the Selling Stockholders, respectively, shall be $_____ per
share.
The obligation of each Underwriter to the Company shall be to purchase
from the Company that number of full shares which (as nearly as practicable, as
determined by you) bears to 1,500,000 the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares. The obligation of each
Underwriter to the Selling Stockholders shall be to purchase from each Selling
Stockholder that number of full shares which (as nearly as practicable, as
determined by you) bears to 1,000,000 the same proportion as the number of
shares set forth opposite the name of such Underwriter in Schedule A hereto
bears to the total number of Firm Common Shares.
Delivery of certificates for the Firm Common Shares to be purchased by
the Underwriters and payment therefor shall be made at the offices of
Montgomery Securities, 600 Montgomery Street, San Francisco, California (or
such other place as may be agreed upon by the Company and the Representatives)
at such time and date, not later than the third (or, if the Firm Common Shares
are priced, as contemplated by Rule 15c6-1(c) under the Securities Exchange Act
of 1934, after 4:30 p.m. Washington D.C. time, the fourth) full business day
following the Release Date, as you shall designate by at least 48 hours prior
notice to the Company (or at such other time and date, not later than one week
after such third or fourth, as the case may be, full business day as may be
agreed upon by the Company and the Representatives) (the "First Closing Date");
provided, however, that if the Prospectus is at any time prior to the First
Closing Date recirculated to the public, the First Closing Date shall occur
upon the later of the third or fourth, as the case may be, full business day
following the Release Date or the date that is 48 hours after the date that the
Prospectus has been so recirculated.
Delivery of certificates for the Firm Common Shares shall be made by
or on behalf of the Company and the Selling Stockholders to you, for the
respective accounts of the Underwriters with respect to the Firm Common Shares
to be sold by the Company and by the Selling Stockholders against payment by
you, for the accounts of the several Underwriters, of the purchase price
therefor by wire transfer or certified or official bank checks payable in same
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<PAGE> 14
day funds to the order of the Company and of the Agent in proportion to the
number of Firm Common Shares to be sold by the Company and the Selling
Stockholders, respectively. The certificates for the Firm Common Shares shall
be registered in such names and denominations as you shall have requested at
least two full business days prior to the First Closing Date, and shall be made
available for checking and packaging on the business day preceding the First
Closing Date at a location in New York, New York, as may be designated by you.
Time shall be of the essence, and delivery at the time and place specified in
this Agreement is a further condition to the obligations of the Underwriters.
In addition, on the basis of the representations, warranties and
agreements herein contained, but subject to the terms and conditions herein set
forth, the Selling Stockholders hereby grant an option to the several
Underwriters to purchase, severally and not jointly, up to the respective
numbers of Optional Common Shares set forth on Schedule B hereto (in the case
of the Selling Stockholders), at the purchase price per share to be paid for
the Firm Common Shares, for use solely in covering any over-allotments made by
you for the account of the Underwriters in the sale and distribution of the
Firm Common Shares. The option granted hereunder may be exercised at any time
(but not more than once) within 30 days after the Release Date, upon notice by
you to the Company and the Agent setting forth the aggregate number of Optional
Common Shares as to which the Underwriters are exercising the option, the names
and denominations in which the certificates for such shares are to be
registered and the time and place at which such certificates will be delivered.
Such time of delivery (which may not be earlier than the First Closing Date),
being herein referred to as the "Second Closing Date," shall be determined by
you, but if at any time other than the First Closing Date shall not be earlier
than three nor later than five full business days after delivery of such notice
of exercise. The number of Optional Common Shares to be purchased by each
Underwriter shall be determined by multiplying the number of Optional Common
Shares to be sold by the Selling Stockholders pursuant to such notice of
exercise by a fraction, the numerator of which is the number of Firm Common
Shares to be purchased by such Underwriter as set forth opposite its name in
Schedule A and the denominator of which is 2,500,000 (subject to such
adjustments to eliminate any fractional share purchases as you in your
discretion may make). If the option granted hereunder is exercised in part,
the number of Optional Common Shares to be sold by each Selling Stockholder
shall be determined by multiplying the number of Optional Common Shares set
forth opposite his or its name in Schedule B by a fraction, the numerator of
which is the number of Optional Common Shares to be purchased by the
Underwriters as specified in such notice of exercise and the
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<PAGE> 15
denominator of which is 375,000 (subject to such adjustments to eliminate any
fractional share purchase as you in your discretion may make). Certificates
for the Optional Common Shares will be made available for checking and
packaging on the business day preceding the Second Closing Date at a location
in New York, New York, as may be designated by you. The manner of payment for
and delivery of the Optional Common Shares shall be the same as for the Firm
Common Shares purchased from the Company and the Selling Stockholders as
specified in the two preceding paragraphs. At any time before lapse of the
option, you may cancel such option by giving written notice of such
cancellation to the Company and the Agent. If the option is cancelled or
expires unexercised in whole or in part, the Company will deregister under the
Act the number of Optional Common Shares as to which the option has not been
exercised.
You have advised the Company and the Selling Stockholders that each
Underwriter has authorized you to accept delivery of its Common Shares, to make
payment and to receipt therefor. You, individually and not as the
Representatives of the Underwriters, may (but shall not be obligated to) make
payment for any Common Shares to be purchased by any Underwriter whose funds
shall not have been received by you by the First Closing Date or the Second
Closing Date, as the case may be, for the account of such Underwriter, but any
such payment shall not relieve such Underwriter from any of its obligations
under this Agreement.
Subject to the terms and conditions hereof, the Underwriters propose
to make a public offering of their respective portions of the Common Shares as
soon after the effective date of the Registration Statement as in the judgment
of the Representatives is advisable and at the public offering price set forth
on the cover page of and on the terms set forth in the final prospectus, if one
is used, or on the first page of the Term Sheet, if one is used.
SECTION 6. Covenants of the Company. The Company covenants and
agrees that:
(a) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at
the time and date that this Agreement is executed and delivered by the
parties hereto, to become effective. If the Registration Statement
has become or becomes effective pursuant to Rule 430A of the Rules and
Regulations, or the filing of the Prospectus is otherwise required
under Rule 424(b) of the Rules and Regulations, the Company will file
the Prospectus, properly completed, pursuant to the applicable
paragraph of Rule 424(b) of the
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<PAGE> 16
Rules and Regulations within the time period prescribed and will
provide evidence satisfactory to you of such timely filing. The
Company will promptly advise you in writing (i) of the receipt of any
comments of the Commission, (ii) of any request of the Commission for
amendment of or supplement to the Registration Statement (either
before or after it becomes effective), any Preliminary Prospectus or
the Prospectus or for additional information, (iii) when the
Registration Statement shall have become effective and (iv) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the institution of
any proceedings for that purpose. If the Commission shall enter any
such stop order at any time, the Company will use its best efforts to
obtain the lifting of such order at the earliest possible moment. The
Company will not file any amendment or supplement to the Registration
Statement (either before or after it becomes effective), any
Preliminary Prospectus or the Prospectus of which you have not been
furnished with a copy a reasonable time prior to such filing or to
which you reasonably object in writing or which is not in compliance
with the Act and the Rules and Regulations.
(b) The Company will prepare and file with the
Commission, promptly upon your request, any amendments or supplements
to the Registration Statement or the Prospectus which are in
compliance with the Act and the Rules and Regulations and which in
your reasonable judgment may be necessary or advisable to enable the
several Underwriters to continue the distribution of the Common Shares
and will use its best efforts to cause the same to become effective as
promptly as possible. The Company will fully and completely comply
with the provisions of Rule 430A of the Rules and Regulations with
respect to information omitted from the Registration Statement in
reliance upon such Rule.
(c) If at any time within the nine-month period referred
to in Section 10(a)(3) of the Act during which a prospectus relating
to the Common Shares is required to be delivered under the Act any
event occurs, as a result of which the Prospectus, including any
amendments or supplements, would include an untrue statement of a
material fact, or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, or if it is necessary at any time to amend the Prospectus,
including any amendments or supplements, to comply with the Act or the
Rules and Regulations, the Company will promptly advise you thereof
and will promptly prepare and file with the Commission, at its own
expense, an
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<PAGE> 17
amendment or supplement which will correct such statement or omission
or an amendment or supplement which will effect such compliance and
will use its best efforts to cause the same to become effective as
soon as possible; and, in case any Underwriter is required to deliver
a prospectus after such nine-month period, the Company upon request,
but at the expense of such Underwriter, will promptly prepare such
amendment or amendments to the Registration Statement and such
Prospectus or Prospectuses as may be necessary to permit compliance
with the requirements of Section 10(a)(3) of the Act.
(d) As soon as practicable, but not later than 45 days
after the end of the first quarter ending after one year following the
"effective date of the Registration Statement" (as defined in Rule
158(c) of the Rules and Regulations), the Company will make generally
available to its security holders an earnings statement (which need
not be audited) covering a period of 12 consecutive months beginning
after the effective date of the Registration Statement which will
satisfy the provisions of the last paragraph of Section 11(a) of the
Act.
(e) During such period as a prospectus is required by law
to be delivered in connection with sales by an Underwriter or dealer,
the Company, at its expense, but only for the nine-month period
referred to in Section 10(a)(3) of the Act, will furnish to you and
the Selling Stockholders or mail to your order copies of the
Registration Statement, the Prospectus, the Preliminary Prospectus and
all amendments and supplements to any such documents in each case as
soon as available and in such quantities as you and the Selling
Stockholders may request, for the purposes contemplated by the Act.
(f) The Company shall cooperate with you and your counsel
in order to qualify or register the Common Shares for sale under (or
obtain exemptions from the application of) the Blue Sky laws and
Canadian securities laws of such jurisdictions as you designate, will
comply with such laws and will continue such qualifications,
registrations and exemptions in effect so long as reasonably required
for the distribution of the Common Shares. The Company shall not be
required to qualify as a foreign corporation or to file a general
consent to service of process in any such jurisdiction where it is not
presently qualified or where it would be subject to taxation as a
foreign corporation. The Company will advise you promptly of the
suspension of the qualification or registration of (or any such
exemption relating to) the Common Shares for offering, sale or trading
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<PAGE> 18
in any jurisdiction or any initiation or threat of any proceeding for
any such purpose, and in the event of the issuance of any order
suspending such qualification, registration or exemption, the Company,
with your cooperation, will use its best efforts to obtain the
withdrawal thereof.
(g) During the period of five years hereafter, the
Company will furnish to the Representatives and, upon request of the
Representatives to each of the other Underwriters: (i) as soon as
practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as
of the close of such fiscal year and statements of income,
stockholders' equity and cash flows for the year then ended and the
opinion thereon of the Company's independent public accountants; (ii)
as soon as practicable after the filing thereof, copies of each proxy
statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q,
Report on Form 8-K or other report filed by the Company with the
Commission, the NASD or any securities exchange; and (iii) as soon as
available, copies of any report or communication of the Company mailed
generally to holders of its Common Stock.
(h) During the period of 180 days after the Release Date,
without the prior written consent of Montgomery Securities (which
consent may be withheld at the sole discretion of Montgomery
Securities), the Company will not issue, offer, sell, grant options to
purchase or otherwise dispose of any of the Company's equity
securities or any other securities convertible into or exchangeable
with its Common Stock or other equity security; provided that the
Company may (i) issue shares of its Common Stock upon the conversion
of shares of its convertible preferred stock outstanding on the date
hereof, (ii) issue shares of its Common Stock upon the exercise of
options granted under its existing employee stock option or purchase
plans, and (iii) grant options and issue shares of its Common Stock
under its existing employee stock option or purchase plans upon terms
and in amounts consistent with past practice; provided that the
Company shall not file a Registration Statement on Form S-8 with
respect to any such plan until at least 30 days after the Release
Date.
(i) The Company will apply the net proceeds of the sale
of the Common Shares sold by it substantially in accordance with its
statements under the caption "Use of Proceeds" in the Prospectus.
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<PAGE> 19
(j) The Company will use its best efforts to qualify or
register its Common Stock for sale in non-issuer transactions under
(or obtain exemptions from the application of) the Blue Sky laws of
the State of California (and thereby permit market making transactions
and secondary trading in the Company's Common Stock in California),
will comply with such Blue Sky laws and will continue such
qualifications, registrations and exemptions in effect for a period of
five years after the date hereof.
(k) The Company will use its best efforts to cause the
Common Stock (including the Common Shares) to be designated for
quotation on the Nasdaq National Market.
You, on behalf of the Underwriters, may, in your sole discretion,
waive in writing the performance by the Company of any one or more of the
foregoing covenants or extend the time for their performance.
SECTION 7. Payment of Expenses. Whether or not the transactions
contemplated hereunder are consummated or this Agreement becomes effective or
is terminated, the Company agrees to pay all costs, fees and expenses incurred
in connection with the performance of the obligations of the Company and the
Selling Stockholders hereunder and in connection with the transactions
contemplated hereby, including without limiting the generality of the
foregoing, (i) all expenses incident to the issuance and delivery of the Common
Shares (including all printing and engraving costs), (ii) all fees and expenses
of the registrar and transfer agent of the Common Stock, (iii) all necessary
issue, transfer and other stamp taxes in connection with the issuance and sale
of the Common Shares to the Underwriters, (iv) all fees and expenses of the
Company's counsel, the Company's independent accountants and the Agent, (v) all
costs and expenses incurred in connection with the preparation, printing or
copying, filing, shipping and distribution of the Registration Statement, each
Preliminary Prospectus and the Prospectus (including all exhibits and financial
statements) and all amendments and supplements provided for herein, this
Agreement, the Agreement Among Underwriters, the Selected Dealers Agreement,
the Underwriters' Questionnaire, the Underwriters' Power of Attorney and the
Blue Sky memorandum, (vi) all filing fees, attorneys' fees and expenses
incurred by the Company or the Underwriters in connection with qualifying or
registering (or obtaining exemptions from the qualification or registration of)
all or any part of the Common Shares for offer and sale under the Blue Sky
laws, (vii) the filing fee of the National Association of Securities Dealers,
Inc., and (viii) all other fees, costs and expenses referred to in Item 13 of
the Registration Statement. Except as provided in this
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<PAGE> 20
Section 7, Section 9 and Section 11 hereof, the Underwriters shall pay all of
their own expenses, including the fees and disbursements of their counsel
(excluding those relating to qualification, registration or exemption under the
Blue Sky laws and the Blue Sky memorandum referred to above).
SECTION 8. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Firm Common
Shares on the First Closing Date and the Optional Common Shares on the Second
Closing Date shall be subject to the accuracy of the representations and
warranties on the part of the Company and the Selling Stockholders herein set
forth as of the date hereof and as of the First Closing Date or the Second
Closing Date, as the case may be, to the accuracy of the statements of Company
officers and the Selling Stockholders made pursuant to the provisions hereof,
to the performance by the Company and the Selling Stockholders of their
respective obligations hereunder, and to the following additional conditions:
(a) The Registration Statement shall have become
effective not later than 5:00 P.M. (or, in the case of a registration
statement filed pursuant to Rule 462(b) of the Rules and Regulations
relating to the Common Shares, not later than 10:00 P.M.), Washington,
D.C. Time, on the date of this Agreement, or at such later time as
shall have been consented to by you; if the filing of the Prospectus,
or any supplement thereto, is required pursuant to Rule 424(b) of the
Rules and Regulations, the Prospectus shall have been filed in the
manner and within the time period required by Rule 424(b) of the Rules
and Regulations; and prior to such Closing Date, no stop order
suspending the effectiveness of the Registration Statement shall have
been issued and no proceedings for that purpose shall have been
instituted or shall be pending or, to the knowledge of the Company,
the Selling Stockholders or you, shall be contemplated by the
Commission; and any request of the Commission for inclusion of
additional information in the Registration Statement, or otherwise,
shall have been complied with to your satisfaction.
(b) You shall be satisfied that since the respective
dates as of which information is given in the Registration Statement
and Prospectus, (i) there shall not have been any change in the
capital stock (other than as contemplated by subparagraph 6(h) above)
of the Company or any material change in the indebtedness (other than
in the ordinary course of business) of the Company, (ii) except as set
forth in or contemplated by the Registration Statement or the
Prospectus,
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<PAGE> 21
no material verbal or written agreement or other transaction shall
have been entered into by the Company, which is not in the ordinary
course of business or which could reasonably be foreseen to have a
material adverse effect on the condition (financial or otherwise),
business or results of operations of the Company, (iii) no loss or
damage (whether or not insured) to the property of the Company shall
have been sustained which materially and adversely affects the
condition (financial or otherwise), business, results of operations or
prospects of the Company, (iv) no legal or governmental action, suit
or proceeding affecting the Company which is materially adverse to the
Company, or which affects or may affect adversely the transactions
contemplated by this Agreement shall have been instituted or
threatened and (v) there shall not have been any material adverse
change in the condition (financial or otherwise), business,
management, results of operations or prospects of the Company which
makes it impractical or inadvisable in the reasonable judgment of the
Representatives to proceed with the public offering or purchase the
Common Shares as contemplated hereby.
(c) There shall have been furnished to you, as
Representatives of the Underwriters, on each Closing Date, in form and
substance satisfactory to you, except as otherwise expressly provided
below:
(i) An opinion of Goodwin, Procter & Hoar,
counsel for the Company and the Selling Stockholders,
addressed to the Underwriters and dated the First Closing Date
or the Second Closing Date, as the case may be, to the effect
that:
(1) The Company has been duly
incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction
of incorporation, is duly qualified or licensed to do
business as a foreign corporation and is in good
standing in all other jurisdictions where the
ownership or leasing of properties or the conduct of
its business requires such qualification or license,
except for jurisdictions in which the failure to so
qualify or be licensed would not have a material
adverse effect on the Company, and has full corporate
power and authority under its Certificate of
Incorporation to own its properties and conduct its
business as described in the Registration Statement;
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<PAGE> 22
(2) The authorized, issued and
outstanding capital stock of the Company is as set
forth under the caption "Capitalization" in the
Prospectus (provided that the currently outstanding
capital stock includes such additional number of
shares as have been issued after March 31, 1996
pursuant to the exercise of options disclosed in the
Prospectus as granted under the Company's 1994
Amended and Restated Stock Option and Grant Plan);
all required corporate proceedings have been taken in
order to validly authorize such authorized capital
stock; all outstanding shares of capital stock
(including the Firm Common Shares and the Optional
Common Shares) have been duly and validly issued, are
fully paid and nonassessable, have been issued in
compliance with federal and state securities laws,
were not, to the best of such counsel's knowledge,
issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase
any securities, and conform as to matters of law in
all material respects to the description thereof
contained in the Prospectus; without limiting the
foregoing, there are no preemptive or other rights to
subscribe for or purchase any of the Firm Common
Shares to be sold by the Company hereunder pursuant
to the Certificate of Incorporation or By-laws of the
Company or Delaware law or, to the best of such
counsel's knowledge, under any contract or other
arrangement;
(3) The certificates evidencing the
Common Shares to be delivered hereunder are in due
and proper form under Delaware law, and when duly
countersigned by the Company's transfer agent and
registrar, and delivered to you or upon your order
against payment of the agreed consideration therefor
in accordance with the provisions of this Agreement,
the Common Shares represented thereby will be duly
authorized and validly issued, fully paid and
nonassessable, will not have been issued in violation
of or subject to any preemptive rights or other
rights to subscribe for or purchase securities (or
which such counsel has knowledge) and will conform as
to matters of law in all material respects to the
description thereof contained in the Prospectus;
(4) Except as disclosed in or
specifically contemplated by the Prospectus,
to the best of such
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<PAGE> 23
counsel's knowledge, there are no outstanding
options, warrants or other rights calling for the
issuance by the Company of, and no commitments, plans
or arrangements of the Company to issue, any shares
of capital stock of the Company or any security
convertible into or exchangeable for capital stock of
the Company;
(5)(a) The Registration Statement has become
effective under the Act, and, to the best of such
counsel's knowledge, no stop order suspending the
effectiveness of the Registration Statement or
preventing the use of the Prospectus has been issued
and no proceedings for that purpose have been
instituted or are pending or contemplated by the
Commission; any required filing of the Prospectus and
any supplement thereto pursuant to Rule 424(b) of the
Rules and Regulations has been made in the manner and
within the time period required by such Rule 424(b);
(b) The Registration Statement, the
Prospectus and each amendment or supplement thereto
(except for the financial statements and notes
thereto, financial statement schedules, and other
financial data included therein, as to which such
counsel need express no opinion) comply as to form in
all material respects with the requirements of the
Act and the Rules and Regulations;
(c) To the best of such counsel's
knowledge, there are no franchises, leases,
contracts, agreements or documents of a character
required to be disclosed in the Registration
Statement or Prospectus or to be filed as exhibits to
the Registration Statement which are not disclosed or
filed, as required;
(d) To the best of such counsel's
knowledge, there are no legal or governmental
actions, suits or proceedings pending or threatened
against the Company which are required to be
described in the Prospectus which are not described
as required;
(6) The statements under the captions
"Management - Stock Option Plan", "Management -
Employee Stock Purchase Plan", "Management -
Non-Competition and Severance Agreements", "Certain
Transactions," "Description of Capital Stock" and
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<PAGE> 24
"Shares Eligible for Future Sale" in the Prospectus,
insofar as such statements constitute a summary of
documents referred to therein or of matters of law,
are accurate summaries and fairly and correctly
present, in all material respects, the information
called for with respect to such documents and matters
of law; provided, however, that such counsel may rely
on representations of the Company with respect to the
factual matters contained in such statements (so long
as such counsel shall state that nothing has come to
their attention which leads them to believe that such
representations are not true and correct in all
material respects).
(7) The Company has the requisite
corporate power and authority to enter into this
Agreement and to sell and deliver the Firm Common
Shares to be sold by it to the several Underwriters;
this Agreement has been duly and validly authorized
by all required corporate action by the Company, and
has been duly and validly executed and delivered by
and on behalf of the Company; and no approval,
authorization, order, consent, registration, filing,
qualification, license or permit of or with any
court, regulatory, administrative or other
governmental body is required for the execution and
delivery of this Agreement by the Company or the
consummation of the transactions contemplated by this
Agreement, except such as have been obtained and are
in full force and effect under the Act and such as
may be required under applicable Blue Sky laws in
connection with the purchase and distribution of the
Common Shares by the Underwriters and the clearance
of such offering with the NASD;
(8) The execution and performance of
this Agreement and the consummation of the
transactions herein contemplated will not conflict
with, result in the breach of, or constitute, either
by itself or upon notice or the passage of time or
both, a default under, any agreement, mortgage, deed
of trust, lease, franchise, license, indenture,
permit or other instrument known to such counsel to
which the Company is a party or by which the Company
or any of its property may be bound or affected which
is material to the Company (except for any conflicts,
breaches or defaults which, individually or in the
aggregate, do not have a material adverse
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<PAGE> 25
effect on the Company's business or results of
operations or on the Company's ability to consummate
the transactions contemplated hereby), or violate any
of the provisions of the certificate of incorporation
or bylaws, or other organizational documents, of the
Company or, so far as is known to such counsel,
violate any statute, judgment, decree, order, rule or
regulation of any court or governmental body having
jurisdiction over the Company or any of its property;
(9) To the best of such counsel's
knowledge, no holders of securities of the
Company have rights which have not been waived
to have any of their shares of Common Stock or
other securities registered under the Act in
connection with the filing of the Registration
Statement by the Company or the offering
contemplated hereby;
(10) To the best of such counsel's
knowledge, this Agreement and the Stockholders
Agreement have been duly authorized, executed and
delivered by or on behalf of each Selling Stockholder
(provided that such opinion shall be given without a
knowledge qualification with respect to the TA
Investors, as such term is used in the Prospectus);
the Agent has been duly and validly authorized to act
as the custodian of the Common Shares to be sold by
the Selling Stockholders; and the performance of this
Agreement and the Stockholders Agreement and the
consummation of the transactions herein contemplated
by each Selling Stockholder will not result in a
breach of, or constitute a default under, any
indenture, mortgage, deed of trust, trust
(constructive or other), loan agreement, lease,
franchise, license or other agreement or instrument
known to such counsel to which such Selling
Stockholder is a party or by which such Selling
Stockholder or any of his or its properties may be
bound, or violate any judgment, decree or order known
to such counsel of any court or governmental body
having jurisdiction over such Selling Stockholder or
any of his or its properties, or so far as is known
to such counsel any statute, rule or regulation
applicable to such Selling Stockholder; and to the
best of such counsel's knowledge, no approval,
authorization, order or consent of any court,
regulatory body, administrative agency or other
governmental body is
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required for the execution and delivery of this
Agreement or the Stockholders Agreement or the
consummation by each Selling Stockholder of the
transactions contemplated by this Agreement, except
such as have been obtained and are in full force and
effect under the Act and such as may be required
under the rules of the NASD and applicable Blue Sky
laws;
(11) To the best of such counsel's
knowledge, each Selling Stockholder has the requisite
power and authority to enter into this Agreement and
the Stockholders Agreement and to sell, transfer and
deliver the Common Shares to be sold on such Closing
Date by such Selling Stockholder hereunder (provided
that such opinion shall be given without a knowledge
qualification with respect to the TA Investors, as
such term is used in the Prospectus); and good and
valid title to such Common Shares so sold, free and
clear of all liens, encumbrances, equities, claims,
restrictions, security interests, voting trusts, or
other defects of title whatsoever, has been
transferred to the Underwriters (whom counsel may
assume to be bona fide purchasers) who have purchased
such Common Shares hereunder; and
(12) To the best of such counsel's
knowledge, the Stockholders Agreement is a valid and
binding agreement of each Selling Stockholder in
accordance with its terms except as enforceability
may be limited by general equitable principles,
bankruptcy, insolvency, reorganization, moratorium or
other laws affecting creditors' rights generally and
except with respect to those provisions relating to
indemnities or contributions for liabilities under
the Act, as to which no opinion need be expressed
(provided that such opinion shall be given without a
knowledge qualification with respect to the TA
Investors, as such term is used in the Prospectus).
In rendering such opinion, such counsel
may rely as to the matters set forth in paragraphs (10),
(11) and (12), on opinions of other counsel
retained by the Selling Stockholders, as to matters of
local law, on opinions of local counsel, and as to matters
of fact, on certificates of the Selling Stockholders and
of officers of the Company and of governmental officials,
in which
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<PAGE> 27
case their opinion is to state that they are so doing and that they
know of no reason why the Underwriters are not justified in relying on
such opinions or certificates and copies of said opinions or
certificates are to be attached to the opinion. Such counsel shall
also include a statement to the effect that nothing has come to such
counsel's attention that would lead such counsel to believe that
either at the effective date of the Registration Statement or at the
applicable Closing Date the Registration Statement or the Prospectus,
or any such amendment or supplement, contains any untrue statement of
a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading (except that such counsel need express no view as to the
financial statements and notes thereto, financial schedules and other
financial data included therein). With respect to such statement,
such counsel may state that their belief is based upon the procedures
set forth therein, but is without independent check and verification;
(ii) Such opinion or opinions of Hale and Dorr,
counsel for the Underwriters, dated the First Closing Date or
the Second Closing Date, as the case may be, with respect to
the incorporation of the Company, the sufficiency of all
corporate proceedings and other legal matters relating to this
Agreement, the validity of the Common Shares, the Registration
Statement and the Prospectus and other related matters as you
may reasonably require, and the Company and the Selling
Stockholders shall have furnished to such counsel such
documents and shall have exhibited to them such papers and
records as they may reasonably request for the purpose of
enabling them to pass upon such matters. In connection with
such opinions, such counsel may rely on representations or
certificates of officers of the Company and governmental
officials.
(iii) A certificate of the Company
executed by the President and Chief Executive Officer and the
Chief Financial Officer of the Company, dated the First
Closing Date or the Second Closing Date, as the case may be,
to the effect that:
(1) The representations and warranties
of the Company set forth in Section 2 of this
Agreement are true and correct as of the date of this
Agreement and as of the First Closing Date or the
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Second Closing Date, as the case may be, and the
Company has complied with all the agreements and
satisfied all the conditions on its part to be
performed or satisfied on or prior to such Closing
Date;
(2) The Commission has not issued any
order preventing or suspending the use of the
Prospectus or any Preliminary Prospectus filed as a
part of the Registration Statement or any amendment
thereto; no stop order suspending the effectiveness
of the Registration Statement has been issued; and to
the best of the knowledge of the respective signers,
no proceedings for that purpose have been instituted
or are pending or contemplated under the Act;
(3) Each of the respective signers of
the certificate has carefully examined the
Registration Statement and the Prospectus; in his
opinion and to the best of his knowledge, the
Registration Statement and the Prospectus and any
amendments or supplements thereto contain all
statements required to be stated therein regarding
the Company; and neither the Registration Statement
nor the Prospectus nor any amendment or supplement
thereto includes any untrue statement of a material
fact or omits to state any material fact required to
be stated therein or necessary to make the statements
therein not misleading;
(4) Since the initial date on which the
Registration Statement was filed, no agreement,
written or oral, transaction or event has occurred
which should have been set forth in an amendment to
the Registration Statement or in a supplement to or
amendment of any prospectus which has not been
disclosed in such a supplement or amendment;
(5) Since the respective dates as of
which information is given in the Registration
Statement and the Prospectus, and except as disclosed
in or contemplated by the Prospectus, there has not
been any material adverse change or a development
involving a material adverse change in the condition
(financial or otherwise), business, properties,
results of operations, management or prospects of the
Company; and no legal or governmental action, suit or
proceeding is pending
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or threatened against the Company which might
reasonably be foreseen to, individually or in the
aggregate, prevent or adversely affect the
transactions contemplated by this Agreement or result
in a material adverse change in the condition
(financial or otherwise), properties, business,
results of operations or prospects of the Company;
since such dates and except as so disclosed, the
Company has not entered into any verbal or written
agreement or other transaction which is not in the
ordinary course of business or which could reasonably
be foreseen to have a material adverse effect on the
condition (financial or otherwise), business or
results of operations of the Company, or incurred any
material liability or obligation, direct, contingent
or indirect, made any change in its capital stock,
made any material change in its short-term debt or
funded debt or repurchased or otherwise acquired any
of the Company's capital stock; and the Company has
not declared or paid any dividend, or made any other
distribution, upon its outstanding capital stock
payable to stockholders of record on a date prior to
the First Closing Date or Second Closing Date, as the
case may be; and
(6) Since the respective dates as of
which information is given in the Registration
Statement and the Prospectus and except as disclosed
in or contemplated by the Prospectus, the Company has
not sustained a material loss or damage by strike,
fire, flood, windstorm, accident or other calamity
(whether or not insured).
(iv) On the First Closing Date and the Second
Closing Date, as the case may be, a certificate, dated such
Closing Date and addressed to you, signed by or on behalf of
the Selling Stockholders to the effect that the representations
and warranties of the Selling Stockholders in this Agreement
are true and correct, as if made at and as of such Closing
Date, and the Selling Stockholders have complied with all the
agreements and satisfied all the conditions on his or its part
to be performed or satisfied prior to such Closing Date.
(v) On the date before this Agreement is executed
and also on the First Closing Date and the Second Closing Date
a letter addressed to you, as Representatives of the
Underwriters, from Arthur Andersen LLP,
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independent accountants, the first one to be dated the day
before the date of this Agreement, the second one to be dated
the First Closing Date and the third one (in the event of a
Second Closing) to be dated the Second Closing Date, in form
and substance reasonably satisfactory to you.
(vi) On or before the First Closing Date, letters
from each Selling Stockholder, each holder of 0.5% or more of
the Company's outstanding Common Stock (assuming conversion of
all outstanding convertible preferred stock into Common Stock)
and each director and officer of the Company, in form and
substance satisfactory to you, confirming that for a period of
180 days after the first date that any of the Common Shares
are released by you for sale to the public, such person will
not directly or indirectly sell or offer to sell or otherwise
dispose of any shares of Common Stock or securities
convertible into or exchangeable for any shares of Common
Stock without the prior written consent of Montgomery
Securities, which consent may be withheld in the sole
discretion of Montgomery Securities.
All such opinions, certificates, letters and documents shall be in
compliance with the provisions hereof only if they are reasonably satisfactory
to you and to Hale and Dorr, counsel for the Underwriters. The Company shall
furnish you with such manually signed or conformed copies of such opinions,
certificates, letters and documents as you request. Any certificate signed by
any officer of the Company and delivered to the Representatives or to counsel
for the Underwriters shall be deemed to be a representation and warranty by the
Company to the Underwriters as to the statements made therein.
If any condition to the Underwriters' obligations hereunder to be
satisfied prior to or at the First Closing Date is not so satisfied, this
Agreement at your election will terminate upon notification by you as
Representatives to the Company and the Agent without liability on the part of
any Underwriter, the Company or the Selling Stockholders except for the
expenses to be paid or reimbursed by the Company pursuant to Sections 7 and 9
hereof and except to the extent provided in Section 11 hereof.
SECTION 9. Reimbursement of Underwriters' Expenses. Notwithstanding
any other provisions hereof, if this Agreement shall be terminated by you
pursuant to Section 8, or if the sale to the Underwriters of the Common Shares
on the First Closing Date is not consummated because of any refusal, inability
or failure on the part of the Company or any Selling Stockholders to perform
any
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<PAGE> 31
agreement herein or to comply with any provision hereof, the Company agrees to
reimburse you and the other Underwriters upon demand for all out-of-pocket
expenses that shall have been reasonably incurred by you and them in connection
with the proposed purchase and the sale of the Common Shares, including but not
limited to fees and disbursements of counsel, printing expenses, travel
expenses, postage, telegraph charges and telephone charges relating directly to
the offering contemplated by the Prospectus. Any such termination shall be
without liability of any party to any other party except that the provisions of
this Section, Section 7 and Section 11 shall at all times be effective and shall
apply.
SECTION 10. Effectiveness of Registration Statement. You, the
Company and the Selling Stockholders will use your, its and their best efforts
to cause the Registration Statement to become effective, to prevent the
issuance of any stop order suspending the effectiveness of the Registration
Statement and, if such stop order be issued, to obtain as soon as possible the
lifting thereof.
SECTION 11. Indemnification. (a) The Company and each of the Selling
Stockholders, jointly and severally, agree to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of the Act against any losses, claims, damages, liabilities or
expenses, joint or several (collectively, "Damages"), to which such Underwriter
or such controlling person may become subject, under the Act, the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company), insofar as such Damages (or actions in respect thereof
as contemplated below) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading, or arise out
of or are based in whole or in part on any inaccuracy in the representations
and warranties of the Company or the Selling Stockholders, as the case may be,
contained herein or any failure of the Company or the Selling Stockholders to
perform their respective obligations hereunder or under law; and will reimburse
each Underwriter and each such controlling person for any legal and other
expenses as such expenses are reasonably incurred by such Underwriter or such
controlling person in connection with investigating, defending,
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settling, compromising or paying any such Damages; provided, that neither the
Company nor any Selling Stockholder shall be liable in any such case to the
extent that any such Damages arise out of or are based upon an untrue statement
or alleged untrue statement or omission or alleged omission made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto in reliance upon and in conformity with the
information furnished to the Company pursuant to Section 4 hereof; provided
further that neither the Company nor any Selling Stockholder shall be liable to
any Underwriter or any such controlling person with respect to any Damages
arising out of or based on any untrue statement or alleged untrue statement or
omission or alleged omission to state a material fact in any Preliminary
Prospectus which is corrected in the Prospectus if the person asserting such
loss, claim, damage, liability or expense purchased Common Shares from such
Underwriter but was not sent or given a copy of the Prospectus at or prior to
the written confirmation of the sale of such Common Shares to such person
(unless the failure to deliver a copy of the Prospectus was the result of a
breach by the Company of its obligations hereunder); provided further, that no
Outside Selling Stockholders (as defined below) shall be liable under this
Section 11 for any Damages arising out of or based upon any untrue statement or
alleged untrue statement of any material fact contained in the Registration
Statement, any Preliminary Prospectus, the Prospectus, or any amendment or
supplement thereto, or arising out of or based upon the omission or alleged
omission to state in any of them a material fact required to be stated therein
or necessary to make the statements in any of them not misleading, unless such
untrue statement or alleged untrue statement or omission or alleged omission
was in reliance upon and in conformity with information furnished by such
Outside Selling Stockholder to the Company or the Representatives for use in
connection therewith; and provided further, that no Selling Stockholder shall
be liable under this Section 11 for an amount in excess of the lesser of (i)
the proceeds (net of the applicable underwriting discount) received by such
Selling Stockholder for the Common Shares sold to the Underwriters pursuant to
this Agreement or (ii) such Selling Stockholder's pro rata share of the total
Damages incurred by the Underwriters and such controlling persons, based upon
the number of Common Shares sold by such Selling Stockholder to the
Underwriters pursuant to this Agreement as a percentage of the total number of
Common Shares sold to the Underwriters pursuant to this Agreement. The Company
and the Selling Stockholders may agree, as among themselves and without
limiting the rights of the Underwriters under this Agreement, as to their
respective amounts of such liability for which they each shall be responsible.
In addition to their other obligations under this Section 11(a), the Company
and the Selling Stockholders agree that, as an interim
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measure during the pendency of any claim, action, investigation, inquiry or
other proceeding arising out of or based upon any statement or omission, or any
alleged statement or omission, or any inaccuracy in the representations and
warranties of the Company or the Selling Stockholders herein or failure to
perform its obligations hereunder, all as described in this Section 11(a), the
Company and (subject to the limitations in the proviso clauses of the first
sentence of this Section 11(a)) the Selling Stockholders will reimburse each
Underwriter on a quarterly basis for all reasonable legal or other expenses
incurred in connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the Company's
or the Selling Stockholders' obligation to reimburse each Underwriter for such
expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any
such interim reimbursement payment is so held to have been improper, each
Underwriter shall promptly return it to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other
commercial lending rate for borrowers of the highest credit standing) announced
from time to time by Bank of America NT&SA, San Francisco, California (the
"Prime Rate"). Any such interim reimbursement payments which are not made to
an Underwriter within 30 days of a request for reimbursement, shall bear
interest at the Prime Rate from the date of such request. This indemnity
agreement will be in addition to any liability which the Company or the Selling
Stockholders may otherwise have. For purposes of this Section 11(a), "Outside
Selling Stockholders" shall mean each Selling Stockholder other than Lars D.
Perkins, J. Paul Costello and Charles A. Borwick.
(b) Each Underwriter will severally indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement, the Selling Stockholders and each person, if any, who
controls the Company or any Selling Stockholder within the meaning of the Act,
against any losses, claims, damages, liabilities or expenses to which the
Company, or any such director, officer, Selling Stockholder or controlling
person may become subject, under the Act, the Exchange Act, or other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Underwriter), insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof as contemplated below)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, or arise
out of or are based upon
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<PAGE> 34
the omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
in each case to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in the
Registration Statement, any Preliminary Prospectus, the Prospectus, or any
amendment or supplement thereto, in reliance upon and in conformity with the
information furnished to the Company pursuant to Section 4 hereof; and will
reimburse the Company, or any such director, officer, Selling Stockholder or
controlling person for any legal and other expense reasonably incurred by the
Company, or any such director, officer, Selling Stockholder or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. In addition
to its other obligations under this Section 11(b), each Underwriter severally
agrees that, as an interim measure during the pendency of any claim, action,
investigation, inquiry or other proceeding arising out of or based upon any
statement or omission, or any alleged statement or omission, described in this
Section 11(b) which relates to information furnished to the Company pursuant to
Section 4 hereof, it will reimburse the Company (and, to the extent applicable,
each officer, director, controlling person or Selling Stockholder) on a
quarterly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and enforceability of the
Underwriters' obligation to reimburse the Company (and, to the extent
applicable, each officer, director, controlling person or Selling Stockholder)
for such expenses and the possibility that such payments might later be held to
have been improper by a court of competent jurisdiction. To the extent that
any such interim reimbursement payment is so held to have been improper, the
Company (and, to the extent applicable, each officer, director, controlling
person or Selling Stockholder) shall promptly return it to the Underwriters
together with interest, compounded daily, determined on the basis of the Prime
Rate. Any such interim reimbursement payments which are not made to the
Company within 30 days of a request for reimbursement, shall bear interest at
the Prime Rate from the date of such request. This indemnity agreement will be
in addition to any liability which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party will
not relieve it
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<PAGE> 35
from any liability which it may have to any indemnified party for contribution
or otherwise than under the indemnity agreement contained in this Section or to
the extent it is not prejudiced as a proximate result of such failure. In case
any such action is brought against any indemnified party and such indemnified
party seeks or intends to seek indemnity from an indemnifying party, the
indemnifying party will be entitled to participate in, and, to the extent that
it may wish, jointly with all other indemnifying parties similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be a conflict
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf
of such indemnified party or parties. Upon receipt of notice from the
indemnifying party to such indemnified party of its election so to assume the
defense of such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the next
preceding sentence (it being understood, however, that the indemnifying party
shall not be liable for the expenses of more than one separate counsel, and one
separate local counsel, approved by the Representatives in the case of
paragraph (a), representing the indemnified parties who are parties to such
action) or (ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of the action, in
each of which cases the fees and expenses of counsel shall be at the expense of
the indemnifying party.
(d) If the indemnification provided for in this Section 11 is
required by its terms but is for any reason held to be unavailable to or
otherwise insufficient to hold harmless an indemnified party under paragraphs
(a), (b) or (c) in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of any losses, claims, damages, liabilities or expenses
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<PAGE> 36
referred to herein (i) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Selling Stockholders and the
Underwriters from the offering of the Common Shares or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (i) above but also the relative fault of the Company, the Selling
Stockholders and the Underwriters in connection with the statements or
omissions or inaccuracies in the representations and warranties herein which
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations. The respective relative benefits
received by the Company, the Selling Stockholders and the Underwriters shall be
deemed to be in the same proportion, in the case of the Company and the Selling
Stockholders as the total price paid to the Company and to the Selling
Stockholders, respectively, for the Common Shares sold by them to the
Underwriters (net of underwriting discounts or commissions but before deducting
expenses), and in the case of the Underwriters as the underwriting discounts or
commissions received by them bear to the total of such amounts paid to the
Company and to the Selling Stockholders and received by the Underwriters as
underwriting discounts or commissions. The relative fault of the Company, the
Selling Stockholders and the Underwriters shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact or
the inaccurate or the alleged inaccurate representation and/or warranty relates
to information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities and expenses referred to above shall be deemed to include, subject
to the limitations set forth in subparagraph (c) of this Section 11, any legal
or other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth in
subparagraph (c) of this Section 11 with respect to notice of commencement of
any action shall apply if a claim for contribution is to be made under this
subparagraph (d); provided, however, that no additional notice shall be
required with respect to any action for which notice has been given under
subparagraph (c) for purposes of indemnification. The Company, the Selling
Stockholders and the Underwriters agree that it would not be just and equitable
if contribution pursuant to this Section 11 were determined solely by pro rata
allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of
the equitable considerations referred to in this
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paragraph. Notwithstanding the provisions of this Section 11, no Underwriter
shall be required to contribute any amount in excess of the amount of the total
underwriting discounts or commissions received by such Underwriter in
connection with the Common Shares underwritten by it and distributed to the
public. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The Underwriters'
obligations to contribute pursuant to this Section 11 are several in proportion
to their respective underwriting commitments and not joint.
(e) It is agreed that any controversy arising out of the operation
of the interim reimbursement arrangements set forth in Sections 11(a) and 11(b)
hereof, including the amounts of any requested reimbursement payments and the
method of determining such amounts, shall be settled by arbitration conducted
under the provisions of the Constitution and Rules of the Board of Governors of
the New York Stock Exchange, Inc. or pursuant to the Code of Arbitration
Procedure of the NASD. Any such arbitration must be commenced by service of a
written demand for arbitration or written notice of intention to arbitrate,
therein electing the arbitration tribunal. In the event the party demanding
Common Shares arbitration does not make such designation of an arbitration
tribunal in such demand or notice, then the party responding to said demand or
notice is authorized to do so. Such an arbitration would be limited to the
operation of the interim reimbursement provisions contained in Sections 11(a)
and 11(b) hereof and would not resolve the ultimate propriety or enforceability
of the obligation to reimburse expenses which is created by the provisions of
such Sections 11(a) and 11(b) hereof.
SECTION 12. Default of Underwriters. It shall be a condition to this
Agreement and the obligation of the Company and the Selling Stockholders to
sell and deliver the Common Shares hereunder, and of each Underwriter to
purchase the Common Shares in the manner as described herein, that, except as
hereinafter in this paragraph provided, each of the Underwriters shall purchase
and pay for all the Common Shares agreed to be purchased by such Underwriter
hereunder upon tender to the Representatives of all such shares in accordance
with the terms hereof. If any Underwriter or Underwriters default in their
obligations to purchase Common Shares hereunder on either the First or Second
Closing Date and the aggregate number of Common Shares which such defaulting
Underwriter or Underwriters agreed but failed to purchase on such Closing Date
does not exceed 10% of the total number of Common Shares which the Underwriters
are obligated to purchase on such Closing Date, the non-defaulting
Underwriters shall be obligated severally, in proportion to their respective
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<PAGE> 38
commitments hereunder, to purchase the Common Shares which such defaulting
Underwriters agreed but failed to purchase on such Closing Date. If any
Underwriter or Underwriters so default and the aggregate number of Common
Shares with respect to which such default occurs is more than the above
percentage and arrangements satisfactory to the Representatives and the Company
for the purchase of such Common Shares by other persons are not made within 48
hours after such default, this Agreement will terminate without liability on
the part of any non-defaulting Underwriter or the Company or the Selling
Stockholders except for the expenses to be paid by the Company and the Selling
Stockholders pursuant to Section 7 hereof and except to the extent provided in
Section 11 hereof.
In the event that Common Shares to which a default relates are to be
purchased by the non-defaulting Underwriters or by another party or parties,
the Representatives or the Company shall have the right to postpone the First
or Second Closing Date, as the case may be, for not more than five business
days in order that the necessary changes in the Registration Statement,
Prospectus and any other documents, as well as any other arrangements, may be
effected. As used in this Agreement, the term "Underwriter" includes any
person substituted for an Underwriter under this Section. Nothing herein will
relieve a defaulting Underwriter from liability for its default.
SECTION 13. Effective Date. This Agreement shall become effective
immediately as to Sections 7, 9, 11, 14 and 16 and, as to all other provisions,
(i) if at the time of execution of this Agreement the Registration Statement
has not become effective, at 2:00 P.M., California time, on the first full
business day following the effectiveness of the Registration Statement, or (ii)
if at the time of execution of this Agreement the Registration Statement has
been declared effective, at 2:00 P.M., California time, on the first full
business day following the date of execution of this Agreement; but this
Agreement shall nevertheless become effective at such earlier time after the
Registration Statement becomes effective as you may determine on and by notice
to the Company or by release of any of the Common Shares for sale to the
public. For the purposes of this Section 13, the Common Shares shall be deemed
to have been so released upon the release for publication of any newspaper
advertisement relating to the Common Shares or upon the release by you of
telegrams (i) advising Underwriters that the Common Shares are released for
public offering, or (ii) offering the Common Shares for sale to securities
dealers, whichever may occur first.
SECTION 14. Termination. Without limiting the right to terminate
this Agreement pursuant to any other provision hereof:
-38-
<PAGE> 39
(a) This Agreement may be terminated by the Company by
notice to you and the Agent or by you by notice to the Company and the
Agent at any time prior to the time this Agreement shall become
effective as to all its provisions, and any such termination shall be
without liability on the part of the Company or the Selling
Stockholders to any Underwriter (except for the expenses to be paid or
reimbursed by the Company pursuant to Sections 7 and 9 hereof and
except to the extent provided in Section 11 hereof) or of any
Underwriter to the Company or the Selling Stockholders (except to the
extent provided in Section 11 hereof).
(b) This Agreement may also be terminated by you prior to
the First Closing Date by notice to the Company and the Agent (i) if
additional material governmental restrictions, not in force and effect
on the date hereof, shall have been imposed upon trading in securities
generally or minimum or maximum prices shall have been generally
established on the New York Stock Exchange or on the American Stock
Exchange or in the over the counter market by the NASD, or trading in
securities generally shall have been suspended on either such Exchange
or in the over the counter market by the NASD, or a general banking
moratorium shall have been established by federal, New York or
California authorities, (ii) if an outbreak of major hostilities or
other national or international calamity or any substantial change in
political, financial or economic conditions shall have occurred or
shall have accelerated or escalated to such an extent, as, in the
judgment of the Representatives, to affect adversely the marketability
of the Common Shares, (iii) if any adverse event shall have occurred
or shall exist which makes untrue or incorrect in any material respect
any statement or information contained in the Registration Statement
or Prospectus or which is not reflected in the Registration Statement
or Prospectus but should be reflected therein in order to make the
statements or information contained therein not misleading in any
material respect, or (iv) if there shall be any action, suit or
proceeding pending or threatened, or there shall have been any
development or prospective development involving particularly the
business or properties or securities of the Company or the
transactions contemplated by this Agreement, which, in the reasonable
judgment of the Representatives, may materially and adversely affect
the Company's business or results of operations and makes it
impracticable or inadvisable to offer or sell the Common Shares. Any
termination pursuant to this subparagraph (b) shall be without
liability on the part of any Underwriter to the Company or the Selling
Stockholders or on the part of the Company or the Selling Stockholders
to any
-39-
<PAGE> 40
Underwriter (except for expenses to be paid or reimbursed by the
Company pursuant to Sections 7 and 9 hereof and except to the extent
provided in Section 11 hereof).
SECTION 15. Failure of the Selling Stockholders to Sell and Deliver.
If one or more of the Selling Stockholders shall fail to sell and deliver to
the Underwriters the Common Shares to be sold and delivered by such Selling
Stockholders at the First Closing Date under the terms of this Agreement, then
the Underwriters may at their option, by written notice from you to the Company
and the Selling Stockholders, either (i) terminate this Agreement without any
liability on the part of any Underwriter or, except as provided in Sections 7,
9 and 11 hereof, the Company or the Selling Stockholders, or (ii) purchase the
shares which the Company and other Selling Stockholders have agreed to sell and
deliver in accordance with the terms hereof. In the event of a failure by one
or more of the Selling Stockholders to sell and deliver as referred to in this
Section, either you or the Company shall have the right to postpone the First
Closing Date for a period not exceeding seven business days in order that the
necessary changes in the Registration Statement, Prospectus and any other
documents, as well as any other arrangements, may be effected.
SECTION 16. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers, of the Selling Stockholders and of
the several Underwriters set forth in or made pursuant to this Agreement will
remain in full force and effect, regardless of any investigation made by or on
behalf of any Underwriter, the Company or any Selling Stockholders or any of
its or their partners, officers or directors or any controlling person, or the
Selling Stockholders, as the case may be, and will survive delivery of and
payment for the Common Shares sold hereunder and any termination of this
Agreement.
SECTION 17. Notices. All communications hereunder shall be in
writing and, if sent to the Representatives shall be mailed, delivered or
telegraphed and confirmed to you at 600 Montgomery Street, San Francisco,
California 94111, Attention: General Counsel, with a copy to Hale and Dorr, 60
State Street, Boston, Massachusetts 02109, Attention: Patrick J. Rondeau, Esq.;
and if sent to the Company or the Selling Stockholders shall be mailed,
delivered or telegraphed and confirmed to the Chief Executive Officer of the
Company and the Agent at Restrac, Inc., 3 Allied Drive, Dedham, Massachusetts
02026 with a copy to Goodwin, Procter & Hoar, Exchange Place, 53 State
Street, Boston Massachusetts 02109, Attention: John J. Egan, III, Esq. The
Company, the
-40-
<PAGE> 41
Selling Stockholders or you may change the address for receipt of
communications hereunder by giving notice to the others.
SECTION 18. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 12 hereof, and to the benefit of the officers and directors
and controlling persons referred to in Section 11, and in each case their
respective successors, personal representatives and assigns, and no other
person will have any right or obligation hereunder. No such assignment shall
relieve any party of its obligations hereunder. The term "successors" shall
not include any purchaser of the Common Shares as such from any of the
Underwriters merely by reason of such purchase.
SECTION 19. Representation of Underwriters. You will act as
Representatives for the several Underwriters in connection with all dealings
hereunder, and any action under or in respect of this Agreement taken by you
jointly or by Montgomery Securities, as Representatives, will be binding upon
all the Underwriters.
SECTION 20. Partial Unenforceability. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement shall
not affect the validity or enforceability of any other Section, paragraph or
provision hereof. If any Section, paragraph or provision of this Agreement is
for any reason determined to be invalid or unenforceable, there shall be deemed
to be made such minor changes (and only such minor changes) as are necessary to
make it valid and enforceable.
SECTION 21. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal laws (and not the laws pertaining to
conflicts of laws) of the State of California.
SECTION 22. General. This Agreement constitutes the entire agreement
of the parties to this Agreement and supersedes all prior written or oral and
all contemporaneous oral agreements, understandings and negotiations with
respect to the subject matter hereof. This Agreement may be executed in
several counterparts, each one of which shall be an original, and all of which
shall constitute one and the same document.
In this Agreement, the masculine, feminine and neuter genders and the
singular and the plural include one another. The section headings in this
Agreement are for the convenience of the parties only and will not affect the
construction or interpretation of this Agreement. This Agreement may be
amended or modified, and the observance of any term of this Agreement may be
waived, only
-41-
<PAGE> 42
by a writing signed by the Company, the Selling Stockholders and you.
Any person executing and delivering this Agreement as Attorney-in-fact
for the Selling Stockholders represents by so doing that he has been duly
appointed as Attorney-in-fact by such Selling Stockholder pursuant to a validly
existing and binding Power of Attorney which authorizes such Attorney-in-fact
to take such action. Any action taken under this Agreement by any of the
Attorneys-in-fact will be binding on all Selling Stockholders.
-42-
<PAGE> 43
If the foregoing is in accordance with your understanding of our
agreement, kindly sign and return to us the enclosed copies hereof, whereupon
it will become a binding agreement between among the Company, the Selling
Stockholders and the several Underwriters including you, all in accordance with
its terms.
Very truly yours,
RESTRAC, INC.
By:______________________________
Lars D. Perkins
SELLING STOCKHOLDERS
By:______________________________
Lars D. Perkins
as Attorney-in-fact
By:______________________________
Cynthia G. Eades
as Attorney-in-fact
The foregoing Underwriting Agreement
is hereby confirmed and accepted by
us in San Francisco, California as of
the date first above written.
MONTGOMERY SECURITIES
WESSELS, ARNOLD & HENDERSON, L.L.C.
ADAMS, HARKNESS & HILL, INC.
Acting as Representatives of the
several Underwriters named in
the attached Schedule A.
By MONTGOMERY SECURITIES
By:______________________________
Partner
-43-
<PAGE> 44
SCHEDULE A
<TABLE>
<CAPTION>
Number of Firm
Common Shares
Name of Underwriter to be Purchased
- ------------------- ---------------
<S> <C>
Montgomery Securities . . . . . . . . . . . . . . . . . . . . . . .
Wessels, Arnold & Henderson, L.L.C. . . . . . . . . . . . . . . . .
Adams, Harkness & Hill, Inc. . . . . . . . . . . . . . . . . . . .
_________
TOTAL . . . . . . . . . . . . . . . . . . . . 2,500,000
=========
</TABLE>
A-1
<PAGE> 45
SCHEDULE B
<TABLE>
<CAPTION>
Number of Firm Number of Optional
Common Shares to Common Shares to
be Sold by Selling be Sold by Selling
Name of Selling Stockholder Stockholder Stockholder
- --------------------------- ------------------ ------------------
<S> <C> <C>
Advent VII, L.P. 258,000 107,500
Advent Atlantic and
Pacific II L.P. 53,262 22,193
Advent New York L.P. 25,800 10,750
Advent Industrial II L.P. 19,202 8,001
TA Venture Investors Limited
Partnership 3,870 1,612
Chestnut III Limited
Partnership 20,145 8,394
Chestnut Capital International
III Limited Partnership 6,721 2,800
Lars D. Perkins 216,000 105,000
J. Paul Costello 252,000 105,000
Charles A. Borwick 136,000 0
John P. Jopling 9,000 3,750
--------- -------
TOTAL 1,000,000 375,000
========= =======
</TABLE>
A-2
<PAGE> 1
EXHIBIT 3.1
FIRST AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RESTRAC, INC.
Restrac, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Restrac, Inc. The date of the filing of
its original Certificate of Incorporation with the Secretary of State of the
State of Delaware was November 8, 1993. The name under which the Corporation
filed its original Certificate of Incorporation was MicroTrac Systems, Inc.
2. This First Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the Restated Certificate of
Incorporation of the Corporation filed with the Secretary of State of the State
of Delaware on January 5, 1994, as heretofore amended (the "Certificate of
Incorporation"), and was duly adopted by the written consent of the stockholders
of the Corporation, with written notice thereof having been given to all
stockholders of the Corporation who have not given their written consent, all in
accordance with the applicable provisions of Sections 228, 242 and 245 of the
General Corporation Law of the State of Delaware (the "DGCL").
3. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to provide as herein set forth in full.
ARTICLE I
NAME
----
The name of the Corporation is RESTRAC, INC.
<PAGE> 2
ARTICLE II
REGISTERED OFFICE
-----------------
The address of the Corporation's registered office 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 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:
A. COMMON STOCK
------------
SECTION 1. VOTING. Each holder of record shall be entitled to one vote for
each share of Common Stock standing in his name on the books of the Corporation.
SECTION 2. DIVIDENDS. Subject to applicable law, the holders of Common
Stock shall be entitled to receive dividends out of funds legally available
therefor at such times and in such
2
<PAGE> 3
amounts as the Board of Directors may determine in its sole discretion, with
each share of Common Stock sharing equally, share for share, in such dividends.
SECTION 3. LIQUIDATION. Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, after the payment or
provision for payment of all debts and liabilities of the Corporation and all
preferential amounts to which the holders of Preferred Stock are entitled with
respect to the distribution of assets in liquidation, the holders of Common
Stock shall be entitled to share ratably in the remaining assets of the
Corporation available for distribution.
SECTION 4. NOTICES. In the event that the Corporation provides any notice,
report or statement to any holder of Common Stock, the Corporation shall at the
same time provide a copy of any such notice, report or statement to each holder
of outstanding Common Stock.
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 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
3
<PAGE> 4
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.
(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
4
<PAGE> 5
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 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
5
<PAGE> 6
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 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
6
<PAGE> 7
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 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
7
<PAGE> 8
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 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
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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 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
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(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 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.
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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 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
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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; 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
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<PAGE> 13
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 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
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<PAGE> 14
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.
SECTION 6. PROTECTIVE PROVISIONS.
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(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
----------------------------
SECTION 1. ISSUANCE. Subject to any limitations prescribed by law or this
Amended and Restated Certificate, the Board of Directors of the Corporation or
an authorized committee thereof is expressly authorized to provide for the
issuance of the shares of Undesignated Preferred Stock in one or more classes or
one or more series of stock within any class, and by
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<PAGE> 16
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 class or series, and to fix the designation, voting powers,
preferences, qualifications, privileges and rights of the share of each such
class or series and any qualifications, limitations and restrictions thereof.
Any action of the Board of Directors or an authorized committee thereof under
this paragraph C shall require an 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 an authorized committee thereof shall have the right to
determine or fix one or more of the following with respect to each class or
series of such Undesignated Preferred Stock to the extent permitted by law:
(a) The distinctive class or serial designation and the number of shares
constituting such class or series;
(b) The dividend rates or the amount of dividends to be paid on the shares
of such class or 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 share of such class
or series;
(d) Whether the shares of such class or 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 class or 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 class or 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 class or 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 class or
series shall be issued;
(i) Whether the shares of such class or series which are redeemed or
converted shall have the status of authorized but unissued shares of Preferred
Stock 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 of the Corporation or an
authorized committee thereof may deem advisable.
Subject to the authority of the Board of Directors as set forth in clause
(i) above, any shares of Undesignated Preferred Stock shall, upon reacquisition
thereof by the Corporation, be restored to the status of authorized but unissued
Undesignated Preferred Stock under this paragraph C.
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.
------------------------------
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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 held following
the fiscal year ending September 30, 1997, and the initial Class III Directors
shall serve for a term expiring at the annual meeting of stockholders to be held
following the fiscal year ending September 30, 1998. At each annual meeting of
stockholders, the successor or successors of the class of Directors whose term
expires at that meeting (other than Directors elected by any series of Preferred
Stock) shall be elected by a plurality of the votes cast at such meeting and
shall hold office for a term expiring at the annual meeting of stockholders held
in the third year following the year of their election. The Directors elected to
each class (other than Directors elected by any series of Preferred Stock) shall
hold office until their successors are duly elected and qualified or until their
earlier resignation or removal.
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this First Amended and Restated Certificate of Incorporation, the
holders of any one or more series of Preferred Stock shall have the right,
voting separately as a series or together with holders of other such series, to
elect Directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of this First Amended and Restated Certificate of
Incorporation and any certificate of designations applicable thereto, and such
Directors so elected shall not be divided into classes pursuant to this Section
3.
During any period when the holders of any series of Preferred Stock have
the right to elect additional Directors as provided for or fixed pursuant to the
provisions of Article IV hereof, then upon commencement and for the duration of
the period during which such right continues: (i) the then otherwise total
authorized number of Directors of the Corporation shall automatically be
increased by such specified number of Directors, and the holders of such
Preferred Stock shall be entitled to elect the additional Directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional Director
shall serve until such Director's successor shall have been duly elected and
qualified, or until such Director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier, subject to such
Director's earlier death, disqualification, resignation or removal. Except as
otherwise provided by the Board in the resolution or resolutions establishing
such series, whenever the holders of any series of Preferred Stock having such
right to elect additional Directors are divested of such right pursuant to the
provisions of such stock, the terms of office of all such additional Directors
elected by the holders of such stock, or elected to fill any vacancies
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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 in the Board of Directors, however
occurring, including, without limitation, by reason of an increase in size of
the Board of Directors, or the death, resignation, disqualification or removal
of a Director, shall be filled solely by the affirmative vote of a majority of
the remaining Directors then in office, even if less than a quorum of the Board
of Directors. Any Director appointed in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of Directors
in which the new directorship was created or the vacancy occurred and until such
Director's successor shall have been duly elected and qualified or until his or
her earlier resignation or removal. Subject to the rights, if any, of the
holders of any series of Preferred Stock to elect Directors, when the number of
Directors is increased or decreased, the Board of Directors shall determine the
class or classes to which the increased or decreased number of Directors shall
be apportioned; provided, however, that no decrease in the number of Directors
shall shorten the term of any incumbent Director. In the event of a vacancy in
the Board of Directors, the remaining Directors, except as otherwise provided by
law, may exercise the powers of the full Board of Directors until the vacancy is
filled.
Section 5. Removal.
-------------------
Subject to the rights, if any, of any series of Preferred Stock to elect
Directors and to remove any Director whom the holders of any such stock have the
right to elect, any Director (including persons elected by Directors to fill
vacancies in the Board of Directors) may be removed from office (i) only with
cause and (ii) only by the affirmative vote of at least two-thirds of the total
votes which would be eligible to be cast by stockholders in the election of such
Director. At least 30 days prior to any meeting of stockholders at which it is
proposed that any Director be removed from office, written notice of such
proposed removal shall be sent to the Director whose removal will be considered
at the meeting. For purposes of this First Amended and Restated Certificate of
Incorporation, "cause," with respect to the removal of any Director shall
include (i) conviction of a felony, (ii) declaration of unsound mind by order of
court, (iii) gross dereliction of duty, (iv) commission of any action involving
moral turpitude, or (v) commission of an action which constitutes intentional
misconduct or a knowing violation of law if such action in either event results
both in an improper substantial personal benefit and a material injury to the
Corporation.
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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 First Amended and Restated
Certificate of Incorporation to authorize corporate action further eliminating
or limiting the personal liability of Directors, then the liability of a
Director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended.
Any repeal or modification of this Article VII by either of (i) the
stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such repeal or
modification with respect to any acts or omissions occurring before such repeal
or modification of a person serving as a Director at the time of such repeal or
modification.
ARTICLE VIII
AMENDMENT OF BY-LAWS
--------------------
Section 1. Amendment by Directors
---------------------------------
Except as otherwise provided by law, the By-laws of the Corporation may be
amended or repealed by the Board of Directors.
Section 2. Amendment by Stockholders
------------------------------------
The By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such
purpose, by the affirmative vote of at least two-thirds of the total votes
eligible to be cast on such amendment or repeal by holders of voting stock,
voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such
meeting of stockholders, such amendment or repeal shall only require the
affirmative vote of a majority of the total votes eligible to be cast on such
amendment or repeal by holders of voting stock, voting together as a single
class.
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ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
-----------------------------------------
The Corporation reserves the right to amend or repeal this First Amended
and Restated Certificate of Incorporation in the manner now or hereafter
prescribed by statute and this First Amended and Restated Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation. No amendment or repeal of this First Amended and
Restated Certificate of Incorporation shall be made unless the same is first
approved by the Board of Directors pursuant to a resolution adopted by the Board
of Directors in accordance with Section 242 of the DGCL, and, except as
otherwise provided by law, thereafter approved by the stockholders. Whenever any
vote of the holders of voting stock is required to amend or repeal any provision
of this First Amended and Restated Certificate of Incorporation, and in addition
to any other vote of holders of voting stock that is required by this First
Amended and Restated Certificate of Incorporation, or by law, the affirmative
vote of a majority of the total votes eligible to be cast by holders of voting
stock with respect to such amendment or repeal, voting together a single class,
at a duly constituted meeting of stockholders called expressly for such purpose
shall be required to amend or repeal any provisions of this First Amended and
Restated Certificate of Incorporation; provided, however, that the affirmative
vote of not less than 80% of the total votes eligible to be cast by holders of
voting stock, voting together a single class, shall be required to amend or
repeal any of the provisions of Article VI or Article IX of this First Amended
and Restated Certificate of Incorporation.
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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 8th day of May, 1996.
/s/ Lars D. Perkins
-----------------------------------
Lars D. Perkins, President
22
<PAGE> 1
EXHIBIT 3.2
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RESTRAC, INC.
Restrac, Inc., a corporation organized and existing under the laws of the
State of Delaware (the "Corporation"), hereby certifies as follows:
1. The name of the Corporation is Restrac, Inc. The date of the filing of
its original Certificate of Incorporation with the Secretary of State of the
State of Delaware was November 8, 1993. The name under which the Corporation
filed its original Certificate of Incorporation was MicroTrac Systems, Inc.
2. This Second Amended and Restated Certificate of Incorporation amends,
restates and integrates the provisions of the First Amended and Restated
Certificate of Incorporation of the Corporation filed with the Secretary of
State of the State of Delaware on May , 1996, and was duly adopted by the
written consent of the stockholders of the Corporation, with written notice
thereof having been given to all stockholders of the Corporation who have not
given their written consent, all in accordance with the applicable provisions of
Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware (the "DGCL").
3. The text of the First Amended and Restated Certificate of Incorporation
is hereby amended and restated in its entirety to provide as herein set forth in
full.
ARTICLE I
NAME
----
The name of the Corporation is RESTRAC, INC.
<PAGE> 2
ARTICLE II
REGISTERED OFFICE
-----------------
The address of the Corporation's registered office in the State of Delaware
is 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware
19801. Its registered agent at such address is The Corporation Trust Company.
ARTICLE III
PURPOSES
--------
The business or purpose of 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 (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.
2
<PAGE> 3
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.
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.
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 Article
IV to fix the designations, powers, preferences and the relative, participating,
optional or other special rights of the shares of a series of Preferred Stock
and any qualifications, limitations and restrictions thereof 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:
(a) The distinctive serial designation and the number of shares
constituting such series;
(b) The rights in respect of dividends 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;
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<PAGE> 4
(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
(j) Such other powers, preferences, rights, qualifications, limitations
and restrictions thereof as the Board of Directors or any authorized committee
thereof may deem advisable.
A. COMMON STOCK
------------
SECTION 1. VOTING. Each holder of record shall be entitled to one vote for
each share of Common Stock standing in his name on the books of the Corporation.
SECTION 2. DIVIDENDS. Subject to applicable law, the holders of Common
Stock shall be entitled to receive dividends out of funds legally available
therefor at such times and in such amounts as the Board of Directors may
determine in its sole discretion, with each share of Common Stock sharing
equally, share for share, in such dividends.
SECTION 3. LIQUIDATION. Upon any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, after the payment or
provision for payment of all debts and liabilities of the Corporation and all
preferential amounts to which the holders of Preferred Stock are entitled with
respect to the distribution of assets in liquidation, the holders of Common
Stock shall be entitled to share ratably in the remaining assets of the
Corporation available for distribution.
SECTION 4. NOTICES. In the event that the Corporation provides any notice,
report or statement to any holder of Common Stock, the Corporation shall at the
same time provide a copy of any such notice, report or statement to each holder
of outstanding Common Stock.
4
<PAGE> 5
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 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.
5
<PAGE> 6
Notwithstanding the foregoing, whenever, pursuant to the provisions of
Article IV of this Second Amended and Restated Certificate of Incorporation, the
holders of any one or more series of Preferred Stock shall have the right,
voting separately as a series or together with holders of other such series, to
elect Directors at an annual or special meeting of stockholders, the election,
term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Second Amended and Restated Certificate
of Incorporation and any certificate of designations applicable thereto, and
such Directors so elected shall not be divided into classes pursuant to this
Section 3.
During any period when the holders of any series of Preferred Stock have
the right to elect additional Directors as provided for or fixed pursuant to the
provisions of Article IV hereof, then upon commencement and for the duration of
the period during which such right continues: (i) the then otherwise total
authorized number of Directors of the Corporation shall automatically be
increased by such specified number of Directors, and the holders of such
Preferred Stock shall be entitled to elect the additional Directors so provided
for or fixed pursuant to said provisions, and (ii) each such additional Director
shall serve until such Director's successor shall have been duly elected and
qualified, or until such Director's right to hold such office terminates
pursuant to said provisions, whichever occurs earlier, subject to such
Director's earlier death, disqualification, resignation or removal. Except as
otherwise provided by the Board in the resolution or resolutions establishing
such series, whenever the holders of any series of Preferred Stock having such
right to elect additional Directors are divested of such right pursuant to the
provisions of such stock, the terms of office of all such additional Directors
elected by the holders of such stock, or elected to fill any vacancies resulting
from the death, resignation, disqualification or removal of such additional
Directors, shall forthwith terminate and the total and authorized number of
Directors of the Corporation shall be reduced accordingly.
SECTION 4. VACANCIES. Subject to the rights, if any, of the holders of any
series of Preferred Stock to elect Directors and to fill vacancies in the Board
of Directors relating thereto, any and all vacancies 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
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<PAGE> 7
incumbent Director. In the event of a vacancy in the Board of Directors, the
remaining Directors, except as otherwise provided by law, may exercise the
powers of the full Board of Directors until the vacancy is filled.
SECTION 5. REMOVAL. Subject to the rights, if any, of any series of
Preferred Stock to elect Directors and to remove any Director whom the holders
of any such stock have the right to elect, any Director (including persons
elected by Directors to fill vacancies in the Board of Directors) may be removed
from office (i) only with cause and (ii) only by the affirmative vote of at
least two-thirds of the total votes which would be eligible to be cast by
stockholders in the election of such Director. At least 30 days prior to any
meeting of stockholders at which it is proposed that any Director be removed
from office, written notice of such proposed removal shall be sent to the
Director whose removal will be considered at the meeting. For purposes of this
Second Amended and Restated Certificate of Incorporation, "cause," with respect
to the removal of any Director shall include (i) conviction of a felony, (ii)
declaration of unsound mind by order of court, (iii) gross dereliction of duty,
(iv) commission of any action involving moral turpitude, or (v) commission of an
action which constitutes intentional misconduct or a knowing violation of law if
such action in either event results both in an improper substantial personal
benefit and a material injury to the Corporation.
ARTICLE VII
LIMITATION OF LIABILITY
-----------------------
A Director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a Director, except for liability (i) for any breach of the Director's
duty of loyalty to the Corporation or its 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.
7
<PAGE> 8
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.
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
8
<PAGE> 9
holders of voting stock, voting together a single class, shall be required to
amend or repeal any of the provisions of Article VI or Article IX of this Second
Amended and Restated Certificate of Incorporation.
9
<PAGE> 10
I, Lars D. Perkins, President of the Corporation, for the purpose of
amending and restating the Corporation's Certificate of Incorporation pursuant
to the General Corporation Law of the State of Delaware, do make this
certificate, hereby declaring and certifying that this is my act and deed on
behalf of the Corporation this ___ day of ___________, 1996.
-----------------------------------
Lars D. Perkins, President
10
<PAGE> 1
EXHIBIT 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
person or by a representative. For the first Annual Meeting following the
initial public
<PAGE> 2
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 presented for action at the Annual
Meeting in question. If neither the Board of Directors nor
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<PAGE> 3
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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<PAGE> 4
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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<PAGE> 5
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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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, informational and
other requirements set forth in this Section 3. Any stockholder who has complied
with the timing,
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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 By-Laws, 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) "Officer" means
any person who serves or has served as a Director or officer of the Corporation
or in any other office filled by election or appointment by the stockholders or
the Board of Directors of the Corporation and any heirs, executors,
administrators or personal representatives of such person; (b) "Non-Officer
Employee" means any person who serves or has served as an employee of the
Corporation, but who is not or was not an Officer, and any heirs, executors,
administrators or personal representatives of such person; (c) "Proceeding"
means any threatened, pending, or completed action, suit or proceeding (or part
thereof), whether civil, criminal, administrative, arbitrative or investigative,
any appeal of such an action, suit or proceeding, and any inquiry or
investigation which could lead to such an action, suit, or proceeding; and (d)
"Expenses" means any liability fixed by a judgment, order, decree or award in a
Proceeding, any amount reasonably paid in settlement of a Proceeding and any
professional fees and other expenses and disbursements reasonably incurred in a
Proceeding or in settlement of a Proceeding, including fines, taxes and
penalties relating thereto.
SECTION 2. OFFICERS. Except as provided in Section 4 of this Article V,
each Officer of the Corporation 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 rights
than said law permitted the Corporation to provide prior to such amendment)
against any and all Expenses incurred by such Officer in connection with any
Proceeding in which such Officer is involved as a result of serving or having
served (a) as an Officer or employee of the Corporation, (b) as a director,
officer or employee of any subsidiary of the Corporation, or (c) in any capacity
with any other corporation, organization, partnership, joint venture, trust or
other entity at the written request or direction of the Corporation, including
service with respect to employee or other benefit plans, and shall continue as
to an Officer after he or she has ceased to be an Officer and shall inure to the
benefit of his or her heirs, executors, administrators and personal
representatives; provided, however, that the Corporation shall indemnify any
such Officer seeking indemnification in connection with a Proceeding initiated
by such Officer only if such Proceeding was authorized by the Board of Directors
of the Corporation.
SECTION 3. NON-OFFICER EMPLOYEES. Except as provided in Section 4 of this
Article V, each Non-Officer Employee of the Corporation may, in the discretion
of the Board of Directors, be indemnified 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 rights than said law permitted the
Corporation to provide prior to such amendment) against any or all
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Expenses incurred by such Non-Officer Employee in connection with any Proceeding
in which such Non-Officer Employee is involved as a result of serving or having
served (a) as a Non-Officer Employee of the Corporation, (b) as a director,
officer or employee of any subsidiary of the Corporation, or (c) in any capacity
with any other corporation, organization, partnership, joint venture, trust or
other entity at the request or direction of the Corporation, including service
with respect to employee or other benefit plans, and 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; provided, however, that the Corporation may
indemnify any such Non-Officer Employee seeking indemnification in connection
with a Proceeding initiated by such Non-Officer Employee only if such Proceeding
was authorized by the Board of Directors of the Corporation.
SECTION 4. GOOD FAITH. No indemnification shall be provided pursuant to
this Article V to an Officer or to a Non-Officer Employee with respect to a
matter as to which such person shall have been finally adjudicated in any
Proceeding not to have 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, with respect to any criminal Proceeding, had no reasonable cause to believe
his or her conduct was unlawful. In the event that a Proceeding is compromised
or settled prior to final adjudication so as to impose any liability or
obligation upon an Officer or Non-Officer Employee, no indemnification shall be
provided pursuant to this Article V to said Officer or Non-Officer Employee with
respect to a matter if there be a determination that with respect to such matter
such person did not act 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, with respect to any criminal Proceeding, had no reasonable cause to believe
his or her conduct was unlawful. The determination contemplated by the preceding
sentence shall be made by (i) a majority vote of those Directors who are not
involved in such Proceeding (the "Disinterested Directors"); (ii) by the
stockholders; or (iii) if directed by a majority of Disinterested Directors, by
independent legal counsel in a written opinion. However, if more than half of
the Directors are not Disinterested Directors, the determination shall be made
by (i) a majority vote of a committee of one or more disinterested Director(s)
chosen by the Disinterested Director(s) at a regular or special meeting; (ii) by
the stockholders; or (iii) by independent legal counsel chosen by the Board of
Directors in a written opinion.
SECTION 5. PRIOR TO FINAL DISPOSITION. Unless otherwise determined by (i)
the Board of Directors, (ii) if more than half of the Directors are involved in
a Proceeding by a majority vote of a committee of one or more Disinterested
Director(s) chosen in accordance with the procedures specified in Section 4 of
this Article or (iii) if directed by the Board of Directors, by independent
legal counsel in a written opinion, any indemnification extended to an Officer
or Non-Officer Employee pursuant to this Article V shall include payment by the
Corporation or a subsidiary of the Corporation of Expenses as the same are
incurred in defending a Proceeding in advance of the final disposition of such
Proceeding upon receipt of an
16
<PAGE> 17
undertaking by such Officer or Non-Officer Employee seeking indemnification to
repay such payment if such Officer or Non-Officer Employee shall be adjudicated
or determined not to be entitled to indemnification under this Article V.
SECTION 6. CONTRACTUAL NATURE OF RIGHTS. The foregoing provisions of this
Article V shall be deemed to be a contract between the Corporation and each
Officer and Non-Officer Employee 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 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 an Officer or
Non-Officer Employee is not paid in full by the Corporation within 60 days after
a written claim for indemnification or documentation of expenses has been
received by the Corporation, such Officer or Non-Officer Employee 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 Officer or Non-Officer
Employee 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 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 7. NON-EXCLUSIVITY OF RIGHTS. The provisions in respect of
indemnification and the payment of expenses incurred in defending a Proceeding
in advance of its final disposition set forth in this Article V shall not be
exclusive of any right which any person may have or hereafter acquire under any
statute, provision of the Certificate or these By-Laws, agreement, vote of
stockholders or disinterested directors or otherwise; provided, however, that in
the event the provisions of this Article V in any respect conflict with the
terms of any agreement between the Corporation or any of its subsidiaries and
any person entitled to indemnification under this Article V, then the provision
which is more favorable to the relevant individual shall govern.
SECTION 8. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any Officer or Non-Officer Employee against any
liability of any character asserted against or incurred by the Corporation or
any such Officer or Non-Officer Employee, or arising out of any such 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.
17
<PAGE> 18
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 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.
18
<PAGE> 19
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 , 1996 and effective as of , 1996.
---------------- -----------------
19
<PAGE> 1
EXHIBIT 10.1
MICROTRAC SYSTEMS, INC.
Stock Purchase Agreement
Convertible Preferred Stock
January 5, 1994
<PAGE> 2
MICROTRAC SYSTEMS, INC.
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. Purchase of Shares ................................................... 1
2. Closing Date ......................................................... 2
3. Representations and Warranties of the Company ........................ 2
3.1 Organization and Standing ................................... 2
3.2 Corporate Power ............................................. 3
3.3 Subsidiaries ................................................ 3
3.4 Capitalization .............................................. 3
3.5 Authorization ............................................... 5
3.6 Financial Statements ........................................ 6
3.7 Changes ..................................................... 7
3.8 Title to Properties and Assets; Liens ....................... 8
3.9 Commitments ................................................. 8
3.10 Intellectual Properties; Governmental
Authorizations .............................................. 8
3.11 Compliance With Other Instruments ........................... 11
3.12 Litigation .................................................. 12
3.13 Insurance ................................................... 13
3.14 Governmental Consent ........................................ 13
3.15 Disclosure .................................................. 13
3.16 Agreements; Changes ......................................... 14
3.17 Taxes ....................................................... 15
3.18 Employees ................................................... 15
3.19 Retirement or Welfare Benefit Plan
Obligations ................................................. 16
3.20 Books and Records ........................................... 16
3.21 Brokers ..................................................... 16
3.22 Environmental Liabilities ................................... 17
3.23 Knowledge Qualification ..................................... 18
4. Representations and Warranties of the Purchasers ..................... 18
4.1 Authority ................................................... 18
4.2 Investment Representations .................................. 18
4.3 Brokers ..................................................... 20
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5. Conditions to the Purchasers' Obligations at
Closing .............................................................. 21
5.1 Representations and Warranties Correct;
Performance of Obligations .................................. 21
5.2 Opinion of Counsel .......................................... 21
5.3 Qualifications .............................................. 21
5.4 Directors ................................................... 21
5.5 Noncompetition Agreements ................................... 22
5.6 Perkins Certificate and Agreement ........................... 22
5.7 Shareholder Agreement; By-Laws .............................. 22
5.8 Termination of Voting Agreements;
Agreement Pertaining to Election of
Directors ................................................... 22
5.9 Key Person Insurance ........................................ 22
5.10 Stock Plan and Agreement .................................... 22
5.11 Proceedings and Documents ................................... 23
6. Conditions to Obligations of the Company ............................. 23
6.1 Representations and Warranties Correct;
Performance of Obligations .................................. 23
6.2 Qualifications .............................................. 23
6.3 Proceedings and Documents ................................... 24
7. Covenants of the Company or the Purchasers ........................... 24
7.1 Financial Information ....................................... 24
7.2 Inspection .................................................. 27
7.3 Confidentiality of Information .............................. 28
7.4 Use of Proceeds ............................................. 28
7.5 Key Person Life Insurance ................................... 28
7.6 Certain Transactions ........................................ 28
7.7 Assignment of Inventions/Confidentiality
Agreements .................................................. 29
7.8 Director's Fees ............................................. 30
7.9 Negative Covenants .......................................... 30
7.10 Non-Competition of Certain Key Employees .................... 31
7.11 Management Compensation ..................................... 33
7.12 Indemnification ............................................. 33
7.13 Capital Expenditures ........................................ 34
7.14 Indebtedness ................................................ 34
7.15 Future Financings ........................................... 34
7.16 Subsidiaries ................................................ 36
7.17 Termination of Covenants .................................... 37
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
8. Registration Rights .................................................. 38
8.1 Certain Definitions ......................................... 38
8.2 Required Registrations ...................................... 40
8.3 Incidental Registrations .................................... 44
8.4 Expenses of Registration .................................... 47
8.5 Registration Procedures ..................................... 47
8.6 Indemnification ............................................. 50
8.7 Information by Holder ....................................... 55
8.8 Rule 144 Reporting .......................................... 55
8.9 Market "Stand-off" Agreement ................................ 56
8.10 Termination ................................................. 56
9. Transfer of Shares ................................................... 57
9.1 Procedures .................................................. 57
9.2 Restrictive Legends ......................................... 57
9.3 Securities Law Compliance ................................... 58
10. Miscellaneous ........................................................ 58
10.1 Costs and Expenses .......................................... 59
10.2 Successors and Assigns ...................................... 59
10.3 Governing Law ............................................... 59
10.4 Survival .................................................... 59
10.5 Entire Agreement; Amendment ................................. 59
10.6 Notices, etc ................................................ 60
10.7 Delays or Omissions ......................................... 61
10.8 Counterparts ................................................ 61
10.9 Severability ................................................ 61
10.10 Captions .................................................... 62
</TABLE>
SCHEDULES
SCHEDULE A Purchasers
SCHEDULE B Exceptions to Representations and Warranties of the Company
SCHEDULE C Post-Closing Share Holdings and Employee Reserve
EXHIBITS
EXHIBIT A Certificate of Incorporation
EXHIBIT B By-Laws
EXHIBIT C Shareholder Agreement
EXHIBIT D Agreement Pertaining to Election of Directors
EXHIBIT E Commitments
EXHIBIT F Intellectual Properties
EXHIBIT G Assignment of Inventions/Confidentiality Agreement
EXHIBIT H Opinion of Counsel
EXHIBIT I Director's Indemnification Agreement
EXHIBIT J Certificate of Lars D. Perkins
EXHIBIT K Agreement Pertaining to Certain Activities
EXHIBIT L Stock Plan and Agreements
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<PAGE> 5
STOCK PURCHASE AGREEMENT
AGREEMENT made and entered into as of the 5th day of January, 1994
(together with Schedules A, B and C and Exhibits E and F hereto and all other
documents incorporated herein by reference to be referred to as the "Agreement")
by and between MicroTrac Systems, Inc., a Delaware corporation (the "Company"),
and the entities listed in Schedule A hereto (individually, a "Purchaser ";
collectively, the "Purchasers").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Purchase of Shares.
The Company will sell to each Purchaser, and each Purchaser will purchase
from the Company, the number of shares of the Company's convertible preferred
stock, $1.00 par value per share (the "Preferred Stock") set forth opposite such
Purchaser's name on Schedule A. The shares of Preferred Stock to be purchased
from the Company by the Purchasers are sometimes herein referred to as the
"Shares", and the price per Share so purchased shall be $6.30. Such purchase and
sale shall be made on the Closing Date (as defined in Section 2 below) and shall
be subject to the terms and conditions hereof and in reliance upon the
representations, warranties and agreements contained herein. The purchase price
for the Shares shall be paid at the Closing (by check payable to the Company or
by wire transfer of funds to the account of the Company) against
<PAGE> 6
delivery of certificates evidencing the Shares and registered in the names of
the respective Purchasers or their nominees. The purchases of Shares by each
Purchaser are separate transactions as fully as if provided for in separate
purchase agreements.
2. Closing Date.
The closing of the purchase and sale of the Shares hereunder (the
"Closing") shall be held at the offices of special counsel to the Purchasers,
Hill & Barlow, a Professional Corporation, One International Place, Boston,
Massachusetts 02110, at 10:00 a.m, on the date first above stated or at such
other time and place to which the Company and the Purchasers may agree (the
"Closing Date").
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to the Purchasers that, except
as set forth in the schedule of exceptions attached as Schedule B hereto (the
"Schedule of Exceptions"):
3.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and is the surviving corporation to a merger with MicroTrac Systems,
Inc., a Massachusetts corporation ("Massachusetts MicroTrac"). All references to
the Company in this Section 3 shall be deemed to include Massachusetts MicroTrac
unless the context otherwise requires. The Company has the requisite corporate
power to own and operate its properties and assets, and to carry on its business
as presently conducted and as proposed to be conducted. The Company is licensed
or qualified as a foreign corporation and is in good
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<PAGE> 7
standing in every state or other jurisdiction wherein the character of its
property or the nature of its activities makes such licensing or qualification
necessary and wherein the failure to be so licensed or qualified would have a
material adverse effect on the Company. Attached as Exhibits A and B hereto are
copies of the certificate of incorporation, as amended (the "Certificate of
Incorporation") and by-laws, as amended (the "By-Laws") of the Company. Said
copies are true, correct and complete and contain all amendments through the
date of this Agreement.
3.2 Corporate Power. The Company has now, and will have at the
Closing Date, all requisite legal and corporate power to enter into this
Agreement, to sell the Shares hereunder, and to carry out and perform its
obligations under the terms of this Agreement.
3.3 Subsidiaries. The Company does not own or control, directly or
indirectly, any interest or investment in any other corporation, association,
partnership or other business entity.
3.4 Capitalization. The Company's entire authorized capital stock
consists of 3,000,000 shares, of which 2,000,000 shares are common stock, $.01
par value per share ("Common Stock"), 995,000 shares of which are issued and
presently outstanding (without giving effect to the transaction referred to in
Section 7.4), and 1,000,000 shares are Preferred Stock, none of which were
outstanding prior to the Closing Date. All such issued and outstanding shares
are duly authorized and validly issued, fully paid and nonassessable and have
been issued in compliance with all
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<PAGE> 8
applicable state and federal laws concerning the issuance of securities. Subject
to the terms and conditions hereof, the Company has authorized the issuance on
the Closing Date of 556,155 shares of Preferred Stock and has authorized the
reservation of the number of shares of Common Stock issuable from time to time
on conversion of the Shares (said reserved shares, when issued, being referred
to herein as the "Purchaser Reserved Shares"), the Preferred Stock having the
terms and provisions set forth in Exhibit A hereto. There are presently reserved
for issuance pursuant to options or purchase rights granted or to be granted,
pursuant to the plan referred to in Section 5.10, to employees, officers,
directors or consultants of the Company 100,000 shares of Common Stock
("Employee Reserved Shares"). Except for the foregoing and except as provided in
this Agreement or the shareholder agreement attached as Exhibit C hereto (the
"Shareholder Agreement"), (i) no subscription, warrant, option, convertible
security or other right (contingent or otherwise) permitting any party other
than the Company to purchase or acquire any shares of capital stock of the
Company is authorized or outstanding, and (ii) the Company has no commitment to
issue any such subscription, warrant, option, convertible security or other
right, or to issue or distribute to holders of any shares of its capital stock
(by reason of their holding such capital stock) any evidences of indebtedness or
assets. Other than as provided in the Certificate of Incorporation, the Company
has no obligation, contingent or otherwise, to purchase, redeem or otherwise
acquire any shares of its capital stock (other than the Shares) or any
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<PAGE> 9
interest therein or to pay any dividend or make any other distribution in
respect thereof. Upon the effectiveness of this Agreement, no person or entity
will be entitled to any preemptive right, right of first refusal or similar
right with respect to the issuance, sale, redemption or transfer of any capital
stock of the Company or any rights with respect to the registration of any
capital stock of the Company under federal or state securities laws, except for
the right of first refusal as to Common Stock contained in the Shareholder
Agreement and except for the registration rights provided for in this Agreement.
Giving effect to the action referred to in the first sentence of Section 5.8 and
other than the agreement pertaining to election of directors attached as Exhibit
D hereto (the "Agreement Pertaining to Election of Directors"), the Shareholder
Agreement and this Agreement, there are no existing voting or stock restriction
agreements or similar agreements between the Company and any of its
shareholders, nor, to the best knowledge of the Company, are there any such
agreements among any of the Company's shareholders. Immediately after the
Closing and giving effect to the transaction referred to in Section 7.4, the
capital stock of the Company issued and outstanding and the Employee Reserved
Shares will be as stated in Schedule C hereto.
3.5 Authorization. All corporate action on the part of the Company,
its officers, board of directors (the "Board") and shareholders necessary for
the sale and issuance of the Shares pursuant hereto and the performance of the
Company's obligations hereunder has been taken or will be taken prior to the
Closing Date.
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<PAGE> 10
This Agreement shall constitute a valid and binding obligation of the Company,
enforceable in accordance with its terms, except as enforcement may be limited
by applicable bankruptcy, reorganization, insolvency or moratorium laws or other
similar laws affecting creditors' rights generally or general principles of
equity whether asserted in a proceeding at law or in equity. The Shares, when
issued in compliance with the provisions of this Agreement, will be validly
issued, fully paid and nonassessable, free of any liens or encumbrances, with
all original issuance taxes paid thereon.
3.6 Financial Statements. The Company has furnished the Purchasers
with copies of (a) its audited balance sheet as of September 30, 1993 and its
audited statement of operations and cash flow for the year ended September 30,
1993 (the "Audited. Financial Statements"), and (b) its unaudited balance sheets
as of October 31, 1993 and November 30, 1993 (November 30, 1993 being herein
referred to as the "Balance Sheet Date") and its unaudited income statements and
statements of cash flow for the one-month periods ended October 31, 1993 and
November 30, 1993 (the "Interim Financial Statements"). The Audited Financial
Statements and the Interim Financial Statements were prepared in accordance with
the Company's books and records and in accordance with generally accepted
accounting principles and fairly present the financial position and results of
operation of the Company as of the dates and for the periods indicated, subject,
however, in the case of the Interim Financial Statements to normal year end
audit adjustments not material in amount. There are no material liabilities of a
type required to be
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<PAGE> 11
reflected on a balance sheet prepared in accordance with generally accepted
accounting principles (whether accrued, absolute, contingent or otherwise) which
are not shown or provided for in the financial statements referred to in this
Section 3.6 except those arising since the Balance Sheet Date in the ordinary
course of the Company's business.
The Schedule of Exceptions contains for the month of December, 1993,
management's good faith estimate of the Company's revenues, cost of goods sold,
operating expenses, operating income, bookings and ending backlog, as reflected
on the Company's books on January 4, 1994, and with the acknowledgement that the
Company has not completed its normal monthly closing adjustments; provided, that
in the case of such operating income, the Company will not be deemed to have
breached the foregoing representation if the actual operating income for such
month is no more than $100,000 less than the amount shown on the Schedule of
Exceptions.
3.7 Changes. Since the Balance Sheet Date, there has not been any
event or condition of any type known to the Company that has materially and
adversely affected the Company's business, prospects, condition, affairs,
operation, properties or assets. Since the Balance Sheet Date, the physical
properties owned or leased by the Company have not suffered any material
destruction or damage, regardless of whether or not any such loss was insured
against.
-7-
<PAGE> 12
3.8 Title to Properties and Assets; Liens. The Company has good and
marketable title to all its properties and assets and has good title to all its
leasehold estates in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than minor liens and encumbrances which do not in
any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company and which have not arisen
otherwise than in the ordinary course of business.
3.9 Commitments. Attached hereto as Exhibit E is a list of all
agreements, contracts, indebtedness, liabilities and other obligations
(collectively, "Commitments") to which the Company is a party or by which it is
bound and which are material to the conduct and operations of its business. For
purposes of this Section 3.9, a Commitment occurring in the ordinary course of
the Company's business shall not be considered material unless it, together with
other Commitments with the same party, involve more than $25,000. Copies of the
documentation evidencing such Commitments have been made available for
inspection by the Purchasers and their special counsel.
3.10 Intellectual Properties; Governmental Authorizations. The Company
has sufficient and valid right, title and ownership of all patents, trademarks,
service marks, trade names, copyrights, licenses, trade secrets, inventions, and
proprietary rights (collectively, "Intellectual Properties"), including without
limitation those relating to RESTRAC, RESTRAC Master Temp, RESTRAC/SQL, RESTRAC
Kiosk, RESTRAC Enterprise, Success Plan,
-8-
<PAGE> 13
Success Plan/SQL, Resume Finder, Resume Scanner, Resume Indexer, and Report
Plus, or licenses, rights or purchase options with respect to the foregoing,
necessary for its business as now conducted and as currently proposed to be
conducted, or will be able to obtain on terms which will not materially and
adversely affect its business all such necessary permits, licenses and other
authority with respect thereto without any conflict with or infringement of the
known or asserted rights of others. Exhibit F contains a complete list of the
software products presently distributed by the Company which are material to its
business (the "Products") and all trademarks that are material to its business.
None of the Products constitute hardware or so-called "firmware." The Company
has taken reasonable steps to establish and preserve its ownership of all
material copyright, trade secret and other proprietary rights with respect to
its products and technology. In particular, without limitation of the foregoing,
the Company has (a) affixed appropriate copyright notices to all copies of the
Products distributed to third parties, in object code form or any other form,
and all related documentation, developed or owned by the Company; (b)
distributed such Products and documentation or otherwise made it available only
to (i) employees, consultants or potential investors who have signed agreements
limiting the use and disclosure thereof and requiring such persons to preserve
the confidentiality thereof, or (ii) other persons who have executed written
license agreements limiting the use, reproduction, distribution and disclosure
thereof and requiring the licensees to preserve the confidentiality thereof; (c)
disclosed
-9-
<PAGE> 14
or made available the source code and systems documentation of such Products,
and any other documents embodying material Intellectual Properties of the
Company which are confidential, only to employees, consultants or potential
investors of the Company who required such disclosure or access for the business
purposes of the Company; and (d) required all such employees, consultants and
potential investors who have had access to such source code, systems
documentation or other documents (collectively, "Proprietary Documentation") to
execute written agreements requiring them to maintain the confidentiality of all
confidential information of the Company, including the Proprietary
Documentation. The Company does not know of any infringement by others of its
copyrights, trademarks or other proprietary rights in any of its products or
technology, or any violation of the confidentiality of any of its Intellectual
Properties, including the Proprietary Documentation. Neither the Company nor, to
the Company's knowledge, any officer or management, technical or professional
employee of the Company is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
conflict with the Company's business as conducted (or as currently proposed to
be conducted, as evidenced by the Business Plan described in Section 3.15) or,
in the case of any such employee, such employee's right to be employed by the
Company. The Company does not believe it is utilizing any inventions or
proprietary ideas of any of its employees (or persons it currently intends to
hire) made prior to
-10-
<PAGE> 15
their employment by the Company and which are known by the Company to be
inventions of such employees or persons, other than as contemplated by the
Agreement. All of the officers and management, technical or professional
employees of the Company have executed agreements containing assignment of
invention and confidentiality covenants substantially in the form contained in
the agreement attached hereto as Exhibit G, and to the Company's knowledge, none
of such officers or management, technical or professional employees is in
violation thereof. The Company has obtained all governmental permits,
authorizations, approvals and licenses known by the Company to be necessary for
its business as now conducted and as currently proposed to be conducted (as
evidenced by such Business Plan) and the absence of which would have a material
adverse effect on the Company.
3.11 Compliance With Other Instruments. The Company is not in
violation in any material respect of any term of its Certificate of
Incorporation, By-Laws, or any Commitment, judgment, decree, order or, to its
knowledge, any statute, rule or regulation applicable to the Company. The
execution, delivery and performance of and compliance with this Agreement, and
the issuance of the Shares pursuant hereto, will not result in any such
violation or be in conflict with or constitute, with or without the passage of
time and giving of notice, a material default under any such term, or result in
the creation of any pledge, lien, encumbrance or charge upon any of the
properties or assets of the Company pursuant to any such terms.
-11-
<PAGE> 16
3.12 Litigation. There is no action, suit, proceeding or investigation
pending and known to the Company or known and currently threatened against the
Company which questions the validity of this Agreement or the right of the
Company to enter into it or to consummate the transactions contemplated hereby,
or which might result, either individually or in the aggregate, other than in
the ordinary course of business, in any material adverse change in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor does the Company know
of any basis for the foregoing. The foregoing includes, without limitation,
actions which to the Company's knowledge are pending or threatened (or any basis
therefor known to the Company) involving the prior employment of any of the
Company's officers or employees, their use in connection with the Company's
business of any information or techniques allegedly proprietary to any of their
former employers, or their obligations under any agreements with prior
employers. The Company is not a party or subject to the provisions of any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality.
3.13 Insurance. The insurable properties of the Company are insured
for the benefit of the Company against all risks normally insured against by
companies in its business and in amounts deemed appropriate by the Company's
management under valid policies issued by insurers believed to be financially
sound. The key person insurance coverage referred to in Section 7.5 is currently
in effect.
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<PAGE> 17
3.14 Governmental Consent. Based in part on the representations and
warranties of the Purchasers in Section 4, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority on the part of the Company is required
in connection with the consummation of the transactions contemplated by this
Agreement.
3.15 Disclosure. To the knowledge of the Company, neither this
Agreement nor any other written information or certificates made or delivered in
connection herewith (with the exception of the Company's Information Memorandum,
dated August, 1993, as updated and supplemented by the 1994 Operating Budget
dated December 17, 1993 (the "Business Plan"), which is covered by the next two
sentences of this Section 3.15) contain any untrue statement of a material fact
or omit to state a material fact known to the Company necessary to make the
statements herein or therein not misleading. The Executive Summary (part I) of
the Business Plan represents management's good faith attempt to set forth a
reasonably complete and accurate description of the Company's business, business
strategies, technology, technology strategies, products, product strategies,
strategic relationships, competition, customers, and management and the industry
in which the Company operates. The updated projections contained in the 1994
Operating Budget were based on assumptions believed to be reasonable and on the
best judgment of management of the Company, which assumptions its management
continues to believe to be reasonable; and the Company
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believes such projections are likely to be achieved, but otherwise no
representation or warranty is made with respect to such projections and no
guarantee is made that such projections will be achieved.
3.16 Agreements; Changes.
(a) Except for this Agreement, the agreements referred to in this
Agreement or the Schedules hereto, or employment relationships between the
Company and certain shareholders, there are no agreements, understandings
or proposed transactions between the Company and any person or entity which
is a shareholder, officer or director of the Company, a relative by blood
or marriage of, a trust or estate for the benefit of, or a person or entity
which directly or indirectly controls, is controlled by, or is under common
control with, any such person or entity (hereinafter referred to as a
"person or entity associated with the Company").
(b) Since the Balance Sheet Date, the Company has not (i) declared or
paid any dividends, or authorized or made any distribution upon or with
respect to any class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or incurred any other liabilities
individually presently in excess of $25,000 or in excess of $50,000 in the
aggregate, other than in the ordinary course of business, (iii) made any
loans or advances to any person, other than in the ordinary course of
business, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than in the ordinary course of business.
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3.17 Taxes. The Company has accurately prepared and timely filed all
income tax returns and other tax returns which are required to be filed by it,
true and complete copies of which for its fiscal years ended September 30, 1990,
1991 and 1992 have been furnished to the Purchasers, and has paid, or made
provision for the payment of, all taxes which have or may have become due
pursuant to said returns or pursuant to any assessment which has been received
by it. No controversy in respect of taxes of any type (including without
limitation sales taxes) is pending, or to the best knowledge of the Company,
threatened. The income tax returns of the Company have never been audited by any
federal or state governmental authority.
3.18 Employees. There are no material controversies pending or, to the
knowledge of the Company, currently threatened between it and any of its
employees. To the Company's knowledge and except as disclosed to the Purchasers,
no officer or key employee has any present intention of terminating his
employment with the Company and the Company has no present intention of
terminating any such employment. The Company is not a party to any collective
bargaining agreement and, to its knowledge, no organizational efforts are
presently being made with respect to any of its employees. The Company has
complied in all material respects with all applicable state and federal laws and
regulations respecting employment and employment practices, terms and conditions
of employment, wages and hours and other laws related to employment, and there
are no arrears in the payments of wages, withholding or
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social security taxes, unemployment insurance premiums or other similar
obligations.
3.19 Retirement or Welfare Benefit Plan Obligations. The Company has
no pension, retirement, welfare benefit or similar plan or obligation, whether
of a legally binding nature or in the nature of informal understandings.
3.20 Books and Records. The minute books of the Company contain
accurate summary records of all meetings and written consents to action of the
Company's shareholders, the Board and all committees, if any, appointed by the
Board. The Company's stock ledger is complete and reflects all issuances,
transfers, repurchases and cancellations of shares of capital stock of the
Company. The books of account and other financial records and the order books,
if any, of the Company accurately and completely reflect all material
information purported to be shown therein in all material respects.
3.21 Brokers. Other than its July 16, 1993 agreement with Cowen &
Company, as amended as of December 30, 1993 (the "Cowen Agreement"), the Company
has no contract, arrangement or understanding with any broker, finder, or
similar agent with respect to the transactions contemplated by this Agreement.
Upon completion of the offering of a total of 556,155 Shares and payment of the
fees specified in the Cowen Agreement with respect thereto, there will be no
further obligation to Cowen & Company for fees with respect to the transactions
contemplated by this Agreement or any future financing by the Company; provided,
that if the Company completes
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additional financings of up to $2,500,000 within one year following the date of
this Agreement, the Company may be responsible for additional fees to Cowen &
Company pursuant to the Cowen Agreement.
3.22 Environmental Liabilities.
(a) To its knowledge, the Company has no obligations or liabilities,
matured or not matured, absolute or contingent, assessed or unassessed,
which could reasonably be expected to have a material and adverse effect,
and no pending claims have been made against it and no currently
outstanding citations or notices including, without limitation, notice
letters, information requests or notices of potential responsibility, have
been issued against it, which could reasonably be expected to have a
material and adverse effect, and which, in the case of any of the
foregoing, have been or are imposed by reason of or based upon any
provision of any Environmental Laws.
(b) As used herein, the term "Environmental Laws" shall mean any and
all federal, state, local, or municipal laws, rules, orders, regulations,
statutes, ordinances, codes, decrees, or requirements of any federal,
state, municipal, or other governmental department, commission, board,
bureau, agency, or instrumentality, or other court or arbitrator, in each
case whether of the United States or foreign, regulating, relating to, or
imposing liability or standards of conduct concerning any hazardous
materials or petroleum products or environmental protection, as now in
effect.
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3.23 Knowledge Qualification. As used in this Section 3, all
references to information known to the Company shall mean information which was
known or, with the exercise of reasonable diligence would have been known, by
Lars D. Perkins or any other executive officer of the Company.
4. Representations and Warranties of the Purchasers. Each of the
Purchasers severally represents and warrants to the Company as follows:
4.1 Authority. Such Purchaser is a limited partnership duly
organized, validly existing and in good standing under the laws of the
jurisdiction shown on Schedule A. Any partnership or similar action on the part
of such Purchaser necessary for the purchase of Shares and the performance of
its obligations hereunder has been taken or will be taken prior to the Closing
Date. This Agreement, when executed and delivered by such Purchaser, will
constitute a valid and legally binding obligation of such Purchaser, enforceable
in accordance with its terms, except as enforcement may be limited by applicable
bankruptcy laws or other similar laws affecting creditors' rights generally.
4.2 Investment Representations. This Agreement is made with each
Purchaser upon the understanding as a specific representation to the Company by
such Purchaser that:
(a) the Shares purchased hereunder will be acquired for such
Purchaser's own account for investment and not with a view to the
distribution of any part thereof, and such Purchaser has no present
intention of selling, granting participation in, or otherwise distributing
the same;
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(b) such Purchaser acknowledges that such Purchaser has the knowledge
and experience in financial and business matters so as to be capable of
evaluating the merit and risk of and protecting such Purchaser's own
interests in connection with such Purchaser's purchase of Shares, and is
able to fend for such Purchaser in the transactions contemplated by this
Agreement and has the ability to bear the economic risk of such Purchaser's
investment pursuant to this Agreement;
(c) such Purchaser is not relying upon any representations of the
Company in connection with its investment other than the Company's
representations contained or referred to in this Agreement;
(d) such Purchaser believes it has obtained all information that it
considers relevant to evaluating the merit and risks of its investment in
the Company;
(e) such Purchaser has specific knowledge and experience with respect
to the computer software industry sufficient to enable it to evaluate the
validity of the assumptions upon which the projections contained in the
Business Plan are based;
(f) such Purchaser is not relying upon any articles contained in the
Business Plan or otherwise made available to it in evaluating the merit and
risks of its investment;
(g) such Purchaser's address set forth in Schedule A is its principal
business address, and the sale of the Company's securities to it will not
be subject to the securities laws of any jurisdiction other than the United
States of America and the Commonwealth of Massachusetts;
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(h) such Purchaser is an institutional investor, as defined in 950 CMR
14.401;
(i) such Purchaser is an accredited investor, as defined in Rule 501
promulgated by the Commission (as defined in Section 8.1); and
(j) such Purchaser understands that such Shares are characterized as
"restricted securities" under the federal securities laws and certain state
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such Shares may be resold without registration under
the Securities Act (as defined in Section 8.1) and those state securities
laws only in certain limited circumstances. In this connection, such
Purchaser represents that such Purchaser is familiar with Rule 144
promulgated by the Commission, as presently in effect, understands the
resale limitations imposed thereby and by the Securities Act, and is aware
that the Company is under no obligation to create a public market for its
securities.
Notwithstanding the foregoing provisions of this Section 4.2, nothing herein
shall be deemed to constitute a waiver by any of the Purchasers of the
representations, warranties or covenants of the Company contained or referred to
in this Agreement or of Lars D. Perkins contained in Exhibit J hereto.
4.3 Brokers. Such Purchaser has no contract, arrangement or
understanding with any broker, finder, or similar agent with respect to the
transactions contemplated by this Agreement.
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5. Conditions to the Purchasers' Obligations at Closing. The obligation
of each Purchaser to purchase Shares at the Closing is subject to the
fulfillment on or prior to the Closing Date of each of the following conditions:
5.1 Representations and Warranties Correct; Performance of
Obligations. The representations and warranties made by the Company in Section 3
hereof shall be true and correct when made, and shall be true and correct on the
Closing Date with the same force and effect as if they had been made on and as
of said date, subject to changes contemplated by this Agreement; and the Company
shall have performed all obligations and conditions herein required to be
performed or observed by it on or prior to the Closing Date.
5.2 Opinion of Counsel. The Purchasers shall have received from G.
Lamar Crittenden, Jr., counsel to the Company, an opinion, dated as of the
Closing Date, substantially in the form attached as Exhibit H hereto.
5.3 Qualifications. All authorizations, approvals or permits of any
governmental authority that are required in connection with the lawful issuance
and sale of the Shares under this Agreement shall have been duly obtained and
shall be effective.
5.4 Directors. Effective as of the Closing, the directors shall
consist of J. Paul Costello, Lars D. Perkins and A. Bruce Johnston. The Company
shall have entered into an indemnification agreement, in the form of Exhibit I
hereto, with each such person.
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5.5 Noncompetition Agreements. The agreements referred to in the
first sentence of Section 7.10 (with Messrs. Engdahl, Borwick, Guilmartin and
Harvey) shall have been entered into and copies thereof delivered to the
Purchasers.
5.6 Perkins Certificate and Agreement. Lars D. Perkins shall have
executed and delivered to the Purchasers a certificate in the form of Exhibit J
and shall have executed and delivered to the Company an agreement in the form of
Exhibit K.
5.7 Shareholder Agreement; By-Laws. The Purchasers and certain other
shareholders of the Company shall have executed and delivered the Shareholder
Agreement. The By-Laws shall have been amended to provide for restrictions on
transfer of shares of Common Stock in form and substance satisfactory to the
Purchasers.
5.8 Termination of Voting Agreements; Agreement Pertaining to
Election of Directors. The voting trust agreement dated February 18, 1988 and
the stockholders' voting agreement dated March 30, 1990 shall have been
terminated by the parties thereto, and evidence of such terminations shall have
been delivered to the Purchasers. The Purchasers and certain other shareholders
of the Company shall have executed and delivered the Agreement Pertaining to
Election of Directors in the form of Exhibit D.
5.9 Key Person Insurance. The key person insurance coverage referred
to in Section 7.5 shall be in effect, and evidence thereof shall have been
delivered to the Purchasers.
5.10 Stock Plan and Agreement. The Company shall have
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duly adopted the Stock Plan and related form of option agreement (including
vesting provisions) attached as Exhibit L hereto.
5.11 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchasers and counsel to the Purchasers, and the
Purchasers shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
6. Conditions to Obligations of the Company. The obligations of the
Company to sell and issue the Shares at the Closing are subject to the
fulfillment on or prior to the Closing Date of the following conditions:
6.1 Representations and Warranties Correct; Performance of
Obligations. The representations and warranties made by the Purchasers in
Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date with the same force and effect as if they had been
made on and as of said date, and the Purchasers shall have performed all
obligations and conditions herein required to be performed by them on or prior
to the Closing Date.
6.2 Qualifications. All authorizations, approvals or permits of any
governmental authority that are required in connection with the lawful issuance
and sale of the Shares under this Agreement shall have been duly obtained and
shall be effective.
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6.3 Proceedings and Documents. All proceedings in connection with the
transactions contemplated hereby and all documents and instruments incident to
such transactions shall be reasonably satisfactory in substance and form to the
Company and its counsel, and the Company shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request.
7. Covenants of the Company or the Purchasers. The Company and the
Purchasers, in the case of Section 7.3, hereby covenant and agree as follows:
7.1 Financial Information. The Company will furnish the following
reports to the persons indicated:
(a) Annual Financial Statements. As soon as practicable, but in any
event within 60 days after the end of each fiscal year of the Company, a
consolidated statement of earnings for such fiscal year, a consolidated
balance sheet of the Company as of the end of such year, and a consolidated
statement of cash flows for such year, such year-end financial reports to
be in reasonable detail, prepared in accordance with generally accepted
accounting principles, and audited and certified by an independent public
accounting firm of nationally recognized standing selected by the Company
and reasonably acceptable to the Purchasers, shall be furnished to the
Purchasers and to their transferees.
(b) Audit Reports. As soon as available, copies of all other financial
reports submitted to the Company or any
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Subsidiary (as defined in Section 7.14) by independent public accountants,
relating to any annual or interim audit of the books of the Company or any
Subsidiary, shall be furnished to the Purchasers and to their transferees.
(c) Monthly and Quarterly Financial Statements. Within 30 days of the
end of the first two months of each quarter and within 30 days of the end
of each quarter, an unaudited statement of earnings, balance sheet and
statement of cash flow and current operating plan of the Company for or as
of the end of such month or quarter, as the case may be, in reasonable
detail, shall be furnished to the Purchasers.
(d) Regulatory Filings. Within 10 days after filing, copies of all
reports filed by the Company pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 shall be furnished to the Purchasers and
their transferees and, promptly upon request by any Purchaser, the Company
shall furnish copies of press releases and other documents that the Company
shall have released to the press during the preceding 90 days.
(e) Litigation. Promptly upon the Company's learning thereof, notice
shall be furnished to the Purchasers of (i) any litigation filed against or
affecting the Company or any Subsidiary, whether or not covered by
insurance, which litigation involves an amount in controversy in excess of
$10,000 or which litigation is requesting a specific equitable remedy
including, without limitation, an injunction or
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restraining order, and (ii) the institution of any suit or administrative
proceeding which is reasonably expected materially and adversely to affect
the business, assets, operations, prospects, employee relations or
condition (financial or otherwise) of the Company or any Subsidiary.
(f) Unbudgeted Costs. Promptly upon the occurrence thereof, notice of
any event which has resulted in, or could reasonably be expected to result
in, an unanticipated cost to the Company or any Subsidiary in excess of
$50,000, including, without limitation, disputes with customers, employees,
consultants or creditors or disputes relating to contractual obligations
and amendments, modifications or waivers of any such obligation, shall be
furnished to the Purchasers.
(g) Other Information. The Company shall furnish to each Purchaser,
and to each transferee or prospective transferee of any Purchaser, such
other information relating to the financial condition, business, prospects
or corporate affairs of the Company as such Purchaser may from time to time
reasonably request; provided, however, that the Company shall not be
obligated to provide information which it deems in good faith to be
proprietary. Notwithstanding the foregoing provisions of this Section 7.1
or Section 7.2, the Company shall not be obligated to furnish information
to or permit inspection by any transferee or prospective transferee of a
Purchaser unless such transferee or prospective transferee (i) is a partner
or shareholder of such Purchaser, (ii) is a venture capital fund or
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other entity, in each case which is affiliated with such Purchaser or (iii)
holds (or will hold immediately following such transfer) no less than
139,000 Shares (such number to be appropriately adjusted in the event of
stock splits, stock combinations, stock dividends or similar
recapitalizations) and unless such transferee or prospective transferee
shall have agreed in writing to be bound by all of the provisions of this
Agreement.
7.2 Inspection. The Company shall permit each Purchaser, at such
Purchaser's expense, to visit and inspect the Company's properties, to examine
its books of account and records and to discuss the Company's affairs, finances
and accounts with its officers, all at such reasonable times as may be requested
by such Purchaser upon reasonable notice to the Company; provided, however, that
the Company shall not be obligated pursuant to this Section 7.2 to provide
access to any information which it reasonably considers to constitute a trade
secret or to contain similarly confidential information.
7.3 Confidentiality of Information. Each Purchaser agrees to maintain
the confidentiality of any information obtained by such Purchaser pursuant to
Sections 7.1 or 7.2 which may be proprietary to the Company or otherwise
confidential and which has not been made available by the Company to the public
or to any other third party on a non-confidential basis. Each Purchaser further
agrees to use such proprietary and confidential information only to benefit the
Company or to monitor such Purchaser's investment in the Company and
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to make no disclosure thereof to a third party (other than his or its partners,
staff and legal and other professional advisers) without the Company's prior
written consent (which may be conditioned upon receipt of a similar undertaking
by the third party but otherwise shall not be unreasonably withheld).
7.4 Use of Proceeds. The Company shall use the proceeds from the sale
of Shares hereunder as follows:
(a) $799,470 shall be used to repurchase 135,000 shares of Common
Stock from existing shareholders of the Company; and
(b) $2,704,306.50 (less the fees payable pursuant to the Cowen
Agreement) shall be used for general corporate purposes, including
repayment of a loan from Costello & Co. in the present principal
amount of approximately $25,000.
Pending use for such purposes, said proceeds shall be temporarily invested in
short-term interest bearing securities, including U.S. Government securities,
shares of money market mutual funds and certificates of deposit and similar
instruments of federally or state-chartered banks.
7.5 Key Person Life Insurance. At all times after the Closing Date,
the Company shall use its best efforts to obtain and maintain in force one or
more policies of life insurance, naming the Company as beneficiary, on the life
of Lars D. Perkins in the aggregate face amount of no less than $3,500,000.
7.6 Certain Transactions. The Company agrees that it will not enter
into any transaction or agreement (other than normal compensation arrangements,
which are subject to Section 7.11),
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including without limitation any lease or other rental or purchase agreement or
any agreement providing for loans or extensions of credit by or to the Company,
or any modification of any of the foregoing, ("contract") with any "person or
entity associated with the Company" as defined in Section 3.16, or with respect
to which any such person or entity has or is to have a direct or indirect
material interest, unless such contract (i) has been effected on an arm's length
basis and is on terms and conditions no less favorable to the Company than could
be obtained from persons or entities not associated with the Company and (ii)
has been approved by no less than a majority of the number of directors
constituting the whole Board (excluding, if a director, any such person
associated with the Company and having such an interest in the contract in
question) or unless such contract was in effect on the date hereof and
previously disclosed to the Purchasers or unless such contract is non-material
and in the ordinary course of business. For purposes hereof, a contract shall be
deemed to be non-material if it and all other contracts (excluding, for this
purpose, compensation under employment contracts and other compensation
arrangements) between the Company and the person or entity in question do not
involve payment by or to the Company during any fiscal year of more than
$25,000.
7.7 Assignment of Inventions/Confidentiality Agreements. Except as
otherwise provided by the Board in a particular case, the Company will use its
best efforts to enter into an assignment of inventions/confidentiality agreement
in substantially the form of
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Exhibit G hereto with each of its current and future officers and management,
technical or professional employees.
7.8 Director's Fees. Commencing on the Closing Date, the Company will
pay to each Purchaser-affiliated director or such director's designee an annual
director's fee in a reasonable amount, but no less than 5% of the total
compensation of the chief executive officer of the Company for the period in
question. The Company will also promptly reimburse all reasonable out-of-pocket
expenses incurred by each such Purchaser-affiliated director in connection with
attending meetings of the Board or expenses directly incurred in connection with
conducting business of the Company at its request.
7.9 Negative Covenants. The Company shall not, without the prior
consent or approval of the holders of at least 51% of the Registrable Securities
(as defined in Section 8.1) then outstanding:
(i) engage in any business other than its business as now
conducted and as currently proposed to be conducted (as evidenced by the
Business Plan); or
(ii) grant any registration rights to any other holders or
prospective holders of its securities which are superior in any material way to
the registration rights under Section 8 hereof; provided, that nothing herein
shall prohibit the Company's grant of registration rights, including those
granted to holders of Management Stock (as defined in Section 8.2(c)), on a pari
passu basis with those granted the Purchasers.
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7.10 Non-Competition of Certain Key Employees. The Company will use
its best efforts to cause George E. Engdahl, Charles A. Borwick, Christopher M.
Guilmartin, F. L. Harvey and such other key employees of the Company as are
determined from time to time by the Board (referred to herein as "Key
Employees") to enter into an agreement with the Company containing covenants
substantially similar to the following provisions of this Section 7.10, subject
to any modifications deemed appropriate by the Company's counsel to comply with
local law. Unless waived by a disinterested majority of the Board, the Key
Employee shall not, during the period of such Key Employee's employment by the
Company and (provided, in the case of a Company Election as hereinafter
described, that the Company pays the Key Employee the Severance Payments (as
hereinafter defined)), for the period specified in the Company Election
following the termination of such employment by the Company for any reason
whatsoever, (i) directly or indirectly engage in any Competitive Business (as
hereinafter defined), whether such engagement shall be as an employer, officer,
director, owner, employee, consultant, stockholder, partner or other participant
in any Competitive Business, (ii) assist others in engaging in any Competitive
Business in the manner described in the foregoing clause (i), (iii) induce
employees of the Company or its subsidiaries to terminate their employment with
the Company or such affiliate or subsidiary or engage in any Competitive
Business or (iv) employ any employees of the Company in any entity affiliated or
associated with the Key Employee. The term "Competitive Business"
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means and includes any business or activity in which the Company is at the time
of such termination actively engaged (or has been actively engaged at any time
during Key Employee's employment with the Company or, at the time of such
termination, has such engagement under active consideration, by the Board)
within any geographic area in which the Company is at such time or during such
employment has been actively conducting such business or activity or within any
geographic area as to which the Board is at the time of such termination
actively considering expansion of such business or activity; provided, however,
that the ownership of no more than 2% of the outstanding capital stock of a
corporation traded on a national securities exchange or the over-the-counter
market shall not be deemed engaging in a Competitive Business. In the event of
termination of employment of a Key Employee for any reason, the Company may, at
its option, within 30 days make an election (the "Company Election") specifying
the number of months (not more than 24) during which the Key Employee must
refrain from the actions described in (i) - (iv) above, and so notify the Key
Employee; and the Company shall make payments to the Key Employee, monthly in
arrears, at a rate equal to such percentage of the base salary of the Key
Employee in effect at the time of such termination as the Board shall have
approved for the severance agreement with such Key Employee (the "Severance
Payments") and for the number of months so specified in the Company Election;
provided, that the amount of the Severance Payment for any such month may be
offset by the amount, if any, of severance or other termination payments by the
Company to
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the Key Employee with respect to such month (with appropriate proration over a
period of 12 months of any lump sum severance or other termination payments to
the Key Employee). The Company agrees to use its best efforts to cause, on or
before February 15, 1994, each direct sales employee of the Company to enter
into an agreement of the type described in this Section 7.10.
7.11 Management Compensation. Compensation (including salary, bonuses,
fringe benefits and stock awards) paid by the Company to its officers shall be
established by a compensation committee of the Board, a majority of the members
of which shall be directors who are not employed by the Company in any capacity
and shall include each member of the Board affiliated with a Purchaser who
wishes to be a member of such committee.
7.12 Indemnification. The Articles of Organization or By-laws of the
Company shall at all times during which any affiliate of any Purchaser serves as
a member of the Board provide for limitations on the liability of the directors
and indemnification of the directors to the fullest extent permitted under
applicable law and in a manner satisfactory to such Purchaser. To the extent not
prohibited by law, in the event that any Holder who is a director of the Company
or any affiliate of a Holder who is a director of the Company shall be made or
threatened to be made a party to any action, suit or proceeding with respect to
which such Holder or director may be entitled to indemnification by the Company
pursuant to this Agreement or the By-Laws, or otherwise, such director shall be
entitled to be represented in such action, suit or proceeding by
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counsel of its choice and the expenses of such representation shall be
reimbursed by the Company as provided in or authorized under this Agreement or
the By-Laws or other provision, as presently in effect (whether or not the
By-Laws or other provision is hereafter amended). The Company will use its best
efforts to obtain, within one year of the Closing Date, and thereafter maintain
in effect directors' and officers' liability insurance in an amount of at least
$1,000,000 per occurrence, provided the same may be obtained at reasonable cost,
as determined by the Board.
7.13 Capital Expenditures. The Company will not, without the approval
of the Board, make any expenditures for fixed or capital assets, or any
commitments for such expenditures, exceeding an amount of $50,000 for any one
such expenditure or series of related expenditures.
7.14 Indebtedness. The Company will not become indebted or create,
incur, assume or be liable in any manner in respect of, or suffer to exist,
without the prior approval of the Board, any new or additional long-term
indebtedness, standby letter of credit or similar loan which, for any one such
borrowing or series of related borrowings, is in excess of $100,000.
7.15 Future Financings.
(a) Right of First Refusal. The Company grants to each Purchaser
the right of first refusal to purchase such Purchaser's pro-rata share, as
defined below, of any equity securities of the Company, including shares of the
Common Stock or securities of any type convertible into, or entitling the holder
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thereof to purchase shares of, Common Stock, proposed to be issued by the
Company subsequent to the date hereof (such securities being hereafter referred
to in this Section 7.15 as the "Securities"). Such Purchaser's "pro-rata share"
shall be that portion of the Securities proposed to be issued which bears the
same relation to all of the Securities proposed to be issued as the number of
shares of Common Stock held by the Purchaser bears to the number of shares of
Common Stock outstanding (assuming, for purposes of calculating such numbers of
shares of Common Stock, the conversion of all outstanding securities which are
convertible into Common Stock, the exercise of the vested portions of all
outstanding options of Common Stock which have been granted to purchase Employee
Reserved Shares, and the exercise of all outstanding options or warrants to
purchase capital stock of the Company other than Employee Reserved Shares), all
determined immediately prior to the offering of the Securities.
(b) Notice. In the event that the Company proposes to issue
Securities, it shall deliver to each Purchaser written notice of its intention,
describing such Securities, specifying such Purchaser's pro-rata share and
stating the purchase price and other terms upon which it proposes to issue the
same (the "Option Notice"). For a period of 20 days from the receipt of the
Option Notice, each Purchaser shall have the right to elect, by written notice
to the Company, to purchase all or any portion of such Purchaser's pro-rata
share of the Securities described in the Option Notice. In the event a Purchaser
fails to exercise such Purchaser's rights of first refusal within the specified
period, or such
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Purchaser elects to acquire less than such Purchaser's aggregate pro-rata shares
pursuant to the exercise of such right, then, during the 90 day period following
the expiration of such 20 day period, the Company may sell, free of any right of
first refusal on such Purchaser's part, the portion of such Purchaser's pro-rata
share not purchased pursuant to such right of first refusal, upon the same terms
specified in the Option Notice.
(c) Exceptions. The right of first refusal granted under this
Section 7.15 shall not apply to (i) the issuance of Employee Reserved Shares;
(ii) the issuance of Purchaser Reserved Shares; (iii) any Securities offered in
a registered public offering; and (iv) the issuance of Securities upon a stock
split or stock dividend with respect to the Company's Common Stock. This right
of first refusal may not be transferred to a transferee other than a partner of
shareholder of a Purchaser or a venture capital fund or other entity, in each
case which is affiliated with a Purchaser, unless such transferee holds no less
than 139,000 Shares (such number to be appropriately adjusted in the event of
stock splits, stock combinations, stock dividends or similar recapitalizations).
7.16 Subsidiaries. As used herein, the term "Subsidiary" shall mean
any corporation, association or other business entity of which securities or
other ownership interests representing more than 50% of the ordinary voting
power are at the time in question owned by the Company or any other Subsidiary.
Except as otherwise approved by the Board, the Company shall have no Subsidiary
other
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than a wholly owned Subsidiary. The provisions of this Section 7 shall, unless
the context requires otherwise, apply equally to any Subsidiary.
7.17 Termination of Covenants. The covenants set forth in this Section
7 (other than those in Sections 7.8, 7.10 and 7.12) shall terminate upon the
consummation of an underwritten public offering pursuant to an effective
registration statement under the Securities Act, as amended, covering the offer
and sale by the Company of common stock to the public which results in aggregate
net proceeds to the Company 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) (a "Qualified Offering"). If not
previously terminated in accordance with this subsection 7.17, the covenants set
forth in this Section 7 (other than those set forth in Section 7.8), shall
terminate as to the TA Group (as hereinafter defined), or any transferee from
any Purchaser or Purchasers, when that Group or transferee ceases to hold in the
aggregate at least 139,000 shares (such number to be appropriately adjusted in
the event of stock splits, stock combinations, stock dividends or similar
recapitalizations) of capital stock of the Company. For purposes of determining
the number of shares held by such a transferee, shares of the capital stock of
the Company held by persons or entities associated or affiliated with such
transferee shall be included. As used herein, the term "TA Group" shall mean and
include Advent VII
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L.P., Advent Atlantic and Pacific II L.P., Chestnut III Limited Partnership,
Chestnut Capital International III Limited Partnership, Advent New York L.P.,
Advent Industrial II L.P., TA Venture Investors Limited Partnership and any of
their respective present or former partners or associated or affiliated persons
or entities.
8. Registration Rights.
8.1 Certain Definitions. As used in this Section 8 and elsewhere in
this Agreement, the following terms shall have the following respective
meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of
the Commission issued under such Act, as they each may, from time to time,
be in effect.
"Holder" shall mean any Purchaser so long as such Purchaser holds at
least 25% of the Shares purchased by such Purchaser pursuant to this
Agreement and/or the Registrable Securities issued upon conversion thereof
and any transferee of such Purchaser so long as such transferee holds at
least 2% of the outstanding capital stock of the Company and provided such
transferee agrees in writing with the Company to hold such stock subject to
all the restrictions of this Agreement.
"Registrable Securities" shall mean (i) the shares of Common Stock
issued or issuable upon conversion of the Shares,
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as provided in the Certificate of Incorporation, as hereafter amended, and
(ii) any securities issued as a dividend or other distribution with respect
to, or in exchange or in replacement of, the securities referred to in
subsection (i).
"Registration Expenses" shall mean all expenses (except for "Selling
Expenses" as defined below) incurred by the Company in complying with
Sections 8.2 or 8.3 of this Agreement, including, without limitation, all
registration and filing fees, printing expenses, reasonable fees and
disbursements of counsel for the Company and, subject to Section 8.4, in
the case of a registration referred to in subsection 8.2(a) or Section 8.3,
the reasonable fees and disbursements of one counsel for the selling
shareholders.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement.
"Registration Statement" shall mean a registration statement on Form
S-1 or Form S-3 filed by the Company with the Commission for a public
offering and sale of securities of the Company.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
any similar federal statute, and the rules and regulations of the
Commission issued under such Act, as they each may, from time to time, be
in effect.
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"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Shares pursuant to Sections 8.2 or
8.3 and all fees and disbursements of counsel for the selling shareholders
not included in Registration Expenses.
8.2 Required Registrations.
(a) If at any time at least six months after the effective date of its
initial public offering (the "Initial Public Offering") the Company shall
be requested in writing by the Holder(s) of more than 50% of the
outstanding shares of Registrable Securities to effect the registration
under the Securities Act of an offering of outstanding shares of
Registrable Securities, the Company shall promptly give written notice of
such proposed registration to all record Holders of Registrable Securities.
Such Holders shall have the right, by giving written notice to the Company
within 30 days from receipt of the Company's notice, to elect to have
included in such registration such of their Registrable Securities as such
Holders may request in such notice of election. Thereupon, the Company
shall, as expeditiously as practicable, use its best efforts to effect the
registration, on a form of general use under the Securities Act, of all
shares of Registrable Securities which the Company has been requested to
register. The Company shall not be obligated to cause to become effective
more than two registration statements pursuant to which Registrable
Securities are sold under this Section 8.2(a) and
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not more than one such registration statement in any consecutive 12-month
period.
Notwithstanding the foregoing, if the Company shall furnish to the
Holders of Registrable Securities requesting registration pursuant to this
Section 8.2(a) a certificate signed by the President of the Company stating
that the Board has made the good faith judgment that it would be
detrimental to the Company and its shareholders for such registration
statement to be filed in the near future, then the Company's obligation to
use its best efforts to file and cause to become effective such
registration statement may be deferred for a period which shall not exceed
90 days. This deferral right may not be exercised by the Company on more
than one occasion for each registration pursuant to this Section 8.2(a).
(b) At such time as the Company shall have qualified for the use of
Form S-3 (but in no event after the expiration of five years from the
effective date of the Initial Public Offering), as the case may be (or any
similar form or forms promulgated by the Commission), the Holders of
Registrable Securities shall each have the right to request an unlimited
number of registrations on Form S-3 or such similar form, as the case may
be (collectively, "Form S-3"). The Company shall give prompt written notice
of each such proposed registration to all other record Holders of
Registrable Securities. Such Holders shall have the right, by giving
written notice to the Company within 30 days from receipt of the Company's
notice, to elect to
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have included in such registration such of their Registrable Securities as
such Holders may request in such notice of election. Thereupon, the Company
shall, as expeditiously as practicable, use its best efforts to effect the
registration, on Form S-3, of all shares of Registrable Securities which
the Company has been requested to register; provided, however, that the
Company shall not be obligated to file and cause to become effective (i)
more than one registration under Section 8.2(b) in any one twelve-month
period or (ii) any Registration Statement on Form S-3 where the proposed
aggregate offering price of the Registrable Securities to be sold
thereunder is less than $1,000,000. Registrations effected pursuant to this
Section 8.2(b) shall not be counted as required registrations pursuant to
Section 8.2(a) hereof.
(c) The Company may include in a registration requested under this
Section 8.2 (i) any authorized but unissued shares of Common Stock for sale
by the Company, and (ii) any shares of its Common Stock held by present or
former employees, consultants, directors or other advisers of the Company
or of Massachusetts MicroTrac and with respect to which registration rights
have been granted by the Company ("Management Stock"); provided, however,
that such shares shall not be included to the extent that the underwriter
of the shares so proposed to be registered (if the offering is
underwritten) or, if the offering is not underwritten, the Holders of a
majority of the shares of Registrable Securities included therein determine
in good faith
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that the inclusion of such shares will interfere with the successful
marketing of the shares of Registrable Securities to be included therein.
If the offering to which a registration statement under this Section 8.2
relates is an underwritten offering, and if, after all shares of Common
Stock proposed to be offered by the Company and all such shares of
Management Stock have been excluded from such registration, a greater
number of shares of Registrable Securities is offered for participation in
such underwriting than in the opinion of the managing underwriter can be
accommodated without adversely affecting the underwriting, the amount of
Registrable Securities proposed to be offered in the underwriting shall be
reduced, pro-rata (based upon the amount of Registrable Securities owned)
among all Holders participating in such registration, to a number deemed
satisfactory by the managing underwriter; provided, however, that for
purposes of making any such reduction, with respect to each Purchaser, the
partners and retired partners of such Purchaser, the estates and family
members of any such partners and retired partners and their spouses, and
any trusts for the benefit of any of the foregoing persons shall be deemed
to be a single "Holder" of Registrable Securities, and any pro-rata
reduction with respect to such "Holder" shall be based upon the aggregate
amount of shares of Registrable Securities owned by all entities and
individuals included in such "Holder", as defined in this provision.
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8.3 Incidental Registrations.
(a) If at any time or from time to time the Company shall determine to
register an offering of any of its Common Stock, for its own account or for
the account of any of its shareholders (other than the Holders), other than
a registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction or any Rule adopted by
the Commission in substitution therefor or in amendment thereto, or a
registration on any registration form which does not include substantially
the same information as would be required to be included in a Registration
Statement covering the sale of Registrable Securities, the Company will:
(i) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends
to attempt to qualify such securities under the applicable Blue Sky or
other state securities laws); and
(ii) include in such registration (and any related qualification
under Blue Sky laws or other compliance), and in any underwriting
involved therein, all of the Registrable Securities and Management
Stock specified in a written request or requests received by the
Company within twenty (20) days after the giving of such written
notice by the Company, by any Holder or Holders and/or Holders of
Management Stock, subject to the limitations set forth in Section
8.3(b).
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(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwritten public offering, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.3(a)(i). In such event the right of any Holder to
registration pursuant to this Section 8.3 shall be conditioned upon such
Holder's participation in such underwritten public offering and the
inclusion of such Holder's Registrable Securities in the underwritten
public offering to the extent provided herein. All Holders proposing to
distribute their securities through such underwritten public offering shall
(together with the Company and the other Holders distributing their
securities through such underwritten public offering) enter into an
underwriting agreement in customary form with the underwriter or
underwriters selected for such underwritten public offering by the Company.
Notwithstanding any other provision of this Section 8.3, if the underwriter
determines that marketing factors require a limitation of the number of
shares to be underwritten, all shares to be sold by the Company shall be
included in such offering before any Registrable Securities are so
included, and further, the underwriter otherwise may limit the number of
Registrable Securities to be included in the registration and underwritten
public offering. The Company shall so advise all Holders (except those
Holders who have not elected to distribute any of their Registrable
Securities through such underwritten public offering), and the number of
shares of Registrable
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Securities and shares of Management Stock that may be included in the
registration and underwritten public offering shall be allocated among such
Holders and holders of Management Stock in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities and shares
of Management Stock owned by such Holders and holders of Management Stock
at the time of filing the Registration Statement. No Registrable Securities
or shares of Management Stock excluded from the underwritten public
offering by reason of the underwriter's marketing limitation shall be
included in such registration. If the terms of any such underwritten public
offering differ materially from the terms (including range of offering
price) previously communicated to any Holder, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
which notice, to be effective, must be received by the Company at least two
(2) business days before the anticipated effective date of the Registration
Statement. In the event that the contemplated sale does not involve an
underwritten public offering and a determination that the inclusion of the
Registrable Securities adversely affects the marketing of the shares shall
be made by the Board in its good faith discretion, then no Registrable
Securities are required hereby to be included in the contemplated sale.
(c) The Company may at any time withdraw or abandon any Registration
Statement which triggers the provisions of this Section 8.3 without any
liability to the Holders.
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8.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification and compliance pursuant to
subsection 8.2(b) and Section 8.3 and the first registration, qualification and
compliance pursuant to subsection 8.2(a) shall be borne by the Company. All
Selling Expenses incurred in connection with any such registration and the
Registration Expenses incurred in connection with the second registration,
qualification and compliance pursuant to subsection 8.2 (a) shall be borne by
the selling Holders on a pro rata basis. If, notwithstanding this Agreement,
applicable authorities in any state wherein Registrable Securities are to be
sold require an allocation of Registration Expenses, each Holder agrees to pay
its apportioned share thereof.
8.5 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. The Company will:
(a) prepare and file with the Commission a Registration Statement with
respect to such Registrable Securities, and use its best efforts in good
faith to cause such Registration Statement to become and remain effective
as provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus included in
such Registration Statement as may be
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necessary or advisable to comply in all material respects with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement or as may be necessary to
keep such Registration Statement effective and current, but for no longer
than nine (9) months subsequent to the effective date of such registration;
(c) furnish to each seller of Registrable Securities such number of
copies of such Registration Statement, each amendment and supplement
thereto (in each case including all exhibits thereto), the prospectus
included in such Registration Statement (including each preliminary
prospectus), and such other documents as any such seller may reasonably
request in order to facilitate the disposition of the Registrable
Securities held by such seller;
(d) enter into such customary agreements and take all such other
action in connection therewith as any Holder may reasonably request in
order to expedite or facilitate the disposition of such Registrable
Securities;
(e) use its best efforts in good faith to register and qualify the
Registrable Securities covered by such Registration Statement under such
securities or Blue Sky laws of such jurisdictions as any selling Holder on
behalf of itself or any other selling Holder shall reasonably request and
do any and all such other acts and things as may be reasonably necessary or
advisable to enable such selling Holder to consummate the disposition in
such jurisdictions of the Registrable Securities
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held by such selling Holder; provided, however that the Company shall not
be required in connection therewith to qualify to do business or file a
general consent to service of process in any such jurisdiction; and
(f) furnish to each prospective selling Holder a signed counterpart,
addressed to the prospective selling Holders, of (i) an opinion of counsel
for the Company, dated the effective date of the Registration Statement,
and (ii), to the extent available to selling stockholders from the
independent auditors of the Company, a "comfort" letter signed by the
independent public accountants who have certified the Company's financial
statements included in the Registration Statement, covering substantially
the same matters with respect to the Registration Statement (and the
prospectus included therein) and (in the case of the "comfort" letter) with
respect to events subsequent to the date of the financial statements, as
are customarily covered (at the time of such registration) in opinions of
issuer's counsel and in "comfort" letters delivered to the underwriters in
underwritten public offerings of securities.
Notwithstanding the foregoing provisions of this Section 8.5, (1) the
Holders of Registrable Securities included in any Registration Statement
will not (until further notice) effect sales thereof after receipt of
telegraphic or written notice from the Company to suspend sales to permit
the Company to correct or update such Registration Statement or prospectus;
but the obligations of the Company with respect to maintaining
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any Registration Statement current and effective shall be extended by a
period of days equal to the period such suspension is in effect; and (2) at
the end of any period during which the Company is obligated to keep any
Registration Statement current and effective as provided by this Section
8.5 (and any extensions thereof required by the preceding paragraph (1) of
this Section 8.5), the Holders of Registrable Securities included in such
Registration Statement shall discontinue sales of shares pursuant to such
Registration Statement upon notice from the Company of its intention to
remove from registration the shares covered by such Registration Statement
which remain unsold, and such Holders shall notify the Company of the
number of shares registered which remain unsold promptly after receipt of
such notice from the Company.
8.6 Indemnification.
(a) The Company will indemnify each Holder, each of the officers,
directors and partners of such Holder, and each person controlling such
Holder, if Registrable Securities held by such Holder are included in the
securities with respect to which registration, qualification or compliance
has been effected pursuant to this Agreement, and each underwriter of such
Registrable Securities, if any, and each person who controls such
underwriter, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on (i) any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering
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circular or other similar document (including any related Registration
Statement, notification or the like) incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission)
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the
circumstances under which they were made, or (ii) any violation by the
Company of any federal, state or common law rule or regulation applicable
to the Company and relating to action or inaction required of the Company
in connection with any such registration, qualification or compliance, and
will reimburse such Holder, each of the officers, directors and partners of
such Holder, and each person controlling such Holder, such underwriter and
each person who controls such underwriter, for any legal and any other
expenses reasonably incurred in connection with investigating or defending
any such claim, loss, damage, liability or action, provided that the
Company will not be liable to a Holder or underwriter in any such case to
the extent that such claim, loss, damage, liability or expense arises out
of or is based on (i) any untrue statement or omission made in reliance
upon and in conformance with written information furnished to the Company
by or on behalf of such Holder or underwriter and which was furnished
specifically for the purpose of being used therein or (ii) a failure by any
Holder to deliver a final prospectus to its transferee if any material
change has been made to the preliminary prospectus.
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(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification
or compliance is being effected, indemnify the Company, each of its
directors and officers, each underwriter, if any, of the Company's
securities covered by such registration, qualification or compliance, each
person who controls the Company or such underwriter within the meaning of
the Securities Act, and each other Holder, each of the officers, directors
and partners of each such other Holder and each person controlling such
other Holder, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement
(or alleged untrue statement) of a material fact contained in any such
Registration Statement, prospectus, offering circular or other similar
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they
were made, and will reimburse the Company, such other Holders, such
directors, officers, partners, persons, underwriters or control persons for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such Registration Statement, prospectus, offering
circular or other document in
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reliance upon and in conformity with written information furnished to the
Company by or on behalf of such Holder and which was furnished specifically
for the purpose of being used therein; provided, however, that the
liability of such Holder under this Section 8.6 shall be limited to an
amount equal to the proceeds to such Holder of Registrable Securities sold
as contemplated herein.
(c) Each party entitled to indemnification under this Section 8.6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party, at such party's expense,
to assume the defense of any such claim or any litigation resulting
therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or litigation, shall be approved by the
Indemnified Party (whose approval shall not unreasonably be withheld), and
the Indemnified Party may participate in such defense at such party's
expense (except for the payment of fees, costs and expenses provided for
below), and provided further that the failure of any Indemnified Party to
give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement, unless such failure to give notice
shall materially adversely affect the Indemnifying Party in the defense of
any such claim or any such litigation. No Indemnifying Party, in the
defense
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of any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation. Notwithstanding
the election of the Indemnifying Party to assume the defense of any such
claim or litigation, the Indemnified Party shall have the right to employ
separate counsel and to participate in the defense of such claim or
litigation, and the Indemnifying Party shall bear the reasonable fees,
costs and expenses of such separate counsel if (i) the use of the counsel
chosen by the Indemnifying Party to represent the Indemnified Party would
present such counsel with a conflict of interest; (ii) the defendants in,
or targets of, any such claim or litigation include both the Indemnified
Party and the Indemnifying Party and the Indemnified Party shall have
reasonably concluded that there may be legal defenses available to it or to
other Indemnified Parties which are different from or additional to those
available to the Indemnifying Party (in which case the Indemnifying Party
shall not have the right to direct the defense of such action on behalf of
the Indemnified Party); (iii) in the exercise of the Indemnified Party's
reasonable judgment, the Indemnifying Party shall not have employed
satisfactory counsel to represent the Indemnified Party within a reasonable
time after notice of the institution of such
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claim or litigation; or (iv) the Indemnifying Party shall authorize the
Indemnified Party to employ separate counsel at the expense of the
Indemnifying Party. The Indemnified Party shall not settle any such claim
or litigation without the consent of the Indemnifying Party.
8.7 Information by Holder. The Holder or Holders of Registrable
Securities included in any registration shall furnish to the Company in writing
such information regarding such Holder or Holders and the distribution proposed
by such Holder or Holders as the Company may reasonably request in writing and
as shall be required in connection with any registration, qualification or
compliance referred to in this Agreement.
8.8 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may at any time permit
the sale of the Company's capital stock to the public without registration, at
all times after 90 days after the effective date of the first registration under
the Securities Act filed by the Company for an offering of its securities to the
general public, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
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(c) furnish to each Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of such
Rule 144 and of the Securities Act and the Exchange Act, a copy of the most
recent annual or quarterly report of the Company, and such other reports
and documents so filed by the Company as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing that
Holder to sell any such securities without registration.
8.9 Market "Stand-off" Agreement. The Holders, if requested by the
Company and an underwriter of the Company's securities, shall agree not to sell
or otherwise transfer or dispose of any common stock (or other securities) of
the Company held by Holders during the 90-day period following the effective
date of the first two Registration Statements (except for any securities of the
Company sold pursuant to such Registration Statement) of the Company filed under
the Securities Act; provided, that all Holders holding more than two percent of
the outstanding capital stock of the Company and all officers and directors of
the Company enter into similar agreements. Such agreement shall be in writing in
form satisfactory to the Company and such underwriter. The Company may impose
stop-transfer instructions with respect to the shares (or securities) subject to
the foregoing restriction until the end of such 90-day period.
8.10 Termination. The covenants set forth in this Section 8 (other
than those relating to registrations commenced prior to the
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termination date herein set forth) shall terminate on the eighth anniversary of
the Initial Public Offering.
9. Transfer of Shares.
9.1 Procedures. Transfer of the Shares issued pursuant to this
Agreement shall be made only on the books of the Company, respectively, by the
holders of record thereof or by their legal representatives who shall furnish
proper evidence of authority to transfer, or by their attorney thereunto
authorized by power of attorney duly executed and filed with the secretary of
the Company, subject to the restrictions, if any, set forth in the By-Laws and
Section 9.2 hereof. The holder in whose name the Shares stand on the books of
the Company shall be deemed by the Company to be owner thereof for all purposes.
9.2 Restrictive Legends. Each certificate evidencing Shares issued or
sold under this Agreement shall contain or otherwise be imprinted with suitable
legends in substantially the following form:
"This security has not been registered under the Securities Act of
1933 or any state securities act, and has been acquired for investment
and not with view to, or for sale in connection with, any distribution
thereof within the meaning of the Securities Act of 1933, as amended.
This security is subject to transfer restrictions contained in a
certain Stock Purchase Agreement dated January 5, 1994, and no
transfer of the security shall be made unless the conditions specified
in said Agreement have been fulfilled. A copy of said Agreement is on
file and available for inspection at the principal offices of the
Company."
-57-
<PAGE> 62
The Company is hereby authorized to place "stop transfer" instructions on
its records or to instruct any transfer agent to prevent the transfer of Shares
except in conformity with this Agreement.
9.3 Securities Law Compliance. No Purchaser or transferee shall
transfer any Shares or Common Stock issued upon conversion thereof or securities
issued with respect thereto until such holder has first given written notice to
the Company describing briefly the manner of any such proposed transfer and
until (i) the Company has received from the holder's counsel an opinion
(reasonably satisfactory in form and substance to the Company's counsel) that
such transfer can be made without compliance with the registration provisions of
the Securities Act or any state securities act and without the necessity of
perfection of an exemption pursuant to Regulation A adopted pursuant to said
Securities Act; or (ii) the Company and the holder shall have complied with
Commission Rule 144 and applicable state securities act requirements, or (iii) a
registration statement covering such securities filed by the Company is declared
effective by the Commission and governing state securities act authorities or
steps necessary to perfect exemptions from such registration are completed.
10. Miscellaneous.
10.1 Costs and Expenses. In connection with this Agreement and the
transactions described herein, the Company agrees to pay the fees and costs (not
in excess of $30,000 in the
-58-
<PAGE> 63
aggregate) of Hill & Barlow, a Professional Corporation, special counsel to the
Purchasers with respect to this transaction.
10.2 Successors and Assigns. All covenants and agreements contained in
this Agreement made by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of such parties,
except as otherwise provided in Sections 7 and 8.
10.3 Governing Law. The internal laws of The Commonwealth of
Massachusetts (regardless of conflict of laws principles) shall govern all
issues concerning the construction, validity and interpretation of this
Agreement.
10.4 Survival. The representations and warranties of the Company
contained in Section 3 of this Agreement shall survive the Closing for a period
of one year; and thereafter no action, suit or claim shall be brought by any
Purchaser alleging any misrepresentation, untruthfulness, fraud, breach or other
claim based upon the subject matter of such representations or warranties, and
any such action, suit or claim shall be forever barred; provided, however, that
an action or suit based upon a claim presented (by written notice to the
Company) within such one year period may be brought at any time within 18 months
following the Closing Date; and provided, further, that any action based upon
common law fraud may be brought within three years after the Closing Date and
thereafter shall be barred.
10.5 Entire Agreement; Amendment. This Agreement and the other
documents delivered pursuant hereto or contemplated hereby
-59-
<PAGE> 64
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof. Neither this Agreement nor any
term hereof may be amended, waived, discharged or terminated except that such
amendment, waiver, discharge or termination may be effected by a written
instrument signed by the Company and the holders of at least 75% of the Shares
then issued and outstanding.
10.6 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be made by hand delivery,
first-class mail (registered or certified, return receipt requested),
telecopier, or overnight air courier guaranteeing next day delivery, addressed
as follows: (a) if to a Purchaser, at such Purchaser's address shown on Schedule
A hereto, with a copy to Thomas C. Chase, Esq., Hill & Barlow, a Professional
Corporation, One International Place, Boston, Massachusetts 02110, (b) if to any
other Holder, at such address as such Holder shall have furnished to the Company
in writing, or, until any such Holder so furnishes an address to the Company,
then to and at the address of the last Holder of such Shares who has so
furnished an address to the Company, and (c) if to the Company, at MicroTrac
Systems, Inc., One Dedham Place, Dedham, Massachusetts 02026, Attention:
President, with a copy to G. Lamar Crittenden, Jr., Esq., Westwood Business
Centre, 690 Canton Street, Westwood, Massachusetts 02090, or to such other
address as the party receiving such notice shall have properly designated to the
other party hereto in writing. Each such notice shall be deemed given at the
time delivered by hand, if
-60-
<PAGE> 65
personally delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next business day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
10.7 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any holder of the Shares upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder, nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereunder occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. All remedies, either under this Agreement, or by law or
otherwise afforded to any holder, shall be cumulative and not alternative.
10.8 Counterparts. This Agreement may be executed in any number of
counterparts, some of which may have signature pages differing as to form, each
of which shall be enforceable against the parties actually executing such
counterparts and all of which together shall constitute one instrument.
10.9 Severability. If any provision of this Agreement, or its
application to any person or circumstances, is invalid or unenforceable, then
the remainder of this Agreement or the application of such provision to other
persons or circumstances, shall not be affected thereby. Further, if any
provision or
-61-
<PAGE> 66
application hereof is invalid or unenforceable then a suitable and equitable
provision shall be substituted therefor in order to carry out so far as may be
valid or enforceable the intent and purposes of the invalid and unenforceable
provision.
10.10 Captions. Captions and headings used herein are for convenience
of reference only and shall not limit or control the meaning of any provisions
hereof.
-62-
<PAGE> 67
The foregoing Agreement is hereby executed under seal as of the date first
above written.
MICROTRAC SYSTEMS INC.
By: /s/ Lars D. Perkins
-------------------------------------
President
Purchasers:
ADVENT NEW YORK, L.P. ADVENT VII L.P.
By: TA Associates VI L.P., By: TA Associates VII L.P.,
its general partner its general partner
By: TA Associates, Inc., By: TA Associates, Inc.,
its general partner its general partner
By: /s/ Brian J. Conway By: /s/ Brian J. Conway
----------------------------------- -----------------------------------
Managing Director Managing Director
ADVENT INDUSTRIAL II L.P. ADVENT ATLANTIC AND PACIFIC II L.P.
By: TA Associates VI L.P., By: TA Associates AAP II Partners,
its general partner its general partner
By: TA Associates, Inc., By: TA Associates, Inc.,
its general partner its general partner
By: /s/ Brian J. Conway By: /s/ Brian J. Conway
----------------------------------- -----------------------------------
Managing Director Managing Director
TA VENTURE INVESTORS LIMITED PARTNERSHIP CHESTNUT III LIMITED PARTNERSHIP
By: TA Associates VI L.P.
Attorney-in-Fact
By: TA Associates, Inc.
its general partner
By: /s/ Brian J. Conway By: /s/ Brian J. Conway
----------------------------------- -----------------------------------
General Partner Managing Director
CHESTNUT CAPITAL INTERNATIONAL
III LIMITED PARTNERSHIP
By: TA Associates VI L.P.
Attorney-in-Fact
By: TA Associates,Inc.,
its general partner
By: /s/ Brian J. Conway
-----------------------------------
Managing Director
<PAGE> 68
SCHEDULE A
Purchasers
<TABLE>
<CAPTION>
Number of
Type of Shares to be Purchase
Name and Address Entity Purchased Price
- ---------------- ------ --------- -----
<S> <C> <C> <C>
Advent VII L.P. Delaware 370,770 $2,335,851.0C
High Street Tower limited
Suite 2500 partnership
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Telephone: (617) 574-6700
Telecopier: (617) 574-6728
Advent Atlantic and Delaware 76,542 $ 482,214.60
Pacific II L.P. limited
High Street Tower partnership
Suite 2500
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Telephone: (617) 574-6700
Telecopier: (617) 574-6728
Chestnut III Limited Ontario, 28,951 $ 182,391.30
Partnership Canada
High Street Tower limited
Suite 2500 partnership
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Telephone: (617) 574-6700
Telecopier: (617) 574-6728
Chestnut Capital Bermuda 9,658 $ 60,845.40
International III limited
Limited Partnership partnership
High Street Tower
Suite 2500
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Telephone: (617) 574-6700
Telecopier: (617) 574-6728
</TABLE>
<PAGE> 69
SCHEDULE A Continued
<TABLE>
<S> <C> <C> <C>
Advent New York L.P. Delaware 37,077 $ 233,585.10
High Street Tower limited
Suite 2500 partnership
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Telephone: (617) 574-6700
Telecopier: (617) 574-6728
Advent Industrial II L.P. Delaware 27,595 $ 173,848.50
High Street Tower limited
Suite 2500 partnership
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Telephone: (617) 574-6700
Telecopier: (617) 574-6728
TA Venture Investors Limited Delaware 5,562 $ 35,040.60
Partnership limited
High Street Tower partnership
Suite 2500
125 High Street
Boston, MA 02110
Attn: A. Bruce Johnston
Telephone: (617) 574-6700
Telecopier: (617) 574-6728
------- -------------
TOTALS 556,155 $3,503,776.50
</TABLE>
<PAGE> 70
AMENDMENT TO STOCK PURCHASE AGREEMENT
This Amendment to Stock Purchase Agreement (the "Amendment") entered
into as of May 9, 1996 by and among Restrac, Inc. (the "Company") and each of
the entities listed on Schedule A hereto (collectively, the "Purchasers") amends
that certain Stock Purchase Agreement dated January 5, 1994 by and among the
Company and the Purchasers (the "Stock Purchase Agreement") as follows:
For good and valuable consideration, the sufficiency of which is hereby
acknowledged, the Company and the Purchasers agree that Section 7.8 of the Stock
Purchase Agreement, relating to the payment of an annual director's fee to
Purchaser-affiliated directors and the reimbursement of reasonable out-of-pocket
expenses incurred by each director in connection with attending meetings of the
Board of Directors or expenses directly incurred in connection with conducting
business of the Company at the Company's request, be terminated in its entirety
upon the consummation of a Qualified Offering (as defined in the Stock Purchase
Agreement).
The foregoing Amendment is hereby executed as of the date first written
above.
RESTRAC, INC
/s/ Lars D. Perkins
------------------------------
By: Lars D. Perkins
Title: President and CEO
PURCHASERS:
Advent VII L.P.
By: TA Associates VII L.P.,
its General Partner
By: TA Associates, Inc.,
its General Partner
By: /s/ A. Bruce Johnston
------------------------------
<PAGE> 71
Advent Atlantic and Pacific II L.P.
By: TA Associates AAP II Partners,
its General Partner
By: TA Associates, Inc.,
its General Partner
By: /s/ A. Bruce Johnston
------------------------------
Advent New York L.P.
By: TA Associates VI L.P.,
its General Partner
By: TA Associates, Inc.,
its General Partner
By: /s/ A. Bruce Johnston
------------------------------
Advent Industrial II L.P.
By: TA Associates VI L.P.,
its General Partner
By: TA Associates, Inc.,
its General Partner
By: /s/ A. Bruce Johnston
------------------------------
2
<PAGE> 72
Chestnut Capital International III
Limited Partnership
By: TA Associates VI L.P.,
its Attorney-in-Fact
By: TA Associates, Inc.,
its General Partner
By: /s/ A. Bruce Johnston
------------------------------
Chestnut III Limited Partnership
By: TA Associates VI L.P.,
its Attorney-in-Fact
By: TA Associates, Inc.,
its General Partner
By: /s/ A. Bruce Johnston
------------------------------
TA Venture Investors Limited Partnership
By: /s/ A. Bruce Johnston
------------------------------
3
<PAGE> 73
SCHEDULE A
Advent VII L.P.
Advent Atlantic and Pacific II L.P.
Advent New York L.P.
Advent Industrial II L.P.
Chestnut Capital International III Limited Partnership
Chestnut III Limited Partnership
TA Venture Investors Limited Partnership
4
<PAGE> 1
EXHIBIT 10.2
STOCK REDEMPTION AGREEMENT
This Agreement is made on January 5 , 1994 between MicroTrac Systems,
Inc., a Delaware corporation (the "Company"), and J. Paul Costello, Lars D.
Perkins and John P. Jopling (the "Stockholders").
WHEREAS, the Company has entered into a Stock Purchase Agreement dated
as of the date of this Agreement, pursuant to which the Company has issued and
sold to Advent VII L.P. and other Purchasers identified therein an aggregate of
556,155 shares of its Preferred Stock; and
WHEREAS, it is a condition of said Stock Purchase Agreement that the
Company shall redeem an aggregate of 135,000 shares of its Common Stock (the
"Shares") held by the Stockholders pursuant to the terms hereof;
NOW, THEREFORE, in consideration of the covenants set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is hereby AGREED:
1. Each of the Stockholders hereby sells, assigns and transfers to the
Company the number of Shares set forth opposite his name on Exhibit A hereto,
represented by the stock certificate(s) listed opposite his name which are
delivered herewith to the Company, and hereby irrevocably appoints the Company's
Treasurer, George E. Engdahl, his attorney to transfer said Shares on the
records of the Company.
2. Upon execution of this Agreement, the Company shall pay to each of
the Stockholders a redemption price of $5.922 for each Share transferred to the
Company hereunder.
3. Each of the Stockholders represents and warrants that:
<PAGE> 2
(a) He has good and clear title to the Shares sold by him to the
Company hereunder, that such Shares are free of any and all liens, encumbrances,
rights of first refusal, contractual commitments, and other restrictions on
transfer, and that no prior transfer of, or commitment to transfer, any of such
Shares has been made; and
(b) He has been an officer and/or director of the Company and/or its
predecessor, MicroTrac Systems, Inc., a Massachusetts corporation, and is
intimately familiar with the Company's affairs. He has made his own independent
decision to sell Shares upon the terms set forth in this Agreement based upon
his own determination of the value of the Shares, and is not relying on any
representations made to him by representatives of the Company. He understands
that the Company may in the future engage in financing transactions in which its
securities are sold for a higher price then the price paid for the Shares
hereunder, that the Company's securities may become registered under federal and
state securities laws, and that there may exist a public market for such
securities. He has consulted with his own legal, financial and tax advisors in
determining to sell his Shares pursuant to this Agreement.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement under seal on the date set forth above.
MICROTRAC SYSTEMS, INC.
/s/ Lars D. Perkins By /s/ George E. Engdahl
- ----------------------------- ----------------------------
Lars D. Perkins
/s/ J. Paul Costello Title Treasurer
- ----------------------------- ----------------------------
J. Paul Costello
/s/ John P. Jopling
- -----------------------------
John P. Jopling
2
<PAGE> 3
EXHIBIT A
TO
STOCK REDEMPTION AGREEMENT
<TABLE>
<CAPTION>
Name Cert. No. No. of Shares
---- --------- -------------
<S> <C> <C>
J. Paul Costello C2 50,000
Lars D. Perkins C1 1
C3 49,999
John P. Jopling C4 35,000
</TABLE>
3
<PAGE> 1
EXHIBIT 10.3
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of January 5, 1994, between MicroTrac
Systems, Inc., a Delaware corporation (the "Company"), and Lars D. Perkins, J.
Paul Costello and John P. Jopling, stockholders of the Company, who are or have
been members of the Board of Directors of the Company or its predecessor,
MicroTrac Systems, Inc., a Massachusetts corporation (collectively referred to
as the "Management Stockholders")'
WHEREAS, Mr. Perkins, Mr. Costello and Mr. Jopling are the holders of
374,530 shares, 374,530 shares and 11,700 shares, respectively, of the Company's
Common Stock, $.01 par value (which 760,760 shares are collectively, together
with all securities received in exchange for or as distributions with respect to
such shares, referred to as the "Management Stock");
WHEREAS, the Company has entered into a Stock Purchase Agreement of
even date herewith, providing for the sale to Advent VII L.P. and certain other
purchasers (the "Purchasers") of an aggregate of 556,155 shares of the
Company's Preferred Stock, $1.00 par value (the "Stock Purchase Agreement");
WHEREAS, the Stock Purchase Agreement provides to the purchasers
registration rights with respect to certain securities of the Company held by
them, defined in such agreement as "Registrable Securities"; and
WHEREAS, the parties desire that certain of such registration rights
relating to "Incidental Registrations" be
<PAGE> 2
shared by the Management Stockholders with the Purchasers on an equal
basis, and that the Management Stockholders have the right to participate in
"Required Registrations" to the maximum extent provided in Section 8.2(c) of the
Stock Purchase Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby
AGREED:
1. Unless otherwise defined herein, all capitalized terms shall have
the same meanings as in the Stock Purchase Agreement.
2. The Management Stockholders shall have the same rights as the
Holders under Section 8.3 of the Stock Purchase Agreement to have shares of
Management Stock included in registrations of the Company's securities under the
Securities Act (and any related qualifications under Blue Sky laws or other
compliance) on the same basis as Registrable Securities.
3. For purposes of the foregoing, the provisions of Section 8.1
("Certain Definitions"), Section 8.4 ("Expenses of Registration"), Section 8.5
("Registration Procedures"), Section 8.6 ("Indemnification"), Section 8 7
("Information by Holder"), Section 8.8 ("Rule 144 Reporting"), and Section 8.9
("Market `Stand-Off' Agreement"), shall be applicable to and binding upon the
Management Stockholders and the Management Stock to the same extent and with the
same effect as they are applicable to and binding upon the Holders and
Registrable Securities, except that for this purpose, and this purpose only,
each Management Stockholder will be deemed a "Purchaser" and shares of
Management Stock will be deemed to be "Shares" purchased pursuant to the
2
<PAGE> 3
Stock Purchase Agreement; and for this purpose, the Management Stockholders
shall be deemed to be "Holders", and the Management Stock shall be deemed to be
"Registrable Securities".
4. In addition, the Company shall give the Management Stockholders
prompt notice of any registration requested under Section 8.2 of the Stock
Purchase Agreement, and the Management Stockholders shall have the right, by
giving written notice to the Company within 15 days from receipt of the
Company's notice, to have shares of Management Stock included in such
registration (pro rata in proportion to their respective holdings of Management
Stock) to the maximum extent permissible under Section 8.2(c) of the Stock
Purchase Agreement.
5. This Agreement is the entire agreement of the parties on the subject
hereof. It may not be modified, nor may any of its provisions be waived, except
by a written instrument signed by the Company and all of the Management
Stockholders.
6. This Agreement shall remain in effect as long as the provisions of
Section 8.2 and/or Section 8.3 of the Stock Purchase Agreement remain in effect.
7. This Agreement shall be governed by and construed in accordance with
the laws of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this
Agreement as of the date set forth above.
MICROTRAC SYSTEMS, INC.
/s/ Lars D. Perkins By /s/ George E. Engdahl
- ------------------------ ------------------------------
Lars D. Perkins George E. Engdahl
Vice President
/s/ J. Paul Costello /s/ John P. Jopling
- ------------------------ ------------------------------
J. Paul Costello John P. Jopling
3
<PAGE> 1
EXHIBIT 10.6
RESTRAC, INC.
1996 EMPLOYEE STOCK PURCHASE PLAN
The purpose of the Restrac, Inc. 1996 Employee Stock Purchase Plan
("the Plan") is to provide eligible employees of Restrac, Inc. (the "Company")
and certain of its subsidiaries with opportunities to purchase shares of the
Company's common stock, $.01 par value (the "Common Stock"). One hundred fifty
thousand (150,000) shares of Common Stock in the aggregate have been approved
for this purpose. The Plan is intended to constitute an "employee stock purchase
plan" within the meaning of Section 423(b) of the Internal Revenue Code of 1986,
as amended (the "Code"), and shall be interpreted in accordance with that
intent.
1. Administration. The Plan will be administered by the Company's Board
of Directors (the "Board") or by a committee appointed by the Board for such
purpose (the "Committee"). The Board or the Committee has authority to make
rules and regulations for the administration of the Plan, and its
interpretations and decisions with regard thereto shall be final and conclusive.
No member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any option granted
hereunder.
2. Offerings. The Company will make one or more offerings to eligible
employees to purchase Common Stock under the Plan ("Offerings"). The initial
Offering will begin on July 1, 1996 [the effective date of the IPO] and will end
on September 30, 1996 (the "Initial Offering"). Thereafter, an Offering will
begin on the first business day
<PAGE> 2
occurring on or after each October 1 and April 1 and will end on the last
business day occurring on or before the following March 31 and September 30,
respectively.
3. Eligibility. All employees of the Company (including employees who
are also directors of the Company) and all employees of each Designated
Subsidiary (as defined in Section 11) are eligible to participate in any one or
more of the Offerings under the Plan, provided that as of the first day of the
applicable Offering (the "Offering Date") they are customarily employed by the
Company or a Designated Subsidiary for more than twenty (20) hours a week and
have completed at least six (6) months of employment.
4. Participation. An employee eligible on any Offering Date may
participate in such Offering by submitting an enrollment form to his appropriate
payroll location at least ten (10) business days before the Offering Date (or by
such other deadline as shall be established for the Offering). The form will (a)
state the percentage to be deducted from his Compensation (as defined in Section
11) per pay period, (b) authorize the purchase of Common Stock for him in each
Offering in accordance with the terms of the Plan and (c) specify the exact name
or names in which shares of Common Stock purchased for him are to be issued
pursuant to Section 10. An employee who does not enroll in accordance with these
procedures will be deemed to have waived his right to participate. Unless an
employee files a new enrollment form or withdraws from the Plan, his deductions
and purchases will continue at the same percentage of Compensation for future
Offerings, provided he remains eligible. Notwithstanding the foregoing,
participation in the Plan will neither be permitted nor be denied contrary to
the requirements of the Code.
2
<PAGE> 3
5. Employee Contributions. Each eligible employee may authorize payroll
deductions at a minimum of one percent (1%) up to a maximum of ten percent (10%)
of his Compensation for each pay period. The Company will maintain book accounts
showing the amount of payroll deductions made by each participating employee for
each Offering. No interest will accrue or be paid on payroll deductions.
6. Deduction Changes. An employee may not increase or decrease his
payroll deduction during any Offering, but may increase or decrease his payroll
deduction with respect to the next Offering (subject to the limitations of
Section 5) by filing a new enrollment form at least ten (10) business days
before the next Offering Date (or by such other deadline as shall be established
for the Offering).
7. Withdrawal. An employee may withdraw from participation in the Plan
by delivering a written notice of withdrawal to his appropriate payroll
location. The employee's withdrawal will be effective as of the next business
day. Following an employee's withdrawal, the Company will promptly refund to him
his entire account balance under the Plan (after payment for any Common Stock
purchased before the effective date of withdrawal). Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Offering, but may enroll in a subsequent Offering in accordance with
Section 4.
8. Grant of Options. On each Offering Date, the Company will grant to
each eligible employee who is then a participant in the Plan an option
("Option") to purchase on the last day of such Offering (the "Exercise Date"),
at the Option Price hereinafter provided for, whole shares of Common Stock
reserved for the purposes of the Plan up to a maximum determined by dividing ten
percent (10%) of such employee's projected
3
<PAGE> 4
Compensation for the period of the Offering by eighty five percent (85%) of the
Fair Market Value of the Common Stock (as defined in Section 11) on the Offering
Date. The purchase price for each share purchased under such Option (the "Option
Price") will be 85% of the Fair Market Value of the Common Stock on the Offering
Date or the Exercise Date, whichever is less.
Notwithstanding the foregoing, no employee may be granted an option
hereunder if such employee, immediately after the option was granted, would be
treated as owning stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Company or any
Parent or Subsidiary (as defined in Section 11). For purposes of the preceding
sentence, the attribution rules of Section 424(d) of the Code shall apply in
determining the stock ownership of an employee, and all stock which the employee
has a contractual right to purchase shall be treated as stock owned by the
employee. In addition, no employee may be granted an Option which permits his
rights to purchase stock under the Plan, and any other employee stock purchase
plan of the Company and its Parents and Subsidiaries, to accrue at a rate which
exceeds $25,000 of the fair market value of such stock (determined on the option
grant date or dates) for each calendar year in which the Option is outstanding
at any time. The purpose of the limitation in the preceding sentence is to
comply with Section 423(b)(8) of the Code.
9. Exercise of Option and Purchase of Shares. Each employee who
continues to be a participant in the Plan on the Exercise Date shall be deemed
to have exercised his Option on such date and shall acquire from the Company
such number of whole shares of Common Stock reserved for the purpose of the Plan
as his accumulated
4
<PAGE> 5
payroll deductions on such date will purchase at the Option Price, subject to
any other limitations contained in the Plan. Any balance remaining in an
employee's account at the end of an Offering will be refunded to the employee
promptly; provided that any balance remaining in an employee's account at the
end of an Offering solely by reason of the inability to purchase a fractional
share will be carried forward to the next Offering.
10. Issuance of Certificates. Certificates representing shares of
Common Stock purchased under the Plan may be issued only in the name of the
employee, in the name of the employee and another person of legal age as joint
tenants with rights of survivorship, or in the name of a broker authorized by
the employee to be his, or their, nominee for such purpose.
11. Definitions.
The term "Compensation" means the amount of base pay and commissions,
prior to salary reduction pursuant to either Section 125 or 401(k) of the Code,
but excluding overtime, incentive or bonus awards, allowances and reimbursements
for expenses such as relocation allowances or travel expenses, income or gains
on the exercise of Company stock options, and similar items.
The term "Designated Subsidiary" means any present or future Subsidiary
(as defined below) that is designated from time to time by the Board or the
Committee to participate in the Plan. Subsidiaries may be so designated either
before or after the Plan is approved by the stockholders.
The term "Fair Market Value of the Common Stock" means the last
reported sale price of the Common Stock on the Nasdaq National Market ("NASDAQ")
on a given day
5
<PAGE> 6
or, if no sales of Common Stock were made on that day, the last reported sale
price of the Common Stock on the next preceding day on which sales were made.
The term "Parent" means a "parent corporation" with respect to the
Company, as defined in Section 424(e) of the Code.
The term "Subsidiary" means a "subsidiary corporation" with respect to
the Company, as defined in Section 424(f) of the Code.
12. Rights on Retirement, Death, or Other Termination of Employment. If
a participating employee's employment terminates for any reason before the
Exercise Date for any Offering, no payroll deduction will be taken from any pay
due and owing to the employee and the balance in his account will be paid to him
or, in the case of his death, to his designated beneficiary as if he had
withdrawn from the Plan under Section 7. An employee will be deemed to have
terminated employment, for this purpose, if the corporation that employs him,
having been a Designated Subsidiary, ceases to be a Subsidiary, or if the
employee is transferred to any corporation other than the Company or a
Designated Subsidiary.
13. Optionees Not Stockholders. Neither the granting of an Option to an
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under the Plan
until such shares have been purchased by and issued to him.
14. Rights Not Transferable. Rights under the Plan are not transferable
by a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
6
<PAGE> 7
15. Application of Funds. All funds received or held by the Company
under the Plan may be combined with other corporate funds and may be used for
any corporate purpose.
16. Adjustment in Case of Changes Affecting Common Stock. In the event
of a subdivision of outstanding shares of Common Stock, or the payment of a
dividend in Common Stock, the number of shares approved for the Plan, and the
share limitation set forth in Section 8, shall be increased proportionately, and
such other adjustment shall be made as may be deemed equitable by the Board or
the Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
17. Amendment of the Plan. The Board or the Committee may at any time,
and from time to time, amend the Plan in any respect, except that without the
approval, within twelve (12) months of such Board or Committee action, by the
holders of a majority of the shares of stock of the Company present or
represented and entitled to vote at a meeting of stockholders, no amendment
shall be made (a) increasing the number of shares approved for the Plan or (b)
redefining the class of corporations whose employees are eligible to receive
Options under the Plan.
18. Insufficient Shares. If the total number of shares of Common Stock
that would otherwise be purchased on any Exercise Date plus the number of shares
purchased under previous Offerings under the Plan exceeds the maximum number of
shares issuable under the Plan, the shares then available shall be apportioned
among participants in proportion to the amount of payroll deductions accumulated
on behalf of
7
<PAGE> 8
each participant that would otherwise be used to purchase Common Stock on such
Exercise Date.
19. Termination of the Plan. The Plan may be terminated at any time by
the Board or the Committee. Upon termination of the Plan, all amounts in the
accounts of participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and
deliver Common Stock under the Plan is subject to listing on NASDAQ (or other
national exchange) and obtaining all governmental approvals required in
connection with the authorization, issuance, or sale of such stock.
The Plan shall be governed by Delaware law except to the extent that
such law is preempted by federal law.
The Plan is intended to comply with the provisions of Rule 16b-3
promulgated under the Securities Exchange Act of 1934, as amended. Any provision
inconsistent with such Rule shall be inoperative and shall not affect the
validity of the Plan. To ensure compliance with such Rule, the Board or the
Committee may limit the right of covered employees to withdraw from the Plan or
to resume participation following withdrawal.
21. Issuance of Shares. Shares may be issued upon exercise of an Option
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
22. Tax Withholding. Participation in the Plan is subject to any
required tax withholding on income of the participant in connection with the
Plan. Each employee agrees, by entering the Plan, that the Company and its
Subsidiaries shall have the right
8
<PAGE> 9
to deduct any such taxes from any payment of any kind otherwise due to the
employee, including shares issuable under the Plan.
23. Notification upon Sale of Shares. Each employee agrees, by entering
the Plan, to give the Company prompt notice of any disposition of shares
purchased under the Plan where such disposition occurs within two years after
the date of grant of the Option pursuant to which such shares were purchased.
24. Effective Date and Approval of Shareholders. The Plan shall take
effect on the first day of the Company's initial public offering, subject to
approval by the holders of a majority of the shares of stock of the Company
present or represented and entitled to vote at a meeting of stockholders, which
approval must occur within twelve (12) months of the adoption of the Plan by the
Board.
9
<PAGE> 1
EXHIBIT 10.7
PAID-UP SOFTWARE LICENSE
This Agreement is made as of January 1, 1993 by and between MicroTrac
Systems, Inc. ("MicroTrac"), a corporation with its principal place of business
at 20 Wells Avenue, Newton, MA 02159, and Costello & Company, Inc. ("Costello"),
a corporation with its principal place of business at 690 Canton Street,
Westwood, MA 02090. For one dollar and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed:
1. Grant of License. MicroTrac hereby grants to Costello a fully-paid,
perpetual license (the "License") to use the current version and all future
versions of MicroTrac's Restrac and SuccessPlan software and all replacement
products developed and/or marketed by MicroTrac (excluding, except as provided
below, third party software, hardware and maintenance support for which license
fees, maintenance fees and/or royalties are payable under MicroTrac's standard
customer arrangements, and any on-site support, customization or implementation
support) (collectively referred to herein as the "Software") and documentation
relating thereto which is part of MicroTrac's standard offering to its customers
(the "Documentation"). The License will include telephone support for one
designated Costello representative, and includes the right to use one copy of
such third-party software as is included in the Software on the date hereof,
provided that Costello will reimburse MicroTrac for any license fee that becomes
payable with respect thereto. The License is not transferable, except that
Costello may grant rights to use the Software to J. Paul Costello, his wife, his
children, and any corporation or other business entity at least 51% of the
equity and voting interest of which is owned by any of them both beneficially
and of record ("Costello Affiliates"), on the condition that each Costello
Affiliate receiving such rights provides MicroTrac with a signed agreement to be
bound by the provisions of this Agreement applicable to Costello. The Software
and Documentation may be used only for the internal business purposes of
Costello and Costello Affiliates, which may include providing services to
customers who are not given direct access to the Software or Documentation.
2. Certain Rights and Restrictions. Pursuant to the License, Costello
acquires only the right to use the Software and Documentation and does not
acquire any rights of ownership in the Software or Documentation or the media in
which they are contained. Subject to the License, MicroTrac retains all rights
of ownership in the Software, the Documentation, the media and all copies
thereof. Costello may make one copy of the Software for backup purposes. No
other copies may be made without MicroTrac's prior written consent. MicroTrac
will provide Costello with such copies of the Software and Documentation as
<PAGE> 2
-2-
are reasonably necessary for the exercise of Costello's rights under
the License. Costello agrees to treat the Software and Documentation as
confidential.
3. No Warranty. MICROTRAC DISCLAIMS ALL WARRANTIES WITH REGARD TO THE
SOFTWARE, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.
4. Limitation of Liability. Costello represents that it is a
sophisticated user that understands the functioning of the Software, and agrees
to have sole responsibility for determining that the Software is suitable for
Costello's purposes and for its proper use, including protection of data from
unintended modification, destruction or disclosure, and for the accuracy and
integrity of the results. MicroTrac shall have no liability to Costello or
Costello's customers arising from the use of the Software.
5. General.
(a) This Agreement is the entire agreement of the parties on the
subject hereof. Its provisions may not be modified or waived other than by an
instrument signed by the party against whom such modification or waiver is to be
enforced.
(b) This Agreement shall be governed by and construed in accordance
with the laws of Massachusetts.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date set forth above.
COSTELLO & COMPANY, INC. MICROTRAC SYSTEMS, INC.
By /s/ J. Paul Costello By /s/ Lars D. Perkins
--------------------------- --------------------------
Title President Title President
--------------------------- --------------------------
<PAGE> 1
[Confidential Treatment]
EXHIBIT 10.8
VERITY, INC. VAR AGREEMENT
The VAR: Administrative Contact:_________
Microtrac Systems, Inc.
20 Wells Avenue Name: Lars D. Perkins
Newton, Ma. 02159
Title: President
Phone: 617-965-4660
FAX: 617-965-9654
Billing Address: Technical Contact:_______________
(if different from above)
_________________________ Name: CHRIS GUILMARTIN
_________________________ Address: MICROTRAC
_________________________ 20 WELLS AVE., NEWTON, MA, 02159
_________________________ Phone: 617-965-4660 x500
ADDENDA & EXHIBITS ATTACHED:
Hardware Addendum Maintenance Services Addendum
Product Addendum Microtrac Systems Standard
Pricing Addendum Restrac License Agreement
International Sublicensing
Addendum
SPECIAL NOTES:
Executed by The VAR: Executed by VERITY, INC:
LARS PERKINS KATHLEEN A. MURPHY
- -------------------------- _______________________________
(Authorized Signature) (Authorized Signature)
Name: LARS PERKINS Name: KATHLEEN A. MURPHY
Title: PRESIDENT Title: VP, FINANCE & CFO
The Effective Date of this Agreement is 11/24, 1996.
By signing this Agreement, the parties agree to the terms and conditions of this
Agreement.
Verity, Inc. 1550 Plymouth Street, Mountain View, Ca. 91043.
<PAGE> 2
VAR AGREEMENT
Verity and the VAR agree that Verity shall license the VAR to manufacture,
market and sublicense versions of Verity's software Products, coupled with an
Application Program developed by the VAR, under the following terms and
conditions:
I. DEFINITIONS
1.1 PRODUCTS
"Product(s)" shall mean the computer software products listed in the Product
Addendum developed and licensed by Verity, or any separable module thereof.
"Products" shall be limited to the version of the products current on the
Effective Date of this Agreement (as updated and modified pursuant to this
Agreement),or if a Product is not available in a certain Hardware/operating
system environment on the Effective Date, the applicable version shall be the
first version generally made available by Verity on the Hardware/operating
system.
"Product(s)" shall refer solely to: (a) the object code computer software
product; and (b) written material furnished by Verity in conjunction with the
Products including instructions and user guides ("Documentation").
1.2 UPDATES
"Updates" shall be improved releases of the Products which are generally made
available at no charge to end users that have entered into support agreements
with Verity. Updates shall not include any options or future products which
Verity licenses separately.
1.3 HARDWARE
"Hardware" shall mean all computer hardware/operating system combinations on
which the Products are generally available, including but not limited to those
specified in the Hardware Addendum. For purposes of a particular sublicense
grant to an End-User, hardware shall be limited to computer hardware equal to or
smaller than the computer hardware specified with reference to the Price List
and operating under the same operating system. Size of hardware systems shall be
determined by the standard Initial license fee for the Products on such system
as set forth in Verity's Price List. The definition of Hardware and Price List
shall be modified as appropriate to reflect the availability of Products on new
Hardware/operating system environments.
<PAGE> 3
1.4 APPLICATION PROGRAM(S) AND APPLICATION PACKAGE(S)
"Application Program(s)" shall mean the VAR's value added application software
described in the Product Addendum with which the Product is to be coupled. The
"Application Package(s)" shall mean the Product coupled with the Application
Program(s).
1.5 END USER
"End User" shall mean a third party to whom the VAR grants the right to to use
the Application Package ("Sublicense").
1.6 PRODUCT SHIPMENT DATE
The "Product Shipment Date" shall be the earlier of (a) the date on which the
first Application Package is sublicensed for a fee; or (b) one year from the
Effective Date of this Agreement.
II. LICENSES GRANTED
2.1.1 Development of Application
Verity grants the VAR a nonexclusive, nontransferable LICENSE to use and
reproduce the Products specified in the Product Addendum in object code form on
the types of computer(s) listed in the Hardware Addendum for the following
purposes only:
a. Developing the Application Package(s);
b. Providing technical support to End Users.
c. For demonstration and sales purposes as set forth in Section
2.2.1.1.
In addition to five (5) copies which may be made for development purposes, VAR
may make one royalty free copy of the Products solely for VAR's internal
archival purposes.
2.1.2 Documentation
Pursuant to this Agreement, the VAR will receive one set of Documentation for
the Product. The VAR may purchase extra Documentation at Verity's then-current
standard rates.
The VAR shall be responsible for drafting documentation for End Users. The VAR
shall have the right to incorporate portions of Verity's Documentation into the
VAR's documentation, provided the provisions of Paragraph 11.3
<PAGE> 4
below are complied with. No information shall be made available to End Users
which would enable their use of the Product beyond the uses permitted by this
Agreement.
2.2 LICENSE TO SUBLICENSE
2.2.1 Sublicensing
Verity hereby grants the VAR a nonexclusive, nontransferable license to
reproduce and Sublicense the Products in object code form only as incorporated
into the Application Package for use on the Hardware and not on a stand-alone
basis. The VAR's rights are restricted to Sublicensing the Products as set forth
in the International Sublicensing Addendum attached hereto.
Each Sublicense shall be in the form of a written agreement, substantially in
the form shown in the Microtrac Systems, Inc., Standard Restrac License
Agreement, attached hereto. Such agreement may be changed through negotiation,
provided that the negotiated license offers no less protection to VAR's third
party suppliers than is contained in the attached agreement. Upon Verity's
request, the VAR shall provide Verity with a copy of the VAR's standard
Sublicense agreement. The VAR shall indemnify Verity for all damages caused by
the VAR's failure to include required terms in the Sublicense agreement.
This License to Sublicense permits the VAR to:
1. use the Products as incorporated into the Application Package for
supervised demonstrations to potential End Users on a royalty-free
basis; this shall include use of the Application Package on Hardware in
the possession of third parties, if such use is reasonably necessary to
marketing the Application Package. If Products are left in the custody
of third parties for such demonstrations, such third parties shall
execute agreements which restrict use of the Application Package and
which protect Verity's proprietary rights in the Products;
2. for each Sublicense granted, make and deliver to the End User an object
code copy of the Application Package.
3. use the Products as incorporated into the Application Package for the
purposes of product evaluation by End-Users. No more than ten (10) such
evaluations shall be on-going at any point in time and the evaluation
period shall not exceed sixty (60) days. Prior to the commencement of
the evaluation period, the End-User shall execute a written agreement
which restricts use of the Application Package and disclaims all
warranties associated with the Application Package.
<PAGE> 5
4. use and grant to Hewlett-Packard Company and Johnson & Johnson ("the
Customers") the right to use TOPIC standard end-user modules in object
code only, in combination with the VAR's product. Should the Customers
elect to upgrade to the VAR's Application Package within a period not
to exceed nine months from the date of execution of this Agreement, the
license fees paid and maintenance fees not yet applied to actual
maintenance services shall be credited towards the license and
maintenance fees owed upon the licensing of the Application Package to
the Customers. The VAR agrees that should the Customers inform VAR of a
desire to use TOPIC separately from the VAR's product, the VAR will
refer them to Verity.
2.2.2 Marketing Practices
In marketing the Products, the VAR shall:
a. avoid deceptive, misleading, or unethical practices that may be
detrimental to Verity or to the Products;
b. not make any representations, warranties, or guarantees to End Users
concerning the Products on behalf of Verity;
c. comply with all applicable federal, state, and local laws and
regulations in performing its duties with respect to the Products.
2.3 INTERNAL USE LICENSE
At VAR's option, Verity will grant to VAR, subject to the payment of license
fees as provided for in the Pricing Addendum, a nonexclusive, worldwide license
to load and execute the Products for operation on VAR's internal computer
systems for VAR's internal data processing purposes.
2.4 LIMITATIONS ON USE
The VAR shall not use or duplicate the Products for any purpose other than as
specified in this Agreement or make the Products available to unauthorized third
parties. The VAR may not, unless it acquires an internal use license under
Section 2.3, use the Products for the processing of internal administrative data
or customer data. The VAR shall not rent, electronically distribute, or
timeshare the Products or market the Products by interactive cable or remote
processing services.
The VAR shall use whatever means, both contractual and technical, as it uses to
protect the Application Program to control the restricted use of each Product.
If the VAR
<PAGE> 6
learns that an End User is using the Product beyond the use permitted by its
Sublicense, the VAR shall take appropriate steps to enforce or terminate the
Sublicense.
The VAR agrees to inform Verity of any known breach of Sublicense terms. If the
VAR fails to use reasonable efforts to enforce the terms of any Sublicense
agreement in the event of a known breach:
(a) the VAR shall be considered to be in breach of this Agreement; and (b)
Verity shall have the right to enforce such Sublicense agreement as a third
party beneficiary, and upon Verity's request, the VAR shall assign to Verity any
rights in the agreements necessary to enforce the required terms of such
agreement(s). The foregoing states Verity's exclusive remedies in the event of a
failure by VAR to enforce the terms of any Sublicense in the event of a known
breach.
2.5 TITLE
Verity shall retain all title, copyright, and other proprietary rights in the
Products. The VAR and its End Users do not acquire any rights in the Product
other than those specified in this Agreement. The VAR shall retain exclusive
ownership of all rights to the Application Programs.
Verity has sole and exclusive intellectual property rights in the Products and
Documentation and all modifications made thereof by Verity.
III. FEES AND PAYMENTS
3.1 DEVELOPMENT LICENSE FEES
Development License fees are specified in the Pricing Addendum.
3.2 SUBLICENSE FEES
For each Sublicense granted by the VAR, the Sublicense fees shall be in the
amounts set forth in the Pricing Addendum. The Sublicense fee shall be
calculated effective the date the Application Package is shipped by VAR. VAR
shall be entitled to a credit against Sublicense fees for cancellations and
returns.
The VAR is free to determine unilaterally its own Sublicense fees to its End
Users.
<PAGE> 7
If an end User upgrades to a larger computer, the VAR will pay additional
Sublicense fees to Verity which are equal to the difference between (a) the
Sublicense fee which would be due to Verity if the Sublicense were newly
granted, and (b) the original Sublicense fee paid to Verity.
Payment of Sublicense fees due to Verity shall be made no later than thirty (30)
days after the end of the calendar quarter in which shipment of the sublicensed
Application Package occurred.
3.3 TECHNICAL SUPPORT FEES
Technical Support fees shall be as set forth in the Pricing Addendum.
The Technical Support fees for the Development License and the Internal Use
License (if applicable) shall be due on each anniversary of the Effective Date
of this Agreement. The initial Technical Support fee for the Development License
and the Internal Use License (if applicable) is due on execution of this
Agreement. Technical Support fees for additional Development Licenses shall be
prorated for the portion of the year remaining from the date the VAR acquires
the additional Development License until the next anniversary of the Effective
Date of this Agreement.
The Technical Support fees for the cumulative Sublicense fees accrued to Verity
under this Agreement shall be due on each anniversary of the Effective Date of
this Agreement.
For purposes of calculating cumulative Sublicense fees, such fees shall be
deemed to have accrued upon the earlier of when the Application Package is
shipped or when the End User is invoiced. The Technical Support fee shall be in
consideration for continuation of the services set forth in Paragraph 5.2 below.
VAR will have no obligation to continue to subscribe to Technical Support for
the Development License if it ceases distribution of the Products.
3.4 GENERAL PAYMENT TERMS
Except as otherwise provided for herein, all fees shall be paid within thirty
(30) days of invoice.
All payments made to Verity shall be in U.S. dollars and shall be made without
deductions based on any sales, use, value-added, or other taxes or withholdings.
<PAGE> 8
The fees listed in this Agreement do not include sales taxes or taxes of any
kind. VAR agrees to pay, and to indemnify and hold Verity harmless from, any
sales, use, business, occupation, value added, excise or similar tax not based
on Verity's net income, as well as the collection and withholding of these
taxes, including penalties and interest which Verity may incur to any local,
state, federal, foreign or other governmental entity with respect to this
Agreement except any payments and interest accrued as a result of Verity's
failure to timely remit payments received from VAR to such entities. VAR's
obligation to pay the taxes incurred during the term of this Agreement shall
survive termination of the Agreement.
Any amounts payable by the VAR hereunder which remain unpaid thirty (30) days
after the due date shall be subject to late penalty fees equal to one percent
(1.0%) per month from the due date until such amount is paid.
IV. REPORTING
4.1 SUBLICENSE REPORTS
Within thirty (30) days of the last day of each month, the VAR shall send Verity
a report detailing for that month:
a. the total number of copies of the Product distributed, as well as the
identification of the types of computers on which the copies were
installed and location of the Sublicenses (city, state, country);
b. the Product elements included in each Sublicense;
c. a detailed account of all revenues due to Verity under this Agreement.
The VAR shall also provide, within ninety (90) days following each Anniversary,
the foregoing information as of each anniversary of the Effective Date of this
Agreement recapping the previous twelve (12) months.
4.2 RECORDS; INSPECTION
The VAR shall maintain books and records in connection with activity under this
Agreement for the term of this Agreement and for at least one year from the date
this Agreement terminates or expires. The records that the VAR shall maintain
shall include, but are not limited to, executed Sublicense agreements and a list
of all the names and addresses of all End Users of the VAR.
<PAGE> 9
Verity's independent auditors may audit the relevant books and records of the
VAR to ensure compliance with the terms of this Agreement and shall treat VAR's
customer list as confidential information. Such audit shall be conducted during
regular business hours at the VAR's offices and shall not interfere unreasonably
with the VAR's business activities. Audits shall be made no more than once
annually. If such audit reveals that VAR has underpaid fees to Verity, the
amount of the fees which have not been paid shall become immediately due and
payable. As part of the audit, Verity's independent auditors may inspect
executed Sublicense agreements and End User lists.
4.3 NOTICE OF CLAIM/CHANGE OF CONTROL
The VAR will notify Verity promptly in writing of: (a) any claim or proceeding
involving the Product that comes to its attention; (b) all claimed or suspected
defects in the Products of which VAR becomes aware; and (c) any material change
in the management or control of the VAR.
V. TECHNICAL SUPPORT
5.1 THE VAR'S TECHNICAL SUPPORT RESPONSIBILITIES
5.1.1 Installation
The VAR will be responsible for any assistance needed by End Users to install
the Product at End User sites, and for providing End Users with initial training
and consultations.
5.1.2 Sublicensing Support
The VAR is responsible for direct technical support to its End Users. Any
questions from the VAR's End Users will be referred by Verity to the VAR. Direct
technical support includes, but is not limited to, (a) documenting problems, (b)
error corrections in the Application Program; (c) answering product use
questions, and (d) training End Users.
5.2 VERITY TECHNICAL SUPPORT RESPONSIBILITIES
5.2.1 Technical Support Services
Verity will provide the VAR with the following Technical Support services:
a. Telephone consultation and assistance.
b. Corrections to errors reported to be in the then-current release of the
Products, as such corrections become generally available to Verity's
other customers in accordance with Verity's Maintenance Service
Program, attached hereto.
<PAGE> 10
c. Updates as they become generally available to Verity's other
customers.
Verity shall only supply Technical Support services for the then-current and
most recent previous major release of the Products licensed hereunder. VAR shall
be obligated to incorporate Updates into the Application Package within six (6)
months.
The VAR will appoint a specific technical contact person and a back-up staff
person to serve as technical contacts for Technical Support purposes.
Verity shall not be obligated to update the Products or to
correct all reported errors in the Products.
5.2.2 Cessation of Support Services (Obsolescence)
Verity may elect to discontinue Technical Support for any Products or for any
portions thereof due to obsolescence. Should Verity elect to discontinue
Technical Support while this Agreement is in effect, the VAR shall receive a
copy of the source code that is relevant to the unsupported Product or portion
thereof. The source code shall be used by the VAR solely for the purpose of
continuing technical support for Sublicenses outstanding and shall be subject to
the terms of this Agreement. The VAR shall not provide the source code to any
third party. Other than as provided for in this Paragraph 5.2.2, the VAR shall
not have access to the source code for the Products.
VI. TERM AND TERMINATION
6.1 INITIAL TERM
This Agreement shall become effective on the Effective Date and shall be valid
for three (3) years from the Product Shipment Date, unless the Agreement is
earlier terminated as provided below.
Following the initial term, VAR will have the right, at its option, to renew
this Agreement for an additional two-year period, subject to all of the terms
and conditions hereof, except that Verity may renegotiate the VAR discount level
to reflect its then-current standard practices (but the discount will in no
event be less than 50%). Such renewal option shall be exercised by written
notice given within ninety (90) days prior to the end of the initial term. VAR
will have the right to make additional renewals of this Agreement, subject to
the renegotiation of terms to reflect Verity's standard business practices in
effect at that time.
<PAGE> 11
6.2 TERMINATION OF AGREEMENT
6.2.1 Termination for Breach
Either party may terminate this Agreement prior to the expiration of the term in
the event that the other party materially defaults in performing any obligation
under this Agreement and such default continues unremedied for a period of
thirty (30) days following written notice of default.
6.2.2 Force Majeure
Neither party shall be liable to the other for failure or delay in the
performance of a required obligation if such failure or delay is caused by
strike, riot, fire, flood, natural disaster, or other similar cause beyond such
party's control, provided that such party gives prompt written notice of such
condition and resumes its performance as soon as possible, and provided further
that the other party may terminate this Agreement if such condition continues
for a period of one hundred eighty (180) days.
6.3 RIGHTS UPON TERMINATION OR EXPIRATION
Upon expiration or termination of this Agreement:
a. Other than as specified in subparagraph b below, all the VAR's rights
to market, reproduce, sublicense, and use the Products shall cease.
b. Unless the termination is for breach by the VAR of Verity's proprietary
rights in the Products, the VAR may continue using the release of the
Products then in the VAR's possession on the computers for which the
Development Licenses were granted, solely for the purpose of continuing
technical support for Sublicenses granted prior to termination. Such
continued use of the Products shall be subject to all the surviving
provisions of this Agreement, as specified in paragraph 6.5.
c. Verity shall no longer have any obligation to provide the VAR with
Technical Support services. However, upon agreement of both parties,
the VAR may arrange to continue Technical Support for the Development
Licenses under Verity's then-current policies.
<PAGE> 12
6.4 EFFECT OF EXPIRATION OR TERMINATION
If this Agreement expires or is terminated for any reason, neither party will be
liable to the other because of such expiration or termination for compensation,
reimbursement, or damages for the loss of prospective profits, anticipated
sales, good will, or for expenditures, investments or commitments made in
connection with this Agreement. Provided, however, that expiration or
termination of this Agreement shall not relieve either party from its liability
to pay any fees which have accrued to the other party as of the expiration or
termination, or which accrue after such expiration or termination.
Any election to terminate under this Section VI shall not limit either party's
right to seek equitable or other appropriate relief relating to the breach.
6.5 SURVIVAL
The parties' rights and obligations under Paragraphs 2.3 and 2.4, and Sections
IV ("Reporting"), VI ("Term and Termination"), VII ("Indemnity"), VIII
("Warranty"), IX ("Limitation of Liability") and X ("Indemnification of Verity")
shall survive expiration or termination of this Agreement.
VII INDEMNITY
Verity will defend and indemnify the VAR against all claims, demands and
liabilities resulting from any claim that the Products licensed and used within
the scope of this Agreement infringe a United States or foreign copyright,
patent, trademark, trade secret, or other proprietary right, provided however
that Verity's total cumulative liability with respect to claims arising under
foreign proprietary rights shall be limited to $1,000,000.
VAR agrees to:
a. notify Verity in writing within thirty (30) days of the date VAR
receives written notice of the claim;
b. Verity has sole control of the investigation, preparation, defense and
all related settlement negotiations; and
c. at Verity's request, provide Verity with all necessary assistance,
information, and authority to perform the above; reasonable
out-of-pocket expenses incurred by the VAR in providing such assistance
will be reimbursed by Verity.
<PAGE> 13
Verity shall have no liability for any claim of infringement based on (a) use of
a superseded or altered release of the Products if such claim of infringement
would have been avoided by the use of a current, unaltered release of the
Products that Verity has provided to the VAR, or (b) the combination or use of
the Products with the Application Program or other materials not furnished by
Verity if such infringement would have been avoided by use of the Products
alone. In the event the Products are held or are believed by Verity to infringe,
Verity shall, at its option and expense:
a. replace or modify the Products to be noninfringing; or
b. obtain for the VAR the right to continue using the Products
for the remainder of the term of this Agreement; or
c. In the event that neither option a) nor b) is a commercially
reasonable alternative, terminate this Agreement and return
to the VAR the License and Sublicense fees paid, prorated
over the term of the Agreement.
This Section VII states Verity's exclusive obligation with respect to claims of
infringement of proprietary rights of any kind.
VIII WARRANTY
8.1 LIMITED WARRANTY
Verity warrants that when delivered the Products will substantially conform to
the specifications listed in the Documentation when operated on the appropriate
Hardware/operating system environment. VERITY DOES NOT WARRANT THAT THE PRODUCTS
WILL RUN PROPERLY ON ALL HARDWARE, THAT THE PRODUCTS WILL MEET THE VAR'S, OR ITS
END USERS' REQUIREMENTS OR OPERATE IN THE COMBINATIONS WHICH MAY BE SELECTED FOR
USE BY THE VAR OR END USER, THAT THE OPERATION OF THE PRODUCTS WILL BE
UNINTERRUPTED OR ERROR FREE, OR THAT ALL PRODUCT ERRORS WILL BE CORRECTED.
Verity makes no warranty to VAR's End Users.
8.2 EXCLUSION
THE WARRANTIES STATED HEREIN ARE SOLE AND EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, AND VERITY EXPRESSLY DISCLAIMS ALL WARRANTIES OF
MERCHANTABILITY, NONINFRINGEMENT, OR FITNESS FOR A PARTICULAR PURPOSE.
<PAGE> 14
IX LIMITATION OF LIABILITY
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY INDIRECT, INCIDENTAL, SPECIAL
OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS, REVENUE, DATA, OR USE,
INCURRED BY EITHER PARTY OR ANY THIRD PARTY, WHETHER IN AN ACTION IN CONTRACT OR
TORT, EVEN IF THE OTHER PARTY OR ANY OTHER PERSON HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. EACH PARTY'S LIABILITY FOR DAMAGES HEREUNDER FOR
ANY CAUSE WHATSOEVER SHALL IN NO EVENT EXCEED THE AMOUNTS RECEIVED BY VERITY
FROM THE VAR UNDER THIS AGREEMENT, PROVIDED THAT THIS LIMITATION SHALL NOT APPLY
WITH RESPECT TO OBLIGATIONS UNDER SECTIONS VII AND X AND TO PAYMENTS WHICH
ACCRUE TO VERITY UNDER THIS AGREEMENT.
X INDEMNIFICATION OF VERITY
The VAR will defend and indemnify Verity against any claim that the Application
Package infringes upon the copyright, patent, trademark, trade secret, or other
proprietary rights of any third party on the condition that Verity gives VAR
sole right to defend and/or settle same, if such claim would have been avoided
by the exclusive use of the Verity Products; provided that the VAR's obligations
hereunder with respect to infringement of foreign proprietary rights shall be
limited to $1,000,000.
The provisions of these Sections VII, VIII, IX, and X allocate the risks under
this Agreement between Verity and the VAR. The fees provided for in this
Agreement reflect this allocation of risks and the limitation of liability
specified herein.
XI GENERAL TERMS AND CONDITIONS
11.1 EQUITABLE RELIEF
The PARTIES acknowledge that any breach of their obligations with respect to
proprietary rights of the other party will cause irreparable injury for which
there are inadequate remedies at law and that each party shall be entitled to
equitable relief in addition to all other remedies available to it.
11.2 NONDISCLOSURE
Neither party shall, without first obtaining the written consent of the other
party, announce this Agreement in a press release or other promotional material
or disclose the terms and conditions of this Agreement, except as may be
required to implement and enforce the terms of this Agreement, or as may be
required by legal procedures or by law.
<PAGE> 15
No other information exchanged between the parties shall be deemed confidential
unless the parties otherwise agree in writing. Results of benchmark tests run on
the Products may not be disclosed unless Verity consents to such disclosure in
writing.
11.3 RESTRICTIONS
a) Copyrights.
The VAR shall retain all Verity copyright notices on the Products used by the
VAR under its Development License.
The VAR shall include the following on all copies of the Application Package
distributed by the VAR: (a) a reproduction of Verity's copyright notice; or (b)
a valid copyright notice indicating that the copyright is vested in the VAR
containing the following: (i) a "c" in a circle and the word "copyright"; (2)
the VAR's name; (3) the date of copyright; and (4) the words "All Rights
Reserved." Such notices shall be placed on (i) the Documentation, (ii) the
Application Package sign-on screen, and (iii) diskette or tape labels.
Notwithstanding any copyright notice by the VAR to the contrary, the copyright
to the Product included in the Application Package shall remain in Verity.
The VAR will promptly report to Verity any apparent copyright infringement
relating to the Products that comes to the VAR's attention.
Other than as specified above, on any reproduction or translation of any
Products, Documentation, or promotional material, the VAR agrees to reproduce
Verity's copyright notices intact.
b) Restricted Rights - Government End Users.
VAR will (a) identify and license the Software and related Documentation in all
proposals and agreements with the United States government or any contractor
therefor; and (b) legend or mark the Software and related Documentation provided
pursuant to any agreement with the United States Government or any contractor
therefor, as follows:
(i) For acquisition by or on behalf of civilian agencies, as necessary
to obtain protection substantially equivalent to that afforded to restricted
computer software and related documentation developed at private expense and
which is existing computer software no part of which was developed with
government funds and provided with Restricted Rights in accordance with
subparagraphs (a) through (d) of the "Commercial Computer Software - Restricted
Rights" clause at 48 C.F.R. 52.227-19 of the Federal Acquisition Regulations and
its successors;
<PAGE> 16
(ii) For acquisition by or on behalf of units of the Department of
Defense ("DoD") as necessary to obtain protection substantially equivalent to
that afforded to commercial computer software and related documentation
developed at private expense and provided with Restricted Rights as defined in
DoD FAR Supplement 48 C.F.R. 52.227 7013(c)(1)(ii) and its successors.
11.4 TRADEMARKS
During the term of this Agreement VAR is authorized to use Verity trademarks and
the Verity logo in connection with VAR's distribution, advertisement, and
promotion of VAR's Application Package derived in whole or in part from Verity
Products. Verity reserves the right to prescribe policies limiting VAR's use of
said trademarks and logo, including but not limited to trademark usage and
advertising policies, and VAR shall comply with same. Other than as provided for
herein, VAR shall have no right, interest or claim in or to such trademarks or
logo. All rights conferred upon VAR pursuant to this Section shall cease upon
termination or expiration of this Agreement. VAR shall not alter Verity's
trademarks or logo, nor shall VAR affix said trademarks or logo to products
other than appropriate Verity Products. VAR shall have the right to affix its
own copyrights, trademarks and logo to Application Packages, provided that in so
doing VAR does not remove or obscure Verity proprietary marks as described in
this Section 11.4.
11.5 RELATIONSHIP BETWEEN PARTIES
In all matters relating to this Agreement, the VAR will act as an independent
contractor. The relationship between Verity and the VAR is that of
licensor/licensee. Neither party will represent that it has any authority to
assume or create any obligation, express or implied, on behalf of the other
party, nor to represent the other party as agent, employee, or in any other
capacity.
Nothing in this Agreement shall be construed to limit either party's right to
independently develop software which is functionally similar to the other
party's products, so long as proprietary information of the other party is not
used in such development. The VAR acknowledges that Verity is also in the
business of developing and marketing applications and licensing them to third
parties. Verity and third parties licensed by Verity may distribute software
that competes with the VAR's application Package.
<PAGE> 17
11.6 ASSIGNMENT
Neither party may assign any rights, duties, and/or privileges under this
Agreement, except to a successor in interest, without the prior written consent
of the other party which consent will not be unreasonably withheld.
11.7 NOTICE
All written notices between the parties shall be deemed to have been given if
sent by certified or registered mail, telex, express courier or telegram to the
first addresses set forth on the attached Cover Page, until such time as a party
provides written notice of its change of address.
1.8 GOVERNING LAW
This Agreement shall be governed by the laws of the State of California and
shall be deemed to be executed in Mountain View, California.
11.9 JURISDICTION
In any legal action relating to this Agreement, the parties agree:
a. that if the VAR brings the action, it shall be instituted in San
Francisco or Santa Clara County, California; and
b. that if Verity brings the action, it shall be instituted in Middlesex
County, Massachusetts.
11.10 SEVERABILITY
Any provision of this Agreement held to be illegal or unenforceable shall be
deemed amended to conform to applicable laws or regulations, or, if it cannot be
so amended without materially altering the intention of the parties, it shall be
stricken and the remainder of this Agreement shall continue in full force and
effect.
11.11 EXPORT
The Products shall not be exported outside the United States without compliance
with applicable U.S. and foreign export requirements and with the terms set
forth in the International Sublicensing Addendum.
<PAGE> 18
11.12 NUCLEAR AND AVIATION APPLICATIONS
The Products are not specifically developed, manufactured or licensed for use in
the planning, construction, maintenance, operation, or use of any nuclear
facility or for the flight, navigation, or communication of aircraft or ground
support equipment. The Application Programs in conjunction with which the
Products are sublicensed hereunder are not intended to be used for such
purposes.
11.13 WAIVER
The waiver of one breach or default hereunder shall not constitute the waiver of
any subsequent breach or default.
11.14 DUPLICATE ORIGINALS
This Agreement may be executed in any number of counterparts, each of which
shall be an original and all of which shall constitute together but one and the
same document.
11.15 ENTIRE AGREEMENT
This Agreement, with all attached exhibits and addenda, sets forth the entire
Agreement between the parties and supersedes prior proposals, agreements, and
representations between them, whether written or oral. This Agreement may be
changed only by mutual agreement of the parties in writing.
<PAGE> 19
LICENSE AGREEMENT BETWEEN
MICROTRAC SYSTEMS, INC. AND VERITY, INC.
EXHIBIT A
HARDWARE ADDENDUM
1.0 HARDWARE ENVIRONMENTS
1.1 DEVELOPMENT LICENSE:
The Development License permits use of the Products only on Intel
80/386/486 CPU based hardware operating with MS/DOS and/or Windows.
1.2 LICENSE TO SUBLICENSE:
The License to Sublicense permits the VAR to grant Sublicenses to use
the Application Packages in all Hardware/Operating system software
environments for which the products are available from time to time,
including, but not limited to, Intel 80/386/486 CPU based Hardware
operating with MS/DOS and/or Windows and HP 9000 Hardware operating
with HP/UX.
2.0 MICROTRAC DEVELOPMENT SITES
MicroTrac Systems shall perform all Application Package Development and
technical support at the following site(s). These sites may be changed or
supplemented from time to time with Verity's written consent, which shall not be
unreasonably withheld.
A. 20 Wells Ave., Newton, MA 02159
<PAGE> 20
LICENSE AGREEMENT BETWEEN
MICROTRAC SYSTEMS, INC. AND VERITY, INC.
EXHIBIT B
PRODUCT ADDENDUM
I. PRODUCTS LICENSED FOR DEVELOPMENT PURPOSES
VERITY PRODUCTS consist of computer software products to support content-based
document retrieval. VERITY PRODUCTS to be licensed include the following:
1.1 TOPIC Application Programming Interface (API), object code only, as
specified in the TOPIC API Programmers Reference Guide that is in
effect as of the Effective date of this Agreement.
TOPIC API functions are grouped into four modules:
1.1.a DATABASE BUILDER API: Functions which enable building and
maintaining TOPIC document databases, indexes, partitions and data
accessors. Subfunction activities include i) system initialization and
shutdown, ii) document database preparation functions, and iii)
document database access functions.
1.1.b STANDARD RETRIEVAL API: Functions which enable an application to
search using word, boolean, and filter methods, generate a results list
of documents meeting the search criteria, and view the documents.
Subfunction activities include i) Document retrieval functions, ii)
document viewing functions, iii) text view and iv) document
attachments.
1.1.c. ADVANCED RETRIEVAL API: Functions which enable an application to
create, retrieve, query, edit and destroy TOPIC retrieval objects.
Subfunction activities include i) TOPIC manipulation functions, and ii)
document scoring explanation function.
1.1.d. TOPIC REAL-TIME API: Function calls which allow communication
between real-time processes and the application software, and dynamic
partition management. Subfunction activities including i) real-time
communications, and ii) real-time partition management.
1.2 TOPIC API demonstration drivers, source and object code.
1.3 TOPIC command line interfaces for building and maintaining databases.
<PAGE> 21
II. PRODUCTS SUBJECT TO SUBLICENSING
2.1 TOPIC standard I/O filters, object code only, for word processing and
desktop publishing packages.
2.2 TOPIC standard End-User software described as: Database Builder, Batch
Profiler, Database Access, Retrieval Client, Partition Server, SQL
Bridge and SQL Gateway for Dedicated Use with VAR's products listed in
section III below.
2.3 Software modules which may be distributed as part of a dedicated use
product sublicense items: 1.1.b, 1.1.c, 1.1.d, 1.3, 2.1, and 2.2 only.
III. MICROTRAC PRODUCTS SUBJECT TO THIS AGREEMENT
3.1 RESTRAC- Employment automation software which provides resume and
applicant tracking and planning.
3.2 SUCCESS PLAN- Succession planning software which automates management
development and internal resume tracking/planning.
<PAGE> 22
LICENSE AGREEMENT BETWEEN
MICROTRAC SYSTEMS, INC. AND VERITY, INC.
EXHIBIT C
PRICING ADDENDUM
1.0 DEVELOPMENT LICENSES
1.1 VAR STARTER KIT - $10,000. Includes: Ten days of API training (two
persons/five days) and Five days of on-site consulting (expenses are billed
separately).
1.2 REAL-TIME API LIBRARY; STANDARD RETRIEVAL API LIBRARY; ADVANCED
RETRIEVAL API LIBRARY; One TOPIC 3.0 Internal Development License $40,000.
PAYMENT TERMS, THESE ITEMS ONLY:
*$20,000 on signing.
*$38,000 Four months after signing.
2.0 SUBLICENSE FEES
2.1 Sublicense fees accrue for each licensed program which contains
software from any of the API component libraries. Sublicense fees are based on
the then-current TOPIC/TOPIC Real-Time API Run-Time License Fee Schedule as
actually charges to a VAR on a standard basis and the platform on which the
program(s) are licensed. VAR sublicense fees are 30% of the TOPIC/TOPIC
Real-Time API Run-Time License Fees for the first $100,000 of revenue to Verity
over the immediately preceding twelve month period. The sublicense fee decreases
to 25% for any month in which revenues to Verity over the immediately preceding
twelve mont period exceed $100,000. Verity will notify VAR ninety (90) days in
advance of any price changes in the License Fee Schedules.
See attached TOPIC/TOPIC Real-Time U.S. and International API License Fee
Schedules.
2.2 TOPIC/TOPIC Real-Time End-User modules may be sublicensed for Dedicated
Use with the application. Sublicense fees for Dedicated Use TOPIC/TOPIC
Real-Time End-User modules are calculated by applying the above VAR Sublicense
Fee Rates top the then current TOPIC/TOPIC Real-Time License Fee Schedule for
End-User products as a function of the platform and the number of concurrent
users for which the program(s) are licensed.
3.0 INTERNAL USE AND EVALUATION FEES
3.1 VAR agrees to pay Verity 30% of any Evaluation charges it levies on its
Prospect/Customer. Should customer purchase, such payment will be credited
against sublicense fees payable with respect to such prospect/customer.
Evaluation fees accrued to Verity are non refundable.
3.2 VAR agrees to pay Verity, license fees for each installation of
TOPIC/TOPIC Real-Time to be used for Internal MicroTrac business. The license
fee rate is 50% of Verity's then-current U.S. Price List.
<PAGE> 23
4.0 SOFTWARE MAINTENANCE
4.1 DEVELOPMENT API LICENSES. During the first year of Topic API use,
Verity charges maintenance support fees for telephone Hot Line Service and
software updates for the API Library(s). These fees are 20% of the license fees
for the purchased Library products. In subsequent years, this fee is reduced to
15% of the API Library license price then in effect. For the initial term of
this agreement, MicroTrac Systems will pay $8,000 for year One; $6,000 for year
Two and; $6,000 for year Three.
4.2 ACCUMULATED ROYALTY FEES. Annual maintenance for Sublicense Royalties
is charged at the rate of 7.5% of the accumulated sublicense royalties paid to
Verity for customers purchasing maintenance from the VAR at the time the payment
obligation to Verity accrues.
4.3 DEDICATED END-USER LICENSES. Annual maintenance and update fees for
TOPIC/TOPIC Real-Time Dedicated End-User products listed in paragraph 2.2 of the
Product Addendum, is charged at the rate of 15% of the sublicense royalty fee
paid by VAR to Verity.
4.4 INTERNAL-USE LICENSES. Annual maintenance and update fees for
TOPIC/TOPIC Real-Time products for internal use is charged at the rate of 15% of
the VAR license fee.
5.0 PILOTS
5.1 HEWLETT PACKARD: Per attached quotation by M. Maione dated 11/12/91.
5.2 JOHNSON & JOHNSON: Per standard Verity License Fee Schedule.
<PAGE> 24
LICENSE AGREEMENT BETWEEN
MICROTRAC SYSTEMS, INC. AND VERITY, INC.
SUPPLEMENT TO EXHIBIT C PRICING ADDENDUM
1.0 MULTI-USER PARTITION SERVER PRICING
1.1 U.S. MULTI-USER PARTITION SERVER Pricing will be based on 30% of the
following schedule:
<TABLE>
<S> <C>
80/386 (OS/2/UNIX): $2,400
80/486 (OS/2/UNIX):
including other Class 3
platforms and, for the HP
sale only, the HP 9000/845 $3,900
</TABLE>
These prices will remain in effect until November 15, 1992, after which time
Partition Server pricing will be determined by applying the VAR sublicense Fee
Rate to the then-current TOPIC/TOPIC Real-Time License Fee Schedule for End-User
products as a function of the platform and the number of concurrent users for
which the program(s) are licensed.
1.2 INTERNATIONAL MULTI-USER PARTITION SERVER Pricing is determined by
applying the VAR Sublicense Fee Rate to the then-current TOPIC/TOPIC Real-Time
International License Fee Schedule for End-User products as a function of the
platform and the number of concurrent users for which the program(s) are
licensed.
<PAGE> 25
TOPIC
U.S. Price List - License Fee
Effective 09/01/91
<TABLE>
<CAPTION>
Class 1 Platforms
Database Host (terminals) Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ------------------------- ------------------------------------------
Host TOPIC Remote TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SQL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $ 8,000 $ 5,000 $ 495 $ 300 $ 100 $ 795 $ 100 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 2 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------------- ---------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SQL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $ 8,000 $ 5,000 $ 600 $ 400 $ 100 $ 1,000 $ 100 $ 300 $ 2,000
1-4 Users $ 2,000 $ 5,000 $ 4,800 $ 1,300 $ 150 $ 3,200 $ 320 $ 2,400 $ 2,000
1-16 Users $ 8,000 $ 5,500 $11,200 $ 3,000 $ 300 $ 7,500 $ 750 $ 5,800 $ 2,000
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 3 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SQL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $13,100 $ 9,200 $ 600 $ 600 $ 100 $ 1,500 $ 200 $ 450 $ 3,280
1-4 Users $13,100 $ 9,200 $ 7,800 $ 2,100 $ 210 $ 5,200 $ 520 $ 3,950 $ 3,280
1-16 Users $13,100 $ 9,200 $18,800 $ 4,200 $ 420 $10,400 $ 1,040 $ 7,900 $ 3,280
1-32 Users $13,100 $ 9,200 $19,000 $ 5,000 $ 500 $12,500 $ 1,250 $ 8,500 $ 3,280
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 4 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SQL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $21,000 $14,700 $ 2,400 $ 1,000 $ 200 $ 4,000 $ 400 $ 1,200 $ 5,250
1-4 Users $21,000 $14,700 $12,600 $ 3,400 $ 340 $ 8,400 $ 840 $ 6,300 $ 5,250
1-16 Users $21,000 $14,700 $25,200 $ 6,700 $ 670 $16,800 $ 1,680 $12,600 $ 5,250
1-32 Users $21,000 $14,700 $31,800 $ 8,400 $ 840 $21,000 $ 2,100 $18,760 $ 5,250
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 5 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ---------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SQL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $31,500 $22,100 $ 2,400 $ 1,600 $ 200 $ 4,000 $ 400 $ 1,200 $ 7,880
1-4 Users $31,500 $22,100 $18,000 $ 5,000 $ 500 $12,600 $ 1,200 $ 9,450 $ 7,880
1-16 Users $31,500 $22,100 $37,800 $10,100 $ 1,010 $25,200 $ 2,520 $18,900 $ 7,880
1-32 Users $31,500 $22,100 $47,300 $12,800 $ 1,260 $31,500 $ 3,150 $23,850 $ 7,880
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 6 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ---------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SQL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $42,000 $29,400 $ 3,000 $ 2,000 $ 200 $ 5,000 $ 500 $ 1,500 $10,500
1-4 Users $42,000 $29,400 $26,200 $ 6,700 $ 670 $16,800 $ 1,680 $12,600 $10,500
1-16 Users $42,000 $29,400 $50,400 $13,400 $ 1,340 $32,800 $ 3,360 $25,200 $10,500
1-32 Users $42,000 $29,400 $63,000 $10,800 $ 1,680 $42,000 $ 4,200 $31,500 $10,500
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 7 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SQL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $58,000 $40,600 $ 3,600 $ 2,400 $ 200 $ 6,000 $ 6,000 $ 1,800 $14,500
1-4 Users $58,000 $40,600 $34,800 $ 9,200 $ 930 $23,200 $23,200 $17,400 $14,500
1-16 Users $58,000 $40,600 $69,800 $18,600 $ 1,860 $46,400 $46,400 $34,800 $14,500
1-32 Users $58,000 $40,600 $87,000 $23,200 $ 2,320 $58,000 $58,000 $43,600 $14,500
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) Upgrades within class are credited at 70% of the original fees paid.
(2) Upgrades from class to class are credited at 90% of the original
license fees paid.
(3) Required for each TOPIC database host platform. Price based on the
aggregate number of simultaneous users.
(4) Hot Backup is 20% of the License Fees for the "Backed Up" Modules.
(5) VAXcluster License is 100% of License Fees for Largest Class
Platform in Cluster Plus 40% for Other Platforms in the Cluster.
(6) TOPIC Partition Server and TOPIC SQL-Gateway require consulting.
Orders without the approval of R. Zollfinger will be rejected.
<PAGE> 26
TOPIC
U.S. Price List - License Fee
Effective 06/01/91
<TABLE>
<CAPTION>
Class 1 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User N/A N/A N/A N/A $ 795 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 2 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $14,400 $ 1,600 $ 800 $ 400 $ 1,000 $ 1,440
1-4 Users $14,400 $ 1,600 $ 4,900 $ 1,000 $ 3,200 $ 1,440
1-16 Users $14,400 $ 1,600 $11,200 $ 3,000 $ 7,500 $ 1,440
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 3 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- ---------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $23,600 $ 2,600 $ 900 $ 600 $ 1,500 $ 2,360
1-4 Users $23,600 $ 2,600 $ 7,800 $ 2,100 $ 5,200 $ 2,360
1-16 Users $23,600 $ 2,600 $16,800 $ 4,200 $10,400 $ 2,360
1-32 Users $23,600 $ 2,600 $19,000 $ 5,000 $12,500 $ 2,360
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 4 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $37,800 $ 4,200 $ 2,400 $ 1,800 $ 4,000 $ 3,780
1-4 Users $37,800 $ 4,200 $12,600 $ 3,400 $ 8,400 $ 3,780
1-16 Users $37,800 $ 4,200 $25,200 $ 6,700 $16,800 $ 3,780
1-32 Users $37,800 $ 4,200 $31,500 $ 8,400 $21,000 $ 3,780
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 5 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $56,700 $ 6,300 $ 2,400 $ 1,000 $ 4,000 $ 5,870
1-4 Users $56,700 $ 6,300 $18,900 $ 5,000 $12,600 $ 5,870
1-16 Users $56,700 $ 6,300 $37,800 $10,100 $25,200 $ 5,870
1-32 Users $56,700 $ 6,300 $47,300 $12,600 $31,500 $ 5,870
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 6 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $75,600 $ 8,400 $ 3,000 $ 2,000 $ 5,000 $ 7,560
1-4 Users $75,600 $ 8,400 $25,200 $ 6,700 $16,800 $ 7,560
1-16 Users $75,600 $ 8,400 $50,400 $13,400 $33,000 $ 7,560
1-32 Users $75,600 $ 8,400 $63,000 $16,800 $42,000 $ 7.560
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 7 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $104,400 $11,800 $ 3,600 $ 2,400 $ 6,000 $10,440
1-4 Users $104,400 $11,800 $34,800 $ 9,300 $22,200 $10,440
1-16 Users $104,400 $11,800 $69,600 $18,600 $46,400 $10,440
1-32 Users $104,400 $11,800 $87,000 $23,200 $68,000 $10,440
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) Upgrades within class are credited at 70% of the original fees paid.
(2) Upgrades from class to class are credited at 90% of the original
license fees paid.
(3) Required for each TOPIC database host platform. Price based on the
aggregate number of simultaneous users.
(4) Hot Backup is 20% of the License Fees for the "Backed Up" Modules.
(5) VAXcluster License is 100% of License Fees for Largest Class
Platform in Cluster Plus 40% for Other Platforms in the Cluster.
(6) Distributed Real-Time Kernel is 140% of largest platform in the
configuration.
(7) Version Management requires consulting. Others without the approval
of R. Zofflinger will be rejected.
<PAGE> 27
TOPIC U.S. Price List - Service Fees
Effective 09/01/90
Annual Maintenance Fees
<TABLE>
<S> <C>
Software Updates/Telephone Support: 15% of U.S. List License Fees for All TOPIC Modules.
Software Updates Only: 7.5% of U.S. List License Fees for All TOPIC Modules.
Training Fees
At Customer Site: $2,500/day plus expenses for standard
courses; up to 12 students; additional
students at the daily rate.
$3,500/day plus expenses for advanced
courses; up to 12 students; additional
students at the daily rate.
At Verity Site: $300/day/student for standard courses.
$500/day/student for advanced courses.
Special Courses: Customer Site rates apply for special
courses; up to 12 students; additional
students at the daily rate.
Special Course development billed at
consulting fee rates.
Expenses: Expenses billed at cost.
Consulting Fees
Staff Consultant: $800 - $1,000/day
Senior Staff Consultant: $1,200 - $1,400/day.
System Engineering: $1,000-$1,600/day/
Expenses: Expenses billed at cost.
Travel Time: Billed at 1/2 daily rate.
Additional Documentation
All Manuals: $75 each, quantity 1-50
$40 each, quantity 50+
</TABLE>
-3-
<PAGE> 28
TOPIC
International Price List - License Fee
Effective 09/01/91
<TABLE>
<CAPTION>
Class 1 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ---------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SOL-ateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $10,400 $ 7,300 $ 800 $ 400 $ 100 $ 1,000 $ 100 N/A N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 2 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- -------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SOL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $10,400 $ 7,300 $ 800 $ 600 $ 100 $ 1,300 $ 100 $ 400 $ 2,600
1-4 Users $10,400 $ 7,300 $ 8,200 $ 1,700 $ 170 $ 4,200 $ 420 $ 3,100 $ 2,600
1-16 Users $10,400 $ 7,300 $14,500 $ 3,800 $ 380 $ 9,500 $ 980 $ 7,250 $ 2,600
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 3 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ---------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SOL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $17,000 $11,900 $ 1,200 $ 800 $ 100 $ 2,000 $ 200 $ 600 $ 4,250
1-4 Users $17,000 $11,900 $10,200 $ 2,700 $ 270 $ 6,800 $ 680 $ 5,100 $ 4,250
1-16 Users $17,000 $11,900 $20,400 $ 5,400 $ 540 $13,000 $ 1,260 $10,200 $ 4,250
1-32 Users $17,000 $11,900 $24,500 $ 6,500 $ 650 $16,500 $ 1,630 $12,250 $ 4,250
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 4 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ---------------------- ------------------------------------------
TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SOL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $27,300 $19,100 $ 3,100 $ 2,100 $ 200 $ 5,200 $ 500 $ 1,550 $ 6,830
1-4 Users $27,300 $19,100 $16,400 $ 4,400 $ 440 $10,900 $ 1,000 $ 8,200 $ 6,830
1-16 Users $27,300 $19,100 $32,800 $ 8,700 $ 870 $21,800 $ 2,180 $16,400 $ 6,830
1-32 Users $27,300 $19,100 $41,000 $10,900 $ 1,090 $27,300 $ 2,730 $20,500 $ 6,830
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 5 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ---------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SOL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $41,000 $28,700 $ 3,100 $ 2,100 $ 200 $ 5,200 $ 500 $ 1,550 $10,250
1-4 Users $41,000 $28,700 $24,600 $ 8,600 $ 600 $18,400 $ 1,640 $12,300 $10,250
1-16 Users $41,000 $28,700 $49,200 $13,100 $ 1,310 $32,800 $ 3,280 $24,600 $10,250
1-32 Users $41,000 $28,700 $61,500 $16,400 $ 1,640 $41,000 $ 4,100 $30,750 $10,250
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 6 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ---------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SOL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $54,000 $38,200 $ 3,900 $ 2,600 $ 300 $ 6,500 $ 700 $ 1,950 $13,650
1-4 Users $54,000 $38,200 $32,800 $ 8,700 $ 870 $21,800 $ 2,180 $18,400 $13,650
1-16 Users $54,000 $38,200 $65,000 $17,400 $ 1,740 $43,800 $ 4,360 $32,800 $13,650
1-32 Users $54,000 $38,200 $82,000 $21,800 $ 2,180 $54,500 $ 5,450 $41,000 $13,650
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 7 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
------------------------------------------------- ---------------------- ------------------------------------------
TOPIC TOPIC
Database Batch Database Retrieval Retrieval Retrieval Retrieval Partition TOPIC
Builder(6) Profiler Access(3) Client Client Client Client Server(6) SOL-Gateway(8)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Single User $75,400 $52,800 $ 4,700 $ 3,100 $ 300 $ 7,800 $ 800 $ 2,350 $18,850
1-4 Users $75,400 $52,800 $45,200 $12,100 $ 1,210 $30,200 $ 3,020 $22,800 $18,850
1-16 Users $75,400 $52,800 $90,400 $24,200 $ 2,420 $60,400 $ 6,040 $45,200 $18,850
1-32 Users $75,400 $52,800 $113,000 $30,200 $ 3,020 $75,500 $ 7,550 $56,500 $18,850
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) Upgrades within class are credited at 70% of the original fees paid.
(2) Upgrades from class to class are credited at 90% of the original
license fees paid.
(3) Required for each TOPIC database host platform. Price based on the
aggregate number of simultaneous users.
(4) Hot Backup is 20% of the License Fees for the "Backed Up" Modules.
(5) VAXcluster License is 100% of License Fees for Largest Class Platform
in Cluster Plus 40% for Other Platforms in the Cluster.
(6) TOPIC Partition Server and TOPIC SOL-Gateway require consulting.
Orders without the approval of R. Zollfinger will be rejected.
<PAGE> 29
TOPIC
U.S. Price List - License Fee
Effective 06/01/91
<TABLE>
<CAPTION>
Class 1 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User N/A N/A N/A N/A $1,000 N/A
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 2 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $18,700 $ 2,100 $ 800 $ 500 $ 1,200 $ 1,870
1-4 Users $18,700 $ 2,100 $ 6,200 $ 1,700 $ 4,200 $ 1,870
1-16 Users $18,700 $ 2,100 $14,500 $ 3,900 $ 9,800 $ 1,870
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 3 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $30,600 $ 3,400 $ 1,200 $ 800 $ 2,000 $ 2,360
1-4 Users $30,600 $ 3,400 $10,200 $ 2,700 $ 6,800 $ 2,360
1-16 Users $30,600 $ 3,400 $20,400 $ 5,400 $12,800 $ 2,360
1-32 Users $30,600 $ 3,400 $24,500 $ 8,500 $16,300 $ 2,360
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 4 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $49,100 $ 5,500 $ 3,100 $ 2,100 $ 6,200 $ 4,910
1-4 Users $49,100 $ 5,500 $16,400 $ 4,400 $10,900 $ 4,910
1-16 Users $49,100 $ 5,500 $32,800 $ 8,700 $21,800 $ 4,910
1-32 Users $49,100 $ 5,500 $41,000 $10,900 $27,300 $ 4,910
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 5 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $73,800 $ 8,220 $ 3,100 $ 2,100 $ 5,200 $ 7,380
1-4 Users $73,800 $ 8,220 $24,600 $ 6,600 $16,400 $ 7,380
1-16 Users $73,800 $ 8,220 $49,200 $13,100 $32,800 $ 7,380
1-32 Users $73,800 $ 8,220 $61,500 $16,400 $41,000 $ 7,380
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 6 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Host Remote
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $98,300 $10,900 $ 3,900 $ 2,600 $ 5,000 $ 7,830
1-4 Users $98,300 $10,900 $32,800 $ 8,700 $18,800 $ 7,830
1-16 Users $98,300 $10,900 $65,800 $17,400 $33,000 $ 7,830
1-32 Users $98,300 $10,900 $92,000 $21,800 $42,000 $ 7,830
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 7 Platforms
Database Host Database Client Custom S/W Components Requiring Consulting
-------------------------------------------- --------------- ------------------------------------------
Real-Time Supported Database Retrieval Retrieval Version
Kernel(6,7) Feed Access(3) Client Client Management(7)
<S> <C> <C> <C> <C> <C> <C>
Single User $135,700 $15,100 $ 4,700 $ 3,100 $ 7,800 $13,570
1-4 Users $135,700 $15,100 $45,200 $12,100 $30,200 $13,570
1-16 Users $135,700 $15,100 $90,400 $24,200 $60,400 $13,570
1-32 Users $135,700 $15,100 $113,00 $30,200 $75,500 $13,570
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes: (1) Upgrades within class are credited at 70% of the original fees paid.
(2) Upgrades from class to class are credited at 90% of the original
license fees paid.
(3) Required for each TOPIC database host platform. Price based on the
aggregate number of simultaneous users.
(4) Hot Backup is 20% of the License Fees for the "Backed Up" Modules.
(5) VAXcluster License is 100% of License Fees for Largest Class
Platform in Cluster Plus 40% for Other Platforms in the Cluster.
(6) Distributed Real-Time Kernel is 140% of largest platform in the
configuration.
(7) Version Management requires consulting. Others without the approval
of R. Zofflinger will be rejected.
<PAGE> 30
TOPIC/TOPIC REAL-TIME
PLATFORM CLASSIFICATIONS
Digital Equipment Corporation
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
VAX 11/725 2 VAX 6310 4 VAX 8800 6
VAX 11/730 2 VAX 6320 5 VAX 8810 5
VAX 11/750 3 VAX 6330 5 VAX 8820 6
VAX 11/78X 3 VAX 6340 6 VAX 8830 6
VAX 6350 6 VAX 8840 7
VAX II 2 VAX 6360 6 VAX 8842 7
VAX 2000 2 VAX 6410 5 VAX 8974 7
VAX 6420 6 VAX 8978 7
VAX 3100 2 VAX 6430 6
VAX 3200 3 VAX 6440 7 VAX 9xxx 7
VAX 3300 3 VAX 6450 7
VAX 3400 3 VAX 6460 7 DEC 2100 2
VAX 3500 4 DEC 3100 3
VAX 3520 4 VAX 6510 5 DEC 5100 3
VAX 3540 4 VAX 6520 6 DEC 5200 4
VAX 3600 4 VAX 6530 6 DEC 5400 4
VAX 3602 4 VAX 6540 7 DEC 5500 4
VAX 3800 4 VAX 6550 7 DEC 5810 5
VAX 3900 4 VAX 6560 7 DEC 5820 5
DEC 5830 6
VAX 4200 3 VAX 8000 3 DEC 5840 6
VAX 4300 4 VAX 82xx 3
VAX 83xx 4 VAX 4000 Mat. 500
VAX 6210 4 VAX 85xx 5 VAX 4060 3
VAX 6220 5 VAX 86xx 5 VAX 4/VCC 2
VAX 6230 5 VAX 87xx 5
VAX 6240 6
</TABLE>
VAX designation includes all MicroVAX, VAXstation and
VAXserver platforms with the same mode #.
DEC designation includes all DECstation and DECsystem
platforms with the same model #.
Sun Microsystems/Solbourne
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
Sun 3 2 SPARC SLC 2 SPARC 2 3
Sun 4 3 SPARC IPC 3 SPARC 3xx 4
Sun IPX 3 SPARC 1+ 3 SPARC 4xx 5
Solbourne 5E-900 5
</TABLE>
SPARC designation includes all SPARCstation and SPARCserver
platforms with the same model #.
Note: Non-supported/non-shipping platforms are enclosed by brackets ( [ ] );
Supported plaforms not currently shipping are enclosed by braces ( { } ).
-7-
<PAGE> 31
Hewlett - Packard
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
{HP 9000/340} 2 HP 9000/635 4 HP 9000/822 3
{HP 9000/360} 2 {HP 9000/720} 3 HP 9000/825 3
{HP 9000/370} 3 {HP 9000/730} 3 HP 9000/832 4
{HP 9000/400} 2 {HP 9000/750 4 HP 9000/835 4
{HP 9000/425} 3 HP 9000/808 2 HP 9000/845 4
{HP 9000/433} 3 HP 9000/815 2 HP 9000/850 5
HP 9000/855 6
</TABLE>
Pyramid Technology/Nixdorf
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
Pyramid 90x 2 Pyramid 9820 5 MIS2 5
Pyramid 98x 3 Pyramid 9825 5 MIS4 6
Pyramid 98xe 3 Pyramid 9830 6 MIS12 7
Pyramid 9805 3 Pyramid 9835 6 Nixdorf Targon 3560 5
Pyramid 9810 4 Pyramid 9840 6 Nixdorf Targon 3570 6
Pyramid 9815 4 Pyramid 9845 6
</TABLE>
MIPS/Control Data
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
RC 2030 3 RS 2030 3 Control Data 4340 4
RC 3240 4 M/2000 5 Control Data 4360 4
RC 3260 4 M/3000 3 Control Data 4380 5
RC 6280 6 Control Data 4680 6
</TABLE>
AT&T
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
3B2/400 2 3B2/500 2 3B2/600 3
</TABLE>
International Business Machines (IBM)
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
RS6000/320 3 RS6000/520 3 RS6000/730 4
RS6000/530 4 RS6000/930 4
RS6000/540 4 RS6000/950 5
RS6000/550 4
</TABLE>
RS6000 designation includes all POWERstation and POWERserver platforms with the
same model #.
Note: Non-supported/non-shipping platforms are enclosed by brackets ( [ ] );
Supported plaforms not currently shipping are enclosed by braces ( { } ).
<PAGE> 32
Sequent Computer
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
S-3 (2000/70) 3 S-16 (2000/200) 4 S-81 (2000/700) 6
S-27 (2000/400) 5 S-81+ (greater than 15 procs) 7
</TABLE>
80x86-Based Microcomputers*
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
80286 (DOS/16M) 1 80286 (OS/2) 2
80386 (DOS/16M) 1 80386 (OS/2) 2 80386 (Unix) 2
80486 (DOS/16M) 2 80486 (OS/2) 3 80486 (Unix) 3
</TABLE>
Apple Computer
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
Macintosh (MacOS) 1
</TABLE>
Miscellaneous
<TABLE>
<CAPTION>
Platform Class Platform Class Platform Class
-------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C>
[NCR 32/450] 3 [Bull 210] 2 [Motorola 8408] 3
[DG/AViiON 3xx] 3 [Bull 220] 2 [Motorola 8608] 3
[DG/AViiON 4xx] 3 [Bull 250] 3 [Motorola 8864] 5
[Convex C120] 4 [Bull 320] 3
[Convex C201/202] 5 [Bull 340] 4
[Convex C210/220] 6 [Bull 360/mono] 4
[Convex C230/240] 7 [Bull 360/multi] 5
</TABLE>
<TABLE>
<CAPTION>
CPU CLASS
--- -----
<S> <C> <C>
*PS2 model 80 386/032 2
PS2 model 90/95 486/052/UNIX 3
</TABLE>
Note: Non-supported/non-shipping platforms are enclosed by brackets ( [ ] );
Supported plaforms not currently shipping are enclosed by braces ( { } ).
<PAGE> 33
PRINTED BY: MICHAEL MALONE PAGE: 1
FROM: BARRY GOSS (11/13/91)
TO: GARY KETALSEN, SUE BAREAMIAN, LOUISE BORRELLI, JOHN CALANDRELLO,
JOSE COLON, SANDRA DUERR
CC:
BCC:
PRIORITY: NORMAL DATE SENT: 11/13/91
MAIL*LINK(R) SMTP NEW DEC PRODUCT CLASSIFICAT
Received: by unix.verity.com (1.21-/Mail*Link(R) SMTP); 13 Nov 91 12:02:56 U
Received: from steel (steel.verity.com) by verity.com (4.1/SMI-4.1)
Id AA27228; Wed, 13 Nov 91 10:59:09 PST
Errors-To: ([email protected])
Received: from unix.verity.com by steel (4.1/SMI-4.1)
Id AA10117; Wed, 13 Nov 91 10:59:08 PST
Message-Id: (9111131859.AA10117@steel)
Date: 13 Nov 91 12:00:25 U
From: "Barry Goss" ([email protected])
Subject: New DEC Product Classificat
To: [email protected], [email protected]
Subject: Time: 10:43 AM
OFFICE MEMO New DEC Product Classifications Date: 11/13/91
Digital recently announced several new products. Here is a brief synopsis and
pricing classifications.
VAX 6000 model 600 series - high performance, expandable SMP machine for
Transaction Processing applications.
VAX 6000/610 - class 6
VAX 6000/620 - class 6
VAX 6000/630 - class 7
VAX 6000/640 - class 7
VAX 6000/650 - class 7
VAX 6000/660 - class 7
VAX 4000 model 500 - server for client/server applications in mid-range systems
environments ($75K-$250K systems price band). Particularly tuned to TP
applications.
VAX 4500 - class 5
VAXstation 4000 model 60 - Digital's highest-performance VAXstation (10.6
SPECmarks/12 VUP's) positioned directly against SUN SPARC IPC and HP 9000/425
workstations. Twice the performance of a VAXstation 3100.
VAX 4060 - class 3
VAXstation 4000 VLC - Digital's lowest cost entry-level VAXstation offering 5.5
SPECmarks/6 VUP's of performance. Base config is diskless with an optional
upgrade to include a 121 MB disk.
VAX VLC - class 2
Please update your Platform Classification tables until such time as I can send
out updates. Thanks.
<PAGE> 34
PRINTED BY: MICHAEL MALONE PAGE: 1
FROM: BARRY GOSS (10/15/91)
TO: GARY KETALSEN, SUE BAREAMIAN, LOUISE BORRELLI, JOHN
CALANDRELLO, JOSE COLON, SANDRA DUERR
CC:
BCC:
PRIORITY: NORMAL DATE SENT: 10/15/91
MAIL*LINK(R) SMTP NEW SUN MACHINES-PRICING
Received: by unix.verity.com (1.21-/Mail*Link(R) SMTP); 15 Oct 91 09:44:27 U
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Id AA28240; Tue, 15 Oct 91 09:39:43 PDT
Errors-To: ([email protected])
Received: from unix.verity.com by steel (4.1/SMI-4.1)
Id AA05053; Tue, 15 Oct 91 09:39:45 PDT
Message-Id: (9110151631.AA05053@steel)
Date: 15 Oct 91 09:44:01 U
From: "Barry Goss" ([email protected])
Subject: New Sun Machines-Pricing
To: [email protected], [email protected]
Subject: Time: 9:08 AM
OFFICE MEMO New Sun Machines-Pricing Date: 10/15/91
Sun recently announced several new multi-processor machines. Here is the pricing
classification:
2 Processor 4 Processor
SPARCserver 630 Class 3 Class 4
SPARCserver 670 Class 3 Class 4
SPARCserver 690 Class 4 Class 5
Please add these to your platform lists.
<PAGE> 35
PRINTED BY: MICHAEL MALONE PAGE: 1
FROM: CAROLE PEELER (8/19/91)
TO: GARY KETALSEN, SUE BAREAMIAN, LOUISE BORRELLI, JOHN
CALANDRELLO, JOSE COLON, SANDRA DUERR
CC:
BCC:
PRIORITY: NORMAL DATE SENT: 8/19/91
MAIL*LINK(R)SMTP PRICE INCREASE FOR REL 3 ED
Received: by unix.verity.com (1.21-/Mail*Link(R) SMTP); 18 Aug 91 14:33:20 U
Received: from unix.verity.com ([128.229.200.99]) by verity.com (4.0/SMI-4.1)
Id AA14401; Mon, 19 Aug 91 14:22:06 PDT
Message-Id: ([email protected])
Date: 18 Aug 91 14:28:21 U
From: "Carole Peeler" ()
Subject: Price Increase for Rel 3 Ed
To: [email protected], [email protected], [email protected]
Subject: Time: 3:51 PM
OFFICE MEMO Price Increase for Rel 3 Education Date: 08/19/91
This is to announce that there is a price increase in Verity Education effective
with the new Release 3 Curriculum. An announcement will be going out to our
customers the last of August. They should receive these announcements the first
week of September.
All Release 2 classes will remain at the original pricing. The Release 3 pricing
is listed below:
Center Pricing:
TOPIC Fundamentals (3 days) $350/day/student
TOPIC DBA (5 days) $400/day/student
TOPIC REAL-TIME DBA (2 days) $400/day/student
TOPIC Application Development (3 days) $400/day/student
TOPIC API (5 days) $500/day/student
On-Site Pricing:
$2500 per day (Max. of 12 students) plus T&E. Additional students at the daily
rate. All classes except TOPIC API.
$3500 per day (Max. of 12 students) plus T&E. Additional students at the daily
rate. This is for TOPIC API.
Course descriptions, and the new schedule, along with an education news letter
will be going out in the late August mailing. If you need any additional
information, please contact me here in the McLean Office or either Lisa Voshage
(Mt. View) or Nikki Jones (McLean).
Thanks ...
Carole Peeler
<PAGE> 36
TOPIC/TOPIC Real-Time
U.S. Price List API Real-Time License Fees
Effective 06/01/90
<TABLE>
<CAPTION>
Class 1 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $ 8,000 $ 8,000 $ 350 + $ 350
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 2 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $ 8,000 $ 8,000 $ 350 + $ 350
Multiuser $ 8,000 $ 8,000 $ 1,500 $ 1,500
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 3 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $13,000 $13,000 $ 750 + $ 750
Multiuser $13,000 $13,000 $ 3,750 $ 3,750
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 4 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $21,000 $21,000 $ 2,000 $ 2,000
Multiuser $21,000 $21,000 $ 8,000 $ 8,000
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 5 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $31,500 $31,500 $ 2,000 $ 2,000
Multiuser $31,500 $31,500 $12,000 $12,000
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 6 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $42,000 $42,000 $ 2,500 $ 2,500
Multiuser $42,000 $42,000 $16,000 $16,000
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 7 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $58,000 $58,000 $ 3,000 $ 3,000
Multiuser $58,000 $58,000 $22,000 $22,000
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE> 37
TOPIC/TOPIC Real-Time
International Price List API Run-Time License Fees
Effective 06/01/90
<TABLE>
<CAPTION>
Class 1 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $10,400 $10,400 $ 450 $ 450
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 2 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $10,400 $10,400 $ 650 $ 650
Multiuser $10,400 $10,400 $ 1,950 $ 1,950
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 3 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $16,900 $16,900 $ 980 $ 980
Multiuser $16,900 $16,900 $ 4,900 $ 4,900
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 4 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $27,300 $27,300 $ 2,600 $ 2,600
Multiuser $27,300 $27,300 $10,400 $10,400
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 5 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $40,950 $40,950 $ 2,600 $ 2,600
Multiuser $40,950 $40,950 $15,600 $15,600
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 6 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $54,800 $54,800 $ 3,250 $ 3,250
Multiuser $54,800 $54,800 $20,800 $20,800
- ---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Class 7 Platforms
-----------------------------------------------------------------------
Database Products Retrieval Products
----------------- ------------------
Database Real-Time Standard Advanced
Builder Database Builder Retrieval Retrieval
<S> <C> <C> <C> <C>
Single User $75,400 $75,400 $ 3,900 $ 3,900
Multiuser $75,400 $75,400 $28,600 $28,600
- ---------------------------------------------------------------------------------------
</TABLE>
<PAGE> 38
LICENSE AGREEMENT BETWEEN MICROTRAC SYSTEMS, INC. AND
VERITY, INC.
INTERNATIONAL SUBLICENSING ADDENDUM
This document is an Addendum to the VAR Agreement (hereinafter "the Agreement")
between MicroTrac Systems, Inc., and Verity, Inc., and is effective on the
Effective Date of the Agreement. The Agreement is hereby amended by adding the
following clauses:
1. Subject to the limitations set forth in Paragraph below, the marketing
and sublicensing rights granted to the VAR in this Agreement shall be
worldwide.
2. Verity may from time to time deny the VAR the right to sublicense the
Products in certain countries in order to protect Verity's interests
if, in the opinion of Verity's counsel, such countries:
a.) do not provide adequate protection for Verity's proprietary
rights through copyright, trade secret, patent, or other laws;
or
b.) have laws or regulations or the government has committed acts
which in the opinion of Verity's counsel are injurious to
Verity's interests in the Products.
3. The VAR warrants that it shall obey all laws and regulations of the
United States and any other countries in which it distributes the
Products. In addition, the VAR warrants that it will not grant
Sublicenses in or ship any Products to a country until it has completed
all necessary government formalities in such country. The VAR will
indemnify Verity for any losses, costs, liability, and damages incurred
by Verity as a result of a failure by the VAR to comply with the
necessary government formalities in any country.
4. The VAR acknowledges that the Products are subject to export controls
imposed on Verity and the VAR by provisions of the U.S. Export
Administration Act of 1979, as amended (the "Act") , and the
regulations promulgated thereunder (the Act and regulations will be
referred to collectively as the "DOC regulations"), and that the export
presently may be accomplished, except in certain instances, under a
GTDR general license. Verity represents that the Products do not
contain any material which cannot be exported under a GTDR license.
<PAGE> 39
Agreement No.:_______
MICROTRAC SYSTEMS, INC.
STANDARD RESTRAC LICENSE AGREEMENT
CUSTOMER:
-----------------------------------------------------------
LOCATION:
-----------------------------------------------------------
RESTRAC SOFTWARE PRODUCT:
-------------------------------------------
DESIGNATED EQUIPMENT:
----------------------------------------------
Subject to the following terms and conditions, MicroTrac Systems, Inc.
("MicroTrac") grants to the customer identified above ("Customer") a license
("License") to use the Restrac software product identified above, which may
include software provided by parties other than MicroTrac ("Third Parties"), and
related documentation ("Software") on the specific equipment ("Equipment") and
at the specific location ("Location") identified above. "Software does not
include third party software products for which MicroTrac resells licenses, and
which are listed as separate products in the proposal attached hereto
("Proposal").
1. License. The License entitles Customer to use the Software on the
Equipment (or other equipment on a temporary basis in case of a malfunction)
and at the Location, solely for Customer's own internal business purposes.
Customer may transfer the License to other equipment and locations only with
MicroTrac's prior written consent, which consent will not be unreasonably
withheld. If the licensed Software consists of RESTRAC Multi-User Software, the
maximum number of users with access to the Software will be limited as set forth
in the Proposal. Customer agrees that if such maximum number of users is
exceeded, it will so notify MicroTrac and pay an additional license fee in
accordance with the schedule included in the Proposal.
2. Certain Restrictions. The License may not be transferred by Customer
other than to Customer's parent or wholly-owned subsidiary, or to a successor to
Customer's business. Customer agrees not to cause or permit the reverse
engineering, disassembly or decompilation of the Software. The Software is a
proprietary product of MicroTrac and Third Parties which includes trade secrets
and is protected by copyright law. Customer may make one copy of the Software
for backup and archival purposes. No other copies shall be made without
MicroTrac's prior written consent. Customer agrees not to remove any product
identification, copyright notices, or other notices of proprietary rights from
the Software, to reproduce such notices on all permitted copies, and to take
such measures to safeguard the Software as it takes with regard to its own
proprietary and confidential material.
<PAGE> 40
3. MicroTrac's Rights. Pursuant to this License, Customer acquires only
the right to use the Software and does not acquire any rights of ownership in
the Software or the media in which it is contained. Subject to the License,
MicroTrac and Third Parties retain all rights of ownership in the Software and
the media and all copies thereof.
4. Additional MicroTrac Services. MicroTrac will provide Customer with
Systems Analysis, Installation and Training services at the times and places,
and in accordance with the policies, contained in the Proposal. Customer agrees
to obtain all necessary hardware and/or software products of suppliers other
than MicroTrac referred to in the Proposal and to have a suitable site ready for
installation of the Software and training within 60 days after the date of
Customer's execution of this Agreement. MicroTrac will also make Maintenance
services for the Software available to Customer under a separate Maintenance
Agreement. All corrections, modifications and enhancements to the Software
provided to Customer as part of such services shall become part of the Software
for all purposes of this Agreement.
5. Payment. The fees for the License and the services to be provided by
MicroTrac will be as stated in the Proposal. If the time reasonably required for
such services exceeds the estimates contained in the Proposal, MicroTrac will
be compensated for excess time in accordance with the policies contained in the
Proposal. License fees will be payable within 30 days after installation of
Software. Service fees will be payable within 30 days after invoice (which will
not pre-date the performance of services). Late charges may be assessed at 1.5%
per month, or if less, the maximum allowable by law. MicroTrac's stated fees do
not include any excise, sales, use or other taxes, duties or governmental
charges, the payment of which (except for state and federal income taxes for
which MicroTrac is liable) will be Customer's responsibility.
6. Termination. The License shall be perpetual, unless sooner
terminated as provided herein. Customer may terminate the License at any time.
MicroTrac may terminate the License if Customer breaches any of the terms and
conditions of this Agreement or a MicroTrac Maintenance Agreement and fails to
cure such breach within 30 days after written notice. Upon termination, Customer
shall return to MicroTrac or destroy and certify to MicroTrac the destruction of
all copies of the Software in Customer's possession or control.
7. Warranty and Limitation of Remedies.
(a) Except as otherwise expressly provided herein, MicroTrac's entire
liability to Customer and Customer's sole remedy hereunder for any cause
whatsoever, regardless of the form of the action, whether in contract, tort, or
strict liability, shall be limited to the amounts paid to MicroTrac by Customer
for the product or service that is alleged to have caused the damages or is the
subject matter of or is directly related to the cause of action.
<PAGE> 41
(b) MicroTrac warrants for a period of 90 days following installation
that the Software will perform substantially as documented. Customer's sole
remedies under this warranty will be the replacement of defective Software which
is returned to MicroTrac during such 90-day period, or, if MicroTrac is unable
within a reasonable period of time to cure a material defect which makes the
Software unfit for its intended use and which is brought to MicroTrac's
attention during such 90-day period, a refund of all license fees paid with
respect to the Software (but not charges for services performed).
(c) The Software is intended for use only by sophisticated customers
who understand the functioning of the Software and the processes embodied
therein. Customer has sole responsibility for determining that the Software is
suitable for its purposes and for its proper use, including protection of data
from unintended modification, destruction or disclosure, and for the accuracy
and integrity of the results. MicroTrac assumes no responsibility for the loss
of data or other damage to persons or property arising out of Customer's use of
the Software, and does not warrant that the Software will be error-free or that
all defects will be corrected.
(d) MicroTrac's warranty applies only to the Software in the form
provided by MicroTrac under normal use as contemplated by this Agreement.
MicroTrac makes no warranty and shall have no liability whatsoever with respect
to hardware or software products of third parties, even if provided by
MicroTrac, except such as may be included as part of the Software.
EXCEPT AS STATED IN THIS SECTION 7 MICROTRAC DISCLAIMS ANY AND ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THIRD PARTIES MAKE NO
WARRANTIES UNDER THIS AGREEMENT. IT IS UNDERSTOOD AND AGREED THAT THE SOFTWARE
DOES NOT CONSTITUTE "CONSUMER GOODS" UNDER ANY STATE OR FEDERAL WARRANTY LAW.
(e) IN NO EVENT WILL MICROTRAC BE LIABLE FOR ANY DAMAGES, FOR BREACH OF
CONTRACT, TORT OR OTHER FORM OF ACTION, INCLUDING LOST PROFITS OR OTHER
INCIDENTAL OR CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SAME,
EXCEPT IN ANY STATE THAT DOES NOT ALLOW THIS DISCLAIMER, WHERE THE LIABILITY, IF
ANY, SHALL BE LIMITED TO THE COST OF THE PRODUCT OR SERVICE ALLEGED TO HAVE
CAUSED THE DAMAGE. THIRD PARTIES ARE NOT PARTIES TO THIS AGREEMENT AND SHALL
HAVE NO LIABILITY FOR DAMAGES HEREUNDER. CUSTOMER MAY HAVE OTHER RIGHTS THAT
VARY FROM STATE TO STATE. THIS SECTION ALLOCATES THE RISKS OF PROGRAM FAILURE
BETWEEN MICROTRAC AND CUSTOMER. MICROTRAC'S PRICING REFLECTS SUCH ALLOCATION OF
RISKS AND THE LIMITATION OF LIABILITY SET FORTH ABOVE.
<PAGE> 42
8. U.S. Government Restricted Rights. The Software and documentation
are provided with RESTRICTED AND LIMITED RIGHTS. Use, duplication, or disclosure
by the Government are subject to restrictions as set forth in FAR
Section52.227-14 (June 1987) Alternate III(g)(3) (June 1987), FAR
Section52.227-19 (June 1987), or DFARS Section52.227-7013(c)(1)(ii)(June 1988),
as applicable, and their successor provisions. Contractor/Manufacturer is
MicroTrac Systems, Inc., 20 Wells Avenue, Newton, Massachusetts 02159.
9. General.
(a) This Agreement (including the Proposal, which is attached hereto
and incorporated herein by reference) sets forth the entire understanding of the
parties on the subject hereof. Any waiver or modification of the provisions of
this Agreement will be effective only if in writing and signed by the party
against whom it is to be enforced. In the event of a conflict with the
provisions of any other document (including but not limited to a purchase order
of Customer), the provisions of this Agreement shall control.
(b) Customer will be responsible for compliance with all legal
requirements applicable to exports of Software made by it.
(c) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
MICROTRAC SYSTEMS, INC.
- ----------------------------------
(Customer)
By: By:
------------------------------- -------------------------------
(Signature) (Signature)
------------------------------- -------------------------------
(Name and Title) (Name and Title)
------------------------------- -------------------------------
(Date) (Date)
<PAGE> 43
VERITY
MAINTENANCE SERVICES PROGRAM
For all Customers who purchase Maintenance Services, Verity provides support in
the form of Error Corrections, Product Updates, and Hotline Telephone Support.
Maintenance Services are provided for the current release and the most recent
previous release of the Product.
The effective date of Maintenance Services is the date Products are shipped from
Verity's facility.
DESCRIPTION OF SERVICES PROVIDED DURING A MAINTENANCE PERIOD
A) Error Corrections
Verity shall exercise commercially reasonable efforts to correct any error
reported by the Customer in the current unmodified release of the Products in
accordance with the priority level reasonably assigned to such error by Verity.
If a reported error has caused a Product to be inoperable, or the Customer's
notice to Verity states that the reported error is substantial and material with
respect to the Customer's use of the product, Verity shall, as expeditiously as
possible, use its best efforts to correct such error or to provide a software
patch or bypass around such error. The Customer acknowledges that all reported
errors may not be corrected.
B) Product Updates
Verity provides, at no additional cost, one (1) copy of all published revision
to the printed documentation and one (1) copy of, or authorization to copy, new
releases of the products, which are not designated by Verity as new products for
which it charges a separate fee.
C) Telephone Hotline Support
Verity provides telephone assistance to all Customers who have purchased
Maintenance Services. Verity Support personnel are available to answer questions
related to Verity's products and how they perform with compatible hardware
systems. Assistance in the development of custom applications for Verity's
products is not included in standard hotline support. If Customers wish to
acquire such support, it is available through Verity's Consulting group at the
then-current consulting rates.
<PAGE> 44
PRIORITY LEVELS OF ERRORS
If the performance of Maintenance Services, Verity applies priority ratings to
problems reported by Customers.
PRIORITY I ERRORS
Description: Program errors that prevent some function or process from
substantially meeting the functional specification and which seriously affect
the overall performance of the function or process and no work-around is known.
Verity Response:
Verity shall promptly initiate the following procedures: (1) assign senior
Verity engineers to correct the error; (2) notify senior Verity Management that
such errors have been reported and that steps are being taken to correct the
error; (3) provide Licensee with periodic reports on the status of corrections;
(4) commence work to provide Licensee with a work-around until final solution is
available; (5) provide final solution to Customer as soon as it is available.
PRIORITY II ERRORS
Description: Program errors that prevent some function or process from meeting
functional specification, but has a reasonable work-around.
Verity Response:
Verity shall provide a work-around to the Customer and shall exercise
commercially reasonable efforts to include the fix for the error in the next
software maintenance release.
PRIORITY III ERRORS
Description: Program errors that prevent some portion of a function from
meeting functional specification but do not seriously affect the overall
performance of the function.
Verity Response:
Verity may include the fix for the error in the next major release of the
software.
<PAGE> 45
LICENSE AGREEMENT BETWEEN
MICROTRAC SYSTEMS, INC. AND VERITY, INC.
ADDENDUM 1
1.0 NON-REFUNDABLE SUBLICENSE FEES
1.1 VAR agrees to commit to pay Sublicense fees of $35,000, which is based on
VAR's estimates of its shipments of TOPIC/TOPIC Real-Time API Run-Time Licenses
during the current fiscal quarter, ended Sept. 30 , 1992. Such payment is
non-cancelable and non-refundable; however, all sublicenses granted by VAR shall
be credited against this payment until it is depleted.
1.2. In consideration of this commitment, Sublicense fees accrued toward this
payment shall be 22.8% of the standard. TOPIC/TOPIC Real-Time API Run-Time
License Fees. Once accrued Sublicense fees exceed $35,000, the sublicense fee
rate will be as set forth in Exhibit C of the Agreement.
1.3 Payment Terms
$35,000 due 10/31/92.
2.0 All other terms and conditions of the Agreement remain unchanged.
Executed by the VAR: Executed by Verity, Inc.
/s/ Hugh Shytle /s/ Kathleen A Murphy
- ---------------------------- -------------------------------
(Authorized Signature) (Authorized Signature)
Name: Hugh Shytle Name: Kathleen A Murphy
----------------------- --------------------------
Title: Vice President Title: Vice President Finance
----------------------- --------------------------
The effective date of this Addendum is August 31, 1992.
<PAGE> 46
LICENSE AGREEMENT BETWEEN
MICROTRAC SYSTEMS, INC. AND VERITY, INC.
ADDENDUM II
1.0 NON-REFUNDABLE SUBLICENSE FEES
1.1 VAR agrees to commit to pay Sublicense fees of $25,000, which is based on
VAR's estimates of its shipment of TOPIC/TOPIC Real-Time API Run-Time Licenses
during the current fiscal quarter, ended December 31, 1992. Such payment is
non-cancelable and non-refundable; however, all sublicenses granted by VAR shall
be credited against this payment until it is depleted.
1.2 In consideration of this commitment, Sublicense fees accrued toward this
payment shall be 22.5% of the standard TOPIC/TOPIC Real-Time API Run-Time
License Fees. Once accrued Sublicense fees exceed $25,000, the sublicense fee
rate will be as set forth in Exhibit C of the Agreement.
1.3 Payment Terms
$25,000 due 1/31/93.
2.0 All other terms and conditions of the Agreement remain unchanged.
Executed by the VAR: Executed by Verity, Inc.
/s/ Hugh Shytle
- ---------------------------- -------------------------------
(Authorized Signature) (Authorized Signature)
Name: Hugh Shytle Name:
---------------------- -------------------------
Title: Vice President Title:
---------------------- -------------------------
The effective date of this Addendum is November 30, 1992.
<PAGE> 47
LICENSE AGREEMENT BETWEEN
MICROTRAC SYSTEMS, INC. AND VERITY, INC.
ADDENDUM III
1.0 NON-REFUNDABLE SUBLICENSE FEES
1.1 VAR agrees to commit to pay Sublicense fees of $45,000, which is based on
VAR's estimates of its shipment of TOPIC/TOPIC Real-Time API Run-Time Licenses
during the current fiscal quarter, ended March 31, 1993. Such payment is
non-cancelable and non-refundable; however, all sublicenses granted by VAR shall
be credited against this payment until it is depleted.
1.2 In consideration of this commitment, Sublicense fees accrued toward this
payment shall be 22.5% of the standard TOPIC/TOPIC Real-Time API Run-Time
License Fees. Once accrued Sublicense fees exceed $45,000, the Sublicense fee
rate will be as set forth in Exhibit C of the Agreement.
1.3 Payment Terms
$45,000 due 4/30/93.
2.0 All other terms and conditions of the Agreement remain unchanged.
Executed by the VAR: Executed by Verity, Inc.
/s/ George E. Engdahl
- ---------------------------- -------------------------------
(Authorized Signature) (Authorized Signature)
Name: George E. Engdahl Name:
---------------------- -------------------------
Title: Treasurer/CFO Title:
---------------------- -------------------------
The effective date of this Addendum is February 26, 1993.
<PAGE> 48
LICENSE AGREEMENT BETWEEN
MICROTRAC SYSTEMS, INC. AND VERITY, INC.
ADDENDUM IV
I. CORPORATE APPLICATION SUBLICENSE FEE RATE (U.S.):
10% OF TOTAL LICENSE FEES PAID BY MICROTRAC CUSTOMER TO MICROTRAC FOR
APPLICATIONS WHICH INCORPORATE THE VERITY API OR PRODUCTS REQUIRED TO SUPPORT
SUCH APPLICATIONS.
TERMS
1. MINIMUM FEE PER CUSTOMER IS $20,000
2. MICROTRAC API APPLICATION ONLY
3. ONE DATABASE BUILDER LOCATION
4. ADDITIONAL DATABASE BUILDER SUBLICENSE FEES SUBJECT TO STANDARD RATES PER
CONTRACT
II. CORPORATE APPLICATION SUBLICENSE FEE RATE WITH MULTIPLE DATABASE BUILDERS
(U.S.):
20% OF TOTAL LICENSE FEES PAID BY MICROTRAC CUSTOMER TO MICROTRAC FOR
APPLICATIONS WHICH INCORPORATE THE VERITY API OR PRODUCTS REQUIRED TO SUPPORT
SUCH APPLICATIONS.
TERMS
1. MINIMUM FEE PER CUSTOMER IS $40,000
2. MICROTRAC API APPLICATION ONLY
Executed by the VAR: Executed by Verity, Inc.
/s/ George E. Engdahl
- ---------------------------- -------------------------------
(Authorized Signature) (Authorized Signature)
Name: George E. Engdahl Name:
---------------------- -------------------------
Title: Treasurer/CFO Title:
---------------------- -------------------------
The effective date of this Addendum is April 2, 1993.
<PAGE> 49
LICENSE AGREEMENT BETWEEN
MICROTRAC SYSTEM, INC. AND VERITY, INC.
ADDENDUM V
1.0 NON-REFUNDABLE SUBLICENSE FEES
1.1 VAR agrees to commit to pay Sublicense fees of $40,000, which is based on
VAR's estimates of its shipment of TOPIC API Run-Time Licenses during the
current fiscal quarter, ended June 30, 1993. Such payment is non-cancelable and
non-refundable; however, all sublicenses granted by VAR shall be credited
against this payment until it is depleted.
1.2 In consideration of this commitment, Sublicense fees accrued toward this
payment shall be 22.5% of the standard TOPIC/TOPIC Real-Time API Run-Time
License Fees. Once accrued Sublicense fees exceed $40,000, the Sublicense fee
rate will be as set forth in Exhibit C of the Agreement.
1.3 Payment Terms:
$40,000 due 7/30/93.
2.0 All other terms and conditions of the Agreement remain unchanged.
Executed by the VAR: Executed by Verity, Inc.
/s/ George E. Engdahl /s/ Valerie Rosenfeld
- ---------------------------- -------------------------------
(Authorized Signature) (Authorized Signature)
Name: George E. Engdahl Name: Valerie Rosenfeld
---------------------- -------------------------
Title: Treasurer and CFO Title: Director Contract Admin.
---------------------- -------------------------
The effective date of this Addendum is May 14, 1993.
<PAGE> 50
AMENDMENT
The VAR agreement between MicroTrac Systems, Inc. of Dedham, MA and
Verity, Inc. of Mountain View, CA dated November 27, 1991 ("Master Agreement")
is hereby amended to include the following special provisions in connection with
an arrangement whereby MicroTrac Systems, Inc. will distribute Resume Reader
Software through PeopleSoft, Inc.:
1. The term of this amendment is five years from the date of the contract
between MicroTrac, Inc. And PeopleSoft, Inc. In the event the Master
Agreement is terminated, all terms and conditions of the Master
Agreement shall survive for purposes of this amendment until the end of
such five year period.
2. In consideration of this commitment, the sublicense fees payable to
Verity, Inc. will be 10% of the amounts payable by PeopleSoft, Inc. to
MicroTrac Systems, Inc. for Resume Reader Software under its contract
with PeopleSoft, Inc., which is attached as Exhibit A to this
amendment.
3. All other terms and conditions of the Master Agreement are unchanged.
Executed by MicroTrac Systems, Inc. Executed by Verity, Inc.
/s/ George Engdahl /s/ Valerie Rosenfeld
- ---------------------------- -------------------------------
(Authorized Signature) (Authorized Signature)
Name: George Engdahl Name: Valerie Rosenfeld
---------------------- -------------------------
Title: CFO Title: Director Contract Admin.
---------------------- -------------------------
The effective date of this Amendment is May 13, 1993.
<PAGE> 51
AMENDMENT #2 TO VAR AGREEMENT
BETWEEN VERITY, INC. AND RESTRAC, INC. (FORMERLY MICROTRAC SYSTEMS, INC.)
DATED NOVEMBER 27, 1991
This is an AMENDMENT #2 to the VAR Agreement between Verity, Inc. and Restrac,
Inc. (formerly MicroTrac Systems, Inc.), dated November 27, 1991, as modified
and amended by written agreement of the parties (hereinafter referred to as the
"VAR Agreement").
WHEREAS, the pricing and related products subject to the VAR Agreement have
changed; and
WHEREAS, the parties had previously agreed to redefine the products covered by
the VAR Agreement and the related pricing effective April 1, 1994, and
WHEREAS, the parties wish to extend the term of the VAR Agreement;
The parties hereby agree as follows:
1. The VAR Agreement is hereby modified by replacing Exhibit A, Hardware
Addendum, Exhibit B, Product Addendum, Exhibit C, Pricing Addendum,
(collectively, the "Old Exhibits") with the revised Exhibits A-C attached to
this Amendment (the "New Exhibits"). All terms of the New Exhibits shall be
deemed effective for any Sublicenses granted on or after April 1, 1994. All
Sublicenses granted prior to April 1, 1994 shall be considered granted under the
terms of the Old Exhibits.
2. The Term of the VAR Agreement is hereby extended until November 27, 1996.
3. Except as specifically modified by this AMENDMENT #2, all other terms of the
Agreement remain in full force and effect. In the event of a conflict between
the terms of the Agreement and the terms of this AMENDMENT #2, the terms of this
AMENDMENT #2 shall control.
IN WITNESS WHEREOF, the parties have executed this AMENDMENT #2 under seal as of
August 11, 1995.
VERITY, INC. RESTRAC, INC.
By: /s/ Philippe Covatot By: /s/ Lars Perkins
--------------------- -----------------------
Name: Philippe Covatot Name: Lars Perkins
--------------------- -----------------------
Title: Chairman & CEO Title: President
--------------------- -----------------------
Date: 9/19/95 Date: 9/19/95
--------------------- -----------------------
<PAGE> 52
VAR AGREEMENT
EXHIBIT A
HARDWARE ADDENDUM
Effective April 1, 1994
1.0 HARDWARE ENVIRONMENTS
1.1 DEVELOPMENT LICENSE
The Development License permits use of the Products on all Hardware/Operating
system software environments for which the Products are available from time to
time.
1.2 LICENSE TO SUBLICENSE
The License to Sublicense permits VAR to grant Sublicenses to use the
Applications Packages in all Hardware/Operating system software environments
for which the Products are available from time to time.
2.0 RESTRAC DEVELOPMENT SITES
Restrac shall perform all Application Package Development and technical support
at the following site(s). These sites may be changed or supplemented from time
to time with Verity's written consent, which shall not be unreasonably withheld:
A. 3 Allied Drive, Suite 311, Dedham, MA 02026
<PAGE> 53
VAR AGREEMENT
EXHIBIT B
PRODUCT ADDENDUM
Effective April 1, 1994
1.0 PRODUCTS LICENSED FOR DEVELOPMENT PURPOSES
VAR is licensed to use the following products for development purposes as
specified in Section 2.1.1 of the Agreement:
1.1 Topic API V4, including:
- Topic API:
Database Builder API Standard Retrieval API, Advanced
Retrieval API, Topic Real Time API
- Topic API demonstration drivers, source and object code
- Topic command line interfaces for building and maintaining
databases
- Topic Partition Server
- Topic standard I/O filters, object code only, for word
processing and desktop publishing packages
- Topic standard End User software described as Database
Builder, Batch Profiler, Database Access, Retrieval
Client, Partition Server, SQL Bridge and SQL Gateway.
1.2 Topic Developer Kit (TDK) Vx, including:
- Basic retrieval and relevancy ranking: Boolean, accrue,
wildcard, proximity
- Infosoft thesaurus included for English - non extensible
- Desktop and filesharing database access
- Mastersoft filters/viewers
- TES - Topic Enterprise Server
- TA - Topic Agents
- TDE - Topic Data Entry
2. PRODUCTS SUBJECT TO SUBLICENSING
The license to sublicense under Section 2.2 of the VAR Agreement permits VAR to
grant Sublicenses to solely use the Topic API V4 or TDK Vx Run Time Software and
associated documentation, including the capabilities described in Sections 1.1
and 1.2 above, for use with the Application Package described in Section 3
below. In no event shall VAR have any right to Sublicense any TDK software other
than the Run Time Software.
Restrac may migrate Sublicensees from Run Time Topic API V4 Sublicenses to Run
Time TDK Vx Sublicenses for use with the Application Package at no additional
charge.
<PAGE> 54
3. RESTRAC PRODUCTS SUBJECT TO THIS AGREEMENT
THE APPLICATION PACKAGE
Restrac Finder - A Restrac product used to read scanned resumes and create a
computerized pool of job applicants/internal candidates, which can then be
searched with user defined criteria and the resulting candidate resumes can be
matched against open positions, faxed to hiring managers, printed, or viewed on
screen. Restrac Finder (formerly known as Resume Reader) is one component of the
Restrac Enterprise family of products.
Restrac agrees that the Application Package shall not provide direct or exposed
access to the development capabilities of TDK Vx, or any of its successors,
unless specifically provided herein. The Application Package shall access,
modify and/or manipulate only those Collections which the Application Package
creates, unless specifically provided herein. For purposes of this section,
"Collection" shall mean the data structures created by the Products and required
for the Run Time Software to operate. Any enhanced search capability will not be
sold or used standalone or as a general purpose document searching feature and
will be sold only as an embedded feature of the fully featured Application
Package.
Restrac recently changed its pricing model to allow clients to purchase Restrac
Enterprise solutions in a "bundled" package, which includes Restrac Finder and
other Restrac software products. For purposes of calculating royalties which are
based on a percentage of the license fees received by Restrac (e.g. distribution
or enterprise/corporate/unlimited use licenses) for bundled solutions, the
license fee charged for the Application Package (Restrac Finder) shall be
calculated as a percentage of the bundled license fee, where such percentage
shall equal to the ratio of the suggested retail price of the Application
Package to the aggregate suggested retail prices of each product included in the
bundled package. In no event shall such percentage be less than thirty percent
(30%). Restrac shall provide Verity with prompt written notice of any change in
such percentage. In addition to the audit rights set forth in Section 4.2 of the
VAR Agreement, Verity shall have the right to audit whether such percentage
calculated is accurate and correct.
<PAGE> 55
VAR AGREEMENT
EXHIBIT C
PRICING ADDENDUM
Effective April 1, 1994
1.0 DEVELOPMENT LICENSES
- Topic Development Licenses for Topic API V4 and Topic TDK Vx
- paid in full.
2.0 SUBLICENSE FEES
2.1 Base Pricing for sublicenses for Topic API V4 or TDK Run Time Software and
associated documentation, including the capabilities described in Section 1.1
and 1.2 of Exhibit B, Product Addendum.
- Database Builder Run Time License Fee (includes server software)
(API V4 or TDK Vx, regardless of platform) - [***]
- Client Run Time License Fee
(API V4 or TDK Vx, regardless of platform) - [***]
2.2 Enterprise or Corporate Licenses for Topic API V4 or TDK Run Time Software
and associated documentation, including the capabilities described in Section
1.1 and 1.2 of Exhibit B, Product Addendum except for those capabilities
provided by third party suppliers are available at the following royalty fees:
For an Enterprise or Corporate license providing
- usage that number of client Application Package licenses
required by and used internally by the Enterprise; and
- one Database Builder Run Time license
VAR shall pay to Verity the greater of [**] or [**] of the license fees paid
to VAR for such Enterprise or Corporate license. Additional Database Builder
runtime licenses may be purchased at the standard rates set forth in 2.1 above.
For an Enterprise or Corporate license providing
- usage that number of client Application Package licenses
required by and used internally by the Enterprise, and
- as many Database Builder Run Time licenses as are required to
support such client Application Packages within the Enterprise
VAR shall pay to Verity the greater of [**] or [**] of the license fees paid
to VAR for such Enterprise or Corporate license.
Restrac recently changed its pricing model to allow clients to purchase Restrac
Enterprise solutions in a "bundled" package, which includes Restrac Finder and
other Restrac software products. For purposes of calculating royalties which are
based on a percentage of the license fees received by Restrac (e.g. distribution
or enterprise/corporate/unlimited use licenses) for bundled solutions, the
license fee
[*] Confidential treatment requested
<PAGE> 56
charged for the Application Package (Restrac Finder) shall be
calculated as a percentage of the bundled license fee, where such percentage
shall equal to the ratio of the suggested retail price of the Application
Package to the aggregate suggested retail prices of each product included in the
bundled package. In no event shall such percentage be less than thirty percent
(30%). Restrac shall provide Verity with prompt written notice of any change in
such percentage. In addition to the audit rights set forth in Section 4.2 of the
VAR Agreement, Verity shall have the right to audit whether such percentage
calculated is accurate and correct.
2.3 Incentive Pricing
Provided that VAR has met the following cumulative payment thresholds, all
royalty payments will be reduced by an additional 10%:
<TABLE>
<CAPTION>
Year Ended Minimum Total Payments
Since July 1 of prior year
<S> <C>
June 30, 1994 $150,000
June 30, 1995 175,000
June 30, 1996 200,000
</TABLE>
3.0 INTERNAL USE AND EVALUATION FEES
3.1 Internal Use Licenses - 50% of retail
3.2 Evaluation Fees - VAR may grant evaluation licenses, provided that VAR will
pay Verity 30% of the evaluation license fees it charges prospective Customers
for use of the Application Package. In the event such prospective Customer
purchases an Application Package license as a result of such evaluation, payment
will be credited against sublicense fees payable with respect to such
prospective Customer, otherwise such evaluation fees are non refundable.
4.0 SOFTWARE MAINTENANCE
4.1 Development Licenses (API V4 & TDK Vx)
Nov 1994-Nov 1995 - $6,000
Nov 1995-Nov 1996 - $1,485.00 per year (one platform), plus
$885.00 per year per additional platform.
4.2 Maintenance for Sublicenses
Sublicenses granted prior to April 1, 1995 - 7.5% of sublicense fees
paid to Verity for clients subscribing to maintenance with VAR.
Sublicenses granted on or after April 1, 1995 - 10% of sublicense fees
paid to Verity for clients subscribing to maintenance with VAR.
4.3 Dedicated End User and Internal Use Licenses - 18% of VAR license fee.
<PAGE> 1
[Confidential Treatment]
Exhibit 10.9
VALUE ADDED RESELLER LICENSE AGREEMENT
This Agreement is made and entered into as of the 31st day of August by and
between the Analytic Sciences Corporation, 55 Walkers Brook Drive, Reading,
Massachusetts 01867 (hereinafter "TASC") and MicroTrac Systems, Inc., 20 Wells
Avenue, Newton, MA 02159, (hereinafter "VAR").
1. DEFINITIONS:
For the purpose of this Agreement, the following are defined terms:
"Distributor" shall mean a third party who is duly appointed by VAR to
sublicense the Licensed Program under the terms of this Agreement.
"Licensed Program" shall mean the particular program or programs listed in
Exhibit A attached hereto and made a part hereof, any updated program or program
portion furnished to VAR by TASC, and any documentation or additional materials
supplied by TASC for use with Licensed Program.
"System" shall mean equipment and/or software listed in Exhibit A developed by
VAR combined with the Licensed Program as required by this Agreement for use by
a third party end user.
2. VALUE ADDED REQUIREMENT:
2.1 VAR agrees that it shall license the Licensed Program for
incorporation into Systems that VAR, in the regular course of its business, will
either (i) remarket to an unaffiliated third party end user or (ii) remarket
to VAR's Distributors who will further remarket such Systems to unaffiliated
third party end user or (ii) remarket to VAR's Distributors who will further
remarket such Systems to unaffiliated third party end users.
2.2 VAR certifies that the Licensed Program shall be incorporated into
Systems consisting of a substantial amount of other hardware and/or software
that VAR manufactures, develops or supplies which represents a significant
functional and value enhancement to the Licensed Program. VAR agrees that it
shall promptly provide to TASC such written information as TASC may from time to
time request relating to the functional and value enhancements required in this
Section.
3. SCOPE OF LICENSE:
3.1 TASC hereby grants to VAR and VAR accepts, a nonexclusive worldwide
license to market, promote, copy and sublicense the Licensed Program solely in
accordance with the terms of this Agreement and solely to Distributors or end
users and solely for the end user's internal use as part of Systems.
<PAGE> 2
3.2 VAR shall reproduce and include TASC's copyright and trade secret
notices on all copies in any form of the Licensed Program. VAR shall make no
attempt to create, generate, or reverse engineer any source code or source code
version of any portion of the Licensed Program.
3.3 VAR many hold itself out as being authorized to market the Licensed
Program and display TASC's name, logo and trademarks as they apply to the
Licensed Program, solely in accordance with such requirements as TASC shall
approve in advance. VAR shall not use or display TASC's name, logo, and
trademarks in connection with any product other than the Licensed Program and
the Systems with which the Licensed Program is to be used. VAR shall have no
interest or license in any mark, name, logo, or other trade designation of TASC.
3.4 TASC hereby grants to VAR and VAR accepts, a nonexclusive worldwide
license to authorize Distributors to market and sublicense the Licensed Program
solely in accordance with the terms of this Agreement and solely to end users
for the end user's internal use as part of Systems.
3.5 Each sublicense granted by VAR or its Distributor must be in the
form of a written agreement signed by an authorized representative of VAR or of
its Distributor and by the end user sublicensee. VAR shall provide TASC with a
copy of the current version and subsequent versions of such standard agreement
before its use in sublicensing the Licensed Program, but neither TASC's receipt
of such documents nor any failure to object thereto, shall constitute a waiver
by TASC or otherwise affect TASC's rights hereunder. VAR may make reasonable
amendments to its sublicense agreement in order to meet the requirements of its
sublicensee, provided that every sublicense includes, at a minimum, terms and
conditions equivalent to those set forth in Exhibit B.
3.6 Each Distributor authorized by VAR to sublicense the Licensed
Program shall execute a written agreement to market and to sublicense the
Licensed Program only in accordance with the provisions of this Agreement. VAR
agrees to use its best efforts to enforce the obligations of its sublicensing
and Distributor agreements and to inform TASC immediately of any known breach of
such obligations. In addition, each such agreement shall provide that TASC shall
have the right to enforce the terms of such agreement.
3.7 VAR shall cause records to be kept of all sublicensees (including
those of its Distributors) under this Agreement; such records may be inspected
at any mutually agreeable time during VAR's normal business hours, by a mutually
agreeable person, at TASC's expense of the sole purpose of verifying compliance
with VAR's obligations under this Agreement.
3.8 VAR hereby warrants to TASC that it and its sublicensees will do
all things necessary to comply with the United States export and technology
transfer laws, including, but not limited to, U.S. Department of Commerce Export
Administration Regulations and the regulations of the Departments of State and
Defense as they may apply to sublicensing the Licensed Program.
3.9 VAR acknowledges that VAR and VAR's Distributors and sublicensees
do not acquire any rights of ownership in the Licensed Programs. Title and all
proprietary rights in the Licensed Program shall at all times remain in TASC.
<PAGE> 3
4. REPORTING AND PAYMENT:
4.1 Within twenty-five (25) days of each calendar quarter, VAR shall
send TASC a report for the quarter adequate for accurately determining the
payments due TASC, including, at a minimum, the following: number of Licensed
Programs VAR has distributed, including end user System serial numbers; date and
means of disposition; identity and address of the recipient; and a list of all
executed Distributor sublicenses, including the address of each Distributor.
Upon request from time to time, VAR shall provide to TASC a list of executed end
user sublicenses indicating whether each end user is covered by VAR's product
maintenance program. VAR shall maintain executed copies of Distributor and end
user sublicenses which shall be available at reasonable times for inspection by
TASC.
4.2 VAR agrees to pay to TASC those prices which are specified in
Exhibit C for each copy distributed. The applicable volume discount shall be
determined and applied at the time of distribution to all copies then being
distributed by VAR. TASC shall have the right to change its prices and include a
revised Exhibit C with six (6) months written notice to VAR.
4.3 The payments under paragraph 4.1 and any subsequent maintenance
charge shall not be construed to include local, state, provincial or federal
sales, use, excise, personal property or other similar taxes or duties, and any
such taxes or duties shall be assumed and paid for by VAR.
5. TERM AND TERMINATION:
5.1 The license granted VAR under Section 3 to sublicense and
distribute the Licensed Program shall terminate the (3) years after the
effective date of this Agreement unless terminated prior to that date in
accordance with this Section. All sublicenses to Distributors shall also
terminate as of that date; however, end user sublicenses granted prior to that
date shall remain valid for their stated term.
5.2 This Agreement may be terminated prior to its stated term under the
following circumstances:
i) TASC shall have the right to terminate this Agreement
if VAR fails to pay TASC the correct fees and other
charges due hereunder within thirty (30) days
following TASC's notice of any deficiency.
ii) If either party should break this Agreement and fail
to correct the break within thirty (30) days
following a written notice specifying the breach,
then this Agreement, together with all rights and
licenses related thereto, shall terminate in
accordance with the provisions of this paragraph,
upon written notice of termination given to the
defaulting party with fifteen (15) days after
expiration of this thirty (30) days.
iii) Any assignment of VAR's assets for the benefit of
creditors, or any voluntary act of bankruptcy by VAR
or any involuntary act of bankruptcy against VAR
which is not resolved in VAR's favor within sixty
(60) days of filing, or any other act of insolvency,
for the protection of debtors, or of
<PAGE> 4
similar import by VAR, or VAR's dissolution or
ceasing to conduct business in the normal course,
shall give TASC the right to terminate this
Agreement immediately.
5.3 In the event of termination, the following rights and obligations
shall apply:
i) VAR may continue running the release of the Licensed
Program then in VAR's possession on a single System,
in accordance with all provisions of this Agreement,
solely for the purpose of continuing customer service
for sublicenses granted prior to termination;
ii) All rights granted in this Agreement respecting
marketing, sublicensing, and use of the Licensed
Program by VAR or its Distributors, aside from those
set forth in (i) above respecting customer service,
shall cease;
iii) TASC shall no longer have any obligation to provide
VAR with support services, error correction, or new
releases of the Licensed Program; however, TASC and
VAR may negotiate an agreement under which TASC will
continue to provide maintenance for a mutually
agreeable period;
iv) VAR shall continue to have the obligation to pay TASC
any fees which shall have accrued to TASC as of the
time such termination becomes effective, or which
accrue to TASC after the effective date of such
termination; and
v) VAR and its Distributors shall return all information
belonging to TASC not needed to support existing
sublicensees.
6. WARRANTIES AND LIMITATION OF REMEDY:
6.1 TASC warrants that it has full power and right to license the
Licensed Program. TASC agrees to indemnify VAR against and hold VAR harmless
from any and all loss, damage, or liability asserted against VAR or incurred by
VAR, arising out of or in connection with any claim that the Licensed Program
infringes any patent, copyright or trade secret, provided that: (i) VAR notifies
TASC promptly in writing of any such claim, (ii) VAR permits TASC to defend,
compromise or settle said claim, (iii) VAR gives TASC all available information,
assistance and authority or enable TASC to do so , and (iv) VAR continues to
fully observe the terms and conditions of this Agreement. TASC shall have no
liability for costs or settlements made without its consent. In addition, TASC
shall have no liability for any claim based upon alteration of the Licensed
Program if such claim would have been avoided by the absence of such alteration.
The foregoing states the sole obligation and exclusive lability of TASC for any
infringements or claims of infringement of any patent, copyright, trade secret
or other intellectual property right.
6.2 TASC further warrants for a period of ninety (90) days from the
date of this Agreement that the Licensed Program or any portion thereof will
substantially conform to TASC's current published software description. VAR
acknowledges, however, that the Licensed Program is of such complexity that it
may have inherent defects and agrees that as TASC's exclusive liability
<PAGE> 5
and VAR's exclusive remedy TASC will provide all reasonable programming services
to correct documented code errors which TASC's diagnosis indicates are caused by
a defect in the delivered Licensed Program. It is a precondition to this
warranty that VAR notify TASC promptly and confirm in writing upon discovering
any nonconformance with the current published software description. This
warranty shall not apply in the event VAR makes or permits any alteration of the
Licensed Program
6.3 THE FOREGOING EXPRESS WARRANTIES ARE THE SOLE AND EXCLUSIVE
WARRANTIES AND ARE IN LIEU OF ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE.
6.4 No employee, agent or representative of TASC has the authority to
bind TASC to any oral representation or warranty concerning the Licensed
Program. Any written representation or warranty not expressly contained in this
Agreement shall not be enforceable by VAR.
6.5 VAR warrants that it will make all commercially reasonable efforts
to distribute the Licensed Program and shall at all times distribute the
Licensed Program in a manner which shall be supportive of TASC's goodwill and
reputation.
6.6 Except as otherwise set forth herein, VAR agrees to indemnify TASC
and to hold TASC, its agents, and its employees harmless from all costs, loss,
liability and expense (including court costs and reasonable fees of attorneys)
from any claims or demands brought against or incurred by TASC arising from or
in connection with the use of the Licensed Program by VAR's sublicensees or
Distributors or arising from VAR's making the Licensed Program available to any
third party.
7. INITIAL MAINTENANCE AND SUPPORT:
7.1 During the term of this Agreement, VAR agrees that VAR or its
Distributors will install the Licensed Program at sublicensee sites and that VAR
will provide sublicensees and Distributor with initial training and
consultation. VAR agrees that it is responsible for first level support of all
Licensed Programs sublicensed by VAR or its Distributors and will provide
maintenance to support all end users and Distributors who are entitled to
maintenance for VAR's systems.
7.2 The warranty period specified in paragraph 6.2 shall be designated
the initial maintenance period and is the subject of all the provisions of this
section. During this period and subject to the limitations of Section 6, TASC
will provide at no cost to VAR: (i) TASC's best efforts to correct reproducible
errors or malfunctions in the current unaltered release of the Licensed Program;
(ii) any updates to the Licensed Program and any minor enhancements which TASC
provides as part of maintenance of the Licensed Program; (iii) any revision to
user guides or other printed material applicable to the Licensed Program; and
(iv) any known problem solution related to the Licensed Program as said solution
becomes known to TASC.
<PAGE> 6
7.3 If it is determined by TASC, after VAR notifies TASC of an error or
malfunction, that the problem is not due to an error, defect or nonconformity in
the Licensed Program, then at VAR's request and subject to the availability of
TASC personnel, TASC shall provide technical assistance to resolve the problem
at TASC's then current time and materials rates for such assistance.
7.4 Any changes made to the Licensed Program by any person outside of
TASC immediately releases TASC from any responsibility to correct or maintain
the Licensed Program.
7.5 TASC agrees to place the source code for the most current version
of the Licensed Program in escrow under agreement with an escrow agent for the
benefit of VAR. The source code would be available to VAR if TASC ceases to
maintain or provide for maintenance of the Licensed Program.
8. EXTENDED MAINTENANCE:
8.1 For as long as TASC is supporting the Licensed Program, extended
maintenance shall be automatically provided and renewed for twelve-month periods
at the beginning of each calendar year at TASC's then current maintenance
charge, payable at the beginning of each new twelve-month period. During the
first calendar year after the expiration of the warranty, the charge will be
pro-rated according to the number of months remaining in that first year. Those
months shall constitute the first extended maintenance period. VAR may elect not
to avail itself of extended maintenance if VAR so notifies TASC in writing at
least thirty (30) days prior to the beginning of any extended maintenance
period.
8.2 Services during extended maintenance periods shall be the same as
those specified in Section 7 which are provided at no additional cost for the
initial maintenance period. Extended maintenance services shall be provided
subject to the limitations of Section 6 above.
8.3 VAR agrees that it will purchase maintenance to support all end
users and Distributors who are entitled to maintenance for VAR Systems.
8.4 TASC shall establish its maintenance policy and charges annually
based on the then current published price(s) for the Licensed Program.
9. PROPRIETARY RIGHTS OF TASC AND RESPONSIBILITIES OF VAR:
9.1 The Licensed Program provided hereunder is and shall remain the
proprietary property of TASC. It is also protected as unpublished work under
U.S. Copyright Law. VAR agrees to treat the Licensed Program and related
documentation and support materials as the confidential and proprietary property
of TASC and shall acquire no rights in them except as set forth herein. Except
as expressly provided herein, VAR agrees not to disclose, provide, transfer,
sublicense or otherwise make available the Licensed Program or any portion
thereof to any person other than VAR or TASC personnel without the prior written
approval of TASC. All personnel of VAR who receive the Licensed Program and
related documentation or support materials shall, before its receipt, be
informed of its confidential and proprietary nature and VAR's obligations
hereunder.
<PAGE> 7
10. GENERAL TERMS AND CONDITIONS:
10.1 It is expected that the parties will disclose to each other
certain information which may be considered confidential or proprietary
("Confidential Information") and each party recognizes the value and importance
of the protection of the other's Confidential Information. All Confidential
Information of one party and disclosed to the other party shall remain solely
the property of the disclosing party, and its confidentiality shall be
maintained and protected by the other party with at least the same effort used
to protect its own confidential information of a similar nature. Each party
represents and warrants that such effort is and will be reasonably calculated to
protect such Confidential Information. Except to the extent required by this
Agreement, both parties agree not to duplicate in any manner the other's
Confidential Information or to disclose it to any third party or to any of their
employees not having a need to know for the purposes of this Agreement. The
parties further agree not to use each other's Confidential Information for any
purpose other than the implementation of this Agreement.
10.1.1 Confidential Information may include, but is not limited to,
trade secrets, processes, formulae, specifications, programs, software
packages, test results, technical know-how, methods and procedures of operation,
business or marketing plan, proposals, and licensed documentation.
Notwithstanding the foregoing, Confidential Information shall not include
information which (i) becomes a part of the public domain through no act or
omission of the receiving party; (ii) was in the receiving party's lawful
possession prior to the disclosure and had not been subject to limitations on
disclosure or use, as shown by the receiving party's files existing at the time
of disclosure; (iii) is independently developed by the receiving party by
persons who have not had access to the Confidential Information; or (iv) is
lawfully disclosed hereafter to the receiving party, without restriction, by a
third party who did not acquire the information directly or indirectly from the
disclosing party.
10.2 VAR acknowledges that portions of the Licensed Program and related
Documentation licensed by TASC to VAR hereunder are protected by copyright. All
copies of the Licensed Program and related Documentation provided by TASC to VAR
hereunder shall bear a copyright notice which VAR shall reproduce on all copies
of the Licensed Program and related Documentation it manufactures. VAR will
promptly report to TASC any apparent copyright infringements relating to the
Licensed Program or Documentation that come to the attention of VAR, and VAR
agrees to cooperate with TASC with respect thereto.
10.3 VAR acknowledges that any symbols, trademarks, and service marks
adopted by TASC to identify its products belong to TASC and that VAR will have
no rights in such marks except as expressly set forth herein. VAR shall market
and distribute the System only under its own names and marks, provided, however,
that all identifications of the Licensed Program marketed or distributed by VAR
(e.g. product labels, advertising) shall include a reasonably prominent
attribution of TASC as VAR's licensor, in a form agreed by the parties prior to
any Licensed Program marketing or distribution by VAR.
<PAGE> 8
10.4 VAR acknowledges and agrees that in the event of a breach by VAR
of this Agreement pertaining to protection or respect of confidential
information or proprietary right of TASC or its suppliers, TASC shall, in
addition to all other legal and equitable remedies, be entitled to an injunction
against such breach without any requirements to post bond as a condition of such
relief.
10.5 IN NO EVENT SHALL TASC'S LIABILITY ARISING OUT OF THIS AGREEMENT
EXCEED THE AMOUNT RECEIVED BY TASC FROM VAR OVER THE TERM OF THIS AGREEMENT OR
ONE HUNDRED THOUSAND DOLLARS ($100,000) WHICHEVER IS LESS. IN NO EVENT SHALL
TASC BE LIABLE FOR COSTS OR PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES. IN
NO EVENT SHALL TASC HAVE ANY LIABILITY FOR INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING
OUT OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOSS OF ANTICIPATED PROFIT,
EVEN IF TASC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE
LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY.
10.6 VAR will in all matters relating to this Agreement act as an
independent contractor. The relationship between TASC and VAR is that of
licensor/developer and Distributor. Neither party will represent that it has any
authority to assume or create any obligation, express or implied, on behalf of
the other party, or to represent the other party as agent, employee, or in any
other capacity. VAR shall be responsible for all expenses incurred by VAR in the
course of exercising any rights or responsibilities accepted by VAR under this
Agreement.
10.7 Neither party may assign this Agreement or any rights or
obligations hereunder, and any attempted such assignment shall be void.
Notwithstanding the foregoing, however, either party shall be entitled to assign
this Agreement to a successor to all or substantially all of its business,
whether by sale, merger, or otherwise.
10.8 All notices under this Agreement shall be given in writing and
dispatched by prepaid first class certified or registered mail, return receipt
requested, to the parties at the address on the first page hereof or to such
other address as the parties may provide to each other in writing by the same
form of notice.
10.9 Any term or provision of this Agreement held to be illegal or
unenforceable shall, if possible, be interpreted so as to be construed as valid,
but in any event the validity or enforceability of the remainder hereof shall
not be affected. In such event, the parties agree to negotiate, in good faith, a
legal and enforceable substitute provision which most nearly effects the
parties' intent in entering into this Agreement.
10.10 The waiver of, or failure to enforce any breach or default
hereunder shall not constitute the waiver of any other or subsequent breach or
default.
<PAGE> 9
10.11 This Agreement shall be governed by the laws of the Commonwealth
of Massachusetts and the parties hereby consent to the personal jurisdiction of
the courts of the Commonwealth or, in the event of exclusive Federal
jurisdiction, the U.S. District Court of Eastern Massachusetts.
10.12 VAR warrants to TASC that it will do all things necessary to
comply with United States Export Laws, including but not limited to the Export
Administration Act and the U.S. Department of Commerce Export Administration
Regulations, and the Arms Export Control Act and the International Traffic in
Arms Regulations as they may apply to marketing or sublicensing the Licensed
Program.
10.13 The provisions of Sections 3, 6, 9 and paragraphs 10.1, 10.2,
10.3, 10.4 and 10.5 shall survive termination of this Agreement.
10.14 This Agreement, along with the exhibits attached hereto and
incorporated herein by reference, sets forth the entire Agreement between the
parties and supersedes prior proposals, agreements, and representations between
them, whether written or oral. This Agreement may be changed only by mutual
agreement of the parties in writing.
*See Addendum attached hereto and incorporated herein by reference.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
signed and executed with the intention of becoming legally bound thereby.
THE ANALYTIC SCIENCES CORPORATION: VAR: MICROTRAC SYSTEMS, INC.
By: /s/ Elton B. Klibanoff By:
------------------------------ -------------------------------
(SIGNATURE WITH AUTHORITY) (SIGNATURE WITH AUTHORITY)
Typed Name: Elton B. Klibanoff Typed Name:_______________________
Title: Deputy Division Director, Contracts Title:____________________________
Date: 31 August 1992 Date:_____________________________
<PAGE> 10
ADDENDUM TO
VALUE ADDED RESELLER LICENSE AGREEMENT
BETWEEN
THE ANALYTIC SCIENCES CORPORATION
AND MICROTRAC, INCORPORATED
DATED
AUGUST 31, 1992 (THE "AGREEMENT")
The Sections of the Agreement referred to above are modified as follows:
1. Add the following new Section 2.3:
"2.3 As long as VAR is distributing the Licensed Program, VAR shall
mention TASC and its licensed trademark, PictureCom, in all of its marketing or
promotional materials printed after the execution of this Agreement which refer
to imaging technology incorporated within or relating to its product Restrac.
The publication of the name PictureCom shall be attributed to TASC and VAR shall
indicate that both TASC and PictureCom are registered trademarks of The Analytic
Sciences Corporation."
2. Delete the first sentence contained in Section 3.2 and insert in lieu
thereof the following: "VAR shall reproduce and include TASC's copyright and
other proprietary rights notices which are included in the Licensed Program in
all copies in any form of the Licensed Program."
3. Modify the final sentence in Section 3.5 by including after the phrase
"at a minimum, terms and conditions" the clause "relating to the protection of
proprietary rights and limitation of liability substantially."
4. Modify the second sentence contained in Section 3.6 by deleting the "."
and inserting in lieu thereof the phrase "affecting TASC."
5. Delete the final sentence of Section 3.6.
6. Modify the first sentence of Section 3.7 by including after the phrase
"such records may be inspected" the clause "no more frequently than semiannually
during the term of the Agreement."
7. Delete the first sentence contained in Section 4.1 and insert in lieu
thereof the following: "Within thirty (30) days after the end of each calendar
quarter, VAR shall send TASC a report for the quarter adequate for accurately
determining the payments due TASC, together with payments due, including, at a
minimum, the following: number of Licensed Programs VAR has distributed; date
and means of disposition; identity of the recipient, unless confidential; and a
list of all executed Distributor sublicenses, including the address of each
Distributor."
<PAGE> 11
8. Modify Section 4.1 by deleting the final sentence therein and inserting
in lieu thereof the following: "VAR shall maintain copies of executed
Distributor and End User Sublicenses which shall be available at reasonable
times for inspection by TASC under Section 3.7. Confidential information not
affecting TASC may be deleted form such copies."
9. The last sentence of Section 4.2 is modified by deleting the "." and
inserting in lieu thereof the following: ", provided that TASC shall not
increase its prices during any annual period ending on the anniversary of this
Agreement during the term hereof by an amount in excess of fifteen percent (15%)
of its price for that Licensed Program charged during the previous annual
period."
10. Add new Section 4.4 as follows:
"4.4 VAR unconditionally agrees to license or distribute a sufficient
number of copies of the Licensed Program during the first year of this Agreement
such that it shall owe and pay TASC not less than Twenty Thousand Dollars
($20,000) for such copies."
11. Modify the first sentence of Section 5.1 by deleting after the phrase "
the Licensed Program shall terminate" the phrase "three (3) years" and inserting
in lieu thereof the phrase "four (4) years."
12. Modify the first sentence of Section 5.2 by deleting from clause (iii)
the word "act" wherever it appears and inserting in lieu thereof the term
"filing."
13. Delete existing clause (iii) of Section 5.3 and insert in lieu thereof
the following: "So long as TASC continues to generally offer support services
for the Licensed Program after termination of this Agreement, VAR shall have the
right to acquire support services from TASC at TASC's then standard support
charges.
14. Modify clause (iv) of Section 5.3 by deleting the "." and inserting in
lieu thereof the following: "for support services contracted for by VAR after
such date."
15. Modify the first sentence of Section 6.2 by deleting after the phrase
"TASC further warrants for a period of ninety (90) days" the phrase "from the
date of this Agreement" and inserting in lieu thereof the phrase "after initial
delivery to VAR."
16. Modify the first sentence of Section 6.2 by deleting the words "which
TASC's diagnosis indicates" in the fifth line.
17. Modify Section 6.5 by deleting the words "make all commercially
reasonable efforts to distribute the Licensed Program and shall at all times."
18. Delete Section 6.6 in its entirety.
19. Modify the first sentence of Section 7.2 by including after the phrase
"the warranty period specified in paragraph 6.2" the phrase "with the initial
delivery of the Licensed Program."
<PAGE> 12
20. Modify the final sentence of Section 7.2 by deleting the "." and
inserting in lieu thereof the following: "and (v) telephone support during TASC
normal business hours to assist VAR with the resolution of problems and
questions regarding the Licensed Program."
21. Modify the first sentence of Section 8.1 by deleting the clause "For as
long as TASC is supporting the Licensed Program" and inserting in lieu thereof
the phrase "During the term of this Agreement, " and by deleting the phrase "at
the beginning of each new twelve-month period" and inserting in lieu thereof the
phrase "with VAR's regular quarterly report based on upon end users receiving
maintenance during the previous quarter pro-rated on a monthly basis."
22. At the end of the final sentence of Section 8.1, delete the period and
add "subject to VAR's obligations under Section 8.3."
23. Delete the existing sentence contained in Section 8.3 and insert in
lieu thereof the following: "VAR agrees that during the term of this Agreement
it will purchase maintenance to support all end-users and distributors who
subscribe to maintenance for VAR systems which include the Licensed Program."
24. Modify Section 8.4 by deleting the existing sentence and inserting in
lieu thereof the following: "TASC shall establish its maintenance charges
annually based on the then published price for the Licensed program, provided,
however, that no annual increase for maintenance charges hereunder will exceed
fifteen percent (15%) of that charged for the prior calendar year."
25. Delete existing Section 10.5 and insert in lieu thereof the following:
"10.5 EXCEPT FOR LOSSES ARISING UNDER SECTION 6.1, IN NO EVENT SHALL
TASC'S LIABILITY ARISING UNDER THIS AGREEMENT EXCEED THE AMOUNTS RECEIVED FOR
THE SPECIFIC LICENSED PRODUCT OR SERVICE GIVING RISE TO THE LIABILITY. EXCEPT
FOR LIABILITY FOR BREACHES OF TASC'S PROPRIETARY RIGHTS TO THE LICENSED PROGRAM
(INCLUDING BUT NOT LIMITED TO THE SCOPE OF VAR'S LICENSE), AND EXCLUDING ANY
LIABILITY ARISING FROM ITS PAYMENT OBLIGATIONS HEREUNDER, IN NO EVENT SHALL
VAR'S LIABILITY ARISING UNDER THIS AGREEMENT EXCEED THE AGGREGATE AMOUNT OF
LICENSE AND MAINTENANCE CHARGES PAYABLE HEREUNDER. IN NO EVENT SHALL TASC BE
LIABLE FOR COSTS OR PROCUREMENT OF SUBSTITUTE PRODUCTS OR SERVICES. IN NO EVENT
SHALL EITHER PARTY HAVE ANY LIABILITY FOR INDIRECT, INCIDENTAL, SPECIAL OR
CONSEQUENTIAL DAMAGES, OR DAMAGES FROM LOSS OF USE, DATA OR PROFITS, HOWEVER
CAUSED AND UNDER ANY THEORY OF LIABILITY ARISING OUT OF THIS AGREEMENT, EVEN IF
EACH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE
LIMITATIONS SHALL APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY
LIMITED REMEDY."
<PAGE> 13
THE ANALYTIC SCIENCES CORPORATION MICROTRAC SYSTEMS, INC.
By: /s/ Elton B. Klibanoff By:
------------------------------------ -----------------------------
Authorized Signature Authorized Signature
Elton B. Klibanoff
- ---------------------------------------- ---------------------------------
Typed Name Typed Name
Deputy Division Director, Contracts
- ---------------------------------------- ---------------------------------
Title Title
<PAGE> 14
EXHIBIT A
SYSTEMS AND PROGRAMS
VAR Systems
RESTRAC and SUCCESSPLAN
TASC Licensed Programs
P-UB Picture Com/Binary (including dedicated input server)
P-UB Picture Com/Color (including dedicated input server)
P-DEV Software and Documentation
<PAGE> 15
EXHIBIT B
MICROTRAC SYSTEMS, INC.
20 Wells Avenue
Newton, MA 02159
(617) 965-4660
Agreement No. _______________
MICROTRAC SYSTEMS, INC.
PURCHASE AND LICENSE AGREEMENT
CUSTOMER: _________________________________________________
ADDRESS: _________________________________________________
SOFTWARE PRODUCT: _________________________________________________
EFFECTIVE DATE: _________________________________________________
Subject to the following terms and conditions, MicroTrac Systems, Inc.
("MicroTrac") grants to the customer identified above ("Customer") a license
("License") to use the MicroTrac software product listed above and related
documentation ("Software") on the type of equipment and at the specific location
("Location") set forth in the attached proposal ("Proposal"). "Software"
includes only the MicroTrac software listed in the Proposal, and any additional
software provided by MicroTrac in return for payment of the appropriate license
fee, all of and any additional software provided by MicroTrac in return for
payment of the appropriate license fee, all of which will be considered licensed
pursuant to this Agreement. The equipment on which the Software is originally
installed is defined as "Equipment" for purposes of this Agreement. Pursuant to
this Agreement, Customer is purchasing such third party software licenses and
hardware as are identified in the Proposal as being provided by MicroTrac
("Third Party Products"). "Software" does not include such Third Party Products.
1. License. The License entitles Customer to use the Software on the Equipment
(or other equipment on a temporary basis in case of a malfunction and at the
Location, solely for Customer's own internal business purposes. Customer may
transfer the License to other equipment and locations only with the consent of
MicroTrac, which will not be withheld unreasonably. Customer may use any
Software identified in the Proposal as Single-User Software only on a single
central processing unit (CPU). Customer may use any Software identified in the
Proposal as multi-user Software only on the network(s) specified in the
Proposal. Customer agrees that the maximum number of users with access to the
Software will be limited as set forth in the Proposal (unless increased as
described below). Customer will have the right to increase the number of users
with access to the software with prior notification to MicroTrac and payment by
Customer of
<PAGE> 16
an additional license fee in accordance with MicroTrac's standard policies.
2. Certain Restrictions. The License may not be transferred by Customer other
than to Customer's parent or wholly-owned subsidiary, or to a successor to
Customer's business. Customer agrees not to cause or permit the reverse
engineering, disassembly or decompilation of the Software. The Software is
proprietary product of MicroTrac which includes trade secrets and is protected
by copy law. Customer may make one copy of the Software for backup purposes. No
other copies may be made without MicroTrac's prior written consent. Customer
agrees not to remove any product identification, copyright notices, or other
notices of proprietary rights from the Software, to reproduce such notices on
all permitted copies, and to take such measures to keep confidential and
safeguard the Software as it takes with regard to its own proprietary and
confidential material.
3. MicroTrac's Rights. Pursuant to the License, Customer acquires only the right
to use the Software and does not acquire any rights of ownership in the Software
or the media in which it is contained. Subject to the License, Micro Trac
retains all rights of ownership in the Software, the media and all copies
thereof.
4. MicroTrac Services. MicroTrac will provide Customer with services such as
installation and training in accordance with the terms and policies contained in
the Proposal. Customer agrees to obtain all products of third parties described
in the Proposal as being provided by Customer, and unless otherwise mutually
agreed, to have a suitable site ready for installation of the Software and
training within sixty (60) days after the date of Customer's execution of this
Agreement. MicroTrac will make maintenance services available to Customer for
the Software and any hardware included in the Third Party Products under a
separate Maintenance Agreement. Corrections, modifications and enhancements to
the Software provided to Customer as part of such services will become part of
the Software for all purposes of this Agreement.
5. Third Party Products.
(a) MicroTrac will arrange for Third Party Products to be shipped to the
Location at Customer's expense prior to the date of installation of the
Software.
(b) Title and risk of loss with respect to the Third Party Products will pass to
Customer upon installation of the products; provided, however, that title and
risk of loss with respect to any Third Parity Products delivered to Customer in
good condition prior to the date of installation will pass to Customer upon
delivery if any damage to such Third Party Product occurs before installation
while that product is on Customer's premises.
6. Payment. The fees for the License, the services to be provided by MicroTrac,
and the Third Party Products will be as stated in the Proposal. Unless otherwise
stated in the Proposal, MicroTrac will invoice Customer for Software and Third
Party Products when delivered, and services when rendered. If, pursuant to
Customer's request, MicroTrac
<PAGE> 17
personnel provided any additional services while on-site, MicroTrac will be
compensated for such services at its current hourly rate. Invoices are payable
upon receipt. Late charges may be assessed on invoices past due over thirty (30)
days at 1.5% per month, or, if less, the maximum allowable by law. MicroTrac's
stated fees do not include any excise, sales, use or other taxes, duties or
governmental charges; payment of such taxes (except for state and federal income
taxes for which MicroTrac is liable) will be Customer's responsibility.
7. Termination. The License will be perpetual, unless sooner terminated as
provided herein. Customer may terminate the License at any time. MicroTrac may
terminate the License if Customer breaches any of the terms and conditions of
this Agreement or any of the terms and conditions of this Agreement or any
Maintenance Agreement in effect between MicroTrac and Customer, and fails to
cure such breach within thirty (30) days after written notice. Upon termination,
Customer agrees either to return to MicroTrac all copies of the Software in
Customer's possession or control, or destroy and certify to MicroTrac the
destruction of all such copies.
8. Warranty and Limitation of Remedies.
(a) Except as otherwise expressly provided herein, MicroTrac entire liability to
Customer and Customer's sole remedy hereunder for any cause whatsoever,
regardless of the form of the action, whether in contract, tort, or strict
liability, will be limited to the amounts paid to MicroTrac by Customer for the
product or service that caused the damages or is the subject matter of or is
directly related to the cause of action.
(b) MicroTrac warrants that for a period of ninety (90) days following
installation, the Software will operate substantially as documented. Customer's
sole remedy under this warranty will be:
(i) the correction or replacement of defective Software which is returned
to MicroTrac with written notice of defects during ninety (90) day period, or;
(ii) if MicroTrac is unable to correct a material defect which makes the
software unfit for its intended use, within a reasonable time after its return
pursuant to Section 8(b)(i), Customer may terminate its License to use the
Software, and MicroTrac shall refund to Customer the License fees paid for the
Software in question. All other fees paid or payable to MicroTrac, including,
but not limited to, Service fees, are non-refundable.
<PAGE> 18
(c) The Software is intended for use only by sophisticated customers who
understand the functioning of the Software and the processes embodied therein.
Customer has sole responsibility for determining that the Software is suitable
for its purposes and for its proper use, including protection of data from
unintended modification, destruction or disclosure, and for the accuracy and
integrity of the results. MicroTrac assumes no responsibility for the loss of
data or other damage to persons or property arising out of Customer's use of the
Software, and does not warrant that the Software will be error-free or that all
defects will be corrected.
(d) MicroTrac's warranty applies only to the Software in the form provided by
MicroTrac under normal use as contemplated by this Agreement. MicroTrac will not
be liable for any damages arising out of use of the Software for a purpose other
than its intended purposes as described in MicroTrac's standard documentation.
(e) MicroTrac makes no warranty and will have no liability whatsoever with
respect to hardware or software products of third parties (including Third Party
Products), except such as may be included as part of the Software. Customer
recognizes that MicroTrac is not the manufacturer or developer of the Third
Party Products for product warranties.
EXCEPT AS STATED IN THIS SECTION 8 MICROTRAC DISCLAIMS ANY AND ALL WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. THE MICROTRAC SOFTWARE
PRODUCT MAY CONTAIN SOFTWARE DEVELOPED BY PARTIES OTHER THAN MICROTRAC. THIRD
PARTIES MAKE NO WARRANTIES UNDER THIS AGREEMENT. IT IS UNDERSTOOD AND AGREED
THAT THE SOFTWARE DOES NOT CONSTITUTE "CONSUMER GOODS" UNDER ANY STATE OR
FEDERAL WARRANTY LAW.
(f) IN NO EVENT WILL MICROTRAC BE LIABLE FOR ANY DAMAGES FOR BREACH OF CONTRACT,
TORT OR OTHER FORM OF ACTION, INCLUDING LOST PROFITS OR OTHER INCIDENTAL OR
CONSEQUENTIAL DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SAME, EXCEPT IN ANY
STATE THAT DOES NOT ALLOW THIS DISCLAIMER, WHERE THE LIABILITY, IF ANY, WILL BE
LIMITED TO THE COST OF THE PRODUCT OR SERVICE ALLEGED TO HAVE CAUSE THE DAMAGE.
THIRD PARTIES AR NOT PARTIES TO THIS AGREEMENT AND WILL HAVE NO LIABILITY FOR
DAMAGES HEREUNDER. CUSTOMER MAY HAVE OTHER RIGHTS THAT VARY FROM STATE TO STATE.
THIS SECTION ALLOCATES THE RISKS OF PROGRAM FAILURE BETWEEN MICROTRAC AND
CUSTOMER. MICROTRAC'S PRICING REFLECTS SUCH ALLOCATION OF RISKS AND THE
LIMITATION OF LIABILITY SET FORTH ABOVE.
9. Infringement.
(a) MicroTrac will defend at its own expense any action against Customer based
upon a claim that the Software in the form furnished to Customer hereunder
infringes a U.S. copyright, or a U.S. patent issued as of the date of the
Agreement, and pay such damages or
<PAGE> 19
costs as are finally awareded against Customer in any action attributable to
such claim, provided that Customer notifies MicroTrac promptly in writing of any
such action and all prior related claims, gives MicroTrac sole control of the
defense and/or settlement of such action, and cooperates fully in any such
defese or settlement. MicroTrac will not be liable hereunder for any costs or
expenses incurred by Customer without MicroTrac's prior written consent.
(b) Should the Software furnished to Cusotmer or any part therof become, or in
MicroTrac's opinion be likely to become, the subject of any such claim of
infringement, MicroTrac may, at its option and expense, obtain for Customer the
right to continue using the Software or replace or modify the Software so that
the use thereof non-ilnfringing or otherwise lawful.
(c) Notwithstanding the foregoing, MicroTrac will have no liability for any
claim of infringement based upon the use of any Software in combination with any
hardware other than the computer hardware on which such Software is designed to
operate or with any software not supplied by MicroTrac, or based upon any other
use of the Software in any manner of which it was not designed or for which it
was not recommended by MicroTrac.
(d) In no event will Micro have any liability for any claim of infringement
with respect to the Third Party Products.
<PAGE> 20
EXHIBIT C
PICTURECOM(A) VAR PRICING
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
VOLUME LEVELS(1)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Item Single-User Display Station(2 3) 0-100 100-250 251-500 501-1000 1001+
- ------------------------------------------------------------------------------------------------------------------------
P-UB PictureCom/Color $250 $225(4) $180 $160 $135
- ------------------------------------------------------------------------------------------------------------------------
Item Application Development Kit
- ------------------------------------------------------------------------------------------------------------------------
P-DEV Software and Documentation $1000
- ------------------------------------------------------------------------------------------------------------------------
Item Maintenance
- ------------------------------------------------------------------------------------------------------------------------
P-TS Maintenance Support and For each Single User Display Station, 15% of the
Software Upgrades then current Single User Display Station Price for
Copies 100-250
- ------------------------------------------------------------------------------------------------------------------------
Dedicated Input Server 0-50 50+
- --------- -----------------------------------------------------------------
$400 $300
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------------
(1) Volume levels are based on and include VAR Sublicenses for the current
calendar year plus the preceding calendar year and include copies of both
PictureCom/Color and PictureCom/Binary.
(2) Includes compression and decompression. Addition of a second compression
product e.g., adding PictureCom/Binary to PictureCom/Color for one user, cost
67% of the standalone list price for the added function. Dedicated input servers
priced separately. "Dedicated input server" means the machine to which the
scanner used in conjunction with VAR's System is attached for the purpose of
inputting documents.
(3) Prices are per PC-class (e.g., 386, 486) processors. Prices for higher
performance platforms (e.g., RISC machines) will be quoted separately and will
reflect increases related to increases in processor performance.
(4) All prices are in U.S. dollars
<PAGE> 21
AMENDMENT TO VALUE-ADDED RESELLER LICENSE AGREEMENT
BETWEEN
THE ANALYTIC SCIENCES CORPORATION
AND MICROTAC, INCORPORATED
DATED AUGUST 31, 1992 (the "Agreement")
The Agreement is modified as follows:
1. Add new Section 4.5 as follows:
"Notwithstanding anything to the contrary contained herein, in lieu of the
sublicense payment and reporting requirements otherwise provided in this section
4 and the extended maintenance payment and reporting requirements set forth in
Section 8 for the types of transactions described hereafter, VAR agrees to pay
TASC (i) five percent (5%) of the total software license, maintenance and
support fees charged by VAR to any end-user ("Enterprise End-User") for any
corporate license transaction (i.e. a license granting a corporation the right
to make an unlimited number of copies solely for internal use) including the
distribution or sublicensing of the Licensed Programs where total software
charges equal or exceed Two Hundred Thousand Dollars ($200,000) in the
aggregate, and (ii) five percent (5%) of all royalties, maintenance an support
fees payable to VAR under its contract with PeopleSoft, Inc. ("PeopleSoft"). VAR
shall remit all amounts owing under this Section 4.5 upon the earlier of (i)
within thirty (30) days of collection from an Enterprise End-User or PeopleSoft,
or (ii) with the transmission of the quarterly report otherwise required by
Section 4.1. As of the time of payment with respect to Enterprise End-Users, VAR
shall send TASC a report estimating the number of Licensed Programs VAR aspects
the Enterprise End-User to initially use, the total charges to the Enterprise
End-User (software, hardware and services) resulting from the transaction, the
identity and address of the Enterprise End-User, and upon request, the location
of each Enterprise End-User site and an estimate of the number of users of the
Licensed Program at such sites. As of the time of payment thereunder with
respect to PeopleSoft, VAR shall send TASC a report showing amounts payable to
VAR by PeopleSoft and the number of copies of the Licensed Program distributed
by PeopleSoft to end-users during such payment period, based upon the most
recent quarterly report received by VAR from PeopleSoft. For license and
maintenance arrangements not expressly described in this Section 4.5, VAR
obligations under the Agreement, including without limitations its obligations
under Section 4 and 8 hereof , shall be unchanged."
2. Modify Section 5.1 by adding the following sentence thereto:
"Solely as it relates to the parties" rights and obligation relating to
PeopleSoft thereunder, the terms and conditions of this Agreement shall
terminate five (5) years after the effective date of the Amendment dated May 14,
1993 attached hereto and made a part hereof."
IN WITNESS WHEREOF, the parties have executed this Amendment this 25th day of
May 1993.
<PAGE> 22
Signed Under Seal.
THE ANALYTICAL SCIENCES MICROTRAC, INC.
CORPORATION
By: /s/ Elton B. Klibanoff By: George Engdahl
___________________________ ____________________________
Authorized Signature Authorized Signature
Elton B. Klibanoff George Engdahl
- ----------------------------------- -----------------------------
Typed Name Typed Name
Deputy Division Director, Contracts Chief Financial Officer
- ----------------------------------- -----------------------------
Title Title
<PAGE> 23
AMENDMENT #2 TO VALUE ADDED RESELLER LICENSE AGREEMENT
BETWEEN THE ANALYTIC SCIENCES CORPORATION AND MICROTRAC
SYSTEMS, INC., DATED AUGUST 31, 1992
This is an AMENDMENT #2 to the Value Added Reseller License Agreement Between
The Analytic Sciences Corporation and MicroTrac Systems, Inc., dated August 31,
1992, as modified by the Addendum dated August 31, 1992, and further modified by
the Amendment executed on May 25, 1993 (all documents combined referred to as
the "Agreement".)
The Agreement is hereby modified as follows:
1. Section 4 is modified by an addition of the following:
"4.6 Effective as of April 1, 1995, the terms contained in Section 4.5 above are
void and are superseded by the terms contained in Exhibit C attached hereto.
However, this provision shall not affect the validity of any sublicenses granted
prior to April 1, 1995 in accordance with the terms of Section 4.5. Effective
April 1, 1995, in connection with the extension of this Agreement, the parties
hereby agree as follows:
(a) VAR waives any claims it may have against TASC for overpaid royalty
fees as of March 31, 1995, and TASC waives any claims it may have against VAR
for unpaid maintenance fees which may be accrued up to March 31, 1995.
(b) Effective as of April 1, 1995, maintenance fees for the Licensed
Programs will accrue at the rates set forth in Exhibit C for all end users under
maintenance contracts with VAR, in accordance with Section 8 of this Agreement.
(c) TASC understands that VAR has entered into a Joint Marketing Agreement
with PeopleSoft, Inc., and as part of that Agreement, VAR has granted
PeopleSoft, Inc. the right to use the System for its own internal business
purposes, during the term of such Joint Marketing Agreement. TASC consents to
VAR's grant of this limited term license, and waives any Licensed Program fees
payable with respect to this limited term license grant."
2. The first sentence of Section 5.1 is removed, and replaced with the
following:
"The license granted VAR under Section 3 to sublicense and distribute the
Licensed Program shall terminate on March 31, 1998, unless such term is extended
by mutual agreement of the parties, or such license is terminated prior to that
date in accordance with this Section."
3. The following shall be added to Section 7:
"7.6 As part of maintenance and support, TASC will participate in regular
account review meetings with VAR (at least one meeting per calendar quarter)."
<PAGE> 24
4. The reference to VAR Systems in Exhibit A is modified by changing "RESTRAC
and SUCCESSPLAN" to "Restrac Hire and Restrac Plan", and Exhibit C is hereby
superseded and replace by the new Exhibit C attached hereto.
The terms of this AMENDMENT #2 shall be effective as of April 1, 1995
("Effective Date"). Except as specifically modified by this AMENDMENT #2, all
other terms of the Agreement and the terms of this AMENDMENT #2, the terms of
this AMENDMENT #2 shall control.
IN WITNESS WHEREOF, the parties have executed this AMENDMENT #2 under seal as of
the Effective Date.
MICROTRAC SYSTEMS, INC.
By: /s/ Elton B. Klibanoff By: /s/ Lars D. Perkins
Name: Elton B. Klibanoff Name: Lars D. Perkins
Title: Director, Contract Legal Affairs Title: President
Date: 26 May 1995 Date: May 19, 1995
<PAGE> 25
EXHIBIT C
PICTURECOM VAR PRICING
FOR RESTRAC
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
PictureCom Binary Price Each PictureCom Binary Price Each
Client Volume Dedicated Input
Server
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1-250 [****] 1-50 [****]
- -----------------------------------------------------------------------------------------------------
251-500 [****] 51-150 [****]
- -----------------------------------------------------------------------------------------------------
501-1000 [****] 151-500 [****]
- -----------------------------------------------------------------------------------------------------
1001-2000 [****] more than 500 [****]
- -----------------------------------------------------------------------------------------------------
2001-4000 [****]
- -----------------------------------------------------------------------------------------------------
4001-10,000 [****]
- -----------------------------------------------------------------------------------------------------
More than 10,000 [****]
- -----------------------------------------------------------------------------------------------------
</TABLE>
*For the second three year VAR agreement beginning April 1, 1995, Restrac shall
be credited with 1000 client seats and 150 Dedicated Input Servers so inital
purchases will commence at [****]/Client Seat and [****]/Input Server
respectively. Volumes shall accumulate as licenses are purchased for both Client
Seats, Input Servers and Corporate Licenses.
ENTERPIRSE LICENSE FEES
<TABLE>
<CAPTION>
Up to 250 Clients Unlimited Clients
- --------------------------------------------------------------------------------
<S> <C> <C>
Single database server license [****] [****]
- --------------------------------------------------------------------------------
Additional database server license [****] [****]
- --------------------------------------------------------------------------------
Unlimited database server license [****] [****]
- --------------------------------------------------------------------------------
</TABLE>
[*] Confidential treatment requested
<PAGE> 26
Payments made under the Enterprise License arrangement will be credited toward
license purchase volumes as follows:
#Client Seat Credits = [****] x Enterprise License Payments
------------------------------------
Then Current Per Seat License Fee
#Dedicated Scan Server Credits = [****] x Enterprise License Payments
------------------------------------
Then Current Server License Fee
Maintenance fees will be paid quarterley, and will be calculated as 2.5% of the
sublicense fees paid by VAR to TASC for end users subscribing to maintenance
from VAR during the previous quarter.
[*] Confidential treatment requested
<PAGE> 1
[Confidential Treatment]
EXHIBIT 10.10
JOINT MARKETING AGREEMENT WITH REFERRAL FEE PAYMENTS
BETWEEN
RESTRAC
AND
PEOPLESOFT, INC.
AGREEMENT, made as of October 1, 1994 between MicroTrac Systems, Inc., a
Delaware corporation with its principal place of business at One Dedham Place,
Dedham, MA 02026, doing business as Restrac (hereinafter "Restrac"), and
PeopleSoft, Inc., a Delaware corporation with its principal place of business at
1331 North California Boulevard, Walnut Creek, CA 94546 (hereinafter
"PeopleSoft").
1. DEFINITIONS
For purposes of this Agreement, the following terms shall have the meanings set
forth below:
1.1 "Checkbox Sale" - A sale of a license for Resume Reader for PeopleSoft made
in accordance with the procedure described by Article 9.1 herein by a PeopleSoft
sales representative without significant assistance from Restrac.
1.2 "Distribution Agreement" - The Software Distribution Agreement between
MicroTrac Systems, Inc. and PeopleSoft, Inc. made as of May 14, 1993.
1.3 "End User" - A third party who has received a license from Restrac (or from
PeopleSoft under the terms of the Distribution Agreement) to use the Resume
Reader for PeopleSoft product.
1.4 "HRMS" - Human Resources Management System, a software product which
automates the overall human resource management function, including but not
limited to personnel administration, position management, benefits, payroll, and
applicant tracking.
1.5 "Interface" - The computer software developed by Restrac which enables
Resume Reader to interface with the PeopleSoft Recruitment Module of the
PeopleSoft HRMS, as modified and enhanced by Restrac and/or PeopleSoft for this
purpose.
1.6 "Marketing Plan" - The Marketing Plan developed jointly by PeopleSoft and
Restrac in accordance with Article 4 hereunder.
1.7 "PeopleSoft Marks" - The "PeopleSoft" and "PeopleSoft HRMS" trademarks which
are owned by PeopleSoft.
1.8 "PeopleSoft Recruitment Interface" - The computer software that defines
PeopleSoft database table and column names, enforces PeopleSoft Recruitment
rules for entering applicants, and validates data entered into PeopleSoft's
Recruitment Module via Resume Reader. As of the Effective Date, the PeopleSoft
Recruitment Interface functions in conjunction with Resume Scanner; in the
future it is expected that the PeopleSoft Recruitment Interface will be enhanced
to allow routing from Resume Finder.
1.9 "Qualified Referral" - A Referral relating to a specific company and
business unit who has not contacted, nor been contacted by, Restrac in the 12
months prior to PeopleSoft's submission of a Referral Worksheet.
1.10 "Recruitment Module" - The portion of the PeopleSoft HRMS which tracks
information on candidates who have applied for positions within a company.
1.11. "Referral" - PeopleSoft's submission and Restrac's acceptance of a
completed Referral Worksheet in accordance with Article 9.1 of this Agreement
<PAGE> 2
1.12 "Referral Fee" - The percentage of the total software license fees received
by Restrac for a sale of Resume Reader for PeopleSoft set forth in accordance
with Article 9.3.
1.13 "Referral Worksheet" - A worksheet used to submit Resume Reader for
PeopleSoft referrals to Restrac, a copy of which is attached as Exhibit D.
1.14 "Resume Reader" - The Restrac Resume Reader software product identified in
Exhibit A, used for resume scanning and retrieval.
1.15 "Resume Reader for PeopleSoft" - The combination of the Resume Reader and
Interface software.
1.16 "Restrac Hire" - The complete Restrac Hire software product identified in
Exhibit A, which consists of an integrated staffing solution using Restrac's
database software and the resume scanning and retrieval technology of the
Restrac Resume Reader product.
1.17 "Restrac Marks" - The "Restrac", "Resume Reader" and "Restrac Hire"
trademarks which are owned by Restrac.
1.18 "Restrac Representative" - An individual designated by Restrac to be
PeopleSoft's contact at Restrac's principal office in Dedham, Massachusetts, to
whom all orders for Resume Reader for PeopleSoft are sent.
1.19 "Term" - The period this Agreement is in effect, or until [****].
1.20 "Territory" - The United States of America and Canada, including their
territories.
2. TERMINATION OF DISTRIBUTION AGREEMENT
The Distribution Agreement is hereby terminated by mutual agreement of the
parties, and shall be of no further force and effect, and all rights and
obligations under such Agreement are terminated except as specifically provided
herein.
3. LICENSE GRANTS
3.1 Restrac grants to PeopleSoft a nonexclusive, nontransferable, perpetual
license to use the Interface in source code and object code form on a
royalty-free basis for any and all purposes determined by PeopleSoft in its sole
discretion without limitation (except as provided below), to make copies of the
Interface, to modify the Interface, and to make derivative works based thereon,
and to grant third parties rights to use the Interface. During the Term,
PeopleSoft will not use the Interface or grant third parties the right to use
the Interface, for the purpose of developing an interface to another software
product which performs the functions of Resume Reader. Subject to the foregoing
license, Restrac retains ownership of the Interface, including ownership of all
copyright, patent, and other intellectual property rights. Both party's rights
to the Interface described by this Article 3.1 (including the right to use,
modify and distribute the Interface) shall be perpetual, and shall survive the
termination of this Agreement.
3.2 Restrac grants to PeopleSoft a nonexclusive, nontransferable license to use
the Resume Reader software in object code form during the Term, in object code
form internally for the management of PeopleSoft's business, for demonstration
purposes in accordance with PeopleSoft's standard policies for
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<PAGE> 3
demonstration of the PeopleSoft HRMS, and for development purposes in
furtherance of this Agreement (but not for the development of competing
products).
3.3 PeopleSoft grants to Restrac a nonexclusive, nontransferable license during
the Term to use the PeopleSoft HRMS and related documentation internally for the
management of Restrac's business, for demonstration purposes in accordance with
Restrac's standard policies for demonstration of Restrac Hire, and for
development purposes in furtherance of this Agreement (but not for the
development of competing software products).
3.4 Restrac acknowledges PeopleSoft's representation that it is the owner of all
right, title and interest in and to the PeopleSoft Marks. PeopleSoft
acknowledges Restrac's representation that it is the is the owner of all right,
title and interest in and to the Restrac Marks. Restrac grants to PeopleSoft a
nonexclusive, nontransferable, royalty free license to use the Restrac Marks,
and PeopleSoft grants to Restrac a nonexclusive, nontransferable, royalty free
license to use the PeopleSoft Marks; provided that neither party may use the
marks of the other party except in connection with the distribution,
advertisement, and promotion of Resume Reader for PeopleSoft. Each party
reserves the right to review and approve all promotional material and written
information pertaining to the Resume Reader for PeopleSoft software, and to
prescribe policies limiting the other party's use of its trademarks and logos,
including but not limited to trademark usage and advertising policies. Except as
otherwise provided herein, neither party shall have any right, interest or claim
in or to the trademarks or logo of the other. All rights conferred upon a party
pursuant to this Article 3.4 shall cease upon termination or expiration of this
Agreement.
4. JOINT MARKETING
4.1 PeopleSoft and Restrac will each use their respective best efforts to
complete a marketing plan ("Marketing Plan") defining each party's
responsibilities to the joint marketing effort by February 28, 1995. The
responsibilities outlined in the Marketing Plan will include sales incentive
programs, joint demonstrations, product cross-training, use of each other's
education and office facilities on an as-available basis, Restrac participation
in PeopleSoft's user conference and Regional Users Groups (as requested and
permitted by the steering committee and client organizers of the groups),
attendance at relevant sales meetings from time to time, product success stories
in the PeopleSoft newsletter, mailings to prospects and clients announcing the
relationship, and continuous access to PeopleSoft's client lists.
4.2 PeopleSoft will use reasonable commercial efforts to promote the sale of,
and to develop a worldwide market demand for, Resume Reader for PeopleSoft
licenses pursuant to the Marketing Plan. PeopleSoft shall include a description
of the PeopleSoft Recruitment Interface software and Resume Reader for
PeopleSoft in all advertising, marketing literature and documentation relating
to the Recruitment Module of the PeopleSoft HRMS.
4.3 PeopleSoft shall use reasonable commercial efforts to ensure that its sales
force makes all prospective licensees of the PeopleSoft HRMS aware of the
availability of Resume Reader for PeopleSoft.
4.4 In the event that PeopleSoft breaches the terms contained in this Article 4,
Restrac may, as its sole remedy for such breach, either terminate this
Agreement [,********************].
5. RESPONSIBILITIES OF PEOPLESOFT
5.1 PeopleSoft will make the PeopleSoft Recruitment Interface available to all
PeopleSoft clients for no additional charge as part of the Recruitment Module to
the PeopleSoft HRMS. The PeopleSoft Recruitment Interface will be delivered with
the PeopleSoft HRMS to all new clients, and will be delivered to all existing
PeopleSoft clients with the upgrade to Version 4 of the PeopleSoft HRMS.
5.2 PeopleSoft will provide maintenance and support for the PeopleSoft
Recruitment Interface at no additional charge to all clients who are under a
maintenance contract with PeopleSoft for the PeopleSoft
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<PAGE> 4
HRMS. PeopleSoft will ensure that Restrac is provided with the current version
of the source code to the PeopleSoft Recruitment Interface on an ongoing basis.
5.3 PeopleSoft will work with Restrac to troubleshoot problems with the
PeopleSoft Recruitment Interface and the Resume Reader for PeopleSoft product,
and will maintain and enhance the PeopleSoft Recruitment Interface so that it
remains compatible with future versions of the PeopleSoft HRMS and Resume Reader
at no fee to Restrac. PeopleSoft will work with Restrac to ensure that the
Interface connects to the PeopleSoft database and to PeopleSoft Security.
5.4 PeopleSoft will provide Restrac with copies of all documentation that it
currently has available regarding the use of, development of, or training for,
Resume Reader for PeopleSoft and/or the Interface. PeopleSoft grants Restrac a
perpetual, nonexclusive, royalty free (provided Restrac does not charge a fee)
license to use such to modify, copy, and distribute such documentation, and to
grant third parties the right to use such documentation, provided that ownership
of the documentation and all copyright and other intellectual property rights
remains with PeopleSoft. Restrac's license to use such documentation shall
survive the expiration or termination of this Agreement.
5.5 PeopleSoft may prepare sales materials describing Resume Reader for
PeopleSoft; provided that all such materials will be subject to Restrac's
approval which will not be unreasonably withheld or delayed. PeopleSoft will not
make any representations concerning the Resume Reader software except as
described by approved sales materials or as otherwise authorized by Restrac.
PeopleSoft will provide Restrac with copies of all sales materials relating to
Resume Reader for PeopleSoft as PeopleSoft makes available for its own
salespeople, at no charge, and Restrac may reproduce such materials at its own
expense, provided that all copyright trademark and other proprietary markings
are reproduced. Such materials shall remain the property of PeopleSoft and
except insofar as they are distributed by Restrac in the course of his
performance of duties under this Agreement, must be promptly returned to
PeopleSoft upon expiration or termination of this Agreement.
5.6 During the Term, each party will provide the other with product and
telephone support for internal use copies of their respective products without
charge.
6. RESTRAC RESPONSIBILITIES
6.1 Restrac will be responsible for providing delivery, installation and support
services for Resume Reader to all End Users at no fee to PeopleSoft (except as
specifically provided by Article 11 of this Agreement).
6.2 Restrac will provide PeopleSoft with reasonable information and assistance
in order to ensure that the Interface remains compatible with future versions
of Resume Reader at no fee to PeopleSoft. Restrac shall work with PeopleSoft
to ensure that the Interface connects to the PeopleSoft database and to
PeopleSoft Security.
6.3 Restrac will provide PeopleSoft with such sales materials relating to Resume
Reader and/or Resume Reader for PeopleSoft as Restrac makes available for its
own salespeople, at no charge, and PeopleSoft may reproduce such materials,
provided that all copyright trademark and other proprietary markings are
reproduced. Such materials shall remain the property of Restrac and except
insofar as they are distributed by PeopleSoft in the course of his performance
of duties under this Agreement, must be promptly returned to Restrac upon
expiration or termination of this Agreement.
7. DEVELOPMENT RE-EVALUATION
4
<PAGE> 5
Upon general availability of PeopleTools 4, PeopleSoft and Restrac development
teams will re-evaluate how to connect Restrac Resume Reader to the PeopleSoft
HRMS. As of the Effective Date, PeopleSoft's expectation is that PeopleTools 4
will eliminate the need for the PeopleSoft Recruitment Interface.
8. PRICING
Restrac's prices for licenses of Resume Reader for PeopleSoft, and associated
maintenance and services, shall be as set forth in Exhibit B attached hereto.
Such prices shall be subject to change at Restrac's sole discretion; provided
that Restrac will give PeopleSoft at least sixty (60) days prior notice of any
price change; and further provided that no such price change shall affect orders
received by Restrac prior to notifying PeopleSoft of such price change.
9. REFERRAL FEES
9.1 Orders. PeopleSoft may place an order for a Checkbox Sale by forwarding a
signed order from the prospective End User in the form attached hereto as
Exhibit C to the Restrac Representative. The Restrac Representative will
indicate acceptance of an order by returning a fully executed order to the
PeopleSoft sales representative, and Restrac's signature will confirm the prices
and terms and conditions of the order.
9.2 Qualified Referrals. In the event that PeopleSoft requests assistance from
Restrac in closing a sale of a Resume Reader for PeopleSoft license to an
account, PeopleSoft may refer the account to Restrac by sending a completed
Referral Worksheet to the Restrac Representative. The Restrac Representative
will accept every referral by returning a fully executed Referral Worksheet,
indicating that the Referral has been accepted by Restrac and further indicating
whether the referral is a Qualified Referral entitling PeopleSoft to a referral
fee on a sale of a Restrac Hire license in accordance with Article 9.4.
9.3 Referral Fees. Restrac will pay to PeopleSoft a Referral Fee for every sale
of a license for Resume Reader for PeopleSoft made by Restrac within or outside
the Territory during the term of this Agreement. For any sales of Resume Reader
for PeopleSoft licenses made on or before August 15, 1995, this percentage will
be [****]. Between August 15, 1995 and August 30, 1995, Restrac
and PeopleSoft will evaluate the division of responsibilities in sales of Resume
Reader for PeopleSoft licenses that have occurred during the first 11 1/2 months
of the Agreement, and the referral percentage will be adjusted effective August
15, 1995 as set forth below:
If 70% or more of the sales of Resume Reader for PeopleSoft licenses
are "Checkbox Sales", the referral percentage will increase to [**]. If
less than 30% of the sales of Resume Reader for PeopleSoft licenses
result from "Checkbox Sales", the referral percentage will decrease to
[**].
Otherwise, the referral percentage will either remain at [**] or only upon
mutual written agreement of the parties, may be determined on a case by case
basis (at either [****], dependent upon the relative involvement of Restrac and
PeopleSoft sales staff in the sale.
9.4 Sales of Restrac Hire. Under no circumstances will Referral Fees be payable
by Restrac in connection with a sale of a license for any Restrac product other
than Resume Reader for PeopleSoft, including Restrac Hire. In the event that,
within nine (9) months after accepting a "Qualified Referral" from PeopleSoft,
Restrac closes a sale of a license for Restrac Hire in lieu of Resume Reader for
PeopleSoft, to the same company and business unit set forth in the Referral
Worksheet, Restrac shall pay to PeopleSoft a Referral Fee equal to the amount
that PeopleSoft would have received had Restrac sold a license for the
equivalent number of seats of Resume Reader for PeopleSoft (assuming that any
discount applied to the sale of Restrac Hire would have been applied at the same
rate to a sale of Resume Reader for PeopleSoft).
9.5 Payments / Reporting. Referral Fees shall only be payable with respect to
accounts collected by Restrac. Within thirty days after the end of each calendar
quarter, Restrac will report and pay to PeopleSoft all Referral Fees due based
upon collections made in the quarter in question, including a statement of the
manner in which the Referral Fees are calculated.
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<PAGE> 6
10. COOPERATIVE RELATIONSHIP
10.1 The parties will work together on a continuing basis to resolve or minimize
technical problems and work out strategies for approaching prospective customers
in ways that avoid or minimize sales channel conflicts. In the event that, in
connection with a Qualified Referral, the prospective client expresses an
interest in the functionality of the full Restrac Hire product, Restrac will
work with the PeopleSoft sales representative to determine an appropriate sales
strategy. In the event that a sale of a Restrac Hire license is consummated with
a company as a result of a Qualified Referral, Restrac shall pay PeopleSoft a
Referral Fee in accordance with the provisions of Article 9.4.
10.2 Upon completion of a sale of a Resume Reader for PeopleSoft license, the
Restrac Representative will contact an account manager designated by PeopleSoft
in order to coordinate the implementation of the Interface and the Resume Reader
software. Restrac and PeopleSoft will each provide the other with such
consultation, and technical assistance as is reasonably necessary to ensure that
the implementation of Resume Reader for PeopleSoft is successful.
10.3 Restrac and PeopleSoft will participate in monthly status meetings (which
may be by phone), to discuss any issues and problems which may arise in
connection with the joint marketing arrangement. Each party will designate a
relationship manager who will participate in these calls and to whom ongoing
questions and issues may be addressed. Both Restrac and PeopleSoft will also
designate a sales representative, a marketing representative, and a technical
representative to represent issues and concerns in their respective areas of
responsibility and to participate periodically in the status meetings.
10.4 While this Agreement remains in effect and for six months thereafter,
neither party will (without the other's written consent) solicit for hire any
person who is then an employee of the other party or otherwise induce such
person to leave his employment. This section shall not apply to general
recruiting advertisements.
11. EXISTING ACCOUNTS
11.1 Restrac agrees to assume responsibility for the installation, training, and
support of the Resume Reader for PeopleSoft systems sold by PeopleSoft under the
terms of the Distribution Agreement prior to its termination which are listed in
Exhibit F to this Agreement, provided that PeopleSoft provides Restrac with the
resources and additional royalty payments described by this Article.
11.2 PeopleSoft will pay to Restrac an additional royalty equal to 15% of the
total software license fees received by PeopleSoft, as compensation for the
first year of maintenance to be provided by Restrac, and will pay Restrac $1,000
per day for the number of days determined by PeopleSoft to be necessary to
install the Resume Reader software and provide user training for each End User
who had been granted a license to use Resume Reader for PeopleSoft under the
terms of the Distribution Agreement. PeopleSoft will also reimburse Restrac for
reasonable travel expenses incurred by Restrac personnel in the performance of
such installation and training services for these existing accounts.
11.3 PeopleSoft will assign account managers who will work with Restrac to
smoothly transition these accounts to Restrac, and will prepare and deliver a
common message to such clients regarding what services were included in the base
system price, and communicating that additional services beyond that baseline
level are billable.
[*********]
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[*****
*****]
13. CONFIDENTIALITY
13.1 Each party agrees to use reasonable commercial efforts to hold business and
technical information of the other party which is identified as being
confidential in strict confidence and not to use such information for any
purpose other than in connection with this Agreement for a period of five years
after the disclosure of such information.
13.2 Notwithstanding the foregoing, a party's obligation of confidentiality will
not apply with respect to information which: (a) is or comes to be publicly
available without breach of this Agreement,; (b) is known to the receiving party
prior to its disclosure; (c) is rightfully obtained from a third party without
restriction on use or disclosure; (d) is independently developed by the
receiving party without reference to the disclosing party's confidential
information; or (e) is required to be disclosed by court or governmental order.
13.3 The provisions of this Article 13 shall survive the expiration or
termination of this Agreement.
14. PATENT AND COPYRIGHT INDEMNITY.
14.1 PeopleSoft shall indemnify and defend Restrac against any claims that
PeopleSoft's HRMS, Financial software, or any portion of either, infringes any
United States or Canadian patent or copyright; provided that PeopleSoft is given
prompt notice of such claim and is given information, reasonable assistance, and
sole authority to defend or settle the claim. PeopleSoft shall have no liability
if the alleged infringement is based on: (i) a modification of the software by
anyone other than PeopleSoft; (ii) use of the software with
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<PAGE> 8
equipment not recommended or approved by PeopleSoft; or (iii) use of the
software other than in accordance with the documentation.
14.2 Restrac shall indemnify and defend PeopleSoft against any claims that the
Resume Reader software, or any portion thereof, infringes any United States or
Canadian patent or copyright; provided that Restrac is given prompt notice of
such claim and is given information, reasonable assistance, and sole authority
to defend or settle the claim. Restrac shall have no liability if the alleged
infringement is based on: (i) a modification of the software by anyone other
than Restrac; (ii) use of the software with equipment not recommended or
approved by Restrac; or (iii) use of the software other than in accordance with
the documentation.
15. LIMITATION OF LIABILITY.
EXCEPT FOR VIOLATIONS OF THE OTHER PARTY'S INTELLECTUAL PROPERTY RIGHTS, NEITHER
PARTY WILL BE LIABLE FOR INDIRECT, INCIDENTAL, SPECIAL, OR CONSEQUENTIAL
DAMAGES, INCLUDING BUT NOT LIMITED TO LOST DATA OR LOST PROFITS, HOWEVER
ARISING, EVEN IF IT HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. EXCEPT
FOR DAMAGES INCURRED UNDER ARTICLE 14, ENTITLED "PATENT AND COPYRIGHT
INDEMNITY", OR VIOLATIONS OF THE OTHER PARTY'S INTELLECTUAL PROPERTY RIGHTS,
NEITHER PARTY'S LIABILITY FOR DAMAGES UNDER THIS AGREEMENT SHALL EXCEED THE
AMOUNT PAID BY RESTRAC TO PEOPLESOFT FOR THE YEAR PRIOR TO THE DATE THE CLAIM
AROSE. THE PARTIES AGREE TO THE ALLOCATION OF LIABILITY RISK WHICH IS SET FORTH
IN THIS SECTION.
16. TERM AND TERMINATION
16.1 Unless sooner terminated as provided herein, this Agreement shall expire on
[****]. The parties may extend the term of this Agreement by mutual consent.
Restrac's obligation to pay Referral Fees to PeopleSoft for any orders or
referrals accepted prior to [****] shall survive the termination of this
Agreement.
16.2 This Agreement may be terminated by either party in the event of a material
breach by the other that has not been cured within sixty (60) days after written
notice thereof.
16.3 Upon termination of this Agreement, each party shall promptly return to the
other all of the other's software and documentation and all confidential
information of the other party in its possession or control.
17. GENERAL
17.1 All notices, requests, consents and other communications hereunder shall be
in writing and shall be delivered to the attention of a party's President, at
such party's address set forth on the first page of this Agreement or such other
address as shall have been provided by notice hereunder.
17.2 The parties are independent contractors, and neither is authorized to
represent or bind the other except as expressly set forth in this Agreement.
17.3 A party's rights and obligations under this Agreement are not assignable
other than to its parent or subsidiary or successor to substantially all of its
business. Subject to the foregoing, this Agreement is binding upon and will
inure to the benefit of a party and its successors and assigns.
17.4 This Agreement may not be modified, nor may any of its provisions be
waived, except by an instrument signed by the party against whom such
modification or waiver is to be enforced.
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17.5 Any action arising out of this Agreement must be brought, if at all, within
two years after the claim on which it is based arises.
17.6 The failure of a party to perform this Agreement shall be excused as long
as such performance is delayed by reason of strikes, war, fire, acts of God or
other causes beyond such party's reasonable control.
17.7 This Agreement, including Exhibits A-F hereto, which are incorporated
herein by reference, embodies the entire agreement and understanding between
Restrac and PeopleSoft with respect to the subject matter hereof and supersedes
any prior agreements and understandings between the parties hereto, including
the Distribution Agreement and Letter of Intent dated November 22, 1994. If any
provision of this Agreement shall be otherwise unlawful, void, or for any reason
unenforceable, then that provision shall be enforced to the maximum extent
permissible so as to effect the intent of the parties. In either case, the
remainder of this Agreement shall continue in full force and effect.
17.8 The headings of the articles used in this Agreement are included for
convenience only and are not to be used in construing or interpreting this
Agreement.
17.9 This Agreement shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
their behalf by their duly authorized officers as of the date set forth above.
MICROTRAC SYSTEMS, INC. D.B.A RESTRAC PEOPLESOFT, INC.
BY: /s/ Lars D. Perkins BY: /s/ Robert D. Finnell
------------------------- -------------------------
NAME: Lars D. Perkins NAME: Robert D. Finnell
------------------------- -------------------------
TITLE: President TITLE: Corporate Counsel
------------------------- -------------------------
DATE: DATE:
------------------------- -------------------------
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EXHIBIT A
RESTRAC SOFTWARE PRODUCTS
RESUME READER: The Restrac Resume Reader software consists of three
Windows-based components-- Resume Scanner, Resume Indexer and Resume Finder.
Resume Scanner
Resume Scanner is used to drive the optical scanner to acquire the resume
image, and run OCR on the image to produce text. During scanning, applicant
profile information is extracted from the resume, placed into a temporary
data form for verification by the scanner operator and then merged into the
applicant database (either Restrac Hire or PeopleSoft Recruitment). The
Resume Scanner software includes the ability to interface with the
PeopleSoft recruitment module via a configurable SQL script file. Resume
Scanner also checks for duplicate resumes, compresses images for storage and
names the OCR'd text files.
Resume Indexer
Resume Indexer is used to index each newly scanned resume so it can be
retrieved at a later time. Typically, it is run by the system administrator
whenever a new batch of resumes has been received. Every word in the resume
is indexed, forming a searchable textbase that managers and recruiters can
query via Resume Finder.
Resume Finder
Resume Finder is used by recruiters and managers to retrieve qualified
candidates for open positions. Users retrieve candidates by constructing
queries made up of "search topics" that are selected from a predefined
library and adding specific words and phrases of their own. Search topics
are high level concepts (such as "Unix Programmer") that Resume Finder
translates into related skill words when searching the resume textbase.
Resume Finder comes with a "Topic Builder utility", which allows users who
have been through a separate Topic Builder training course to modify and add
to the predefined library of search topics. Individual "search topics" can
be weighted, using a slider bar, to indicate their importance. For example,
the user can weight a Bachelor's degree as required and a Master's as
desirable. The search returns a ranked list of candidates from which
individual resume images and text can be viewed. Selected resumes can then
be printed on a laser printer. Support for fax and E-Mail (CC:Mail and
Microsoft Mail) is also built in.
RESTRAC HIRE:
Restrac Hire is a complete employment management system that integrates the
Resume Reader software described above (Resume Scanner, Resume Indexer and
Resume Finder) with an applicant tracking and requisition management database
through a tool called the recruiting workbench. From within Restrac Hire,
applicant correspondence can be generated, and reports on recruiting activity
can be generated. Technically, Restrac Hire is a Windows, client/server-based
application that supports multiple SQL RDBMSs.
<PAGE> 11
EXHIBIT B
PRICING FOR
RESUME READER FOR PEOPLESOFT
STARTER SYSTEM
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ITEM DESCRIPTION PRICE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
STARTER SYSTEM Assumes 1 site and includes software license, 1st yr. [****]
maintenance, installation and training.
Software: license for 1 Scanner Workstation and 4 Finder
Workstations [****]
Installation [****]
Training: 1 day at client site--Scanner Module and Finder
Module Training for up to 5 Users [****]
- ---------------------------------------------------------------------------------------------------------------------------
SCANNER HARDWARE Choose 1 option (includes scanner hardware and 1st yr.
maintenance)
Low Volume Fujitsu M3096G System: up to 500 pages per day [****]
High Volume Fujitsu M3097G System: 500-750 pages per day [****]
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL OPTIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
ITEM DESCRIPTION PRICE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ADDITIONAL WORKSTATION
LICENSES Includes software license, installation and 1st yr. maintenance
Scanner Workstation License [****]
Finder Workstation Licenses (price listed per station)
1-4 [****]
5-10 [****]
11-20 [****]
21+ [****]
- ---------------------------------------------------------------------------------------------------------------------------
ADDITIONAL TRAINING
(AT CLIENT SITE) Taken with Starter System Training [****] per module, per user
Taken after Starter System Training total module price plus
[****]day
Topic Builder (for tailoring the standard library of search [****]
terms--1 day)
- ---------------------------------------------------------------------------------------------------------------------------
OTHER OPTIONS Fax Out for Recruiters (LAN must be running Novell Netware) [****] per site
Connecting Multiple Sites to a Central Site (includes [****] (central site only)
software, installation and 1st yr. maintenance)
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: ENTERPRISE LICENSES ARE AVAILABLE, AND WILL BE QUOTED ON A CASE BY CASE
BASIS
[*] Confidential treatment requested
<PAGE> 12
EXHIBIT C
RESUME READER FOR PEOPLESOFT LICENSE ORDER FORM
STARTER SYSTEM
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ITEM DESCRIPTION PRICE QTY
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
STARTER SYSTEM Assumes 1 site and includes software license, 1st yr. [****]
maintenance, installation and training.
Software: license for 1 Scanner Workstation and 4 Finder
Workstations [****]
Installation [****]
Training: 1 day at client site--Scanner Module and Finder
Module Training for up to 5 Users [****] $
- ---------------------------------------------------------------------------------------------------------------------------------
SCANNER HARDWARE Choose 1 option (includes scanner hardware and 1st yr.
maintenance)
Low Volume Fujitsu M3096G System: up to 500 pages per day [****] $
---------------------------------------------------------------------------------------------------------------
High Volume Fujitsu M3097G System: 500-750 pages per day [****] $
---------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL OPTIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
ITEM DESCRIPTION PRICE QTY
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ADDITIONAL
WORKSTATION Includes software license, installation and 1st yr.
LICENSES maintenance
Scanner Workstation License [****] $
-----------------------------------------------------------------------------------------------------------------
Finder Workstation Licenses
1-4 [****] (per station)
5-10 [****]
11-20 [****]
21+ [****] $
- -----------------------------------------------------------------------------------------------------------------------------------
ADDITIONAL
TRAINING Taken with Starter System Training [****] per module, per user $
(AT CLIENT SITE)
-----------------------------------------------------------------------------------------------------------------
Taken after Starter System Training total module price plus $
[****]day
-----------------------------------------------------------------------------------------------------------------
Topic Builder (for tailoring the standard library of search [****] $
terms--1 day)
- -----------------------------------------------------------------------------------------------------------------------------------
OTHER OPTIONS Fax Out for Recruiters (LAN must be running Novell Netware) [****] per site $
-----------------------------------------------------------------------------------------------------------------
Connecting Multiple Sites to a Central Site (includes [****]
software, installation and 1st yr. maintenance) (central site only) $
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: ENTERPRISE LICENSES ARE AVAILABLE, AND WILL BE QUOTED ON A CASE BY CASE
BASIS
<TABLE>
<S> <C> <C>
TOTAL $
==================
</TABLE>
Payment terms are net 30 days from delivery. If services are rescheduled with
less than 30 days notice the customer may incurr an additional rescheduling fee
equal to [****] of services fees. Resume Reader for PeopleSoft licenses are
subject to the Resume Reader for PeopleSoft Software License Terms and
Conditions (Rev. 1/95), a copy of which has been provided to customer.
My signature below constitues an order of the products set forth above for the
prices and under the terms contained in this Order Form.
[*] Confidential treatment requested
- ------------------------------- ------------------ --------------
Name Printed Signature Date
Ship Bill
-------------------------- --------------------------
To: To:
-------------------------- --------------------------
-------------------------- --------------------------
Purchase Order #
--------------------------
PeopleSoft Sales Manager:
-------------------------- ----------------------
Signature
Company Name:
----------------------------------------------------
Address:
----------------------------------------------------
City, State, Zip:
----------------------------------------------------
Key Contact: Title:
------------------------ ----------------
Phone Number:
------------------------
<PAGE> 13
RESTRAC
RESUME READER FOR PEOPLESOFT
SOFTWARE LICENSE TERMS AND CONDITIONS
LICENSE: Restrac hereby grants to the customer ("Customer") identified on the
attached Restrac Order Form ("Order Form") a non-exclusive, nontransferable
license ("License") to use the Resume Reader for PeopleSoft software and
related documentation ("Software") for Customer's internal business purposes,
on the number of workstations set forth on the Order Form, in consideration of
the fees specified therein. The number of workstations with access to the
Software will be limited to the number set forth on the Order Form, unless
Customer pays an additional license fee in accordance with Restrac's then
current price list. Customer may make a reasonable number of copies of the
Software for backup and archival purposes; no other copies may be made.
Customer agrees not to cause or permit the reverse engineering, disassembly or
decompilation of the Software. The Software is a proprietary product of
Restrac, and Customer agrees to reproduce Restrac's proprietary rights notices
on all permitted copies of the Software and to use other reasonable measures to
safeguard and keep confidential the Software. Subject to this License, Restrac
retains all right, title and interest in and to the Software and all copies
thereof.
LIMITED WARRANTY: Restrac warrants that for a period of ninety (90) days
following delivery, the Software will operate substantially as documented.
Customer's sole remedy under this warranty will be the correction or
replacement of defective Software returned to Restrac during the warranty
period, or if Restrac is unable to correct a deficiency in any Software returned
during the warranty period, Customer may terminate its License and receive a
refund of the License fees paid for such Software.
EXCEPT FOR THE LIMITED WARRANTY SET FORTH ABOVE, RESTRAC DISCLAIMS ANY AND ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
PROPRIETARY RIGHTS INDEMNITY: Restrac will defend at its own expense any
action against Customer based upon a claim that the Software in the form
furnished to Customer hereunder infringes a U.S. copyright or patent; provided
that Restrac is given prompt notice of such claim and is given information,
reasonable assistance, and sole authority to defend or settle the claim. In
the defense or settlement of the claim, Restrac may obtain for Customer the
right to continue using the Software, or replace or modify the Software so that
the use thereof becomes non-infringing. Restrac will not be liable for any
infringement claim based upon the use of the Software other than in accordance
with its documentation, or in combination with any hardware or software not
provided, recommended or approved by Restrac.
LIMITATION OF LIABILITY: RESTRAC'S ENTIRE LIABILITY TO CUSTOMER AND CUSTOMER'S
SOLE REMEDY HEREUNDER FOR ANY CAUSE, REGARDLESS OF THE FORM OF ACTION, WILL BE
LIMITED TO THE LICENSE FEES PAID TO RESTRAC FOR THE PRODUCT THAT CAUSED THE
DAMAGES OR IS THE SUBJECT MATTER OF THE CLAIM. IN NO EVENT WILL RESTRAC BE
LIABLE FOR ANY DAMAGES FOR LOST PROFITS OR OTHER INCIDENTAL OR CONSEQUENTIAL
DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SAME.
TERM AND TERMINATION: The License will be perpetual, unless sooner terminated
as provided herein. Customer may terminate the License at any time, and
Restrac may terimate the License if Customer breaches this License and fails to
cure such breach within 30 days after receipt of written notice therof. Upon
termination, Customer agrees to either return or certify to Restrac the
destruction of, all copies of the Software.
EXPORT: Customer will be responsible for compliance with all legal
requirements applicable to exports of Software made by it.
U.S. GOVERNMENT RESTRICTED RIGHTS: The Software is provided with RESTRICTED
AND LIMITED RIGHTS. Use, duplication, or disclosure by the Government are
subject to restrictions as set forth in FAR 227.17 (June 1987) Alternate
III(g)(3) (June 1987), FAR 52.227-19 (June 1987), or DFARS
52.227-7013(c)(1)(ii) (June 1988), as applicable, and their successor
provisions. Contractor/Manufacturer is Restrac, One Dedham Place, Dedham, MA
02026.
GOVERNING LAW: This Agreement will be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts.
ENTIRE AGREEMENT: This Agreement sets forth the entire understanding of the
parties on the subject hereof, and may only be modified in a writing signed by
both parties. Any terms set forth in a document which is not incorporated in
this Agreement, (including but not limited to a purchase order of Customer),
will be without legal force or effect.
RESTRAC, ONE DEDHAM PLACE, DEDHAM, MASSACHUSETTS 02026 (617) 320-5600
(REV. 1/95)
*PeopleSoft is a registered trademark of PeopleSoft, Inc. 1331 North California
Boulevard, Walnut Creek, CA 94546
<PAGE> 14
EXHIBIT D
RESUME READER FOR PEOPLESOFT
REFERRAL WORKSHEET
Date Submitted:
-------------------------
PeopleSoft
Sales Manager:
-------------------------
Phone:
-------------------------
Signature:
-------------------------
ACCOUNT PROFILE INFORMATION:
Prospect:
------------------------------------------------------
Address:
------------------------------------------------------
City, State, Zip:
------------------------------------------------------
Key Contacts:
------------------------- -----------------------
Title:
------------------------- -----------------------
Phone:
------------------------- -----------------------
Current HRMS: If PeopleSoft, Version #:
------------------ ----------------
Current Recruitment Software:
------------------------------------------------------
Current Resume Scanning Software:
------------------------------------------------------
Estimated Number of Workstations Needing Access to Resume Reader for PeopleSoft:
------------------------------------------------------
Number of Resumes per Year:
------------------
Numbers of Employees at this location: Worldwide:
------------------ ---------
RDBMS: Operating System: Server Type:
----------- ------------------ ---------
Number of Recuiters:
-------------------
Budget: Timeframe:
------------------- -------------------
[RESTRAC LOGO]
LEAD ACCEPTANCE
Date Accepted: By:
------------------- -------------------
Signature
Qualified Restrac Hire Referral: Yes or No
---------
Circle One
<PAGE> 15
Restrac Hire Disqualification Reason:
---------------------------------
<PAGE> 16
EXHIBIT E
MINIMUM SALES TARGETS
RESUME READER FOR PEOPLESOFT
[*****
*****]
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
Period
------------------------------------------------------------------------------
[****] [****] [****] [****]
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales Units per Period [****] [****] [****] [****]
- ------------------------------------------------------------------------------------------------------------
Cumulative Sales Units [****] [****] [****] [****]
- ------------------------------------------------------------------------------------------------------------
</TABLE>
* Each sale of a starter Resume Reader for PeopleSoft system to an independent
business unit of a company is considered a Sales Unit. (Sales of software
purchased to add-on to an existing Resume Reader for PeopleSoft system are not
considered in determining the number of Sales Units.)
[*] Confidential treatment requested
<PAGE> 17
EXHIBIT F
EXISTING ACCOUNTS
<TABLE>
<CAPTION>
LICENSEE LICENSE DATE MAINTENANCE END
<S> <C> <C>
AT&T / HRISO 12/30/93 12/20/94
BATTELLE PACIFIC NORTHWEST LAB 9/21/94 9/21/95
BLUE CROSS/BLUE SHIELD NJ 5/16/94 5/16/95
CDSI
DIRECTV, INC. 6/24/94 6/25/95
JOHNS HOPKINS UNIV. APL 6/10/94 6/10/95
OTTERTAIL POWER CO. 6/26/94 6/8/95
RAINBOW PROGRAMMING 6/30/94 6/30/95
VITRO CORP 11/15/93 11/15/94
</TABLE>
<PAGE> 1
EXHIBIT 11.1
RESTRAC, INC.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
Pro forma Net Income SEPTEMBER 30, MARCH 31,
Per Common and 1995 1996
---- ----
Common Equivalent Share (unaudited)
----------------------- -----------
<S> <C> <C>
Net income $ 400,807 $ 526,670
Weighted average common shares outstanding 3,870,000 3,870,000
Common Stock issuable upon conversion of Redeemable Convertible Preferred
Stock to Common Stock issued (1) 2,502,696 2,502,696
Dilutive effect of Common Stock options issued prior to one year from the 360,118 348,423
filing of this registration statement
Dilutive effect of Common Stock options issued within one year from 174,249 174,249
the filing of this registration statement (2)
Number of shares of Common Stock to be issued pursuant to the proposed
initial public offering sufficient to generate proceeds for the payment of
$548,733 of Convertible Preferred Stock dividends payable upon the
consummation of the proposed initial public offering 42,210 42,210
---------- ---------
Weighted average common and common equivalent shares outstanding 6,949,273 6,937,578
---------- ---------
Pro forma net income per share amount $ 0.06 $ 0.08
========== ==========
</TABLE>
_______________
(1) Assumes Convertible Preferred Stock is surrendered in conjunction with
the subsequent conversion into 2,502,696 shares of Common Stock.
(2) Pursuant to Securities and Exchange Commission Staff Accounting
Bulletin No. 83, common and preferred stock, options and warrants
issued at prices below the initial public offering price of $13.00 per
share ("cheap stock") during the twelve month period immediately
preceding the initial filing date of the Company's Registration
Statement for its initial public offering have been included as
outstanding for all periods presented. The dilutive effect of the
common and common share equivalents was computed in accordance with the
treasury stock method.
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Restrac, Inc.:
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
Registration Statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 9, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 4313
<SECURITIES> 0
<RECEIVABLES> 3423
<ALLOWANCES> 350
<INVENTORY> 0
<CURRENT-ASSETS> 8601
<PP&E> 2866
<DEPRECIATION> 1457
<TOTAL-ASSETS> 10084
<CURRENT-LIABILITIES> 5959
<BONDS> 0
3983
0
<COMMON> 46
<OTHER-SE> 17
<TOTAL-LIABILITY-AND-EQUITY> 10084
<SALES> 9903
<TOTAL-REVENUES> 9903
<CGS> 3124
<TOTAL-COSTS> 7746
<OTHER-EXPENSES> 1322
<LOSS-PROVISION> 129
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 936
<INCOME-TAX> 409
<INCOME-CONTINUING> 835
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 527
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
