<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
EXIGENT INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 7373 59-3379927
(State of Incorporation) (Primary Standard (IRS Employer
Industrial Classification Identification
Code Number) Number)
----------------------------
1225 Evans Road
Melbourne, Florida 32904-2314
(407) 723-3999
(Address and telephone number of
Registrant's principal executive offices)
Jeffrey C. Clift, President
Exigent International, Inc.
1225 Evans Road
Melbourne, Florida 32904-2314
(407) 723-3999
(Name, address and telephone number of agent for service)
Copy to: Lynn H. Wangerin, Esq.
Ogden Newell & Welch
1200 One Riverfront Plaza
Louisville, Kentucky 40202
(502) 582-1601
----------------------------
Approximate date of commencement of proposed distribution to public: As
soon as practicable after the registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [x]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Title of each class Proposed maximum Proposed maximum
of securities to be Amount to be offering price aggregate offering Amount of
registered registered per unit (1)(2) price (1)(2) registration fee (2)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares 3,520,245 $ 0.881 $ 3,101,336 $ 1,070
Common Stock
Purchase Warrants 1,070,270 $ (3) $ (3) $ (3)
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) There is no offering price. The securities registered pursuant to this
registration statement are currently held as follows: 300,000 shares and
425,000 warrants are held by Monogenesis Corporation, of which each holder
of shares of Monogenesis Corporation will receive as a dividend 125 shares
and 200 warrants; 1,704,430 shares and 229,896 warrants are held by the
Software Technology, Inc. Restated Employee Stock Ownership Plan and
Trust; 445,545 shares and 240,378 warrants are held by other shareholders
of Exigent International, Inc. and 174,996 warrants are held by Joseph
Walker & Sons, Inc. The Common Shares to be registered also include
1,070,270 shares issuable upon exercise of the Warrants.
(2) Fee computation based upon book value of Software Technology, Inc., the
wholly owned subsidiary of Exigent International, Inc., as of January 31,
1996.
(3) The warrants are registered in the same registration statement as the
Common Shares underlying the warrants and, therefore, no separate
registration fee is required.
================================================================================
<PAGE>
EXIGENT INTERNATIONAL, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PAGE
ITEM NUMBER - PART I, S-1 LOCATION NUMBER
- ------------------------- -------- ------
<S> <C> <C>
1. Forepart of the Registration Statement and Same 1
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Same 2, 81
Pages of Prospectus
3. Summary Information, Risk Factors and Summary; Risk Factors 2, 6
Ratio of Earnings to Fixed Charges
4. Use of Proceeds Not applicable
5. Determination of Not applicable
Offering Price
6. Dilution Risk Factors - Dilution as a 10
Result of ESOP
7. Selling Security Holders /1/ Risk Factors - Shares Available 11, 31
for Resale; The Distribution;
Principal Shareholders and
Security Ownership of Management
8. Plan of Distribution The Distribution 11
9. Description of Securities to Be Registered Securities 33
10. Interests of Named Experts and Counsel Not applicable
11. Information With Respect to the Registrant
(a) Description of business Business 14
(b) Description of property Business - Property 22
(c) Legal proceedings Same
(d) Market price of and dividends on the Risk Factors - Absence of 11, 33, 36
registrant's common stock and related Trading Market; Securities;
stockholder matters Dividends
</TABLE>
- ----------------
/1/ The referenced section includes a description of the security holders whose
shares are being registered pursuant to this registration statement. Some of
the registered shares will be distributed immediately by Monogenesis Corporation
to its shareholders.
<PAGE>
<TABLE>
<CAPTION>
ITEM NUMBER - PART I, S-1 LOCATION NUMBER
- ------------------------- -------- ------
<S> <C> <C>
(e) Financial statements Same 40
(f) Selected financial data Summary - Selected Financial Data 4
(g) Supplementary financial information Not applicable
(h) Management's discussion and Same 23
analysis of financial condition and
results of operations
(i) Changes in and disagreements with Not applicable
accountants on accounting and
financial disclosure
(j) Directors and executive officers Management 26
(k) Executive compensation Management - Executive 29
Compensation
(l) Security ownership of certain Principal Shareholders and 31
beneficial owners and management Security Ownership of Management
(m) Certain relationships and related Management - Certain Transactions 30
transactions
12. Disclosure of Commission Position on Liability and Indemnification of 36
Indemnification for Securities Act Directors and Officers
Liabilities
</TABLE>
<PAGE>
Prospectus
- ----------
EXIGENT INTERNATIONAL, INC.
1225 Evans Road
Melbourne, Florida 32904-2314
(407) 723-3999
3,520,245 Common Shares
(par value, $0.01 per share)
1,070,270 Common Stock Purchase Warrants
Exigent International, Inc. (the "Issuer") is registering 3,520,245 Common
Shares (the "Shares") and 1,070,270 Common Stock Purchase Warrants (the
"Warrants"). Monogenesis Corporation ("Monogenesis") holds 300,000 Common
Shares and 425,000 Warrants; other shareholders of the Issuer hold 2,149,975
Common Shares and 470,274 Warrants; Joseph Walker and Sons, Inc. holds 174,996
Warrants; and 1,070,270 shares are the Common Shares underlying the Warrants.
See "Principal Shareholders and Security Ownership of Management" and
"Securities." The Shares constitute approximately 63.4% of all classes of
common stock of the Issuer and approximately 72.4% of the Common Shares
(assuming exercise of all Warrants). Monogenesis will distribute to its
shareholders 125 Common Shares and 200 Warrants for each share of Monogenesis
stock held of record on __________ , 1996 (the "Distribution"). After the
Distribution, Monogenesis will own approximately 1% of the outstanding Common
Shares and all Monogenesis shareholders together will own approximately 5.2% of
the outstanding Common Shares (assuming exercise of all Warrants). See "The
Distribution."
Each Warrant entitles the holder to purchase one Common Share of the
Issuer at a price of $3.00 per share during the 36 month period commencing on
the date of issuance of the Warrant. There can be no assurance that the price
of a Common Share will ever equal or exceed the exercise price of the Warrants,
and consequently, whether it will ever be profitable for holders of Warrants to
exercise such Warrants. See "Securities."
The Distribution will be made as soon as practicable after the date of
this Prospectus (the "Distribution Date"). The Issuer will not receive any
consideration from the Distribution or any subsequent sale of the Shares, but
will receive consideration if any Warrants are exercised. There is no current
public trading market for the Shares or the Warrants and there can be no
assurance that a market will develop after the Distribution. See "Risk Factors
- Absence of Trading Market."
The Issuer is a Delaware corporation. As a result of transactions entered
into in connection with the Distribution, the Issuer owns all of the issued and
outstanding stock of Software Technology, Inc., a Florida corporation formed in
1978. See "The Distribution."
__________________________________________
THE COMMON SHARES AND WARRANTS DESCRIBED HEREIN INVOLVE A HIGH DEGREE OF
RISK. SEE "RISK FACTORS."
___________________________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
__________________________________________
A MONOGENESIS INSTITUTIONAL DISTRIBUTION
The date of this Prospectus is ________________, 1996.
<PAGE>
ADDITIONAL INFORMATION
----------------------
The Issuer will furnish annual reports containing audited financial
statements to its shareholders. Additional unaudited reports may be provided to
shareholders at such time as the Issuer may determine or as required by law. The
Issuer is not currently required to file reports under the Securities Exchange
Act of 1934 (the "1934 Act"), but expects to become subject to reporting
requirements at the conclusion of the Distribution. See "The Distribution."
The Issuer has filed a registration statement (which term shall include all
amendments, exhibits and schedules) on Form S-1 under the 1933 Act with the
Securities and Exchange Commission (the "Commission") in Washington, D.C. This
Prospectus, which constitutes a part of the registration statement, does not
contain all of the information set forth in the registration statement as filed
including the exhibits thereto. The registration statement may be reviewed
without charge at the Commission's principal place of business in Washington,
D.C. Copies of the registration statement may be obtained from the Public
Reference Section of the Commission located at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed prices. Statements made in this Prospectus
as to the contents of any contract or other document are not necessarily
complete, and, where such contract or other document has been filed as an
exhibit to the registration statement, reference is hereby made to such exhibit
and each such statement is qualified in all respects by such reference.
SUMMARY
-------
The following is a summary of certain information contained elsewhere in
the Prospectus. Reference is made to, and this summary is qualified by, the more
detailed information set forth in the Prospectus, which should be read in its
entirety.
THE DISTRIBUTION
- ----------------
Distributed Company................... Exigent International, Inc. (the
"Issuer"), a newly formed Delaware
corporation, acquired all of the
issued and outstanding stock of
Software Technology, Inc. ("STI") in
exchange for 3,486,600 Common Shares
and 697,320 Class B Common Shares of
the Issuer. See "Securities." The
Issuer also acquired all of the
outstanding warrants of STI in
exchange for 645,270 of its Warrants.
See "The Distribution."
Distributing Company.................. Monogenesis Corporation, a Delaware
corporation, pursuant to a resolution
of its board of directors is
distributing Common Shares and
Warrants of the Issuer as a dividend
to its shareholders of record on
___________, 1996. See "The
Distribution" and "Management -
Certain Transactions."
2
<PAGE>
Distribution Ratio.................... Each Monogenesis shareholder will
receive 125 Common Shares, par value
$0.01 per share, and 200 Warrants of
the Issuer for each share of
Monogenesis stock held by it. See
"The Distribution."
Distribution Agent.................... Mid-America Bank of Louisville and
Trust Company, Monogenesis' transfer
agent, will act as distribution
agent, transfer agent and warrant
agent for the Issuer. See
"Securities - Transfer Agent and
Registrar."
Shares to be Distributed.............. The Common Shares to be distributed
will constitute approximately 6.6% of
the issued and outstanding Common
Shares, and approximately 5.6% of the
total issued and outstanding stock of
all classes of common stock of the
Issuer. The Issuer will not receive
any proceeds from the distribution of
these shares. However, the Issuer
will receive consideration if any
Warrants are exercised. See "The
Distribution" and "Securities."
Warrants to be Distributed............ The Warrants to be distributed will
constitute approximately 37.5% of the
issued and outstanding Warrants.
Each Warrant entitles the holder to
purchase one Common Share of the
Issuer at an exercise price of $3.00
per share and may be exercised during
the 36 month period following
issuance of the Warrant. The Common
Shares and the Warrants are
separately transferable. See
"Securities."
Distribution Date..................... Certificates representing the Shares
and the Warrants will be mailed to
Monogenesis shareholders as soon as
practical after the date of this
Prospectus. See "The Distribution."
SALES OF SHARES AND WARRANTS BY
SELLING SHAREHOLDERS.................. 2,149,975 Common Shares and all
Warrants held by certain shareholders
of the Issuer and by the Software
Technology, Inc. Restated Employee
and Stock Ownership Plan and Trust
(the "ESOP") will be registered and
available for resale by such
shareholders subject to certain
limitations. See "Principal
Shareholders and Security Ownership
of Management." These shares
constitute approximately 56.8% of the
issued and outstanding Common Shares,
and approximately 47.9% of the total
issued and outstanding stock of all
classes of common stock of the
Issuer. The Issuer will not receive
any proceeds from the sale of shares
or Warrants held by these
shareholders; however, it will
receive proceeds if any Warrants are
exercised. See "Risk Factors -
Shares Available for Resale" and "The
Distribution."
3
<PAGE>
Trading Market........................ There will be no immediate trading
market for the Shares or the
Warrants. See "Risk Factors -
Absence of Trading Market."
THE ISSUER
- ----------
Exigent International, Inc. (the "Issuer"), a Delaware corporation,
acquired all of the issued and outstanding stock of Software Technology, Inc.
("STI"), a Florida corporation, in exchange for stock of the Issuer. The Issuer
also acquired all of the issued and outstanding warrants of STI in exchanged for
Warrants. See "The Distribution."
The Issuer's wholly owned subsidiary, STI, is a systems and software
engineering firm which provides technical solutions for government and industry.
STI specializes in command and control applications for ground, flight, test and
process control relating to satellite technology. It also provides systems and
software engineering services and commercial off-the-shelf ("COTS") products for
real-time command, control and data acquisition systems such as OS/COMET(TM), a
commercially available command and control development and support system. In
addition, STI has developed and markets an airport security and control system,
currently used primarily outside of the United States, and a data switching unit
which provides rapid switching of data received to several devices
simultaneously and is currently used by telecommunications companies and
satellite ground stations. See "Business."
The Issuer was incorporated on March 25, 1996. It's principal office is
located at 1225 Evans Road, Melbourne, Florida 32904-2314. The telephone number
is (407) 723-3999. STI was incorporated on June 13, 1978 and has the same
principal office as the Issuer. See "Business - History."
SELECTED FINANCIAL DATA
- -----------------------
The selected financial data is that of STI. The pro forma figures of net
income per share and stockholders' equity per share reflect the capitalization
of the Issuer.
4
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Statement of Earnings Data (1):
- ----------------------------------------------------------------------------------------------
Years Ended January 31,
(Amounts in thousands except
per share amounts)
- ----------------------------------------------------------------------------------------------
1992 1993 1994 1995 1996
--------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Revenues $ 15,233 $ 14,913 $ 16,761 $ 19,761 $ 25,292
Cost of Sales (12,519) (12,234) (13,401) (16,064) (19,408)
Gross Profit 2,714 2,679 3,360 3,697 5,884
General and Administrative Expenses (1,910) (1,805) (2,511) (2,539) (3,841)
Research and Development Costs (3) (84) (126) (102) (155)
Operating Income 801 790 723 1,056 1,888
Total Other Income (Expense) 35 20 (13) 20 (1)
Income before Taxes 836 810 710 1,076 1,887
Income Tax Expense (323) (357) (216) (354) (755)
Net Income $ 513 $ 453 $ 494 $ 722 $ 1,132
Net Income per Pro Forma Common
Share (2) $ 0.11 $ 0.10 $ 0.11 $ 0.16 $ 0.25
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Balance Sheet Data (1):
- ----------------------------------------------------------------------------------------------
Years Ended January 31,
(Amounts in thousands except
per share amounts)
- ---------------------------------------------------------------------------------
1992 1993 1994 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Total Assets $4,032 $4,224 $4,631 $6,471 $8,248
Total Long-Term Liabilities (3) $ 56 $ 4 --- $ 17 $ 10
Total Stockholders' Equity $2,537 $2,901 $3,306 $3,939 $4,893
Stockholders' Equity Per Pro Forma
Common Share (2) $ 0.57 $ 0.65 $ 0.74 $ 0.88 $ 1.09
- ---------------------------------------------------------------------------------
</TABLE>
(1) The statement of earnings data for 1994, 1995 and 1996 and the balance
sheet data for 1995 and 1996 were derived from the audited financial
statements of STI which are included in their entirety elsewhere in this
Prospectus. See "Financial Statements."
5
<PAGE>
(2) Pro forma net income and stockholders' equity per share reflect the number
of shares of the Issuer's common stock (including Class B Common Stock)
which are issued and outstanding as of the date hereof (4,483,920 shares)
for all years rather than the number of shares of STI actually outstanding
on the applicable dates and have been rounded to the nearest cent. These
figures do not include Common Shares which may be issued upon exercise of
the Warrants. See "Capitalization."
(3) The total long-term liabilities amounts exclude the current portion of
such obligations.
RISK FACTORS
------------
The securities described in this Prospectus involve a high degree of risk.
Prior to investing, prospective investors in the Shares and the Warrants should
consider the following factors inherent in, and affecting the business of, the
Issuer and its subsidiary, STI.
LIMITED NUMBER OF CUSTOMERS. Most of STI's business is developing software
and systems for satellite ground stations. See "Business." There are a limited
number of customers for this technology. In addition, more than 40% of STI's
revenues are derived from two contracts and more than 55% of STI's revenues are
derived from four contracts. Of these four contracts, three are with various
agencies of the U.S. Government. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The expiration of any of these
contracts without replacement with comparable contracts or the loss of any of
any one of these contracts for any reason could materially affect STI's income.
STI has designated diversification as a priority and has made progress in
diversifying over the last three years. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Management also
hopes that product emphasis will minimize this risk.
DEPENDENCE ON GOVERNMENT CONTRACTS. More than half of STI's current
revenues come from contracts with various agencies of the U.S. Government with
approximately 23% of such revenues attributable to contracts with the Naval
Research Laboratory. See "Risk Factors - Limited Number of Customers." STI is
working to expand its contracts with commercial entities but expects a large
percentage of its revenues to continue to be derived from contracts with U.S.
government agencies. See "Business" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The loss or termination of any
one of the larger government contracts due to funding cuts or contract
termination contracts without renewal or replacement with contracts of similar
value could significantly affect STI's performance. Most government contracts,
even if they have a longer term, are cancelable by the government agency after
the first or second year.
FIXED PRICE CONTRACTS. STI principally performs under software development
and/or operations and maintenance contracts. STI commits to deliver software
that meets specific requirements for a fixed price that is negotiated prior to
development. The proposed price is based on engineering estimates with suitable
margins to accommodate reasonable contingencies. Should
6
<PAGE>
the actual cost to develop the software exceed the fixed price, STI must
complete the contract and incur whatever losses result. See "Business -
Products."
DEPENDENCE ON SATELLITE COMMAND AND CONTROL INDUSTRY. Currently, most of
STI's revenues are derived from products and services related to the satellite
command and control industry. Should this industry take a substantial downturn
and the number of satellites deployed be materially reduced, STI's new business
opportunities would be limited significantly. However, management does not
believe that a reduction is likely in the near future. See "Business." In
addition, management is attempting to diversify STI's customer base as well as
the industries in which it operates which, if successful, would minimize the
impact of any decline in the industry.
ONGOING SUPPORT REQUIREMENTS. STI has committed under various contracts and
licenses to provide support and maintenance for certain of its software
products. See "Business." Under these agreements, STI is required to maintain
some number of staff members familiar with that version of the product to
provide customer service.
COMPETITION. STI believes it is one of only three companies in the United
States which derive substantially all of their revenue from development of
tracking, telemetry, command and control software related to satellites and
satellite ground station support and is the largest of the three. In addition to
these companies, at least eight large aerospace/defense contractors have
developed tracking, telemetry, command and control software either in-house as
primary contractors or through outsourcing or subcontractors (including STI in
some cases). Thus, some of STI's competitors are also its customers. These
larger competitors have significantly greater financial resources than STI,
although income from such products represent only a small portion of their total
revenue. See "Business - Competition." There can be no assurance that STI can
continue to compete effectively with these companies or maintain them as
customers while competing with them on other projects.
CHANGING TECHNOLOGY. The computer industry is technology driven and shows
rapid changes in what is state-of-the-art. To be successful in this industry, a
company must be able to produce products, and to continuously update existing
products, so that its products are at all times state-of-the-art. Any of STI's
products could become obsolete at any time due to rapid technological changes
and STI may not be able to update its products quickly enough to remain
competitive. See "Risk Factors - Research and Development" and "Business -
Research and Development."
INTELLECTUAL PROPERTY RIGHTS. Under some government contracts, STI develops
software that it decides to commercialize by investing additional research and
development funds and then marketing the software as a product. In some cases,
the government contracts preclude STI from selling the resulting product to any
government agencies. If the primary market for a potential product is government
agencies, STI may not be able to recover invested funds through sale of the
product. Management of STI is aware of this issue and strives to reach
agreements as to these matters at the inception of the contract to prevent any
problems with limitations on resale.
7
<PAGE>
SECURITY CLEARANCE. Many of STI's contracts with government agencies
require that certain of its employees and procedures meet security clearance
requirements. STI has not had any problems meeting these requirements, but
should one develop, it could lose a significant portion of its contracts.
GENERAL ENVIRONMENTAL. STI is the lessee of several parcels of real estate
on which its operations are located. Accordingly, STI is an "operator" under
applicable state and federal environmental laws. As an operator, STI is
potentially responsible for the clean-up of any hazardous or toxic materials
that may be improperly located in any of its facilities. The development and
manufacturing processes of STI do not generate any significant quantities of
hazardous or toxic materials. See "Business - Manufacturing." The officers of
STI are not aware of any hazardous materials improperly located at any of STI's
facilities.
RELIANCE ON EXISTING MANAGEMENT. STI's success is dependent upon the
capabilities and reputation of its senior management and technical personnel and
on their maintaining or enhancing existing relationships with STI's customers.
See "Management." The loss of key officers, managers or senior technical staff
could have a materially adverse affect on STI's business. In such event, there
can be no assurance that STI could attract qualified replacements.
SHORTAGE OF QUALIFIED EMPLOYEES. As a result of the expansion of the number
of business users of computers and the expansion in demand for computer services
and custom software programming, there is a short supply of computer
professionals. The situation is not expected to improve in the near future. As a
result, many computer programming companies have a year or two year backlog of
high end computer applications awaiting programming. Thus, it is possible that
STI could have problems finding, keeping and replacing employees. However,
defense contractors have laid off many of their computer/engineering employees
and this trend is expected to continue thereby creating a pool of employees who
would likely have at least some of the expertise needed by STI. In addition, STI
has developed and maintains an employee benefit program which management
believes to be superior to that of most of its competitors which it believes
will help it to attract and retain qualified employees.
CAPITAL REQUIREMENTS. The Issuer and STI believe that they have sufficient
capital to meet their needs through fiscal year 1997. Should additional capital
be required in the future, however, there can be no assurance that the Issuer or
STI will be able to obtain this funding or that sufficient debt or equity
financing will be available to meet any such capital requirements. All of STI's
accounts receivable and equipment are pledged as collateral on a term loan and
line of credit and STI is prohibited from incurring additional indebtedness
without the prior approval of the lender. In the event of a violation by STI of
the loan documents, the lender could declare the indebtedness to be immediately
due and payable and foreclose on the collateral.
OS/COMET(TM) WARRANTY AND SUPPORT. During the past year, STI has sold its
primary commercial product, OS/COMET(TM), to several large satellite programs
and committed to support this product over the lifetime of these programs (10
years or more). There is no history of the cost to STI supporting this product.
In fiscal year 1997, STI put maintenance contracts in place to cover
8
<PAGE>
the estimated cost of supporting OS/COMET(TM) during this time frame, but
unusual problems beyond the reasonable expectations of STI could cost more to
correct than the contract price.
PATENTS AND COPYRIGHTS. The management of STI does not know of any
circumstances in which any component of its products infringes on any
intellectual property right of another. However, STI does not routinely do
patent searches on its designs and there is a possibility that its computer
hardware designs or software algorithms infringe on intellectual property rights
of others, which rights may be protected by copyright, patent or other common
law rights. In the event that STI has infringed on any such rights, it could be
required to pay damages. In addition, if STI were unable to change the design of
such product so that it no longer infringed on any intellectual property rights,
it would lose the ability to sell such product as well as the benefits of all
previous marketing efforts and name recognition associated with the product.
Even if alterations to avoid any intellectual property problems were possible,
the product as changed might not be successful in the marketplace.
TRADEMARKS. Management of STI does not believe that it is infringing on the
trademark of any other entity in the world. STI has recently filed an
application to register the name "OS/COMET(TM)" with the U.S. Patent and
Trademark Office ("PTO"). Based upon the results of a search of the records of
the PTO, management believes that the application will mature to registration.
In addition, the Issuer has filed an application to register its name "Exigent
International" which application management also believes will mature to
registration based upon a search of the PTO records. If either of those
applications should be denied registration, STI and the Issuer may lose the
benefits of previous marketing and name recognition. In addition, STI has not
applied for or registered its name and may be unable to register it. Management
is aware of at least one other company using the name. Although management does
not believe the other company does business in the aerospace industry, if STI
were prohibited from using the name, it would lose the benefits of name
recognition and its previous marketing.
LACK OF OPERATIONAL HISTORY. The Issuer was incorporated on March 25, 1996
and has not yet engaged in business other than the acquisition of STI as
described in this Prospectus. See "The Distribution." It therefore has no
earnings record. However, the Issuer's wholly owned subsidiary, STI, has been in
business since 1978 and had earnings before payment of taxes of the following
amounts for the fiscal years ended January 31: $1,887,141 for 1996; $1,075,935
for 1995; and $709,510 for 1994. See "Selected Financial Data" and "Financial
Statements."
CURRENT PROSPECTUS AND STATE "BLUE SKY" REGISTRATION OR EXEMPTION REQUIRED
TO EXERCISE THE WARRANTS. Holders of the Warrants will have the right to
exercise the Warrants to purchase Common Shares only if such shares qualify for
sale under state securities laws or are exempt from qualification under
applicable securities or "blue sky" laws of the states in which the various
holders of the Warrants then reside and there is available a current Prospectus
permitting the sale of the Common Shares underlying the Warrants. The Issuer has
undertaken and intends to use reasonable efforts to keep current a prospectus
which will permit the sale of the Common Shares underlying the Warrants, but
there can be no assurance that the Issuer will be able to do so. The Issuer is
not required to qualify for sale the Common Shares in any state. The Warrants
may lose
9
<PAGE>
some of all of their value if a prospectus covering the underlying shares is not
kept effective or if the underlying shares are not, or cannot be, qualified in
an applicable state. See "Securities."
CONTROL BY HOLDERS OF CLASS B COMMON SHARES. The Issuer has two classes of
voting stock issued and outstanding: Common Shares and Class B Common Shares.
Although each holder of Common Shares and Class B Common Shares is entitled to
one vote for each share of stock held, the holders of Class B Common Shares are
entitled to elect 75% of the members of the board of directors of the Issuer
(presently seven members). Holders of Common Shares (together with holders of
Class D Common Shares and any voting Preferred Shares) are only entitled to
elect 25% of the members of the board of directors (presently three members).
(If the number of issued and outstanding Common Shares, Class D Common Shares
and voting Preferred Shares is less than 10% of the aggregate number of issued
and outstanding Common Shares and Class B Common Shares, all directors will be
elected by the holders of all shares voting together.) Thus, holders of Class B
Common Shares will control the board of directors and therefore, the Issuer.
Except with respect to matters which require voting by class, shareholders of
all classes will vote together on all other matters properly brought before the
shareholders. See "Principal Shareholders and Security Ownership of Management"
and "Securities."
DIVIDENDS. The Issuer is newly formed and has not paid dividends. It's only
significant source of earnings out of which to pay dividends will be dividends
it receives from its subsidiary, STI. STI has historically paid dividends to its
shareholders. It paid $177,955 and $88,977 in dividends in years ended in 1996
and 1995, respectively. See "Financial Statements." In connection with a loan
agreement entered into in 1995, STI is prohibited from taking certain actions
without the prior approval of the lender including (i) declaring or paying
dividends in excess of the lessor of 25% of net income or $100,000, (ii) merging
or consolidating or (iii) selling substantially all of its assets. There is no
guarantee that STI, and therefore the Issuer, will pay dividends in the future.
AUTHORIZATION OF PREFERRED STOCK. The Issuer's Certificate of Incorporation
authorizes the issuance of Preferred Shares with designations, rights and
preferences as determined from time to time by its Board of Directors.
Accordingly, the Board of Directors is empowered, without shareholder approval,
to issue Preferred Shares with dividends, liquidation, conversion, voting or
other rights that could adversely affect the dividends, liquidation rights,
voting rights or other rights of the holders of Common Shares. The voting rights
of any Preferred Shares, however, are limited by the Certificate of
Incorporation and cannot exceed the voting rights of any Common Shares. In the
event of issuance, Preferred Shares could be used, under certain circumstances,
as a method of discouraging, delaying or preventing a change of control of the
Issuer. See "Securities."
DILUTION AS A RESULT OF ESOP. STI has adopted an employee stock ownership
plan, Software Technology, Inc. Restated Employee Stock Ownership Plan and Trust
(the "ESOP"). The ESOP currently owns 1,704,430 Common Shares and 340,886 Class
B Common Shares of the Issuer. It also owns 229,896 Warrants. Under the
governing instrument of the ESOP, the Board of Directors, in its sole
discretion, may give cash or issue stock, or cause the Issuer to issue stock to
the ESOP, for the benefit of the employees of STI. At such times as stock is
issued to the ESOP, such issuance results in dilution to the shareholders of the
Issuer.
10
<PAGE>
ABSENCE OF TRADING MARKET. There is not an established public trading
market for the Shares or the Warrants. There can be no assurance as to the
prices at which the Shares or the Warrants will trade or that such prices will
not be significantly below the book value per share of the Shares. Until the
Shares and the Warrants are fully distributed and an orderly market develops (if
at all), the prices at which the Shares or the Warrants trade may fluctuate
significantly. Prices for the Shares and the Warrants will be determined in the
marketplace and may be influenced by many factors, including the depth and
liquidity of the market, investor perception of the Issuer and the industry in
which the Issuer participates, and general economic and market conditions.
SHARES AVAILABLE FOR RESALE. Approximately 35% of the issued and
outstanding Common Shares of the Issuer (all shares except the Common Shares
described in this Prospectus) are "restricted securities" as such term is
defined in Rule 144 promulgated under the Securities Act of 1933 (the "1933
Act"). (Class B Common Shares may be converted to Common Shares.) Sales of
securities by affiliates of the Issuer may also be subject to Rule 144 resale
limitations. Currently, approximately 91% of the restricted securities are held
by Dean W. Boley, Rudiger D. Lichti, Don F. Riordan, Jr. and Daniel J. Stark.
See "Principal Shareholders and Security Ownership of Management." In general,
under Rule 144, if adequate public information is available with respect to the
Issuer, beginning 90 days after the date of this Prospectus a person who has
satisfied a two year holding period may sell, within any three month period, a
number of shares which does not exceed the greater of 1% of the then outstanding
shares of the class of securities in question or the average weekly trading
volume during the four calendar weeks prior to such sale. Sales under Rule 144
are also subject to certain restrictions relating to manner of sale, notice and
the availability of current public information about the issuer. Sales of
restricted securities by a person who is not an affiliate of the issuer (as
defined in the 1933 Act) and who has satisfied a three year holding period may
be made without regard to volume limitations, manner of sale, notice or other
requirements of Rule 144. The Issuer is unable to predict the effect that sales
made pursuant to Rule 144 or other exemptions under the 1933 Act may have on the
prevailing market price of the registered Common Shares, or when such sales may
begin under the holding period requirements of Rule 144.
THE DISTRIBUTION
----------------
The Issuer initially issued 300,000 Common Shares and 425,000 Warrants to
Monogenesis, a closed-end registered investment company pursuant to a Stock
Purchase Agreement and Plan of Reorganization imposing certain obligations on
Monogenesis attendant to the sale. See "Management - Certain Transactions." The
Issuer then issued 3,486,600 Common Shares and 697,320) Class B Common Shares to
shareholders of STI in return for all of the issued and outstanding stock of STI
and 645,270 Warrants in return for all of the issued and outstanding warrants of
STI. The former shareholders of STI became the owners of all of the issued and
outstanding Class B Common Shares of the Issuer and approximately 92% of the
issued and outstanding Common Shares of the Issuer which makes the former
shareholders of STI the holders of approximately 93% of the issued and
outstanding shares of all classes of stock of the Issuer. See "Principal
Shareholders and Security Ownership of Management" and "Securities." Pursuant to
a resolution of its Board of Directors, Monogenesis is distributing as a
dividend to its shareholders
11
<PAGE>
125 Common Shares and 200 Warrants of the Issuer for each share held of record
on ___________________, 1996. The certificates for the Shares and the Warrants
will be mailed on the date hereof or as soon thereafter as is practically
possible.
Shareholders of Monogenesis that receive Shares and Warrants will receive
such securities as a dividend. No holder of Monogenesis stock will be required
to pay any cash or other consideration for the Shares or the Warrants received
in the Distribution or surrender or exchange Monogenesis stock in order to
receive Shares or Warrants. Holders of the Warrants will be required to pay the
exercise price to exercise the Warrants. See "Securities." The Issuer is paying
the expenses of the Distribution which include legal, accounting, consulting,
transfer agent and filing fees.
Shareholders, including the recipients of Common Shares distributed by
Monogenesis, will be able to sell their Shares and Warrants which are
registered, at any time, although the sale of securities by affiliates is
limited under Rule 144. It is expected that, at such time as registered Shares
or Warrants are sold, such securities will be sold through the selling efforts
of brokers or dealers. There is no agreement with any specific brokers or
dealers relating to the Shares or the Warrants nor has any plan of distribution
or sale of the Shares or Warrants been developed, other than the dividend
distribution to Monogenesis shareholders described above.
Prior to or on the effective date of the registration statement, the Issuer
will file a registration statement under the 1934 Act registering the Shares and
the Warrants thereunder. Such filing together with the filing of the
registration statement under the 1933 Act will subject the Issuer to the
reporting requirements of the 1934 Act and the Issuer will be a public company.
The Issuer intends to apply for a listing of the Shares and the Warrants on a
national exchange which reports transactions on a real time basis; however,
there can be no assurance that the Shares and the Warrants will be so listed.
CAPITALIZATION
--------------
The capitalization of STI (prior to its acquisition by the Issuer) and the
pro forma capitalization of the Issuer (giving effect to the acquisition of STI)
as of January 31, 1996 are as follows:
12
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------
Capitalization of STI Prior to Acquisition:
- --------------------------------------------------------------------------------------------------------
Stockholders' Equity:
<S> <C>
Common stock
par value - $0.01 per share;
800,000 shares authorized; 768,400 shares
issued and 593,182 outstanding $ 7,684
Paid-in capital 29,030
Retained earnings 5,600,586
Treasury stock, common 175,218 shares at cost (744,763)
----------
Total Stockholders' Equity $4,892,537
==========
- --------------------------------------------------------------------------------------------------------
Pro Forma Capitalization of the Issuer Assuming Acquisition of STI:
- --------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common Shares
par value - $0.01 per share;
30,000,000 authorized
3,786,600 shares issued and outstanding(1) $ 3,787
Class B Common Shares
par value - $0.01 per share;
5,000,000 shares authorized;
697,320 shares issued and outstanding 697
Class D Common Shares
par value - $0.01 per share;
600,000 shares authorized;
no shares issued and outstanding -0-
----------
Total Common Shares $ 4,484
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Preferred Shares
par value - $0.01 per share;
10,000,000 shares authorized;
no shares issued and outstanding -0-
Paid-in-capital 29,030
Retained earnings 4,855,823
----------
Total Stockholders' Equity $4,889,337
==========
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) In addition to the Common Shares of the Issuer held by former shareholders
of STI, the issued and outstanding Common Shares of the Issuer include the
300,000 Common Shares issued to Monogenesis for $3,000. This number does not
include the 1,070,270 Common Shares which my be issued upon the exercise of
the Warrants. See "Securities."
In August, 1995, STI entered into a loan agreement with Sun Bank,
National Association, located in Melbourne, Florida. Under the agreement, the
bank loaned STI $800,000 for the purpose of purchasing new equipment. The
agreement also allows STI to borrow up to $1,800,000 under a revolving line of
credit. The term loan bears interest at a rate equal to the prime rate set by
the bank from time to time plus 0.375%. Interest is payable monthly and
principal is payable in 36 monthly installments of $22,222.22 beginning April 1,
1996; provided that, all principal and interest is due and payable on or before
February 28, 1999. The line of credit bears interest at a rate equal to the
prime rate set by the bank from time to time plus 0.25%. Interest only is due
and payable monthly; the principal balance is due and payable upon demand and
must be paid in full for a period of at least 45 days during the first period
ending June 28, 1996 and during each additional 12 month period in which the
credit is available thereafter. As of March 5, 1996, STI had an outstanding
principal balance of $90,000 under the line of credit.
BUSINESS
--------
GENERAL
- -------
The Issuer was formed on March 25, 1996 by STI. It issued shares to
the shareholders of STI in exchange for all of the issued and outstanding stock
of STI. See "The Distribution." All of the Issuer's business operations are
conducted through STI.
STI is primarily a professional services company which develops
computer solutions and systems under contract to both government and industry.
Its research and development efforts primarily relate to satellite command and
control systems. See "Risk Factors - Dependence on Satellite Command and Control
Industry." Generally, the government contracts specify goals to be reached and
estimate the number of hours of work of various levels of employees required to
reach the goals. The contract price is based on pre-approved, hourly rates for
employees' time with certain
14
<PAGE>
pre-approved overhead costs figured in. If the goals are met in fewer hours, the
contract rate is lowered. If it takes more hours than estimated to meet goals,
fees are reduced on a pro rata basis based on actual hours delivered versus the
number of hours estimated in the contract. Longer term government contracts are
also generally subject to revisions to the terms and reductions in fees after
one or two base years. See "Risk Factors - Fixed Price Contracts."
Most of STI's commercial contracts contain "firm fixed price"
agreements. These agreements generally call for a specified set of requirements
to be delivered at a negotiated price. If STI's development costs yield a result
that is less than fixed price, STI will make a profit on that contract. If STI's
development costs exceed the fixed price, STI will have a loss on that contract.
These types of contracts are typically broken down into a set of milestones with
progress payments made at each milestone. These are generally called earned
value milestones and help STI and the customer track the program status and
provide STI with cash flow.
Typical customers for products and services of STI are:
. Various agencies of the U.S. government (some classified) using
satellites for communication or defense.
. Telecommunication companies, particularly those focused on low-
earth-orbit satellite systems for use for cellular phone services.
. Aerospace and defense contractors developing computerized
weaponry and defense systems employing satellite technology.
. Engineering firms.
. Foreign agencies controlling airports and airport security.
Currently, approximately 52% of STI's revenues are derived from
contracts with approximately 30 different government agencies. See "Risk
Factors-Dependence on Government Contracts." The largest government contracts,
representing approximately one-third of the revenues from the government, are
with the Naval Research Laboratory ("NRL") Space Systems Division. In addition,
Loral Federal Systems and STI, as subcontractor, were awarded a five year
contract to use commercial off the shelf workstations and software to upgrade
the Global Positioning Systems ("GPS") ground command and control functions. STI
is providing its OS/COMET/TM/ command and control software and engineering
services as part of the Loral contract. GPS's 24 satellites provide worldwide
navigation data for military and civilian aircraft, spacecraft and land and
marine applications. The new system will replace a slower mainframe-based system
and legacy software which were costly to maintain.
15
<PAGE>
STI's remaining revenues come from three commercial customers with
the bulk of such revenues, approximately 27% of STI's total revenues, coming
from its contract with Motorola/1/, Inc. to provide the ground software for the
IRIDIUM/(R)//2/ program (currently believed to be the largest commercial space
program) which will control interconnected low earth orbit satellites to provide
communication worldwide using hand-held wireless telephones. See "Risk Factors -
Limited Number of Customers."
STI has expertise in the following areas:
. Real-time Space Systems
. Satellite Ground Stations
. Command and Control
. Satellite Simulators
. Process Automation
. Test and Data Systems
. Networks and Systems Integration
. Professional Training
STI has played a prominent role in Navy, NASA, Air Force and BMDO space programs
since 1978. STI has also provided systems solutions to major corporations
including Lockheed-Martin, Loral, Motorola, Rockwell, GE Astro Space, Allied
Field Engineering, Harris and Perot Systems.
STI's experience includes providing ground, flight and test support to the
NRL Space System Division on advanced research and development and mission
critical systems, including the advanced control system software, for NRL's
state-of-the-art ground stations; the OSSE experiment software for NASA's
Compton Gamma Ray Observatory; software engineering systems, management and
analysis to develop a nationwide network for Perot Systems; X Window graphical
user interfaces for the AT&T Telstar 4 and NASA Mars Observer SSTI satellite
checkout stations for GE Astro Space; and data acquisition and control software
used worldwide in the power control centers of electric utility, transportation
and oil companies for Harris Controls Division.
In addition to developing, marketing and supporting certain products, STI
provides engineering and training services such as: system engineering to assist
in defining and specifying quantifiable, testable system requirements; software
engineering to improve software quality and productivity supported by formal
review, configuration control and audits by the STI quality assurance and
configuration management staff; integration and testing services for black box
level through system integration and final acceptance test according to
Department of Defense and industry standards; systems management in distributed
computing systems and information networks; and professional training services
including hands-on and interactive multi-media, computer-based training.
- ------------
/1/ Motorola is a registered trademark of Motorola, Inc.
/2/ IRIDIUM/(R)/ is a registered trademark and service mark of Iridium, Inc.
16
<PAGE>
STI is a charter member of the Software Engineering Institute's Industry
Affiliates Program and applies the SEI's software quality program.
PRODUCTS
- --------
In addition to providing software engineering, systems engineering,
integration and management and professional training services, STI has designed
and developed and manufactures and markets certain commercial products. STI owns
all of the rights in some of its products while other products were developed by
STI under contracts with customers to which products the customer retains
certain rights. See "Business - Research and Development." Descriptions of STI's
main commercial products follow.
OS/COMET/TM/. OS/COMET/TM/ is a general-purpose, integrated tool set and
run-time environment for the development of sophisticated command-and-control
software. STI receives approximately 3% of its revenues from the license of, and
maintenance agreements relating to, OS/COMET/TM/. STI originally developed the
OS/COMET/TM/ family of software products for the support of satellite ground
stations and for spacecraft integration and testing environments. Due to
flexibility of design and robust architecture, OS/COMET/TM/ software is readily
adaptable to virtually any feedback control requirement, such as factory
automation or supervisory process control. Currently, STI is developing
OS/COMET/TM/ prototype applications for the pipeline industry and factory
automation. The OS/COMET/TM/ systems can be run on any of several inexpensive,
POSIX-compliant UNIX/TM/ workstations and make extensive use of the X Window
System/TM/ and the OSF/Motif/TM/ graphical user environment standards.
The OS/COMET/TM/ environment, together with user-developed applications and
data bases, can be configured to satisfy most requirements for command, control
and data monitoring systems. Part of OS/COMET/TM/'s efficiency and popularity is
attributable to the elimination of redundancy. When any part of millions of
lines of custom software codes or attendant hardware designs developed during
past engineering projects may be applicable to new programs, these tested codes
and/or designs (also known as objects) may be identified by the user and
temporarily integrated into the new program. Using OS/COMET/TM/, the objects may
be tested by simulation to see if the integration will achieve the desired
result. Then the lines of code are appropriately utilized or not. Along the same
lines, OS/COMET/TM/ enables migration and consolidation of such object and
attendant hardware designs as may be useful from any of the predominant
engineering platforms to the task at hand. Use of OS/COMET/TM/ results in
reduction of software development and systems design and integration costs.
The development of the initial version of the COMET/TM/ software was funded
by the NRL under contract and the NRL retains certain rights to distribute that
version of COMET/TM/ within the government. STI retains the exclusive rights to
OS/COMET/TM/, the derivative version of COMET/TM/ which is UNIX based, although
STI has agreed to license to the NRL the derivative version, OS/COMET/TM/, for
their applications at no cost. Other governmental entities which want to use the
newer version will be required to pay license fees.
17
<PAGE>
TOTAL AIRPORT SECURITY AND CONTROL SYSTEM. STI has developed an airport
security and control system designed to mitigate terrorist threats and enhance
airport security. STI receives approximately 0.5% of its revenues from the
license of this product. The system works basically as follows: Baggage,
including all carry-on items are bar coded at check-in. Passenger's faces are
recorded in the computer and correlated with the luggage. Airport security can
track passengers and baggage from check-in to boarding. Baggage handlers, check-
in counters, customs, immigration, boarding gates and security checkpoints are
able to share data and video images via a high speed network of personal
computers. As passengers approach the boarding gate, the ticket taker scans the
bar code affixed to carry-on luggage with a hand-held scanner. If a passenger
attempts to board with carry-on luggage that was not in that passenger's
possession at check-in, the system alerts security personnel. Likewise, if
checked luggage is loaded on the aircraft and the corresponding passenger does
not board, the system alerts security personnel. Most of the current customers
of this product are outside of the United States.
MODEL 2032 DATA SWITCHING UNIT. This STI hardware product was developed for
use by satellite ground stations. However, the largest market for the product is
the telecommunications industry. The data switching unit allows data received to
be switched to several devices simultaneously. It is six times faster than
existing conventional products. STI receives approximately 0.5% of its revenues
from the sale of the data switching unit.
VALUE ADDED REMARKETER LICENSE. STI has entered in a remarketer license
with SL Corporation pursuant to which STI is entitled to incorporate SL software
into derivative products and distribute such products so long as they add
functionality to STI's products, are not a commercially acceptable substitute
for SL's products, are not competitive as a general purpose tool and do not
provide access to programmable libraries. End users must license the copies of
the SL software embedded in the derivative products. SL's software is a dynamic
graphics engine. STI derives approximately 1% of its revenues from these
derivative products.
RESEARCH AND DEVELOPMENT
- ------------------------
STI is primarily a professional services company providing research and
development ("R&D") for specific projects or tasks under contract to both
government and industry. Much of its R&D activities are funded under contracts
with government or industry. STI does however fund R&D for development or
enhancement of certain products which management believes are commercially
marketable. Generally, most of its contract funded R&D relates to satellite
command and control, developing systems for the ground and space segments of the
aerospace/defense industry and phone systems providers in the telecommunications
industry. Often through these projects, STI identifies potential software
product offerings for commonly used functions. These concepts are evaluated and,
based on estimated costs and commercial sale potential, funded and developed by
STI as separate products. The emphasis placed on low cost solutions by STI
customers mandates the need for reusable software components and products.
STI spent $154,856 in the fiscal year ended January 31, 1996, and $102,533
and $126,478 respectively for the years ended in 1995 and 1994 on company
sponsored R&D. With respect to the
18
<PAGE>
commercial development and enhancement of OS/COMET/TM/ STI has spent $2,000,000
over four years. See "Business - Products." This product was initially developed
over the course of ten years through contract funded R&D. The cost of developing
the high speed data switching unit was approximately $100,000 and of developing
the airport security system, approximately $50,000. The latter uses mostly off-
the-shelf software.
Presently, STI's R&D efforts, in addition to contract funded R&D, are
focused on enhancing the OS/COMET/TM/ product, developing an object oriented
data base system to complement OS/COMET/TM/ and attempting to penetrate new
markets. The proposed OS/COMET/TM/ enhancements include improved tools relying
heavily on graphics for increased utility and ease of operation. Proposed future
R&D projects include continued development of OS/COMET/TM/ focusing on
applications which target specific opportunities and further development of the
airport security system adding additional image recognition capabilities and
laser scanning. See "Risk Factors - Changing Technology."
All four of STI's facilities are available for R&D activity. See
"Business - Property." Each facility has extensive computer resources and is
networked to all other facilities. The following equipment owned by STI is fully
engaged for design development tasks:
. 40 Sun workstations
. 1 HP 9000 workstation
. 50 McIntosh computers
. 30 PC compatible computers
. 4 Vax computers
. 20 terminals
. Corporate network (Internet)
MARKETING
- ---------
According to the Aerospace Industries Association, space related sales
within the aerospace/defense industry (including satellite and launch vehicles)
for 1995 were $27.0 billion, an increase of 1.4% over 1994 and are expected to
be $28.1 billion for 1996. See "Risk Factors - Dependence on Satellite Command
and Control Industry." STI's management believes that approximately 10% of such
funds are spent for software development costs. Although the military and civil
space agency sectors are shrinking, the commercial sector of the aerospace
industry, particularly satellite communications, has been expanding. According
to industry studies, there are in excess of 900 satellite missions pending
through 2004. Communications satellites make up at least two-thirds of the
pending launches of which more than two-thirds of those are proposed commercial
launches, by such companies as Hughes, Lockheed-Martin, Loral, Motorola and TRW.
Most of STI's opportunities to bid on contracts for systems development,
software engineering or support are derived through solicitation of, or by
initiation from, STI's existing customers. STI's solicitation efforts are made
through four in-house sales personnel.
19
<PAGE>
Prospects for STI's commercial products such as OS/COMET/TM/ and the
data switching unit are generated through direct mail solicitation handled by an
advertising firm. STI has also recently entered into a joint marketing agreement
to market OS/COMET/TM/ with a division of Harris Computer Systems Corp. located
in Fort Lauderdale, Florida in connection with its sale of Harris Nighthawk
computer systems. Approximately one-third of the Nighthawk systems are used by
customers for various engineering applications involving telemetry to which
OS/COMET/TM/ is applicable. In addition, STI advertises in Space News Magazine
and participates in various trade shows.
Prospects for sale of the airport security system are generated in
cooperation with World Wide Security Systems, Inc., an independent airport
security consulting firm that markets the system as an affiliate of STI.
BACKLOG
- -------
STI estimates that its backlog orders believed to be firm as of January 31,
1996 and 1995 were $46,753,100 and $35,528,657. Approximately $17,631,000 of the
1996 backlog relates to the unfunded portion of government contracts. STI
estimates that 45% of its backlog on January 31, 1996 will be completed during
the fiscal year which will end on January 31, 1997. See "Risk Factors - Shortage
of Qualified Employees."
COMPETITION
- -----------
STI is best known for its development of command and control technology for
low earth orbit communication satellite systems. See "Risk Factors - Dependence
on Satellite Command and Control Industry." In general, aerospace/defense
contractors must obtain or produce this type of software in connection with the
manufacture and sale of satellites, but place little emphasis on this relatively
small area and often contract with other companies, such as STI, to provide the
software. Thus, many of STI's customers are also its competitors and provide, in
some circumstances, similar products as STI as well as engaging STI to provide
products. See "Risk Factors - Competition." In addition, there are not many
"independent" competitors because of the expertise involved and the cost of
failure. Satellite systems and command and control software are considered
"mission critical." Without software that is able to control the satellite, a
multi-billion dollar satellite or constellation of satellites could be placed in
orbit and be unable to perform to mission specifications.
STI believes it is one of only three, and the largest of these three,
"independent" companies nationwide that derive substantially all of their
revenues from development of tracking, telemetry and command and control
software related to satellites and satellite ground station support. In addition
to its two direct competitors, STI competes with many of the large
aerospace/defense contractors which are also often its customers. See "Risk
Factors - Competition." Companies within the professional services sector of the
computer industry are also potential competitors of STI. However, with the
exception of IBM through a subsidiary, Federal Systems Company which has been
sold to Loral Corporation (an aerospace/defense contractor), STI is not aware of
any contracts for development of satellite tracking, telemetry or command and
control software awarded
20
<PAGE>
to these types of companies. Many computer professional services companies, such
as Computer Sciences Corporation, do service satellite ground stations with
information technologies, such as systems to organize, archive, interpret and
analyze telemetered data. These and other computer companies also may compete
with some of STI's COTS products.
STI's two direct competitors which also derive substantially all of their
revenue from the development of satellite related software are Integral Systems,
Inc. and Talarian Corporation. Integral Systems, Inc. is a 13 year old public
company with gross revenues in the $9 million range which has approximately 85
employees. Talarian Corporation is a seven year old privately held company with
approximately 16 employees that derives most of its income from contracts with
Lockheed-Martin. Its gross revenues are in the $4 million range.
There are eight leading aerospace/defense contractors in the United States
that derive revenues from space related sales, most of which have developed
tracking, telemetry and command and control software in-house as primary
contractors, through sub-contractors and through outsourcing. However, revenues
derived from development of such software represent only a minuscule portion of
their total revenue. The software is nevertheless essential to their contracts
to manufacture satellites. These aerospace/defense contractors are all
significantly larger than STI with significantly greater resources. See "Risk
Factors - Competition." They are GRC International, Harris Corporation, Hughes
Electronics Corporation, Lockheed-Martin Corporation, Loral Corporation,
Northrop Grumman Corporation, Rockwell International Corporation and TRW, Inc.
See "Risk Factors - Competition."
MANUFACTURING
- -------------
In addition to providing software and system development and professional
services, STI produces certain computer software and hardware products.
Basically, software kits consist of the software license, registration card,
documentation and diskettes. A vinyl insert holds the diskettes and a binder
organizes the documentation which may include 1,000 or more pages. Each kit is
labeled and shrink-wrapped. With the exception of documentation, materials are
obtained on an as-needed basis. Two employees can easily produce several kits
per day. All of STI's products are high price/low volume; therefore, very little
inventory need be maintained.
In order to provide its high speed switch matrix (hardware), STI contracts
out the production of the circuit board, purchases components and assembles and
tests the product in-house just prior to shipment. This is a high margin very
low volume item sold primarily for use in satellite ground stations. STI
generally has a 120 day lead-time to deliver the product and, therefore, does
not need to keep it in inventory.
All of the materials used in producing the software kits and the high speed
switch matrix are available from a variety of vendors. Thus, STI has not had,
and does not expect to have, any problems obtaining competitive prices from
suppliers or in effecting quick deliveries.
21
<PAGE>
PROPERTY
- --------
STI's and the Issuer's corporate headquarters are located in Melbourne,
Florida near the "Space Coast." STI is currently leasing a 29,000 square foot
building pursuant to a ten year lease which will expire on December 1, 2005. STI
has the right to renew the lease for two additional five year terms and has an
option to purchase the property which may be exercised during certain periods
prior to the expiration of the fifth year and of the tenth year of the lease.
The purchase price is the fair market value of the property determined by
appraisal, but in no event less than the outstanding balance on the mortgage.
In addition to the corporate headquarters, STI leases 15,296 square feet of
space in Alexandria, Virginia which lease will expire August 31, 1998 (subject
to STI's right to renew for up to two additional one year terms), approximately
2,300 square feet of space in Denver, Colorado which lease will expire on
December 30 of this year, and 1,046 square feet of space in LaPlata, Maryland
which will expire October 14, 1997 (subject to STI's right to renew for up to
three additional one year terms).
STI believes that, with the new addition to its headquarters, its space
needs will be met until 1998. To meet anticipated growth requirements after
1998, STI will lease additional office space as necessary. Due to the nature of
its business, there are no special facility issues to consider since software
development can be conducted in standard office space and its manufacturing
requirements are minuscule and most often handled through sub-contractors.
EMPLOYEES
- ---------
STI had 247 employees, of which 224 were salaried engineers, on January 31,
1996. Of these employees, approximately 50% work at corporate headquarters in
Florida, 35% in the Virginia and Maryland offices in the Washington, D.C. area,
and 5% at the Colorado office with the remaining 15% working out of several
offices and/or their homes. Approximately 90% work in software development with
the remaining 10% in administrative positions. See "Risk Factors -Shortage of
Qualified Employees."
HISTORY
- -------
The Issuer was formed as a Delaware corporation in 1996 to acquire all of
the issued and outstanding stock of STI. See "The Distribution." STI, a Florida
corporation, was formed in 1978 to take advantage of a contract with the NRL
obtained by four aerospace engineers. The contract was to support an NRL ground
station, the software for which the four has written as employees of various
large aerospace/defense contractors. This contract established STI's working
relationship with the NRL which continues to be one of its two largest
customers. The expertise and technology acquired through its efforts for the NLR
enabled STI ro pursue related work with other customers including NASA, the Air
Force and commercial space companies. The intensive software engineering
discipline developed by STI in support of mission critical space systems also
enabled STI to diversify into other software related fields such as process
control and information systems.
22
<PAGE>
Out of its experiences over the years and in furtherance of its
diversification efforts, STI has been able to identify and develop software
products based on commonly occurring requirements in programming for the
satellite industry and now offers these as "commercial off-the-shelf" products
that complement its aerospace engineering expertise.
In 1993, Motorola awarded STI a long-term contract to develop most of the
software required for its IRIDIUM project which STI believes is the leading
technological model for low-earth orbit satellite systems for point-to-point
cellular phone communications in the world. It will consist of a constellation
of 66 satellites. More recently, in 1995, STI was awarded a $4,000,000 contract
to provide similar software for the GPS Group System being developed by Loral
Federal Systems. With these contracts, STI has further diversified its business
and reduced its reliance on government contracts.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
The following is management's discussion and analysis of (i) STI's
financial condition as of January 31, 1996 compared with the fiscal years ended
January 31, 1995 and 1994; (ii) STI's operations for the years ended January 31,
1996, 1995 and 1994; and (iii) STI's financial condition and results of
operations for fiscal years ended January 31, 1996, 1995 and 1994.
LIQUIDITY. As of January 31, 1996, STI's ratio of current assets to current
liabilities was 2.1 down from 2.3 for the year ended January 31, 1995. This
decrease is due to the large accounts receivable balances accumulating over this
period as a result of the Motorola contract. The average collection period was
86 days for the fiscal year 1996, down from 99 days for the year ended January
31, 1995. Again, this fluctuation is due to the Motorola contract which is paid
based on milestones. The quick liquidity ratios were 2.0 and 2.2 for the fiscal
years ended January 31, 1996 and 1995, respectively.
STI's cash portfolio (cash and cash equivalents) increased $261,444 at
January 31, 1996. The increase is due to: cash provided by operating activities
of $2,592,895, cash used in investing activities of $(1,247,133) and cash used
in financing activities of $(1,084,318). The cash provided by operating
activities increased primarily due to an increase in cash received from
customers. STI's cash portfolio decreased $(959,367) at January 31, 1995. The
decrease is due to: cash used in operating activities of $(1,036,133), cash used
in investing activities of $(689,295) and cash provided by financing activities
of $766,061. The decrease in cash used in operating activities is primarily due
to an increase in payments made to suppliers and employees.
In fiscal year 1996 and 1995 STI acquired $1,122,226 and $526,512,
respectively, of capital assets compared with $198,883 in 1994. This was due
primarily to the increase in the number of STI's commercial contracts (as
opposed to government contracts) in fiscal year 1996 and 1995. These contracts
required the purchase of substantial additional computing resources. Capital for
equipment purchases is expected to slow for the next two fiscal years as STI has
now modernized and acquired sufficient computer resources for expected
operations. This increase in capital assets
23
<PAGE>
in fiscal year 1996 also had a large impact on depreciation expense and affected
operating activities. In fiscal year 1996 and 1995, STI also spent $161,785 and
$162,783, respectively, in capitalized research and development costs to develop
the new product, OS/COMET, compared to none in fiscal year 1994.
Cash used in financing activities for fiscal year 1996 was $(1,084,318) of
which $900,000 was used to pay off the $900,000 borrowed under a line of credit
in fiscal year 1995 when $766,061 of cash was provided by financing activities.
Dividends of $0.30, $0.15 and $0.15 per share were paid in fiscal year 1996,
1995 and 1994, respectively, and totaled $177,955, $88, 977 and $88,977. Cash
flow used in financing activities for fiscal year 1994 was $(191,895). Principal
payments on long-term debt amounted to $6,363, $6,562 and $32,341 in fiscal
years 1996, 1995 and 1994, respectively.
As of January 31, 1996 and 1995, STI had bank line of credits of $1,800,000
and $900,000, respectively. Draws against the line as of January 31, 1996 and
1995 were $0 and $900,000, respectively. Management believes existing cash,
funds generated by operations and the available line of credit will be
sufficient to meet STI's operating requirements in fiscal year 1997.
PROVISION FOR INCOME TAXES. The effective rate for the year ending January
31, 1996 was 40%, up 21% from the fiscal year 1995 effective rate of 33%. The
increase is primarily from the state taxes on the increased taxable income and
increased sales in other states. The notes to the Financial Statements describe
the differences between the U.S. statutory and effective income tax rates.
ANALYSIS OF OPERATIONS. Sales for the period ending January 31, 1996 were
$25,291,635, up 28% from fiscal year 1995 sales of $19,760,600. These sales
reflect a 51% to 49% government to commercial revenue split compared to a 69% to
31% split in fiscal year 1995. Fiscal year 1995 sales were 18% higher than
fiscal year 1994 sales of $16,760,901. Gross profit jumped from $3,696,993
(18.7% of sales) to $5,883,499 (23.3% of sales) from the year ended January 31,
1995 to the year ended January 31, 1996. Gross profit for fiscal year 1994 was
consistent with 1995 at $3,360,152 (20.0% of sales). Net income rose from
$493,610 (2.9% of sales) in 1994 to $722,210 (3.6% of sales) in 1995 to
$1,131,741 (4.5% of sales) in 1996). Management attributes these increases to
STI's successful transition from the defense related industry to commercial
operations in a short period of time and the higher margin on commercial fixed
price contracts compared to cost plus government contracts.
Fiscal year 1995 saw STI obtain its first significant commercial contracts
from Motorola when it was engaged to provide satellite ground station software
for a constellation of satellites that will provide worldwide cellular telephone
service. The Motorola contract allowed STI to leverage its technology into the
commercial arena. In fiscal year 1996, STI repeated this feat by winning a
contract to provide similar software for the Global Positioning Satellite (GPS)
System. With these two contracts, STI is involved in the two premier satellite
endeavors taking place today. STI is also teamed with the GPS incumbent in
pursuit of the next generation satellite system.
24
<PAGE>
The current contract base provides sufficient backlog to maintain STI
through FY 1997. STI invested in excess of $1,000,000 over the last 18 months in
its premier software product OS/COMET. This investment facilitated the
significant contract awards that management believes would have been impossible
otherwise. Commitment to maintain support for the product will continue through
fiscal year 1997 and is necessary to deliver the services under contract.
STI opened its third branch office in LaPlata, Maryland in October 1995 to
support the GPS contract efforts and is already expanding that facility. STI
completed expansion of its corporate headquarters to facilitate its increased
commercial activity. These increased facility costs should not affect STI's
overhead as these increases were made to accommodate existing needs and not
future expansion. The commercial satellite business is projected to continue
with strong sales worldwide and is expected to show moderate increases
throughout the end of the decade, providing additional opportunities for STI.
Demand for software engineers is expected to provide new opportunities for
STI, but will place a premium on the efforts to retain the current work force.
This risk will put additional pressure on overall payroll costs, but should be
an industry wide phenomenon. Management believes that benefits offered by STI
remain above the level of its competition and should help to stabilize its
workforce. Overhead costs for benefits should remain flat and maintain the same
percentage of wages for fiscal year 1997. Management believes it is important
that STI not reduce benefits while the software engineer demand remains high. To
do so and hold costs stable has been a management challenge and will continue to
be so in the near future; however, increased competition in the health insurance
market has helped to ease some of this pressure. Maintaining STI's comprehensive
benefit plan will also facilitate its ability to sustain an effective recruiting
campaign.
LEGAL PROCEEDINGS
-----------------
Neither the Issuer nor STI is currently involved in any material legal
proceedings.
25
<PAGE>
MANAGEMENT
----------
OFFICERS AND DIRECTORS OF THE ISSUER AND STI
- --------------------------------------------
<TABLE>
<CAPTION>
NAME POSITION WITH THE ISSUER (1) POSITION WITH STI
- ---- ---------------------------- -----------------
<S> <C> <C>
Jeffrey C. Clift President, Director President, Director
Don F. Riordan, Jr. (2) Secretary/Treasurer, Director Secretary/Treasurer,
Director
William K. Presley Chairman of the Board, Vice Chairman of the Board,
President, Director Vice President, Director
Thomas O. Chewning, Jr. Vice President, Director Vice President, Director
Jack D. Daily Vice President, Director Vice President, Director
David J. Nowacki (2) Vice President, Director Vice President, Director
Daniel J. Stark Vice President, Director Vice President, Director
James A. Traficant Vice President, Director Vice President, Director
David R. Reading Vice President Vice President
Dean W. Boley Director Director
P. Bradley Walker Director Director
- ---------------------------------------------------------------------------------------
</TABLE>
(1) All persons listed have held such positions with the Issuer since May 1,
1996.
(2) Mr. Riordan and Mr. Nowacki are the Trustees of the ESOP.
Officers serve at the discretion of the Board of Directors. Directors hold
office until the next annual meeting of shareholders and until their successors
have been elected and accept office. Directors receive directors' fees of $3,500
per year. Mr. Walker is employed by STI as a management consultant through
Joseph Walker & Sons, Inc. and received $48,000 during the 1996 fiscal year. See
"Management - Certain Transactions."
Dean W. Boley, age 58, was one of the founders of STI and has been a
director and employee of STI since its beginning in 1978. He has held various
offices with STI including the office of President. He retired from STI in
October 1992. He received his B.S. in Petroleum Engineering from West Virginia
University in 1961.
26
<PAGE>
Thomas O. Chewning, Jr., age 51, is currently a Vice President of STI. He
is also Director of Engineering for STI. Mr. Chewning has been a director and
President, Secretary and Treasurer of STI. He began his employment with STI in
1982. He attended Duke University and received a B.S. in Math in 1967 and M.S.
EE in 1969, both from the Florida Institute of Technology.
Jeffrey C. Clift, age 40, has been a director of STI since February 1993
and President and Chief Executive Officer of STI since October 1992. Prior to
becoming President, Mr. Clift had been Director of Operations for STI since
1988. From 1983 to 1988, he was a Software/Systems engineer for STI. As a
Software/Systems engineer, he gained experience in the analysis, design and
development of real-time software systems for Department of Defense satellite
applications including space data processing, satellite system and subsystem
testing, ground station operations, mission support and payload processing. From
1978 to 1982, he was a software engineer for Harris Corporation. Mr. Clift
received a B.S. EE in 1977 from the University of Florida.
Jack D. Daily, age 54, has been a director of STI since 1988. He has also
been a Vice President and Director of Field Operations. Currently, Mr. Dailey is
Director of Space Operations. He began employment with STI in 1981. He received
his B.S. in Mathematics in 1965 from the University of Alabama and completed
course work at the University of Miami in the masters program for Management
Science.
David J. Nowacki, age 43, has been a director of STI since 1989 and a Vice
President of STI since 1991. Since November 1992, he has also been the Melbourne
Operations Manager and is responsible for operations at STI's Melbourne
facility. He has been an employee of STI since 1980. Prior to his employment
with STI, he was a software engineer with the RCA Service Corporation on the
Eastern Test Range from 1976 to 1980 where he was assigned to a missile tracking
ship. Mr. Nowacki received a B.S. in Mathematics from Waynesburg College in
Pennsylvania in 1974 and an M.S. in Mathematics from West Virginia University in
1976.
William K. Presley, age 49, has been a director of STI since 1987, Chairman
of the Board since 1989 and Vice President (or President in 1990) since 1987. He
has been employed by STI since July, 1983 as a chief systems engineer. He
received his B.S. EE from Auburn University in Alabama in 1969.
David R. Reading, age 53, has been a Vice President of STI since 1991. He
is also Director of Space Operations. He has been employed by STI since 1980 and
was a director of STI from 1992 to 1994. He received a B.S. in Computer Science
from University College of Maryland in 1981.
Don F. Riordan, Jr., age 49, has been a director of STI since 1980 and
Secretary/Treasurer and Chief Financial Officer since 1991 as well as holding
the offices of Chairman of the Board, Vice President, Secretary and Treasurer at
various times prior to 1991. He has been employed by STI since 1979 and, in
addition to administrative duties, writes and tests access software. Prior to
joining STI, Mr. Riordan was project leader on several projects for the Air
Force Eastern Test Range in Cape Canaveral as well as an on-site programmer for
several Air Force ETR Missile Tracking
27
<PAGE>
Stations. He received his B.S. in Mathematics from Wake Forest University in
North Carolina in 1968.
Daniel J. Stark, age 53, has been a director of STI since 1978. He has been
a Vice President since 1983. He has also held the offices of President, Chairman
of the Board, Secretary and Treasurer as well as Vice President in certain years
prior to 1983. He has been an employee of STI from 1993 to the present and from
1978 to 1989. From 1989 to 1993, he was a software engineer with, and an owner
of, Sysgen International Inc. where he developed the interface command and
telemetry CTRUS box to the COMET operating system as well as other projects,
many of which were related to the COMET operating system. Prior to joining STI,
Mr. Stark was a system programmer with the RCA Service Corporation from 1976 to
1978. Mr. Stark received a B.A. in Mathematics from Bellarmine College in
Louisville, Kentucky in 1965 and an M.S. in Mathematics from the Florida
Institute of Technology in 1971.
James A. Traficant, age 34, has been a director of STI since 1990, Vice
President and Director of Advanced Programs since 1993 and an employee of STI
since 1984. Mr. Traficant currently is involved in the development and
management of the Advanced Programs Division. As Director of Business
Development, he worked with a founder and the President of STI to establish long
term growth and diversification strategy for STI during which time STI was
awarded contracts with commercial firms. He was also instrumental in STI's
involvement in the IRIDIUM program. Mr. Traficant received his B.S. in
Electrical Engineering from Geneva College in Pennsylvania in 1984 and his
M.B.A. from George Washington University in Washington, D.C. in 1992.
P. Bradley Walker, age 37, became a director of STI in March 1996. He has
been a consultant to Joseph Walker & Sons, Inc. (which provides consulting
services to STI) since 1992. He is also the sole proprietor of PBW Consulting.
He has been the Chairman and an owner of The Walker Group, Inc., a family
holding company, for the past eight years. He is also Secretary of Monogenesis
Corporation. The Walker Group, Inc., as a shareholder of Monogenesis, will own
stock of the Issuer after the Distribution.
28
<PAGE>
EXECUTIVE COMPENSATION
- ----------------------
The following table sets forth the compensation of the President (the Chief
Executive Officer), the four most highly compensated executive officers and the
most highly compensated employee of STI who is not also an executive officer for
the fiscal years ending January 31, 1996, 1995 and 1994. The Issuer has not paid
any compensation.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
- -------------------------------------------------------------------------------------------
Other Annual Restricted Stock
Name and Salary Bonus Compensation (1) Awards (2)
Principal Position Year ($) ($) ($) ($)
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Jeffery C. Clift 1996 116,928 25,013 3,500 24,987
President, CEO 1995 112,752 30,000 3,500 -0-
1994 104,400 20,000 3,500 -0-
- -------------------------------------------------------------------------------------------
Thomas O. Chewning, Jr. 1996 106,312 7,013 3,500 39,310
Vice-President 1995 101,476 11,000 3,500 -0-
1994 85,539 4,000 3,500 -0-
- -------------------------------------------------------------------------------------------
Rudiger D. Lichti 1996 78,025 -0- -0- 110,556
1995 77,360 -0- -0- -0-
1994 69,927 -0- -0- -0-
- -------------------------------------------------------------------------------------------
Don F. Riordan, Jr. 1996 82,212 -0- 3,500 110,556
CFO, Secretary/ 1995 76,206 -0- 3,500 -0-
Treasurer 1994 69,838 -0- 3,500 -0-
- -------------------------------------------------------------------------------------------
Daniel J. Stark 1996 87,034 -0- 3,500 110,556
Vice President 1995 86,503 -0- 3,500 -0-
1994 39,040 -0- 3,500 -0-
- -------------------------------------------------------------------------------------------
James A. Traficant 1996 107,532 110,005 3,500 124,025
Vice President 1995 101,700 33,000 3,500 -0-
1994 86,016 25,000 3,500 -0-
- -------------------------------------------------------------------------------------------
</TABLE>
(1) These are annual director's fees.
(2) STI issued a total of 46,986 shares in restricted stock bonuses for fiscal
year 1996 valued at $659,214. Of these shares, 36,563 shares valued at
$512,979 were issued to the persons listed in this table. The value of all
of STI's shares at the end of the 1996 fiscal year was
29
<PAGE>
$9,783,400. All restricted stock was vested upon grant. Dividends will be
paid to the extent paid on any shares. STI has a history of paying annual
dividends. All shares of stock of STI were exchanged for Common Shares and
Class B Common Shares as of the date hereof. See "The Distribution."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION IN
- --------------------------------------------------------------
COMPENSATION DECISIONS
- ----------------------
Prior to this year, executive compensation was determined by STI's board of
directors which consisted of executive officers of STI. Effective for fiscal
year 1997, STI established a compensation committee. The members of the current
committee are Dean Boley, Dave Nowacki, Don Riordan and Brad Walker. The
compensation committee is working on an executive stock incentive plan which
will use the Issuer's Class D Common Shares. The Class D Common Shares would be
convertible to Common Shares based upon a participant's performance. Officers
and divisional managers would be eligible to participate at the discretion of
the President. Various scoring groups would be established under which the
participants will be scored and through which shares will be distributed.
CERTAIN TRANSACTIONS
- --------------------
Brad Walker, a director of STI since March of 1996, provides consulting
services to STI through Joseph Walker & Sons, Inc. ("JWSI") which received
$48,000 in consulting fees from STI during the past year as well as warrants.
See "Principal Shareholders and Security Ownership of Management." In addition,
upon completion of the Distribution, JWSI will receive additional fees of
$45,000. JWSI also expects to provide consulting services to STI and the Issuer
in the future from which fees Mr. Walker is expected to benefit.
In addition, Mr. Walker is Secretary of Monogenesis and Chairman and
control shareholder of The Walker Group, Inc. which will receive shares of stock
of the Issuer from Monogenesis in the Distribution.
30
<PAGE>
PRINCIPAL SHAREHOLDERS AND SECURITY
OWNERSHIP OF MANAGEMENT
-----------------------
The following table sets forth information with respect to ownership of
issued and outstanding stock and warrants of the Issuer by management and 5% or
greater shareholders as of the date hereof:
<TABLE>
<CAPTION>
Total Number of Percent Number of
Securities Owned of Registered
Name and Address Title of Class Beneficially (1) Class (2) Shares (3)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dean W. Boley Common Shares 553,160 15% 138,290
439 Bentley Street Class B Common Shares 110,632 16%
Oviedo, Florida Common Stock Purchase Warrants 74,610 7%
- ---------------------------------------------------------------------------------------------------------
Thomas O. Chewning, Jr. Common Shares 61,755 2% 15,439
931 Fostoria Drive Class B Common Shares 12,351 2%
Melbourne, Florida Common Stock Purchase Warrants 8,328 1%
- ---------------------------------------------------------------------------------------------------------
Jeffrey C. Clift Common Shares 8,905 * 2,226
571 Wethersfield Place Class B Common Shares 1,781 *
Melbourne, Florida Common Stock Purchase Warrants 1,200 *
- ---------------------------------------------------------------------------------------------------------
Jack D. Daily Common Shares 13,435 * 3,359
135 Moncure Drive Class B Common Shares 2,687 *
Alexandria, Virginia Common Stock Purchase Warrants 1,812 *
- ---------------------------------------------------------------------------------------------------------
Rudiger D. Lichti Common Shares 253,470 7% 63,368
304 Palm Court Class B Common Shares 50,694 7%
Indialantic, Florida Common Stock Purchase Warrants 34,188 3%
- ---------------------------------------------------------------------------------------------------------
William K. Presley Common Shares 11,645 * 2,911
635 Kenwood Court Class B Common Shares 2,329 *
Satellite Beach, Florida Common Stock Purchase Warrants 1,572 *
- ---------------------------------------------------------------------------------------------------------
David R. Reading Common Shares 7,135 * 1,784
695 Caribbean Road Class B Common Shares 1,427 *
Satellite Beach, Florida Common Stock Purchase Warrants 960 *
- ---------------------------------------------------------------------------------------------------------
Don F. Riordan, Jr. Common Shares 257,790 7% 64,448
414 LaCosta Street Class B Common Shares 51,558 7%
Melbourne Beach, Florida Common Stock Purchase Warrants 34,770 3%
- ---------------------------------------------------------------------------------------------------------
Daniel J. Stark Common Shares 552,430 15% 138,108
5180 Sandlake Drive Class B Common Shares 110,486 16%
Melbourne, Florida Common Stock Purchase Warrants 74,514 7%
- ---------------------------------------------------------------------------------------------------------
James A. Traficant Common Shares 44,200 1% 11,050
8305 Peach Court Class B Common Shares 8,840 1%
Fairfax Station, Virginia Common Stock Purchase Warrants 5,964 1%
- ---------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Total Number of Percent Number of
Securities Owned of Registered
Name and Address Title of Class Beneficially (1) Class (2) Shares (3)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
P. Bradley Walker (4) Common Shares 63,750 2% 63,750
12 Green Brier Class B Common Shares 0 0%
Parkersburg, West Virginia Common Stock Purchase Warrants 102,000 10%
- ---------------------------------------------------------------------------------------------------------
STI ESOP (5) Common Shares 1,704,430 45% 1,704,430
1226 Evans Road Class B Common Shares 340,886 49%
Melbourne, Florida Common Stock Purchase Warrants 229,896 21%
- ---------------------------------------------------------------------------------------------------------
Joseph Walker & Sons, Inc. Common Shares 0 0% 0
88 Walker Creek Road Class B Common Shares 0 0%
Walker, West Virginia Common Stock Purchase Warrants 174,996 16%
- ---------------------------------------------------------------------------------------------------------
Total number of shares Common Shares 1,574,205 42% 441,365
owned by directors and Class B Common Shares 302,091 43%
executive officers as a Common Stock Purchase Warrants 305,730 29%
group (4)
- ---------------------------------------------------------------------------------------------------------
</TABLE>
* Less than 1%.
-------------------------------------------------------------------------
(1) Except as described below, all owners have sole voting power and sole
investment power over all shares listed. The number of shares owned
does not include shares allocated to such person's account in the
ESOP.
(2) These figures do not include any Common Shares or Class B Common
Shares which could be issued upon the conversion of the outstanding
Warrants. Holders of the Warrants could receive up to 1,070,270
Common Shares. See "Securities".
(3) None of the Class B Common Shares will be registered. All of the
Warrants are registered.
(4) The shares listed as beneficially owned by Mr. Walker are owned by
The Walker Group, Inc. Mr. Walker is Chairman and control shareholder
of The Walker Group, Inc. See "Management - Certain Transactions."
(5) The ESOP shares are voted by the trustees. Don Riordan and David
Nowacki are currently the trustees.
Joseph Walker and Sons, Inc. ("JWSI") performed certain consulting
services for STI and the Issuer in partial consideration of which it received
warrants of STI which it exchanged for 174,996 Warrants of the Issuer which
constitute approximately 16% of the total issued and outstanding Warrants. If
all of the Warrants are exercised by JWSI and no other Warrants are exercised or
shares issued, JWSI will own approximately 4% of the issued and outstanding
Common Shares.
32
<PAGE>
SECURITIES
----------
DESCRIPTION OF CAPITAL STOCK
- ----------------------------
COMMON SHARES. The Issuer is authorized to issue 30,000,000 Common Shares,
par value $.01 per share, of which 3,786,000 shares were issued and outstanding
as of the date of this Prospectus. There will be approximately 2,023 holders of
the issued and outstanding Common Shares after the Distribution. See "Principal
Shareholders." The holders of Common Shares of the Issuer are entitled to one
vote per share on all entitled matters including the election of directors and
do not have cumulative voting rights. With respect to the election of directors,
holders of Common Shares (together with holders of Class D Common Shares and of
any Preferred Shares with voting rights) voting as a separate class are entitled
to elect 25% of the members of the Board of Directors of the Issuer. Holders of
Class B Common Shares are entitled to elect the remaining directors. See "Risk
Factors - Control By Holders of Class B Common Shares." Notwithstanding the
foregoing, if, on the record date for any shareholders' meeting at which
directors are to be elected, the number of issued and outstanding Common Shares,
Class D Common Shares and voting Preferred Shares is less than 10% of the
aggregate number of issued and outstanding voting shares of all classes, all
directors will be elected by the holders of all voting shares voting together.
The holders of Common Shares have a noncumulative $.05 per share annual
dividend preference over non-stock dividends paid on Class B Common Shares
(described below) from funds legally available for dividends when, as and if
declared by the Board of Directors of the Issuer. See "Risk Factors - Lack of
Dividends." In addition, holders of Class B Common Shares may not receive any
dividends unless holders of Common Shares receive a dividend per share at least
equal to the dividend per share paid to holders of Class B Common Shares. Stock
dividends may only be paid to holders of Common Shares in Common Shares and only
if the same number of Class B Common Shares will be paid with respect to each
outstanding Class B Common Share. The payment of dividends may also be subject
to preferential or identical rights, if any, of the holders of other outstanding
securities. See "Risk Factors - Authorization of Preferred Stock." Common Shares
or Class B Common Shares may not be combined or subdivided without at the same
time making a proportionate combination or subdivision of the shares of the
other of such classes.
Holders of Common Shares are also entitled to share ratably in all of the
assets of the Issuer available for distribution to holders of common shares
(including Class B Common Shares and Class D Common Shares) upon liquidation,
dissolution or winding up of the affairs of the Issuer subject to the preference
of holders of Common Shares, but only to the extent of the par value of such
Common Shares, and subject to any preferential rights of the holders of any
other outstanding securities. See "Risk Factors - Authorization of Preferred
Stock." Common Shares do not have preemptive, subscription or conversion rights
and are not subject to call or redemption (there are no applicable sinking fund
provisions). All Common Shares now outstanding are fully paid and nonassessable.
CLASS B COMMON SHARES. In addition to Common Shares, the Issuer is
authorized to issue 5,000,000 Class B Common Shares, $.01 par value per share,
of which 697,320 shares were issued
33
<PAGE>
and outstanding as of the date hereof. See "Principal Shareholders." Holders of
Class B Common Shares have the right to one noncumulative vote per share on all
matters on which they are entitled to vote. For the election of directors, the
holders of a majority of Class B Common Shares are entitled to elect 75% of the
members of the Board of Directors. If, on the record date for any shareholders'
meeting at which directors are to be elected, the number of issued and
outstanding Common Shares, Class D Common Shares and voting Preferred Shares is
less than 10% of the aggregate number of issued and outstanding voting shares of
all classes, all directors will be elected by the holders of all voting shares
voting together. If more than 90% of the aggregate number of issued and
outstanding Common Shares, Class B Common Shares, Class D Common Shares and
voting Preferred Shares are Class B Common Shares, the holders of a majority of
Class B Common Shares will in practice be able to elect all of the members of
the Board of Directors. See "Risk Factors - Control By Holders of Class B Common
Shares."
Holders of Class B Common Shares are entitled to receive dividends when, as
and if declared subject to a non-cumulative $.05 per share annual dividend
preference on each Common Share. See "Risk Factors - Lack of Dividends." In
addition, holders of Class B Common Shares may not receive any dividend unless
holders of Common Shares receive a dividend per share at least equal to the
dividend per share paid to holders of Class B Common Shares. Stock dividends may
only be paid to holders of Class B Common Shares in Class B Common Shares and
may only be paid in shares at all if the same number of Common Shares will be
paid with respect to each outstanding Common Share. The payment of dividends may
also be subject to preferential or identical rights, if any, of the holders of
other outstanding securities. See "Risk Factors - Authorization of Preferred
Stock."
Holders of Class B Common Shares are also entitled to share ratably in all
of the assets of the Issuer available for distribution to holders of common
shares (including Common Shares and Class D Common Shares) upon liquidation,
dissolution or winding up of the affairs of the Issuer, subject to the
preference of holders of Common Shares, but only to the extent of the par value
of such Common Shares, and subject to any preferential rights of other
shareholders. See "Risk Factors -Authorization of Preferred Stock." Holders of
Class B Common Shares have preemptive rights only as to Class B Common Shares.
Class B Common Shares are not subject to call or redemption (there are no
applicable sinking fund provisions). All Class B Common Shares now outstanding
are fully paid and nonassessable.
In addition, the Board of Directors must seek the approval of a majority of
the holders of Class B Common Shares to grant rights to subscribe for, purchase
or issue shares of authorized and unissued Class B Common Shares. Common Shares
or Class B Common Shares may not be combined or subdivided without at the same
time making a proportionate combination or subdivision of the shares of the
other of such classes. Each share may also be converted into one Common Share at
any time at the option of the holder.
At this time, approximately 49% of the issued and outstanding Class B
Common Shares are owned by the ESOP. See "Principal Shareholders and Security
Ownership of Management." The ESOP, as the controller of 49% of shares of the
outstanding Class B Common Shares, is the largest
34
<PAGE>
shareholder of Class B Common Shares. The holders of Class B Common Shares elect
75% of the directors and generally control the Issuer. See "Risk Factors -
Control By Holders of Class B Common Shares."
CLASS D COMMON SHARES. Class D Common Shares are a convertible security
created in order to secure highly motivated executive personnel for the Issuer
and its subsidiaries and take the place of compensation stock options, although
the Issuer remains authorized to issue stock options. There are 600,000 Class D
Common Shares authorized at $.01 par value per share. Class D Common Shares are
identical to Common Shares and have equal rights and privileges with Common
Shares except as described below. Class D Common Shares are nontransferable. The
Board of Directors, by resolution, may authorize the issuance of Class D Common
Shares; provided that, each such resolution contains a formula under which the
shares may be converted to Common Shares. In no case may the Board of Directors
set any conversion rights which could result in the issuance of more than ten
Common Shares for each Class D Common Share. At the close of business on the
fifth anniversary of the date of a resolution authorizing the issuance of any
Class D Common Shares, such issued and outstanding but unconverted shares will
be deemed to have been converted at the rate of one Common Share for each such
Class D Common Share. There are no issued and outstanding Class D Common Shares
as of the date of this Prospectus.
PREFERRED SHARES. The Board of Directors of the Issuer, by resolution, has
the authority to issue, in one or more series, up to 10,000,000 Preferred
Shares. Such unissued shares will have such preferences, rights and limitations
as are established by the Board of Directors except that the voting rights, if
any, of one Preferred Share may not exceed the voting rights of one Common
Share. See "Risk Factors - Authorization of Preferred Stock." There are no
issued and outstanding Preferred Shares as of the date of this Prospectus.
COMMON STOCK PURCHASE WARRANTS. The Issuer has issued and outstanding
1,070,270 Common Stock Purchase Warrants, each Warrant entitling the holder to
purchase one Common Share of the Issuer. The Warrants may be exercised at any
time during the 36 month period beginning on the date of this Prospectus at an
exercise price of $3.00 per share, subject to adjustment, by surrendering the
Warrant to the Warrant Agent with the subscription properly completed and
executed with payment of the exercise price. No fractional Common Shares will be
issued in connection with the exercise of Warrants. The Issuer has no right to
call the Warrants.
If a holder of Warrants fails to exercise the Warrants prior to their
expiration, the Warrants will expire and the holder will have no further rights
with respect to the Warrants. If a market for the Warrants develops, the holder
may sell the Warrants instead of exercising them. There can be no assurance that
a market for the Warrants will develop or continue. See "Risk Factors - Absence
of Trading Market." If the Issuer is unable to qualify for sale the Common
Shares underlying the Warrants (or the shares are exempt from qualification) in
the states in which the various holders of the Warrants then reside, holder of
the Warrants may have no choice but to let the Warrants expire. See "Risk
Factors - Current Prospectus and State 'Blue Sky' Registration or Exemption
Required to Exercise the Warrants."
35
<PAGE>
A holder of Warrants will not have any rights or privileges of a
shareholder of the Issuer prior to exercise of such Warrants. The Issuer will
keep available a sufficient number of authorized Common Shares to permit
exercise of the Warrants.
The exercise price of the Warrants and the number of shares issuable upon
exercise of the Warrants will be subject to adjustment in the event of stock
dividends, stock splits, combinations, reorganizations, subdivisions and
reclassifications. No assurance can be given that the market price of the
Issuer's Common Shares will exceed the exercise price at any time during the
term of the Warrants.
The Warrants were issued pursuant to a Warrant Agreement between the Issuer
and Mid-America Bank of Louisville and Trust Company (the "Warrant Agent"). All
descriptions of the Warrants are qualified in their entirety by reference to the
Warrant Agreement which is included as an exhibit to the Registration Statement
of which this Prospectus is a part.
TRANSFER AGENT, REGISTRAR AND WARRANT AGENT
- -------------------------------------------
The transfer agent and registrar for the Common Shares and the Warrant
Agent is Mid-America Bank of Louisville and Trust Company, P.O. Box 1101,
Louisville, Kentucky 40201-1101.
DIVIDENDS
---------
The Issuer has not paid any dividends. STI has paid dividends of $177,955
and $88,977 for fiscal years ended in 1996 and 1995 respectively. In connection
with a loan agreement entered into in 1995, STI is prohibited from declaring or
paying dividends in excess of the lesser of 25% of net income or $100,000, among
other actions, without the prior approval of the lender. There is no guarantee
that STI, and therefore the Issuer, will pay dividends in the future. See "Risk
Factors - Dividends" and "Authorization of Preferred Stock."
LIABILITY AND INDEMNIFICATION OF
DIRECTORS AND OFFICERS
----------------------
Officers and directors of the Issuer are covered by certain provisions of
the Delaware General Corporation Law and the Certificate of Incorporation and
Bylaws of the Issuer, which serve to limit, and, in certain instances, to
indemnify them against, certain liabilities which they may incur in such
capacities.
36
<PAGE>
ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES
- -------------------------------------------------
Delaware has enacted legislation which authorizes corporations to limit or
eliminate the personal liability of directors to corporations and their
shareholders for monetary damages for breach of a director's fiduciary duty of
care. The duty of care requires that, when acting on behalf of the corporation,
directors must exercise an informed business judgment based on all material
information reasonably available to them. Absent the limitations authorized by
the legislation, directors are accountable to corporations and their
shareholders for monetary damages for conduct constituting negligence or gross
negligence in the exercise of their duty of care. Although the statute does not
change directors' duty of care, it enables corporations to limit available
relief to equitable remedies such as injunction or rescission by including
certain provisions in its Certificate of Incorporation.
The Issuer's Certificate of Incorporation limits the liability of its
directors to the Issuer or its shareholders (in their capacity as directors, but
not in their capacity as officers) to the fullest extent permitted by the
legislation. Specifically, the directors of the Issuer will not be personally
liable for monetary damages for breach of director's fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Issuer or its shareholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit.
INDEMNIFICATION
- ---------------
The Issuer's Certificate of Incorporation provides that the Issuer
indemnify any and all of its directors or officers or former directors or
officers or any person who may have served at its request as a director or
officer of another corporation in which it owns shares of capital stock or of
which it is a creditor against expenses actually and necessarily incurred by
them in connection with the defense of any action, suit or proceeding in which
they, or any of them, are made parties, or a party, by reason of being or having
been directors or officers of the Issuer, or of such other corporation, except
in relation to matters as to which any such director or officer or former
director or officer or person shall be adjudged in such action, suit or
proceeding to be liable for negligence or misconduct in the performance of duty.
In addition, Section 7.1(a) of the Issuer's Bylaws provides that the Issuer
must indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Issuer) by reason of the fact that such person is or
was a director, officer, employee or agent of the Issuer, or is or was serving
at the request of the Issuer as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding if such person acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Issuer, and, with respect to any criminal
37
<PAGE>
action or proceeding, had no reasonable cause to believe the conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Issuer, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that this conduct was unlawful.
Section 7.1(b) of the Issuer's Bylaws provides that the Issuer must
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
Issuer to procure a judgment in its favor by reason of the fact that such person
is or was a director, officer, employee or agent of the Issuer or is or was
serving at the request of the Issuer as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred in connection with the defense or settlement of such action
or suit if such person acted in good faith and in a manner reasonably believed
to be in or not opposed to the best interests of the Issuer, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Issuer unless and
only to the extent that the Delaware Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Delaware Court of Chancery or such other court shall deem proper.
Section 7.1(d) of the Issuer's Bylaws provides that any indemnification
under Sections 7.1(a) and (b) (unless ordered by a court) shall be made by the
Issuer only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because such person has met the applicable standard of conduct.
Such determination shall be made (i) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the shareholders of the Issuer. To the
extent, however, that a director, officer, employee or agent of the Issuer has
been successful on the merits or otherwise in defense of any action, suit or
proceeding described above, or in the defense of any claim, issue or matter
therein, such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred in connection therewith, without the
necessity of authorization in the specific case under Section 7.1(c).
Under Section 7.1(e), expenses incurred by a director, officer, employee or
agent of the Issuer in defending or investigating a threatened or pending
action, suit or proceeding may be paid by the Issuer in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such director, officer, employee or agent to repay such amount
if it shall ultimately be determined that such person is not entitled to be
indemnified by the Issuer.
38
<PAGE>
The indemnification and advancement of expenses provided by or granted
pursuant to the Issuer's Bylaws are not exclusive of any other rights to which
those seeking indemnification or advancement of expenses may be entitled under
any Bylaw, agreement, contract, vote of shareholders or disinterested directors
or otherwise, both as to action in official capacity and as to action in another
capacity while holding such office, it being the Issuer's policy that
indemnification of the persons specified in the Bylaws shall be made to the
fullest extent permitted by law. The indemnification and advancement of expenses
provided by, or granted pursuant to the Issuer's Bylaws shall, unless otherwise
provided when authorized or ratified, continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person.
Insofar as indemnification for liabilities arising under the 1933 Act may
be permitted to directors, officers or persons controlling the Issuer pursuant
to the foregoing provisions, the Issuer has been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the 1933 Act and is therefore unenforceable.
LEGAL MATTERS
-------------
The Issuer has been advised with respect to certain legal aspects of the
offering by Ogden Newell & Welch, 1200 One Riverfront Plaza, Louisville,
Kentucky 40202.
EXPERTS
-------
The financial statements of STI at January 31, 1996, 1995 and 1994, and for
each of the years in the three year period ended January 31, 1996, appearing in
this Prospectus have been audited by Hoyman, Dobson & Company, P.A., Certified
Public Accountants, 215 Baytree Drive, Suite 1, Melbourne, Florida 32940,
independent auditors, as set forth in its report thereon appearing elsewhere
herein. The financial statements are included in reliance upon such report given
upon the authority of such firm as an expert in accounting and auditing.
39
<PAGE>
FINANCIAL STATEMENTS
--------------------
TABLE OF CONTENTS
-----------------
Software Technology, Inc.
Years ended January 31, 1996, 1995 and 1994
PAGE
----
Independent Auditor's Report - March 22, 1996 41
Balance Sheets - January 31, 1996 and 1995 42
Statements of Income and Retained Earnings - For the Years Ended
January 31, 1996 and 1995 44
Statements of Cash Flows - For the Years Ended January 31, 1996 and 1995 45
Notes to Financial Statements - January 31, 1996 and 1995 47
Independent Auditor's Report - March 31, 1995 60
Balance Sheets - January 31, 1995 and 1994 61
Statements of Income and Retained Earnings - For the Years Ended
January 31, 1995 and 1994 63
Statements of Cash Flows - For the Years Ended January 31, 1995 and 1994 64
Notes to Financial Statements - January 31, 1995 and 1994 66
40
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Software Technology, Inc.
We have audited the accompanying balance sheets of Software Technology, Inc. as
of January 31, 1996 and 1995, and the related statements of income and retained
earnings, and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Software Technology, Inc. as of
January 31, 1996 and 1995, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
Our audit was conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information on pages
15-18 is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, is fairly stated in all material respects in relation to
the basic financial statements taken as a whole.
Hoyman, Dobson & Company, P.A.
Melbourne, Florida
March 22, 1996
41
<PAGE>
SOFTWARE TECHNOLOGY, INC.
BALANCE SHEETS
JANUARY 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 270,084 $ 8,640
Accounts receivable, pledged 1,201,324 1,381,617
Costs and estimated earnings in excess of
billings on uncompleted contracts, pledged 4,948,043 4,024,493
Prepaid expenses 122,807 14,491
Deferred income taxes 221,000 251,300
----------- -----------
TOTAL CURRENT ASSETS 6,763,258 5,680,541
----------- -----------
PROPERTY AND EQUIPMENT, pledged
Cost 2,686,678 1,668,631
Accumulated depreciation (1,474,347) (1,068,212)
----------- -----------
NET PROPERTY AND EQUIPMENT 1,212,331 600,419
----------- -----------
OTHER ASSETS
Research and development costs, net of
accumulated amortization of $108,379 in
1996 and $23,685 in 1995 216,189 139,098
Deposits 34,803 31,308
Cash surrender value of life insurance 21,167 19,742
----------- -----------
TOTAL OTHER ASSETS 272,159 190,148
----------- -----------
TOTAL ASSETS $ 8,247,748 $ 6,471,108
=========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
42
<PAGE>
SOFTWARE TECHNOLOGY, INC.
BALANCE SHEETS (CONTINUED)
JANUARY 31, 1996 AND 1995
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Line of credit $ - $ 900,000
Accounts payable 222,019 149,040
Accrued expenses 2,614,204 1,341,997
Billings in excess of costs and estimated
earnings on uncompleted contracts 198,339 27,045
Income taxes payable 304,000 91,500
Current portion, long-term debt 6,760 5,475
---------- ----------
TOTAL CURRENT LIABILITIES 3,345,322 2,515,057
---------- ----------
LONG-TERM LIABILITIES
Long-term debt, less current portion 4,461 12,109
Other liabilities 5,428 5,191
---------- ----------
TOTAL LONG-TERM LIABILITIES 9,889 17,300
---------- ----------
TOTAL LIABILITIES 3,355,211 2,532,357
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 800,000 shares
authorized, 768,400 issued and 593,182
outstanding 7,684 7,684
Paid in capital 29,030 29,030
Retained earnings 5,600,586 4,646,800
---------- ----------
5,637,300 4,683,514
Treasury stock, common, 175,218 shares at cost (744,763) (744,763)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 4,892,537 3,938,751
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $8,247,748 $6,471,108
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
43
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
REVENUES $ 25,291,635 $ 19,760,600
COST OF SALES (19,408,136) (16,063,607)
------------ ------------
GROSS PROFIT 5,883,499 3,696,993
GENERAL AND ADMINISTRATIVE EXPENSES (3,840,669) (2,538,667)
RESEARCH AND DEVELOPMENT COSTS (154,856) (102,533)
------------ ------------
OPERATING INCOME 1,887,974 1,055,793
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 33,987 34,805
Interest expense (26,311) (11,524)
Loss on disposal of fixed assets (8,509) (3,139)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) (833) 20,142
------------ ------------
INCOME BEFORE INCOME TAXES 1,887,141 1,075,935
INCOME TAX EXPENSE (755,400) (353,725)
------------ ------------
NET INCOME 1,131,741 722,210
RETAINED EARNINGS, BEGINNING OF YEAR 4,646,800 4,013,567
DEDUCT: CASH DIVIDENDS ($.30 PER SHARE
IN 1996 AND $.15 PER SHARE IN 1995) (177,955) (88,977)
------------ ------------
RETAINED EARNINGS, END OF YEAR $ 5,600,586 $ 4,646,800
============ ============
EARNINGS PER COMMON SHARE $1.91 $1.22
===== =====
</TABLE>
The accompanying notes are an integral part of this statement.
44
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 24,719,672 $ 17,488,101
Interest received 33,987 34,805
Cash paid to suppliers and employees (21,621,853) (18,197,759)
Interest paid (26,311) (11,524)
Income taxes paid (512,600) (349,756)
------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 2,592,895 (1,036,133)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition of capital assets (1,122,226) (526,512)
Cash proceeds from the sale of capital assets 36,878 -
Cash paid for capitalized research
and development (161,785) (162,783)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (1,247,133) (689,295)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit (900,000) 900,000
Principal payments on long-term debt (6,363) (6,562)
Dividends paid (177,955) (127,377)
------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (1,084,318) 766,061
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 261,444 (959,367)
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 8,640 968,007
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 270,084 $ 8,640
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
45
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $1,131,741 $ 722,210
---------- -----------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 549,621 262,304
Loss on disposal of fixed assets 8,509 3,139
(Increase) decrease in accounts receivable 180,293 (438,707)
Increase in costs and estimated earnings in
excess of billings on uncompleted contracts (923,550) (1,859,381)
(Increase) decrease in prepaid expenses (108,316) 3,685
Decrease in deferred charges - 24,961
Increase (decrease) in deferred income taxes 30,300 (83,900)
Increase (decrease) in deposits (3,495) 7,303
Increase in cash surrender value of life insurance (1,425) (3,027)
Increase in accounts payable 72,979 63,023
Increase in accrued expenses 1,272,207 148,972
Increase in billings in excess of costs and
estimated earnings on uncompleted contracts 171,294 20,225
Increase in income taxes payable 212,500 87,869
Increase in other liabilities 237 5,191
---------- -----------
Total adjustments 1,461,154 (1,758,343)
---------- -----------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $2,592,895 $(1,036,133)
========== ===========
</TABLE>
The accompanying notes are an integral part of this statement.
46
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Software Technology, Inc. (STI) is a systems and software
engineering firm providing innovative technical solutions for government
and industry. STI also produces OS/COMET -- a commercially available
command and control development and support system. STI provides systems
and software engineering services and COTS products for real-time command,
control, and data acquisition systems. STI retains expertise in leading
edge technologies supporting applications ranging from bit slice
microprocessor software to large realtime systems. STI specializes in
command and control applications for ground, flight, test, and process
control and has extensive expertise in graphics, simulations, and
information systems.
REVENUE AND COST RECOGNITION - The Company recognizes revenues on time-
and-material and cost-plus-fixed-fee contracts as time is expended and
costs are incurred. The fee on cost-plus fixed fee contracts is
recognized ratably over total costs as they are incurred. Revenues and
costs from fixed price contracts are recognized on the percentage-of-
completion method, measured by the percentage of total costs incurred to
date to total estimated costs for each contract. This method is used
because management considers total expended costs to be the best available
measure of progress on these contracts. Costs as used herein exclude, in
the early stages of a contract, all or a portion of the costs of materials
if, in the opinion of management, it appears that such an exclusion would
result in a more accurate measurement of the level of work performed
towards contract completion.
Contract costs include all direct material and labor costs and those
indirect costs related to contract performance such as indirect labor,
supplies, repairs, and depreciation costs.
Certain general and administrative expenses (including bid and proposal
expenses) allowable in accordance with United States Government
procurement practices are included in contract costs for government
contracts because they are identifiable with contract revenue.
Adjustments to cost estimates are made periodically, and losses expected
to be incurred on contracts in progress are charged to operations in the
period such losses are determined. The aggregate of costs incurred and
income recognized on uncompleted contracts in excess of related billings
is shown as a current asset, and the aggregate of billings on uncompleted
contracts in excess of related costs incurred and income recognized is
shown as a current liability.
The Company is also engaged as seller in a number of software products.
Generally, revenue is recognized upon delivery of the software. After the
sale, if significant obligations remain or significant uncertainties exist
about customer acceptance of the software, revenue is deferred until the
obligations are satisfied or the uncertainties are resolved. When
collectibility of the receivable is in doubt, revenue is recognized under
the installment method or cost recovery method. Revenue from software
services is recognized as the services are performed.
47
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS - For purposes of the statement of cash flows, cash
equivalents include time deposits, certificates of deposit, and all highly
liquid debt instruments with original maturities of three months or less.
CONTRACT AND OTHER RECEIVABLES - The Company considers contract and other
receivables to be fully collectible; accordingly, no allowance for
doubtful accounts is required.
DEPRECIATION - The cost of property, plant and equipment is depreciated
over the estimated useful lives of the related assets. Depreciation is
computed on the straight-line method, accelerated cost recovery system and
the modified accelerated cost recovery system as appropriate.
AMORTIZATION - The costs of capitalized research and development costs
are amortized over their estimated useful lives of three years.
Amortization is computed on the straight-line method.
INCOME TAXES - Income taxes are provided for the tax effects of
transactions reported in the financial statements and consist of taxes
currently due and deferred taxes related primarily to differences between
the basis of vacation and sick leave and research and development costs
for financial and income tax reporting. The deferred tax assets and
liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled.
EARNINGS PER SHARE - Earnings per share amounts are based on the weighted
average number of shares outstanding (593,182 in 1996 and 1995).
NOTE 2 - ACCOUNTS RECEIVABLE
The following is a summary of accounts receivable at January 31:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Contract receivables $1,000,165 $1,215,900
Retainage receivable 200,412 152,979
Other receivables 747 12,738
---------- ----------
Total accounts receivable $1,201,324 $1,381,617
========== ==========
</TABLE>
The retainage receivable balance represents contracts which provide for
retainage provisions against billable amounts and are due upon completion
of the contracts and acceptance by the customer.
The Company expects to collect all receivables within the next fiscal
year.
48
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 3 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at January 31:
<TABLE>
<CAPTION>
Estimated
1996 1995 Life
------------ ------------ -----------
<S> <C> <C> <C>
Furniture and equipment $ 404,129 $ 317,090 3-8 years
Vehicles 15,703 15,703 5 years
Computer equipment 2,243,494 1,312,486 5 years
Leasehold improvements 23,352 23,352 39.5 years
----------- -----------
Total cost 2,686,678 1,668,631
Less accumulated depreciation (1,474,347) (1,068,212)
----------- -----------
Net property and equipment $ 1,212,331 $ 600,419
=========== ===========
</TABLE>
Depreciation expense charged to general and administrative expense in 1996
and 1995 was $78,737 and $62,160, respectively. Depreciation expense
charged to applied overhead in 1996 and 1995 was $218,555 and $139,038,
respectively. Depreciation expense charged directly to cost of sales in
1996 and 1995 was $167,635 and $37,421, respectively.
NOTE 4 - LINE OF CREDIT
Software Technology, Inc. has a $1,800,000 and $900,000 line of credit with
a bank as of January 31, 1996 and 1995. The notes bear interest on the
unpaid principal balance at an interest rate per annum equal to the bank's
prime rate plus .25% and .50%, respectively. As of January 31, 1996 and
1995 the outstanding draws against the lines were $0 and $900,000,
respectively. The prime rate at January 31, 1996 and 1995 were 8.5% and
9.0% respectively. All accounts receivable, equipment, furniture and
fixtures are pledged as collateral on this line of credit.
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consist of the following at January 31:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Accrued bonuses $ 834,030 $ 30,000
Accrued payroll taxes payable 26,672 25,826
Accrued fringe benefits 959,515 788,771
Accrued pension and profit sharing 252,058 216,382
Accrued ESOP payment 541,929 281,018
---------- ----------
Total accrued expenses $2,614,204 $1,341,997
========== ==========
</TABLE>
49
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 6 - LONG TERM DEBT
Long term debt outstanding at January 31 consists of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Unsecured note payable to bank, payable in thirty-six
monthly installments of $630, including interest at 7.25%
beginning October 1994, ending August 1997. 11,221 17,584
------- -------
TOTAL LONG-TERM DEBT 11,221 17,584
Less: current portion of long-term debt 6,760 5,475
------- -------
TOTAL LONG-TERM DEBT, less current portion $ 4,461 $12,109
======= =======
Future maturities of long-term debt as of January 31, 1996 are as follows:
Amount
--------
1997 $ 6,760
1998 4,461
-------
$11,221
=======
</TABLE>
NOTE 7 - EMPLOYEE RETIREMENT PLANS
The Company has a defined contribution pension plan that covers
substantially all employees who have met certain age and length of service
requirements. Contributions to the plan are 5% of eligible compensation.
Eligible compensation for the years ended January 31, 1996 and 1995 was
approximately $10,958,000 and $9,401,000, respectively. For the years ended
January 31, 1996 and 1995 the amount of pension expense was $547,894 and
$470,066, respectively.
The Company also sponsors a profit-sharing plan which allows substantially
all full-time employees to defer compensation under Section 401(k) of the
Internal Revenue Code and the employer to electively contribute to the
plan. Employer contributions to the plan are made at the discretion of the
Board of Directors. The employer contributions made to the plan for the
years ended January 31, 1996 and 1995 were $547,894 and $470,066,
respectively.
NOTE 8 - EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan (ESOP). Contributions to
this plan are at the discretion of the Board of Directors. Full time
employees who have attained the age of twenty-one (21) and have one year of
service are eligible to participate in the plan. Shares purchased by the
plan
50
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 8 - EMPLOYEE STOCK OWNERSHIP PLAN (CONTINUED)
are allocated annually to eligible employees proportional to their
compensation, not including overtime and bonuses. Employee stock
ownership plan contributions, charged to operations, amounted to $542,064
and $281,018 for the years ending January 31, 1996 and 1995, respectively.
The ESOP has 302,286 and 279,440 shares of the total issued and
outstanding stock respectively at January 31, 1996 and 1995.
NOTE 9 - LEASE OBLIGATIONS
Office space and equipment is leased under operating leases expiring in
various years through 2005.
Minimum future rental payments under non-cancelable operating leases
having remaining terms in excess of one year as of January 31, 1996 for
each of the next five years and in the aggregate are:
<TABLE>
<CAPTION>
Year ending January 31: Amount
-----------
<S> <C>
1997 $ 604,307
1998 511,230
1999 417,345
2000 278,286
2001 268,748
Subsequent to 2001 790,383
----------
Total minimum future rental payments $2,870,299
===========
</TABLE>
The minimum future rental payments have not been reduced by $178,662 of
sublease rentals to be received in the future under non-cancelable
subleases. Rent expense for the years ended January 31, 1996 and 1995 was
$549,573 and $429,659, respectively.
NOTE 10 - ECONOMIC DEPENDENCY
The Company sells a substantial portion of its products to two major
customers in the Satellite Command and Control Industry. Transactions
with these major customers, a commercial customer and a group of U.S.
Government agencies, consist of the following:
<TABLE>
<CAPTION>
Customer 1 Customer 2
----------- -----------
1996
<S> <C> <C>
Revenues $10,570,539 $6,077,568
Accounts Receivable 763,374 -
Costs and estimated earnings in excess
of billings on uncompleted contracts 3,092,112 629,211
Billings in excess of costs and estimated
earnings on uncompleted contracts (149,569) (16,868)
</TABLE>
51
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 10 - ECONOMIC DEPENDENCY (CONTINUED)
<TABLE>
<CAPTION>
Customer 1 Customer 2
----------- -----------
1995
<S> <C> <C>
Revenues $5,024,249 $4,040,030
Accounts Receivable 264,271 342,615
Costs and estimated earnings in excess
of billings on uncompleted contracts 2,501,763 473,383
Billings in excess of costs and estimated
earnings on uncompleted contracts - -
</TABLE>
NOTE 11 - RESEARCH AND DEVELOPMENT COSTS
Some research and development costs are charged to operations when incurred and
are included in operating expenses. The amounts charged for the years ending
January 31, 1996 and 1995 were $154,856 and $102,533, respectively.
During the years ended January 31, 1996 and 1995, $161,785 and $162,783,
respectively, of research and development costs for computer software to be sold
or otherwise marketed were capitalized. The amortization of costs related to
computer software product development held for sale was $84,694 and $23,685 for
the years ended January 31, 1996 and 1995 respectively. The amount of
unamortized computer software costs at January 31, 1996 and 1995 was $216,189
and $139,098 respectively.
NOTE 12 - INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109
"Accounting for Income Taxes."
The components of the provision for income taxes at January 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Current expense
Federal $596,000 $358,400
State 129,100 79,225
Deferred tax benefit due to temporary differences
Federal 26,800 (71,800)
State 3,500 (12,100)
-------- --------
Total provision for income taxes $755,400 $353,725
======== ========
</TABLE>
52
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 12 - INCOME TAXES (CONTINUED)
The following is a reconciliation of the provisions for income taxes to the
expected amounts using the statutory rate:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Expected statutory amount 34.0% 34.0%
Nondeductible meals and entertainment .3 .3
Nondeductible officers life insurance .5 .9
Tax penalties - .2
Dividends (1.6) (1.5)
Research and experimental credit (.6) (2.1)
State income taxes 4.6 2.4
Other 2.8 (1.3)
---- ----
Actual tax provision 40.0% 32.9%
==== ====
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and amounts used for income tax purposes.
The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of January 31, 1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Accrued payroll expenses $301,000 $251,300
Depreciation 2,400 -
Amortization (82,400) -
-------- --------
Net deferred tax asset $221,000 $251,300
======== ========
</TABLE>
NOTE 13 - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of temporary cash investments. The Company places
its temporary cash investments with a financial institution. The amount of
credit exposure in excess of federally-insured limits at January 31, 1996 was
$1,325,459.
NOTE 14 - COMMITMENTS AND CONTINGENCIES
The Company has outstanding purchase commitments of $42,020 as of January 31,
1996. These represent outstanding purchase orders for which neither the item nor
invoice has been received.
53
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1996 AND 1995
NOTE 15 - SUBSEQUENT EVENT
A. NOTE PAYABLE
On March 31, 1996, the Company drew $800,000 down on a note payable which was
dated August 31, 1995. The note bears interest on the unpaid principal balance
at an interest rate per annum equal to the bank's prime rate plus .375%. The
principal is payable in 36 monthly payments of $22,222 beginning April 1, 1996
and ending on March 1, 1999. The note is collateralized by all accounts
receivable, equipment and furniture and fixtures of the Company. The following
are future maturities of the above note payable:
<TABLE>
<CAPTION>
Amount
--------
<S> <C>
1997 $222,222
1998 266,667
1999 266,667
2000 44,444
--------
$800,000
========
</TABLE>
B. TREASURY STOCK
In March and April 1996, the Company reissued 46,986 shares of treasury stock,
at cost, in the form of bonuses for service performed during the year ended
January 31, 1996. The cost of the stock $199,690 is recorded as accrued bonuses
at January 31, 1996.
Also, in April 1996, the Company reissued 38,600 shares of treasury stock, at
cost in the form of a contribution to the ESOP plan for the year ended January
31, 1996. The cost of the stock $164,050 is recorded as part of accrued ESOP
payment at January 31, 1996.
54
<PAGE>
SUPPLEMENTARY INFORMATION
55
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF COST OF SALES
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
COST OF SALES
Central engineering labor $ 4,544,944 $ 3,476,820
Branch engineering labor 1,625,937 1,388,754
Offsite engineering labor 3,555,422 4,064,085
Arizona engineering labor 1,058,314 421,330
Other direct costs 2,670,284 1,359,502
Applied overhead 6,108,091 5,455,649
Less: research and development costs (154,856) (102,533)
----------- -----------
TOTAL COST OF SALES $19,408,136 $16,063,607
=========== ===========
</TABLE>
See accompanying notes and accountant's report.
56
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
GENERAL AND ADMINISTRATIVE EXPENSES
Marketing & recruiting salary $ 147,041 $ 138,968
Referral fee 4,200 -
Bonuses and incentive awards 839,271 201,833
Bid and proposal 129,076 167,339
Marketing and recruiting expense 136,127 56,251
Contributions 1,980 4,665
Penalties - 4,804
Office salaries 182,598 155,920
System managers salaries 39,463 29,284
Advertising 91,994 281
Conference and meeting expense 13,481 8,816
Entertainment 2,880 1,924
Taxes - other 6,889 770
Officers' administrative time 119,426 114,101
Insurance 32,252 16,633
Officers' life insurance 27,063 27,837
Tangible and intangible property tax 23,762 19,367
Directors' fees 35,000 35,000
Professional fees 55,715 43,787
Miscellaneous business expense 23,187 30,813
Severance pay 24,080 6,600
Utilities 8,654 7,811
Communication 25,013 14,200
Rent 28,729 23,034
Equipment rent/repair/maintenance 41,614 34,867
Depreciation 78,737 62,160
Travel and meals 89,891 69,276
Unallowable overhead travel - 117
Relocation 388 906
Office supplies 61,863 56,258
Dues and subscriptions 9,099 4,267
Process improvements 52,089 17,881
Non-productive time 828 13,117
Training and meetings 61,963 19,871
Administrative time 411,930 398,593
ESOP contributions 542,064 281,018
Administrative personnel expense 491,223 469,917
Automobile expenses 1,099 381
---------- ----------
TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES $3,840,669 $2,538,667
========== ==========
</TABLE>
See accompanying notes and accountant's report.
57
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF APPLIED OVERHEAD
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
APPLIED OVERHEAD
PERSONNEL OVERHEAD
Vacation $ 846,623 $ 754,568
Holiday 499,859 442,968
Sick leave 313,043 277,834
Continuing education 52,858 54,097
Employee morale 54,879 34,478
Payroll taxes 988,925 890,096
Pension administrative costs 69,972 80,462
Pension 547,894 470,066
Insurance 1,150,305 1,210,224
Long term disability pay 15,460 -
Profit sharing 547,894 470,06
Service award 8,033 7,831
Other - 1,548
---------- ----------
TOTAL PERSONNEL OVERHEAD 5,095,745 4,694,238
---------- ----------
CENTRAL DEPARTMENT OVERHEAD
Utilities 62,649 51,994
Communication 96,093 55,400
Office rent 178,452 154,013
Repair/rent/maintenance 98,120 51,926
Depreciation 134,525 85,325
Amortization 84,694 23,685
Relocation 4,402 20,652
Facilities consultant 813 -
Dues and subscriptions 680 1,577
Office supplies 72,416 59,036
Non-productive time 2,943 4,615
Administrative time 137,340 100,425
---------- ----------
TOTAL CENTRAL DEPARTMENT OVERHEAD 873,127 608,648
---------- ----------
BRANCH DEPARTMENT OVERHEAD
Utilities 11,147 10,711
Communication 31,390 31,718
Office rent 240,117 206,483
Equipment repair and maintenance 22,574 26,241
Depreciation 31,738 26,857
</TABLE>
See accompanying notes and accountant's report.
58
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF APPLIED OVERHEAD (CONTINUED)
FOR THE YEARS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<CAPTION>
BRANCH DEPARTMENT OVERHEAD (CONTINUED)
1996 1995
----------- -----------
<S> <C> <C>
Travel 59 515
Relocation 12,357 6,258
Dues and subscriptions 1,531 1,589
Office supplies 28,168 20,088
Non-productive time 1,937 294
Administrative time 73,562 60,821
---------- ----------
TOTAL BRANCH DEPARTMENT OVERHEAD 454,580 391,575
---------- ----------
OFF-SITE OVERHEAD
Communication 26 338
Repairs and maintenance 472 -
Depreciation 2,736 602
Travel 366 239
Relocation 16,695 39,676
Dues and subscriptions 1,013 798
Office supplies 1,460 1,294
Non-productive time 3,321 5,657
Administrative time 12,759 4,428
---------- ----------
TOTAL OFF-SITE OVERHEAD 38,848 53,032
---------- ----------
ARIZONA OVERHEAD
Communication 3,576 396
Rent 420 185
Repair/rent/maintenance 4,332 418
Depreciation 49,556 26,254
Travel 968 -
Relocation 43,239 140,680
Office supplies 12,565 2,622
Administrative time 21,030 7,518
Non-productive time 1,328 -
---------- ----------
TOTAL ARIZONA OVERHEAD 137,014 178,073
---------- ----------
PERSONNEL EXPENSES APPLIED TO GENERAL
AND ADMINISTRATIVE (491,223) (469,917)
---------- ----------
TOTAL APPLIED OVERHEAD $6,108,091 $5,455,649
========== ==========
</TABLE>
59
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Directors and Stockholders
Software Technology, Inc.
We have audited the balance sheet of Software Technology, Inc. (a C-corporation)
as of January 31, 1995, and the related statements of income and retained
earnings, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of Software Technology, Inc. as of and for the year ended January 31,
1994, were audited by other auditors whose report dated March 3, 1994, expressed
an unqualified opinion on those statements. As discussed in Note 16, the Company
has restated its 1994 financial statements during the current year to correct an
error in recording deferred income taxes. The other auditors reported on the
1994 financial statements before the restatement.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the financial position of Software Technology, Inc. as
of January 31, 1995, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information on pages 14-17 is
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
Hoyman, Dobson & Company, P.A.
March 31, 1995
60
<PAGE>
SOFTWARE TECHNOLOGY, INC.
BALANCE SHEETS
JANUARY 31, 1995 AND 1994
ASSETS
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 8,640 $ 968,007
Accounts receivable 1,381,617 942,910
Costs and estimated earnings in excess of
billings on uncompleted contracts 4,024,493 2,158,292
Prepaid expenses 14,491 18,176
Deferred charges - 24,961
Deferred income taxes 251,300 167,400
----------- ----------
TOTAL CURRENT ASSETS 5,680,541 4,279,746
----------- ----------
PROPERTY AND EQUIPMENT
Cost 1,668,631 1,197,412
Accumulated depreciation (1,068,212) (901,867)
----------- ----------
NET PROPERTY AND EQUIPMENT 600,419 295,545
----------- ----------
OTHER ASSETS
Intangible assets, net of accumulated amortization
of $23,685 in 1995 and $0 in 1994 139,098 -
Deposits 31,308 38,611
Cash surrender value of life insurance 19,742 16,715
----------- ----------
TOTAL OTHER ASSETS 190,148 55,326
----------- ----------
TOTAL ASSETS $ 6,471,108 $4,630,617
=========== ==========
</TABLE>
The accompanying notes are an integral part of this statement
61
<PAGE>
SOFTWARE TECHNOLOGY, INC.
BALANCE SHEETS (CONTINUED)
JANUARY 31, 1995 AND 1994
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES
Line of credit $ 900,000 $ -
Accounts payable 149,040 86,017
Accrued expenses 1,341,997 1,193,025
Billings in excess of costs and estimated
earnings on uncompleted contracts 27,045 -
Income taxes payable 91,500 3,631
Stock dividend payable - 38,400
Current portion, long-term debt 5,475 4,026
---------- ----------
TOTAL CURRENT LIABILITIES 2,515,057 1,325,099
---------- ----------
LONG-TERM LIABILITIES
Long-term debt, less current portion 12,109 -
Other liabilities 5,191 -
---------- ----------
TOTAL LONG-TERM LIABILITIES 17,300 -
---------- ----------
TOTAL LIABILITIES 2,532,357 1,325,099
---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $.01 par value, 800,000 shares
authorized, 768,400 issued and 593,182 outstanding 7,684 7,684
Paid in capital 29,030 29,030
Retained earnings 4,646,800 4,013,567
---------- ----------
4,683,514 4,050,281
Treasury stock, common, 175,218 shares at cost (744,763) (744,763)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 3,938,751 3,305,518
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,471,108 $4,630,617
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement
62
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
REVENUES $ 19,760,600 $ 16,760,901
COST OF SALES (16,063,607) (13,400,749)
------------ ------------
GROSS PROFIT 3,696,993 3,360,152
GENERAL AND ADMINISTRATIVE EXPENSES (2,538,667) (2,510,867)
RESEARCH AND DEVELOPMENT COSTS (102,533) (126,478)
------------ ------------
OPERATING INCOME 1,055,793 722,807
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 34,805 38,633
Interest expense (11,524) (2,502)
Loss on disposal of fixed assets (3,139) (49,428)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) 20,142 (13,297)
------------ ------------
INCOME BEFORE INCOME TAXES 1,075,935 709,510
INCOME TAX EXPENSE (353,725) (215,900)
------------ ------------
NET INCOME, AS RESTATED FOR 1994 722,210 493,610
RETAINED EARNINGS, BEGINNING OF YEAR 4,013,567 3,608,934
DEDUCT: CASH DIVIDENDS ($.15 PER SHARE
IN 1995 AND 1994) (88,977) (88,977)
------------ ------------
RETAINED EARNINGS, END OF YEAR $ 4,646,800 $ 4,013,567
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
63
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 17,488,101 $ 16,265,406
Interest received 34,805 38,633
Cash paid to suppliers and employees (18,197,759) (15,350,784)
Interest paid (11,524) (2,502)
Income taxes paid (349,756) (304,164)
------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,036,133) 646,589
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition of capital assets (526,512) (193,883)
Cash paid for capitalized research and development (162,783) -
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (689,295) (193,883)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 900,000 -
Principal payments on long-term debt (6,562) (52,341)
Dividends paid (127,377) (139,554)
------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 766,061 (191,895)
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (959,367) 260,811
CASH AND CASH EQUIVALENTS, BEGINNING
OF YEAR 968,007 707,196
------------ ------------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 8,640 $ 968,007
============ ============
</TABLE>
The accompanying notes are an integral part of this statement.
64
<PAGE>
SOFTWARE TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ---------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net income $ 722,210 $ 493,610
----------- ---------
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 262,304 155,012
Loss on disposal of fixed assets 3,139 49,464
Increase in accounts receivable (438,707) (848,945)
Decrease (increase) in costs and estimated earnings
in excess of billings on uncompleted contracts (1,859,381) 378,411
(Increase) decrease in other receivables 19,597 (17,590)
(Increase) decrease in prepaid expenses 3,685 (15,619)
(Increase) decrease in deferred charges 24,961 (24,961)
Increase in deferred income taxes (83,900) (132,500)
Decrease in deposits 7,303 22,654
Increase in cash surrender value of life insurance (3,027) (3,610)
Increase in accounts payable 63,023 31,400
Increase in accrued expenses 148,972 515,027
Increase in billings in excess of costs and
estimated earnings on uncompleted contracts 20,225 -
Increase in income taxes payable 87,869 44,236
Increase in other liabilities 5,191 -
----------- ---------
Total adjustments (1,758,343) 152,979
----------- ---------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES $(1,036,133) $ 646,589
=========== =========
SUPPLEMENTAL INFORMATION ON NONCASH
INVESTING AND FINANCIAL ACTIVITIES:
In 1994, the Company financed leasehold improvements
with a note payable in the amount of $20,120.
</TABLE>
The accompanying notes are an integral part of this statement.
65
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS - Software Technology, Inc. (STI) is a systems and software engineering
firm providing innovative technical solutions for government and industry. STI
also produces OS/COMET -- a commercially available command and control
development and support system. STI provides systems and software engineering
services and COTS products for real-time command, control, and data acquisition
systems. STI retains expertise in leading edge technologies supporting
applications ranging from bit slice microprocessor software to large realtime
systems. STI specializes in command and control applications for ground, flight,
test, and process control and has extensive expertise in graphics, simulations,
and information systems.
REVENUE AND COST RECOGNITION - The Company recognizes revenues on time-and-
material and cost-plus-fixed-fee contracts as time is expended and costs are
incurred. The fee on cost-plus fixed fee contracts is recognized ratably over
total costs as they are incurred. Revenues and costs from fixed price contracts
are recognized on the percentage-of-completion method, measured by the
percentage of total costs incurred to date to total estimated costs for each
contract. This method is used because management considers total expended costs
to be the best available measure of progress on these contracts. Costs as used
herein exclude, in the early stages of a contract, all or a portion of the costs
of materials if, in the opinion of management, it appears that such an exclusion
would result in a more accurate measurement of the level of work performed
towards contract completion.
Contract costs include all direct material and labor costs and those indirect
costs related to contract performance such as indirect labor, supplies, repairs,
and depreciation costs.
Certain general and administrative expenses (including bid and proposal
expenses) allowable in accordance with United States Government procurement
practices are included in contract costs for government contracts because they
are identifiable with contract revenue.
The asset "Costs and estimated earnings in excess of billings on uncompleted
contracts" represents costs and associated revenues which have been recognized
but not billed.
The Company is also engaged as seller in a number of software transactions.
Generally, revenue is recognized upon delivery of the software. After the sale,
if significant obligations remain or significant uncertainties exist about
customer acceptance of the software, revenue is deferred until the obligations
are satisfied or the uncertainties are resolved. When collectibility of the
receivable is in doubt, revenue is recognized under the installment method or
cost recovery method. Revenue from software services is recognized as the
services are performed.
CASH EQUIVALENTS - For purposes of the statement of cash flows, cash equivalents
include time deposits, certificates of deposit, and all highly liquid debt
instruments with original maturities of three months or less.
66
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CONTRACT AND OTHER RECEIVABLES - The Company considers contract and other
receivables to be fully collectible; accordingly, no allowance for doubtful
accounts is required.
DEPRECIATION - The cost of property, plant and equipment is depreciated over the
estimated useful lives of the related assets. Depreciation is computed on the
straight-line method, accelerated cost recovery system and the modified
accelerated cost recovery system as appropriate.
AMORTIZATION - The costs of capitalized research and development costs are
amortized over their estimated useful lives of three years. Amortization is
computed on the straight-line method.
INCOME TAXES - Income taxes are provided for the tax effects of transactions
reported in the financial statements and consist of taxes currently due and
deferred taxes related primarily to differences between the basis of vacation
and sick leave for financial and income tax reporting. The deferred tax assets
and liabilities represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. Deferred taxes also are recognized for
operating losses that are available to offset future taxable income and tax
credits that are available to offset future federal income taxes.
NOTE 2 - ACCOUNTS RECEIVABLE
The following is a summary of accounts receivable at January 31:
<TABLE>
<CAPTION>
1995 1994
---------- ---------
<S> <C> <C>
Contract receivables $1,215,900 $672,619
Retainage receivable 152,979 237,956
Other receivables 12,738 32,335
---------- --------
Total accounts receivable $1,381,617 $942,910
========== ========
</TABLE>
The retainage receivable balance represents contracts which provide for
retainage provisions against billable amounts and are due upon completion of the
contracts and acceptance by the customer.
67
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 3 - PROPERTY AND EQUIPMENT
The following is a summary of property and equipment at January 31:
<TABLE>
<CAPTION>
Estimated
1995 1994 Life
---------- ----------- ----------
<S> <C> <C> <C>
Furniture and equipment $ 317,090 $ 333,539 3-8 years
Vehicles 15,703 15,703 5 years
Computer equipment 1,312,486 848,170 5 years
Leasehold improvements 23,352 - 39.5 years
---------- -----------
Total cost 1,668,631 1,197,412
Less accumulated depreciation (1,068,212) (901,867)
---------- -----------
Net property and equipment $ 600,419 $ 295,545
========== ===========
</TABLE>
Depreciation expense charged to general and administrative expense in 1995 and
1994 was $201,198 and $155,012, respectively. Depreciation expense charged to
cost of sales in 1995 and 1994 was $37,421 and $0, respectively.
NOTE 4 - LINE OF CREDIT
Software Technology, Inc. has a $900,000 line of credit with a bank. The note
bears interest on the unpaid principal balance at an interest rate per annum
equal to the bank's prime rate plus .50%. As of January 31, 1995 and 1994 the
outstanding draws against the line were $900,000 and $0, respectively. The prime
rate at January 31, 1995 was 9%. All accounts receivable are pledged as
collateral on this line of credit.
NOTE 5 - ACCRUED EXPENSES
Accrued expenses consist of the following at January 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Accrued bonus $ 30,000 $ -
Accrued payroll taxes payable 25,826 22,407
Accrued fringe benefits 788,771 556,205
Accrued pension and profit sharing 216,382 175,706
Accrued employee stock ownership 281,018 438,707
---------- ----------
Total accrued expenses $1,341,997 $1,193,025
========== ==========
</TABLE>
68
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 6 - LONG TERM DEBT
Long term debt outstanding at January 31 consists of the following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Note payable to bank, payable in forty-eight monthly
installments of $345, including interest at 10.91%
beginning May 1990, secured by a van. $ - $ 1,018
Note payable to bank, payable in thirty-six monthly
installments of $3,008, including interest at prime
plus .75% beginning March 1991, secured by
equipment and fixtures. - 3,008
Unsecured note payable to bank, payable in thirty-six
monthly installments of $630, including interest at
7.25% beginning October 1994. 17,584 -
------- --------
TOTAL LONG-TERM DEBT 17,584 4,026
Less: current portion of long-term debt 5,475 4,026
------- --------
TOTAL LONG-TERM DEBT, less current portion $12,109 $ -
======= ========
</TABLE>
Following are maturities of long-term debt for each of the next three years:
Amount
-------
1996 $ 5,475
1997 6,941
1998 5,168
-------
$17,584
=======
NOTE 7 - EMPLOYEE RETIREMENT PLAN
The Company has a defined contribution pension plan that covers substantially
all employees who have met certain age and length of service requirements.
Contributions to the plan are 5% of eligible compensation. Eligible compensation
for the years ended January 31, 1995 and 1994 was approximately $9,401,000 and
$8,774,000, respectively. For the years ended January 31, 1995 and 1994 the
amount of pension expense was $470,066 and $438,707, respectively.
The Company also sponsors a profit-sharing plan which allows substantially all
full-time employees to defer compensation under Section 401(k) of the Internal
Revenue Code and the employer to electively contribute to the plan. Employer
contributions to the plan are made at the discretion of the Board of Directors.
The employer contributions made to the plan for the years ended January 31, 1995
and 1994 were $470,066 and $263,224, respectively.
69
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 8 - EMPLOYEE STOCK OWNERSHIP PLAN
The Company has an employee stock ownership plan (ESOP). Contributions to this
plan are at the discretion of the Board of Directors. Full time employees who
have attained the age of twenty-one (21) and have one year of service are
eligible to participate in the plan. Shares purchased by the plan are allocated
annually to eligible employees proportional to their compensation, not including
overtime and bonuses. Employee stock ownership plan contributions, charged to
operations, amounted to $281,018 and $438,707 for the years ending January 31,
1995 and 1994, respectively. The ESOP has 279,440 shares of the total issued and
outstanding stock at January 31, 1995 and 1994.
NOTE 9 - LEASE OBLIGATIONS
Office space and equipment is leased under operating leases expiring in various
years through 2003.
Minimum future rental payments under non-cancelable operating leases having
remaining terms in excess of one year as of January 31, 1995 for each of the
next five years and in the aggregate are:
Year ending January 31: Amount
----------
[S] [C]
1996 $ 468,821
1997 466,391
1998 426,694
1999 340,205
2000 202,786
Subsequent to 2000 1,029,786
----------
Total minimum future rental payments $2,934,683
==========
The minimum future rental payments have not been reduced by $242,089 of sublease
rentals to be received in the future under non-cancelable subleases. Rent
expense for the years ended January 31, 1995 and 1994 was $429,659 and $443,556,
respectively.
NOTE 10 - ECONOMIC DEPENDENCY
The Company sells a substantial portion of its products to two major customers.
Sales to these major customers aggregated $5,024,249 and $4,040,030 for the year
ended January 31, 1995 and $0 and $5,384,562 for the year ended January 31,
1994. Amounts due from these major customers included in accounts receivable,
were $3,094,060 and $1,171,053 at January 31, 1995 and $0 and $609,054 at
January 31, 1994, respectively.
70
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 11 - RESEARCH AND DEVELOPMENT COSTS
Most research and development costs are charged to operations when incurred and
are included in operating expenses. The amounts charged for the years ending
January 31, 1995 and 1994 were $102,533 and $126,478, respectively.
During the year ended January 31, 1995, $162,783 of research and development
costs for computer software to be sold or otherwise marketed were capitalized.
The amortization of costs related to computer software products held for sale
was $23,685. The amount of unamortized computer software costs at January 31,
1995 was $139,098.
NOTE 12 - INCOME TAXES
The components of the provision for income taxes at January 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Current expense
Federal $358,400 $ 290,020
State 79,225 58,380
Deferred tax benefit due to temporary differences
Federal (71,800) (112,126)
State (12,100) (20,374)
-------- ---------
$353,725 $ 215,900
======== =========
</TABLE>
The temporary differences result from expenses such as vacation and sick leave
which are deductible for book purposes prior to deductibility for tax purposes.
The deductible temporary differences of approximately $631,400 for federal and
$668,100 for state for the year ended January 31, 1995 and $448,495 for both
federal and state for the year ended January 31, 1994, are classified as short
term, based on their characteristics.
NOTE 13 - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of temporary cash investments. The Company places
its temporary cash investments with a financial institution. The amount of
credit exposure in excess of federally-insured limits at January 31, 1995 was
$530,053.
71
<PAGE>
SOFTWARE TECHNOLOGY, INC.
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 1995 AND 1994
NOTE 14 - COMMITMENTS AND CONTINGENCIES
The Company has outstanding purchase commitments of $83,560 as of January 31,
1995. These represent outstanding purchase orders for which neither the item nor
invoice has been received.
NOTE 15 - RECLASSIFICATION
Certain amounts in the balance sheet and income statement for the year ended
January 31, 1994 have been reclassified to be consistent with the year ended
January 31, 1995 presentation.
NOTE 16 - RESTATEMENT
The accompanying financial statements for the year ended January 31, 1994 have
been restated to correct an error in recording the deferred income taxes made in
the year ended January 31, 1994. The effect of the restatement was to increase
net income for the year ended January 31, 1994 by $86,600.
72
<PAGE>
SUPPLEMENTARY INFORMATION
73
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF COST OF SALES
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
COST OF SALES
Central engineering labor $ 3,476,820 $ 2,594,504
Branch engineering labor 1,388,754 1,416,829
Offsite engineering labor 4,064,085 3,594,815
Arizona engineering labor 421,330 -
Other direct costs 1,359,502 1,915,045
Applied overhead 5,455,649 3,924,730
Less: research and development costs (102,533) (45,174)
----------- -----------
TOTAL COST OF SALES $16,063,607 $13,400,749
=========== ===========
</TABLE>
See accompanying notes and accountant's report.
74
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF GENERAL AND ADMINISTRATIVE EXPENSES
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
GENERAL AND ADMINISTRATIVE EXPENSES
Marketing & recruiting salary $ 138,968 $ 122,252
Bonus 121,500 6,300
Bid and proposal 167,339 320,012
Marketing & recruiting expense 56,251 71,418
Contributions 4,665 2,099
Penalties 4,804 67
Office salaries 155,920 192,740
System managers salaries 29,284 22,579
Advertising 281 21,702
Conference 8,816 6,447
Entertainment 1,924 1,825
Awards 80,333 -
Taxes - other 770 1,175
Officers' administrative time 114,101 109,325
Insurance 16,633 25,323
Officers' life insurance 27,837 24,879
Tangible & intangible property tax 19,367 18,779
Directors' fees 35,000 35,000
Miscellaneous 21,802 6,371
Professional fees 43,787 35,044
Miscellaneous business expense 9,011 6,251
Severance pay 6,600 7,336
Utilities 7,811 17,835
Communication 14,200 10,744
Rent 23,034 43,925
Equipment rent/repair/maintenance 34,867 30,966
Depreciation 62,160 43,360
Travel 59,434 35,811
Unallowable overhead travel 117 -
Travel and meals 9,842 3,506
Amortization - 691
Relocation 906 -
Facilities consultant - 5,564
Office supplies 56,258 33,175
Dues and subscriptions 4,267 3,306
Process improvements 17,881 -
Non-productive time 13,117 281
Training and meetings 19,871 23,196
Administrative time 398,593 301,159
Training and meeting expense - 12,369
ESOP 281,018 438,707
Administrative personnel expense 469,917 468,645
Automobile expenses 381 703
---------- ----------
TOTAL GENERAL AND
ADMINISTRATIVE EXPENSES $2,538,667 $2,510,867
========== ==========
</TABLE>
See accompanying notes and accountant's report.
75
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF APPLIED OVERHEAD
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
APPLIED OVERHEAD
PERSONNEL OVERHEAD
Vacation $ 754,568 $ 606,086
Holiday 442,968 359,596
Sick leave 277,834 221,409
Continuing education 54,097 41,477
Employee morale 34,478 30,437
Payroll taxes 890,096 721,020
Pension administrative costs 80,462 43,702
Retirement 470,066 438,707
Insurance 1,210,224 888,577
Profit sharing 470,066 263,224
Service award 7,831 2,711
Other 1,548 -
---------- ----------
TOTAL PERSONNEL OVERHEAD 4,694,238 3,616,946
---------- ----------
CENTRAL DEPARTMENT OVERHEAD
Utilities 51,994 65,447
Communication 55,400 38,798
Office rent 154,013 144,878
Repair/rent/maintenance 51,926 33,702
Depreciation 85,325 81,275
Amortization 23,685 11,571
Relocation 20,652 10,704
Facilities consultant - 22,257
Dues and subscriptions 1,577 1,110
Office supplies 59,036 21,972
Non-productive time 4,615 4,324
Administrative time 100,425 34,638
---------- ----------
TOTAL CENTRAL DEPARTMENT OVERHEAD 608,648 470,676
---------- ----------
BRANCH DEPARTMENT OVERHEAD
Utilities 10,711 5,451
Communication 31,718 24,443
Office rent 206,483 157,378
Equipment repair & maintenance 26,241 18,216
Depreciation 26,857 16,564
</TABLE>
See accompanying notes and accountant's report.
76
<PAGE>
SOFTWARE TECHNOLOGY, INC.
SCHEDULES OF APPLIED OVERHEAD (CONTINUED)
FOR THE YEARS ENDED JANUARY 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
BRANCH DEPARTMENT OVERHEAD (continued)
Travel 515 1,195
Relocation 6,258 2,980
Dues and subscriptions 1,589 1,483
Office supplies 20,088 20,444
Non-productive time 294 980
Administrative time 60,821 26,268
---------- ----------
TOTAL BRANCH DEPARTMENT OVERHEAD 391,575 275,402
---------- ----------
OFF-SITE OVERHEAD
Communication 338 279
Depreciation 602 1,551
Travel 239 410
Relocation 39,676 15,467
Dues and subscriptions 798 1,032
Office supplies 1,294 2,016
Non-productive time 5,657 9,416
Administrative time 4,428 180
---------- ----------
TOTAL OFF-SITE OVERHEAD 53,032 30,351
---------- ----------
ARIZONA OVERHEAD
Communication 396 -
Rent 185 -
Repair/rent/maintenance 418 -
Depreciation 26,254 -
Relocation 140,680 -
Office supplies 2,622 -
Administrative time 7,518 -
---------- ----------
TOTAL ARIZONA OVERHEAD 178,073 -
---------- ----------
PERSONNEL EXPENSES APPLIED TO GENERAL
AND ADMINISTRATIVE (469,917) (468,645)
---------- ----------
TOTAL APPLIED OVERHEAD $5,455,649 $3,924,730
========== ==========
</TABLE>
77
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and if given or made, such information or representations must not be
relied upon as having been authorized by the Issuer. The delivery of this
Prospectus at any time does not imply that the information herein is correct as
of any time subsequent to its date of issue. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any of these
securities.
-------------------------
TABLE OF CONTENTS
-------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Additional Information 2
Summary 2
Risk Factors 6
The Distribution 11
Capitalization 12
Business 14
Management's Discussion
and Analysis of Financial
Condition 23
Legal Proceedings 25
Management 26
Principal Shareholders and
Security Ownership of
Management 31
Securities 33
Dividends 36
Liability and Indemnification
of Directors 36
Legal Matters 39
Experts 39
Financial Statements 40
</TABLE>
-------------------------
3,520,245 COMMON SHARES
AND
1,070,270 COMMON STOCK
PURCHASE WARRANTS
OF
EXIGENT INTERNATIONAL, INC.
-------------------------
PROSPECTUS
-------------------------
__________________, 1996
UNTIL _____________________, 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
78
<PAGE>
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
Expenses of the offering are estimated to be approximately $150,000 which
amount includes the following items:
<TABLE>
<CAPTION>
<S> <C>
Registration fee - federal $ 1,070
Registration fees - state $ 0
Transfer Agent Fees* $20,000
Printing and EDGAR Filing Costs* $18,000
Legal Fees (including fees relating
to the reorganization)* $50,000
Accounting Fees $15,000
Consultant Fees $45,000
</TABLE>
- -------------------------------------------------------------------------------
* estimates
Item 14. Indemnification of Directors and Officers
The Issuer has provisions in its Certificate of Incorporation which limit
its directors' monetary liability to it or its shareholders except: (a) for any
breach of the director's duty of loyalty to the corporation or its shareholders;
(b) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (c) for unlawful payment of dividends
or unlawful repurchase or redemption of its own stock; or (d) for any
transaction from which the director derived an improper personal benefit.
The Issuer is required to indemnify its officers and directors for any
liability incurred by them in their capacity as such except in relation to
matters as to which any such director or officer or former director or officer
or person shall be adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of duty.
Item 15. Recent Sales of Unregistered Securities
The Issuer issued 300,000 Common Shares and 425,000 Warrants to Monogenesis
Corporation on _______________, 1996 for $3,000.00, the par value of the Common
Shares. The Issuer claims exemption from registration under Section 4(2) of the
Securities Act of 1933.
In addition, on the effective date of this Registration Statement, the
Issuer issued 3,486,600 Common Shares and 697,320 Class B Common Shares to the
shareholders of Software Technology, Inc. in exchange for all of STI's issued
and outstanding stock. The Issuer also issued 470,274 Common Stock Purchase
Warrants in exchange for all of STI's issued and outstanding warrants on the
same date. The Issuer claims exemption from registration under Section 4(2) of
the Securities Act of 1933.
The securities issued to Monogenesis Corporation, 2,149,975 of the Common
Shares issued to STI shareholders and all of the Warrants will be registered
under this Registration Statement. The remaining securities issued will bear a
restrictive legend.
79
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
------------------------------------------
INDEX TO EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
---------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
Exhibit Page
Table Number Number
------------ ------
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
I. Plan of Acquisition, Reorganization, Arrangement, 2
Liquidation or Succession
- ----------------------------------------------------------------------------------------------
(i) Stock Purchase Agreement and Plan of 87
Reorganization (excluding all Schedules except 1.1)
- ----------------------------------------------------------------------------------------------
II. Articles of Incorporation and Bylaws 3
- ----------------------------------------------------------------------------------------------
(i) Certificate of Incorporation of Exigent International, 116
Inc.
- ----------------------------------------------------------------------------------------------
(ii) Bylaws of Exigent International, Inc. 125
- ----------------------------------------------------------------------------------------------
III. Opinion of Counsel - Legality of Securities Being 5 149
Registered
- ----------------------------------------------------------------------------------------------
IV. Material Contracts 10
- ----------------------------------------------------------------------------------------------
(i) Agreement Between Exigent International, Inc. and 151
Transfer Agent
- ----------------------------------------------------------------------------------------------
(ii) Common Stock Purchase Warrant Agreement 157
Between Exigent International, Inc. and Warrant
Agent
- ----------------------------------------------------------------------------------------------
V. Subsidiaries of the Registrant 21 168
- ----------------------------------------------------------------------------------------------
VI. Consent of Experts 23
- ----------------------------------------------------------------------------------------------
(i) Consent of Hoyman, Dobson & Company, P.A., 169
Certified Public Accountants
- ----------------------------------------------------------------------------------------------
(ii) Consent of Counsel - See Exhibit 5
- ----------------------------------------------------------------------------------------------
VII. Financial Data Schedule 27 170
- ----------------------------------------------------------------------------------------------
</TABLE>
80
<PAGE>
Item 17. Undertakings
The undersigned registrant hereby undertakes to file, during any period in
which offers or sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in the registration statement;
and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
81
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Melbourne, State of
Florida, on June 7, 1996.
Exigent International, Inc.
By: /s/ Jeffrey C. Clift
----------------------------------------------------
Jeffrey C. Clift, President, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
/s/ Jeffrey C. Clift on June 7, 1996
- --------------------------------------------
Jeffrey C. Clift, President, Chief Executive Officer
/s/ Don F. Riordan, Jr. on June 7, 1996
- --------------------------------------------
Don F. Riordan, Jr., Chief Financial Officer
The following are at least a majority of the directors of Exigent
International, Inc.:
/s/ Jeffrey C. Clift on June 7, 1996
- ------------------------------------
Jeffrey C. Clift
/s/ Don F. Riordan, Jr. on June 7, 1996
- ------------------------------------
Don F. Riordan, Jr.
/s/ David J. Nowacki on June 7, 1996
- ------------------------------------
David J. Nowacki
/s/ Daniel J. Stark on June 7, 1996
- ------------------------------------
Daniel J. Stark
/s/ William K. Presley on June 7, 1996
- ------------------------------------
William K. Presley
/s/ Thomas O. Chewning, Jr. on June 7, 1996
- ------------------------------------
Thomas O. Chewning, Jr.
82
<PAGE>
Exhibit 2
---------
STOCK PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
among
Software Technology, Inc.,
Monogenesis Corporation,
Joseph Walker & Sons, Inc.
and
Shareholders of Software
Technology, Inc.
Dated: December 15, 1995
<PAGE>
STOCK PURCHASE AGREEMENT
AND
PLAN OF REORGANIZATION
----------------------
This Stock Purchase Agreement and Plan of Reorganization (the "Agreement")
is entered into as of this 15th day of December, 1995 by and among Software
Technology, Inc., a Florida corporation ("STI"); Monogenesis Corporation, a
Delaware corporation ("Monogenesis"); Joseph Walker & Sons, Inc., a Delaware
corporation ("JWSI"); and the persons listed on Schedule 1.1 that are currently
shareholders of STI (collectively referred to as the "Shareholders").
WHEREAS, Monogenesis will create a Delaware corporation (the "Holding
Company"), which will acquire all of the issued and outstanding shares of stock
of STI in a stock for stock exchange;
WHEREAS, the Holding Company will have four classes of stock authorized:
Common Shares, Class B Common Shares, Class D Common Shares and Preferred Shares
as well as common stock purchase warrants as described below;
WHEREAS, STI has authorized 800,000 shares of common stock, 593,182 of
which are issued and outstanding and 175,218 of which are treasury shares and
will have outstanding warrants to purchase 95,839 shares of common stock of STI;
WHEREAS, the Shareholders own all of the issued and outstanding stock of
STI and desire to exchange their stock in STI for stock in the Holding Company,
in the ratio of one Class B Common Share and five Common Shares of the Holding
Company for each share of common stock of STI;
WHEREAS, prior to the Closing Date, STI will distribute to the each
Shareholder warrants to purchase 1,124 shares of common stock of STI for each
10,000 shares of common stock of STI held by such Shareholder (rounded to the
nearest whole share);
WHEREAS, prior to the Closing Date, JWSI will purchase, and STI will issue
to JWSI, warrants to purchase 29,166 of its common stock;
WHEREAS, the Shareholders and JWSI will own all of the outstanding warrants
to purchase shares of stock of STI and desire to exchange such warrants for
Common Stock Purchase Warrants (the "Warrants") to purchase Common Shares of the
Holding Company (which Warrants will be exercisable for thirty-six months and
have an exercise price of $3.00 per share) in the ratio of six Warrants for each
warrant to purchase one share of common stock of STI;
<PAGE>
WHEREAS, prior to the Closing Date (as hereinafter defined), Monogenesis
will purchase, and the Holding Company will issue to Monogenesis, 300,000 of its
Common Shares at a purchase price of $0.01 per share together with 425,000
Warrants at a purchase price of $0.01 per Warrant;
WHEREAS, prior to the stock for stock exchange, the Holding Company (and
STI) will file a registration statement (the "Registration Statement")
registering 1,875,051 of the Common Shares to be issued to the Shareholders, all
of the Common Shares and all of the Warrants to be issued to Monogenesis and
JWSI and all of the Common Shares underlying the Warrants pursuant to the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, on the Closing Date, Monogenesis will authorize its transfer agent
to distribute to Monogenesis shareholders 125 Common Shares of the Holding
Company and 200 Warrants of the Holding Company for each share of stock of
Monogenesis held;
NOW THEREFORE, in consideration of the mutual covenants and conditions
hereinafter set forth, the parties agree as follows:
ARTICLE I
SECURITIES
1.1 EXCHANGE OF SECURITIES. Subject to the terms and conditions
hereinafter set forth, on the Closing Date (as defined below), the Holding
Company shall cause to be issued and delivered to the Shareholders and JWSI the
class and the number of shares of stock of the Holding Company (the "Shares")
and the number of Warrants set forth opposite their names on Schedule 1.1, which
is attached hereto and made a part hereof, in exchange for which the
Shareholders and JWSI shall deliver to the Holding Company all of the issued and
outstanding stock and warrants of STI.
1.2 SHAREHOLDER AND JWSI WARRANTS. Prior to the exchange of securities
described in Section 1.1 above, STI shall distribute to each Shareholder
warrants to purchase 1,124 shares of its common stock for each 10,000 shares of
common stock of STI held by such Shareholder (rounded to the nearest whole
share). In addition, STI shall sell to JWSI warrants to purchase 29,166 of its
shares of common stock.
1.3 ISSUANCE OF SECURITIES TO MONOGENESIS. Prior to the exchange of
securities described in Section 1.1 above, the Holding Company shall issue to
Monogenesis 300,000 Common Shares upon
89
<PAGE>
receipt of the purchase price of $0.01 per share and 425,000 Warrants (in
substantially the form attached hereto as Exhibit 1.3) upon receipt of the
purchase price of $0.01 per share.
1.4 REGISTRATION STATEMENT. The Holding Company and STI shall prepare
and file the Registration Statement pursuant to the 1933 Act registering a total
of 3,175,079 Common Shares and 1,000,028 Warrants, which constitute 1,875,051 of
the 2,965,910 Common Shares to be issued to the Shareholders, the 400,032
Warrants to be issued to the Shareholders, the 300,000 Common Shares and 425,000
Warrants to be issued to Monogenesis, the 174,966 Warrants to be issued to JWSI
and the 1,000,028 Common Shares underlying the Warrants. The Shareholders shall
receive the registered shares as indicated on Schedule 1.1.
1.5 DISPOSITIONS OF SHARES BY SHAREHOLDERS. The parties desire that this
transaction qualify as a tax free reorganization under Section 368(a)(1)(B) of
the Internal Revenue Code of 1986, as amended. In furtherance thereof, the
Shareholders as a group (excluding the Software Technology, Inc. Restated
Employee Stock Ownership Plan and Trust Agreement (the "ESOP")) shall not
dispose of any shares of the Holding Company stock received in the exchange
within five years of the exchange if such disposition would reduce the aggregate
fair value of the Holding Company stock (measured as of the date of the
exchange) retained by the Shareholders (including the ESOP) to an amount less
than 50% of the aggregate fair value of all of STI's issued and outstanding
stock immediately before the exchange, unless such Shareholder obtains an
opinion of counsel reasonably satisfactory to the Holding Company that such
transfer will not violate the continuity of shareholder interest requirement set
forth in Treas. Reg. (S) 1.368-1. Any Shareholder wishing to dispose of any
shares of the Holding Company stock received in the exchange shall provide
written notice to the Holding Company, not less than five business days prior to
the intended date of disposition, specifying the number of shares of which the
Shareholder proposes to dispose.
ARTICLE II
CLOSING
2.1 TIME AND PLACE. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the place and on such date and at
such time within ten business days after the date on which all of the conditions
set forth in Articles IX and X to each party's obligations hereunder have been
satisfied or waived, as set forth in a written notice from Monogenesis at least
five business days prior thereto; or on such other date and at such other time
and place as STI and Monogenesis
90
<PAGE>
may mutually agree. The date on which the Closing actually occurs is herein
referred to as the "Closing Date".
2.2 ACTIONS AT THE CLOSING. At the Closing, the Shareholders shall
deliver to the Holding Company and the Holding Company shall deliver to the
Shareholders the shares and warrants to be exchanged in accordance with Section
1.1 of this Agreement. The Shareholders and JWSI shall deliver the certificates
and agreements representing all of the issued and outstanding shares of stock
and warrants of STI to the Holding Company in negotiable form or together with
completed and executed stock powers transferring such shares and warrants to the
Holding Company. Upon receipt of such shares and warrants, the Holding Company
shall instruct the transfer agent to prepare and deliver certificates
representing the Shares and the Warrants.
2.3 HOLDING COMPANY DIRECTORS. As soon as practical after filing the
Holding Company's Certificate of Incorporation, Monogenesis, as incorporator,
shall designate those persons indicated by STI the initial Board of Directors of
the Holding Company.
2.4 SIMULTANEOUS ACTIONS. All proceedings to be taken and all documents
to be executed and delivered by the parties at the Closing shall be deemed to
have been taken and executed simultaneously and no proceedings shall be deemed
taken nor any documents executed or delivered until all have been taken,
executed and delivered.
ARTICLE III
REPRESENTATIONS AND WARRANTS OF STI
STI represents and warrants to Monogenesis, all of which representations
and warranties shall be true on the Closing Date and shall survive the Closing,
that:
3.1 ORGANIZATION. STI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Florida and has the
corporate power to own its property and carry on its business as it is now being
conducted. STI is duly qualified and in good standing to do business in every
jurisdiction in which such qualification is necessary and each of such
jurisdictions is listed on Schedule 3.1 attached hereto. Copies of the Articles
of Incorporation and the Bylaws of STI, which have been furnished by STI to
Monogenesis, are true and correct copies of said documents including all
amendments to the date hereof. The offices and directors of STI are listed on
Schedule 3.1.
91
<PAGE>
3.2 CAPITALIZATION. STI has authorized 800,000 shares of Common Stock
which have a par value of $0.01 per share. Of such shares, 593,182 are issued
and outstanding and have been and will be duly authorized, validly issued, fully
paid and nonassessable. Except as set forth on Schedule 3.2 hereto and as
described herein, there is no: (i) outstanding security convertible into or
exchangeable for Common Stock; (ii) option, warrant, put, call or other right to
purchase or subscribe to Common Stock; or (iii) contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance or disposition
of Common Stock or the issuance or disposition of any security convertible into
Common Stock. STI's records reflect the ownership of all issued and
outstanding shares of its stock as reflected on Schedule 1.1.
3.3 SUBSIDIARIES. STI has no subsidiaries and owns no stock, partnership
or other equity interest in any other entity.
3.4 AUTHORITY. STI has full power to execute and perform this Agreement.
The execution and delivery of this Agreement has been duly authorized by all
necessary corporate and other actions. Neither the execution nor delivery of
this Agreement nor the performance, observation or compliance with its terms and
conditions will violate any provision of law, any order of court or other
governmental agency, the Articles of Incorporation or Bylaws of STI, or any
indenture, agreement or other instrument to which STI is a party, or by which it
is bound or by which any of its property is bound. No consent to the
performance, observation or compliance with the terms and conditions of this
Agreement by STI is required from any third party.
3.5 FINANCIAL STATEMENTS. Schedule 3.5 attached hereto contains true and
complete copies of the following (collectively, the "Financial Statements"):
(a) the audited balance sheets of STI as of January 31, 1993, 1994
and 1995, and the related audited statements of earnings and retained earnings
and cash flow for the fiscal years then ended, and notes related thereto; and
(b) the unaudited balance sheet (the "Balance Sheet") of STI as of
July 31, 1995 (the "Balance Sheet Date") and the related unaudited statement of
earnings for the six months then ended, presented on a comparative basis with
financial statements as of July 31, 1994, prepared by STI and accompanied by a
certificate in the form of Exhibit 3.5 hereto executed by the persons indicated
on said Exhibit.
92
<PAGE>
The Financial Statements either eliminate or clearly disclose all transactions
between STI, Shareholders and their affiliates. Except as otherwise noted in the
Financial Statements, the Financial Statements are complete and present fairly
the financial position of STI and the results of its operations as of the dates
thereof and for the periods covered thereby in conformity with generally
accepted accounting principles applied on a consistent basis.
3.6 ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on Schedule
3.6 attached hereto, to the Best Knowledge (as defined in Section 3.19 below) of
STI, at the Balance Sheet Date (i) the Company had no liabilities or obligations
of any nature (matured or unmatured, fixed or contingent) which were not
provided for or disclosed on the Balance Sheet, (ii) all reserves and allowances
provided on the Balance Sheet were adequate for the purposes indicated therein
and (iii) there were no loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board ("FASB")) which were not adequately provided for in the Balance
Sheet.
3.7 ABSENCE OF CHANGES. Since the Balance Sheet Date, except as set
forth on Schedule 3.7 attached hereto, STI's business has operated in the
ordinary course and there has not been (i) any adverse change in its condition
(financial or otherwise), assets, liabilities, earnings or business; (ii) any
obligation or liability (whether absolute, accrued, contingent or otherwise and
whether due or to become due) incurred, or any transaction, contract or
commitment entered into, other than items incurred or entered into (as the case
may be) in the ordinary course of the business; (iii) any amendment or
termination of a material contract, license, lease, commitment or other
agreement to which STI is a party, except in the ordinary course of business
and consistent with past practice; (iv) any license, sale, transfer, pledge,
mortgage or other disposition of any tangible or intangible asset or
Intellectual Property (as defined in Section 3.13 below) except sales of
inventory in the ordinary course of business and consistent with past practice;
(v) any failure to operate its business in the ordinary course consistent with
past practice, including, but not limited to, any failure to make capital
expenditures or investments necessary to continue business in the ordinary
course or any failure to pay trade accounts payable when due; or (vi) any
dividend or other distribution declared or paid or any change in its Common
Stock outstanding.
3.8 TITLE TO ASSETS. STI has good and marketable title to all of its
assets, free and clear of all mortgages, liens, pledges, charges, security
interests, rights of way, options, rights of
93
<PAGE>
first refusal, conditions, restrictions or encumbrances of any kind or
character, whether or not relating to the extension of credit or the borrowing
of money (collectively, "Encumbrances"), except for (i) the Encumbrances
disclosed in the Financial Statements or set forth on Schedule 3.8, and (ii)
liens for taxes and governmental charges not yet payable without penalty or
which STI is contesting in good faith by appropriate action and which are
identified on Schedule 3.8 attached hereto (collectively, but only to the extent
expressly so designated on such Schedule 3.8, the "Permitted Encumbrances").
There is no asset used or required by STI in the conduct of its business which
is not either owned by it or licensed or leased to it, all of which licenses or
leases are disclosed on Schedule 3.8.
3.9 LITIGATION. Except as set forth on Schedule 3.9 attached hereto,
there are no (i) audits, inspections, actions, suits, claims, investigations or
legal, administrative or arbitration proceedings pending or threatened against
STI, whether at law or in equity, whether civil or criminal in nature or whether
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, nor,
to the Best Knowledge of STI, does any basis exist therefor or (ii) judgments,
decrees, injunctions or orders of any court, governmental department,
commission, agency, instrumentality or arbitrator against STI. STI has made
available to Monogenesis all documents and correspondence relating to matters
referred to in Schedule 3.9.
3.10 COMPLIANCE; GOVERNMENTAL AUTHORIZATION. (a) STI has complied with
all federal, state, territorial, local or foreign laws, ordinances, regulations
or orders applicable to its business or assets, including, by way of
description, and not limitation, matters relating to the environment, anti-
competitive practices, discrimination, employment, health and safety, taxes,
issuance of securities, customs duties and requirements and foreign practices.
Seller has all federal, state, territorial, local and foreign governmental
licenses and permits necessary in the conduct of its business as presently
conducted, which licenses and permits are in full force and effect, and no
violations are outstanding or uncured with respect to any such licenses or
permits and no proceeding is pending or threatened to revoke or limit any of
them. Except as set forth on Schedule 3.10(a), such licenses, consents and
permits shall not be affected in any respect by the transactions contemplated
hereby.
(b) As used in this Agreement, "Hazardous Substance" shall mean and
include all hazardous or toxic substances, wastes or materials, any pollutants
or contaminants (including, without
94
<PAGE>
limitation, all oil and petroleum of any kind and in any form, asbestos and raw
materials which include hazardous constituents), or any other similar
substances, or materials which are included under or regulated by any applicable
local, state, federal or foreign law, rule or regulation pertaining to
environmental regulation, contamination, clean-up or disclosure, including,
without limitation, the Clean Air Act, the Federal Water Pollution Control Act,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Superfund Amendments and Reauthorization Act of 1986, the Resource
Conservation and Recovery Act of 1976, the Toxic Substances Control Act, the
Federal Insecticide, Fungicide and Rodenticide Act, the Occupational Safety and
Health Act, the Emergency Planning and Community Right-to-Know Act of 1986, and
all comparable applicable state or local laws, orders and regulations, as any of
the foregoing has heretofore been amended.
(c) STI hereby warrants to Buyer that STI and the supervisory
employees, officers and directors of STI have no knowledge of the presence,
storage, disposition, generation, treatment, release or discharge of any
Hazardous Substance on, under or about the assets owned by STI or the land and
buildings on and in which STI currently conducts or previously conducted its
operations except as set forth on Schedule 3.10(c).
3.11 LABOR RELATIONS; EMPLOYEES. Seller is in compliance with all
applicable federal, state, territorial, local and foreign laws and regulations
respecting labor, employment and employment practices, terms and conditions of
employment and wages and hours. There is no unfair labor practice complaint
against STI pending before any state, local or foreign agency. Except as set
forth on Schedule 3.11 hereto, there is no labor strike, dispute, slowdown,
stoppage or organizational effort or similar activity actually pending or, to
the Best Knowledge of STI, threatened involving STI; no representation question
exists respecting the employees of STI; and no collective bargaining agreement
presently covers any employees of STI, nor is any currently being negotiated.
3.12 EMPLOYEE BENEFIT PLANS. (a) Schedule 3.12 attached hereto lists all
"employee pension benefit" plans (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")), all "employee
welfare benefit" plans (as defined in Section 3(1) of ERISA) and any other
qualified or non-qualified plans, programs or letters of commitment promising
current or future benefits or deferred compensation (individually, a "Plan" and,
collectively, the "Plans") maintained by STI. All Plans which are "employee
pension benefit" plans are so indicated in Schedule 3.12. All reports,
statements, returns and other information required to be furnished or filed with
respect to the
95
<PAGE>
Plans have been furnished or filed, or both, and all required records have been
maintained. There are no actions, suits or claims pending, or to the Best
Knowledge of STI, threatened against, involving, or affecting any Plan. STI has
no material liability, civil or criminal, under any provision of ERISA or any
other applicable statute or rule of law with respect to the Plans.
(b) There are no violations of the health care continuation coverage
requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA") with respect to employees of STI or any qualified
beneficiaries of such employees.
3.13 INTELLECTUAL PROPERTY. Set forth on Schedule 3.13 is a list and a
brief description or identification of all intellectual property rights owned,
leased or licensed by STI or used in connection with its business, including
without limitation all patents, patent applications, trade names, fictitious or
assumed names, trademarks, trademark applications, service marks, service mark
applications, copyrights, copyright applications, patterns, inventions, trade
secrets, proprietary processes and formulae, license agreements, and all other
similar proprietary rights, whether patentable or unpatentable (collectively,
the "Intellectual Property"). Except only as set forth on Schedule 3.13, STI is
not a licensor or licensee in respect of any Intellectual Property. STI owns or
possesses adequate licenses or other rights to use all Intellectual Property
necessary to conduct its business as now operated and all of such Intellectual
Property is owned outright by STI except as is otherwise specifically noted on
Schedule 3.13. To the Best Knowledge of STI, there is no infringement,
misappropriation or other misuse being made by any other party of the
Intellectual Property. No claim is pending or threatened to the effect that the
present or past operations of STI infringe or conflict with the asserted rights
of others in respect of any Intellectual Property, and no claim is pending or
threatened to the effect that any of such Intellectual Property is invalid or
unenforceable.
3.14 ACCOUNTS AND NOTES RECEIVABLE. All unpaid accounts and notes
receivable outstanding at the date hereof constitute, and those outstanding at
the Closing Date will constitute, valid and enforceable claims arising in bona
fide transactions in the ordinary course of business, except as enforceability
is limited by applicable bankruptcy, reorganization, insolvency, moratorium,
fraudulent conveyance or similar laws affecting the enforcement of creditors
rights generally. Except as set forth in Schedule 3.14 or reserved against in
the Final Balance Sheet, there is (i) no account or note debtor who has refused
or threatened to refuse to pay its obligations or who has or threatened to set-
off such
96
<PAGE>
obligations for any reason, (ii) no account or note debtor who is to STI's Best
Knowledge insolvent or bankrupt and (iii) no account or note receivable pledged
to any third party. The reserves and allowances provided for on the Balance
Sheet have been established on the basis of historical experience in accordance
with generally accepted accounting principles. To the Best Knowledge of STI, no
material customer of STI is currently a debtor in any proceeding under the
Federal Bankruptcy Code or other similar law except as specifically described in
Schedule 3.14, in which is also set forth the amount of such customer's payments
to STI during the ninety days prior to the bankruptcy filing and the amount of
any preference claims pending or threatened against STI.
3.15 INVENTORIES. The inventories of STI are, and at the Closing Date
will be, (i) of a quantity which is reasonable in the circumstances of STI; and
(ii) of a quality which is substantially similar to the historical quality of
STI's inventory.
3.16 TAX MATTERS. For purposes of this Agreement, the term "Taxes" means
all taxes of any kind or nature, including but not limited to federal, state,
local and foreign income taxes, withholding taxes, branch profit taxes, gross
receipts taxes, franchise taxes, sales and use taxes, business and occupation
taxes, property taxes, VAT, custom duties or imposts, stamp taxes, excise taxes,
payroll taxes, intangible taxes and capital taxes and any penalties or interest
thereon. STI has filed within the time and in the manner prescribed by law all
tax returns and reports required to be filed by it under the laws of the United
States and each state or other jurisdiction in which it conducts business
activities requiring the filing of tax returns or reports. STI has paid or set
up adequate reserves in the Balance Sheet in respect of all Taxes. Except as
noted in Schedule 3.8, there are no tax liens, whether imposed by the United
States, any state, local, foreign or other taxing authority, outstanding against
STI or its assets. All Taxes and assessments that STI is required to withhold
or to collect have been duly withheld or collected and all withholdings and
collections have either been duly and timely paid over to the appropriate
governmental authorities or are, together with the payments due or to become due
in connection therewith, duly reflected on the Balance Sheet in accordance with
generally accepted accounting principles.
3.17 BOOKS AND RECORDS. The books of account and other corporate
financial records of STI are in all material respects complete and correct, have
been maintained in accordance with good business practices and matters contained
therein are appropriately and accurately reflected in the Financial Statements.
The
97
<PAGE>
corporate record book of STI contains true and complete copies of all meetings
of its shareholders and directors.
3.18 DISPOSITION OF HOLDING COMPANY STOCK. STI is not aware of any
present plan, intention or arrangement of any Shareholder or Shareholders to
dispose of the Holding Company stock to be received hereunder which would reduce
the aggregate fair value of the Holding Company stock (as measured as of the
date of the exchange) retained by the Shareholders to an amount less than 50% of
the aggregate value of all STI stock immediately prior to the exchange.
3.19 DISCLOSURE. Neither this Agreement (including the Schedules and
Exhibits attached hereto) nor any other document, certificate or statement
furnished to Monogenesis by or on behalf of STI in connection with the
transactions contemplated hereby, when considered in the aggregate with all
other such documents, certificates or statements, contains any untrue statement
of a material fact or omits to state a material fact necessary in order to make
the statements contained herein and therein not misleading.
3.20 BEST KNOWLEDGE OF STI. STI represents and warrants that each time
a representation and warranty is based on "Best Knowledge" that STI has made a
duly diligent investigation and inquiry.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDERS
Each Shareholder represents and warrants, all of which representations and
warranties shall be true on the Closing Date and shall survive the Closing,
that:
4.1 AUTHORITY. Each Shareholder has full power and authority to execute
and perform this Agreement and to exchange his shares of stock and warrants of
STI upon the terms provided in this Agreement. The execution and delivery of
this Agreement has been duly authorized by each Shareholder. Neither the
execution nor delivery of this Agreement nor the performance, observation or
compliance with its terms and provisions will violate any provision of law, any
order of court or other governmental agency, or any indenture, agreement or
other instrument to which any Shareholder is a party, or by which any of them is
bound or by which any of their property is bound. No consent to the
performance, observation or compliance with the terms and conditions of this
Agreement by any Shareholder is required from any third party.
98
<PAGE>
4.2 STOCK OWNERSHIP. All of the Common Stock of STI is directly owned by
the respective Shareholders, as indicated herein, free and clear of all liens,
encumbrances, security interests, charges, pledges, options, restrictions on
transfer, rights of refusal or other adverse claims of any kind except as set
forth on Schedule 4.2 attached hereto. No person owns or has any beneficial
interest in any Common Stock except Shareholders. Each Shareholder has good and
marketable title to the shares and warrants being transferred by such
Shareholder. No Shareholder has transferred or assigned, or entered into any
agreement or understanding to transfer or assign, any of the Common Stock or
warrants of STI or any of the voting rights pertaining to the shares except as
set forth on Schedule 4.2 attached hereto.
4.3 DISPOSITION OF HOLDING COMPANY STOCK. No Shareholder has any present
plan, intention or arrangement to dispose of the Holding Company stock to be
received hereunder which would reduce the aggregate fair value of the Holding
Company stock (as measured as of the date of the exchange) retained by the
Shareholders to an amount less than 50% of the aggregate value of all STI stock
immediately prior to the exchange.
4.4 INVESTMENT REPRESENTATIONS. (a) Each Shareholder has received such
material information as has been requested for purposes of becoming fully
familiar with the financial condition of STI and the expected condition of the
Holding Company, the administration of their business affairs, and their
prospects for future business.
(b) Each Shareholder is fully aware and has been advised that the
securities received pursuant to this Agreement are speculative in nature and
that neither STI nor the Holding Company make any assurance whatever concerning
the present or prospective value of the securities.
(c) Each Shareholder understands that, with the exception of the
1,875,051 Common Shares and the Warrants which will be registered pursuant to
the 1933 Act, the securities to be received by the Shareholders pursuant to this
Agreement are not to be registered under the 1933 Act, on the ground that the
securities are being issued and sold in a transaction not involving any public
offering and that, consequently, the transaction is exempt from registration
under the 1933 Act by virtue of the provisions of Section 4(2) thereof; nor are
the securities to be registered under the securities laws of any state on the
ground that the sale is exempt, or registration of securities is not required,
under the securities laws of any states in which Shareholders reside.
99
<PAGE>
(d) Each Shareholder understands that the reliance of STI and the
Holding Company upon the above exemptions is predicated in part on the
representation of the Shareholders that such unregistered securities are being
acquired for the account of the Shareholders with no present intention of
reselling or otherwise distributing the same.
(e) Each Shareholder understands that he or she will not be able to
dispose of any shares acquired pursuant to this Agreement, except such shares as
are registered as described in Article I, or any interest therein unless and
until such shares or interests have been registered under the 1933 Act and
applicable state securities laws or the Holding Company has received an opinion
from counsel satisfactory to it that registration is not required in connection
with such disposition. He or she understands that the Holding Company will
prohibit transfers of the shares which are not registered as described in
Article I in the absence of registration or the mentioned opinion of counsel and
a restrictive legend will be placed on the Class B Common Shares and on the
Common Shares received by the Shareholders which are not registered as described
in Article I reflecting these restrictions.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF MONOGENESIS
Monogenesis represents and warrants, all of which representations and
warranties shall be true on the Closing Date and shall survive the Closing,
that:
5.1 ORGANIZATION. Monogenesis is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to carry on its business as it is now being conducted.
5.2 AUTHORITY. Monogenesis has the full power to execute and perform
this Agreement. The execution and delivery of this Agreement has been duly
authorized by all necessary corporate and other actions. Neither the execution
nor delivery of this Agreement nor the performance, observance or compliance
with its terms and conditions will violate any provision of law, any order of
court or other governmental agency, the Certificate of Incorporation or Bylaws
of Monogenesis or any indenture, agreement or other instrument to which
Monogenesis is a party, or by which it is bound. No consent to the performance,
observation or compliance with the terms and conditions of this Agreement by
Monogenesis is required from any third party.
100
<PAGE>
5.3 SHAREHOLDERS. Monogenesis has in excess of 1,000 shareholders.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF JWSI
JWSI represents and warrants, all of which representations and warranties
shall be true on the Closing Date and shall survive the Closing, that:
6.1 ORGANIZATION. JWSI is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has the
corporate power to carry on its business as it is now being conducted.
6.2 AUTHORITY. JWSI has the full power to execute and perform this
Agreement. The execution and delivery of this Agreement has been duly
authorized by all necessary corporate and other actions. Neither the execution
nor delivery of this Agreement nor the performance, observance or compliance
with its terms and conditions will violate any provision of law, any order of
court or other governmental agency, the Certificate of Incorporation or Bylaws
of JWSI or any indenture, agreement or other instrument to which JWSI is a
party, or by which it is bound. No consent to the performance, observation or
compliance with the terms and conditions of this Agreement by JWSI is required
from any third party.
6.3 OWNERSHIP OF WARRANTS. JWSI owns the warrants of STI to be exchanged
hereunder free and clear of all liens, encumbrances, security interests,
charges, pledges, options, restrictions on transfer, rights of refusal or other
adverse claims of any kind. JWSI has good and marketable title to the warrants
being transferred. JWSI has not transferred or assigned, or entered into any
agreement or understanding to transfer or assign, any of the warrants.
ARTICLE VII
COVENANTS OF STI
STI hereby covenants and agrees with Monogenesis as follows:
7.1 CONDUCT OF BUSINESS UNTIL CLOSING DATE. Except as permitted or
required hereby or as Monogenesis may otherwise consent in writing, between the
date hereof and the Closing Date, STI shall:
101
<PAGE>
(a) operate its business only in the usual, regular and ordinary
manner as such business was conducted prior to the Balance Sheet Date and, to
the extent consistent with such operation, use its best efforts to (i) preserve
the present business organization intact, (ii) keep available the services of
the present employees, and (iii) preserve the present business relationship with
customers, suppliers and others having business dealings with it;
(b) maintain all properties necessary for the conduct of the
business, whether owned or leased, in substantially the same condition as they
now are (reasonable wear and tear which are not such as to materially adversely
affect operations and damage due to unavoidable casualty excepted);
(c) neither (i) encumber, mortgage or voluntarily subject to lien,
except for liens created pursuant to existing loan agreements, any of the
properties or assets, (ii) convey, transfer or acquire any material asset or
property other than in the ordinary course of business, nor (iii) except in the
ordinary course of business, incur any material fixed or contingent obligation
or enter into any material agreement, commitment or other transaction or
arrangement; and
(d) neither declare, set aside, pay or make any dividend or other
distribution or payment on or in respect of shares of its stock, nor directly or
indirectly redeem, retire, purchase or otherwise acquire any of its stock except
annual dividends as historically paid.
7.2 ACCESS TO PROPERTIES AND RECORDS. STI shall give to Monogenesis and
its representatives reasonable access during normal business hours to STI's
properties, personnel, books, tax returns, contracts, commitments and records
and the right to make copies thereof. STI shall furnish to Monogenesis and such
representatives all such additional documents and financial and other
information as Monogenesis or its representatives may from time to time
reasonably request and permit Monogenesis and such representatives to examine
all records and working papers relating to the preparation, review and audits of
STI's financial statements and tax returns.
7.3 ADVICE OF CHANGES. Between the date hereof and the Closing Date, STI
shall advise Monogenesis promptly in writing of any fact of which any STI
becomes aware, which, if known at the date hereof, would have been required to
be set forth or disclosed in or pursuant to this Agreement.
102
<PAGE>
7.4 CONDUCT. Except as permitted or required hereby or as STI may notify
Monogenesis in writing, STI shall not enter into any transaction, take any
action, or fail to take any action, which would result in any of the
representations and warranties of STI contained in this Agreement or in any
Schedule or Exhibit hereto not being true and correct at and as of the time
immediately after such transaction has been entered into or such event has
occurred and on the Closing Date.
7.5 APPROVALS, CONSENTS. STI shall obtain in writing prior to the
Closing Date all approvals, consents and waivers, required to be obtained by STI
in order to effectuate the transactions con templated hereby, and shall deliver
to Monogenesis copies thereof, reasonably satisfactory in form and substance to
Monogenesis.
ARTICLE VIII
COVENANTS OF MONOGENESIS
Monogenesis hereby covenants and agrees with STI as follows:
8.1 CONFIDENTIALITY; RETURN OF DOCUMENTS. Unless and until the
transactions contemplated by this Agreement are consummated, Monogenesis shall
keep in confidence all proprietary and financial information of STI, and shall
not, except to the extent required by law or to the extent any such information
is otherwise publicly available, without the prior written consent of STI,
reveal any such financial or proprietary information to any third party other
than securities regulatory authorities in connection with the Registration
Statement or counsel, accountants or experts retained by Monogenesis who shall
be bound by the same restrictions. If the transactions contemplated by this
Agreement are not consummated, Monogenesis shall return to STI, at STI's
request, all documents supplied to Monogenesis by STI pursuant to the provisions
of this Agreement.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF MONOGENESIS
The obligation of Monogenesis to perform as provided in this Agreement is
subject to the satisfaction at or prior to the Closing Date of the following
conditions unless waived by Monogenesis in its sole discretion:
9.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of STI and Shareholders contained in this Agreement and in any
Schedule or Exhibit hereto shall be true and accurate in all material respects
on and as of the Closing
103
<PAGE>
Date, with the same force and effect as if made on the Closing Date, except as
affected by transactions required or permitted hereby, and except that any such
representation or warranty made as of a specified date (other than the date of
this Agreement) shall have been true and accurate in all material respects on
and as of such date.
9.2 PERFORMANCE OF AGREEMENTS. STI and Shareholders shall have performed
and complied with all covenants, obligations and agreements to be performed or
complied with, on or before the Closing Date pursuant to this Agreement or any
Schedule or Exhibit hereto, including, but not limited to, the transfer of the
Shares to the Holding Company.
9.3 STI'S CERTIFICATE. Monogenesis shall have received an accurate
certificate, dated the Closing Date, of STI, satisfactory in form and substance
to Monogenesis, certifying as to the fulfillment of the matters specified in
Sections 9.1 and 9.2.
9.4 SECRETARY'S CERTIFICATE. Monogenesis shall have received an accurate
certificate, dated the Closing Date, of the Secretary or Assistance Secretary of
STI, satisfactory in form and substance to Monogenesis, with respect to the
resolutions adopted by the Board of Directors of STI approving this Agreement
and the transactions contemplated hereby.
9.5 CONSENTS, AUTHORIZATIONS. All consents, authorizations, orders or
approvals of, and filings or registrations with and the expiration of all
waiting periods imposed by, any third party, including, without limitation, any
federal, state or local commission, board or other regulatory body, lender,
lessor, licensor or supplier which are required for or in connection with the
execution and delivery of this Agreement by STI and Shareholders and the
consummation of the transactions contemplated hereby shall have been duly
obtained or made and shall be in full force and effect.
9.6 LEGISLATION. No federal, state or local statute, rule or regulation
shall have been enacted after the date of this Agreement which prohibits,
restricts, delays or materially adversely affects the business of STI or the
consummation of the transactions contemplated by this Agreement or any of the
conditions to the consummation of such transactions. No temporary restraining
order or injunction shall be in effect, or threatened by a governmental agency,
restraining the consummation of the transactions contemplated hereby.
104
<PAGE>
9.7 SHAREHOLDER AND JWSI WARRANTS. STI shall have distributed to each
Shareholder warrants to purchase 1,124 shares of its common stock for each
10,000 shares of common stock of STI held by such Shareholder (rounded to the
nearest whole share). STI shall have sold to JWSI warrants to purchase 29,166
if its shares of common stock.
9.8 ISSUANCE, REGISTRATION AND DISTRIBUTION OF SHARES AND WARRANTS. The
Holding Company shall have been formed and shall have taken all steps necessary
to issue the Shares and Warrants in accordance with this Agreement. Monogenesis
shall have resolved to distribute to each of its shareholders 125 Common Shares
and 200 Warrants of the Holding Company to be issued to Monogenesis for each
share of stock of Monogenesis held by such shareholder. The Registration
Statement shall have been filed registering 1,875,051 of the Common Shares to be
issued to Shareholders, all of the Common Shares to be issued to Monogenesis,
all of the Warrants and all of the Common Shares underlying the Warrants, and
such Registration Statement shall have become effective.
9.9 GOOD STANDING CERTIFICATES. Monogenesis shall have received
certificates acceptable to it from the Secretary of State of (i) the
jurisdiction in which STI is incorporated, certifying that STI is in good
standing under the laws of such jurisdiction and a certified copy of the
Articles of Incorporation and all amendments, and (ii) each jurisdiction in
which STI is qualified to do business as a foreign corporation, certifying that
STI is so qualified and in good standing.
9.10 INTERIM FINANCIALS. Monogenesis shall have received the unaudited
balance sheet of STI as of the month-end immediately preceding the Closing Date
(or the prior month-end if the Closing occurs prior to the tenth business day of
a month), and the related unaudited statements of earnings, retained earnings
and cash flows for the portion then ended of the fiscal year commencing February
1, 1995, presented on a comparative basis with financial statements of the same
portion of the preceding fiscal year, prepared by STI and accompanied by a
certificate in the form of Exhibit 3.5 attached hereto executed by the persons
indicated on said Exhibit. Such statements for the fiscal year commencing
February 1, 1995 shall not differ from those for the comparable period of the
preceding fiscal year in any materially adverse respect.
9.11 CASUALTY. There shall have not occurred any fire, flood, earthquake
or other casualty to assets of STI resulting in a cost of repair or replacement
of more than $25,000 in excess of applicable insurance coverage.
105
<PAGE>
ARTICLE X
CONDITIONS TO OBLIGATIONS OF STI, SHAREHOLDERS AND JWSI
The obligation of STI, Shareholders and JWSI to perform their obligations
under this Agreement is subject to the satisfaction at or prior to the Closing
Date of the following conditions unless waived by STI, Shareholders and JWSI in
their sole discretion:
10.1 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Monogenesis contained in this Agreement or in any Schedule or
Exhibit hereto shall be true and accurate in all material respects on and as of
the Closing Date, with the same force and effect as if made on the Closing Date,
except as affected by transactions required or permitted hereby, and except that
any such representation or warranty made as of a specified date (other than the
date of this Agreement), shall have been true and accurate in all material
respects on and as of such date.
10.2 PERFORMANCE OF AGREEMENTS. Monogenesis shall have performed and
complied in all material respects with all covenants, obligations and agreements
to be performed or complied with by it on or before the Closing Date pursuant to
this Agreement or any Schedule or Exhibit hereto.
10.3 OFFICER'S CERTIFICATION. STI and Shareholders shall have received
an accurate certificate, dated the Closing Date, of a duly authorized officer of
Monogenesis, satisfactory in form and substance to STI and Shareholders,
certifying as to the fulfillment of the matters specified in Sections 10.1 and
10.2.
10.4 SECRETARY'S CERTIFICATE. STI and Shareholders shall have received an
accurate certificate, dated the Closing Date, of the Secretary or Assistant
Secretary of Monogenesis, satisfactory in form and substance to STI and
Shareholders, with respect to the resolutions adopted by the Board of Directors
of Monogenesis approving this Agreement and the transactions contemplated
hereby.
10.5 CONSENTS, AUTHORIZATIONS. All consents, authorizations, orders or
approvals of, and filings or registrations with, and the expiration of all
waiting periods imposed by any third party, including without limitation, any
federal, state or local commission, board or other regulatory body which are
required for or in connection with the execution and delivery by Monogenesis of
this Agreement and the consummation by Monogenesis of the transactions
contemplated hereby shall have been obtained or made and shall be in full force
and effect.
106
<PAGE>
10.6 LEGISLATION. No federal, state or local statute, rule or regulation
shall have been enacted after the date of this Agreement which prohibits,
restricts, delays or materially adversely affects the consummation of the
transactions contemplated by this Agreement or any of the conditions to the
consummation of such transactions. No temporary restraining order or injunction
shall be in effect, or threatened by a governmental agency, restraining the
consummation of the transactions contemplated hereby.
10.7 SHAREHOLDER AND JWSI WARRANTS. STI shall have distributed to each
Shareholder warrants to purchase 1,124 shares of its common stock for each
10,000 shares of common stock of STI held by such Shareholder (rounded to the
nearest whole share). STI shall have sold to JWSI warrants to purchase 29,166
if its shares of common stock.
10.8 BOARD OF DIRECTORS OF THE HOLDING COMPANY. The Certificate of
Incorporation or Bylaws of the Holding Company shall require that the Holding
Company have the number of directors requested by STI, approximately 75% of
which will be elected by the holders of the Class B Common Shares and
approximately 25% of which will be elected by the holders of the Common Shares.
The President of the Holding Company shall not be a director solely by holding
such office, and shall only be a director of the Holding Company if otherwise
elected by the shareholders of the Holding Company. In addition, the
Shareholders shall have entered into a voting agreement pursuant to which the
Shareholders agree to vote their Common Shares to elect directors, the number of
which will be designated by STI prior to Closing, which are selected by a
committee made up of the directors elected by the holders of Class B Common
Shares who hold office immediately prior to the election.
10.9 ISSUANCE, REGISTRATION AND DISTRIBUTION OF SHARES AND WARRANTS. The
Holding Company shall have been formed and shall have taken all steps necessary
to issue the Shares in accordance with this Agreement. Monogenesis shall have
resolved to distribute to each of its shareholders 125 Common Shares and 200
Warrants of the Holding Company to be issued to Monogenesis for each share of
stock of Monogenesis held by such shareholder. The Registration Statement shall
have been filed registering 1,875,051 of the Common Shares to be issued to
Shareholders, all of the Common Shares to be issued to Monogenesis, all of the
Warrants and all of the Common Shares underlying the Warrants, and such
Registration Statement shall have be become effective.
107
<PAGE>
ARTICLE XI
TERMINATION
11.1 TERMINATION. This Agreement may be terminated at any time prior to
the Closing Date:
(a) by STI or Monogenesis at any time after June 30, 1996; provided,
however, that if the Registration Statement has not become effective and
Monogenesis is diligently pursuing the registration of the Shares then
Monogenesis may extend such date beyond June 30, 1996 to a date within ten
business days of the effective date, but not later than December 31, 1996;
(b) by Monogenesis, if the after tax earnings of STI do not equal an
average of $50,000 per month for the period beginning immediately after the end
of the last fiscal year and ending on the day prior to the effective date of the
Registration Statement;
(c) by Monogenesis, if there has been a violation or breach by STI or
Shareholders of any material agreement, representation or warranty of any of
them contained in this Agreement and such violation or breach has not been
waived by Monogenesis, or, with respect to a violation or breach of an
agreement, cured within ten business days after the receipt of written notice
thereof; or
(d) by STI, if there has been a violation or breach by Monogenesis of
any material agreement, representation or warranty of Monogenesis contained in
this Agreement and such violation or breach has not been waived by STI or, with
respect to a violation or breach of an agreement, cured within ten business days
after the receipt of written notice thereof.
In the event of termination of this Agreement and abandonment of the
transactions contemplated hereby pursuant to this Section 11.1, written notice
thereof shall forthwith be given to the other party and this Agreement shall
terminate and the transactions contemplated hereby shall be abandoned, without
further action by any of the parties hereto. The provisions of Sections 8.1,
13.1 and 13.2 shall survive any such termination.
ARTICLE XII
INDEMNIFICATION
12.1 INDEMNIFICATION. (a) STI and each Shareholder shall, jointly and
severally, indemnify, defend and save Monogenesis
108
<PAGE>
harmless from, against, for and in respect of the following: (i) any damages,
losses, obligations, liabilities, claims, actions or causes of action sustained
or suffered by Monogenesis and arising from a breach of any representation,
warranty, covenant or agreement of STI or Shareholders contained in or made
pursuant to this Agreement (including the Schedules and Exhibits attached
hereto), or in any certificate, instrument or agreement delivered by STI or any
Shareholder pursuant hereto or in connection with the transactions contemplated
hereby; and (ii) all reasonable costs and expenses (including, without
limitation, reasonable attorneys', accountants', and other professional fees and
expenses) incurred by Monogenesis in connection with any action, suit,
proceeding, demand, investigation, assessment or judgment incident to any of the
matters indemnified against under this Section 12.1(a). No claim, demand, suit
or cause of action shall be brought against STI under or pursuant to this
Section 12.1(a) with respect to the representations and warranties set forth in
Article IV hereof unless Monogenesis gives STI and Shareholders written notice,
with reasonable specificity, of the existence of any such claim, demand, suit or
cause of action under this Agreement. Upon the giving of such written notice as
aforesaid, Monogenesis shall have the right, in addition to all other remedies
available to it, to commence legal proceedings for the enforcement of its rights
under this Agreement. Monogenesis, at its option and with at least two days
advance notice to the affected party, may recover any such liability by setoff
against payments otherwise required to be made by Monogenesis to such party
pursuant to any agreement between Monogenesis and such party.
(b) Monogenesis shall indemnify, defend and save STI and Shareholders
harmless from, against, for and in respect of the following: (i) any damages,
losses, obligations, liabilities, claims, actions or causes of action sustained
or suffered by STI or any Shareholder and arising from a breach of any
representation, warranty, covenant or agreement of Monogenesis contained in or
made pursuant to this Agreement or in any certificate, instrument or agreement
delivered by it pursuant hereto or in connection with the transactions
contemplated hereby; and (ii) all reasonable costs and expenses (including,
without limitation, reasonable attorneys', accountants', and other professional
fees and expenses) incurred by STI or Shareholders in connection with any
action, suit, proceeding, demand, investigation, assessment or judgment incident
to any of the matters indemnified against under this Section 12.1(b). No claim,
demand, suit or cause of action shall be brought against Monogenesis under or
pursuant to this Section 12.1(b) unless such party gives Monogenesis written
notice, with reasonable specificity, of the existence of any such claim, demand,
suit or cause of action under this Agreement. Upon the giving of
109
<PAGE>
such written notice as aforesaid, such party shall have the right, in addition
to all other remedies available to it, to commence legal proceedings for the
enforcement of its rights under this Agreement.
12.2 THIRD PARTY CLAIMS. With respect to claims resulting from the
assertion of liability by third parties, the obligations and liabilities of the
party responsible for indemnification (the "Indemnifying Party") hereunder with
respect to indemnification claims by the party entitled to indemnity (the
"Indemnified Party") shall be subject to the following terms and conditions: (i)
the Indemnified Party shall give prompt written notice to the Indemnifying Party
of any assertion of liability by a third party which might give rise to a claim
by the Indemnified Party against the Indemnifying Party based on the indemnity
agreements contained in Section 11.1 hereof, stating the nature and basis of
said assertion and the amount thereof, to the extent known; and (ii) the
Indemnifying Party shall not make any settlement of any claims without the
written consent of the Indemnified Party; provided, however, that if an
Indemnified Party does not consent to a settlement proposed by the Indemnifying
Party and accepted by the adverse third party, the liability of the Indemnifying
Party shall be limited to the amount that would have been paid in such
settlement.
12.3 REMEDIES CUMULATIVE. The remedies provided for in this Article XII
shall be cumulative and shall not preclude assertion by the Indemnified Party of
any other rights or the seeking of any other remedies against the Indemnifying
Party.
12.4 RECOVERIES. In the event an Indemnified Party subsequently receives
payment (including without limitation proceeds of insurance and payments on
accounts receivable) with respect to a matter for which it has been fully
indemnified by the Indemnifying Party, the Indemnified Party shall promptly pay
the amount of such payment up to the indemnification received, to the
Indemnifying Party.
ARTICLE XIII
MISCELLANEOUS
13.1 STRUCTURING FEE. Upon the execution of this Agreement, STI shall
pay Monogenesis a nonrefundable structuring fee in the amount of $25,000.
13.2 EXPENSES; TRANSFER TAXES. All fees, costs and expenses incurred by
STI, Shareholders or Monogenesis in connection with,
110
<PAGE>
relating to or arising out of the preparation, execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby, including, without limitation, organizational costs of the
Holding Company, fees of the transfer agent and legal and accounting fees and
expenses, shall be borne by STI.
13.3 BINDING EFFECT. This Agreement shall become binding and effective
when executed by the parties hereto. This Agreement shall not be assignable by
any party without the prior written consent of the other parties, except that
without relieving Monogenesis of any of its obligations under this Agreement,
Monogenesis may assign this Agreement to any of its affiliates. Subject to the
foregoing, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the respective successors, heirs, legal representatives, and
assigns of the parties hereto. This Agreement constitutes an agreement among
the parties hereto and none of the agreements, covenants, representations or
warranties contained herein shall be for the benefit of any third party not a
party to this Agreement.
13.4 ENTIRE AGREEMENT; AMENDMENTS. This Agreement (including the
Schedules and Exhibits attached hereto) contains the entire understanding of the
parties with respect to its subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to the subject
matter hereof. This Agreement may be amended only by a written instrument duly
executed by the parties, and any condition to a party's obligations hereunder
may only be waived in writing by such party.
13.5 HEADINGS. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
13.6 NOTICES. All notices, claims, certificates, requests, demands and
other communications hereunder shall be in writing and shall be deemed given if
delivered personally, if mailed (by registered or certified mail, return receipt
requested and postage prepaid), if sent by reputable overnight courier service
for next business day delivery, or if sent by facsimile transmission, as
follows:
111
<PAGE>
if to STI, to: Jeffrey C. Clift, President
Software Technology, Inc.
1225 Evans Road
Melbourne, Florida 32904-2314
Telephone: (407)723-3999
Facsimile: (407)984-3559
if to Monogenesis, to: Scot D. Walker, President
Monogenesis Corporation
Drawer 88, Walker Creek Road
Walker, West Virginia 26180-9948
Telephone: (800)543-8620
Facsimile: (800)543-8619
if to Shareholders, to: their addresses set forth on the books
of STI.
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such
communication shall be effective on the date of receipt (or, if received on a
non-business day, on the first business day after the date of receipt).
13.7 PUBLICITY. The parties agree that, except as otherwise required by
law, the issuance of any reports, statements or releases pertaining to this
Agreement or the transactions contemplated hereby is subject to mutual consent.
13.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Delaware (without giving
effect to its laws regarding conflicts of law).
13.9 WAIVERS. Any provision of this Agreement may be waived only by a
written instrument executed by the party to be charged with such waiver. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
13.10 DEFINED TERMS. Throughout this Agreement various terms have been
defined by being enclosed in quotation marks, usually in parentheses, and used
with their initial letters capitalized. Unless the context otherwise requires,
such defined terms shall have their designated meaning whenever used in this
Agreement or any attached schedules.
13.11 FEES. If there is any litigation between the parties related to
this Agreement or the transactions contemplated by this
112
<PAGE>
Agreement, the prevailing party shall be entitled to recover all reasonable
costs and expenses (including, without limitation, reasonable attorneys',
accountants' and other professional fees and expenses).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered on the date first above written.
SOFTWARE TECHNOLOGY, INC.
By: ______________________________
Title: ______________________________
MONOGENESIS CORPORATION
By: ______________________________
Scot D. Walker, President
JOSEPH WALKER AND SONS
By: ______________________________
Title: ______________________________
THE SHAREHOLDERS
Software Technology, Inc. Restated
Employee Stock Ownership Plan and
Trust Agreement
By: ______________________________
Title: ______________________________
113
<PAGE>
______________________________
Dean W. Boley
______________________________
Daniel J. Stark
______________________________
Don R. Riordan
______________________________
Rudiger D. Lichti
______________________________
Thomas O. Chewning
______________________________
William K. Presley
______________________________
Kenneth E. Zepf
______________________________
Jack D. Dailey
______________________________
Donald M. McKay
______________________________
David R. Reading
EXBT_2.
114
<PAGE>
SCHEDULE 1.1
HOLDING COMPANY STOCK AND WARRANTS TO BE ISSUED TO STI SHAREHOLDERS
-------------------------------------------------------------------
<TABLE>
<CAPTION>
RESTRICTED REGISTERED CLASS B REGISTERED
NAME COMMON SHARES COMMON SHARES COMMON SHARES WARRANTS
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dean W. Boley 352,095 117,365 93,892 63,318
- -----------------------------------------------------------------------------
Daniel J. Stark 351,547 117,183 93,746 63,222
- -----------------------------------------------------------------------------
Don R. Riordan 163,792 54,598 43,678 29,454
- -----------------------------------------------------------------------------
Rudiger D. Lichti 160,552 53,518 42,814 28,872
- -----------------------------------------------------------------------------
Thomas O. Chewning 37,684 12,561 10,049 6,780
- -----------------------------------------------------------------------------
William K. Presley 6,840 2,280 1,824 1,230
- -----------------------------------------------------------------------------
Kenneth E. Zepf 6,840 2,280 1,824 1,230
- -----------------------------------------------------------------------------
Jack D. Daily 5,374 1,791 1,433 966
- -----------------------------------------------------------------------------
Donald M. McKay 3,750 1,250 1,000 672
- -----------------------------------------------------------------------------
David R. Reading 2,385 795 636 426
- -----------------------------------------------------------------------------
ESOP -0- 1,511,430 302,286 203,862
- -----------------------------------------------------------------------------
TOTAL 1,090,859 1,875,051 593,182 400,032
- -----------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT 3(i)
------------
CERTIFICATE OF INCORPORATION
OF
EXIGENT INTERNATIONAL, INC.
---------------------------
The undersigned, acting as incorporator of a corporation under the General
Corporation Law of the State of Delaware, adopts the following certificate of
incorporation for such corporation (the "Corporation"):
1. NAME. The name of the Corporation is "Exigent International, Inc."
2. PURPOSES. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
3. CLASSES OF STOCK. The total number of shares which the Corporation is
authorized to issue is 45,600,000 shares of which 30,000,000 shares shall be
designated "Common Shares;" 5,000,000 shall be designated "Class B Common
Shares;" 600,000 shall be designated "Class D Common Shares;" 10,000,000 shall
be designated "Preferred Shares." The number of Class D Common Shares
authorized shall not exceed 2% of the number of Common Shares authorized. All
shares of stock of the Corporation shall have a par value of $0.01 per share.
No holder of shares of any class of stock of the Corporation now or hereafter
authorized shall be entitled to cumulative voting or shall have any preferential
or preemptive right to subscribe for, purchase or receive any shares of the
Corporation of any class now or hereafter authorized, or any portions or
warrants for such shares, or any securities convertible into or exchangeable for
such shares, which may at any time be issued, sold or offered for sale by the
Corporation; except that, holders of Class B Common Shares shall have preemptive
rights with respect to the issuance of Class B Common Shares only. In addition,
the Corporation shall not sell or offer to sell any Class B Common Shares
without the prior approval of the holders of a majority of the issued and
outstanding Class B Common Shares.
4. COMMON AND CLASS B COMMON SHARES. The Common Shares and the Class B
Common Shares shall be identical in all respects and have equal rights and
privileges, except as otherwise provided in this certificate. The relative
rights, preferences and limitations of the shares of each class are as follows:
(a) DIVIDENDS. Except as provided in subparagraph 4(b), the
Corporation shall not pay any dividends during any fiscal year to the holders of
Class B Common Shares, unless and until the Corporation shall have paid the
holders of Common Shares a dividend
<PAGE>
of not less than $0.05 per share during such year, and in addition, unless the
Corporation shall also pay the holders of Common Shares a dividend per share at
least equal to the dividend per share paid to the holders of the Class B Common
Shares during such year. The Corporation may pay dividends to holders of Common
Shares in excess of dividends paid, or without paying dividends, to holders of
Class B Common Shares. The dividend preference for Common Shares shall not be
cumulative.
(b) SHARE DISTRIBUTION. The Corporation shall make a share distribution of
Class B Common Shares or Common Shares only as follows:
(i) Common Shares may only be distributed as a stock dividend on Common
Shares and Class B Common Shares may only be distributed as a stock dividend on
Class B Common Shares; except that, prior to the issuance of any Common Shares,
Common Shares may be distributed as a stock dividend on Class B Common Shares;
and
(ii) if a stock dividend is declared with respect to either Common
Shares or Class B Common Shares, a stock dividend of the same number of shares
shall be declared with respect to the other of such classes.
(c) STOCK COMBINATIONS OR SPLITS. The Corporation shall not combine or
subdivide either Common Shares or Class B Common Shares without at the same time
making a proportionate combination or subdivision of shares of the other of such
classes.
(d) VOTING. Each holder of Common Shares and Class B Common Shares shall
be entitled to one vote for each share of stock registered in his or her name,
except that, the holders of Class B Common Shares shall have exclusive voting
power if no Common Shares, Class D Common Shares or voting Preferred Shares are
issued and outstanding and holders of Common Shares, Class D Common Shares and
voting Preferred Shares shall have exclusive voting power if no shares of Class
B Common Shares are issued and outstanding. In all other cases, voting power
shall be divided between such classes as follows:
(i) With respect to the election of directors, holders of Common
Shares together with the holders of Class D Common Shares and voting Preferred
Shares voting together as a separate class shall be entitled to elect that
number of directors which constitutes 25% of the authorized number of members of
the board of directors and, if such 25% is not a whole number, then the holders
of Common Shares, Class D Common Shares and voting Preferred Shares shall be
entitled to elect the nearest higher whole number of directors that is at least
25% of such membership. Holders of Class
117
<PAGE>
B Common Shares voting as a separate class shall be entitled to elect the
remaining directors.
(ii) The holders of Common Shares, Class D Common Shares and voting
Preferred Shares shall be entitled to vote together as a separate class on the
removal, with or without cause, of any director elected by such holders and the
holders of Class B Common Shares shall be entitled to vote as a separate class
on the removal, with or without cause, of any director elected by the holders of
Class B Common Shares.
(iii) Any vacancy in the office of a director elected by the holders of
the Common Shares, Class D Common Shares and voting Preferred Shares may be
filled by a vote of such holders voting together as a separate class and any
vacancy in the office of a director elected by the holders of the Class B Common
Shares may be filled by a vote of such holders voting as a separate class. In
the absence of a stockholder vote, in the case of a vacancy in the office of a
director elected by either class, such vacancy may be filled by the remaining
directors as provided in the bylaws of the Corporation. Any director elected by
the board of directors to fill a vacancy shall serve until the next annual
meeting of stockholders and until his or her successor has been elected and has
qualified. If permitted by the bylaws, the board of directors may increase the
number of directors and any vacancy so created may be filled by the board of
directors; provided that, so long as the holders of Common Shares, Class D
Common Shares and voting Preferred Shares have the rights provided in
subparagraph 4(d) of this certificate in respect of the last preceding annual
meeting of stockholders, the board of directors may be so enlarged by the board
of directors only to the extent that at least 25% of the enlarged board consists
of directors elected by the holders of the Common Shares, Class D Common Shares
and voting Preferred Shares or by persons appointed to fill vacancies created by
the death, resignation or removal of persons elected by the holders of the
Common Shares, Class D Common Shares and voting Preferred Shares.
(iv) Notwithstanding the foregoing, holders of Common Shares, Class D
Common Shares and voting Preferred Shares shall not have the right to elect
directors as set forth above if, on the record date for any stockholders'
meeting at which directors are to be elected, the number of issued and
outstanding Common Shares, Class D Common Shares and voting Preferred Shares is
less than 10% of the aggregate number of issued and outstanding voting shares of
all classes. In such case, all directors to be elected at such meeting shall be
elected by the holders of all voting shares voting together as a single class.
118
<PAGE>
(v) The holders of the Common Shares and the holders of the Class B Common
Shares shall be entitled to vote as separate classes only when required by law
to do so irrespective of the limitations placed herein on the voting rights of
such stockholders, or when a separate class vote is required by specific
provision therefor in this certificate of incorporation or in the bylaws of the
Corporation. Holders of all voting shares shall vote as a single class, in all
other matters including, but not limited to, any amendment to this certificate
in order to increase or decrease the aggregate number of authorized shares of
Common Stock, Class D Common Stock or Preferred Stock.
(e) CONVERSION. Each holder of record of Class B Common Shares may at any
time or from time to time, in such holder's sole discretion and at such holder's
option, convert any whole number or all of such holder's Class B Common Shares
into fully paid and non-assessable Common Shares at the rate (subject to
adjustment as hereinafter provided) of one Common Share for each Class B Common
Share surrendered for conversion. Any such conversion may be effected by
surrendering the certificate or certificates for the Class B Common Shares to be
converted, duly endorsed, at the office of the Corporation, or the transfer
agent, if any, together with a written notice to the Corporation that such
holder elects to convert all or a specified number of Class B Common Shares and
stating the name or names in which the certificate or certificates for such
Common Shares are to be issued. The conversion shall be deemed to have been
made at the close of business on the date of surrender and the person or persons
entitled to receive the Common Shares issuable on conversion shall be treated
for all purposes as the record holder or holders of such Common Shares on that
date.
The Corporation shall hold in reserve the number of authorized but unissued
Common Shares as may be necessary to convert all issued and outstanding Class B
Common Shares to Common Shares without the necessity of a declaration by the
directors. No Class B Common Shares may be issued unless the number of
authorized but unissued and unreserved Common Shares is sufficient to satisfy
the conversion of such Class B Common Shares.
No fraction of a Common Share shall be issued on conversion of any Class B
Common Share. In lieu thereof, the Corporation shall pay the holder the fair
market value of any such fraction in cash. The fair market value shall be based,
in the case of publicly traded securities, on the last sale price for such
securities on the business day next prior to the date such fair market value is
to be determined (or, in the event no sale is made on that day, the average of
the closing bid and asked prices for that day on the principal stock exchange on
which Common Shares are traded or, if the Common Shares are not then listed on
any national securities exchange, the
119
<PAGE>
average of the closing bid and asked prices for the day quoted by the NASDAQ
System), or, in the case of non-publicly traded securities, the fair market
value on such day determined by a qualified independent appraiser appointed by
the board of directors of the Corporation. Any such determination of fair
market value shall be conclusive and binding on the Corporation and on each
holder of Class B Common Shares and Common Shares.
(f) LIQUIDATION. Holders of issued and outstanding Common Shares
shall have preference over the Class B Common Shares upon the voluntary or
involuntary liquidation of the Corporation, but only to the extent that the
holders of Common Shares shall be paid the par value of such shares prior to any
distribution being made to the holders of Class B Common Shares. In such case,
after receiving the par value of their shares, the holders of Common Shares
shall receive no further distribution unless and until each holder of Class B
Common Shares has received the par value of each share held and a sum equal to
the distribution made on each Common Share for which the holders of Class B
Common Shares have not received a like amount.
5. CLASS D COMMON SHARES. Class D Common Shares shall be identical to
Common Shares and have equal rights and privileges, except as otherwise set
forth below:
(a) ISSUANCE. The board of directors, by resolution, may authorize
the issuance of Class D Common Shares; provided that, each resolution
authorizing the issuance of Class D Common Shares shall provide a formula under
which the shares issued may be converted into Common Shares. In no case shall
the board of directors set any conversion rights which could result in the
issuance of more than 10 Common Shares for each Class D Common Share.
(b) TRANSFER. Class D Common Shares shall be non-transferable.
(c) CONVERSION. The board of directors shall decide, in its sole
discretion, if a holder of record of Class D Common Shares is deemed to have met
any conditions placed upon the conversion of the holder's Class D Common Shares
into Common Shares. At such time as a holder of record of Class D Common Shares
has received a written notice from the board of directors of the Corporation
that such holder is deemed to have met all conditions for conversion of any
Class D Common Shares into Common Shares as set forth in the resolution
authorizing the issuance of such shares, the holder may convert the Class D
Common Shares described in the notice into fully paid and non-assessable Common
Shares. Any such conversions may be effected by surrendering the certificate or
certificates for the Class D Common Shares to be converted, duly endorsed, at
the office of the Corporation, or the transfer agent, if any, together with a
120
<PAGE>
written notice to the Corporation that such holder elects to convert such Class
D Common Shares and stating the name or names in which the certificate or
certificates for Common Shares are to be issued. The conversion shall be deemed
to have been made at the close of business on the date of surrender and the
person or persons entitled to receive the Common Shares issuable on conversion
shall be treated for all purposes as the record holder or holders of such Common
Shares on that date.
At the close of business on the fifth anniversary of the date of the
resolution authorizing the issuance of any Class D Common Shares, issued and
outstanding but unconverted Class D Common Shares shall be deemed to have been
converted at the rate of one fully paid and non-assessable Common Share for one
Class D Common Share and, commencing at the close of business on such
anniversary, the record holder of such Class D Common Shares shall be treated
for all purposes as the record holder of the Common Shares issuable on such
conversion.
The Corporation shall hold in reserve the number of authorized but
unissued Common Shares as may be necessary to convert issued and outstanding
Class D Common Shares to Common Shares without the necessity of a declaration by
the directors. No Class D Common Shares may be issued unless the number of
authorized but unissued and unreserved Common Shares is sufficient to satisfy
the conversion of such Class D Common Shares.
6. PREFERRED SHARES. The board of directors, by resolution, shall have
the authority to issue, in one or more series, Preferred Shares, having such
preferences, rights and limitations as established by the board of directors.
However, the voting rights, if any, of one Preferred Share shall not exceed the
voting rights of one Common Share.
7. DURATION. The period of duration of the Corporation shall be
perpetual.
8. POWERS OF BOARD OF DIRECTORS. The affairs of the Corporation shall be
managed and conducted by a board of directors. The board of directors shall have
the authority, without first obtaining the approval of the stockholders of the
Corporation, unless otherwise provided herein, upon such terms and conditions as
the board deems appropriate:
(a) to grant rights or options to subscribe for or purchase, and
issue, shares of authorized and unissued stock of the Corporation of any class
now or hereafter authorized, to any persons, including officers and directors of
the Corporation;
121
<PAGE>
(b) to make distributions to its stockholders out of its capital
surplus, and to purchase its own shares out of its unreserved and unrestricted
capital surplus;
(c) to the extent permitted by the applicable laws of the State of
Delaware, to guarantee or assume liability for the payment of the principal of,
or dividends or interest on, or sinking fund payments in respect to, stocks,
bonds, debentures, warrants, rights, scrip, notes, evidences of indebtedness or
other securities or obligations of any kind; and liability for the performance
of any other contract or obligation, made or issued by any domestic or foreign
corporation, partnership, association, trustee, group, individual or entity; and
(d) to make, alter and repeal the bylaws of the Corporation.
9. NUMBER OF AND INITIAL BOARD OF DIRECTORS. The number of directors
shall be fixed by, or in the manner provided in, the bylaws.
10. ELECTION OF DIRECTORS. Elections of directors need not be by written
ballot unless otherwise provided by the bylaws of the Corporation.
11. STOCKHOLDERS' MEETINGS. Meetings of stockholders may be held at the
Corporation's principal offices, or as the bylaws may provide. In order to
constitute a quorum for purposes of actions by the stockholders of the
Corporation, one-third of the shares entitled to vote must be present or
represented by proxy at the meeting.
12. BOOKS. The books of the Corporation may be kept (subject to any
provision contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the board of directors or in
the bylaws of the Corporation.
13. CREDITORS. Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this Corporation under the provisions of Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of this Corporation, as the
122
<PAGE>
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or class
of creditors, and/or if the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this Corporation, as the case may be,
and also on this Corporation.
14. DIRECTOR'S LIABILITY. A director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director; provided that a director's liability
shall not be limited: (a) for any breach of the director's duty of loyalty to
the Corporation or its stockholders; (b) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of law; (c) for
unlawful payment of dividends or unlawful repurchase or redemption of its own
stock; or (d) for any transaction from which the director derived an improper
personal benefit.
15. INDEMNIFICATION. The Corporation shall indemnify any and all of its
directors or officers or former directors or officers or any person who may have
served at its request as a director or officer of another corporation in which
it owns shares of capital stock or of which it is a creditor against expenses
actually and necessarily incurred by them in connection with the defense of any
action, suit or proceeding in which they, or any of them, are made parties, or a
party, by reason of being or having been directors or officers or a director or
officer of the Corporation, or of such other corporation, except in relation to
matters as to which any such director or officer or former director or officer
or person shall be adjudged in such action, suit or proceeding to be liable for
negligence or misconduct in the performance of duty. Such indemnification shall
not be deemed exclusive of any other rights to which those indemnified may be
entitled, under any bylaw, agreement, vote of stockholders, or otherwise.
16. AMENDMENTS. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
17. REGISTERED OFFICE AND AGENT. The address of the Corporation's
registered office in the County of New Castle of the State of Delaware is
Corporation Trust Center, 1209 Orange Street,
123
<PAGE>
Wilmington, Delaware 19801 and the name of its registered agent is The
Corporation Trust Company.
18. INCORPORATOR. The name and mailing address of the incorporator is:
Software Technology, Inc., 1225 Evans Road, Melbourne, Florida 32904-2314.
The undersigned, being the incorporator of Exigent International, Inc., for
the purpose of forming a corporation under the General Corporation Law of the
State of Delaware hereby acknowledges the foregoing to be its act and deed and
that the facts stated herein are true this _____ day of ________________, 1996.
Software Technology, Inc.
By: ___________________________________
Its: __________________________________
State of _________________ )
) SS
County of ________________ )
I, ___________________, a notary of said state and county do certify that
_______________________, as ____________________ of Software Technology, Inc.,
the incorporator, whose name is signed to the writing above bearing date the
______ day of __________, 1996 has this day acknowledged the same before me.
Given under my hand this _____ day of _____________, 1996.
My commission expires: ___________________________________________________.
_________________________________________
[seal] Notary Public
124
<PAGE>
EXHIBIT 3(ii)
-------------
BYLAWS
OF
EXIGENT INTERNATIONAL, INC.
MAY 1, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
<C> <S> <C> <C>
ARTICLE I -- OFFICES..................................... 1
1.1 Principal Office............................... 1
1.2 Registered Office.............................. 1
ARTICLE II -- SHAREHOLDERS............................... 1
2.1 Annual Meetings................................ 1
2.2 Special Meetings............................... 1
2.3 Place of Special Meetings...................... 1
2.4 Notice of Annual or Special Meetings........... 2
2.5 Meetings by Consent of All Shareholders........ 2
2.6 Waiver and Consent to Meetings of Less
Than All Shareholders.......................... 2
2.7 Exception to Notice Requirements............... 3
2.8 Fixing of a Record Date........................ 3
2.9 Voting Record.................................. 4
2.10 Quorum......................................... 4
2.11 Proxies........................................ 4
2.12 Voting of Shares............................... 5
2.13 Voting of Shares by Certain Holders............ 5
2.14 Voting Procedures and Inspectors of Elections.. 6
2.15 Consent of Shareholders In Lieu of Meeting..... 7
2.16 Shareholder Inspection of Books and Records.... 8
ARTICLE III -- DIRECTORS................................. 8
3.1 General Powers................................. 8
3.2 Number, Tenure and Qualifications.............. 8
3.3 Removal and Resignation........................ 8
3.4 Regular Meetings............................... 8
3.5 Special Meetings............................... 9
3.6 Telephonic Meetings............................ 9
3.7 Notice of Directors' Meetings.................. 9
3.8 Quorum......................................... 10
3.9 Manner of Acting............................... 10
3.10 Vacancies...................................... 10
3.11 Compensation................................... 11
3.12 Action by Written Consent...................... 11
3.13 Chairman and Vice Chairman of the Board........ 11
3.14 Conflicts of Interest.......................... 11
3.15 Director Inspection of Books and Records....... 12
3.16 Committees..................................... 12
ARTICLE IV -- OFFICERS................................... 13
4.1 Classes........................................ 13
4.2 Election and Term of Office.................... 13
</TABLE>
126
<PAGE>
<TABLE>
<C> <S> <C>
4.3 Removal and Resignations....................... 13
4.4 Vacancies...................................... 13
4.5 Chairman of the Board of Directors............. 13
4.6 President...................................... 14
4.7 Vice President................................. 14
4.8 Treasurer...................................... 14
4.9 Secretary...................................... 15
ARTICLE V -- CONTRACTS, LOANS, CHECKS AND DEPOSITS....... 15
5.1 Contracts...................................... 15
5.2 Checks, Drafts................................. 15
5.3 Deposits....................................... 15
ARTICLE VI -- CERTIFICATES FOR SHARES AND THEIR TRANSFER. 16
6.1 Certificates for Shares........................ 16
6.2 Lost, Stolen or Destroyed Stock Certificates... 16
6.3 Transfer of Shares............................. 16
ARTICLE VII -- INDEMNIFICATION........................... 17
7.1 Indemnification................................ 17
ARTICLE VIII -- MISCELLANEOUS............................ 19
8.1 Amendments..................................... 19
8.2 Fiscal Year.................................... 20
8.3 Dividends...................................... 20
8.4 Seal........................................... 20
8.5 Waiver of Notice............................... 20
</TABLE>
127
<PAGE>
BYLAWS
OF
EXIGENT INTERNATIONAL, INC.
ARTICLE I
OFFICES
-------
1.1 Principal Office. The principal office of the Corporation shall be in
Melbourne, Florida. The Corporation may have such other offices, either within
or without the State of Delaware or the State of Florida, as the business of the
Corporation may require.
1.2 Registered Office. The registered agent and office of the Corporation
at the date of adoption of these Bylaws are The Corporation Trust Company, 1209
Orange Street, County of New Castle, Delaware 19801. The registered agent and
the address of the registered office may be changed from time to time by the
Board of Directors.
ARTICLE II
SHAREHOLDERS
------------
2.1 Annual Meetings. The annual meeting of the shareholders shall be held
at such time, place and on such date as the Board of Directors may designate and
state in the notice of the meeting. If no place is designated, the meeting shall
be held at the principal executive office of the Corporation. The purpose of
such meeting shall be the election of directors and such other business as may
properly come before it. If the election of directors shall not be held on the
day designated for an annual meeting, or at any adjournment thereof, the Board
of Directors shall cause the election to be held at a special meeting of the
shareholders to be held as soon thereafter as may be practicable. The failure to
hold an annual meeting does not invalidate the Corporation's existence or affect
any otherwise valid corporate act.
2.2 Special Meetings. Special meetings of the shareholders may be called
by the Chairman of the Board, President, by the Board of Directors, or by the
holders of shares entitling such holders to not less than twenty-five percent of
the possible votes at such meeting.
2.3 Place of Special Meetings. The Board of Directors may designate any
place within or without the State of Delaware or the State of Florida as the
place for any special meeting called by the Board of Directors. A waiver of
notice signed by all shareholders
<PAGE>
may include a designation of any place as the place for the holding of such
meeting. If no designation is properly made, or if a special meeting be
otherwise called, the place of the meeting shall be at the principal executive
office of the Corporation.
2.4 Notice of Annual or Special Meetings. Written or printed notice
stating the place, day, and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten (10) days nor more than sixty (60) days before the
date of the meeting, either personally or by mail, by or at the direction of the
President or the Secretary, or the officer or persons calling the meeting, to
each shareholder entitled to vote at such meeting as of the record date
established under Section 2.8 of these Bylaws. Only business within the purpose
or purposes described in the meeting notice may be conducted at the special
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail, postage prepaid, in a sealed envelope addressed to
the shareholder at his address as it appears in the records of the Corporation.
When a meeting is adjourned to another time or place, notice of the adjourned
meeting need not be given if the time and place are announced at the meeting at
which the adjournment is taken. At the adjourned meeting, the Corporation may
transact any business which could have been transacted at the original meeting.
If the adjournment is for more than thirty (30) days or, if after adjournment a
new record date is fixed, a notice of the adjourned meeting must be given to
every shareholder entitled to vote at the meeting.
2.5 Meetings by Consent of All Shareholders. If all the shareholders
shall meet at any time and place and consent in writing to the holding of a
meeting, such meeting shall be valid without call or notice, and at such meeting
any corporate action may be taken.
2.6 Waiver and Consent to Meetings of Less Than All Shareholders. If a
shareholder meeting shall occur without all shareholders in attendance, a prior
or subsequent written waiver of notice or consent to the holding of such meeting
signed by the absent shareholders shall be equivalent to the call and giving of
any requisite notice, and such meeting shall be valid without call or notice,
and corporate action may be taken at such meeting. Neither the business to be
transacted at, nor the purpose of, any meeting need be specified in the written
waiver. Attendance of a person at a meeting constitutes waiver of notice except
when the person attends the meeting for the express purpose of objecting at the
beginning of the meeting to the transaction of business because the meeting is
not lawfully called or convened. The execution of a written consent shall
constitute a waiver of notice with respect to the actions taken
129
<PAGE>
in the consent even if the consent does not expressly contain a waiver clause.
2.7 Exception to Notice Requirements. Whenever notice is required to be
given to any person with whom communication is unlawful, the giving of such
notice is not required and the Corporation has no duty to apply to any
governmental authority or agency for a license or permit to give such notice. In
addition, whenever notice is required to be given to any shareholder to whom (a)
notice of two (2) consecutive annual meetings, and all notices of meetings or
the taking action by written consent during the period between such two (2)
consecutive annual meetings, or (b) all, and at least two (2) payments (if sent
by first class mail) of dividends or interest on securities during a twelve (12)
month period, have been mailed addressed to such person at the address shown on
the records of the Corporation and have been returned undeliverable, the giving
of notice to such persons is not required. Any action or meeting which shall be
taken or held without notice to such persons shall have the same force and
effect as if such notice had been duly given. If any such person thereafter
delivers to the Corporation a written notice setting forth such person's then
current address, the requirement that notice be given to such person shall be
reinstated.
2.8 Fixing of a Record Date.
-----------------------
(a) The Board of Directors of the Corporation may fix a date which
shall not precede the date of the resolution fixing the record date and which
record date is not less than ten (10) days nor more than sixty (60) days prior
to the date of any meeting of shareholders as the record date for the
determination of shareholders entitled to notice of, or to vote at, such
meeting. If no record date is fixed by the Board of Directors, the record date
for determining shareholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of business on the day which next precedes the day on which the meeting is
held. When a determination of shareholders has been made as provided in this
section, such determination shall apply to any adjournment thereof; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting. The Board of Directors may fix a record date to determine the
shareholders entitled to consent to corporate action in writing without a
meeting on a date which shall not precede and is not more than ten (10) days
after the date upon which the resolution fixing the record date is adopted by
the Board of Directors. If no record date has been fixed, the record date for
shareholders entitled to consent to corporate action in writing is (i) when no
prior action by the Board of Directors is required, the first date on which a
signed written consent setting forth the actions taken or proposed to be taken
is delivered, by hand or certified or registered mail, to
130
<PAGE>
the Corporation to its registered office, to its principal place of business, or
to an officer or agent of the Corporation having custody of the Corporation's
minute book; or (ii) when prior action by the Board of Directors is required, at
the close of business on the day on which the Board of Directors adopts the
resolution taking such prior action.
(b) The Board of Directors may fix a record date to determine the
shareholders entitled to receive payment of any dividend or other distribution
or allotment of any rights or the shareholders entitled to exercise any rights
in respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action which shall not precede the date upon which the
resolution fixing the record date is adopted and which shall not be more than
sixty (60) days prior to such action. If no record date is fixed, the record
date shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
2.9 Voting Record. The officer or agent having charge of the transfer
book for shares of the Corporation shall make a complete list of the
shareholders entitled to vote at such meeting, arranged in alphabetical order,
with the address of, and the number of shares held by, each shareholder. Such
list shall be available for inspection by any shareholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to such meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list must also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder who is present
during the whole course of the meeting.
2.10 Quorum. One-third of the outstanding shares of the Corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at any meeting of shareholders, unless otherwise required by Delaware
corporation law. If a quorum of shareholders is present, the affirmative vote of
a majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders, unless the vote of a
greater number or voting by classes is required by the Delaware corporation law,
or by the Certificate of Incorporation or Bylaws of the Corporation.
2.11 Proxies. At all meetings of shareholders, a shareholder may vote
shares in person or by proxy. A shareholder may execute a writing authorizing
another person or persons to act as proxy or such shareholder. The shareholder
or the shareholder's authorized
131
<PAGE>
officer, director, employee or agent may sign or cause a signature to be affixed
by any reasonable means to the proxy. A telegram, cablegram or other means of
electronic transmission including information from which it can be determined
that the transmission was authorized by the shareholder, or a photographic,
photostatic, facsimile or other reliable reproduction of a writing appointing a
proxy shall be deemed to be a sufficient, signed appointment form assuming that
it is a complete reproduction of the entire original writing or transmission.
Such proxy shall be filed with the Secretary of the Corporation before or at the
time of the meeting. No proxy shall be valid after three (3) years from the date
of its execution, unless otherwise provided in the proxy. An appointment of a
proxy is revocable unless the appointment form conspicuously states that it is
irrevocable and that the appointment is coupled with an interest. A proxy may
be made irrevocable regardless of whether the interest is an interest in the
stock itself or in the Corporation generally. Upon extinguishment of the
interest the proxy becomes revocable.
2.12 Voting of Shares. Each outstanding share of stock authorized by the
Corporation's Certificate of Incorporation to have voting power shall be
entitled to the number of votes set forth in the Certificate of Incorporation
upon each matter submitted to a vote at a meeting of shareholders.
2.13 Voting of Shares by Certain Holders.
-----------------------------------
(a) Shares standing in the name of another corporation may be voted
by either that corporation's president or by proxy appointed by the president
unless another person appointed to vote the stock under a bylaw or a resolution
of the board of directors of that corporation presents a certified copy of the
bylaw or resolution, in which case such person may vote the stock.
(b) A fiduciary may vote, either in person or by proxy, stock
registered in such person's name as fiduciary. If the stock is not registered in
the fiduciary's name, the fiduciary may vote the stock, either in person or by
proxy, upon providing proof of the fact that such fiduciary has legal title to
the stock in a fiduciary capacity and is qualified to act in that capacity.
(c) Where shares stand of record in the names of two (2) or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety or otherwise, or if two (2) or more persons
have the same fiduciary relationship respecting the same shares, unless the
Secretary of the Corporation is given written notice to the contrary, and is
furnished with a copy of the instrument or order appointing them or creating the
132
<PAGE>
relationship wherein it is so provided, their acts with respect to voting have
the following effect:
(i) if only one (1) votes, such act binds all;
(ii) if more than one (1) vote, the act of the majority so
voting binds all; or
(iii) if more than one (1) vote, but the vote is evenly split on
any particular matter each faction may vote the securities in question
proportionately, or any person voting the shares or a beneficiary, if any, may
apply to any court of competent jurisdiction to appoint an additional person to
act with the persons so voting the shares which shall then be voted as
determined by a majority of such persons and the person appointed by the court
(if the instrument so filed shows that any such tenancy is held in unequal
interests, a majority or even split shall be a majority or even split in
interest).
(d) A shareholder whose shares are pledged shall be entitled to vote
such shares unless the transfer by the pledgor on the books of the Corporation
expressly empowered the pledgee to vote thereon, in which case only the pledgee
shall be entitled to vote the shares so transferred.
(e) The Corporation shall be entitled to reject a vote, consent,
waiver or proxy appointment if the Secretary or other officer or agent
authorized to tabulate votes, acting in good faith has reasonable basis for
doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
2.14 Voting Procedures and Inspectors of Elections. At any time at which
the Corporation has a class of voting securities listed on a national securities
exchange, authorized for quotation on an inter-dealer quotation system thereof,
or held of record by more than two thousand (2,000) shareholders, in advance of
any meeting of shareholders, the Corporation must appoint one (1) or more
inspectors to act at the meeting and make a written report thereof. The
Corporation may designate one (1) or more persons as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate is able to
act at a meeting of shareholders, the person presiding at the meeting shall
appoint one (1) or more inspectors to act at the meeting. Each inspector, before
beginning, must take and sign an oath to execute faithfully the duties of
inspector with strict impartiality and according to the best of his or her
ability. The inspectors must: (a) ascertain the number of shares outstanding and
the voting power of each; (b) determine the shares represented at a meeting and
the validity of proxies and ballots; (c) count all votes and ballots; (d)
determine and retain
133
<PAGE>
for a reasonable period a record of the disposition of any challenges made to
any determination by the inspectors; and (e) certify their determination of the
number of shares represented at the meeting and their count of all votes and
ballots. The inspectors may appoint or retain other persons or entities to
assist the inspectors in the performance of the duties. The date and time of
the opening and the closing of the polls for each matter upon which the
shareholders will vote at a meeting shall be announced at the meeting. No
ballot, proxies or votes, nor any revocations thereof or changes thereto, shall
be accepted by the inspectors after the closing of the polls unless a court of
competent jurisdiction upon application by a shareholder shall determine
otherwise. In determining the validity and counting of proxies and ballots, the
inspectors are limited to an examination of the proxies, any envelopes submitted
with those proxies, any other information provided in accordance with Section
2.11 hereof, ballots and the regular books and records of the Corporation,
except that the inspectors may consider other reliable information for the
limited purpose of reconciling proxies and ballots submitted by or on behalf of
banks, brokers, their nominees or similar persons which represent more votes
than the holder of a proxy is authorized by the record owner to cast or more
votes than the shareholder holds of record. If the inspectors consider other
reliable information for the limited purpose permitted herein, the inspectors,
at the time they make their certification, must specify the precise information
considered by them including, the person or persons from whom they obtained the
information, when the information was obtained, the means by which the
information was obtained, and the basis for the inspectors' belief that such
information is accurate and reliable.
2.15 Consent of Shareholders In Lieu of Meeting. Any action required to
be taken, or which may be taken, at a meeting of the shareholders may be taken
without a meeting, without prior notice and without a vote, if one (1) or more
consents in writing, setting forth the action so taken, are (a) signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shareholders entitled to vote thereon were present and voted and (b)
delivered to the Corporation by delivery to the Corporation's registered office,
its principal place of business, or an officer or agent having custody of its
minute book. Delivery made to the Corporation's registered office must be made
by hand or by certified or registered mail, return receipt requested. A written
consent must bear the date of signature of each shareholder who signs the
consent. No written consent is effective, unless within sixty (60) days of the
earliest dated a consent is delivered, written consents signed by a sufficient
number of holders are delivered as required. Prompt notice of the taking of the
actions without a meeting by less than
134
<PAGE>
unanimous written consent must be given to those shareholders who have not
consented in writing.
2.16 Shareholder Inspection of Books and Records. As used in this
section, "shareholder" means a shareholder of record. Any shareholder, in person
or by attorney or other agent, upon written demand under oath stating the
purpose thereof, has the right during the usual hours for business to inspect
for any proper purpose the Corporation's stock ledger, a list of its
shareholders and its other books and records, and to make copies of extracts
therefrom. A proper purpose shall mean a purpose reasonably related to such
person's interest as a shareholder. In every instance where an attorney or other
agent shall be the person who seeks the right to inspection, the demand under
oath must be accompanied by a power of attorney or such other writing which
authorizes the attorney or other agent to so act on behalf of the shareholder.
The demand under oath shall be directed to the Corporation at its registered
office in Delaware or at its principal place of business.
ARTICLE III
DIRECTORS
---------
3.1 General Powers. The business and affairs of the Corporation shall be
managed by its Board of Directors.
3.2 Number, Tenure and Qualifications. The number of directors on the
date of adoption of these Bylaws shall be ten (10). The number of directors of
the Corporation may be increased or decreased by resolution of the Board of
Directors. All directors shall hold office for the term for which they are
elected or until their successors shall have been elected and qualified,
whichever period is longer. The directors need not be residents of the State of
Delaware, nor need they hold any shares of stock of the Corporation.
3.3 Removal and Resignation. Holders of Common Stock, Class D Common
Stock and voting Preferred Stock, if any, may remove, with or without cause, any
or all directors elected by them by a majority of shares voting together as a
separate class. Holders of Class B Common Stock may remove, with or without
cause, any or all directors elected by them by a majority of shares voting
together as a separate class. Any member of the Board of Directors may resign
from the Board of Directors at any time by giving written notice to the
President or Secretary of the Corporation, and unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
3.4 Regular Meetings. A regular meeting of the Board of Directors shall
be held without other notice than this Bylaw
135
<PAGE>
immediately after, and at the same place as, the annual meeting of shareholders.
The Board of Directors may provide, by resolution, the time and place, either
within or without the State of Delaware or the State of Florida, for the holding
of additional regular meetings without other notice than such resolution.
3.5 Special Meetings. Special meetings of the Board of Directors may be
called by, or at the request of, the Chairman of the Board, the President or a
majority of the total number of directors of the Corporation and shall be
preceded by at least two (2) days notice of the date, time and place of the
meeting.
3.6 Telephonic Meetings. Members of the Board of Directors or a committee
of the board may participate in a meeting by means of a conference telephone or
similar communications equipment if all persons participating in the meeting can
hear each other at the same time. Participation in a meeting by these means
constitutes presence in person at the meeting.
3.7 Notice of Directors' Meetings. No notice need be given of any regular
meeting of the Board of Directors. Notice of a special meeting of the Board of
Directors shall contain the date, time and place of the meeting and may be
communicated in person; by telephone, telegraph, facsimile or other form of wire
or wireless communication; or by mail or private carrier. Oral or telephonic
notice shall be effective when communicated, provided that it is promptly
confirmed in writing. Written notice is effective at the earliest of the
following:
(a) when received;
(b) five (5) days after deposit in the United States mail as
evidenced by the postmark, if mailed postpaid and correctly addressed; or
(c) on the date shown on the return receipt, if sent by registered or
certified mail, return receipt requested, and the receipt is signed by, or on
behalf of, the addressee.
Any director may waive notice of any meeting before or after the meeting. The
waiver shall be in writing and signed by the director entitled to the notice and
filed with the minutes of the meeting. The attendance of a director at any
meeting shall constitute a waiver of notice of such meeting, except when a
director attends a meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened. The execution of a written consent shall constitute a waiver of
notice with respect to the actions taken in the consent even if the consent does
not expressly contain a waiver clause. Neither the business to
136
<PAGE>
be transacted at, nor the purpose of, any regular or special meeting of the
Board of Directors need be specified in the notice or waiver of notice of such
meeting.
3.8 Quorum. A majority of the number of directors fixed by, or determined
in accordance with, Section 3.2 hereof shall constitute a quorum for the
transaction of business at any meeting of the Board of Directors; provided that,
if less than a majority of the directors are present at said meeting, a majority
of the directors present may adjourn the meeting from time to time without
further notice.
3.9 Manner of Acting. The act of the majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors, unless otherwise required by the Certificate of Incorporation of the
Corporation or these Bylaws. A director who is present at a meeting of the Board
of Directors, or a committee of the Board of Directors when corporate action is
taken, shall be deemed to have assented to the action taken unless the director:
(a) objects at the beginning of the meeting (or promptly upon
arrival) to holding it or transacting business at the meeting;
(b) dissents or abstains from the action taken and such dissent or
abstention is entered in the minutes of the meeting; or
(c) delivers written notice of dissent or abstention to the presiding
officer of the meeting before its adjournment or to the Corporation immediately
after adjournment of the meeting. The right of dissent or abstention shall not
be available to a director who votes in favor of the action taken.
3.10 Vacancies. A vacancy occurring in the office of a director elected
by the holders of the Common Stock, Class D Common Stock and voting Preferred
Stock may be filled by the affirmative vote of a majority of the holders of such
classes of stock or a majority of the remaining directors elected by the holders
of such classes of stock, if at least one (1) such director remains. A vacancy
occurring in the office of a director elected by the holders of Class B Common
Stock may be filled by the affirmative vote of a majority of the holders of such
class of stock or a majority of the remaining directors elected by the holders
of such class of stock, if at least one (1) such director remains. A director
elected to fill a vacancy shall be elected for the unexpired term of the
predecessor in office. If at any time, by reason of death, resignation or other
cause, the Corporation has no directors in office, then any officer,
shareholder, personal representative of a shareholder or other like fiduciary,
may call a special meeting of shareholders or may apply to a court of competent
jurisdiction for a decree ordering an election. Subject to the restrictions
described above relating to directors
137
<PAGE>
elected by holders of certain classes of stock, if one (1) or more directors
resign from the board effective at a future date, a majority of the directors
then in office, including those who have so resigned, have the power to fill
such vacancy or vacancies, the vote thereon to take effect when the resignations
become effective.
3.11 Compensation. By resolution of the Board of Directors, each director
may be paid expenses, if any, of attendance at each meeting of the Board of
Directors, and may be paid a stated stipend as director or a fixed sum for
attendance at each meeting of the Board of Directors, or both. No such payment
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor.
3.12 Action by Written Consent. Any action required or permitted to be
taken at any meeting of the Board of Directors of any committee thereof may be
taken without a meeting if all members of the board or the committee, as the
case may be, consent to such action in writing, and the writing or writings are
filed with the minutes of the proceedings of the board or committee.
3.13 Chairman and Vice Chairman of the Board. The Board of Directors may
appoint one of its members Chairman of the Board of Directors. The Board of
Directors may also appoint one of its members as Vice Chairman of the Board of
Directors, and such individual shall serve in the absence of the Chairman and
perform such additional duties as may be assigned by the Board of Directors.
3.14 Conflicts of Interest. No contract or transaction between the
Corporation and one (1) or more of its directors or officers, or between the
Corporation and any other corporation, partnership, trust, firm, association or
entity in which one (1) or more of the directors or officers of the Corporation
is a director, officer, partner, shareholder, member, employee or agent or is
financially interested, shall be void or voidable solely for this reason, or
solely because the director or officer is present at, or participants in, the
meeting of the Board of Directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction or solely because their votes
are counted for such purposes, if:
(a) the material facts of the contract or transaction and the
director's interest or relationship are disclosed or known to the Board of
Directors or committee of the Board of Directors and the Board of Directors or
the committee in good faith authorizes, approves, or ratifies the contract or
transaction by the affirmative vote (or consent) of a majority of the
disinterested directors even though the number of disinterested directors may be
less than a quorum;
138
<PAGE>
(b) the material facts of the contract or transaction and the
director's interest or relationship are disclosed or known to the shareholders
entitled to vote thereon and they specifically authorize, approve or ratify in
good faith such contract or transaction by vote or written consent sufficient
for the purpose; or
(c) the contract or transaction is fair as to the Corporation as of
the time it is authorized, approved or ratified by the Board of Directors, a
committee thereof or the shareholders.
Such interested directors may be counted in determining the presence of a quorum
at a meeting of the Board of Directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction.
3.15 Director Inspection of Books and Records. Any director shall have
the right to examine the Corporation's stock ledger, a list of its shareholders
and its other books and records for a purpose reasonably related to such
person's position as a director.
3.16 Committees.
----------
(a) The Board of Directors may appoint an Executive Committee, which
shall consist of two (2) or more members of the Board of Directors and shall
serve at the pleasure of the Board of Directors. The Chairman of any Executive
Committee shall be designated by the Board of Directors. Meetings of the
Executive Committee shall be held from time to time as called by the Chairman of
the Executive Committee or any two (2) members thereof by notice to the other
members of the committee. Notice of any such meeting shall be given by oral,
telegraphic or written notice not less than twenty-four (24) hours prior to such
meeting. In order to take action, a majority of the members of such committee
must be present and shall constitute a quorum. During the intervals between the
meeting of the Board of Directors, the Executive Committee, if such committee is
established, shall possess and may exercise all of the powers of the Board of
Directors of the Corporation in the management of the business, affairs and
properties of the Corporation, as are not prohibited by statute, the Certificate
of Incorporation of the Corporation or these Bylaws. All action taken the
Executive Committee shall be deemed to be action of the Board of Directors of
the Corporation.
(b) The Board of Director may also designate one (1) or more other
committees, each committee to consist of two (2) or more members of the Board of
Directors of the Corporation. Such committees shall have and may exercise the
powers of the Board of Directors of the Corporation which are delegated to the
committee by the Board of Directors.
139
<PAGE>
(c) Each committee shall keep regular minutes of its meetings and
report same to the Board of Directors of the Corporation when required.
ARTICLE IV
OFFICERS
--------
4.1 Classes. The officers of the Corporation shall be a President, a
Secretary and a Treasurer, each of whom shall be elected by the Board of
Directors. Such other officers and assistant officers as may be deemed necessary
may be elected or appointed by the Board of Directors. Any two (2) or more
offices may be held by the same person. A person who holds more than one (1)
office may not act in more than one (1) capacity to execute, acknowledge or
verify an instrument if required by law to be executed, acknowledged or verified
by more than one (1) officer.
4.2 Election and Term of Office. The officers of the Corporation shall be
elected by the Board of Directors at the first and, thereafter, at each annual
meeting of the Board of Directors. If the election of officers shall not be held
at any such meeting, such election shall be held as soon thereafter as is
convenient. Vacancies may be filled or new offices created and filled at any
meeting of the Board of Directors. Officers shall hold office until their
successors shall have been duly elected and shall have qualified or until death,
resignation or removal.
4.3 Removal and Resignations. Any officer or agent elected or appointed
by the Board of Directors may be removed by the Board of Directors whenever, in
its judgment, the best interests of the Corporation would be served thereby, but
such removal shall be without prejudice to the contract rights, if any, of the
person so removed. Election or appointment of an officer or agent shall not of
itself create contract rights. Any officer of the Corporation may resign at any
time by giving written notice to the President or Secretary of the Corporation,
and unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
4.4 Vacancies. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise may be filled by the Board of Directors
for the unexpired portion of the term.
4.5 Chairman of the Board of Directors. The Chairman of the Board of
Directors, if that office be created and filled, may, at the discretion of the
Board of Directors, be the chief executive officer of the Corporation and, if
such, shall, in general, supervise and control the affairs and business of the
Corporation, subject to
140
<PAGE>
control by the Board of Directors. The Chairman of the Board shall preside at
all meetings of the shareholders and Board of Directors.
4.6 President. The President, unless a chairman is appointed and
designated chief executive officer pursuant to Section 4.5 hereof, shall be the
chief executive officer of the Corporation. If no chairman has been appointed
or, in the absence of the chairman, the President shall preside at all meetings
of the shareholders and of the Board of Directors. The President may sign, with
the Secretary or any other proper officer of the Corporation thereunto
authorized by the Board of Directors, certificates for shares of the
Corporation, any deeds, mortgages, bonds, contracts or other instruments which
the Board of Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board of
Directors or by these Bylaws to some other officer or agent of the Corporation,
or shall be required by law to be otherwise signed or executed; and, in general,
shall perform all duties incident to the office of President and such other
duties as may be prescribed by the Board of Directors from time to time. Unless
otherwise ordered by the Board of Directors, the President shall have full power
and authority on behalf of the Corporation to attend, act and vote at any
meetings of shareholders of any corporation in which the Corporation may hold
stock, and at such meeting, shall hold and may exercise all rights incident to
the ownership of such stock which the Corporation, as owner, might have had and
exercised if present. The Board of Directors may confer like powers on any other
person or persons.
4.7 Vice President. In the absence of the President, or in the event of
inability or refusal to act, the Vice President (or, in the event there be more
than one Vice President, the Vice Presidents in order designated at the time of
their election, or in the absence of any designation, then, in the order of
their election), if that office be created and filled, shall perform the duties
of the President, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any Vice President may sign,
with the Secretary or an assistant secretary, certificates for shares of the
Corporation; and shall perform such other duties as from time to time may be
assigned by the Chairman of the Board, President or the Board of Directors.
4.8 Treasurer. The Treasurer shall have charge and custody of and be
responsible for all funds and securities of the Corporation; receive and give
receipts for monies due and payable to the Corporation from any source
whatsoever, and deposit all such monies in the name of the Corporation in such
banks, trust companies and other depositories as shall be selected in accordance
with the provisions of Article V of these Bylaws; and, in general, perform all
the duties incident to the office of Treasurer and such other duties
141
<PAGE>
as from time to time may be assigned by the Chairman of the Board, the President
or the Board of Directors. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of duties in such sum and with such
surety as the Board of Directors shall determine.
4.9 Secretary. The Secretary shall keep the minutes of the shareholders'
meetings, Board of Directors' meetings and meetings of committees of the Board
of Directors in one (1) or more books provided for that purpose; see that all
notices are duly given in accordance with the provisions of these Bylaws or as
required by law; be custodian of the corporate records and of the seal, if any,
of the Corporation; keep a register of the post office address of each
shareholder; sign with the President or Vice President certificates for shares
of stock of the Corporation; have general charge of the stock transfer books of
the Corporation; and, in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned by the
Chairman of the Board, the President or the Board of Directors.
ARTICLE V
CONTRACTS, LOANS,
CHECKS AND DEPOSITS
-------------------
5.1 Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract and execute and deliver
any instruments in the name of and on behalf of the Corporation. Such authority
may be general or confined to specific instances.
5.2 Checks, Drafts. All checks, drafts or other orders for the payment of
money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, or agent or agents, of
the Corporation and in such manner as shall, from time to time, be determined by
resolution of the Board of Directors.
5.3 Deposits. All funds of the Corporation not otherwise employed shall
be deposited, from time to time, to the credit of the Corporation in such banks,
trust companies and other depositories as the Board of Directors may select.
142
<PAGE>
ARTICLE VI
CERTIFICATES FOR SHARES
AND THEIR TRANSFER
------------------
6.1 Certificates for Shares. Certificates representing shares of the
Corporation shall be in such form as may be determined by the Board of Directors
and by the laws of the State of Delaware. Each certificate shall have noted
conspicuously thereon any applicable restrictions on sale or transfer. Such
certificates shall be signed by the President and by the Secretary or such other
officers as may be designated by the Board of Directors. All certificates for
shares shall be consecutively numbered within each class of stock in the order
in which they are issued. The name of the person owning the shares represented
thereby, with the number of shares and date of issue, shall be entered on the
books of the Corporation. All certificates surrendered to the Corporation or its
agent for transfer shall be canceled and no new certificates shall be issued
until the former certificates for a like number of shares shall have been
surrendered and canceled, except that, in case of a lost, destroyed or mutilated
certificate, a new one may be issued therefor upon such terms and indemnity to
the Corporation as the Board of Directors may prescribe.
6.2 Lost, Stolen or Destroyed Stock Certificates. The Corporation may
issue a new certificate of stock in place of any certificate issued by it and
alleged to have been lost, stolen or destroyed, if the person claiming the
certificate to be lost, stolen or destroyed shall make an affidavit of that
fact. In addition, the Corporation may require the owner of the lost, stolen or
destroyed certificate, or such person's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction.
6.3 Transfer of Shares. Transfer of shares of the Corporation shall be
made only on the books of the Corporation by the registered holders thereof, or
by their legal representatives who shall furnish proper evidence of authority to
transfer, or by their attorney thereunto authorized by power of attorney duly
executed and filed with the Secretary or the transfer agent of the Corporation,
and on surrender for cancellation of the certificate for such shares. The person
in whose name shares stand on the books of the Corporation shall be deemed the
owner thereof for all purposes as regards the Corporation.
143
<PAGE>
ARTICLE VII
INDEMNIFICATION
---------------
7.1 Indemnification.
---------------
(a) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if such person acted
in good faith and in a manner reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe the conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that this conduct was unlawful.
(b) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that such person is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred in connection with
the defense or settlement of such action or suit if such person acted in good
faith and in a manner reasonably believed to be in or not opposed to the best
interests of the Corporation and except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Corporation unless and only to the extent that the
Delaware Court of Chancery or the court in which such action or suit was brought
shall determine upon application that, despite the adjudication of liability but
in view of all the circumstances of the case, such person is fairly and
reasonably
144
<PAGE>
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit, or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, such person shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred in connection therewith.
(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because such person
has met the applicable standard of conduct set forth in subsections (a) and (b)
of this section. Such determination shall be made: (1) by the Board of Directors
by a majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding; (2) if such a quorum is not obtainable, or,
even if obtainable a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion; or (3) by the shareholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the Corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount if
it shall ultimately be determined that such person is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the Board of Directors deems
appropriate.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise, both as to action in
official capacity and as to action in another capacity while holding such
office.
(g) The Corporation may purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another
145
<PAGE>
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against such person and incurred in any such capacity, or
arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify against such liability under this section.
(h) For purposes of this section, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, employees or
agents, so that any person who is or was a director, officer, employee or agent
of such constituent corporation, or is or was serving at the request of such
constituent corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall stand
in the same position under this section with respect to the resulting or
surviving corporation as he would have with respect to such constituent
corporation if its separate existence had continued.
(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to any employee benefit plan or its participants or
beneficiaries; and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this
section.
(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE VIII
MISCELLANEOUS
-------------
8.1 Amendments. The Board of Directors shall have the power and authority
to alter, amend or repeal Bylaws of the Corporation at any regular or special
meeting at which a quorum is present by the
146
<PAGE>
vote of a majority of the entire Board of Directors, subject always to the power
of the shareholders under Delaware law to adopt, alter or repeal such Bylaws.
8.2 Fiscal Year. The Board of Directors shall have the power to fix, and
from time to time change, the fiscal year of the Corporation. Unless otherwise
fixed by the Board, the fiscal year of the Corporation shall end on January 31.
8.3 Dividends. The Board of Directors may, from time to time, declare,
and the Corporation may pay, dividends on its outstanding shares in the manner
and upon the terms and conditions provided by law and its Certificate of
Incorporation.
8.4 Seal. The Board of Directors of the Corporation may adopt a seal on
behalf of the Corporation.
8.5 Waiver of Notice. Whenever any notice is required to be given under
the provisions of these Bylaws, or under the provisions of the Corporation's
Certificate of Incorporation, or under the provisions of the corporation laws of
the State of Delaware, a waiver thereof in writing, signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be equivalent to the giving of such notice.
The above Bylaws were adopted by the Board
of Directors of Exigent International, Inc.
as of May 1, 1996.
-------------------------------------------
Secretary
147
<PAGE>
HISTORICAL TABLE
BYLAWS OF
EXIGENT INTERNATIONAL, INC.
Bylaws initially adopted as of May 1, 1996.
AMENDMENTS
----------
Date Article/Section No.
---- -------------------
148
<PAGE>
EXHIBIT 5
---------
[Form of Counsel Opinion]
______________, 1996
Exigent International, Inc.
1225 Evans Road
Melbourne, Florida 32904-2314
RE: REGISTRATION STATEMENT ON FORM S-1
OUR FILE NO.: 27818/1
Members of the Board of Directors:
This letter is in response to your request for our opinion in connection
with the Registration Statement on Form S-1 under the Securities Act of 1933, as
amended, of Exigent International, Inc. (the "Corporation"). We have examined
the following documents of the Corporation:
1. Certificate of Incorporation of the Corporation filed March 25, 1996;
2. Bylaws of the Corporation;
3. Resolutions of the Corporation reflecting various actions by the Board
of Directors and Shareholders thereof; and
4. Such other documents, papers, statutes and authorities as we deem
necessary to form the basis of the opinion hereinafter expressed.
We have assumed the genuineness of the signatures on all documents renewed
and the authenticity of such documents and that the documents submitted to us as
copies conform to the originals. We have relied on certificates of public
officials and upon certificates of the officers and directors of the
Corporation.
Based on the foregoing, we are of the opinion that the Common Shares of the
Corporation to be registered under the registration statement described above,
if issued in accordance therewith and
149
<PAGE>
Exigent International, Inc.
- ---------------, 1996
Page 150
the documents listed herein, will be legally issued, fully paid and non-
assessable under Delaware law.
We give you our permission to file this opinion with the Securities and
Exchange Commission as an exhibit to the registration statement referred to
above.
Sincerely yours,
Ogden Newell & Welch
LHW/dgj
150
<PAGE>
EXHIBIT 10(i)
-------------
SECURITIES TRANSFER AND REGISTRAR AGREEMENT
BETWEEN
MID-AMERICA BANK OF LOUISVILLE
AND TRUST COMPANY
AND
<PAGE>
This Securities Transfer and Registrar Agreement is made in Louisville,
Kentucky as of the _____ day of __________, 1996 by and between Mid-America Bank
of Louisville and Trust Company ("Bank of Louisville"), 500 West Broadway,
Louisville, Kentucky 40202 and ___________________________________________
("Corporation") at ___________________________________________.
THE PARTIES DO HEREBY AGREE AS FOLLOWS:
1. Appointment of transfer agent. Corporation hereby appoints Bank of
Louisville as Transfer Agent of certificates representing all shares of the
following class of stock of the Corporation, now or hereafter authorized by its
Certificate of Incorporation:
<TABLE>
<CAPTION>
Shares Authorized
Shares Authorized for Issuance by
by Board of
Par Certificate of Shares Directors
Class Value Incorporation Outstanding But Unissued
- ----- ----- ----------------- ----------- -----------------
<S> <C> <C> <C> <C>
Common
</TABLE>
2. Duties of transfer agent. For the purpose of the original issue of the
certificates representing shares of stock now or hereafter authorized for
issuance by the Corporation but unissued, Bank of Louisville is hereby directed:
(a) To record and countersign certificates signed by or bearing the
facsimile signatures of the officers of the Corporation authorized by its Bylaws
to sign stock certificates, in such names and in such amounts as the Corporation
may direct in writing signed by the President and Secretary of the Corporation.
(b) To present such certificates for registration and countersignature and
when so countersigned to deliver the certificates to or upon the written order
of any officer of the Corporation.
3. Issuance and recording of stock certificates. Bank of Louisville is
authorized and directed to make transfers, from time to time, upon the records
of the Corporation of any outstanding certificates representing shares of such
stock of the Corporation heretofore issued and of certificates representing
shares of such stock of the Corporation which may hereafter be issued, and of
certificates issued in exchange therefore, signed by or bearing the facsimile
signatures of the officers of the Corporation authorized by its Bylaws to sign
stock certificates and countersigned by Bank of Louisville as the Transfer Agent
and Registrar upon surrender thereof for transfer properly endorsed and duly
stamped as may be required by pertinent state statutes, and upon cancellation of
such certificates to record and countersign new certificates, duly signed as
herein provided, for an equal number of shares of such stock and present such
certificates for registration and countersignature
152
<PAGE>
and when so countersigned to deliver such certificates to or upon the order of
the person entitled thereto.
Bank of Louisville is authorized and directed to maintain the original
stock ledger and transfer book containing the name, address and number of shares
issued to each shareholder. These records are available for inspection by the
Corporation at any time. A shareholder listing providing names, addresses, and
outstanding shares will be provided by Bank of Louisville upon the request of
the Corporation or as otherwise may be required by applicable law. Shareholders
must notify the Bank of Louisville of any changes in the address of record.
4. Custody of facsimile signature devices. Certified specimen signatures
of the officers of the Corporation and certified specimen certificates of the
stock of the Corporation in the form duly approved by it shall be lodged with
Bank of Louisville. When any officer shall no longer be vested with authority to
sign for the Corporation, written notice thereof shall immediately by given to
Bank of Louisville and until receipt of such notice Bank of Louisville shall be
fully protected and held harmless in recognizing and acting upon the signature
of such officer. Bank of Louisville, however, is authorized and directed, until
otherwise instructed in writing by the Corporation, to issue and countersign in
the course of its duties certificates bearing the signatures of officers of the
Corporation who no longer bear the title of the office over which their
signatures on the stock certificates appear, or who have died or have severed
their connection with the Corporation. All such certificates, whether issued
prior or subsequent to the change of status of such officers, shall be
recognized by the Corporation from the date of issuance thereof as valid and
binding certificates of stock of the Corporation for all purposes and in all
respects.
5. Indemnity for replacement certificates. In the event that any such
certificate shall become lost, stolen, or destroyed, no new certificate or
certificates shall be issued in lieu thereof until an indemnity bond in such
form as may be approved by the Corporation shall have been furnished. The bond
shall be in form satisfactory to Bank of Louisville and Bank of Louisville shall
be named as an obligee therein.
6. Dividend agent. Bank of Louisville is hereby appointed Dividend
Disbursing Agent for the Capital Stock of the Corporation for which it now or
hereafter may be acting as Transfer Agent, and it hereby is authorized to pay
such dividends as may hereafter be declared by the Board of Directors of the
Corporation upon being furnished with collected funds sufficient for the payment
of such dividends by noon the business day prior to the payable date and a
resolution of the Corporation signed by the Secretary of the Corporation
notifying it of the declaration of any such dividend, the date upon which such
dividend is payable, and the record date of such dividend.
7. Appointment of Registrar. Bank of Louisville is hereby appointed
Registrar for the registration of certificates for all shares of the following
class of stock now or hereafter authorized by the Certificate of Incorporation
of the Corporation:
153
<PAGE>
Class of Stock Par Value
-------------- ---------
Common
Bank of Louisville is authorized upon direction of the Corporation to
register for original issue certificates for such shares of such stock, not
exceeding the number of unissued shares at the time authorized to be issued by
the Certificate of Incorporation of the Corporation.
Bank of Louisville is authorized and directed, upon the surrender for
cancellation of certificates for shares of such stock now outstanding or
hereafter issued, to register new certificates for the number of shares
represented by the certificates so canceled when such new certificates shall
have been countersigned. Bank of Louisville is authorized to maintain such
records as it may deem necessary or advisable in connection with its duties as
Registrar.
Bank of Louisville shall be immediately advised in writing (1) of the
appointment of any other registrar, (2) of all original issues and cancellations
by way of retirement of shares of such stock made or effected by the Corporation
or registered by any other registrar, and (3) unless an officer of the
Corporation shall have notified Bank of Louisville in writing to the contrary,
of all registrations of certificates for shares of such stock made or effected
by the Corporation or any other registrar, and that the Corporation agrees to
indemnify and hold harmless Bank of Louisville from and against all losses,
costs, claims, and liability which Bank of Louisville may suffer or incur by
reason of its registering or failing or declining to register any certificate
for shares of such stock upon transfer or exchange of any certificate for shares
of such stock (i) registered by any other registrar or agent of the Corporation
of whose appointment Bank of Louisville shall not have been advised in writing,
or (ii) of the registration of which Bank of Louisville shall not have been so
advised, and that Bank of Louisville shall not be liable for, and shall be
protected by the Corporation against, any losses, costs, claims, and liability
based upon any act or omission of the Corporation or any other registrar or any
other agent of the Corporation.
Bank of Louisville may rely conclusively and act, without further
investigation, upon any list, instruction, certification, authorization, stock
certificate, or other instrument or paper believed by it in good faith to be
genuine and to have been signed, countersigned, or executed by any duly
authorized person or persons, or upon the instruction of any officer of the
Corporation; and further that Bank of Louisville may register any certificate
for shares of such stock which is believed by it in good faith to have been duly
authorized, or may refuse to register any certificate for share of such stock if
in good faith Bank of Louisville deems such refusal necessary in order to avoid
any liability on the part of either the Corporation or itself, and that the
Corporation agrees to indemnify and hold harmless Bank of Louisville from and
against any and all losses, costs, claims, and liability for so relying or
acting or refusing to act.
In case any of the officers of the Corporation whose manual or facsimile
signature appears on any stock certificate to be registered shall cease to be
such officer prior to the registration of such certificate, Bank of Louisville
is directed nevertheless to register such certificate as though the
154
<PAGE>
person signing the same or whose facsimile signature appears thereon had not
ceased to be such officer, unless written instructions of the Corporation to the
contrary are received by Bank of Louisville.
8. Certification. The Secretary of the Corporation shall certify copies
of this agreement and of the Bylaws of the Corporation and of all amendments
thereto under the seal of the Corporation and lodge such copies thereof with
Bank of Louisville, together with a copy of the Certificate of Incorporation,
and all amendments thereto, properly certified by the Secretary of State, and
from time to time furnish Bank of Louisville similarly certified copies of any
amendments that may be made to the Certificate of Incorporation or Bylaws.
9. Fee Schedule. In consideration of Bank of Louisville performing the
duties as herein set forth, the Corporation agrees to pay Bank of Louisville
according to the fee schedule which is attached hereto as Exhibit A and
incorporated by reference as if fully set forth herein. Said fee schedule is
subject to change upon sixty (60) days written notice by Bank of Louisville. A
monthly minimum fee of $300 shall be paid by the Corporation, whether or not
services are rendered by Bank of Louisville totalling that amount.
10. Termination. Bank of Louisville and the Corporation agree that either
party may terminate this agreement upon six (6) months prior written notice.
This agreement will terminate immediately at the election of Bank of Louisville
upon the occurrence of any of the following events:
(i) failure to pay any fee required by this agreement or the fee
schedule then in effect which is not paid within 15 days from the date it is
due;
(ii) the dissolution, merger, consolidation or liquidation of the
Corporation or any sale of all or any substantial part of its assets (except in
the ordinary course of business);
(iii) the Corporation makes an assignment for the benefit of
creditors, or a voluntary or an involuntary petition is filed by or against the
Corporation under any law having for its purpose the adjudication of the
Corporation as bankrupt or the reorganization of the Corporation.
No delay or failure of Bank of Louisville in the exercise of any right or
power under this agreement shall act as a waiver of such right or power, nor
will it preclude the future exercise of the right or power, or of any remedy
which Bank of Louisville may have outside this agreement.
11. Choice of Law. This agreement shall be governed by the laws of the
Commonwealth of Kentucky.
155
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this agreement to be executed
by their duly authorized officers as of the date first above written:
_____________________ ("Corporation")
By_________________________________
Mid-America Bank of Louisville and Trust Company
("Bank of Louisville")
By_________________________________
H. Steve Niesse, Vice President, Securities Transfer Department
156
<PAGE>
EXHIBIT 10(ii)
--------------
COMMON STOCK PURCHASE WARRANT AGREEMENT
---------------------------------------
This Common Stock Purchase Warrant Agreement is made as of _________,
1996, by and between Exigent International, Inc., a Delaware corporation (the
"Company"), and Mid-America Bank of Louisville and Trust Company, a Kentucky
banking corporation (the "Warrant Agent").
WHEREAS, the Company has determined to issue and deliver Common Stock
Purchase Warrants (the "Warrants") entitling the holders of the Warrants to
purchase an aggregate of 1,000,028 Common Shares of the Company;
WHEREAS, the Company desires to provide for the form and provisions of the
Warrants, the terms upon which they will be issued and may be exercised, and the
respective rights, limitations and immunities of the Company, the Warrant Agent
and the holders of the Warrants; and
WHEREAS, all acts and things necessary have been done and performed to make
the Warrant, when executed on behalf of the Company and countersigned by or on
behalf of the Warrant Agent, as provided in this Agreement, the valid, binding
and legal obligation of the Company, and to authorize the execution and
delivery of this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained herein,
the parties hereto agree as follows:
Article I
Execution and Countersignature of Warrants
1.01. Execution and Countersignature of Warrants.
(a) Each Warrant, whenever issued, shall be dated __________,
1996, shall be substantially in the form of Exhibit A attached hereto and
incorporated hereby, and shall be signed by, or bear the facsimile signature of,
the President or a Vice President and of the Secretary or an Assistant Secretary
of the Company. If any officer whose facsimile signature has been placed upon
any Warrant ceases to be that officer before the Warrant is issued, the Warrant
may be issued with the same effect as if the officer had not ceased to be that
officer on the date of issuance.
(b) No Warrant may be exercised until it has been countersigned
by the Warrant Agent. The Warrant Agent shall countersign a Warrant only if:
(i) the Warrant is to be issued in exchange or
substitution for one or more previously countersigned Warrants, as
provided in this Agreement, or
(ii) the Company instructs the Warrant Agent to do so.
<PAGE>
(c) Unless and until countersigned by the Warrant Agent pursuant
to this Agreement, a Warrant is invalid and of no effect.
Article II
Warrant Price, Duration and Exercise of Warrants
2.01. Warrant Price. Each Warrant, when countersigned by the Warrant
Agent, shall entitle the holder of the Warrant, subject to the provisions of
this Agreement, to purchase from the Company the number of Common Shares stated
in the Warrant at the price of $3.00 per share, subject to the adjustments
provided in Article III of this Agreement. The Warrant Price as used herein
shall refer to the price per share at which Common Shares may be purchased at
the time a Warrant is exercised.
2.02. Duration of Warrants. Warrants may be exercised only on or before a
date that is 36 months after the date of the Warrants (the "Expiration Date").
Notwithstanding the foregoing, if notice has been given as provided in Article
III hereof in connection with the liquidation, dissolution or winding up of the
Company, the Warrants shall expire at the close of business on the third full
business day before the date specified in the notice as the record date for
determining holders of stock entitled to receive any distribution upon the
liquidation, dissolution or winding up; provided, however, that such date is at
least 5 business days after the date of the notice.
2.03. Exercise of Warrants.
(a) A Warrant, when countersigned by the Warrant Agent, may be
exercised by surrendering it at the office of the Warrant Agent in Louisville,
Kentucky, or at the office of its successor as warrant agent, with the exercise
form set forth in the Warrant duly completed and executed, and by paying in
full, in lawful money of the United States, the Warrant Price for each full
Common Share as to which the Warrant is exercised, and any applicable taxes.
Notwithstanding the foregoing, the Company is only required to use reasonable
efforts which will permit the purchase and sale of the Common Shares underlying
the Warrants and is not required to qualify the Warrants or the Common Shares
underlying the Warrants in any state.
(b) As soon as practicable after the exercise of any Warrant, the
Company shall issue to, or upon the order of, the holder or holders of the
Warrant, in whatever name or names the Warrant holder may direct, a certificate
or certificates for the number of full Common Shares to which the holder or
holders are entitled, registered in the name or names specified by the holder or
holders, and, if the Warrant is not exercised in full (except with respect to a
remaining fraction of a share), a new countersigned Warrant for the number of
shares (including fractional shares) as to which the Warrant has not been
exercised. All Warrants surrendered shall be canceled by the Company.
(c) If the same holder of one or more Warrants exercises the
purchase rights under the Warrants in the same transaction in a manner that
leaves the right to purchase a fraction of a share unexercised, the Company
shall pay a cash adjustment with respect to that final fraction
158
<PAGE>
in an amount equal to the same fraction of the current market price of one
Common Share on the business day that next precedes the day of exercise reduced
by the same fraction of the Warrant Price of one Common Share on that day. For
this purpose, the current market price shall be the price of one Common Share on
the principal stock exchange on which the Common Shares is traded on the next
preceding business day, or, if no sales take place on that day or if the Common
Shares are not then listed on a stock exchange, the average of the reported bid
and asked prices on that day in the over-the-counter market.
(d) All Common Shares issued upon the exercise of a Warrant shall
be duly and validly issued, fully paid and nonassessable, and the Company shall
pay all taxes in connection with the issuance of such shares. The Company shall
not be required to pay any tax imposed in connection with any transfer involved
in the issuance of a certificate for Common Shares in any name other than that
of the holder or holders of the Warrant surrendered in connection with the
purchase of the shares. In this case the Company shall not be required to issue
or deliver any stock certificate until the tax has been paid.
(e) Each person in whose name any certificate for Common Shares
is issued shall be deemed to have become the holder of record of the shares on
the date on which the Warrant was surrendered and payment of the Warrant Price
and any applicable taxes was made, irrespective of the date of delivery of the
certificate, except that, if the date of surrender and payment is a date when
the stock transfer books of the Company are closed, a person shall be deemed to
have become the holder of shares at the close of business on the next succeeding
date on which the stock transfer books are open. Except as otherwise provided in
Article III, each person holding any shares received upon exercise of Warrants
shall be entitled to receive only dividends or distributions which are payable
to holders of record on or after the date on which the person is deemed to
become the holder of record of such shares.
Article III
Adjustments
3.01. Stock Dividends - Split-Ups. If after the date of this Agreement,
and subject to the provisions of Section 3.07 hereof, the number of outstanding
Common Shares of the Company is increased by a stock dividend payable in Common
Shares or by a split-up of Common Shares, then, on the day following the date
fixed for the determination of holders of Common Shares entitled to receive the
stock dividend or split-up, the number of shares issuable on exercise of each
Warrant shall be increased in proportion to the increase in outstanding shares
and the then applicable Warrant Price shall be correspondingly decreased.
3.02. Aggregation of Shares. If after the date of this Agreement, and
subject to the provisions of Section 3.07 hereof, the number of outstanding
Common Shares of the Company is decreased by a combination or reclassification
of Common Shares, then, after the effective date of the combination or
reclassification, the number of Common Shares issuable on exercise of each
Warrant shall be decreased in proportion to the decrease in outstanding Common
Shares and the then applicable Warrant Price shall be correspondingly increased.
159
<PAGE>
3.03. Special Stock Dividends. If after the date of this Agreement, and
subject to the provisions of Section 3.07 hereof, shares of any class of stock
of the Company (other than Common Shares) are issued by way of a stock dividend
on outstanding Common Shares, then, commencing with the day following the date
fixed for the determination of holders of Common Shares entitled to receive the
stock dividend, in addition to any Common Share receivable upon exercise of the
Warrants, the Warrant holders upon exercise of the Warrants shall be entitled to
receive, as nearly as practicable, the same number of shares of dividend stock,
plus any shares issued upon any subsequent change, replacement, subdivision or
combination of the stock dividend, to which the holders would have been entitled
if their Warrants would have been exercised immediately prior to the stock
dividend. No adjustment in the Warrant Price shall be made merely by virtue of
the happening of any event specified in this Section 3.03.
3.04. Reorganization, Etc. If after the date of this Agreement any
capital reorganization or reclassification of the Common Shares of the Company,
or consolidation or merger of the Company with another corporation, or sale of
all or substantially all of its assets to another corporation is effective,
then, as a condition of the reorganization, reclassification, consolidation,
merger or sale, lawful and fair provision shall be made whereby the Warrant
holders after the transaction shall have the right to purchase and receive, upon
the basis and upon the terms and conditions specified in the Warrants and in
lieu of the Common Shares of the Company purchasable and receivable immediately
prior to the transaction upon the exercise of the rights represented by the
Warrants, the shares of stock, securities or assets that may be issued or
payable with respect to or in exchange for a number of outstanding Common Shares
equal to the number of Common Shares purchasable and receivable immediately
prior to the transaction upon the exercise of the rights represented by the
Warrants if the reorganization, reclassification, consolidation, merger or sale
had not taken place. Appropriate provisions shall be made in connection with a
reorganization, reclassification, consolidation, merger or sale with respect to
the rights and interests of the Warrant holders to the end that the provision of
this Agreement (including, without limitation, provisions for adjustments of the
Warrant Price and of the number of shares purchasable upon exercise of the
Warrants) shall immediately after the transaction be applicable as nearly as
possible to any shares of stock, securities or assets deliverable immediately
after the transaction upon the exercise of the Warrants. The Company shall not
effect any consolidation, merger or sale unless, prior to the consummation of
the transaction, the successor corporation (if other than the Company) resulting
from the consolidation or merger, or the corporation purchasing the assets,
assumes by written instrument executed and delivered to the Warrant Agent the
obligation to deliver to the Warrant holders the shares of stock, securities or
assets in accordance with the foregoing provisions that the holders may be
entitled to purchase.
3.05. Notice of Change in Warrant. Upon any adjustment of the Warrant
Price or the number of shares issuable on exercise of a Warrant, then and in
each case the Company shall give written notice of the adjustment to the Warrant
Agent. The notice shall state the Warrant Price resulting from the adjustment
and the increase or decrease, if any, in the number of shares purchasable at
that price upon exercise of a Warrant, setting forth in reasonable detail the
method of calculation and the facts upon which the calculation is based. The
Company shall mail or cause to be mailed to each holder of Warrants at the
address registered with the Company, a notice setting
160
<PAGE>
forth such change or adjustment. Failure to file a statement or to give notice,
or any defect in a statement or notice, shall not affect the legality or
validity of the changes or adjustments.
3.06. Other Notices. In case at any time:
(a) the Company pays any dividends payable in stock upon its
Common Shares or makes any distributions (other than regular cash dividends) to
the holders of its Common Shares;
(b) the Company offers for subscription pro rata to the holders
of its Common Shares any additional shares of stock of any class or any other
rights;
(c) there is a capital reorganization, a classification of the
capital stock of the Company or a consolidation or merger of the Company with,
or a sale of all or substantially all of its assets to, another corporation; or
(d) there is a voluntary or involuntary dissolution, liquidation
or winding up of the Company; then, in any one or more of these cases, the
Company shall give written notice in the manner set forth in Section 3.05 of
this Agreement of the date on which (i) the books of the Company close or a
record is taken for the dividend, distribution or subscription rights, or (ii)
the reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up takes place. The notice also shall specify the date as
of which the holders of record of Common Shares shall participate in dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Shares for securities or other property deliverable upon the
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding up. The notice shall be given and published at least 20
days prior to the transaction in question and not less than 20 days prior to the
record date or the date on which the Company's transfer books are closed with
respect to the transaction. Failure to give or publish the notice, or any defect
in the notice, shall not affect the legality or validity of any transaction
covered or to be covered in the notice.
3.07. Limitation on Fractions. Notwithstanding anything in Sections 3.01
or 3.02 hereof to the contrary, cumulative adjustments in the number of shares
issuable upon exercise of Warrants shall be made only to the nearest multiple of
one-tenth of a share, i.e., fractions of less than five-hundredths of a shares
shall be disregarded and fractions of five-hundredths of a shares or more shall
be treated as being one-tenth of a share.
3.08. Form of Warrant. The form of Warrant need not be changed due to any
change pursuant to this article, and Warrants issued after a change pursuant to
this Article, and Warrants issued after a change may state the same Warrant
Price and the same number of shares as is stated in the Warrants initially
issued pursuant hereto. However, at any time in its sole discretion, the
Company may make any change in the form of Warrant that it may deem appropriate
and that does not affect the substance of the Warrants. Any Warrant
subsequently issued and countersigned,
161
<PAGE>
whether in exchange or substitution for an outstanding Warrant or otherwise, may
be in the form as so changed.
Article IV
Other Provisions Relating to Rights of Holders of Warrants
4.01. No Rights as Stockholder Conferred by Warrants. A Warrant does not
entitled its holder to any of the rights of a stockholder of the Company.
4.02. Lost, Stolen, Mutilated or Destroyed Warrants. If any Warrant is
lost, stolen, mutilated or destroyed, the Company and the Warrant Agent may
issue a new Warrant of like denomination, tenor and date as the Warrant so lost,
stolen, mutilated or destroyed. Any such issuance of a new Warrant shall be on
whatever terms and conditions with respect to indemnity or otherwise that the
Company and Warrant Agent may in their sole discretion impose (which shall, in
the case of a mutilated Warrant, include the surrender of the Warrant). Any new
Warrant shall constitute an original contractual obligation of the Company,
regardless of whether the allegedly lost, stolen, mutilated or destroyed Warrant
is at any time enforceable by anyone.
4.03. Reservation of Common Shares. The Company shall at all times
reserve and keep available the number of its authorized but unissued Common
Shares which is sufficient to permit the exercise in full of all outstanding
Warrants. If at any time the number of authorized but unissued Common Shares is
not sufficient for these purposes, the Company shall take such corporate action
as, in the opinion of counsel, may be necessary to increase its authorized but
unissued shares to the number of shares sufficient for these purposes. The
Warrants, and the Common Shares issuable upon exercise of the Warrants, are
registered under the Securities Act of 1933, as amended.
Article V
Ownership and Transfer of Warrants
5.01. Ownership of Warrants. Warrants issued pursuant to this Agreement
shall be treated as owned only by the holder of record as determined by the
Warrant Agent.
5.02. Transfer of Warrants. After countersignature by the Warrant Agent
in accordance with the provisions of this Agreement, one or more Warrants may be
surrendered to the Warrant Agent for transfer and, upon their cancellation, the
Warrant Agent shall countersign and deliver in exchange one or more new
Warrants, as requested by the holder of the canceled Warrant or Warrants, for
purchase of the same aggregate number of shares as were evidenced by the Warrant
or Warrants so canceled. The Company shall give notice to the registered
holders of the Warrants of any change in the address, or in the designation, of
the Warrant Agent.
162
<PAGE>
Article VI
Warrant Agent
6.01. Resignation, Consolidation or Merger of Warrant Agent.
(a) The Warrant Agent, or any successor, may resign its duties
and be discharged from all further duties and liabilities hereunder after giving
one month's notice in writing to the Company, except that shorter notice may be
given if the Company, in writing, accepts such shorter notice as sufficient. If
the office of Warrant Agent becomes vacant by resignation or incapacity to act
or otherwise, the Company shall appoint in writing a successor Warrant Agent in
place of the Warrant Agent.
(b) If the Company fails to make an appointment within 30 days
after it has been notified in writing of a resignation or an incapacity by the
resigning or incapacitated Warrant Agent or by the holder of a Warrant (who
must, with any notice, submit the Warrant for inspection by the Company), then
the holder of any Warrant may apply to any court of competent jurisdiction for
the appointment of a successor Warrant Agent. Any successor Warrant Agent,
whether appointed by the Company or by a court, must be a corporation organized,
doing business and in good standing under the laws of the United States of
America or of any State, authorized under the laws under which it is governed to
exercise corporate trust powers, be subject to supervision or examination by
federal or state authorities, and have a combined capital and surplus of not
less than $5,000,000. The combined capital and surplus of any successor Warrant
Agent shall be deemed to be the combined capital and surplus set forth in the
most recent report of its condition published prior to its appointment, provided
that these reports are published at least annually pursuant to law or to the
requirements of a federal or state supervision or examining authority.
(c) After appointment, any successor Warrant Agent shall be
vested with all the authorities, powers, rights, immunities, duties and
obligations of its predecessor Warrant Agent with like effect as if originally
named as Warrant Agent under this Agreement without any further act or deed.
However, if for any reason it becomes necessary or appropriate, the predecessor
Warrant Agent shall execute and deliver, at the Company's expense, an instrument
transferring to a successor Warrant Agent all the authority, powers, rights,
immunities, duties and obligations of a Warrant Agent hereunder. Not later than
the effective date of any appointment the Company shall give notice of the
appointment to the predecessor Warrant Agent to each transfer agent for its
Common Shares and to the registered holders of the Warrants. Failure to give
notice, or any defect in a notice, shall not affect the validity of the
appointment of a successor Warrant Agent.
(d) Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated or any corporation resulting from any merger
or consolidation to which the Warrant Agent is a party shall be the successor
Warrant Agent under this Agreement without any further act.
6.02. Fees and Expenses of Warrant Agent. The Company shall (a) pay the
Warrant Agent reasonable remuneration for its services as Warrant Agent
hereunder and reimburse the Warrant
163
<PAGE>
Agent upon demand for all expenditures that it may reasonably incur in the
execution of its duties hereunder; and (b) perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all
further and other acts, instruments and assurances that reasonably may be
required by the Warrant Agent to carry out or perform this Agreement.
6.03. Additional Provisions.
(a) The Warrant Agent may consult with legal counsel (who may be
legal counsel for the Company) and the opinion of legal counsel shall be full
and complete authorization and protection to the Warrant Agent with respect to
any action taken or omitted by it in good faith and in accordance with the
opinion.
(b) Whenever in the performance of its duties under this
Agreement the Warrant Agent deems it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or suffering any
action hereunder, the fact or matter (unless other evidence with respect thereto
is specifically prescribed in this Agreement) may be deemed to be conclusively
proved and established by a statement signed by the President or a Vice
President or the Treasurer or an Assistant Treasurer or the Controller or the
Secretary of the Company and delivered to the Warrant Agent. However, in its
discretion, the Warrant Agent may in lieu of a signed statement accept other
evidence of a fact or matter or may require further or additional evidence that
to it may seem reasonable.
(c) The Warrant Agent shall be liable hereunder only for its own
negligence or willful misconduct.
(d) The Warrant Agent shall not be liable for or by reason of any
of the statements of fact or recital contained in this Agreement or in the
Warrants (except its countersignature of the Warrants) or be required to verify
the statements or recitals, and all of these statements and recitals are and
shall be deemed to have been made only by the Company.
(e) The Warrant Agent shall not be responsible for (i) the
validity of this Agreement, (ii) the execution and delivery of this Agreement or
the validity and execution of any Warrants (except its countersignature or
execution of the Warrants), (iii) any breach by the Company of any covenant or
condition contained herein or in any Warrant, (iv) the making of any adjustment
required by Article III of this Agreement or (v) the manner, method or amount of
any adjustment or the ascertaining of the existence of facts that would require
any adjustment. The Warrant Agent also, by any act under or pursuant hereto,
shall not be deemed to make any representation or warranty as to the
authorization or reservation of any Common Shares to be issued pursuant hereto,
as to any Warrant or as to whether, when issued, Common Shares shall be duly and
validly issued, fully paid and nonassessable.
6.04. Acceptance of Agency. The Warrant Agent hereby accepts the agency
established by this Agreement and agrees to perform this Agreement upon the
terms and conditions set forth herein. Among other things, the Warrant Agent
shall account promptly to the Company with respect
164
<PAGE>
to Warrants exercised and concurrently pay to the Company all moneys received by
it for the purchase of Common Shares through the exercise of Warrants.
Article VII
Other Matters
7.01. Payment of Taxes. The Company shall from time to time promptly pay
all taxes and charges that may be imposed upon the Company or the Warrant Agent
in connection with the issuance or delivery of Common Shares upon the exercise
of Warrants, but the Company shall not be required to pay any transfer taxes in
connection with the Warrants or shares.
7.02. Modification of Agreement. Without the consent or concurrence of
the holders of the Warrants, the Warrant Agent may by supplemental agreement or
otherwise concur with the Company in making any changes or corrections in this
Agreement that it is advised by counsel (who may be counsel for the Company) are
required to cure any ambiguity or to correct any defective or inconsistent
provision or clerical omission or mistake or manifest error contained herein.
7.03. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company or the Warrant Agent shall bind and inure
to the benefit of their respective successors and assigns hereunder.
7.04. Notices and Demands to Company and Warrant Agent. Any notice
or demand authorized by this Agreement to be given or made by the Company, the
Warrant Agent or by the holder of any Warrant shall be sufficiently given or
made if sent by certified or registered mail, postage prepaid, addressed (until
another address is filed in writing), as follows:
To the Company: Exigent International, Inc.
1225 Evans Road
Melbourne, Florida 32904-2314
Attn: President
To the Warrant Agent: Mid-America Bank of Louisville and Trust
Company
500 West Broadway
Louisville, Kentucky 40202
Attn: _______________
7.05. Applicable Law. The validity, interpretation and performance
of this Agreement and of the Warrants shall be governed by the laws of the State
of Delaware.
7.06. Persons Having Rights Under This Agreement. Nothing expressed
in this Agreement and nothing that may be implied from any of the provisions
hereof is intended, or shall be construed, to confer upon, or give to, any
person or corporation other than the parties to this Agreement and the holders
of the Warrants any right, remedy or claim under or by reason of this Agreement
or of any covenant, conditions, stipulation, promise or agreement contained
herein, and all covenants,
165
<PAGE>
conditions, stipulations, promises and agreements contained herein shall be for
the sole and exclusive benefit of the parties hereto and their respective
successors and assigns and of the holders of the Warrants.
7.07. Examination of Agreement. A copy of this Agreement shall be
available at all reasonable times at the office of the Warrant Agent for
inspection by the holder of any Warrant. The Warrant Agent may require the
holder seeking inspection to submit the Warrant for inspection by it.
7.08. Effect of Headings. The article and section headings in this
Agreement are for convenience only and are not part of this Agreement and shall
not affect the interpretation hereof.
WITNESS the signatures of the parties to this Agreement as of the day first
above written.
Exigent International, Inc.
By: __________________________________
Title: _______________________________
Mid-America Bank of Louisville and Trust Company
By: __________________________________
Title: _______________________________
0053652.01
<PAGE>
EXHIBIT 21
----------
EXIGENT INTERNATIONAL, INC.
SUBSIDIARIES OF THE REGISTRANT
EXHIBIT 21 TO FORM S-1
Software Technology, Inc.
<PAGE>
EXHIBIT 23
----------
CONSENT OF CERTIFIED PUBLIC ACCOUNTANTS
---------------------------------------
We consent to the reference to our firm under the captions "Experts" and
"Financial Statements" and to the use of our reports dated March 22, 1996 and
March 3, 1994 in the Form S-1 Registration Statement filed on behalf of Exigent
International, Inc. for the registration of 3,520,245 Common Shares and
1,070,270 Common Stock Purchase Warrants of Exigent International, Inc. under
Section 8(a) of the Securities Act of 1933.
Dated : June 7, 1996 Hoyman, Dobson & Company, P.A.
By: /s/ Charles W. Hoyman, Jr.
--------------------------
Title: President
---------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FINANCIAL STATEMENTS OF SOFTWARE TECHNOLOGY, INC. FOR FISCAL YEAR ENDED
JANUARY 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1995
<PERIOD-END> JAN-31-1996
<CASH> 270,084
<SECURITIES> 0
<RECEIVABLES> 6,149,367<F1>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,763,258
<PP&E> 2,686,678
<DEPRECIATION> 1,474,347
<TOTAL-ASSETS> 8,247,748
<CURRENT-LIABILITIES> 3,345,322
<BONDS> 9,889<F2>
<COMMON> 7,684
0
0
<OTHER-SE> 4,884,853
<TOTAL-LIABILITY-AND-EQUITY> 8,247,748
<SALES> 0
<TOTAL-REVENUES> 25,291,635
<CGS> 0
<TOTAL-COSTS> 19,408,136
<OTHER-EXPENSES> 4,021,836
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,887,974
<INCOME-TAX> 755,400
<INCOME-CONTINUING> 1,131,741
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,131,741
<EPS-PRIMARY> 1.91<F3>
<EPS-DILUTED> 1.09<F4>
<FN>
<F1> This number includes accounts receivable, pledged, and costs and estimated
earnings in excess of billings on uncompleted contracts, pledged.
<F2> This figure is long-term liabilities less the current portion of such
liabilities.
<F3> Earnings per share are as reflected on the financial statements of Software
Technology, Inc. prior to the reorganization; at such time, there were
593,182 shares issued and outstanding.
<F4> Earnings per share fully diluted are earnings per share adjusted to reflect
the number of shares issued and outstanding after the reorganization
(4,483,920 shares).
</FN>
</TABLE>
