<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended: DECEMBER 31, 1998
or
[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from_____to_____
Commission File Number: 0-20735
RESTRAC, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------
DELAWARE 04-2935271
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
91 HARTWELL AVENUE
LEXINGTON, MA 02421
(Address of principal executive offices) (zip code)
(781) 869-5000
(REGISTRANT'S TELEPHONE NUMBER)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the Registrant
was required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date:
TITLE OF EACH CLASS
-------------------
Common stock, $.01 par value, shares outstanding at January 31, 1999:
10,028,450 shares.
<PAGE>
RESTRAC, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
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<S> <C>
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at December 31, 1998
and September 30, 1998 3
Consolidated Statements of Operations for the three months ended
December 31, 1998 and December 31, 1997 4
Consolidated Statements of Cash Flows for the three months ended
December 31, 1998 and December 31, 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk 19
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 2. Changes in Securities 20
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
PART III - SIGNATURES 21
Exhibit #10.27 22
Exhibit #27.1 51
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
RESTRAC, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1998 1998
----------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents ................................................ $ 2,140 $ 9,772
Short-term investments.................................................... 5,870 6,664
Accounts and installments receivable, less allowance for doubtful accounts
of $400 at December 31, 1998 and September 30, 1998 ................... 6,571 7,282
Other current assets ...................................................... 2,237 1,445
Refundable income taxes.................................................... 135 135
Deferred income taxes ..................................................... 1,083 900
-------- --------
Total current assets ............................................. 18,036 26,198
-------- --------
Long-term installments receivable, net ..................................... 548 581
Property and equipment, net ................................................ 3,357 2,967
Long-term investments ...................................................... 590 893
Junglee investment, net .................................................... 14,669 --
Other assets, net .......................................................... 553 792
-------- --------
TOTAL ASSETS ..................................................... $ 37,753 $ 31,431
-------- --------
-------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of capital lease obligations ............................. $ 93 $ 131
Accounts payable ......................................................... 1,779 1,799
Accrued expenses ......................................................... 2,642 3,272
Deferred revenue ......................................................... 5,893 5,481
Accrued income taxes ..................................................... 56 211
-------- --------
Total current liabilities ........................................ 10,463 10,894
-------- --------
Deferred income taxes ...................................................... 19 19
-------- --------
Deferred rent .............................................................. 201 195
-------- --------
Stockholders' Equity:
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 -- 10,714,819 shares at December 31, 1998,
9,022,674 shares at September 30, 1998 ................................ 107 90
Additional paid-in capital ................................................. 28,082 19,502
Treasury stock, at cost .................................................... (831) (831)
Retained (deficit) earnings ................................................ (288) 1,562
-------- --------
Total stockholders' equity ....................................... 27,070 20,323
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ....................... $ 37,753 $ 31,431
-------- --------
-------- --------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
3
<PAGE>
RESTRAC, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
-----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Revenue:
Product revenue........................................................ $ 2,500 $ 4,022
Services revenue....................................................... 3,902 2,974
------------ ------------
Total revenue.................................................. 6,402 6,996
------------ ------------
Cost of Revenue:
Product revenue........................................................ 227 124
Services revenue....................................................... 2,146 2,071
------------ ------------
Total cost of revenue.......................................... 2,373 2,195
------------ ------------
Gross margin............................................................. 4,029 4,801
------------ ------------
Operating Expenses:
Research and development............................................... 1,425 1,265
Sales and marketing.................................................... 3,027 2,566
General and administrative............................................. 1,133 942
Amortization of Junglee investment..................................... 638 --
------------ ------------
Total operating expenses....................................... 6,223 4,773
------------ ------------
(Loss) income from operations............................................ (2,194) 28
Other income, net........................................................ 161 143
------------ ------------
(Loss) income before (benefit) provision for income taxes................ (2,033) 171
(Benefit) provision for income taxes .................................... (183) 68
------------- ------------
Net (loss) income ....................................................... $ (1,850) $ 103
------------- ------------
------------- ------------
Basic net (loss) income per common share ................................ $ (.20) $ .01
------------- ------------
------------- ------------
Diluted net (loss) income per common share............................... $ (.20) $ .01
------------- ------------
------------- ------------
Basic weighted average number of common shares outstanding............... 9,136,474 8,202,461
------------- ------------
------------- ------------
Diluted weighted average number of common shares outstanding............. 9,136,474 8,557,667
------------- ------------
------------- ------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
4
<PAGE>
RESTRAC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31,
----------------------------
1998 1997
-------------- -------------
<S> <C> <C>
Cash Flows from Operating Activities:
Net (loss) income ................................. $ (1,850) $ 103
Adjustments to reconcile net (loss) income to net
cash (used in) provided by operating activities --
Depreciation and amortization................... 1,100 425
Deferred income taxes,net ...................... (183) --
Deferred rent .................................. 6 6
Changes in assets and liabilities
Accounts and installments receivable, net .... 711 113
Other current assets ......................... (792) (129)
Refundable income taxes ...................... (9)
Long-term installments receivable ............ 33 --
Accounts payable ............................. (20) (586)
Accrued expenses ............................. (630) (62)
Deferred revenue ............................. 412 313
Accrued income taxes ......................... (155) 68
----------- ----------
Net cash (used in) provided by
operating activities...................... (1,368) 242
----------- ----------
Cash Flows from Investing Activities:
Investment in Junglee ............................. (6,778) --
Purchases of property and equipment ............... (852) (292)
Maturities and purchases of short-term
investments, net ................................ 794 269
Maturities and purchases of long-term
investments, net................................. 303 (2,010)
Change in other assets ............................ 239 (5)
----------- ----------
Net cash used in investing activities ..... (6,294) (2,038)
----------- ----------
Cash Flows from Financing Activities:
Payments of capital lease obligations ............. (38) (34)
Proceeds from exercise of common stock options .... 9 63
Proceeds from employee stock purchase plan
stock issuance................................... 59 75
----------- ----------
Net cash provided by financing activities . 30 104
----------- ----------
Net decrease in Cash and Cash Equivalents ........... (7,632) (1,692)
----------- ----------
Cash and Cash Equivalents, beginning of period....... 9,772 5,745
----------- ----------
Cash and Cash Equivalents, end of period ............ $ 2,140 $ 4,053
----------- ----------
----------- ----------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for
Interest ....................................... $ 3 $ 6
----------- ----------
Income taxes ................................... $ 155 $ 9
----------- ----------
Supplemental Schedule of Noncash Financing Activities
Issuance of Junglee Stock ...................... $ 8,529 $ --
-------------- -------------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
FINANCIAL STATEMENTS.
5
<PAGE>
RESTRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Restrac, Inc. and its wholly-owned subsidiary, Restrac Securities Corporation,
collectively referred to in these Notes to Consolidated Financial Statements as
"Restrac" or "the Company". All intercompany accounts and transactions have been
eliminated in consolidation.
The consolidated financial statements of the Company presented herein,
without audit except for balance sheet information at September 30, 1998, have
been prepared pursuant to the rules of the Securities and Exchange Commission
for quarterly reports on Form 10-Q and do not include all of the information and
footnote disclosures required by generally accepted accounting principles. These
statements should be read in conjunction with the consolidated financial
statements and notes thereto for the year ended September 30, 1998 ("Fiscal
1998") included in the Company's Form 10-K filed with the Securities and
Exchange Commission on December 29, 1998.
The consolidated balance sheet as of December 31, 1998, the consolidated
statements of operations for the three month periods ended December 31, 1998 and
1997, and the consolidated statements of cash flows for the three month periods
ended December 31, 1998 and 1997, are unaudited but, in the opinion of
management, include all adjustments (consisting solely of normal, recurring
adjustments) necessary for a fair presentation of results for these interim
periods.
The consolidated results of operations for the three month period ended
December 31, 1998 are not necessarily indicative of the results to be expected
for the fiscal year ending September 30, 1999 ("Fiscal 1999").
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements reflect the application
of certain significant accounting policies described below and elsewhere in the
notes to the Fiscal 1998 consolidated financial statements referenced above.
(a) REVENUE RECOGNITION
Product revenue includes software license fees. Services revenue includes
customer maintenance fees and fees for training, installation, consulting,
scanning, job posting services and RESTRAC WEBHIRE. The Company recognizes
product and services revenue in accordance with the provisions of Statement of
Position No. 97-2, SOFTWARE REVENUE RECOGNITION.
Product revenue from software license fees is recognized upon delivery
provided there are no significant Company obligations remaining and
collectibility of the revenue is probable. If an acceptance period is allowed,
revenue is recognized upon the earlier of the customer acceptance or the
expiration of the acceptance period, as defined in the applicable software
license agreement.
6
<PAGE>
RESTRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Installments receivable represent the present value of future payments
related to the financing of noncancelable term license agreements that provide
for payment in installments over a five-year period. A portion of each
installment is recognized as interest income in the accompanying consolidated
statements of operations.
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 generally allocates approximately 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. Services revenue from training, installation, consulting, resume
scanning and job posting is recognized as the related services are performed.
Services revenue from RESTRAC WEBHIRE is recognized ratably over the service
term.
Deferred revenue represents payments received by the Company in advance of
product delivery or service performance.
(b) NET (LOSS) INCOME PER SHARE
SFAS No. 128, EARNINGS PER SHARE, establishes standards for computing and
presenting earnings per share and applies to entities with publicly held common
stock or potential common stock. In accordance with SFAS No. 128, basic net
(loss) income per share for December 31, 1998 and December 31, 1997 is
calculated by dividing net (loss) income by the weighted average number of
common shares outstanding for those periods.
Diluted earnings per share includes the effect of dilutive securities. As a
net loss is presented for the period ended December 31, 1998, the loss per share
was based only on the weighted average number of common shares outstanding.
Common equivalent shares outstanding during the 1999 period were not used as
their inclusion would have been anti-dilutive.
The following table reconciles the weighted average common shares
outstanding to the shares used in computation of diluted weighted average common
shares outstanding:
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1998 1997
---------- ---------
<S> <C> <C>
Weighted average common shares outstanding...................... 9,136,474 8,202,461
Dilutive effect of options...................................... -- 355,206
---------- ---------
Diluted weighted average common shares outstanding.............. 9,136,474 8,557,667
</TABLE>
For the three month periods ended December 31, 1998 and 1997, 1,463,160 and
18,500 potential common shares, respectively, were excluded from the above
calculation as their effect would have been anti-dilutive.
7
<PAGE>
RESTRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(c) CASH AND CASH EQUIVALENTS
Cash equivalents are recorded at amortized cost and consist of highly
liquid investments with original maturities of three months or less.
(d) SHORT- AND LONG- TERM INVESTMENTS
Short-term investments consist of investments with original maturities
between three and twelve months. Long-term investments consist of investments
that will mature greater than twelve months from the balance sheet date. The
Company classifies these short- and long-term investments as held-to-maturity,
and accordingly, they are carried at amortized cost, which approximates market.
These investments consist of municipal debt securities.
The Company does not use derivative financial instruments in its investment
portfolio. The Company places its investments in instruments that meet high
quality standards, as specified in the Company's investment policy guidelines;
the policy also limits the amount of credit exposure to any one issue, issuer
and type of investment. The Company does not expect any material loss with
respect to its investment portofolio.
3) JUNGLEE INVESTMENT
On November 18, 1998, the Company acquired certain assets and assumed
certain obligations of the Junglee Employment Services business of Amazon.com.
In exchange for cash of $6 million and 1,670,273 shares of Restrac common stock
valued at $8.5 million, Restrac received exclusive rights to Junglee's online
recruitment technologies. Restrac also acquired Junglee's Internet production
sites and will manage and develop the employer and career site business
relationships established by Junglee Corp. ("Junglee"). Restrac did not retain
any Junglee personnel in connection with the transaction. The investment will be
amortized over 2 years.
4) BUSINESS SEGMENT INFORMATION
Effective for the year ended September 30, 1998, the Company adopted SFAS
131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED INFORMATION, which
requires disclosure of financial and descriptive information about the Company's
reportable operating segments. The operating segments reported below are the
segments for which separate financial information is available and for which
operating profit/loss amounts are evaluated regularly by senior management in
deciding how to allocate resources and in assessing performance.
The Company has two reportable segments: enterprise software solutions and
internet and transaction-based solutions, the latter of which started to emerge
in fiscal 1997 with the offering of outsourced services (e.g., resume scanning,
acknowledgement letters) and the research and development activities undertaken
for this segment. The Internet and transaction-based solutions segment provides
outsourced management of private candidate pools via RESTRAC WEBHIRE,
subscription services to public pools and job-posting sites, resume scanning,
reference checking and other fee-based staffing functions. The enterprise
software solutions segment provides perpetual licenses to the Company's software
products
8
<PAGE>
RESTRAC, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
and the related maintenance, training, implementation and consulting services in
support of such licenses.
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Expenses related to general
corporate functions such as Information Technology, Finance and Human Resources,
and general and administrative costs such as depreciation, rent and utilities
are allocated to the reportable segments based on relative headcount as a basis
of relative usage. Income tax provision (benefit) is allocated to the reportable
segments in deriving segment profit (loss) based on each segment's pro rata
income or loss before income tax provision (benefit). The Company has no
intersegment sales and transfers, and does not allocate assets to the operating
segments.
The Company's reportable segments are strategic business units that offer
different solutions tailored to a customer's needs. They are managed separately
because each business requires different technology and sales and marketing
strategies.
<TABLE>
<CAPTION>
Three Months Ended December 31, 1998:
- ------------------------------------------------------------------------------------------------------------------------
Internet and Enterprise
Transactions Software Other Consolidated
------------ -------- ----- ------------
<S> <C> <C> <C> <C>
Total Revenue ................... $ 824 $ 5,578 $ -- $ 6,402
Research & Development .......... $ 480 $ 945 $ -- $ 1,425
Depreciation and Amortization ... $ 716 $ 384 $ -- $ 1,100
Other Income, Net ............... $ -- $ -- $ 161 $ 161
Segment Profit (Loss) ........... $ (1,874) $ (122) $ 146 $ (1,850)
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended December 31, 1997:
- ------------------------------------------------------------------------------------------------------------------------
Internet and Enterprise
Transactions Software Other Consolidated
------------ -------- ----- ------------
<S> <C> <C> <C> <C>
Total Revenue ..................... $ 271 $ 6,725 $ -- $ 6,996
Research & Development ............ $ 224 $ 1,041 $ -- $ 1,265
Depreciation and Amortization ..... $ 55 $ 370 $ -- $ 425
Other Income, Net ................. $ -- $ -- $ 143 $ 143
Segment Profit (Loss) ............. $ (527) $ 544 $ 86 $ 103
</TABLE>
9
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998
This report contains forward looking statements that involve risks and
uncertainties. The statements contained in this report that are not purely
historical are forward looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities and
Exchange Act of 1934, as amended. Forward looking statements include, without
limitation, statements containing the words "Anticipates", "Believes",
"Expects", "Intends", "Future", and words of similar import which express
management's belief, expectations or intentions regarding the Company's future
performance. All forward looking statements included in this report are based on
information available to the Company on the date hereof, and the Company has no
obligation to update any such forward looking statements. The Company's actual
results could differ materially from its historical operating results and from
those anticipated in these forward looking statements as a result of certain
factors, including, without limitation, the factors described under "Factors
Affecting Future Operating Results" included at the end of this Item 2. You
should carefully review each of the factors set forth therein, and you should be
aware that there may be other factors that could cause these differences. In
addition, the Company and its customers and suppliers may experience
unanticipated delays or expenses in achieving Year 2000 compliance.
CONSOLIDATED RESULTS OF OPERATIONS
(IN THOUSANDS)
REVENUE
Total revenue for the three month period ended December 31, 1998 was $6,402
compared to $6,996 for the three month period ended December 31, 1997,
representing a decrease of 8%.
PRODUCT REVENUE. Product revenue was $2,500 for the three months ended
December 31, 1998 compared to $4,022 for the three months ended December 31,
1997. Protracted sales cycles resulting from the transition to an
Internet/Intranet product line and competitive pressures were the primary
contributors to this reduction. Because the Company's product revenue consists
of a small number of large dollar transactions, wide fluctuations can be
experienced from period to period. Such fluctuations are not necessarily
indicative of future results.
SERVICES REVENUE. Services revenue increased 31% to $3,902 for the three
months ended December 31, 1998 from $2,974 for the three months ended December
31, 1997. The increase was attributable to the greater than 200% growth in the
emerging Internet and transaction revenue segment as well as increases in
maintenance stemming from the growth in the installed customer base.
COST OF REVENUE
COST OF PRODUCT REVENUE. Cost of product revenue represented 9% of total
product revenue for the three months ended December 31, 1998 as compared to 3%
for the three months ended December 31,
10
<PAGE>
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)
1997. The increase as a percentage of product revenue is due primarily to
increased costs in royalties due under third party licensing arrangements for
the RESTRAC HIRE FOR INTRANET product.
COST OF SERVICES REVENUE. For the period ended December 31, 1998, 70% of
cost of services was attributed to the enterprise software segment, with the
remainder associated with the Internet and transaction-based solutions segment.
This compares to 77% of cost of services attributed to the enterprise software
segment for the period ended December 31, 1997. Cost of services revenue
increased 4% to $2,146 for the three months ended December 31, 1998 from $2,071
for the three months ended December 31, 1997. The increase in absolute dollars
is principally attributable to costs associated with RESTRAC WEBHIRE and the
introduction of services in connection with the JUNGLEE transaction. Cost of
services revenue decreased as a percentage of services revenue to 55% for the
first quarter of Fiscal 1999 from 70% for the first quarter of Fiscal 1998.
OPERATING EXPENSES
RESEARCH AND DEVELOPMENT. Research and development expenses were $1,425 or
22% of total revenue for the three months ended December 31, 1998 as compared to
$1,265 or 18% of total revenue for the comparable Fiscal 1998 period. This
increase is primarily due to increases in both personnel and consulting expenses
in support of the Company's new and existing product development initiatives.
The Internet and transaction-based solutions segment accounted for 34% of total
research and development expenses in the first quarter of Fiscal 1999 and 18%
for the first quarter of Fiscal 1998. All of the Company's research and
development costs have been expensed as incurred.
SALES AND MARKETING. Sales and marketing expenses were $3,027 or 47% of
total revenue for the three months ended December 31, 1998 as compared to $2,566
or 37% of total revenue for the comparable Fiscal 1998 period. The increase in
absolute dollars is due primarily to expansion of the RESTRAC WEBHIRE sales
force. The Internet and transaction-based solutions segment accounted for 31% of
total sales and marketing expenses in the first quarter of Fiscal 1999 and 13%
for the first quarter of Fiscal 1998. The Company expects that sales and
marketing expenses may vary from quarter to quarter as a percentage of total
revenue.
GENERAL AND ADMINISTRATIVE. General and administrative expenses were $1,133
or 18% of total revenue for the three months ended December 31, 1998 as compared
to $942 or 13% of total revenue for the comparable three month period of Fiscal
1998. The absolute dollar increase for the three month period of Fiscal 1999 as
compared to Fiscal 1998 is the result of personnel increases in support of the
Company's infrastructure.
OTHER INCOME, NET
Other income increased to $161 for the three month period ended December
31, 1998 from $143 for the comparable Fiscal 1998 period. The increase is
primarily attributable to the interest received on installment sales
partially offset by reduced returns on investments due to lower average
combined cash and cash equivalents and short- and long- investment balances.
The Company expects to continue to
11
<PAGE>
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)
yield investment income on its average balance of combined cash and cash
equivalents and short- and long-term investments at an average rate consistent
with that experienced for the first quarter of Fiscal 1999.
(BENEFIT) PROVISION FOR INCOME TAXES
The Company's effective tax rate for the three months ended December 31,
1998 was (9%) as compared to 40% for the three months ended December 31, 1997.
The effective tax rate represents the Company's estimate of the rate expected to
be applicable for the full fiscal year. The change in the effective tax rate
relates primarily to the Company's taking a conservative view in recognizing tax
benefits generated in Fiscal 1999 which will be realized against taxable income
earned in future years.
LIQUIDITY AND CAPITAL RESOURCES
(IN THOUSANDS)
At December 31, 1998, the Company had cash and cash equivalents and short-
and long-term investments of $8,600, a decrease of $8,729 from $17,329 at
September 30, 1998. Working capital was $7,573 at December 31, 1998 as compared
to $15,304 at September 30, 1998, a decrease of $7,731. The reductions were due
principally to cash outlays in connection with the Junglee transaction.
Cash used in operating activities was $1,368 during the three month period
ended December 31, 1998. Use of cash in operating activities consisted mainly of
the net loss for the three month period of $1,850, the offsetting effects of
depreciation and amortization of $1,100 and growth in deferred revenue of $412
and the timing of receipts and disbursements, resulting in prepayment of certain
expenses, decreases in accounts and installments receivable and fluctuations in
certain liabilities.
The Company used $6,294 in investing activities during the first quarter of
Fiscal 1999, principally for the investment in Junglee of $6,778 and the
purchase of property and equipment of $852 (primarily computer equipment),
partially offset by net proceeds of $1,097 from net maturities of short- and
long-term investments. Net cash provided by financing activities for the three
month period ended December 31, 1998 was $30.
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 may evaluate potential acquisitions of
products, businesses and technologies that may complement or expand the
Company's business. The Company currently does not have any 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.
12
<PAGE>
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)
The Company believes that its current cash and cash equivalent and
short-term investment balances and any cash provided by future operations will
be sufficient to meet its working capital expenditure requirements for at least
the next twelve months. Although operating activities may provide cash in
certain periods, operating and investing activities may use cash in other
periods. Consequently, any future growth may require the Company to obtain
additional equity or debt financing.
IMPACT OF YEAR 2000 ISSUE
The following paragraphs in this section include "Year 2000 readiness
disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act.
The Year 2000 issue results from computer programs written with two digits
rather than four to define the applicable year. Any of the Company's computer
programs that have date-sensitive software and are not Year 2000 compliant may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
The Company has attempted to make an assessment with regard to whether its
own internal information systems are Year 2000 compliant. In particular, the
Company has upgraded its accounting (excluding payroll) and customer management
systems with systems that are warranted by the vendors to be Year 2000
compliant. In addition, the Company plans to seek assurances from its existing
vendors whose systems are not warranted to be Year 2000 compliant that such
systems are Year 2000 compliant. Currently, the Company does not anticipate
purchasing additional systems. The Company does not separately track the
internal costs incurred for Year 2000 projects. Although the Company does not
believe that any additional Year 2000 compliance-related costs will be
significant, there can be no such assurance. Any failure of third-party
equipment or software comprising any part of the Company's systems to operate
properly with regard to Year 2000 and thereafter could require the Company to
incur unanticipated expenses to address associated problems. The Company has
received assurances that all material embedded systems included in the Company's
products are Year 2000 compliant.
The Company believes, based on an internal assessment, that the current
versions of its software products are Year 2000 compliant. The Company limits
its contractual warrantees on Year 2000 compliance to objective performance
standards that the Company has tested, and the Company makes no warrantees for
nonconformance if the Company's software products are combined with other
software or data that are not conducive to accurately calculating, comparing or
sequencing date and time data between the twentieth and twenty-first centuries.
The Company has no plan to ascertain whether the internal systems and products
of its customers are Year 2000 compliant. Although the Company has not been
involved in any litigation or proceeding to date involving its products or
services related to Year 2000 issues, there can be no assurance that the Company
will not in the future be required to defend its products or services or to
negotiate resolutions of claims based on Year 2000 issues.
13
<PAGE>
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (CONTINUED)
The Company does not have any specific contingency plans if any Year 2000
problems develop with respect to the Company's embedded systems, systems
acquired from vendors or systems used by third parties with whom the Company has
a mutual relationship. Contingency plans will be developed if it appears the
Company or its key vendors will not be Year 2000 compliant, and such
non-compliance is expected to have a material adverse impact on the Company's
operations.
Year 2000 issues may affect the purchasing patterns of customers and
potential customers in a variety of ways. Many companies are expending
significant resources to replace or remedy their current hardware and software
systems for Year 2000 compliance. These expenditures may result in reduced funds
available to purchase software products such as those offered by the Company.
The Company does not believe that there is any practical way to ascertain the
extent of, and has no plan to address problems associated with such a reduction
in purchasing resources of its customers. Any such reduction could, however,
result in a material adverse effect on the Company's business, operating results
and financial condition. The Year 2000 issue is pervasive and complex, as
virtually every computer operation will be affected in some way. Consequently,
no assurance can be given that Year 2000 compliance can be achieved without
significant additional costs.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The Company operates in a dynamic and rapidly changing environment that
involves risks and uncertainties. The following section lists some, but not all,
of these risks and uncertainties which may have a material adverse effect on the
Company's business, financial condition or results of operations. This section
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto, and Management's Discussions and Analysis of Financial Condition
and Results of Operations for the years ended September 30, 1998, 1997 and 1996
and for the quarters ended December 31, 1998 and 1997.
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 (which is based in
part on annual sales targets) and general economic conditions. Historically,
revenue in each of the first two fiscal quarters has been lower than in the
preceding fourth fiscal quarter (which typically has the highest revenue and net
income), due largely to sales incentive programs. A substantial portion of the
Company's sales often 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
14
<PAGE>
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)
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.
EMERGING MARKETS
The Company's future success is substantially dependent on broader
recognition of the potential benefits afforded by automated staffing software
and services and the growth in demand for such solutions. 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 and services will continue to grow or that the
introduction of new technologies or services will not render the Company's
existing software and services 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 amplified 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 and services
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
advancement of products, functionalities and other staffing solutions that
capitalize on the increasing use of the Internet and corporate intranets. There
can be no assurance that the Company will be successful in developing and
marketing products that will keep pace with technological changes in the market
or new technologies introduced by competitors or that it will satisfy evolving
consumer preferences. Maturation of Internet and intranet-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.
DEPENDENCE ON PRINCIPAL PRODUCT
The Company currently derives most of its revenue from its RESTRAC HIRE
(including recently introduced HIRE FOR INTRANET) 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
15
<PAGE>
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)
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.
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 and services 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 services or that such
solutions 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 and
services that address changes in technology or customer demands may require the
Company to substantially increase development expenditures or result in 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.
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, (v) providers of other client/server application
software or document management systems and (vi) Internet-based staffing
solution providers.
The Company's primary direct competitor is Resumix, Inc. The Company also
competes directly against other providers of human resource staffing solutions,
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, are large, publicly traded organizations with access to
significantly
16
<PAGE>
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)
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 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 competition and any resulting price reductions could have a material
adverse effect on the Company's business, financial condition, and results of
operations.
DEPENDENCE ON KEY PERSONNEL
The Company's future success depends to a significant extent on its senior
management and other key employees. 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 training such personnel.
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. 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 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 is
licensed from third parties on a nonexclusive basis. The termination of any of
such licenses, or the failure of the third party licensers 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.
17
<PAGE>
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)
MANAGEMENT OF CHANGE
The evolution 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 operations 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. 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.
RELIANCE ON SINGLE CLIENT INTERFACE AND SINGLE SERVER PLATFORM
At the present time, the Company supports client (workstation) platforms
utilizing Microsoft's Windows family of software products, including Windows
3.1, Windows NT and Windows 95. If Microsoft were to fundamentally change the
architecture of its software product such that users of the Company's software
applications experienced significant performance degradation or were rendered
incompatible with future versions of Microsoft's Windows Operating System, the
Company's business, financial condition and results of operations could be
materially adversely effected. If a new client platform or other interface were
to gain broad acceptance in the marketplace, there can be no assurance that the
Company's architecture would be compatible with such an interface.
Certain of the Company's products exclusively operate on Microsoft's NT
Server and Internet Information Server (IIS) platforms. If Microsoft were to
fundamentally change the architecture of its server product such that users of
the Company's software applications experienced significant performance
degradation or were rendered incompatible with future versions of Microsoft's NT
Server or IIS, the Company's business, financial condition and results of
operations could be materially adversely effected. If a new type of server were
to gain broad acceptance in the marketplace, there can be no assurance that the
Company's architecture would be compatible with such a server.
LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND DEPENDENCE ON PROPRIETARY
RIGHTS; RISK OF LITIGATION
The Company relies on a combination of copyright and trade secret laws,
employee and third party non-disclosure agreements and other methods to protect
its proprietary rights. There can be no assurance that the measures taken by the
Company to protect its proprietary rights will be adequate to prevent
misappropriation of its technology or independent development by others of
similar technology. In addition, the Company may be subject to additional risk
as it enters into transactions in countries where intellectual property laws are
not well developed or are poorly enforced. The Company's inability to protect
its proprietary rights would have a material adverse effect on the Company's
business, financial condition and results of operations.
18
<PAGE>
RESTRAC, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTH PERIOD ENDED DECEMBER 31, 1998 -- (Continued)
As the number of human resource application software products and services
in the industry increases and the functionality of these solutions 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.
PRODUCT LIABILITY
Although the Company has not experienced any product liability claims to
date, the sale and support of products by the Company and the incorporation of
products from other companies may entail the risk of product liability claims.
The Company's license agreements with its customers typically contain provisions
intended to limit the Company's exposure to such claims, but such provisions may
not be effective in limiting the Company's exposure. A successful product
liability action brought against the Company could adversely effect the
Company's business, financial condition and results of operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
Information relating to quantitative and qualitative disclosure about
market risk is set forth under the caption "Short- and Long- Term Investments"
in Note 2(d) of the Notes to Consolidated Financial Statements. The company does
not have material foreign currency risks.
19
<PAGE>
RESTRAC, INC.
PART II - OTHER INFORMATION:
Item 1. Legal Proceedings
The Company is not involved in any pending legal proceedings other than
those arising in the ordinary course of the Company's business. Management
believes that the resolution of these matters will not materially affect the
Company's business or the financial condition of the Company.
Item 2. Changes in Securities and Use or Proceeds
On November 18, 1998, the Company issued 1,670,273 shares of its common
stock, par value $.01 per share, to Amazon.com (the "Sold Shares"). In
consideration for the issuance of the Sold Shares, and a cash payment of $6
million, the Company received all of the assets and business of Amazon.com, Inc.
and Junglee Corp. relating solely to the collection, organization and
presentation of employment and related data. No registration under the
Securities Act of 1933, as amended (the "Securities Act"), was required in
connection with the issuance of the Sold Shares because the issuance to
Amazon.com was a transaction not involving a public offering (Section 4(2) of
the Securities Act).
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits furnished as Exhibits hereto:
<TABLE>
<CAPTION>
Exhibit No. Description
---------- -----------
<S> <C>
+ 10.27 Software and Trademark License Agreement dated
November 18, 1998 between the Company, Amazon.com,
Inc. and Junglee Corp.
27.1 Financial Data Schedule Pursuant to Regulation S-X
Article 5
</TABLE>
(b) On December 4, 1998 the Company filed a form 8-K under Item 2 of
Form 8-K in connection with the acquisition of certain rights and
assets and assumption of certain obligations and liabilities of the
Junglee Corp., a subsidiary of Amazon.com.
+ Certain portions of this document have been omitted pursuant to a
confidential treatment request filed with the Securities and Exchange
Commission (the "Commission"). The omitted portions have been filed
separately with the Commission.
20
<PAGE>
RESTRAC, INC.
PART III - SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
RESTRAC, INC.
Date: February 12, 1999
/s/ LARS D. PERKINS
-----------------------
Lars D. Perkins
Chief Executive Officer
/s/ CYNTHIA G. EADES
-----------------------
Cynthia G. Eades
Chief Financial Officer
21
<PAGE>
Exhibit 10.27
Portions of this Exhibit have been omitted pursuant to a confidential treatment
request filed with the Securities and Exchange Commission. An (*) identifies
where such confidential treatment has been omitted. The omitted portions have
been filed separately with the Securities and Exchange Commission.
SOFTWARE AND TRADEMARK LICENSE AGREEMENT
This Software and Trademark License Agreement (the "AGREEMENT") is made
as of November 18, 1998 (the "EFFECTIVE DATE") by and between Amazon.com,
Inc., a Delaware corporation with its principal place of business at 1516 Second
Ave. Seattle, Washington 98101 ("AMAZON"), Junglee Corp., a Delaware
corporation, with its principal place of business at 1516 Second Ave. Seattle,
Washington 98101 ("JUNGLEE") and Restrac, Inc. a Delaware corporation with its
principal place of business at 91 Hartwell Ave. Lexington, MA 02173 ("RESTRAC").
Junglee and Amazon shall hereinafter collectively be referred to as "SELLER".
RECITALS
A. WHEREAS, Junglee has developed proprietary computer Software,
defined below, which searches, retrieves, organizes and presents employment data
from disparate sources; and
B. WHEREAS, the parties desire that Restrac obtain an exclusive license
to use such Software and certain related trademarks solely in accordance with
the terms and conditions of this Agreement.
NOW THEREFORE, for good and valuable consideration the parties hereby
agree as follows:
1. DEFINITIONS.
"FIELD OF USE" means *****************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*****************************************************************************
*******************************.
"JUNGLEE TRADEMARKS" means the trademarks, service marks, logos,
slogans, and trade names listed on EXHIBIT B.
"SOFTWARE" means the software described on EXHIBIT A, AS IT
EXISTS AS OF THE EFFECTIVE DATE, and any other associated code and documentation
provided by Seller hereunder. The Software does not include any Third Party
Software.
"SOURCE CODE" means the source code of the Software, together
with any associated programmers' notes and/or technical documentation.
"THIRD PARTY SOFTWARE" means the third party software products
set forth on EXHIBIT A.
22
<PAGE>
2. GRANT OF RIGHTS.
2.1 SOURCE CODE LICENSE. Subject to the terms and conditions of this
Agreement, Seller hereby grants Restrac a paid-up, irrevocable (except as
provided in Section 9.2), non-exclusive (except as provided in Section 2.3
below), non-transferable (except as provided in Section 14.6 below),
non-sublicensable (except as provided in Section 2.5 below), worldwide license
to internally use, copy, modify and make derivative works from the Source Code
of the Software to provide information, products and services marketed solely
within the Field of Use.
2.2 OBJECT CODE LICENSE. Subject to the terms and conditions of this
Agreement, Seller hereby grants Restrac a paid-up, irrevocable, non-exclusive
(except as provided in Section 2.3 below) and non-transferable (except as
provided in Section 14.6 below) worldwide license to use, copy, sublicense
(provided such sublicense complies with Section 2.4 below) and distribute the
object code of the Software to provide information, products and services
marketed solely within the Field of Use.
2.3 EXCLUSIVE USE. For a period ***************** commencing upon the
Effective Date, Seller shall neither use nor market any Software to provide
services within the Field of Use. For a period ***************** commencing upon
the Effective Date, Seller will not use nor authorize another to use the Junglee
Marks in connection with marketing any services specifically within the Field of
Use. **************************************************************************
*************************************************************************
*****************************************************************************
*****************************************************************************
********************************************************. Notwithstanding the
foregoing, Seller shall not at any time sell, license or otherwise transfer
(collectively, "transfer") all or substantially all of the Software or any of
the Junglee Marks to any third party if the terms of such transfer permit such
third party broad usage of the Software or the Marks within the Field of Use
similar to, or broader than, that granted under this Agreement or if such
transfer includes the Source Code; PROVIDED, HOWEVER, that this prohibition on
transfer shall not apply to transfers to Amazon's affiliates or to a third party
who acquires all or substantially all of Amazon's assets or to the surviving
entity in a merger in which Amazon's stockholders prior to the merger hold less
than a majority of the shares of such surviving entity following such merger.
2.4 RESTRICTIONS.
2.4.1 Restrac has no right to, and shall not, provide access
to, transfer, sublicense or otherwise distribute the Software Source Code to any
third party, except as expressly provided in this Agreement, or as approved in
advance and in writing by Seller.
2.4.2 Restrac will not (a) use, copy, modify, access or make
derivative works from the Software except for use in the Field of Use and
subject to all other restrictions set forth in this Agreement; or (b) copy or
modify the Source Code for the Software, except as necessary to use the Software
in accordance with the license rights granted under Sections 2.1 and 2.2, and
subject to all other restrictions set forth in this Agreement.
23
<PAGE>
2.4.3 Restrac shall not (a) permit any third party to reverse
engineer, disassemble, decompile or otherwise attempt to derive source code from
the object code of the Software (and shall include restrictions prohibiting such
activities in all agreements relating to the Software), or (b) make the Software
available to any third parties other than as expressly permitted in this
Agreement.
2.4.4 Subject to the restrictions set forth elsewhere in this
Agreement, Restrac shall not sublicense the object code of the Software, nor use
such Software to provide services within the Field of Use, unless such
sublicense or service is provided pursuant to a written agreement which:
(a) Contains terms and conditions to protect Seller and its
proprietary rights in the Software and Confidential Information to at
least the same degree as the terms and conditions of this Agreement;
(b) Makes no warranties or representations on behalf of
Seller;
(c) Does not grant any rights with respect to the Software
beyond those granted to Restrac under this Agreement; and
(d) Only allows further sublicensing or access under a written
agreement containing these same terms and conditions.
Restrac shall keep written records of all such agreements and shall permit
Seller to review all such agreements for compliance with the provisions of this
Agreement upon providing ten (10) days written notice to Restrac.
2.5 SOURCE CODE ESCROW. Restrac may provide access to the Source Code
to third parties solely (i) in accordance with the terms and conditions of a
source code escrow agreement substantially in the form of EXHIBIT C hereto
("ESCROW AGREEMENT"); and (ii) provided that each such third party agrees in
writing to be bound by such Escrow Agreement in the course of licensing Restrac
products which incorporate the Software. Such access shall be limited to each
third party using the Source Code solely to maintain and support the Software
for its internal business purposes and solely within the Field of Use. Seller
shall be made an express third-party beneficiary of each such Escrow Agreement,
with the right to enforce such agreement in accordance with its terms. Restrac
shall provide Seller with written notice of (i) each third party who enters into
an Escrow Agreement within thirty (30) days of such execution; (ii) each third
party who makes a claim or demand that it is entitled to receive the Source Code
under an Escrow Agreement, together with reasonable details of such claim,
within five (5) days of Restrac becoming aware of such claim; and (iii) the
occurrence of any such release within five (5) days thereafter. Restrac shall
use its best efforts to prevent any such release of the Source Code and shall
keep Seller reasonably informed of its response to any such claim or demand.
2.6 ASSIGNMENT OF THIRD PARTY SOFTWARE LICENSES. Seller will use its
reasonable efforts to assign to Restrac all license agreements granting Seller
rights in the Third Party
24
<PAGE>
Software, and Restrac agrees to accept such assignment. To the extent such
agreements are assigned to Restrac, Restrac hereby assumes all responsibilities
and obligations under such agreements.
2.7 RESERVATION OF RIGHTS. Except as expressly provided herein, Seller
does not grant to Restrac any right or license, express or implied, in any of
its intellectual or tangible property, including without limitation the Software
or Junglee Trademarks. Seller and its suppliers reserve all rights and licenses
in and to the Software and Junglee Trademarks not expressly granted to Restrac
under this Agreement.
2.8 COVENANT NOT TO SUE. Seller hereby covenants and agrees that, for
so long as the license for the Source Code is in effect hereunder, it shall not
institute, or have instituted, any suit or action at law or in equity against
Restrac, its successors or assigns, relating to the marketing of information,
products and services by Restrac solely within the Field of Use using any part
of the Software which is the subject of a patent or patent application owned by
or licensed to Seller and existing on the date of this Agreement.
3. PAYMENTS. In consideration of the licenses granted hereunder, Restrac shall
issue to Amazon the securities, and pay Seller the amounts, allocated to this
Agreement in Schedule 1.5 of the Asset Purchase Agreement between the parties
dated as of even date herewith (the "ASSET PURCHASE AGREEMENT").
4. OBLIGATIONS OF RESTRAC.
4.1 SUPPORT. Except for Seller's transition obligations as specifically
set forth in Section 8 of, and EXHIBIT C to, the Asset Purchase Agreement,
Restrac shall be solely responsible for all support, maintenance and development
of the Software in connection with its use by Restrac in accordance with this
Agreement.
4.2 RESTRAC COVENANTS. Restrac will: (i) conduct business in a manner
that reflects favorably at all times on the Software, Junglee Trademarks, and
the good name, good will and reputation of Seller; (ii) avoid deceptive,
misleading or unethical practices that are or might be detrimental to Seller,
the Junglee Trademarks, Software or the public; (iii) make no false or
misleading representations with regard to Seller or the Software; and (iv) not
publish or employ, or cooperate in the publication or employment of, any
misleading or deceptive advertising material with regard to Seller or the
Software.
4.3 COMPLIANCE WITH U.S. EXPORT LAWS. Restrac acknowledges that all
Software including documentation and other technical data are subject to export
controls imposed by the U.S. Export Administration Act of 1979, as amended (the
"ACT"), and the regulations promulgated thereunder. Restrac will not export or
reexport (directly or indirectly) any Software or documentation or other
technical data therefor without complying with the Act and the regulations
thereunder.
25
<PAGE>
4.4 COSTS AND EXPENSES. Except as expressly provided herein or agreed
to in writing by Seller and Restrac, Restrac will pay all costs and expenses
incurred in the performance of Restrac's obligations under this Agreement.
4.5 INFRASTRUCTURE. Except as provided in EXHIBIT C to the Asset
Purchase Agreement, Restrac shall be solely responsible for establishing all
infrastructure and facilities necessary to support the Software and related
hardware, including, without limitation, implementing all electrical
connections, network connections, HVAC, and other site requirements.
4.6 SOLICITATION OF EMPLOYEES. Because of the trade secret subject
matter of each party's business, each party agrees that, except as expressly
permitted in writing by the other party, it will not solicit the services of any
of the employees, consultants, or suppliers of the other party for a period of
three (3) years commencing upon the Effective Date.
5. ENFORCEMENT. Restrac will enforce all of its agreements with third parties to
the extent that such agreements materially relate to or could materially affect
Seller or its rights. As such agreements materially relate to or could
materially affect Seller or its intellectual property, including without
limitation its Confidential Information and Software, Restrac shall make Seller
an express third party beneficiary of the clauses giving rise to such relation
or effect in each such agreement, with the right, in Seller's sole discretion,
to enforce such clauses in each such agreement in accordance with its terms.
Upon receipt of notice of any material breach of such clauses from Seller,
Restrac shall promptly commence appropriate enforcement action. Restrac will
provide Seller with written notice of any material breach of any of the
foregoing agreements that relates to or could affect Seller or its intellectual
property promptly upon learning of any such breach, and shall co-operate with
Seller in prosecuting any such breach.
6. PROPRIETARY RIGHTS.
6.1 OWNERSHIP. As between Restrac and Seller, Seller owns and shall
retain all right, title and interest in and to the Software, including
without limitation all copyrights, patents, trade secrets and other
intellectual property rights therein. Restrac shall not encumber, grant a
security interest in, register, or otherwise take any action inconsistent
with Seller's ownership interest in the Software. As between Restrac and
Seller, Restrac shall own all right, title and interest in and to any
modifications or derivative works of the Software created by or for Restrac
under Section 2.1 (excluding any modifications or derivative works that may
be made by Seller, other than as may be expressly agreed in writing by the
parties), and subject to Seller's underlying rights in the Software. At no
time during or after the term of this Agreement shall Restrac challenge or
assist others to challenge Seller's intellectual property rights in the
Software. Subject to the following three (3) sentences, Seller shall have the
sole right to prosecute any infringements of Seller's intellectual property
rights in the Software. However, if such infringement relates solely to the
Field of Use, and does not affect Seller's rights or relationships outside of
the Field of Use, Restrac shall have the sole right to prosecute such
infringement for so long as Section 2.3 is in effect. If Section 2.3
terminates or expires, then either party shall have the right to prosecute
such infringement that relates solely to the Field of Use and does not affect
Seller's rights or
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relationships outside of the Field of Use. If an infringement materially affects
the Field of Use, but is not solely related to the Field of Use, Restrac may
prosecute such infringement, solely as it relates to the Field of Use, only if
Seller does not take affirmative action to prosecute such infringement within
sixty (60) days of its receipt of written notice of such infringement from
Restrac. To the extent that Restrac obtains any patents which represent an
improvement to the Software and such patents are filed within five (5) years of
the Effective Date ("RESTRAC SOFTWARE PATENTS"), Restrac hereby covenants and
agrees that it shall not institute, or have instituted, any suit or action at
law or in equity against the Seller, or any wholly-owned subsidiaries,
successors or assigns of the Seller, claiming infringement of any of the Restrac
Software Patents. To the extent that Seller obtains any patents which represent
an improvement to the Software and such patents are filed within five (5) years
of the Effective Date ("SELLER SOFTWARE PATENTS"), Seller hereby covenants and
agrees that it shall not institute, or have instituted, any suit or action at
law or in equity against Restrac, or any wholly-owned subsidiaries, successors
or assigns of Restrac, claiming infringement of any of the Seller Software
Patents.
6.2 PROPRIETARY NOTICES. Restrac shall not remove, obscure or alter
Seller's copyright or patent notices on the Software, except as may be
reasonably requested by Seller.
6.3 TRADEMARK USE.
(a) TRADEMARK USE. During the first five (5) years of the term of
this Agreement, Restrac may display the Junglee Trademarks on and in connection
with the Software. Restrac's use of the Junglee Trademarks shall not create any
right, title or interest therein. Restrac shall use the Junglee Trademarks only
in a manner which complies in all material respects with Seller's then-current
trademark guidelines, and all such use shall be for Seller's benefit.
(b) SELLER APPROVAL. Restrac shall submit to Seller all
representations of the Junglee Trademarks that Restrac intends to use for
Seller's approval of design, color, and other details. Restrac shall not
publish, disseminate, exhibit, or otherwise distribute any material bearing such
representations without Seller's prior approval. Restrac shall submit to Seller
prior to publication any advertising, press release, promotion, marketing
materials, and publicity used by Restrac in its efforts to promote Seller or the
Restrac Service for Seller's prior written approval, which approval shall not be
unreasonably withheld. If Seller does not approve of any materials submitted by
Restrac to Seller under this Section 6.3(b), Seller will provide comments in
writing detailing Seller's reasons for such rejection. If such comments are not
received by Restrac within ten (10) business days of Seller's receipt of such
materials, such materials shall be deemed approved.
(c) GOODWILL. If Restrac, in the course of promoting and marketing
its products or services, acquires any goodwill or reputation in any of the
Junglee Trademarks, all such goodwill or reputation shall automatically vest in
Seller when and as, on an on-going basis, such acquisition of goodwill or
reputation occurs, without any separate payment or other consideration of any
kind to Restrac and Restrac agrees to take all such actions necessary to
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effect such vesting. Restrac shall not contest the validity of any of the
Junglee Trademarks or Seller's exclusive ownership of them.
(d) ADOPTION OF MARKS. Restrac shall not adopt, use, or register,
whether as a corporate name, trademark, service mark or other indication of
origin, any of the Junglee Trademarks, or any word or mark confusingly similar
to the Junglee Trademarks in any jurisdiction.
(e) NO CONTINUING RIGHTS. Upon any termination of this Agreement in
its entirety, Restrac will immediately cease all display, advertising and use of
all Junglee Trademarks and will not thereafter use, advertise or display any
trademark, trade name, logo or designation which is, or any part of which is,
similar to or confusing with any Seller Trademark.
(f) OBLIGATION TO PROTECT. Restrac agrees to use reasonable efforts
to protect Seller's proprietary rights in the Software and Junglee Trademarks,
and to cooperate at Seller's expense in Seller's efforts to protect such
proprietary rights. Restrac agrees to promptly notify Seller of any known or
suspected breach of such proprietary rights that comes to Restrac's attention.
7. CONFIDENTIALITY.
7.1 CONFIDENTIAL INFORMATION. "Confidential Information" means (a) the
terms and conditions of this Agreement; and (b) any and all other information
disclosed by one party to the other which is marked "confidential" or
"proprietary," including oral information which is designated confidential at
the time of disclosure, provided that it is reduced to a written summary marked
"confidential" which is supplied to the other party within thirty (30) days of
the oral disclosure. All information regarding the Software, including without
limitation, all information with respect to the use, installation and operation
of the Software, shall be deemed Seller Confidential Information whether or nor
it is designated as Confidential Information.
7.2 EXCLUSIONS. "Confidential Information" does not include any
information that the receiving party can demonstrate by written records: (a) was
rightfully known to the receiving party prior to its disclosure hereunder by the
disclosing party; (b) is independently developed by the receiving party; (c) is
or becomes publicly known through no wrongful act of the receiving party; (d)
has been rightfully received from a third party whom the receiving party has
reasonable grounds to believe is authorized to make such disclosure without
restriction; (e) has been approved for public release by the disclosing party's
prior written authorization; or (f) must be produced or disclosed pursuant to
applicable law, regulation or court order, provided that the receiving party
provides prompt advance notice thereof to enable the disclosing party to seek a
protective order or otherwise prevent such disclosure. In addition, either party
may disclose the existence and terms of this Agreement in connection with a
potential acquisition of substantially the entire business of such entity
relating to the Field of Use or a private or public offering of such party's
securities, provided that such party shall at all times use reasonable efforts
to limit the disclosure of, and protect the confidentiality of all such
information. Such party will provide the other with advanced notice of any such
potential acquisition or private or public offerings.
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7.3 PRESERVING CONFIDENTIALITY. Each party hereby agrees that it shall
not use any Confidential Information received from the other party other than as
expressly permitted under the terms of this Agreement or as expressly authorized
in writing by the other party. Each party shall use the same degree of care to
protect the other party's Confidential Information as it uses to protect its own
Confidential Information of like nature, but in no circumstances less than
reasonable care. Neither party shall disclose the other party's Confidential
Information to any person or entity other than its officers, employees and
consultants who need access to such Confidential Information in order to effect
the intent of this Agreement.
7.4 SOURCE CODE. Restrac acknowledges that the Source Code of the
Software is highly valuable and sensitive Seller Confidential Information, and
Restrac shall, if such an agreement is not already in effect with the applicable
individual and entity, require each employee, subcontractor and consultant given
access to the Source Code to first sign a confidentiality agreement with Restrac
that protects the Source Code to at least the same extent as the terms of this
Agreement. Restrac shall make Seller an express third-party beneficiary of each
such agreement, with the right, in Seller's sole discretion, to enforce such
agreement in accordance with its terms. Restrac will use its reasonable best
efforts to implement procedures to maintain the confidentiality of all Source
Code in its possession or control, including without limitation procedures to
control the access to the Source Code. Except as specifically permitted in
Section 2.5 in connection with a source code escrow, or 14.6 of this Agreement
in connection with the sale of the business of Restrac, Restrac shall not allow
any third-party to access the Source Code unless such access is first approved
in writing by Seller in each instance or unless such third party is an employee,
subcontractor or consultant of Restrac who has complied with this Section 7.4.
Restrac shall at all times keep all copies of the Source Code at Restrac 's
principal corporate offices, which are currently located at the address first
set forth above. Any use or storage of copies of the Source Code at any other
locations is expressly prohibited, unless prior written permission has been
granted by Seller. Restrac hereby assures Seller that it shall use its
reasonable best efforts and whatever means reasonably necessary to prevent
removal of or access to the Source Code by outside electronic, networked or
other means from the location designated above. Restrac shall keep a written log
of all individuals who have access to the Source Code, and shall promptly
provide Seller with a copy of such log from time to time upon Seller's
reasonable request.
8. REPRESENTATIONS AND WARRANTIES.
8.1 BY SELLER. Seller represents and warrants that: (a) Seller has not
granted, and will not grant during the term of this Agreement, any rights in or
to the Software that conflict with the rights granted to Restrac hereunder; and
(b) Seller has the right, power and authority to grant the rights and licenses
specified in this Agreement.
8.2 DISCLAIMER. EXCEPT AS EXPRESSLY PROVIDED IN THIS SECTION 8, ALL
SELLER SERVICES AND SOFTWARE ARE PROVIDED TO RESTRAC "AS IS." EACH PARTYMAKES NO
OTHER WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE,
REGARDING ANY SOFTWARE OR
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SERVICES, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF
MERCHANTABILITY, OR FITNESS FOR A PARTICULAR PURPOSE. SELLER DOES NOT WARRANT
THAT THE FUNCTIONS CONTAINED IN THE SOFTWARE, THIRD-PARTY SOFTWARE OR ANY
RELATED SERVICES WILL MEET RESTRAC'S REQUIREMENTS OR THAT THE OPERATION OF THE
SOFTWARE, THIRD-PARTY SOFTWARE, SERVICE OR HOSTING ENVIRONMENT WILL BE
UNINTERRUPTED OR ERROR-FREE.
8.3 NO WARRANTY AS TO HOSTING SERVICES OR THIRD PARTY SOFTWARE. ALL
THIRD PARTY SERVICES (INCLUDING HOSTING SERVICES), AND THE THIRD PARTY SOFTWARE
IS PROVIDED TO RESTRAC "AS IS." SELLER MAKES NO WARRANTIES OF ANY KIND, EITHER
EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, REGARDING ANY THIRD-PARTY SERVICES,
OR THIRD-PARTY SOFTWARE, AND SELLER SPECIFICALLY DISCLAIMS ANY IMPLIED
WARRANTIES OF NONINFRINGEMENT, MERCHANTABILITY, OR FITNESS FOR A PARTICULAR
PURPOSE.
8.4 NO WARRANTY AS TO FINANCIAL OUTCOME. Restrac acknowledges that
Restrac has no expectation and has received no assurances that any the Software
or any related services will generate any anticipated amount of profits, or that
Restrac will receive any amount of profits by virtue of this Agreement.
9. DURATION AND TERMINATION OF AGREEMENT.
9.1 TERM. Except as provided for herein, the term of this Agreement
shall commence on the Effective Date and continue perpetually.
9.2 TERMINATION. Notwithstanding the provisions of this Section 9 or
any other provisions of this Agreement, this Agreement, or portions of this
Agreement as the case may be, may be terminated at any time as set forth below.
(a) SELLER TERMINATION FOR CAUSE. Until the fifth anniversary of
the Effective Date of this Agreement, Seller may terminate Restrac's license for
the Source Code set forth in Section 2.1 if Restrac intentionally or by gross
negligence materially fails to perform or is in default of any of its
obligations, duties or responsibilities relating to the Software source code
under Sections 2.4.1, 2.4.3, 2.5 or 7 of this Agreement, Restrac fails to remedy
such breach within thirty (30) days following Restrac's receipt of written
notice of such breach and such breach is continuing at the time such termination
becomes effective.
(b) RESTRAC TERMINATION FOR CAUSE. Restrac may terminate this
Agreement at any time in the event that Seller fails to perform any material
obligation, warranty, duty or responsibility or is in default with respect to
any material term or condition undertaken by Seller under this Agreement and
such failure or default continues unremedied for a period of thirty (30) days
following Seller's receipt of such written notice of such failure or default.
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(c) EFFECT OF TERMINATION. Upon any termination of this Agreement
by Restrac all licenses hereunder shall immediately terminate and each party
shall promptly return all Confidential Information of the other party. Upon any
termination by Seller pursuant to Section 9.2(a) above, all Restrac's license to
the Source Code set forth in Section 2.1 shall immediately terminate and Restrac
shall promptly return all Seller Confidential Information relating to the Source
Code.
(d) NO DAMAGES FOR TERMINATION. NEITHER SELLER NOR RESTRAC SHALL,
AS THE CASE MAY BE, BE LIABLE TO THE OTHER FOR DAMAGES OF ANY KIND, INCLUDING
INCIDENTAL OR CONSEQUENTIAL DAMAGES, ON ACCOUNT OF THE TERMINATION BY IT OF THIS
AGREEMENT IN ACCORDANCE WITH THIS SECTION 9. RESTRAC WAIVES ANY RIGHT IT MAY
HAVE TO RECEIVE ANY COMPENSATION OR REPARATIONS ON TERMINATION BY SELLER OF THIS
AGREEMENT IN ACCORDANCE WITH THIS SECTION 9 UNDER THE LAW OF ANY TERRITORY OR
OTHERWISE, OTHER THAN AS EXPRESSLY PROVIDED IN THIS AGREEMENT. Neither Seller
nor Restrac, as the case may be, will be liable to the other on account of
termination of this Agreement in accordance with this Section 9 for
reimbursement or damages for the loss of goodwill, prospective profits or
anticipated income, or on account of any expenditures, investments, leases or
commitments made by either Seller or Restrac, as the case may be, or for any
other reason whatsoever based upon or growing out of such termination. Restrac
acknowledges that (i) Restrac has no expectation and has received no assurances
that any investment by Restrac in the Software will be recovered or recouped,
and (ii) Restrac will not have or acquire by virtue of this Agreement or
otherwise any vested, proprietary or other right in the Software or in
"goodwill" created by its efforts hereunder. THE PARTIES ACKNOWLEDGE THAT THIS
SECTION HAS BEEN INCLUDED AS A MATERIAL INDUCEMENT FOR SELLER TO ENTER INTO THIS
AGREEMENT AND THAT SELLER WOULD NOT HAVE ENTERED INTO THIS AGREEMENT BUT FOR THE
LIMITATIONS OF LIABILITY AS SET FORTH HEREIN.
(e) SURVIVAL. Sections 2.2, 2.4, 5, 6.1, 6.2, 7, 9.2(c), 9.2(d) and
10 through 14 shall survive any termination or expiration of this Agreement.
10. RELATIONSHIP OF THE PARTIES. Restrac's relationship with Seller during the
term of this Agreement will be that of an independent contractor. Neither party
will have, and will not represent that it has, any power, right or authority to
bind the other party, or to assume or create any obligation or responsibility,
express or implied, on behalf of the other party or in the other party's name,
except as herein expressly provided.
11. INDEMNIFICATION.
11.1 INDEMNIFICATION OF RESTRAC. Seller will, at its expense, defend
and hold harmless Restrac against and, subject to the limitations set forth
herein, pay all costs and damages made in settlement or awarded against Restrac
and all reasonable attorney's fees and costs of litigation resulting from any
claim based on an allegation that the Software or Junglee Trademarks, when
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used as permitted under this Agreement, infringe a U.S. Patent or foreign
equivalent thereof issued as of the Effective Date, copyright, trade secret or
trademark of a third party. Notwithstanding the foregoing, in the event that the
Software or Junglee Trademarks or any portions thereof, is held, or in Seller's
reasonable opinion, is likely to be held to constitute an infringement, Seller,
at its option and expense, shall either (i) modify or replace such infringing
Software or Junglee Trademarks so as to make them non-infringing or (ii) procure
the right to continue to use such infringing Software or Junglee Trademarks.
11.2 NO COMBINATION CLAIMS. Notwithstanding Section 11.1, Seller shall
not be liable to Restrac for any claim arising from or based upon the
combination, operation or use of any Software with equipment, data or
programming not supplied by Seller, or arising from any alteration or
modification of the Software by a party other than Seller.
11.3 INDEMNIFICATION OF SELLER. Except for claims indemnified by Seller
in Section 11.1 above (as limited by Section 11.2), Restrac agrees to indemnify
Seller (including paying all reasonable attorneys' fees and costs of litigation)
against and hold Seller harmless from, any and all claims by any other party
resulting from Restrac's and/or Restrac's representatives', distributors',
and/or contractors' acts, omissions or misrepresentations, regardless of the
form of action, and excluding any claims that would have not have arisen but for
Seller's breach of this Agreement.
11.4 PROCEDURES FOR INDEMNIFICATION. If any action, suit or proceeding
will be commenced by a third party against, or any claim or demand be asserted
against, Seller or Restrac, as the case may be, in respect of which Seller or
Restrac is entitled to demand indemnification under Section 11 of this
Agreement, then as a condition precedent thereto, the party seeking
indemnification ("INDEMNITEE") will promptly notify the other party
("INDEMNITOR") in writing to that effect and with reasonable particularity. The
Indemnitor will have the right to assume the control of the defense, compromise
or settlement of such action, suit, proceeding or claim, including the selection
of counsel, subject to the right of the Indemnitee to participate (at its own
expense and with counsel of its choice) in the defense, compromise or settlement
of such action, suit, proceeding, claim or demand, and in connection therewith
the Indemnitee will cooperate fully in all respects with the Indemnitor in any
such defense, compromise or settlement. The Indemnitor will not compromise or
settle any such action, suit, proceeding, claim or demand without the prior
written consent of the Indemnitee, which consent will not be unreasonably
withheld or delayed. So long as the Indemnitor is defending in good faith any
such action, suit, proceeding, claim or demand asserted by a third party against
the Indemnitee, the Indemnitee will not settle or compromise such action, suit,
proceeding, claim or demand without the prior written consent of the Indemnitor,
which consent will not be unreasonably withheld or delayed. The Indemnitee will
make available to the Indemnitor or its agents all records and other materials
in the Indemnitee's possession reasonably required for contesting any third
party claim or demand. If the Indemnitor will fail to promptly and adequately
defend any such action, suit, proceeding, claim or demand, or if there is an
inherent conflict between the legal or factual positions of Indemnitor and
Indemnitee, then the Indemnitee may defend, through counsel of its own choosing,
such action, suit, proceeding, claim or demand and (so long as Indemnitee gives
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the Indemnitor at least ten (10) days' notice of the terms of the proposed
settlement thereof and permits the Indemnitor to then undertake the defense
thereof if Indemnitor objects to the proposed settlement) to settle such action,
suit, proceeding, claim or demand and to recover from the Indemnitor the amount
of such losses.
11.5 EXCLUSIVE REMEDY AND ENTIRE LIABILITY. THE PROVISIONS OF SECTION
11 STATE RESTRAC'S SOLE AND EXCLUSIVE REMEDY, AND SELLER'S SOLE AND EXCLUSIVE
DUTY AND LIABILITY FOR ANY CLAIM OF PATENT, TRADEMARK, TRADE SECRET, COPYRIGHT
OR OTHER PROPRIETARY RIGHTS INFRINGEMENT.
12. LIMITED LIABILITY. EXCEPT AS A RESULT OF A BREACH OF SECTIONS 2.4, 2.5, 4.6,
OR 7, NEITHER PARTY WILL BE LIABLE TO THE OTHER FOR ANY LOST PROFITS OR FOR ANY
INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR SPECIAL DAMAGES SUFFERED BY THE
OTHER PARTY, ITS AFFILIATES, DISTRIBUTORS, CUSTOMERS OR OTHERS ARISING OUT OF OR
RELATED TO THIS AGREEMENT OR THE SOFTWARE OR SERVICE, FOR ALL CAUSES OF ACTION
OF ANY KIND (INCLUDING TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY AND BREACH
OF WARRANTY) EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, AND REGARDLESS OF WHETHER ANY REMEDY SET FORTH HEREIN FAILS OF ITS
ESSENTIAL PURPOSE OR OTHERWISE. EXCEPT AS A RESULT OF A BREACH OF SECTIONS 2.4,
2.5, 4.6 OR 7, IN NO EVENT SHALL EITHER PARTY'S LIABILITY HEREUNDER EXCEED THE
CASH AMOUNTS PAID BY RESTRAC TO SELLER HEREUNDER.
13. ARBITRATION.
13.1 AGREEMENT TO SUBMIT. Except for disputes arising out of or related
to Seller's rights in the Software or Junglee Trademarks, or either party's
rights in its Confidential Information, the parties agree to submit disputes
between them arising out of or relating to this Agreement and its formation,
breach, performance, interpretation and application to arbitration as follows:
13.2 NOTICE. Each party will provide written notice to the other party
of any dispute within six (6) months of the date when the dispute is first
discovered. If a party fails to provide such notice, recovery on the dispute
will be barred.
13.3 ARBITRATION RULES. Arbitration will be conducted pursuant to the
Commercial Arbitration Rules of the American Arbitration Association, as
modified herein. The venue for Arbitration shall be Seattle, Washington if filed
by Restrac, and Boston, Massachusetts if filed by Seller. Within fifteen (15)
days after the date that written notice is provided to the other party, each
party will appoint a single arbitrator, and within an additional fifteen (15)
days thereafter, the two parties so chosen will appoint a third arbitrator. All
arbitrators will have knowledge of and experience regarding the computer
industry. The arbitration hearing will be commenced within sixty (60) days after
the appointment of all three arbitrators and the hearing will be completed and
an award rendered in writing within thirty (30) days after the commencement of
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the hearing, unless the arbitrators determine that exceptional circumstances
justify delay. Each party will have the right to take up to four (4) evidentiary
depositions, and exchange one set of document production requests and one set of
not more than twenty-five interrogatories, without subparts, prior to the
hearing. The arbitration award will be final and binding and may be enforced in
any court of competent jurisdiction.
14. GENERAL.
14.1 WAIVER. The waiver by either party of any default by the other
shall not waive subsequent defaults of the same or different kind.
14.2 NOTICES. All notices and demands hereunder will be in writing and
will be served by personal service, mail, overnight delivery or confirmed
facsimile transmission at the address of the receiving party set forth in this
Agreement (or at such different address as may be designated by such party by
written notice to the other party). All notices or demands by mail shall be by
certified or registered airmail, return receipt requested, and shall be deemed
complete and effective upon receipt.
14.3 ATTORNEYS' FEES. In the event any litigation is brought by either
party in connection with this Agreement, the prevailing party in such litigation
shall be entitled to recover from the other party all the costs, reasonable
attorneys' fees and other expenses incurred by such prevailing party in the
litigation.
14.4 CONTROLLING LAW, JURISDICTION AND SEVERABILITY. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Washington, excluding the Convention on Contracts for the International Sale of
Goods and that body of law known as conflicts of laws. The English-language
version of this Agreement controls when interpreting this Agreement.
14.5 SEVERABILITY. In the event that any of the provisions of this
Agreement shall be held by a court or other tribunal of competent jurisdiction
to be unenforceable, such provision will be enforced to the maximum extent
permissible and the remaining portions of this Agreement shall remain in full
force and effect.
14.6 ASSIGNMENT. This Agreement will not be assignable by either party,
and neither party may delegate its duties hereunder without the prior written
consent of the other, such consent not to be unreasonably withheld; provided,
however, that either party may assign this Agreement to a subsidiary or entity
controlling, controlled by or under common control with such party, or that
purchases or owns all or substantially all of such party's assets or outstanding
shares, or to an entity that purchases all or substantially all of the assets of
its business in the Field of Use. The provisions hereof shall be binding upon
and inure to the benefit of the parties, their successors and permitted assigns.
Any such permitted assignee must agree in writing to be bound by the terms and
conditions of this Agreement in order for such assignment to be of effect. Any
assignment or transfer not in accordance with this section shall be null and
void.
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14.7 COMPLIANCE WITH LAW. Each party will comply with all applicable
international, national, state, regional and local laws and regulations in
performing its duties hereunder and in any of its dealings under this Agreement.
14.8 EQUITABLE RELIEF. Each party acknowledges that any breach of its
obligations under this Agreement with respect to the proprietary rights or
confidential information of other party will cause other party irreparable
injury for which there are inadequate remedies at law, and therefore either
party will be entitled to equitable relief in addition to all other remedies
provided by this Agreement or available at law.
14.9 NON-EXCLUSIVE REMEDY. The exercise by either party of any remedy
under this Agreement will be without prejudice to its other remedies under this
Agreement or otherwise.
14.10 INJUNCTIVE RELIEF. Restrac acknowledges that any breach of its
obligations under this Agreement with respect to the Intellectual Property
Rights or Confidential Information of Seller will cause Seller irreparable
injury for which there are inadequate remedies at law, and therefore, Seller
will be entitled to equitable relief in addition to all other remedies provided
by this Agreement or available at law.
14.11 ENTIRE AGREEMENT. This Agreement, including the exhibits attached
hereto, constitutes the complete and exclusive agreement between the parties
pertaining to the subject matter hereof, and supersedes in their entirety any
and all written or oral agreements previously existing between the parties with
respect to such subject matter. Restrac acknowledges that it is not entering
into this Agreement on the basis of any representations not expressly contained
herein. Any modifications of this Agreement must be in writing and signed by
both parties hereto. Any such modification shall be binding upon Seller only if
and when signed by one of its duly authorized officers.
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14.12 DUE EXECUTION; COUNTERPARTS. The party executing this Agreement
represents and warrants that he or she has been duly authorized under its
charter documents and applicable law to execute this Agreement on behalf of such
party. This Agreement may be executed in counterparts, each of which will be
deemed an original, but both of which together will constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the Effective Date.
AMAZON.COM, INC.
SIGNATURE:
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PRINTED NAME:
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TITLE:
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DATE:
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JUNGLEE, CORP.
SIGNATURE:
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PRINTED NAME:
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TITLE:
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DATE:
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RESTRAC, INC.
SIGNATURE:
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PRINTED NAME:
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TITLE:
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DATE:
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EXHIBIT A
TO THE LICENSE AGREEMENT
SOFTWARE
The following Junglee Software, in source code and object code forms, for all
versions currently in production, in beta testing or under development (as
more fully described in the technical documentation attached hereto and
incorporated by reference):
1. Korak, including Virtual Database Management System (VDB), Site Definition
Language (SDL) and Mapping Definition Language (MDL)
2. Job Canopy (versions 1.0, 1.01, 1.03 and 1.1)
3. Scripts to generate Integrated Data Tables (IDT) and Configurable IDT(s)
4. Reports (versions 1.0, 1.01 and 1.1)
5. Junglee Extraction Language (JEL engine)
6. All Employment Extractors
7. All Employment Wrappers
8. Self Publishing (version 1.0)
9. ASP--PLS/Oracle
10. Junglee Super
11. Jute
12. Web Monitor
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THIRD-PARTY SOFTWARE
Seller will purchase for Buyer any third-party software necessary to transfer
the servers identified in Schedule 2.5 to the Asset Purchase Agreement.
In addition, to the extent permitted by the Seller's respective license
agreements, Seller will assign its licenses to the following:
1. Sun Solaris 2.x
2. Oracle Server MLE; Oracle Server V8 (attached Oracle documentation is
hereby incorporated by reference)
3. PLS, including CPL Version 6.3, PL Version 4.15, PL Web Version 3.0,
PL Web-Co Version 1.x, PL Web Turbo Version 2.6
4. Netscape Enterprise Server for Solaris
38
<PAGE>
EXHIBIT B
TO THE LICENSE AGREEMENT
JUNGLEE TRADEMARKS
JUNGLEE
JOBS BY JUNGLEE
JOBCANOPY
SPECIFICATIONS AS TO APPEARANCE, ETC., ARE ATTACHED.
39
<PAGE>
EXHIBIT C
TO THE LICENSE AGREEMENT
FORM OF SOURCE CODE ESCROW AGREEMENT
Attached.
40
<PAGE>
EXHIBIT C
FORM OF
SOURCE CODE ESCROW AGREEMENT
This Agreement (the "Agreement") is made as of ______________ among
RESTRAC, INC. ("Licensor"), DSI TECHNOLOGY ESCROW SERVICES ("Escrow Agent"),
and those entities that become parties to this Agreement pursuant to Section
16 below ("Licensee").
1. BACKGROUND. Licensor has licensed or will license the Licensed
Program (as defined below) to each Licensee pursuant to a written software
license agreement (a "License Agreement"). Licensor has agreed to place in
escrow the Source Code (as defined below) for the Licensed Program, to be
released to Licensees upon the occurrence of certain events as hereinafter
described.
2. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) LICENSED PROGRAM. The computer program(s), consisting of a
series of instructions or statements in machine readable, object code form
only, licensed to Licensees by Licensor pursuant to License Agreements.
(b) SOURCE CODE. The version of the source code used by Licensor
to generate the Licensed Program, contained on one or more magnetic tapes or
other media, together with a print-out of the source code listing.
(c) DOCUMENTATION. Explanatory information, whether in
machine-readable form or otherwise, which would assist a software engineer in
understanding the structure, purpose and operation of the Source Code.
(d) INFORMATION. The Source Code and the Documentation,
collectively.
(e) UPDATE EVENT. The delivery to Licensees of any new release
of the Licensed Program or the expiration of twelve months since the most
recent Update Event if the Source Code has been modified in the interim.
(f) UPDATE INFORMATION. All information, including without
limitation additional and/or replacement Source Code and Documentation,
necessary to bring the Information in escrow prior to an Update Event into
compliance with the definition of Information contained in Section 2(d) after
the occurrence of such Update Event. The term "Information" shall be deemed
to include any such Update Information for the purposes of this Agreement.
41
<PAGE>
3. APPOINTMENT OF ESCROW AGENT. Escrow Agent is hereby appointed
and accepts appointment to act as escrow agent hereunder.
4. FEES OF ESCROW AGENT.
(a) All fees of Escrow Agent in connection with its duties
hereunder shall be paid by and shared equally by all parties who are
Licensees at the time such fees become due or, if there are no Licensees at
any such time, by Licensor.
(b) Escrow Agent's fees for the initial year of service are due
in full within sixty (60) days after the execution of this Agreement. Annual
renewal fees will be due in full upon the receipt of invoice unless otherwise
specified by the invoice. Late payments are subject to interest at the rate
of one and one-half percent per month (18% per annum) from the due date.
(c) Escrow Agent's fees will be as specified in its standard fee
schedule as modified from time to time. Escrow Agent shall notify Licensor
and each Licensee at least ninety (90) days prior to any increase in its
fees. For any service not listed on its standard fee schedule, Escrow Agent
shall provide a price quotation prior to rendering such service.
5. REPRESENTATIONS AND WARRANTIES. Licensor represents and warrants
to each Licensee as follows:
(a) Licensor has the right to enter into and perform this
Agreement, to grant each Licensee the license granted pursuant to Section
10(a) of this Agreement and to deposit the Information under the terms of
this Agreement.
(b) The Information initially deposited hereunder is reasonably
sufficient to enable a software engineer, skilled in the art of computer
programming and without recourse to collateral sources of assistance other
than commercially available computer programs, to independently compile the
Licensed Program and to modify the Licensed Program.
EXCEPT AS STATED ABOVE, LICENSOR DISCLAIMS ALL WARRANTIES, WHETHER
EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE INFORMATION,
INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. IN NO EVENT SHALL LICENSOR BE LIABLE FOR SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT LIMITED TO, LOSS OF PROFITS, LOSS
OF DATA OR LOSS OF USE DAMAGES, ARISING OUT OF OR WITH RESPECT TO THIS
AGREEMENT OR THE INFORMATION.
42
<PAGE>
6. DEPOSIT OF INFORMATION INTO ESCROW. Within thirty (30) days after
the execution of this Agreement by Licensor and Escrow Agent, Licensor shall
deliver to Escrow Agent one copy of the Information in one or more sealed
packages (a "Deposit"), each of which shall be separately labeled and
accompanied by a separate written list of its contents in the form of EXHIBIT
B attached hereto (an "EXHIBIT B"). Thereafter, within thirty (30) days after
the occurrence of any Update Event, Licensor shall deliver one copy of the
Update Information in a sealed package to Escrow Agent accompanied by an
EXHIBIT B. Each EXHIBIT B shall be signed by Licensor prior to submission to
Escrow Agent. Upon the delivery of any Update Information to Escrow Agent,
Licensor may instruct Escrow Agent to return to it any previously delivered
Information (other than the most recent and one previous versions of the
Information) which is no longer necessary to satisfy Licensor's obligations
under this Agreement.
7. ACCEPTANCE AND STORAGE OF INFORMATION.
(a) Upon receipt of any Information hereunder, Escrow Agent shall
visually match the accompanying EXHIBIT B to the labels on the Deposit.
Escrow Agent shall not be responsible for verifying the contents of the
Deposit or validating the accuracy of Licensor's labeling of the Deposit. If
Escrow Agent determines that there is a discrepancy between the EXHIBIT B and
the labels on the Deposit, Escrow Agent shall notify Licensor within five (5)
days after receipt thereof, and Licensor shall promptly correct such
discrepancy. Acceptance of the Information shall occur when Escrow Agent
determines that the EXHIBIT B matches the labels on the Deposit. Upon
acceptance, Escrow Agent shall sign the EXHIBIT B and mail copies thereof to
Licensor and each Licensee.
(b) After acceptance, Escrow Agent shall store and maintain the
Information in such an environment or facility as Escrow Agent determines, in
its discretion, is suitable for the safekeeping of the Information. Escrow
Agent shall not permit any person to have access to the Information other
than in accordance with this Agreement, and shall maintain security measures,
in accordance with reasonable professional standards, to prevent unauthorized
access to the Information. Escrow Agent shall not release the Information
except in accordance with the provisions of this Agreement.
8. INSPECTION OF INFORMATION. Each Licensee shall have the right at
its sole expense from time to time during the term of this Agreement, upon
reasonable notice to Escrow Agent and Licensor, to designate a representative
to inspect, test and review the Information in the presence of a
representative of Escrow Agent and a representative of Licensor, if Licensor
so chooses, during normal business hours for the purpose of determining the
completeness and adequacy of the Information. Such representative shall be an
independent accounting or consulting firm, not employed or regularly retained
by or affiliated with such Licensee, as may be reasonably
43
<PAGE>
acceptable to Licensor, As a condition to such inspection, such
representative shall execute a confidentiality agreement in form and
substance reasonably acceptable to Licensor.
9. RELEASE AND DELIVERY OF INFORMATION.
(a) A Licensee may request in writing that Escrow Agent deliver
the Information to such Licensee upon the occurrence of any of the following
events (a "Triggering Event"):
(i) Licensor materially breaches its support and maintenance
obligations for the Licensed Program under any written agreement between
Licensor and such Licensee and such breach remains uncured for sixty (60)
days after delivery of written notice thereof to Licensor;
(ii) Licensor ceases to offer support and maintenance services
for the Licensed Program and such cessation continues for sixty (60) days
after delivery of written notice thereof to Licensor; or
(iii) The institution by or against Licensor of any proceedings
under the United States Bankruptcy Code or any other federal or state
bankruptcy, reorganization, receivership, insolvency or other similar law
affecting the rights of creditors generally;
(b) Upon receipt by Escrow Agent of notice from a Licensee of a
Triggering Event, Escrow Agent shall promptly deliver a copy of such notice
to Licensor. Escrow Agent shall, twenty (20) days after delivery of such
notice to Licensor, deliver the Information to such Licensee, unless within
such twenty (20) day period Licensor shall have delivered to Escrow Agent and
such Licensee a written denial that such Triggering Event has occurred. If
Escrow Agent receives such denial within such twenty (20) day period, such
Licensee's entitlement to receive the Information under this Agreement shall
be resolved by arbitration pursuant to Section 15 of this Agreement, and
Escrow Agent shall retain possession of the Information pending the final
determination by the Arbitration Panel, which determination may be relied
upon by Escrow Agent without further inquiry.
10. POSSESSION, USE AND PROTECTION OF THE INFORMATION.
(a) If the Information is released to a Licensee pursuant to this
Agreement, Licensor hereby grants to such Licensee a non-exclusive,
royalty-free, non-assignable license to possess and use the Information
solely for the internal support and maintenance of the Licensed Program, and
solely in accordance with the terms of the License Agreement. Except as set
forth in Section 10(b), such Licensee shall not disclose, market, license,
sell, distribute, sublicense or in any other manner
44
<PAGE>
make the Information available to third parties. Such Licensee shall not
under any circumstances copy, duplicate or otherwise reproduce any
Information except as required for the internal support and maintenance of
the Licensed Program.
(b) Each Licensee acknowledges and agrees that title to the
Information shall remain with Licensor (or its licensors, as the case may be)
at all times and that the Information shall remain confidential and
proprietary to Licensor (or its licensors, as the case may be). If the
Information is released to a Licensee pursuant to this Agreement, the
Information shall be received and held by such Licensee in confidence until
it falls into the public domain without breach of this Agreement by such
Licensee. Such Licensee shall limit use of and access to the Information to
such of its employees (or third parties reasonably acceptable to Licensor) as
are directly involved in the internal support and maintenance of the Licensed
Program and who are bound by written agreement to preserve the confidentiality
thereof. Such Licensee shall promptly report to Licensor any actual or
suspected violation of this Section 10 and shall take all reasonable further
steps requested by Licensor to prevent or remedy any such violation.
(c) If, following the release of the Information to a Licensee,
Licensor subsequently establishes pursuant to Section 15 that the conditions
which constituted a Triggering Event no longer exist, such Licensee shall
immediately cease use of such Information and return such Information (and
all copies thereof) to Escrow Agent together with an EXHIBIT B. Upon Escrow
Agent's acceptance of such Information in accordance with Section 7(a), such
Information shall be held in escrow in accordance with this Agreement until
another Triggering Event shall have occurred.
11. TERMINATION.
(a) This Agreement shall continue in effect with respect to a
Licensee until the termination or expiration of the License Agreement between
Licensor and such Licensee unless sooner terminated by the written agreement
of Licensor and such Licensee or for non-payment of Escrow Agent's fees
pursuant to Section 11(b) below, The termination of this Agreement with
respect to a Licensee shall not terminate this Agreement with respect to
other Licensees, except as provided in Section 11(b) below.
(b) This Agreement shall have an initial term of one year,
commencing on the date set forth above in the first sentence of this
Agreement (the "Effective Date"). This Agreement shall automatically be
renewed for additional one-year periods upon receipt by Escrow Agent of the
specified renewal fees. The initial "Renewal Date" of this Agreement is one
year from the Effective Date and in succeeding years is one year from the
most recent Renewal Date. In the event that the renewal fees are not received
within thirty (30) days prior to the Renewal Date, Escrow Agent shall notify
Licensor and each Licensee that this Agreement will expire
45
<PAGE>
on the Renewal Date unless the renewal fees are paid. If Escrow Agent does
not receive the renewal fees by the Renewal Date, this Agreement shall expire
on the Renewal Date without further notice and without liability of Escrow
Agent to the parties to this Agreement.
(c) If this Agreement expires or is otherwise terminated with
respect to a Licensee, all duties and obligations of Escrow Agent to such
Licensee shall terminate, and if this Agreement expires or is otherwise
terminated with respect to all Licensees, all duties and obligations of
Escrow Agent to Licensor and all Licensees shall terminate. If Licensor
requests the return of the Information upon expiration or termination of this
Agreement with respect to all Licensees, Escrow Agent shall return the
Information to Licensor only after Escrow Agent's outstanding invoices and
deposit return fees have been paid. If such fee(s) are not received by Escrow
Agent within thirty (30) days after expiration or termination of this
Agreement with respect to all Licensees, Escrow Agent shall, at its option,
destroy or return the Information to Licensor.
12. RESPONSIBILITIES AND LIABILITIES OF ESCROW AGENT. Escrow Agent
shall not be liable under this Agreement with respect to the condition or
contents of the Information or for any action taken or omitted in compliance
with this Agreement in good faith and in the exercise of Escrow Agent's own
good judgment or in reliance on advice of Escrow Agent's counsel or for any
other cause unless a court of competent jurisdiction finds that Escrow
Agent's conduct was (i) willful misconduct, (ii) fraudulent, (iii) grossly
negligent, (iv) in bad faith or (v) in disregard of or contrary to the terms
of this Agreement. Escrow Agent shall be obligated only for the performance
of such duties as are specifically set forth in this Agreement and may rely
and shall be protected in relying on or refraining from acting on any order
or instrument reasonably and actually believed by it to be genuine and to
have been signed or presented by the proper party or parties. Escrow Agent
shall not be responsible for or be required to enforce any of the terms or
conditions of any agreement between Licensor and any Licensee. Escrow Agent
shall not be responsible or liable in any manner whatsoever for the
performance by Licensor or any Licensee of their respective obligations under
this Agreement.
13. RESIGNATION AND DISCHARGE; SUCCESSOR ESCROW AGENT.
(a) Escrow Agent may resign at any time, effective on such date
specified in a written notice of resignation delivered to Licensor and each
Licensee at least ninety (90) days prior to such effective date. Escrow Agent
may be discharged at any time, with or without cause, by written agreement of
Licensor and a majority in number of Licensees, effective upon receipt of
written notice of such discharge from Licensor. The resignation or discharge
of Escrow Agent shall not affect the right of Escrow Agent to be paid for its
services through the date of resignation or discharge.
46
<PAGE>
(b) In the event of the resignation or discharge of Escrow Agent,
Licensor shall appoint a successor Escrow Agent (who shall be reasonably
acceptable to a majority in number of Licensees), and such successor Escrow
Agent shall assume the rights, powers and responsibilities of Escrow Agent
hereunder upon its written agreement to act as Escrow Agent hereunder and to
become a party hereto.
(c) Escrow Agent's obligations hereunder shall terminate upon the
effective date of its resignation or discharge, except that it shall continue
to hold the Information in accordance with this Agreement until a successor
Escrow Agent is appointed, at which time Escrow Agent shall deliver the
Information to such successor Escrow Agent. If no successor Escrow Agent is
appointed within thirty (30) days after the effective date of such
resignation or discharge, Escrow Agent shall deliver the Information to the
Arbitration Panel pursuant to Section 15, shall give written notice of the
same to Licensor and each Licensee and shall have no further responsibility
with respect thereto.
14. INDEMNIFICATION. Licensor and each Licensee, jointly and
severally, agree to indemnify, defend and hold Escrow Agent harmless against
any loss, liability or expense, including reasonable attorneys' fees,
incurred by Escrow Agent as a result of any action taken or omitted in
compliance with this Agreement in good faith and in the exercise of Escrow
Agent's own good judgment or in reliance on advice of Escrow Agent's counsel
or for any other cause unless a court of competent jurisdiction finds that
Escrow Agent's conduct was (i) willful misconduct, (ii) fraudulent, (iii)
grossly negligent, (iv) in bad faith or (v) in disregard of or contrary to
the terms of this Agreement.
15. ARBITRATION. Any dispute regarding the occurrence or
non-occurrence of a Triggering Event shall be submitted to arbitration before
a panel of arbitrators selected in accordance with the commercial rules of
the American Arbitration Association (the "Arbitration Panel"). If the
Arbitration Panel determines that a Triggering Event has occurred with
respect to a Licensee, Escrow Agent shall immediately release the Information
to such Licensee, provided that if it is subsequently determined pursuant to
a final adjudication of the dispute that a Triggering Event has not occurred,
Licensee shall immediately cease use of the Information, shall return the
Information to Escrow Agent, and shall destroy all other copies of the
Information, or any part thereof, in its possession. If the Arbitration Panel
determines that a Triggering Event has not occurred, Escrow Agent shall
continue to hold the Information in accordance with this Agreement. The
proceedings of the Arbitration Panel shall be held, and any determination of
the Arbitration Panel shall be deemed to have been made, in Boston,
Massachusetts. All questions of law shall be decided in accordance with the
laws of the Commonwealth of Massachusetts.
47
<PAGE>
16. ADDITION OF LICENSEES. Licensor may, in its sole discretion and
without obtaining the consent of Escrow Agent or any Licensee, add its
customers as Licensees under this Agreement. Licensor and each such customer
so added shall execute a Counterpart Signature Page to this Agreement
substantially in the form of EXHIBIT C attached hereto, which shall be
promptly delivered to Escrow Agent. Escrow Agent shall acknowledge receipt of
such Counterpart Signature Page by signing it and returning copies to
Licensor and such Licensee, and such Licensee shall thereafter be deemed a
"Licensee" for all purposes of this Agreement.
17. THIRD-PARTY BENEFICIARY: Licensor and each Licensee hereby agree
that Amazon.com, Inc. shall be a third-party beneficiary of the rights of
Licensor under this Agreement, with the power to enforce this Agreement in
accordance with its terms, to the extent that this Agreement governs the
disposition of any Source Code or Documentation that constitute or consist of
source code or documentation licensed by Amazon.com, Inc. to Licensor under
the Software and Trademark License Agreement dated as of November __, 1998 by
and among Amazon.com, Inc., Junglee Corp and Licensor. Amazon.com, Inc. will
have no obligation or liability to Escrow Agent or any Licensee hereunder.
18. NOTICES. All notices required or permitted hereunder shall be
given in writing and shall be deemed delivered upon (i) delivery by messenger
or overnight courier service or (ii) three (3) days following the date of
mailing by registered or certified mail, postage prepaid, addressed to
Licensor or Escrow Agent at the applicable address set forth in EXHIBIT A
attached hereto and addressed to a Licensee at the address set forth on the
applicable Counterpart Signature page. Any party may change its address by
ten (10) days' written notice given to the other party in the manner set
forth in this Section 18.
19. GOVERNING LAW. This Agreement is made in and shall be construed
in accordance with the laws of the Commonwealth of Massachusetts.
20. NO WAIVER. No delay or omission by any party in exercising any
right under this Agreement shall operate as a waiver of that or any other
right. A waiver or consent given by a party on any one occasion shall be
effective only in that instance and shall not be construed as a bar or waiver
of any right on any other occasion.
21. SEVERABILITY. In the event that any provision of this Agreement
shall be invalid, illegal or otherwise unenforceable, the validity, legality
and enforceability of the remaining provisions shall in no way be affected or
impaired thereby.
22. SUCCESSORS AND ASSIGNS. Neither Licensor nor any Licensee may
assign this Agreement without the written consent of the other, except that
no such consent shall be required for an assignment in connection with the
sale of all or substantially
48
<PAGE>
all of a party's business by merger, sale of stock, sale of assets or otherwise.
Escrow Agent may not assign this Agreement without the written consent of
Licensor and a majority in number of Licensees. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties, their
respective executors, administrators, successors and assigns.
23. AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by Escrow Agent, Licensor and a majority in number
of Licensees.
24. COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together shall
constitute but one Agreement binding on the parties.
25. CAPTIONS. The captions of the sections of this Agreement are for
convenience of reference only and in no way define, limit or affect the scope
or substance of any section of this Agreement.
SIGNATURES ON FOLLOWING PAGE.
49
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as a sealed instrument as of the day and year set forth above.
RESTRAC, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
DSI TECHNOLOGY ESCROW SERVICES
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
50
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,140
<SECURITIES> 6,460
<RECEIVABLES> 7,519
<ALLOWANCES> 400
<INVENTORY> 0
<CURRENT-ASSETS> 18,036
<PP&E> 8,451
<DEPRECIATION> 5,094
<TOTAL-ASSETS> 37,753
<CURRENT-LIABILITIES> 10,463
<BONDS> 0
0
0
<COMMON> 107
<OTHER-SE> 26,963
<TOTAL-LIABILITY-AND-EQUITY> 37,753
<SALES> 6,402
<TOTAL-REVENUES> 6,402
<CGS> 227
<TOTAL-COSTS> 2,373
<OTHER-EXPENSES> 6,223
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3
<INCOME-PRETAX> (2,033)
<INCOME-TAX> (183)
<INCOME-CONTINUING> (1,850)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,850)
<EPS-PRIMARY> (0.2)
<EPS-DILUTED> (0.2)
</TABLE>
