<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 18, 1997.
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
----------------
ARIS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WASHINGTON 7379 91-1497147
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
FORT DENT ONE, SUITE 250 CT CORPORATION SYSTEMS
6720 FORT DENT WAY 520 PIKE STREET
SEATTLE, WASHINGTON 98188-2555 SEATTLE, WASHINGTON 98101
(206) 433-2081 (206) 622-4511
(ADDRESS AND TELEPHONE NUMBER OF (NAME, ADDRESS AND TELEPHONE NUMBER
REGISTRANT'S OF
PRINCIPAL EXECUTIVE OFFICES) AGENT FOR SERVICE)
----------------
COPIES TO:
<TABLE>
<S> <C> <C>
WILLIAM E. VAN VALKENBERG, ESQ. NORBERT W. SUGAYAN, JR., ESQ. RONALD J. LONE, ESQ.
BRADLEY B. FURBER, ESQ. GENERAL COUNSEL LAURIE A. SMILEY, ESQ.
JEFFREY M. HEUTMAKER, ESQ. ARIS CORPORATION CHRISTOPHER J. VOSS, ESQ.
VAN VALKENBERG FURBER LAW GROUP P.L.L.C. 6720 FORT DENT WAY, SUITE 250 STOEL RIVES LLP
1325 FOURTH AVENUE, SUITE 940 SEATTLE, WASHINGTON 98188-2555 SEATTLE, WASHINGTON 98101-3197
SEATTLE, WASHINGTON 98101-2509 TELEPHONE: (206) 433-2081 3600 ONE UNION SQUARE
TELEPHONE: (206) 464-0460 FACSIMILE: (206) 433-1182 600 UNIVERSITY STREET
FACSIMILE: (206) 464-2857 TELEPHONE: (206) 624-0900
FACSIMILE: (206) 386-7500
</TABLE>
----------------
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT
----------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF MAXIMUM AGGREGATE AMOUNT OF
SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED PER SHARE PRICE(1) FEE(2)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, without
par value.............. . . $35,280,000 $10,691
- -----------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee.
(2) Calculated pursuant to Rule 457(o) under the Securities Act of 1933.
Includes shares of Common Stock subject to the Underwriters' over-
allotment option.
----------------
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 BECAME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL ., 1997
[LOGO OF ARIS(SM)]
- --------------------------------------------------------------------------------
. SHARES
COMMON STOCK
- --------------------------------------------------------------------------------
Of the . shares of Common Stock, without par value ("Common Stock"), of ARIS
Corporation ("ARIS" or the "Company") offered hereby (the "Offering"), .
shares are being offered by the Company and 20,800 shares are being offered
by certain shareholders of the Company (the "Selling Shareholders"). The
Company will not receive any of the proceeds from the sale of shares by the
Selling Shareholders.
Prior to this Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $. and $. per share. See "Underwriting" for a discussion of the
factors to be considered in determining the initial public offering price.
The Company has applied to have the Common Stock approved for listing on the
Nasdaq National Market under the symbol "ARSC."
For information concerning certain risk factors which should be considered by
prospective investors, see "Risk Factors" commencing on page 3.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
<TABLE>
<CAPTION>
PROCEEDS PROCEEDS
PRICE UNDERWRITING TO TO SELLING
TO PUBLIC DISCOUNT(1) COMPANY(2) SHAREHOLDERS
<S> <C> <C> <C> <C>
Per Share $. $. $. $.
Total(3) $. $. $. $.
</TABLE>
(1) The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of this Offering of approximately $. payable by
the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase
up to an additional . shares of Common Stock to cover over-allotments. If
all such shares are purchased, the total Price to Public, Underwriting
Discount and Proceeds to the Company will be $., $., and $.,
respectively. See "Underwriting."
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to
approval of certain legal matters by counsel and certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. Delivery of the shares of Common
Stock offered hereby to the Underwriters is expected to be made in New York,
New York, on or about ., 1997.
DEUTSCHE MORGAN GRENFELL
MONTGOMERY SECURITIES
PIPER JAFFRAY INC.
The date of this Prospectus is , 1997.
<PAGE>
[ARIS Logo]
The Company believes that its ability to provide clients with an integrated IT
solution, coupled with its focus on leading-edge technologies, provide it with
a unique competitive advantage.
[A graphic consisting of three concentric circles laid on top of one another.
The center circle lists three companies: Oracle, Microsoft and Sun
Microsystems. The second circle outlines ARIS' three operating divisions and
the outer circle outlines, by operating division, the general products and
services offered by each division.]
Except as otherwise noted, all information in this Prospectus, including
share and per share information, assumes no exercise of the Underwriters'
over-allotment option and gives effect to a two-for-one stock split of the
Company's outstanding Common Stock effected August 29, 1996.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS OR EFFECTING SYNDICATE COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
THE COMPANY
ARIS provides an integrated information technology ("IT") solution consisting
of consulting and training services primarily focused on Oracle Corporation
("Oracle") and Microsoft Corporation ("Microsoft") technologies. ARIS currently
focuses on three core consulting competencies: packaged application
implementation, custom application development and systems architecture
planning and deployment. The Company currently offers 118 instructor-led course
titles for IT professionals conducted at ARIS' training centers and at client
facilities. The Company also develops, markets and supports proprietary
software products that enhance Oracle database management and Oracle packaged
applications. The Company believes that its ability to provide clients with an
integrated IT solution, coupled with its focus on leading-edge technologies,
provide it with a unique competitive advantage. The Company's strategy is to
become a leading provider of integrated IT solutions by: (i) leveraging
synergies between consulting and training; (ii) focusing on leading-edge
technologies; (iii) attracting and retaining highly skilled employees;
(iv) maintaining high levels of client satisfaction; (v) expanding its
geographic presence; and (vi) pursuing strategic acquisitions.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered.... . shares (including . shares by the Company and 20,800
shares by the Selling Shareholders)
Common Stock outstanding . shares(1)
after this Offering....
Use of Proceeds......... To repay debt and for working capital and general
corporate purposes.
Proposed Nasdaq National ARSC
Market Symbol..........
</TABLE>
SUMMARY CONSOLIDATED AND PRO FORMA COMBINED FINANCIAL INFORMATION
(In thousands, except per share data)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
(UNAUDITED) (UNAUDITED) PRO FORMA
1992 1993 1994 1995(2) 1996(3) 1996(4)
----------- ----------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Consulting revenue...... $2,091 $3,416 $6,132 $9,725 $16,312 $18,245
Training revenue........ 112 263 551 4,821 9,385 17,423
Software revenue........ -- 7 369 205 1,201 2,022
------ ------ ------ ------ ------- -------
Total revenue........... 2,203 3,686 7,052 14,751 26,898 37,690
Cost of consulting and
training.............. 1,214 2,086 3,637 7,176 13,353 17,558
Cost of software....... -- -- 47 42 354 788
------ ------ ------ ------ ------- -------
Gross profit........... 989 1,600 3,368 7,533 13,191 19,344
Selling, general and
administrative
expense............... 403 947 2,077 4,548 9,351 14,718
Research and
development expense... -- -- -- -- 171 171
In-process research and
development........... -- -- -- -- 307 307
Amortization of
intangible assets..... -- -- -- 4 116 433
------ ------ ------ ------ ------- -------
Income from operations.. 586 653 1,291 2,981 3,246 3,715
====== ====== ====== ====== ======= =======
Net income.............. $ 397 $ 448 $ 826 $2,010 $ 2,014 $ 2,208
====== ====== ====== ====== ======= =======
Net income per share(5). $ 0.11 $ 0.11 $ 0.13 $ 0.24 $ 0.24 $ 0.26
====== ====== ====== ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996
-------------------------------
PRO PRO FORMA
ACTUAL FORMA(6) AS ADJUSTED(7)
------- -------- --------------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and investments in
marketable securities......................... $ 1,573 $ 1,574 $ .
Total assets................................... 12,956 17,076 .
Total debt..................................... 1,500 2,139 .
Shareholders' equity........................... 8,210 9,610 .
</TABLE>
- -------
1. Excludes 1,246,000 shares of Common Stock reserved for issuance under the
Company's stock option plans. At December 31, 1996 there were outstanding
options to purchase 353,700 shares of Common Stock at a weighted average
exercise price per share of $2.12. See "Management--Executive Compensation,"
"--Stock Option Plans," and Note 10 of Notes to Consolidated Financial
Statements.
2. Reflects the acquisition of Clarity, Inc. on January 1, 1995 in a
transaction accounted for as a purchase.
3. Reflects the acquisition of SQLSoft, Inc., SofTeach Corporation and Noetix
Corporation on May 1, 1996, October 1, 1996 and October 1, 1996,
respectively, in transactions accounted for as purchases.
4. Presents the consolidated results of operations of the Company as if
SQLSoft, Inc., SofTeach Corporation, Noetix Corporation and Oxford Computer
Group Limited had been acquired on January 1, 1996, including the impact of
certain adjustments. The Company completed the acquisition of Oxford
Computer Group Limited on February 28, 1997 in a transaction accounted for
as a purchase.
5. See Note 1 of Notes to Consolidated Financial Statements for an explanation
of the method used to determine the number of shares used in the per share
calculation.
6. Pro forma balance sheet data at December 31, 1996 assumes the acquisition of
Oxford Computer Group Limited was completed on December 31, 1996.
7. Gives effect to the application of the estimated net proceeds of this
Offering to the Company. See "Use of Proceeds."
1
<PAGE>
THE COMPANY
ARIS provides an integrated IT solution consisting of consulting and
training services primarily focused on Oracle and Microsoft technologies. The
Company also develops, markets and supports proprietary software products that
enhance Oracle database management and Oracle packaged applications. The
Company believes that its ability to provide clients with an integrated IT
solution, coupled with its focus on leading-edge technologies, provide it with
a unique competitive advantage. The Company's strategy is to become a leading
provider of integrated IT solutions by: (i) leveraging synergies between
consulting and training; (ii) focusing on leading-edge technologies; (iii)
attracting and retaining highly skilled employees; (iv) maintaining high
levels of client satisfaction; (v) expanding its geographic presence; and (vi)
pursuing strategic acquisitions. ARIS may shift or expand its vendor focus
over time in order to maintain alignment with leading-edge, emerging
technologies.
ARIS CONSULTING. ARIS provides mission critical IT consulting services to
clients that require assistance planning, designing, developing, testing and
deploying Oracle and Microsoft technologies. ARIS currently focuses on three
core consulting competencies: packaged application implementation, custom
application development and systems architecture planning and deployment. ARIS
believes that its vendor focus, consulting methodologies and proprietary
software tools result in higher value-added services for its consulting
clients. As of March 31, 1997, ARIS employed 141 consultants and project
managers.
ARIS TRAINING. ARIS is a leading provider of training for IT professionals
in Microsoft BackOffice, Oracle, Sun Solaris and Java, Internet/intranet and
networking technologies. ARIS provides instructor-led training through
regularly scheduled open-enrollment classes, private classes (using both
standard and customized course content) and on-line training. During 1996,
ARIS offered 95 course titles and its instructors taught 989 classes. As of
March 31, 1997, the Company had 44 classrooms in nine training centers with a
total capacity of 479 students.
The Company has experienced significant growth, with revenue and operating
income increasing from $7.1 million and $1.3 million, respectively, in 1994,
to $26.9 million and $3.2 million, respectively, in 1996. Since 1995, the
Company has acquired three training companies, one software development
company, assumed the operations of one IT consulting business, and opened four
new offices. In addition, in February 1997, the Company acquired Oxford
Computer Group Limited ("Oxford"), an IT training and consulting company
located in the United Kingdom that specializes in Microsoft technologies. Pro
forma combined revenue and operating income for 1996, was $37.7 million and
$3.7 million, respectively, assuming the two training companies and one
software company acquired in 1996 and the acquisition of Oxford in 1997, had
been completed on January 1, 1996.
The Company currently operates eight consulting offices and nine training
centers in the United States and the United Kingdom. The Company's clients
include Fortune 1000 companies and governmental entities such as Boeing,
Microsoft, Hewlett-Packard, Lockheed Martin, Starbucks Coffee, TIG Holdings,
Quebecor, the British Broadcasting Company, National Westminster Group,
Tektronix, Nike, Weyerhaeuser and the U.S. Internal Revenue Service.
ARIS was incorporated in Washington in October 1990. The Company's
headquarters is located at 6720 Fort Dent Way, Suite 250, Seattle, Washington
98188-2555 and its telephone number at that address is (206) 433-2081.
2
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, investors
should carefully consider the following risk factors before making an
investment decision concerning the Common Stock. All statements, trend
analysis and other information contained in this Prospectus relative to
markets for the Company's services and products and trends in revenue, gross
margin and anticipated expense levels, as well as other statements including
words such as "seek," "anticipate," "believe," "plan," "estimate," "expect,"
"intend" and other similar expressions, constitute forward-looking statements.
These forward-looking statements are subject to business and economic risks,
and the Company's actual results of operations may differ materially from
those contained in the forward-looking statements.
RECRUITMENT AND RETENTION OF IT PROFESSIONALS. The Company's future success
will depend in large part on its ability to attract, develop, motivate and
retain highly skilled IT professionals, particularly project managers,
consultants and instructors. Highly skilled IT professionals are in high
demand and are likely to remain a limited resource for the foreseeable future.
The Company competes for consultants and project managers with other
consulting firms, software vendors and consumers of IT consulting services.
The Company competes for instructors with other training service providers,
software and hardware vendors and the in-house IT training departments of
major corporations. There can be no assurance that the Company will be
successful in hiring and retaining a sufficient number of IT professionals to
staff its consulting projects and to meet demand for instructor-led classes.
See "Business--Personnel and Human Resources."
ABILITY TO MANAGE GROWTH AND INTEGRATE RECENT ACQUISITIONS. ARIS recently
has experienced rapid growth that has placed, and will continue to place,
significant demands on its management and other resources. Between January 1,
1996 and March 31, 1997, the Company's total employee headcount increased from
115 to 371, and the Company opened or acquired four new consulting offices and
six new training centers in the United States and the United Kingdom. The
Company expects to continue to hire additional personnel, open new offices and
make acquisitions. To manage its growth effectively, the Company must continue
to improve its operational, financial and other management processes and
systems, and to attract, develop, motivate and retain highly skilled IT
professionals. In addition, the Company's success depends largely on
management's ability to maintain high levels of employee utilization, project
and instructional quality and competitive pricing for its services. None of
the Company's senior management previously has managed a business of the
Company's size or has any experience managing a public company. No assurance
can be given that the Company will be successful in managing its growth.
Since 1995 the Company has pursued an aggressive growth strategy by
acquiring companies in complementary service, product and geographic markets.
In January 1995 the Company acquired an IT training company and, between May
1996 and October 1996, the Company acquired two IT training companies, one
software development company and assumed the operations of one IT consulting
business. In February 1997, the Company completed the acquisition of Oxford,
an IT training and consulting company located in the United Kingdom. Oxford is
the largest company acquired by ARIS to date and its first international
acquisition. There can be no assurance that the Company will be able to
integrate Oxford successfully into the ARIS organization. The failure to
integrate Oxford or any of the Company's other recent acquisitions
successfully into the Company or the inability to achieve anticipated revenue
and operating results during the integration process could have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
3
<PAGE>
CUSTOMER CONCENTRATION. The Company has derived, and believes that it may
continue to derive, a significant portion of its revenue from a limited number
of large clients. One client, Tektronix, accounted for 9.1%, 21.8% and 20.0%
of the Company's total revenue in 1996, 1995 and 1994, respectively. In
addition, revenue received by the Company from various branches and agencies
of the U.S. federal government collectively (including revenue under the 8(a)
Program described below) accounted for 12.1%, 16.4% and 5.9% of the Company's
total revenue in 1996, 1995 and 1994, respectively. There can be no assurance
that the volume of work performed for specific clients will be sustained from
year to year, or that a major client in one year will engage the Company in a
subsequent year. Any significant reduction in the scope of work performed for
the Company's principal clients or a number of smaller clients, the failure of
anticipated projects for current clients to materialize, or deferrals,
modifications or cancellations of ongoing projects by current clients could
have a material adverse effect on the Company's business, financial condition
and results of operations. From March 1993 to March 1997, the Company
qualified under Section 8(a) of the Small Business Act (the "8(a) Program").
As an 8(a) Program participant, the Company was awarded contracts with U.S.
government agencies totaling approximately 9.0%, 13.9% and 3.7% of the
Company's revenue in 1996, 1995 and 1994, respectively. In the first quarter
of 1997, the Company ceased to be eligible to participate in the 8(a) Program.
Accordingly, the Company may be less successful bidding for certain U.S.
government contracts in areas where 8(a) Program qualification is considered
in the contract award process. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business--Clients."
DEPENDENCE ON KEY VENDORS OF SOFTWARE TECHNOLOGY. The Company relies on
formal and informal relationships with key providers of software technology,
in particular, Microsoft, Oracle, and Sun Microsystems, Inc. ("Sun"). During
1996, 84.8% of the Company's consulting revenue was derived from projects in
which ARIS implemented IT solutions employing Oracle technologies. During the
same period, training in Microsoft and Oracle technologies generated 66.6% and
14.6%, respectively, of the Company's revenue from training services. The
Company participates in a number of Microsoft, Oracle and Sun programs that
enable the Company to obtain early information about new software products and
courseware, and to benefit from the increased credibility and enhanced
reputation resulting from vendor accreditation. Management believes Oracle may
develop an authorized third-party training program. If Oracle creates an
authorized third-party training program and ARIS does not participate in the
program, ARIS' training revenue and ability to compete effectively in
providing training in Oracle technologies could be adversely impacted. Any
significant changes to the vendor sponsored programs in which the Company
participates or any deterioration in the relationship between the Company and
a key vendor could result in the loss of vendor certifications, a reduction in
the number of client referrals or vendor actions which might adversely affect
the Company's ability to compete successfully. See "Business--Relationships
with Key Vendors."
VARIABILITY OF QUARTERLY OPERATING RESULTS. The Company's operations and
related revenue and operating results historically have varied from quarter to
quarter, and the Company expects these variations to continue. Factors causing
such fluctuations have included and may include: the number, size and scope of
consulting projects; the contractual terms and degree of completion of such
projects; project delays; variations in utilization rates and average billing
rates for consultants and project managers due to vacations, holidays and the
integration of newly hired consultants; the inability of the Company to
conduct as many four- and five-day courses due to national holidays and
vacation schedules, particularly, in the fourth quarter; frequency of training
classes and demand for training following new software product releases;
variations in fill rates in training classes; integration of acquired
entities; and general economic conditions. Because a significant percentage of
the Company's expenses, particularly personnel costs and rent, are relatively
fixed in advance of any particular quarter, shortfalls in revenue
4
<PAGE>
caused by these and other factors may cause significant variations in
operating results in any particular quarter. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Quarterly Results
of Operations."
PROJECT RISKS. Most of ARIS' consulting agreements permit the client to
terminate an engagement without cause and without significant penalty upon 14
or fewer days' notice to the Company. Clients may from time to time terminate
their agreements with the Company due to the Company's failure to meet
expectations or for other reasons. Additionally, contracts to perform services
for the U.S. government may be subject to renegotiation. The termination or
renegotiation of one or more engagements by the Company's clients could
adversely affect revenue and operating results, damage the Company's
reputation, and adversely affect its ability to attract new business.
Additionally, ARIS has undertaken and may in the future undertake fixed
price consulting projects. From time to time the Company may establish a price
or project schedule before the client's design specifications are completed.
The Company's failure to accurately estimate the resources required for such
projects or its failure to complete its contractual obligations in a manner
consistent with the project plan upon which the fixed price/fixed schedule
contract was based could have a material adverse effect on the profitability
of such projects.
GROWTH THROUGH ACQUISITIONS. ARIS intends to continue growing through
strategic acquisitions of businesses that the Company believes will complement
its operations. The success of ARIS' plan to grow through acquisitions depends
on, among other things, the Company's ability to (i) identify and acquire
businesses on terms that management considers attractive; (ii) integrate
acquired businesses into its organization; and (iii) retain the acquired
businesses' key personnel and principal clients. Any future acquisitions would
be accompanied by the risks commonly encountered in such transactions,
including difficulties associated with assimilating the personnel and
operations of the acquired business, the Company's inability to achieve
expected financial results or strategic goals for the acquired business, the
potential disruption of the Company's ongoing business, the diversion of
significant management and other resources and the maintenance of uniform
standards, controls, procedures and policies. There can be no assurance that
the Company will be able to identify future acquisition candidates or to
successfully overcome the risks and challenges encountered in completing and
integrating future acquisitions. The Company's failure or inability to
implement and manage its acquisition strategy could have a material adverse
effect on the Company's business, financial condition, and results of
operations. In addition, future acquisitions could require ARIS to issue
dilutive equity securities, incur debt or contingent liabilities and amortize
expenses related to goodwill and other intangible assets, any of which could
have a material adverse effect on the market for and the price of the
Company's Common Stock.
RELIANCE ON KEY PERSONNEL. The Company's continuing success will depend in
large part on the continued services of a number of key employees including
Paul Y. Song, its founder, President, Chief Executive Officer and Chairman.
The loss of the services of Mr. Song, certain of the Company's senior
management or other key personnel could have a material adverse effect on the
Company. The Company has entered into employment agreements containing non-
competition, non-solicitation and non-disclosure clauses with all of its
management, consultants and project managers and instructors, except Mr. Song.
These contracts, however, do not guarantee that these individuals will
continue their employment with the Company. In addition, there is no guarantee
that the non-competition and non-solicitation provisions of these agreements
would be enforced by a court if the Company were required to seek to enforce
its rights thereunder. The loss of one or more of the Company's key employees
to a current or potential competitor could result in the loss of existing or
potential clients to such competitor
5
<PAGE>
adversely affecting revenues and operating income. The Company currently
maintains and is the beneficiary of a "key man" life insurance policy in the
amount of $2.0 million on the life of Mr. Song. See "Management--Directors,
Executive Officers and Key Employees" and "--Employment Agreements."
INTERNATIONAL OPERATIONS. As a result of the recent acquisition of Oxford, a
substantial portion of the Company's revenue is derived from its international
operations. The Company faces certain risks inherent in conducting business
internationally, such as unexpected changes in regulatory requirements,
foreign currency fluctuations, difficulties in staffing and managing foreign
operations, differing employment laws and practices in foreign countries,
longer payment cycles, seasonal reductions in business activity during the
summer months in Europe and certain other parts of the world, and potentially
adverse tax consequences. Any of these factors could adversely affect the
success of the Company's international operations. There can be no assurance
that such factors will not have a material adverse effect on the Company's
international operations and, consequently, on the Company's consolidated
financial condition and results of operations.
COMPETITION. The IT consulting industry and the IT training industry are
generally regarded as separate industries, each of which is rapidly growing
and highly competitive. Within each industry there are a large number of
competitors, many of which have significantly greater financial, technical,
marketing and human resources and greater name recognition than the Company.
ARIS' principal competitors in the delivery of consulting services are the
consulting divisions of the large international accounting firms, the
consulting divisions of software vendors such as Oracle, and numerous
international, national and regional IT consulting firms. The Company faces
competition in the delivery of IT training services from the in-house IT
departments of its prospective clients, companies such as International
Business Machines and Hewlett-Packard, software vendors, other Microsoft
Authorized Technical Education Centers ("ATECs"), and independent
international, national and regional training companies. The Company's
software product, ARIS DFRAG, competes with system management tools
distributed by BMC Software, Platinum Technology and Compuware. Although the
Company believes few commercially available software products currently
compete directly with the Company's other software product, NoetixViews, there
can be no assurance that new competitive products will not be developed by
Oracle, third party software vendors or by in-house IT departments of the
Company's current or potential clients. There can be no assurance that any
future products will not achieve greater market acceptance than the Company's
software products. Failure by ARIS to compete successfully in the consulting
or training market would have a material adverse effect on the Company's
business, financial condition and results of operations. See "Business--
Competition."
RAPID TECHNOLOGICAL CHANGE. The Company's success also depends in part on
its ability to develop IT solutions that keep pace with continuing changes in
technology, evolving industry standards and changing client preferences. This
may require the Company to make substantial expenditures to develop new
consulting services, course titles and courseware, to hire new consultants,
project managers and instructors and to acquire new software and hardware. If
the Company is unable, for financial or other reasons, to make those
expenditures, hire additional qualified personnel, or make the necessary
acquisitions, the Company's ability to compete effectively may be materially
and adversely affected.
INTELLECTUAL PROPERTY RIGHTS. The Company uses certain proprietary
consulting and training methodologies, courseware, software applications and
products, trademarks and service marks and other proprietary and intellectual
property rights. The Company relies upon a combination of copyright, trademark
and trade secret laws, as well as nondisclosure and other contractual
arrangements, to protect these proprietary rights. The Company uses client
licensing
6
<PAGE>
agreements and employee and third-party nondisclosure and confidentiality
agreements to limit access to and distribution of its proprietary information.
There can be no assurance that the steps taken by the Company to protect its
intellectual property rights will be adequate to deter misappropriation of
such rights or that the Company will be able to detect unauthorized uses and
take immediate or effective steps to enforce its rights. If substantial
unauthorized uses of the Company's proprietary rights were to occur, the
Company could be required to engage in costly and time-consuming litigation to
enforce its rights. In addition, the Company does business in countries that
do not provide protection or enforcement of intellectual property rights to
the same extent as the United States, and on the Internet, which is not
currently subject to comprehensive regulation.
The Company develops custom software applications and methodologies, and
training courses, methodologies and courseware for third party software
products. The training courses, methodologies and courseware are owned by the
Company through agreements with employees and subcontractors, but ownership of
software applications developed for clients is often assigned to the client,
with the Company retaining limited use licenses. The Company also develops
software application tools in the course of its consulting projects. The
Company generally seeks to retain significant ownership or marketing rights
for adaptation and reuse in subsequent projects. Issues relating to the
ownership of and rights to use training courses, methodologies, courseware,
software applications and other tools can be complicated and there can be no
assurance that disputes will not arise that affect the Company's ability to
resell or reuse such products and methodologies.
There can be no assurance that the Company's competitors will not
independently develop products or methodologies functionally similar to the
Company's products and methodologies, or that third parties will not claim
that the Company's current or future products, courseware or services infringe
their proprietary rights. Although the Company believes that its products,
courseware and services do not infringe on any third-party intellectual
property rights, there can be no assurance that such a claim will not be
asserted against the Company in the future or that, if asserted, any such
claim will be defended successfully. See "Business--Intellectual Property."
CONTROL BY PRINCIPAL SHAREHOLDERS. Paul Y. Song, the Company's founder,
President, Chief Executive Officer and Chairman, is the Company's single
largest shareholder. Mr. Song's wife, Tina J. Song, is the Director of Human
Resources and Information Technology for the Company and is the Company's
third largest shareholder. A family limited partnership controlled by Mr. and
Mrs. Song is the Company's second largest shareholder. Upon the completion of
this Offering, Mr. and Mrs. Song will beneficially own . % of the Company's
outstanding shares of Common Stock. As a result, Mr. and Mrs. Song will be
able to control the affairs and management of the Company and the outcome of
any matters requiring a shareholder vote (other than those matters for which a
supermajority vote is required under Washington law or the Company's Amended
and Restated Bylaws (the "Restated Bylaws")), including the election of the
members of the Board of Directors. Such control could delay or prevent a
change in control of the Company. Other members of Mr. Song's immediate
family, including his brother, John Y. Song, Vice President of Eastern
Operations, own an aggregate of 220,000 shares of Common Stock and options to
purchase an additional 60,800 shares of Common Stock. See "Management" and
"Principal and Selling Shareholders."
POTENTIAL LIABILITY TO CLIENTS. Many of the Company's engagements involve
projects that are critical to the operations of its clients' businesses and
provide benefits that may be difficult to quantify. Any failure in a client's
information system could result in a claim for substantial damages against the
Company, regardless of the Company's responsibility for such failure. Although
the Company generally attempts to limit contractually its liability for
damages arising from negligent acts, errors, mistakes or omissions in
rendering its services, there can be
7
<PAGE>
no assurance that the limitations of liability set forth in its service
contracts will be enforceable or would otherwise protect the Company from
liability for damages. The Company maintains general liability insurance
coverage, including coverage for errors and omissions, against claims of up to
$2.0 million in the aggregate. There can be no assurance, however, that such
coverage will continue to be available on commercially reasonable terms or
will be available in sufficient amounts to cover one or more large claims, or
that the Company's insurer will not disclaim coverage as to any future claim.
The successful assertion of one or more large claims against the Company that
exceed available insurance coverage or changes in the Company's insurance
policies, including premium increases or the imposition of large deductible or
co-insurance requirements, could adversely affect the Company's business,
financial condition and results of operations.
NO PRIOR PUBLIC MARKET; POTENTIAL VOLATILITY OF STOCK PRICE. Prior to this
Offering there has been no public market for the Company's Common Stock. There
can be no assurance that an active public market for the Common Stock will
develop or be sustained after the Offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price will be determined by negotiation between the
Company and the representatives of the Underwriters. See "Underwriting" for a
discussion of the factors to be considered in determining the initial public
offering price. Moreover, the market for securities of early stage, small
market capitalization companies is volatile, often as a result of factors
unrelated to an issuer's operations. In addition, the Company believes factors
such as quarterly variations in operating results, changes in relationships
between the Company and certain key vendors of software products, general
conditions in the IT industry or the industries in which the Company's clients
compete and changes in earnings estimates by securities analysts could
contribute to the volatility of the price of the Company's Common Stock and
cause significant price fluctuations. These factors, as well as general
economic conditions, could adversely affect the market price of the Common
Stock. Furthermore, securities class action litigation is not uncommon against
issuers, particularly following periods of volatility in the market price of
an issuer's securities. There can be no assurance that such litigation will
not occur in the future with respect to the Company. Such litigation could
result in substantial costs and a diversion of management's attention and
resources, which could have a material adverse effect on the Company's
business, financial condition and results of operations. Any adverse
determination in such litigation could subject the Company to significant
liabilities.
ANTI-TAKEOVER PROVISIONS. Certain provisions of the Company's Amended and
Restated Articles of Incorporation (the "Restated Articles") and Restated
Bylaws, which will be submitted for approval at the annual meeting of
shareholders on April 25, 1997, could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of the Company. The Restated Articles, for
example, permit the Board of Directors of the Company to issue preferred stock
with rights senior to those of the Common Stock without any further vote or
action by the shareholders, and the Restated Articles and Restated Bylaws
divide the Board of Directors into three classes of directors having staggered
terms. Such provisions could limit the price that certain investors might be
willing to pay in the future for shares of the Company's Common Stock and also
could have the effect of delaying, deterring or preventing a change in control
of the Company. Moreover, the issuance of preferred stock could decrease the
amount of earnings and assets available for distribution to holders of the
Common Stock, or could affect adversely the rights and powers, including
voting powers, of such holders. See "Description of Capital Stock."
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial amounts of the
Company's Common Stock in the public market after this Offering could
adversely affect prevailing market prices for the Common Stock. Taking into
account restrictions imposed by the Securities Act of 1933, as
8
<PAGE>
amended (the "Securities Act"), rules promulgated by the Securities and
Exchange Commission (the "Commission") thereunder and lock-up agreements
between certain shareholders and Deutsche Morgan Grenfell Inc. (the "Lock-up
Agreements"), the number of additional shares that will be available for sale
in the public market, subject in some cases to the volume and other
restrictions of Rule 144 under the Securities Act, will be as follows:
6,528,160 shares of Common Stock will be eligible for sale beginning 180 days
after the closing of this Offering, and 850,020 shares will be eligible for
sale pursuant to Rule 144 upon the expiration of applicable holding periods,
which will expire between November 1, 1997 and March 10, 1999. Deutsche Morgan
Grenfell Inc. may, in its sole discretion and at any time without notice,
release all or any portion of the shares subject to such Lock-up Agreements.
Upon the closing of this Offering, holders of 301,200 shares of Common Stock
are entitled to certain rights with respect to the registration of such shares
under the Securities Act. In addition, the Company intends to file a
registration statement on Form S-8 under the Securities Act approximately 180
days after the closing of this Offering to register approximately 1,951,700
shares of Common Stock reserved for issuance under the Company's stock option
plans. In addition, up to 4,000 shares of Common Stock issuable upon exercise
of an outstanding warrant will become available for sale in the public market
following the expiration of the Rule 144 holding period on February 24, 1998,
if exercised pursuant to cashless exercise provisions, or one year following
the exercise of the warrant for cash. See "Description of Capital Stock--
Registration Rights" and "Shares Eligible for Future Sale."
DISCRETION AS TO THE USE OF PROCEEDS. The Company has not yet identified
specific uses for a significant portion of the net proceeds from this
Offering. The Company's management will retain broad discretion to allocate
net proceeds. Purchasers of the shares of Common Stock offered hereby will be
entrusting their funds to the Company's management, upon whose judgment they
must depend, with limited information concerning the specific working capital
requirements and general corporate purposes to which the funds ultimately will
be applied. See "Use of Proceeds."
DILUTION; ABSENCE OF DIVIDENDS. The initial public offering price will be
substantially higher than the net tangible book value per share of Common
Stock. Investors participating in this Offering will therefore incur
immediate, substantial dilution of $ . per share. To the extent outstanding
options or warrants to purchase the Company's Common Stock are exercised,
there will be further dilution. See "Dilution." The Company has not paid any
cash dividends since 1993 and does not anticipate declaring or paying any cash
dividends in the foreseeable future. See "Dividend Policy."
9
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of . shares of Common Stock
offered by the Company are estimated to be $ . ($ . if the over-allotment
option is exercised in full), assuming an initial public offering price of
$ . per share and after deducting estimated underwriting discounts and other
offering expenses payable by the Company.
The Company intends to use approximately $3.9 million of the net proceeds
from this Offering to repay a term loan from U.S. Bank of Washington, N.A.
("U.S. Bank"), which the Company incurred primarily to fund its repurchase of
415,000 shares of the Company's Common Stock from certain shareholders at
$8.50 and $9.75 per share in February and March of 1997. See "Certain
Transactions." The term loan bears interest at a variable rate, currently
8.25%, and is due and payable within ten days of the closing of this Offering.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources." The Company intends to use
the remaining net proceeds for working capital, expansion of the Company's
business and for general corporate purposes. A portion of the net proceeds
also may be used to acquire or invest in complementary businesses. Although
the Company frequently evaluates potential acquisitions of complementary
businesses, there are no present understandings, commitments or agreements
with respect to the acquisition of any other businesses. See "Business--
Strategy."
To the extent that the net proceeds of this Offering are not used
immediately, they will be invested in short-term, interest-bearing,
investment-grade securities.
DIVIDEND POLICY
The Company has not paid any cash dividends since 1993. The Company
currently expects to retain all future earnings to finance the operation and
expansion of its business and does not anticipate declaring or paying any cash
dividends in the foreseeable future.
10
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996, (i) on an actual basis; (ii) on a pro forma basis presented
as if the acquisition of Oxford had been completed on December 31, 1996 and
giving effect to the Company's repurchase of 415,000 shares of Common Stock at
a price of $8.50 to $9.75 per share and the $3.9 million of bank debt incurred
to fund a portion of this repurchase; and (iii) on a pro forma basis as
adjusted to reflect the sale of . shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $. per share and
the application of the estimated net proceeds therefrom. The information set
forth below should be read in conjunction with the audited consolidated
financial statements of the Company and Notes thereto (the "Consolidated
Financial Statements") and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1996(1)
--------------------------
PRO PRO FORMA
ACTUAL FORMA AS ADJUSTED
------ ------- -----------
(IN THOUSANDS)
--------------------------
<S> <C> <C> <C>
Notes payable....................................... $1,500 $1,876 $ .
Term loan........................................... -- 3,900 .
Capital lease obligations........................... -- 263 .
------ ------- -----
1,500 6,039 .
------ ------- -----
Shareholders' equity:
Common Stock, no par value; 10,000,000 shares
authorized; 7,555,900; 7,420,900; and . shares
issued and outstanding, respectively.............. 1,943 -- .
Retained earnings(2)................................ 6,042 5,357 .
Net unrealized holding gain on investments.......... 225 225 .
------ ------- -----
Total shareholders' equity...................... 8,210 5,582 .
------ ------- -----
Total capitalization.............................. $9,710 $11,621 $ .
====== ======= =====
</TABLE>
- --------
(1) Excludes 1,246,000 shares of Common Stock reserved for issuance under the
Company's stock option plans. At December 31, 1996 there were outstanding
options to purchase 353,700 shares of Common Stock at a weighted average
exercise price per share of $2.12. See "Management--Executive
Compensation," "--Stock Option Plans" and Note 10 of Notes to Consolidated
Financial Statements.
(2) The excess of the reduction in Common Stock attributable to the share
repurchase over the Common Stock balance of $685,000 has been charged
against retained earnings.
11
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of December 31, 1996
was $1,934,000, or $0.26 per share of Common Stock. Pro forma net tangible
book value per share represents the amount of total tangible assets of the
Company reduced by the amount of its total liabilities divided by the total
number of shares of Common Stock after giving effect to the issuance of
280,000 shares of Common Stock in connection with the acquisition of Oxford,
the repurchase of 415,000 shares of Common Stock at a price of $8.50 to $9.75
per share and the $3.9 million of bank debt incurred to fund a portion of this
repurchase. After giving effect to the sale by the Company of . shares offered
hereby (at the assumed initial public offering price of $. per share and after
deducting the estimated underwriting discount and offering expenses), the
adjusted pro forma net tangible book value of the Company as of December 31,
1996 would have been approximately ., or $. per share. This represents an
immediate increase in such net tangible book value of $. per share to existing
shareholders and an immediate dilution of $. per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................. $ .
Pro forma net tangible book value per share before the
Offering..................................................... $0.26
Increase per share attributable to new investors.............. $ .
Pro forma net tangible book value per share after the Offering.. $ .
---
Net tangible book value dilution per share to new investors..... $ .
===
</TABLE>
The following table summarizes, on a pro forma basis, the difference between
the total consideration and average price per share paid by the existing
shareholders and that paid by new investors purchasing shares in this Offering
at the assumed initial public offering price of $ ..
<TABLE>
<CAPTION>
TOTAL AVERAGE
SHARES(1) CONSIDERATION PRICE
----------------- ------------------ PER
NUMBER PERCENT AMOUNT PERCENT SHARE
--------- ------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Existing shareholders.............. 4,642,000 .% $1,015,000 .% $0.22
New investors...................... . . . . .
--------- ----- ---------- -----
Total............................ . 100.0% $ . 100.0%
========= ===== ========== =====
</TABLE>
- --------
(1) Sales by the Selling Shareholders in the Offering will reduce the number
of shares held by existing shareholders to ., or .% of the total number of
shares outstanding after the Offering, and will increase the number of
shares to be purchased by new investors to ., or . of the total number of
shares of Common Stock outstanding after the Offering. See "Principal and
Selling Shareholders."
The foregoing table excludes 1,246,000 shares of Common Stock reserved for
issuance under the Company's stock option plans. At December 31, 1996, there
were outstanding options to purchase 353,700 shares of Common Stock at a
weighted average exercise price per share of $2.12. See "Management--Executive
Compensation," "--Stock Option Plans" and Note 10 of Notes to Consolidated
Financial Statements.
12
<PAGE>
SELECTED CONSOLIDATED AND PRO FORMA
COMBINED FINANCIAL DATA
The consolidated statement of operations data for the three year period
ended December 31, 1996 and the consolidated balance sheet data as of December
31, 1995 and 1996 are derived from the Consolidated Financial Statements of
the Company that have been audited by Price Waterhouse LLP, independent
accountants, which are included elsewhere in this Prospectus. The balance
sheet data as of December 31, 1994 are derived from financial statements of
the Company which are not included in this Prospectus but which were audited
by Price Waterhouse LLP. The statement of operations data for the two year
period ended December 31, 1993 and the balance sheet data as of December 31,
1992 and 1993 are derived from unaudited financial statements of the Company
which, in the opinion of management, include all adjustments, consisting only
of normal recurring adjustments, that are necessary for a fair presentation of
the results of operations for these periods. The pro forma combined statement
of operations data for the year ended December 31, 1996 has been derived from
the unaudited pro forma combined statement of income of the Company, which
presents the results of operations of the Company as if SQLSoft Inc.
("SQLSoft"), SofTeach Corporation ("SofTeach"), Noetix Corporation ("Noetix")
and Oxford had been acquired on January 1, 1996, and the pro forma combined
balance sheet data as of December 31, 1996 are derived from the unaudited
combined balance sheet of the Company giving effect to the acquisition of
Oxford as if it was completed on December 31, 1996, including the impact of
certain adjustments (the "Pro Forma Combined Financial Information"), which
are included elsewhere in this Prospectus. The following selected consolidated
financial data should be read in conjunction with, and are qualified in their
entirety by reference to, the Consolidated Financial Statements, the Pro Forma
Combined Financial Information and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" appearing elsewhere in this
Prospectus. The historical results should not be construed to be indicative of
future results of operations and the pro forma information should not be
construed to be indicative of actual or future results of operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------
(UNAUDITED) (UNAUDITED) PRO FORMA
1992 1993 1994 1995(1) 1996(2) 1996(3)
----------- ----------- --------- ------- ------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue:
Consulting............. $2,091 $3,416 $6,132 $9,725 $16,312 $18,245
Training............... 112 263 551 4,821 9,385 17,423
Software............... -- 7 369 205 1,201 2,022
------ ------ ------ ------ ------- -------
Total revenue........ 2,203 3,686 7,052 14,751 26,898 37,690
------ ------ ------ ------ ------- -------
Cost of sales:
Consulting and
training.............. 1,214 2,086 3,637 7,176 13,353 17,558
Software............... -- -- 47 42 354 788
------ ------ ------ ------ ------- -------
Total cost of sales.. 1,214 2,086 3,684 7,218 13,707 18,346
------ ------ ------ ------ ------- -------
Gross profit......... 989 1,600 3,368 7,533 13,191 19,344
Operating expenses:
Selling, general and
administrative ....... 403 947 2,077 4,548 9,351 14,718
Research and
development........... -- -- -- -- 171 171
In-process research
and development....... -- -- -- -- 307 307
Amortization of
intangible assets..... -- -- -- 4 116 433
------ ------ ------ ------ ------- -------
Total operating
expenses............ 403 947 2,077 4,552 9,945 15,629
------ ------ ------ ------ ------- -------
Income from operations.. 586 653 1,291 2,981 3,246 3,715
Other income, net...... 16 35 11 115 115 64
------ ------ ------ ------ ------- -------
Income before income
tax.................... 602 688 1,302 3,096 3,361 3,779
Income tax expense..... 205 240 476 1,086 1,347 1,571
------ ------ ------ ------ ------- -------
Net income.............. $ 397 $ 448 $ 826 $2,010 $ 2,014 $ 2,208
====== ====== ====== ====== ======= =======
Net income per share(4). $ 0.11 $ 0.11 $ 0.13 $ 0.24 $ 0.24 $ 0.26
====== ====== ====== ====== ======= =======
Weighted average number
of common and common
equivalent shares
outstanding(5)......... 3,693 4,166 6,555 8,366 8,461 8,461
====== ====== ====== ====== ======= =======
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
(UNAUDITED) (UNAUDITED) PRO FORMA
1992 1993 1994 1995(1) 1996(2) 1996(6)
----------- ----------- --------- ------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents
and investments in
marketable securities.. $ 174 $ 78 $ 274 $1,241 $ 1,573 $ 1,574
Total assets............ 1,060 1,607 3,320 6,843 12,956 17,076
Total debt.............. -- -- -- -- 1,500 2,139
Shareholders' equity.... 757 1,203 2,113 4,642 8,210 9,610
</TABLE>
- --------
(1) The Company acquired Clarity on January 1, 1995 in a transaction accounted
for as a purchase.
(2) The Company acquired SQLSoft, SofTeach and Noetix on May 1, 1996, October
1, 1996 and October 1, 1996, respectively, in transactions accounted for
as purchases.
(3) Presents the consolidated results of operations of the Company as if
SQLSoft, SofTeach, Noetix and Oxford had been acquired on January 1, 1996,
including the impact of certain adjustments. The Company completed the
acquisition of Oxford on February 28, 1997 in a transaction accounted for
as a purchase.
(4) See Note 1 of Notes to Consolidated Financial Statements for an
explanation of the method used to determine the number of shares used in
the per share calculation.
(5) Excludes 1,246,000 shares of Common Stock reserved for issuance under the
Company's stock option plans. At December 31, 1996, there were outstanding
options to purchase 353,700 shares of Common Stock at a weighted average
exercise price per share of $2.12. See "Management--Executive
Compensation," "--Stock Option Plans" and Note 10 of Notes to Consolidated
Financial Statements.
(6) Pro forma balance sheet data at December 31, 1996 assumes the acquisition
of Oxford was completed on December 31, 1996.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
ARIS began operations in 1990 as an IT consulting company specializing in
custom software application development for Oracle technologies. In 1993, ARIS
expanded its consulting activities from custom application development to
include packaged application implementation and introduced its first software
product, ARIS DFRAG. In response to client requests for training, the Company
began providing training services in Oracle technologies in 1991, and became a
Microsoft ATEC in 1994. In 1996 the Company became a Sun Educational Services
U.S. Strategic Partner for Seattle, Washington and Portland, Oregon.
The Company's revenue is derived from its consulting and training services
and sales and maintenance of its software products. Consulting revenue is
derived primarily from professional fees billed to clients. Revenue from
contracts that are billed on a time and materials basis is recognized as
services are performed. Revenue from fixed price contracts is recognized on
the percentage of completion method, based on the ratio of costs incurred to
the total estimated project costs. The Company bills its clients on a monthly
or semi-monthly basis. Where revenue is recognized before an invoice is sent,
the revenue in excess of billings is recorded as work in progress.
Occasionally, the Company is requested to provide hardware and software in
conjunction with its consulting projects. In such cases, the Company
recognizes as revenue only the difference between its cost and the resale
price for the software and hardware.
Training revenue is derived primarily from fees charged to corporate clients
for employee training provided at client facilities or at ARIS' training
centers and from fees charged to individual students for open enrollment
classes. In its open enrollment classes, the Company seeks to fill each
available seat in each scheduled class. The Company continuously monitors this
fill rate and may cancel or reschedule classes that are underenrolled. Revenue
for a training class is recognized in the month in which the last day of the
training event falls. Since a large number of training events are five-day
classes that end on a Friday, the number of Fridays in a given month impacts
the training revenue for that month.
Software revenue is derived from the sale of ARIS' products, ARIS DFRAG and
NoetixViews, and from support contracts with clients who purchase the software
products. Revenue is recognized when the software product has been shipped,
collectibility is probable and there are no significant obligations of the
Company remaining to be performed. Software support is billed at the beginning
of the contract period and is recognized ratably through the term of the
contract.
From March 1993 to March 1997, the Company qualified under the 8(a) Program.
As an 8(a) Program participant, the Company was awarded contracts with U.S.
government agencies totaling 9.0%, 13.9% and 3.7% of the Company's revenue in
1996, 1995 and 1994, respectively. In the first quarter of 1997, the Company
ceased to be eligible to participate in the 8(a) Program. Accordingly, the
Company may be less successful bidding for certain U.S. government contracts
in areas where 8(a) Program qualification is considered in the contract award
process.
RECENT ACQUISITIONS
In addition to its internal growth, the Company has grown through strategic
acquisitions of complementary businesses. Since January 1995, the Company has
made the following acquisitions:
15
<PAGE>
CLARITY, INC. In January 1995, the Company acquired the stock of Clarity, an
IT training company based in Bellevue, Washington, for $117,000 in cash and
1.4 million shares of ARIS Common Stock having a value of $263,000. Clarity
had revenue of $2.3 million in 1994.
SQLSOFT, INC. In May 1996, the Company acquired the stock of SQLSoft, a
Microsoft ATEC based in Bellevue, Washington for 708,900 shares of ARIS Common
Stock having a value of $1.3 million. SQLSoft had revenue of $2.6 million in
1995.
SOFTEACH CORPORATION. In October 1996, the Company purchased assets and
assumed liabilities of SofTeach, a Microsoft ATEC located in Denver, Colorado,
for a cash payment of $750,000, a $500,000 promissory note and 42,000 shares
of ARIS Common Stock having a value of $152,000. The Company combined the
operations of SofTeach with its existing operations in Denver. SofTeach had
revenue of $1.5 million for the first nine months of 1996 and $2.1 million in
1995.
NOETIX CORPORATION. The Company acquired the stock of Noetix in October 1996
in exchange for a cash payment of $835,000 and 40,000 shares of ARIS Common
Stock having a value of $145,000. Noetix develops, distributes and supports a
software product, NoetixViews, which enhances an end-user's ability to access
and manage information from Oracle's database products. Noetix had revenue of
$821,000 for the first nine months of 1996 and $413,000 in 1995.
OXFORD COMPUTER GROUP LIMITED. In February 1997, the Company acquired the
stock of Oxford in exchange for 280,000 shares of ARIS Common Stock having a
value of $1.4 million. Oxford is a Microsoft ATEC with facilities in Oxford,
London and Birmingham in the United Kingdom which also provides IT consulting
services primarily on Microsoft technologies. In calendar year 1996, Oxford
had revenue of (Pounds)4.7 million.
Each of these transactions was accounted for as a purchase. Capitalized
software development costs, non-compete agreements and goodwill resulting from
these acquisitions have been amortized over approximately three years, two
years and fifteen years, respectively.
In August 1996 the Company assumed the operations of Cray Solutions, a
division of Cray Research, Inc., a subsidiary of Silicon Graphics, Inc. In
connection with this transaction, the Company added 14 consultants and two
administrative staff providing IT consulting services in Dallas, Texas.
16
<PAGE>
CONSOLIDATED STATEMENT OF OPERATIONS
The following table sets forth, for the periods indicated, certain financial
data as a percentage of total consolidated revenue (except as noted):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1994 1995 1996
STATEMENT OF OPERATIONS DATA: ----- ----- -----
<S> <C> <C> <C>
Revenue:
Consulting............................................... 87.0% 65.9% 60.6%
Training................................................. 7.8 32.7 34.9
Software................................................. 5.2 1.4 4.5
----- ----- -----
Total revenue.......................................... 100.0 100.0 100.0
----- ----- -----
Cost of sales:
Consulting and training.................................. 51.5 48.6 49.7
Software................................................. 0.7 0.3 1.3
----- ----- -----
Total cost of sales.................................... 52.2 48.9 51.0
----- ----- -----
Gross margin........................................... 47.8 51.1 49.0
Operating expenses:
Selling, general and administrative...................... 29.5 30.9 34.8
Research and development................................. -- -- 0.6
In-process research and development...................... -- -- 1.1
Amortization of intangible assets........................ -- -- 0.4
----- ----- -----
Income from operations..................................... 18.3 20.2 12.1
Other income............................................. 0.2 0.8 0.4
----- ----- -----
Income before income tax................................... 18.5 21.0 12.5
Income tax expense....................................... 6.7 7.4 5.0
----- ----- -----
Net income................................................. 11.8% 13.6% 7.5%
===== ===== =====
- --------
Cost of sales:
Consulting and training(1)............................... 54.4% 49.3% 52.0%
Software(2).............................................. 12.7% 20.5% 29.5%
</TABLE>
- --------
(1) Expressed as a percentage of combined consulting and training revenue.
(2) Expressed as a percentage of software revenue.
1996 COMPARED TO 1995
Revenue in 1996 was $26.9 million, representing an 81.8% increase over
revenue of $14.8 million in 1995, a result of increased revenue in each of the
Company's business lines. During 1996, the Company's single largest client
accounted for 9.1% of revenue, down from 21.8% in 1995. The Company's five
largest clients in 1996 accounted for 35.0% of revenue as compared to 52.9% of
revenue in 1995. In addition, during 1996, revenue received by the Company
from various branches and agencies of the U.S. federal government accounted
for approximately 12.1% of revenue, down from 16.4% in 1995. See "Risk
Factors--Customer Concentration" and "Business--Clients."
Consulting revenue in 1996 was $16.3 million, representing a 68.0% increase
over consulting revenue of $9.7 million in 1995. This increase is primarily
attributable to an increase in the number of billable consultants and project
managers from 52 at the end of 1995 to 118 at the end of 1996, an approximate
10% increase in average billing rates, an increase in the number and size of
consulting projects and, to a lesser extent, the geographic expansion of the
17
<PAGE>
Company's consulting services from the Seattle, Washington and Portland,
Oregon areas to include metropolitan Washington, D.C., Tampa, Florida, Dallas,
Texas and Denver, Colorado.
Training revenue in 1996 was $9.4 million, representing a 95.8% increase
over training revenue of $4.8 million in 1995. This increase is attributable
to a number of factors, including (i) the acquisition of SQLSoft in May 1996
and SofTeach in October 1996, which management estimates added approximately
$1.8 million and $378,000 in training revenue in 1996, respectively; (ii) high
demand for certain new course offerings, including training in Microsoft
Windows NT 3.51 and Microsoft Internet and messaging products; (iii) the
Company's designation as a Sun Educational Services U.S. Strategic Partner for
the Seattle, Washington and Portland, Oregon areas; and (iv) an increase in
the number of public classes held from 194 in 1995 to 299 in 1996.
Software revenue in 1996 was $1.2 million as compared with revenue of
$205,000 in 1995. This increase is principally the result of an increase in
the sales of ARIS DFRAG following the hiring of a senior sales manager for
software products in late 1995 and the release of ARIS DFRAG 4.0 in January
1996. In addition, the acquisition of Noetix in October 1996 added
approximately $474,000 in revenue in the fourth quarter of 1996.
Cost of consulting and training consists primarily of salaries and employee
benefits for consultants, project managers and instructors, subcontractor
fees, and non-reimbursable travel expenses related to consulting and training
activities. Cost of consulting and training was $13.4 million in 1996,
representing an 86.1% increase over $7.2 million in 1995. This increase is
primarily attributable to an increase in the number of consultants, project
managers and instructors from 69 at the end of 1995 to 149 at the end of 1996.
Cost of consulting and training as a percentage of combined consulting and
training revenue increased from 49.3% in 1995 to 52.0% in 1996. This increase
is primarily attributable to lower utilization of consultants in 1996
resulting from a large number of newly hired consultants that were not billing
immediately upon being hired. The lower utilization was partially offset by a
10% increase in average billing rates. In addition, the Company had higher
than usual subcontractor costs in the second half of 1996 primarily as a
result of the assumption of the operations of Cray which used a higher
percentage of subcontractors than the Company. Extensive use of subcontractors
will generally adversely impact the Company's gross margins. As a result, the
Company seeks to keep its use of subcontractors to a minimum.
Cost of software consists of software development costs expensed prior to
determination of market feasibility, costs and manufacturing expenses
associated with the production and packaging of software products. Cost of
software increased to $354,000 in 1996 from $42,000 in 1995. This increase
coincides with the rise in sales of software licenses revenue and is primarily
attributable to the costs of packaging and distribution of ARIS DFRAG 4.0 and
NoetixViews.
Selling, general and administrative expense ("SG&A expense") consists of
salaries and employee benefits for executive, managerial, administrative and
sales personnel, facility leases, amortization of capitalized computer
hardware and equipment costs, software license fees and travel and business
development costs. SG&A expense was $9.4 million in 1996, a 104.3% increase
over SG&A expense of $4.6 million in 1995. SG&A expense as a percentage of
total revenue increased from 30.9% in 1995 to 34.8% in 1996. This increase is
due to non-recurring expenses associated with the acquisition and integration
of SQLSoft, Noetix and SofTeach, higher expenses due to the opening of four
new offices in Dallas, Texas, London, England, Tampa, Florida and the
metropolitan Washington, D.C. area, including expenses related to the hiring
of personnel required to staff the new offices and an increase in expenditures
for recruitment and training of IT professionals. The number of management,
sales and administrative staff increased from 46 at the end of 1995 to 101 at
the end of 1996.
18
<PAGE>
In 1996, the Company had $307,000 of in-process research and development
expense related to the acquisition of Noetix and amortization of intangible
assets of $116,000 related to acquisitions made by the Company in 1996.
Other income (expense) consists primarily of interest expense associated
with short term borrowings and interest income on cash and cash equivalents.
In each of 1995 and 1996, the Company had other income of $115,000.
The Company's effective income tax rate in 1996 was 40.1% compared with
35.1% in 1995. The increase in 1996 was primarily attributable to purchased
research and development costs for software development of an acquired
business and an increase in liability for state income tax resulting from the
geographic expansion of ARIS' service offerings.
1995 COMPARED TO 1994
The Company's revenue was $14.8 million in 1995, a 108.5% increase over
revenue of $7.1 million in 1994. The Company's single largest client accounted
for 21.8% and 20.0% of revenue in 1995 and 1994, respectively. The Company's
five largest clients in 1995 accounted for 52.9% of revenue as compared to
38.2% of revenue in 1994. In addition, during 1995, revenue received by the
Company from various branches and agencies of the U.S. federal government
accounted for approximately 16.4% of revenue, up from 5.9% in 1994. See "Risk
Factors--Customer Concentration" and "Business--Clients."
Consulting revenue was $9.7 million in 1995, representing a 59.0% increase
over revenue of $6.1 million in 1994. This increase reflects an increase in
the number and size of consulting projects and an increase in the average
number of billable consultants and project managers over the period.
Training revenue was $4.8 million in 1995, compared with $551,000 in 1994.
This increase reflects the impact of additional revenue resulting from the
acquisition of Clarity, high demand for new course offerings in Microsoft and
Oracle technologies, the expansion of existing training facilities in the
Seattle, Washington area and the opening of a new training center in the
Portland, Oregon area. In addition, the Company began offering classes to the
public in 1995 and held 194 public classes in that year.
The Company's software revenue was $205,000 in 1995, compared with $369,000
in 1994. In 1994, the Company's software revenue included a one-time payment
of $125,000 made by OpenVision Technology to acquire rights to resell ARIS
DFRAG. The remaining decrease was the result of declining sales of ARIS DFRAG
3.0 prior to the release of ARIS DFRAG 4.0 in January 1996.
Cost of consulting and training was $7.2 million in 1995, a 100.0% increase
from $3.6 million in 1994, but declined as a percentage of combined consulting
and training revenue from 54.4% in 1994 to 49.3% in 1995. The decrease in cost
of consulting and training as a percentage of combined consulting and training
revenue is primarily attributable to increased utilization of consultants and
project managers, an increase in the average billing rate and the addition of
$4.3 million in training revenue that had slightly lower costs.
Cost of software was $42,000 in 1995 as compared with $47,000 in 1994. This
decrease is attributable to the decline in sales of ARIS DFRAG 3.0 in 1995
prior to the release of ARIS DFRAG 4.0 in January 1996.
SG&A expense was $4.6 million in 1995, a 119.0% increase from $2.1 million
in 1994. SG&A expense increased as a percentage of total revenue from 29.5% in
1994 to 30.9% in 1995. The
19
<PAGE>
increase is primarily due to generally higher expenses required to expand
ARIS' training activities, including increased facility and equipment
expenses, an increase in marketing expenses, and an increase in the number of
sales, management and administrative personnel. Full-time sales, management
and administrative personnel increased from 14 at the end 1994 to 46 at the
end of 1995. In addition, the Company incurred approximately $125,000 in non-
recurring charges related to the acquisition and subsequent integration of
Clarity in 1995.
In 1995, the Company had other income of $115,000 as compared with other
income of $11,000 in 1994. The increase in 1995 is attributable primarily to
interest income, investment income realized on an equity fund investment and
income realized from the sale of fixed assets.
The Company's effective income tax rate was 35.1% in 1995 and 36.6% in 1994.
This decrease is primarily the result of a one time tax rebate in Oregon in
1995.
QUARTERLY RESULTS OF OPERATIONS
The following table sets forth certain unaudited quarterly consolidated
statements of operations for each of the eight quarters in the period ended
December 31, 1996 and the percentage of the Company's total revenue
represented by each item in the respective quarter. In the opinion of
management, this information has been presented on the same basis as the
Consolidated Financial Statements appearing elsewhere in this Prospectus, and
all necessary adjustments, consisting only of normal recurring adjustments,
have been included in the amounts stated below to present fairly the unaudited
quarterly results when read in conjunction with the Consolidated Financial
Statements of the Company and related Notes thereto. The operating results for
any quarter should not be considered indicative of results of any future
period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Consulting............. $2,544 $2,535 $2,221 $2,425 $2,543 $3,497 $4,532 $5,740
Training............... 818 1,168 1,372 1,463 1,778 2,601 2,217 2,789
Software............... 59 50 42 54 106 176 386 533
------ ------ ------ ------ ------ ------ ------ ------
Total revenue.......... 3,421 3,753 3,635 3,942 4,427 6,274 7,135 9,062
------ ------ ------ ------ ------ ------ ------ ------
Cost of sales:
Consulting and
training.............. 1,626 1,773 1,825 1,952 2,177 3,001 3,681 4,494
Software............... 18 15 28 (19) 4 13 21 316
------ ------ ------ ------ ------ ------ ------ ------
Total cost of sales.... 1,644 1,788 1,853 1,933 2,181 3,014 3,702 4,810
------ ------ ------ ------ ------ ------ ------ ------
Gross profit........... 1,777 1,965 1,782 2,009 2,246 3,260 3,433 4,252
Operating expenses:
Selling, general and
administrative........ 932 970 1,264 1,382 1,429 2,037 2,429 3,456
Research and
development........... -- -- -- -- 15 16 16 124
In-process research and
development........... -- -- -- -- -- -- -- 307
Amortization of
intangible assets..... 1 1 1 1 1 11 17 87
------ ------ ------ ------ ------ ------ ------ ------
Total operating
expenses.............. 933 971 1,265 1,383 1,445 2,064 2,462 3,974
------ ------ ------ ------ ------ ------ ------ ------
Income from operations.. 844 994 517 626 801 1,196 971 278
Other income, net...... 2 25 26 62 2 44 21 48
------ ------ ------ ------ ------ ------ ------ ------
Income before income
tax.................... 846 1,019 543 688 803 1,240 992 326
Income tax expense..... 296 356 190 244 297 451 362 237
------ ------ ------ ------ ------ ------ ------ ------
Net income.............. $ 550 $ 663 $ 353 $ 444 $ 506 $ 789 $ 630 $ 89
====== ====== ====== ====== ====== ====== ====== ======
Net income per share.... $ 0.06 $ 0.08 $ 0.04 $ 0.05 $ 0.06 $ 0.09 $ 0.07 $ 0.01
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUE
-------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1995 1995 1995 1995 1996 1996 1996 1996
-------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Consulting............. 74.4% 67.5% 61.1% 61.5% 57.4% 55.7% 63.5% 63.3%
Training............... 23.9 31.1 37.7 37.1 40.2 41.5 31.1 30.8
Software............... 1.7 1.4 1.2 1.4 2.4 2.8 5.4 5.9
----- ----- ----- ----- ----- ----- ----- -----
Total revenue.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
----- ----- ----- ----- ----- ----- ----- -----
Cost of sales:
Consulting and
training.............. 47.5 47.2 50.2 49.5 49.2 47.8 51.6 49.6
Software............... 0.5 0.4 0.8 (0.5) 0.1 0.2 0.3 3.5
----- ----- ----- ----- ----- ----- ----- -----
Total cost of sales.... 48.0 47.6 51.0 49.0 49.3 48.0 51.9 53.1
----- ----- ----- ----- ----- ----- ----- -----
Gross profit........... 52.0 52.4 49.0 51.0 50.7 52.0 48.1 46.9
----- ----- ----- ----- ----- ----- ----- -----
Operating expenses:
Selling, general and
administrative........ 27.2 25.8 34.8 35.1 32.3 32.5 34.1 38.1
Research and
development........... -- -- -- -- 0.3 0.2 0.2 1.4
In-process research and
development........... -- -- -- -- -- -- -- 3.4
Amortization of
intangible assets..... -- -- -- -- -- 0.2 0.2 0.9
----- ----- ----- ----- ----- ----- ----- -----
Total operating
expenses.............. 27.2 25.8 34.8 35.1 32.6 32.9 34.5 43.8
----- ----- ----- ----- ----- ----- ----- -----
Income from operations.. 24.8 26.6 14.2 15.9 18.1 19.1 13.6 3.1
Other income, net...... 0.1 0.7 0.7 1.6 -- 0.7 0.3 0.5
----- ----- ----- ----- ----- ----- ----- -----
Income before income
tax.................... 24.9 27.3 14.9 17.5 18.1 19.8 13.9 3.6
Income tax expense..... 8.7 9.5 5.2 6.2 6.7 7.2 5.1 2.6
----- ----- ----- ----- ----- ----- ----- -----
Net income.............. 16.2% 17.8% 9.7% 11.3% 11.4% 12.6% 8.8% 1.0%
===== ===== ===== ===== ===== ===== ===== =====
- --------
Cost of sales:
Consulting and
training(1)............ 48.3% 47.9% 50.8% 50.2% 50.4% 49.2% 54.5% 52.7%
Software(2)............. 30.5% 30.0% 66.7% -- 3.8% 7.4% 5.4% 59.3%
</TABLE>
- --------
(1) Expressed as a percentage of combined consulting and training revenue.
(2)Expressed as a percentage of software revenue.
The Company's operations and related revenue and operating results
historically have varied from quarter to quarter, and the Company expects
these variations to continue. Factors causing such fluctuations have included
and may include: the number, size and scope of consulting projects, the
contractual terms and degree of completion of such projects, project delays,
variations in utilization rates and average billing rates for consultants and
project managers due to vacations, holidays and the integration of newly hired
consultants, the inability of the Company to conduct as many four- and five-
day courses due to national holidays and vacation schedules, particularly in
the fourth quarter of each year, frequency of training classes and demand for
training following new software product releases, variations in fill rates in
training classes, integration of acquired entities and general economic
conditions.
During 1995, consulting revenue decreased slightly in each of the second and
third quarters primarily due to reorganization of the consulting business from
a highly-centralized model to a decentralized regional model, the loss of
several consultants to competitors and clients and decreased levels of
employee utilization due to the integration of newly hired consultants and
seasonality. In the second half of 1995, the Company assigned a manager to
each region to focus on employee satisfaction and retention and hired a
dedicated recruiting staff. During 1996, consulting revenue increased
sequentially each quarter.
Except for the third quarter of 1996, training revenue generally increased
in each of the eight quarters presented, although growth in training revenue
was generally slower in the third and fourth quarters of each year due to
seasonality. For the third quarter of 1996, training revenue decreased by
14.8% due to the centralized scheduling of classes, which resulted in an
inaccurate assessment of regional demand for specific course titles, and the
integration of SQLSoft and the acquisition of SofTeach, each of which diverted
significant management resources. The Company believes it has addressed these
issues by decentralizing class scheduling and implementing an acquisition
strategy that dedicates specific ARIS personnel, not responsible for other
operational tasks, to the integration of an acquired entity.
21
<PAGE>
Cost of consulting and training has increased in each of the eight quarters
presented due to steady hiring of consultants, project managers and
instructors to support an increased number of consulting projects and training
classes. Unanticipated variations in the number and timing of consulting
projects, fill rates for training classes, average utilization rates and
average billing rates of consultants have resulted in quarterly fluctuations
in gross margins. Cost of consulting and training as a percentage of combined
consulting and training revenue is generally higher in the third and fourth
quarter of each year due to the seasonality of the Company's business. During
the summer months vacation schedules of client personnel affect the demand for
training classes. In addition, the Company conducts a six-to-eight week
training course for newly hired IT professionals each summer, which, coupled
with vacation schedules of consultants, results in lower than average
utilization rates for the Company's consultants. In the fourth quarter,
training revenue is adversely impacted by the Company's inability to conduct
four- and five-day classes during the shortened work weeks in that quarter due
to national holidays.
SG&A expense increased in absolute dollars in each of the eight quarters
presented as the Company incurred significant non-recurring expense associated
with the opening of three new training facilities, the acquisition of four
companies and the hiring of management, sales and marketing and administrative
staff to support this growth. During 1996, ARIS' accounting staff increased
from three to seven, its sales staff increased from three to nine and its IT
staff increased from three to seven. Also during the eight quarters presented,
the Company developed and implemented a regional management infrastructure.
SG&A expense as a percentage of total revenue fluctuated over the eight
quarters. This quarterly variation in margin is primarily the result of the
timing of expenses incurred in opening new training facilities and the
acquisition and integration of four companies. In the first quarter of 1995,
SG&A expense as a percentage of total revenue was 27.2% primarily due to non-
recurring expenses related to the acquisition of Clarity in January, 1995. In
the third and fourth quarters of 1995, SG&A expense was 34.8% and 35.1%,
respectively, as a result of costs associated with the implementation of a
regional management infrastructure, the expansion of training facilities in
the Seattle, Washington area and in Denver, Colorado and increased marketing
expenses. SG&A expense as a percentage of total revenue was relatively
constant at 32.3% and 32.5% in each of the first and second quarters of 1996,
respectively; increasing to 34.1% in the third quarter of 1996 as a result of
the expenses associated with the opening of a new office near London, England,
the acquisition of SQLSoft, further expansion of its training facilities and
headquarters in the Seattle, Washington and Portland, Oregon areas, the costs
associated with the assumption of the operations of Cray, and the
establishment of a subsidiary for the development and marketing of ARIS'
software products. In the fourth quarter of 1996, SG&A expense as a percentage
of total revenue increased to 38.1% as a result of the aggregate impact of the
ongoing integration costs related to the SQLSoft acquisition, the assumption
of the operations of Cray, the acquisition and subsequent integration costs of
SofTeach and Noetix, the opening of a new training center in the Washington
D.C. area, the expenses associated with the opening of a new consulting office
in Tampa, Florida, and the hiring and training of management and
administrative personnel to support the regionalized management infrastructure
implemented for training operations during this quarter.
Due to the foregoing factors, among others, it is possible that in some
future quarter the Company's results of operations may vary from the
expectations of the securities analysts or investors. In such event, the price
of the Company's Common Stock would likely be materially affected. See "Risk
Factors--Variability of Quarterly Operating Results."
22
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Through 1995, the Company financed its business activities primarily through
cash generated from operations. Net cash provided from operations was $706,000
in 1996, $2.2 million in 1995 and $477,000 in 1994. At December 31, 1996, the
Company held cash and cash equivalents of $177,000 and investments in
marketable securities of $1.4 million.
In 1996, 1995 and 1994, the Company invested a significant portion of its
net income in an equity fund; amounts invested were $462,000, $381,000 and
$368,000, respectively. On April 3, 1997, this fund was liquidated and the net
proceeds of $1.3 million were used to repay a portion of the $1.7 million
outstanding under the Company's revolving credit facility with U.S. Bank. In
the future, the Company intends to invest its surplus cash in short-term,
interest-bearing, investment-grade securities.
At December 31, 1996, the Company had $1.0 million outstanding on a line of
credit with U.S. Bank. In March 1997, the Company replaced this existing line
of credit with a new line of credit with U.S. Bank, which provides for
borrowings of up to $8.0 million (the "U.S. Bank Facility"). Under the U.S.
Bank Facility, which expires on June 1, 1998, the Company may borrow up to
$8.0 million on a revolving basis, of which $5.0 million may be converted to a
term loan. Borrowings under the U.S. Bank Facility bear interest at a variable
rate based on certain financial ratios and range from the London Inter-bank
Offered Rate (LIBOR) plus 1.75% to LIBOR plus 3.0%. The U.S. Bank Facility
includes covenants relating to the maintenance of certain financial ratios,
such as minimum net worth, and provides that all borrowings are collateralized
by the Company's assets. Additionally, the U.S. Bank Facility prohibits Oxford
from incurring indebtedness in excess of $600,000 from any non-U.S. bank. As
of March 1, 1997, $1.7 million was outstanding under the revolving portion of
the U.S. Bank Facility and $3.9 million was outstanding under the fixed-term
portion of the U.S. Bank Facility. The Company is required to repay the term
loan from the proceeds of this Offering within ten days of the closing of this
Offering. The term loan was incurred primarily to fund the Company's
repurchase of 415,000 shares of Common Stock from certain shareholders at
$8.50 and $9.75 per share in February and March of 1997. See "Certain
Transactions."
In connection with the acquisition of the assets of SofTeach, the Company
issued to SofTeach a promissory note in the principal amount of $500,000 which
bears interest at 6%, and is payable in two installments of $250,000 each,
plus accrued interest. The Company paid $250,000 on this note on April 2, 1997
and the balance is due on July 1, 1997.
The Company invested $1.2 million, $911,000 and $220,000 in facility leases
and equipment, including computer hardware, in 1996, 1995 and 1994,
respectively. In 1996, the Company expended $1.4 million for the acquisition
of the training and software businesses it acquired during that year. The
Company anticipates capital expenditures during 1997 to acquire additional
property and equipment, including expenses relating to the new facility leases
for the expansion of the Company's training centers in the Portland, Oregon
and Washington, D.C. areas and the purchase of computers and equipment in the
ordinary course of business.
The Company believes that the expected net proceeds from this Offering,
combined with cash provided from its operations and borrowings available under
the U.S. Bank Facility, will be sufficient to meet the Company's working
capital and capital expenditure requirements for the next 24 months.
23
<PAGE>
BUSINESS
ARIS provides an integrated IT solution consisting of consulting and
training services primarily focused on Oracle and Microsoft technologies. ARIS
currently focuses on three core consulting competencies: packaged application
implementation, custom application development and systems architecture
planning and deployment. The Company currently offers 118 instructor-led
course titles for IT professionals conducted at ARIS' training centers and at
client facilities. The Company also develops, markets and supports proprietary
software products that enhance Oracle database management and Oracle packaged
applications. The Company believes that its ability to provide clients with an
integrated IT solution, coupled with its focus on leading-edge technologies,
provide it with a unique competitive advantage.
INDUSTRY BACKGROUND
Enterprises face a rapidly changing, highly competitive environment where
access to information through the use of information technology can result in
improvements in products and services, lower costs and increased client
satisfaction. As the pace of technological change accelerates, an enterprise's
ability to evaluate, integrate, deploy and leverage IT systems is becoming a
critical competitive issue. For example, enterprises are increasingly moving
from mainframe systems that run proprietary software to open systems based on
client/server architectures and Internet-enabled technologies. International
Data Corporation ("IDC") estimates that the 1995 worldwide market for IT
consulting was $19.8 billion and is projected to grow to $38.2 billion by the
year 2000.
The complex task of developing and implementing enterprise-wide, mission
critical solutions is a costly and time consuming undertaking. For example,
enterprise resource planning projects, which generally include planning and
integration of manufacturing, distribution and financial systems, require
cooperation and coordination of virtually every department within an
enterprise. Many enterprises do not have adequate personnel with the requisite
technology skills or are reluctant to expand or retool their existing IT
departments for particular implementation projects. Confronted with the
challenge of designing and implementing more complex IT systems to accomplish
their goals, many enterprises are turning to independent IT service providers.
To maximize the effectiveness of increasingly complex information systems,
enterprises must ensure that their IT employees possess the skills to operate,
maintain and maximize performance of these systems. Each time an enterprise
implements a new technology or updates its existing technology, employee
training is required and, in many large enterprises, IT training is virtually
continuous. IDC estimates that the 1995 worldwide market for IT education and
training was $14.9 billion and is projected to grow to $27.0 billion by 2000.
In 1995, the training of IT professionals represented $3.3 billion of the $6.1
billion IT education and training market in the United States. Due to a
shortage of in-house instructors experienced in the latest technologies and
the high cost of developing and maintaining internal training courses in
rapidly evolving technologies, many enterprises are turning to outside firms
to train their IT professionals.
THE ARIS SOLUTION
ARIS provides its clients with an integrated IT solution consisting of
consulting and training services that enables them to quickly leverage new
technologies to deliver and improve operational processes and performance. The
ARIS solution includes the following characteristics:
COMPLETE IT SOLUTION. ARIS offers its clients an integrated IT solution that
addresses the technology requirements and the resource constraints clients
face when adopting a new
24
<PAGE>
technology. The Company believes that its combination of consulting, training
and software products enables its clients to rapidly and effectively implement
technologies that improve business processes and the information flow within
an organization. Because ARIS develops in-depth knowledge regarding the needs
and objectives of its consulting clients, ARIS believes it is strategically
positioned to provide custom training solutions for these clients.
CONSULTING EXPERTISE IN HIGH-DEMAND, LEADING-EDGE TECHNOLOGIES. ARIS
fulfills the mission critical technology needs of its clients by designing and
implementing solutions using leading-edge technologies from vendors such as
Oracle and Microsoft. Expertise in leading-edge technologies allows ARIS to
enhance project quality, reduce development time and project costs and
effectively develop customized solutions. In addition, ARIS maintains
strategic relationships with certain software vendors, providing the Company
access to technologies in the early or pre-release cycles of software
development. ARIS consultants and project managers use a proprietary
methodology, ARIS RAPIDMethod, for packaged application implementation and
Oracle's CASE*Method for custom application development relating to Oracle
technologies.
QUALITY COURSE OFFERINGS FOR HIGH-DEMAND, LEADING-EDGE TECHNOLOGIES. ARIS
primarily provides public and private instructor-led training to IT
professionals on leading-edge technologies including Microsoft Windows NT, SQL
Server, Exchange Server, and Visual Basic; Oracle database administration and
development tools such as Designer/2000 and Developer/2000; Sun Java and
Solaris; Microsoft Internet and Intranet technologies; and general networking
technologies. The Company uses vendor-supplied and proprietary courseware and
training methodologies. The Company believes that it is one of the largest
Microsoft ATECs and one of the largest independent providers of Oracle
training in the United States. The Company also is a Sun Educational Services
U.S. Strategic Partner for Seattle, Washington and Portland, Oregon.
STRATEGY
The Company's objective is to be a leading provider of integrated IT
solutions by pursuing the following strategies:
LEVERAGE SYNERGIES BETWEEN CONSULTING AND TRAINING. By offering a
combination of consulting and training services, the Company is able to: (i)
capitalize on cross-selling opportunities between training and consulting;
(ii) increase client referrals; (iii) enhance its name recognition; and (iv)
provide a complete solution to its clients. The Company encourages its
instructors to participate in consulting projects, enabling instructors to
improve their technical knowledge with practical software implementation
experience. In addition, the Company offers ongoing training in the latest
technologies to its consultants and project managers.
FOCUS ON LEADING-EDGE TECHNOLOGIES. The Company intends to maintain its
alignment with leading-edge technology vendors such as Oracle and Microsoft.
By focusing on leading-edge technologies, the Company is able to offer
specialized and value-added services to its clients. ARIS may shift or expand
its vendor focus over time in order to maintain alignment with leading-edge,
emerging technologies.
ATTRACT AND RETAIN HIGHLY SKILLED IT PROFESSIONALS. The Company's success
depends on its ability to attract, train, motivate and retain highly skilled
IT professionals. The Company believes it offers its employees: (i) multiple
professional opportunities and challenges to work in one or more of the
Company's consulting, training and software divisions; (ii) the ability to
work with leading-edge technologies; (iii) attractive compensation plans that
align employees' interests and goals with those of the Company; (iv) a
stimulating, flexible, entrepreneurial work environment; and (v) the
opportunity to receive continuous, ongoing technical training. These
25
<PAGE>
factors have resulted in a turnover rate which management believes is below
the industry average.
MAINTAIN HIGH LEVELS OF CLIENT SATISFACTION. The Company believes that
satisfying client expectations is critical to expanding relationships with
existing clients and receiving positive references for future sales. The
Company requests that its clients complete evaluations of its training classes
and consulting projects and a percentage of total cash compensation for
consultants and project managers and instructors is directly linked to client
satisfaction.
EXPAND GEOGRAPHIC PRESENCE. The Company intends to expand its operations by
opening or acquiring additional consulting offices and training centers in
strategic geographic locations, including opening training centers in markets
where it currently has consulting offices. ARIS also intends to expand
internationally to better service its multinational clients and to gain access
to new markets.
PURSUE STRATEGIC ACQUISITIONS. Since January 1995, ARIS has pursued an
aggressive acquisition strategy acquiring five complementary businesses. The
Company plans to continue to pursue additional strategic acquisitions in order
to: (i) acquire expertise in new technologies; (ii) expand its client base;
(iii) gain access to qualified IT professionals; and (iv) enter new geographic
markets.
ARIS CONSULTING AND SOFTWARE PRODUCTS
ARIS provides mission critical IT consulting services primarily to clients
that require assistance planning, designing, developing, testing and deploying
Oracle and Microsoft technologies. ARIS' vendor specific focus has enabled it
to develop greater depth of expertise and proprietary methodologies. ARIS
currently focuses on three core consulting competencies: packaged application
implementation, custom application development and systems architecture
planning and deployment. As of March 31, 1997, ARIS employed 141 consultants
and project managers in eight offices. The Company's consulting clients are
generally medium to large businesses and governmental agencies.
PACKAGED APPLICATION IMPLEMENTATION. ARIS consulting focuses on the high
growth packaged enterprise resource planning market, particularly the
implementation of Oracle database management and Oracle packaged applications
("Oracle Applications"). ARIS' consultants and project managers use a
proprietary methodology, ARIS RAPIDMethod, to implement Oracle Applications
consistently and reliably. As of March 31, 1997, ARIS was engaged in 36 of
these projects, which typically require five to 15 consultants, and generally
extend for a period of six months to two years. The following is a case study:
In 1994, Tektronix, Inc., a leading manufacturer of electronic
hardware, engaged ARIS to regionalize and standardize the financial and
distribution operations of Tektronix' diverse independent business
divisions around the world, which had been using nearly 500 separate
computer information systems. The Company's relationship with Tektronix
began with an engagement to implement Oracle General Ledger, Accounts
Payable, and Project Accounting applications at Tektronix' corporate
headquarters. At the same time, Tektronix was in the process of
replacing its legacy order management/accounts receivable applications.
Because of ARIS' demonstrated abilities and knowledge of Oracle
Financials, Tektronix engaged ARIS to assist with the Order Management
project. ARIS has been involved in the implementation of General
Ledger, Financial Reporting, Purchasing, Accounts Payable, Project
Accounting, Fixed Assets, Order Entry, Inventory and Accounts
Receivable. ARIS consultants and project managers are currently working
with Tektronix on the implementation of world-wide
26
<PAGE>
Oracle Applications including Accounts Receivable, Order Entry and
Inventory at Tektronix locations in 30 countries.
CUSTOM APPLICATION DEVELOPMENT. ARIS consulting provides custom application
development services, particularly client/server and Internet/intranet
projects involving Oracle and Microsoft technologies. For database
development, ARIS consultants and project managers use Oracle's CASE*Method
information engineering methodology, often in conjunction with Oracle's CASE
tool, Designer/2000. In addition, ARIS has developed a library of proprietary
reusable software that allows its consultants and project managers to
accelerate custom application development. As of March 31, 1997, ARIS was
engaged in 39 of these projects, which typically require three to 10
consultants, and generally extend for a period of four months to one year. The
following is a case study:
As part of its efforts to enforce federal excise tax provisions
relating to the sale of diesel fuel, the U.S. Internal Revenue Service
("IRS") engaged ARIS in a $3.0 million contract to develop a customized
software system that would permit IRS field agents wireless remote
access to Oracle databases. ARIS designed and implemented a system that
allows IRS agents to review the compliance and enforcement histories of
diesel fuel users using a laptop or handheld computer. This system has
largely eliminated the need for IRS agents to carry certain files into
the field and to send reports and correspondence to IRS facilities
through the mail. Following the successful completion of this project,
the IRS engaged ARIS to perform additional consulting work and to
provide training services to IRS information specialists.
SYSTEMS ARCHITECTURE PLANNING AND DEPLOYMENT. ARIS consulting provides
systems architecture planning and deployment for IT architectures including
Microsoft BackOffice, Oracle databases, UNIX and general networking
architectures. System architecture engagements involve a range of services
including capacity planning, implementation design and planning, readiness
assessment, performance tuning and monitoring, configuration and installation,
infrastructure management, process evaluation and complete database
administration outsourcing. As of March 31, 1997, ARIS was engaged in 19 of
these projects, which typically require one to five consultants, and generally
extend for a period of one to six months. The following is a case study:
The Washington State Department of Social and Health Services
("DSHS") retained ARIS to design an Internet protocol ("IP") addressing
scheme and Microsoft Windows NT domain strategy that would be
appropriate for a distributed environment with limited administrative
support for DSHS' 32 locations and over 3,000 computers throughout
Washington. The IP addressing plan had to co-exist with a number of IP
based machines already on the network that were not part of the DSHS
upgrade. ARIS consultants faced significant constraints with regard to
the number of network addresses available and the number of sub-
networks already deployed at the various sites. ARIS consultants
successfully designed and deployed a distributed architecture
throughout DSHS on a timely basis.
The Company assigns consultants to projects based on specific requirements.
Consultant utilization, billing rates and headcount are reviewed regularly by
project managers and regional managers, and is reviewed monthly by senior
management, to ensure maximum efficiency. Project staffing varies depending on
the number of project engagements and the size, duration and location of each
engagement. As projects are completed or as new consultants are hired, there
may be periods when certain consultants and project managers are not assigned
to active
27
<PAGE>
client projects. During these periods of non-assignment, consultants and
project managers receive training on new technologies, develop methodologies
and tools and assist in developing the Company's internal data systems.
ARIS SOFTWARE PRODUCTS. The Company currently has two software products,
ARIS DFRAG and NoetixViews. In 1993, the Company developed ARIS DFRAG, a tool
used by database administrators to identify and reorganize "fragmented" data
in Oracle databases, thereby improving performance. In January 1996, the
Company released ARIS DFRAG 4.0, which includes a graphical user interface
based upon Microsoft Windows which can be used to browse and manage database
objects within an Oracle database. ARIS consulting uses ARIS DFRAG in many of
its consulting projects. As of March 31, 1997, ARIS had sold 395 ARIS DFRAG
licenses to 87 clients in 13 countries.
The Company acquired Noetix in October 1996. NoetixViews allows end users to
view data from Oracle Applications, including General Ledger, Accounts
Payable, Accounts Receivable, Inventory, Purchase Order, Order Entry, Fixed
Assets, Bill of Material, Work in-Process, Project Costing and Project
Billing. The Company also has developed an interface to NoetixViews that is
available for Oracle's new version of its Discoverer/2000, an end user
decision support product suite. As of March 31, 1997, ARIS had sold 550
NoetixViews module licenses to 110 clients in five countries.
Management believes ARIS' software products enhance its consulting services.
Through its consulting and training services, ARIS expects to continue to
identify development opportunities for new software products.
ARIS TRAINING
ARIS is a leading provider of training to IT professionals in Microsoft
BackOffice, Oracle Applications, Sun Solaris and Java, Internet, and
networking technologies. ARIS provides instructor-led training through
regularly scheduled open enrollment classes, private classes (using both
standard and customized content), and on-line training. ARIS also provides
other training related services such as IT skills assessment, "train the
trainer" programs, curriculum development and training consulting. The Company
offers public open enrollment classes in nine training centers located in the
metropolitan areas of Seattle, Washington, Portland, Oregon, Washington, D.C.,
and Denver, Colorado, as well as London, Birmingham and Oxford in the United
Kingdom. The Company also delivers private training both at its training
centers and at client facilities worldwide.
As of March 31, 1997, the Company employed 72 instructors, of whom 60 were
certified by Microsoft, Sun or both. Each of the Company's instructors has, on
average, more than 10 years of professional IT experience. During 1996, ARIS
offered 95 course titles and its instructors conducted 989 classes. At March
31, 1997, the Company had 44 classrooms with a capacity of 479 students. The
average duration of a class during 1996 was 3.8 days. The Company seeks to
achieve a high fill rate for each of its public classes without exceeding a
maximum class size in order to preserve a high level of individual student
attention. The Company devotes considerable resources to maintaining the
skills of its instructors who are required to maintain the certifications
necessary to teach new course titles as a part of ARIS' Microsoft and Sun
authorized training designations.
In terms of the number of students trained, management believes that ARIS is
one of the largest Microsoft ATECs and one of the largest independent
providers of Oracle training in the United States. The Company also is a Sun
Educational Services U.S. Strategic Partner for Seattle, Washington and
Portland, Oregon. Oxford also is a Microsoft ATEC and has received ISO 9001
certification.
28
<PAGE>
ARIS uses both vendor-designed and proprietary courseware and training
methodologies. The Company continually evaluates market demand for training in
its core technologies and updates current course titles or develops new course
titles to satisfy the changing needs of the market. To ensure that its course
titles and instructors meet the needs of the market and maintain the Company's
quality standards, each class participant is asked to complete an evaluation of
the course materials and of the instructor at the end of their training. These
evaluations are used by the Company to modify course offerings and training
techniques in order to improve instructor performance.
The following are ARIS' 118 current course titles:
ORACLE TECHNOLOGY
- --------------------------------------------------------------------------------
ORACLE GENERAL ORACLE DBA
Oracle Queries Using the SQL Oracle7 Database Architecture and
Language Administration
Oracle7 Foundation Oracle7 Advanced Database
Administration Workshop
Developing Oracle7 Stored Procedures
Using PL/SQL ORACLE DEVELOPER/DESIGNER TOOLS
Oracle7 Application Tuning Developer/2000 Forms 4.5
Advanced PL/SQL Workshop Developer/2000 Reports 2.5
Oracle7 Precompiler Interface Developing Visual Basic Applications
Using Oracle7
Oracle Designer/2000 Workshop
- --------------------------------------------------------------------------------
MICROSOFT TECHNOLOGY
- --------------------------------------------------------------------------------
ACCESS EXCHANGE SERVER
Introduction to Microsoft Access 7.0 Installing and Configuring Microsoft
Exchange Server 4.0
Intermediate Microsoft Access 7.0
Installing and Configuring Microsoft
Exchange Server 5.0
Advanced Microsoft Access 7.0
Creating Applications with Access Core Technologies of Microsoft
2.0/7.0 Exchange Server 4.5
Programming with Microsoft Access Microsoft Exchange Server Multisite
for Windows 95 and Internet Environments
Microsoft Access 7: Introduction Microsoft Exchange Server Support
Microsoft Access 7: Advanced Implementing MS Mail 3.5
C++ Mastering Microsoft Exchange
Development
Programming in Microsoft Visual C++
for C Programmers FOXPRO
Programming in Visual C++ Programming in Microsoft Visual
FoxPro 3.0 for Windows
EXCEL
Application Development with Excel
5.0
29
<PAGE>
MICROSOFT TECHNOLOGY
- --------------------------------------------------------------------------------
GENERAL SYSTEM SUPPORT SUPPORTING MICROSOFT WINDOWS 95
Migrating to Windows 95 Using Installing and Configuring Microsoft
Systems Management Server 1.1 Windows 95
Supporting Microsoft Systems Microsoft Windows 95 Training
Management Server 1.2
Supporting Windows for Workgroups
Planning a Microsoft Systems
Management Server Site 1.2 Accelerated Training for Windows 3.1
& Windows for Workgroups 3.11
Internetworking Microsoft TCP/IP on
Microsoft Windows NT 3.5 Supporting Windows 3.1 and DOS 6.2
Internetworking Microsoft TCP/IP on WINDOWS NT 3.51
Microsoft Windows NT 4.0
Supporting Microsoft Windows NT
Supporting SNA Server 3.0 Server 3.51
OFFICE Accelerated Training for Microsoft
Windows NT 3.51
Mastering Microsoft Office 97
Development Supporting Microsoft Windows NT 3.51
Installing and Supporting Microsoft Microsoft Windows NT Training
Office 97
WINDOWS NT 4.0
PROJECT
Supporting Microsoft Windows NT
4.0--Core Technologies
Introduction to Project 4.1
Intermediate/Advanced Project 4.1 Accelerated Training for Microsoft
Windows NT 4.0
SQL SERVER
Administering Microsoft Windows NT
4.0
Fast Track 1: Microsoft SQL Server
Fundamentals
Installing and Configuring Microsoft
Windows NT Server 4.0
System Administration for Microsoft
SQL Server 6.5
Supporting Microsoft Windows NT
4.0--Enterprise Technologies
Implementing a Database Design on
Microsoft SQL Server 6.5
Enterprise Series: Implementing
Directory Services Using MS Windows
NT Server 4.0
Performance Tuning and Optimization
of Microsoft SQL Server 6.5
Microsoft SQL Server Training Enterprise Series: Microsoft Windows
NT Server 4.0 Server Analysis and
Optimization
New Features of SQL Server 6.5
VISUAL BASIC Enterprise Series: Microsoft Windows
NT Server 4.0 Network Analysis and
Optimization
Fundamentals of Microsoft Visual
Basic 4.0
Enterprise Series: Troubleshooting
Microsoft Windows NT Server 4.0 in
the Enterprise
Programming with Microsoft Visual
Basic 4.0
Mastering Microsoft Visual Basic 4.0 Microsoft Windows NT 4.0 Network
Administration Training
Mastering Microsoft Visual Basic
Version 5.0 Microsoft Windows NT 4.0 Technical
Support Training
Mastering Microsoft Visual Basic 5.0
Fundamentals Installing and Configuring Microsoft
Windows NT Workstation 4.0
VBA Fundamentals
Microsoft Windows NT 4.0 Overview
WINDOWS PROGRAMMING
Windows NT 4.0 Upgrade
Microsoft Windows Operating Systems
and Services Architecture
Fundamentals of Programming
Microsoft Foundation Class Library
Applications
Intermediate Windows-Based
Programming Using MFC Libraries
Mastering MFC Development
Programming with Windows NT using C
Windows & Windows 95 Support
30
<PAGE>
SUN TECHNOLOGY
- --------------------------------------------------------------------------------
Solaris 2.X System Administration Solaris 2.X NIS+ Administration with
Essentials Workshop
Introduction to Solaris 2.X System Programming for Beginners with Java
Administration
Introduction to Java Programming
Solaris 1.X to Solaris 2.X System
Administration
Introduction to Java Programming
(Win95 Version)
Solaris 2.X System Administration
Java Application Programming
Managing Your Network Using SunNet
Manager
Advanced Java Programming Workshop
Solaris 2.X Network Administration
Solaris 2.X NIS+ Administration with
Workshop
- --------------------------------------------------------------------------------
INTERNET/INTRANET TECHNOLOGY
- --------------------------------------------------------------------------------
Mastering Internet Development with Supporting Microsoft Proxy Server
ActiveX Technologies
Mastering Enterprise Web Site
Internet Development with ActiveX Development
and Visual Basic Script
Microsoft Web Site Essentials
Introduction to Oracle PowerBrowser
Mastering Microsoft Visual J++
Web Authoring and Design with
Microsoft Internet Explorer Implementing Normandy Server
Microsoft Internet Information Implementing Microsoft Merchant
Server 2.0 Training Server
Implementing Internet Services in a Installing Microsoft Internet
Microsoft Network Information Server
Creating and Configuring a Web Supporting Microsoft Internet
Server Using Microsoft Tools Information Server 2.0
Administering and Supporting FrontPage Introduction
Microsoft FrontPage 97
- --------------------------------------------------------------------------------
GENERAL TECHNOLOGY
- --------------------------------------------------------------------------------
Networking Essentials New Technology Seminar for Managers
Introduction to C Programming Relational Technology--Executive
Director Overview
Introduction to UNIX
Understanding Object Technology
UNIX Korn Shell Programming
Relational Database Design Concepts
The following is a case study:
ARIS is a leading provider of Microsoft training through the ATEC
channel. In addition, Microsoft frequently engages ARIS for
development and delivery of training programs for Microsoft personnel,
Microsoft Partners, and the Solution Provider channel. ARIS has
participated in pre-release training for Microsoft on Windows 95,
Systems Management Server, SNA Server, Exchange Server, Internet
Information Server, Merchant Server, Microsoft Commercial Internet
Server, Visual Basic and, most recently, Microsoft NT Server Cluster
Technologies. This training has been delivered in North America,
Europe, Asia, Latin America, Africa and Australia. ARIS considers
itself to be a key Microsoft partner because it facilitates the early
adoption of Microsoft technologies.
31
<PAGE>
RELATIONSHIPS WITH KEY VENDORS
The Company has developed strategic relationships with key vendors of
software, particularly Oracle, Microsoft and Sun. The Company participates in
a number of software application implementation programs established by
Oracle, including the Oracle BAP (Business Alliance Partner) program, the
Oracle ISV (Independent Software Vendor) program, the Oracle CAI (Cooperative
Applications Initiative) program and the Oracle SMTI (Systems Management Tools
Initiative) program. The Company has received a number of endorsements and
certifications from these vendors, including designation as a Microsoft
Solution Provider Partner, a Microsoft ATEC and a Sun Educational Services
U.S. Strategic Partner. These strategic relationships allow the Company to
gain access to beta versions of software and the software vendor's marketing
channels as well as to receive discounts on software. The Company regularly
participates with Microsoft in the development of courseware for new products
and trains Microsoft's employees during the early stages of a new product roll
out.
Certain of these software vendors also compete with the Company in providing
IT consulting and training services. Disputes between the Company and these
software vendors could result in the loss of vendor certifications, a
reduction in the number of client referrals or vendor actions which might
adversely affect the Company's ability to compete successfully with its
competitors. See "Risk Factors--Dependence on Key Vendors of Software" and "--
Competition."
SALES AND MARKETING
The Company sells its consulting and training services directly through its
regional sales forces. As of March 31, 1997, the Company had eight account
executives selling consulting services and five account executives and 11
telemarketing representatives selling training services. Software products are
sold by three internal telemarketing representatives and through referrals
from the Company's consulting operations. Other important client sources
include industry trade shows and referrals from, and joint marketing events
with, Oracle, Microsoft and other IT vendors. ARIS sales personnel are
compensated through a combination of a base salary and commissions.
Commissions are paid when services are performed or products are shipped
rather than when a contract is signed.
The ARIS marketing plan includes direct mail solicitations, advertising in
IT trade journals, trade show participation and seminars. The Company's course
catalogue and Internet web site are integral parts of its marketing effort.
32
<PAGE>
CLIENTS
The Company performs professional services for clients across a broad range
of industries and governmental entities. Set forth below is a representative
list of significant clients of the Company and the services and products
provided to them in 1996:
<TABLE>
<CAPTION>
NAME OF CLIENT CONSULTING TRAINING SOFTWARE
-------------- ---------- -------- --------
<S> <C> <C> <C>
Alaska Department of Transportation and Public
Facilities....................................... [X]
British Broadcasting Company (UK)................. [X]
City of Seattle................................... [X] [X] [X]
Channel Four Television Corporation (UK).......... [X]
Eagle Insurance Group............................. [X] [X]
ESCO Corporation.................................. [X] [X] [X]
Government Technology Service, Inc................ [X]
Hewlett Packard Company........................... [X]
Home Buyers Warranty.............................. [X] [X]
King County Department of Metropolitan Services... [X] [X] [X]
Lockheed Martin Corporation....................... [X] [X]
Micron Electronics, Inc. ......................... [X]
Microsoft Corporation............................. [X] [X]
National Westminster Group (UK)................... [X]
Nike, Inc......................................... [X] [X]
Oregon Health Sciences University................. [X] [X]
Quantum Corporation............................... [X] [X]
Quebecor, Inc..................................... [X] [X]
Robertson Ceco, Inc. ............................. [X]
SCITEX America Corp. ............................. [X] [X]
Starbucks Coffee Company.......................... [X]
Sun Microsystems, Inc. ........................... [X]
Tektronix, Inc.................................... [X] [X] [X]
The Boeing Company................................ [X] [X] [X]
The Gates Rubber Company.......................... [X] [X]
TIG Insurance Company............................. [X]
Tosco Northwest Company........................... [X] [X] [X]
U.S. Coast Guard.................................. [X]
U.S. General Services Administration.............. [X]
U.S. Internal Revenue Service..................... [X] [X]
Washington State Department of Transportation..... [X]
Washington State Department of Natural Resources.. [X] [X]
Weyerhaeuser Company.............................. [X] [X] [X]
</TABLE>
The Company has derived, and believes that it may continue to derive, a
significant portion of its revenue from a limited number of large clients. One
client, Tektronix, accounted for 9.1%, 21.8% and 20.0% of the Company's total
revenue in 1996, 1995 and 1994, respectively. In addition, revenue received by
the Company from various branches and agencies of the U.S. federal government
collectively (including revenue under the 8(a) Program) accounted for
approximately 12.1%, 16.4% and 5.9% of the Company's total revenue in 1996,
1995 and 1994, respectively. There can be no assurance that the volume of work
performed for specific clients will be sustained from year to year, or that a
major client in one year will engage the Company in a subsequent year. See
"Risk Factors--Customer Concentration."
COMPETITION
The IT consulting industry and the IT training industry are generally
regarded as separate industries, each of which is rapidly growing and highly
competitive. Within each industry there are a large number of competitors,
many of which have significantly greater financial, technical, marketing and
human resources and greater name recognition than the Company. The
33
<PAGE>
Company believes that its ability to provide clients with an integrated IT
solution, coupled with its focus on leading-edge technologies, provide it with
a unique competitive advantage. ARIS differentiates itself from its consulting
and training competitors by striving to be first to market with new
technologies, by leveraging the synergies between consulting and training, by
delivering consulting and training in high-demand, leading-edge technologies,
by the breadth and depth of its curriculum, convenience of its course
scheduling, its ability to deliver consulting and training services in
numerous geographic locations, and the quality, skill and reputation of its
instructors, consultants and project managers. Nevertheless, the Company
competes with companies in both the consulting and training industries.
ARIS' principal competitors in the delivery of consulting services are the
consulting divisions of the large international accounting firms, the
consulting divisions of software vendors such as Oracle, and numerous
international, national and regional IT consulting firms.
The Company faces competition in the delivery of IT training services from
the in-house IT departments of its prospective clients, companies such as
International Business Machines and Hewlett-Packard, software vendors, other
Microsoft ATECs, and independent international, national and regional training
companies.
The Company focuses its software product development on solving problems
that few other software companies have addressed. The Company's software
product, ARIS DFRAG, competes with the system management tools distributed by
BMC Software, Platinum Technology and Compuware. Although the Company believes
few commercially available products currently compete directly with
NoetixViews, there can be no assurance that new competitive products will not
be developed by Oracle, third party software vendors or by in-house IT
departments of the Company's current or potential clients. Management believes
that its primary competition in software development will come from custom in-
house development. See "Risk Factors--Competition."
INTELLECTUAL PROPERTY
The Company uses certain proprietary consulting and training methodologies,
courseware, software applications and products, trademarks and service marks,
and other proprietary and intellectual property rights. The Company relies
upon a combination of copyright, trademark and trade secret laws, as well as
nondisclosure and other contractual arrangements, to protect its proprietary
rights. The Company uses client licensing agreements and employee and third-
party nondisclosure and confidentiality agreements to limit access to and
distribution of its proprietary information.
The Company develops custom software applications and methodologies, and
training courses and methodologies for third party software products. The
training courses, methodologies and courseware are owned by the Company
through agreements with employees and subcontractors, but ownership of
software applications developed for clients is often assigned to the client,
with the Company retaining limited use licenses. The Company also develops
software application tools in the course of its consulting projects. The
Company generally seeks to retain significant ownership or marketing rights
for adaptation and reuse in subsequent projects. See "Risk Factors--
Intellectual Property Rights."
PERSONNEL AND HUMAN RESOURCES
As of March 31, 1997, the Company had 371 full-time employees, 273 of whom
were in the United States and 93 of whom were in the United Kingdom. Of this
total, 117 employees were involved in the delivery of training services, 172
employees were involved in the delivery and
34
<PAGE>
support of consulting services, 14 employees were involved in the sales,
marketing, development and support of software products, and 68 were involved
in management and administration. In addition, the Company retains the
services of subcontractors for certain consulting projects and to conduct
certain training services.
The Company places significant emphasis on the recruitment, training and
professional development of its employees, and offers a competitive
compensation package. These factors have resulted in attrition rates which
management believes are below the industry average.
The Company devotes considerable resources to its recruiting efforts. The
Company identifies prospective employees through referrals from existing
employees and clients, on-campus recruiting at colleges and universities, and
by advertising at trade shows and over the Internet. The Company currently has
three full-time recruiters.
The Company's consultants and project managers benefit from their ability to
receive ongoing training in the latest technological advances and developments
at the Company's training centers. The ability of the Company to train its
consultants and project managers internally provides the Company with a
competitive advantage over its competitors, many of whom must contract with
third-party instructors to keep their IT professionals current in the latest
technologies. In addition, the Company has a six-to-eight week training
program for its newly hired IT professionals which includes training in the
technologies comprising the Company's core competencies and training in the
Company's proprietary methodologies.
The Company's compensation package consists of a combination of salary,
stock options and benefits plans. In addition, the Company awards performance-
based bonuses to certain employees, including nearly all of its consultants,
project managers and instructors. The Company believes that by linking
employee compensation to the success of the Company, employees are encouraged
to focus on client satisfaction and to seek continuous professional
development.
The Company's success will depend in part on the continued services of its
key employees. As a result, the Company has entered into employment agreements
containing non-competition, non-disclosure and non-solicitation covenants with
all of its management, consultants, project managers and instructors, except
Mr. Paul Y. Song.
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<PAGE>
FACILITIES
The Company's headquarters is located at 6720 Fort Dent Way, Suite 250,
Seattle, Washington. The Company leases approximately 9,000 square feet in two
buildings in this business complex. The Company and its subsidiaries also
lease facilities in various locations listed in the table below (as of March
31, 1997).
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE NO. OF
LOCATION FOOTAGE CLASSROOMS FUNCTION
-------- ----------- ---------- --------
<C> <C> <C> <S>
Seattle, WA................. 9,000 -- Corporate headquarters,
consulting headquarters
Bellevue, WA................ 15,000 6 Training headquarters
(Seattle area)
Bellevue, WA................ 8,000 5 ARIS Software, Inc.
(Seattle area) headquarters, training
Beaverton, OR............... 7,000 4 Consulting, training,
(Portland area) software
Denver, CO.................. 3,000 2 Consulting, training
Denver, CO.................. 7,000 5 Training
Dallas, TX.................. 7,000 -- Consulting
Fairfax, VA................. 10,500 5 Training, consulting
(Washington, D.C. area)
Tampa, FL................... 2,000 -- Consulting
London, U.K................. 6,500 9 Training
London, U.K................. 1,250 3 Training (not currently
in use)
Oxford, U.K................. 5,000 -- Oxford headquarters
Birmingham, U.K............. 2,500 4 Training
Oxford, U.K................. 4,000 4 Training
</TABLE>
LEGAL PROCEEDINGS
The Company is from time to time involved in legal proceedings that arise
out of the normal course of business. As of March 31, 1997, the Company was
not involved in any material legal proceedings.
36
<PAGE>
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES
The directors, executive officers and key employees of the Company and their
ages as of March 31, 1997, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Paul Y. Song..................... 34 President, Chief Executive Officer and
Chairman of the Board
Kendall W. Kunz.................. 33 Senior Vice President of Western
Operations and Director
John Y. Song..................... 35 Vice President of Eastern Operations
Thomas W. Averill................ 52 Vice President of Finance and Chief
Financial Officer
Jeffrey W. Gilles................ 46 Vice President of Training Business
Development
John J. Griffin.................. 39 Vice President of Sales and Marketing
David W. Melin................... 41 President of ARIS Software, Inc. and
Noetix Corporation
Hugh Simpson-Wells............... 40 Managing Director of Oxford Computer
Group Limited
Norbert W. Sugayan, Jr........... 36 General Counsel and Secretary
Tina J. Song..................... 33 Director of Human Resources and
Information Technology
Bruce R. Kennedy(1)(2)........... 58 Director
Kenneth A. Williams(1)(2)........ 42 Director
</TABLE>
- --------
(1) Member of Audit Committee
(2) Member of Compensation Committee
PAUL Y. SONG, founder of the Company, has been the Company's President,
Chief Executive Officer and Chairman since its incorporation in October 1990.
Mr. Song also serves as Chairman of the Company's subsidiaries, Oxford, ARIS
Software Inc. ("ASI"), and ASI's wholly-owned subsidiary, Noetix. From 1988 to
1990, Mr. Song was employed by Oracle's Consulting division in a number of
capacities. Mr. Song received a B.S. degree in Electrical Engineering from the
General Motors Institute and an M.S. degree in Computer Science from the
Massachusetts Institute of Technology. Paul Y. Song is the husband of Tina J.
Song and the brother of John Y. Song.
KENDALL W. KUNZ was appointed as the Company's Senior Vice President of
Western Operations and a Director in March 1997. Mr. Kunz is responsible for
the Company's consulting and training operations in the Western United States,
including Washington, Oregon, Colorado and Texas. Mr. Kunz served as the
Company's Senior Vice President of Education from October 1996 to March 1997.
From August 1995 to October 1996, Mr. Kunz was the Company's Vice President of
Consulting and from June 1994 to August 1995, Mr. Kunz served as Vice
President of Sales and Marketing. From July 1992 until June 1994, Mr. Kunz
served as the Company's Director of Sales and Marketing. Between June 1988 and
July 1992, Mr. Kunz was employed by Oracle in a number of capacities. Mr. Kunz
received a B.S. degree in Management from Purdue University.
JOHN Y. SONG was appointed as the Company's Vice President of Eastern
Operations in March 1997. Mr. Song is responsible for the Company's consulting
and training operations in the Eastern United States, including the Washington
D.C. area and Florida. Mr. Song served as the Company's Vice President of
Business Development from September 1996 to March 1997.
37
<PAGE>
From March 1996 to August 1996, Mr. Song was the Company's Executive Director
for the Federal and Public Sector and from February 1991 to February 1996, Mr.
Song was Director of Business Development of the Company. Prior to joining the
Company, Mr. Song worked in Hong Kong for Hill and Knowlton, a public
relations firm, and in Seoul, Republic of Korea for Lee and Associates, a
management consulting firm. Mr. Song received a B.A. degree in Journalism from
Western Washington University and an M.B.A. degree from the Graduate School of
International Studies at Yonsei University (Republic of Korea). John Y. Song
is the brother of Paul Y. Song.
THOMAS W. AVERILL has served as Vice President of Finance and Chief
Financial Officer since joining ARIS in July 1996 and is responsible for the
Company's financial and administrative operations. Mr. Averill has also served
as the Chief Financial Officer and a Director of ASI and Noetix since August
1996 and October 1996, respectively, and a Director of Oxford since March
1997. From November 1994 to July 1996, Mr. Averill was self-employed as a
private business and finance consultant. Between November 1992 and November
1995, Mr. Averill also was a Vice President of Finance and a director of Simon
Golub and Sons, Inc., a manufacturer and international wholesale distributor
of personal time pieces and fine jewelry. From 1990 to 1992, Mr. Averill was
an employee of and consultant to Paragon Computer Corp. and was the Vice
President of Finance of Paragon Computer Technology Corp., both of which are
computer systems integration companies.
JEFFREY W. GILLES has served as the Company's Vice President of Training
Business Development since October 1996. Mr. Gilles is responsible for
creating business alliances, developing online training capabilities, and new
product research and development. From January 1995 to October 1996, Mr.
Gilles was Vice President of Education of the Company, responsible for the
Company's training operations. From June 1992 to December 1994, Mr. Gilles was
the President of Clarity. From July 1988 to June 1992, Mr. Gilles was Regional
Education Manager for Oracle. Mr. Gilles received a B.A. degree in
Broadcasting and Film, a B.S. degree in Computer Science and an M.S. degree in
Computer Science from the University of Iowa.
JOHN J. GRIFFIN has served as the Company's Vice President of Sales and
Marketing since July 1996. From 1988 to 1996, Mr. Griffin held various sales
and account management positions at Oracle and, immediately prior to joining
the Company, was Oracle's Global Account Manager for the Boeing Company. Prior
to joining Oracle, Mr. Griffin held technical, management and sales positions
for a number of companies. Mr. Griffin received a B.A. degree in
Organizational Communications from the University of Utah.
DAVID W. MELIN has served as President and a Director of ASI and Noetix
since August 1996 and October 1996, respectively. From 1990 to 1996, Mr. Melin
owned and operated Allied Bolt Co., an industrial fastener distribution and
manufacturing company. Mr. Melin was Product Manager for MS-DOS and Microsoft
LAN Manager at Microsoft from 1984 to 1989. Mr. Melin received a B.A. degree
in Mechanical Engineering from the University of Washington and an M.S. degree
in Engineering Management from Stanford University.
HUGH SIMPSON-WELLS is Managing Director and Secretary of Oxford, the U.K.
subsidiary of the Company, and is responsible for all operations of Oxford.
Mr. Simpson-Wells founded Oxford in 1983. Prior to founding Oxford, Mr.
Simpson-Wells was an engineer with the Ford Motor Company in the U.K. Mr.
Simpson-Wells received an M.S. degree in Engineering Science from Oxford
University.
NORBERT W. SUGAYAN, JR. has served as the Company's General Counsel since
February 1996, its Secretary since April 1997 and as Secretary of ASI and
Noetix since November 1996. Prior to joining the Company on a full-time basis,
Mr. Sugayan practiced law with private law firms in Seattle, Washington, as of
counsel to Lane Powell Spears Lubersky
38
<PAGE>
from February 1996 to December 1996, as a principal of Harris, Sugayan & Hull
from March 1994 to February 1996 and as an attorney with Bogle & Gates from
February 1992 to March 1994. Prior to February 1992, Mr. Sugayan practiced law
in Seoul, Republic of Korea and Dallas, Texas. Mr. Sugayan received a B.A.
degree in Economics and English from the University of Michigan, a J.D. degree
from the University of Notre Dame Law School, and an L.L.M. degree in
Corporations Law from New York University.
TINA J. SONG has served as the Company's Director of Human Resources and
Information Technology since January 1995. Ms. Song was a Vice President of
the Company from October 1990 until March 1996, and was a Director of the
Company from October 1990 until November 1994. From April 1993 to January
1995, Ms. Song was also the Company's Consulting Resource Manager. Ms. Song
received a B.S. degree in Electrical Engineering from the General Motors
Institute. Ms. Song is the wife of Paul Y. Song.
BRUCE R. KENNEDY was appointed as a Director of the Company in March 1997.
Mr. Kennedy is Chairman Emeritus of Alaska Air Group, Inc., a New York Stock
Exchange listed airline holding company. Since 1991, Mr. Kennedy has served as
a Director, and as Chairman of the Executive Committee of the Board, of Alaska
Air Group, Inc. He served as Chairman, Chief Executive Officer and President
of Alaska Air Group, Inc., Chairman, Chief Executive Officer and President of
Alaska Airlines, Inc. and as Chairman of Horizon Air Industries, Inc., a
regional airline, from 1979 to 1991.
KENNETH A. WILLIAMS was appointed as a Director of the Company in March
1997. From 1996 to the present, Mr. Williams has been Vice Chairman and a
director of CUC International, a consumer services company. He is also a
member of the Office of the President of CUC International. Prior to joining
CUC International, Mr. Williams was the Chairman of the Board and Chief
Executive Officer of Sierra On-Line, Inc., a consumer software company which
he co-founded in 1979 and which was acquired by CUC International in 1996.
Upon approval of the Company's Restated Articles at an annual meeting of
shareholders to be held on April 25, 1997, the Board of Directors of the
Company will be divided into three classes. One class will be elected at each
annual meeting of shareholders, with the members of each class to hold office
for a three-year term and until successors of such class have been elected and
qualified. Messrs. Song and Kennedy will initially serve as Class I directors
until the annual meeting of shareholders held in 2000, or until their
respective successors have been elected and qualified. Mr. Williams will
initially serve as a Class II director until the annual meeting of
shareholders held in 1999, or until his successor has been elected and
qualified. Mr. Kunz will initially serve as a Class III director until the
annual meeting of shareholders held in 1998, or until his successor has been
elected and qualified.
BOARD COMMITTEES
The Board of Directors has created an Audit Committee and a Compensation
Committee. The Audit Committee consists of Mr. Kennedy (Chair) and Mr.
Williams. Among other functions, the Audit Committee makes recommendations to
the Board of Directors regarding the selection of independent auditors,
reviews the results and scope of the audit and other services provided by the
Company's independent auditors, reviews the Company's balance sheet, statement
of operations and cash flows and reviews and evaluates the Company's internal
control functions.
The Compensation Committee consists of Mr. Williams (Chair) and Mr. Kennedy.
The Compensation Committee reviews and approves the compensation and benefits
for the Company's executive officers, administers the Company's stock option
plans and makes recommendations to the Board of Directors regarding the
Company's compensation policies.
39
<PAGE>
DIRECTOR COMPENSATION
Directors of the Company do not receive cash compensation for their services
as directors or members of the committees of the Board of Directors, but are
reimbursed for their reasonable expenses incurred in attending Board and
committee meetings. In addition, each non-employee director is entitled to
receive stock options pursuant to the automatic grant provisions of the
Company's 1997 Stock Option Plan. See "--Stock Option Plans."
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Paul Y. Song was the sole director of the Company during 1996 and made
all decisions concerning the compensation of executive officers, including his
own.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table sets forth certain
information regarding compensation earned by the Company's Chief Executive
Officer and the other executive officers who earned in excess of $100,000 in
salary and bonus during fiscal 1996 (the "Named Executive Officers").
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
----------------
ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- --------------------------- -------- ------- ------------
<S> <C> <C> <C>
Paul Y. Song..................................... $120,000 $90,553 $3,655(1)
President and Chief Executive Officer
Kendall W. Kunz.................................. 108,000 81,644 1,190(1)
Senior Vice President of Western Operations
Jeffrey W. Gilles................................ 102,000 74,830 --
Vice President of Training Business Development
John Y. Song..................................... 76,000 53,680 3,046(1)
Vice President of Eastern Operations
</TABLE>
- --------
(1) Represents amount paid by the Company for automobile expenses.
STOCK OPTION PLANS
1997 STOCK OPTION PLAN. On March 13, 1997, the Board of Directors adopted
the 1997 Stock Option Plan (the "1997 Stock Option Plan"), which has been
submitted for approval at an annual meeting of shareholders to be held on
April 25, 1997. The aggregate number of shares reserved for issuance under the
1997 Stock Option Plan is two million shares, less the 1,259,700 shares that
have been granted and not subsequently become available for future grant under
the Company's 1995 Stock Option Plan, and subject to certain other
adjustments. The 1997 Stock Option Plan will be administered by the
Compensation Committee of the Board of Directors (the "Plan Administrator")
and provides for the grant of options to purchase shares of the Company's
Common Stock to employees, officers and directors of, and consultants to, the
Company. Options granted may be either incentive stock options ("ISOs") within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended,
or non-statutory stock options ("NSOs"). The recipients of grants, the number
of options granted, and other terms and conditions of options granted under
the 1997 Stock Option Plan are to be determined in the discretion of the Plan
Administrator, except that the 1997 Stock Option Plan provides for automatic,
non-discretionary grants of 5,000 NSOs to non-employee directors (as defined
under Rule 16b-3 promulgated pursuant to the Securities Exchange Act of 1934,
as amended) for each year of service (or portion thereof) on the Board of
Directors of the Company.
40
<PAGE>
Under the terms of the 1997 Stock Option Plan, ISOs may be issued only to
employees of the Company or employees of any present or future subsidiary of
the Company. After the date of this Prospectus, the exercise price of ISOs
granted under the 1997 Stock Option Plan may not be less than 100% of the fair
market value of the Common Stock at the time of the grant (or less than 110%
in the case of a holder of 10% or more of the total voting power of the
Company). ISOs will have a maximum term of ten years from the date of grant
(five years in the case of a holder of greater than 10% of the total voting
power of the Company), and will generally vest over a period of four years.
The aggregate fair market value (as determined at the time of grant) of shares
with respect to which ISOs are excercisable for the first time by an optionee
in any one calender year may not exceed $100,000. After the date of this
Prospectus, NSOs granted under the 1997 Stock Option Plan will have an
exercise price of not less than 100% of the fair market value of the Common
Stock at the time of the grant, and will have a maximum term of ten years from
the date of grant. Fair market value of the Common Stock will be determined by
the Plan Administrator. Options granted under the 1997 Stock Option Plan will
not be transferable other than by will or the laws of descent and
distribution, except that NSOs will also be transferable pursuant to a
domestic relations order.
1995 STOCK OPTION PLAN. As of December 31, 1996, options to purchase 353,700
shares were outstanding under the Company's 1995 Stock Option Plan (the "1995
Stock Option Plan"), with a weighted-average exercise price of $2.12 per
share, and options to purchase 906,000 shares had been exercised. ISOs granted
under the 1995 Stock Option Plan generally have a maximum term of ten years
from the date of grant, and vest over a period of five years. NSOs granted
under the 1995 Stock Option Plan generally have a maximum term of seven years.
Options granted under the 1995 Stock Option Plan are not transferable other
than by will or the laws of descent and distribution. In connection with the
adoption of the 1997 Stock Option Plan in March 1997, the Board of Directors
determined that it would not make any future grants under the 1995 Stock
Option Plan.
Prior to January 1995, the Company from time to time granted NSOs to key
employees. These grants were not made pursuant to any formal policy or plan.
EMPLOYMENT AGREEMENTS
Each of the Named Executive Officers except Mr. Paul Y. Song has an
employment agreement with the Company. Mr. Kendall W. Kunz's employment
agreement provides for his employment as an officer of the Company for an
indefinite period, subject to the right of either party to terminate upon 30
days' prior written notice. Mr. John Y. Song's employment agreement provides
for his employment as an officer of the Company for an indefinite period,
subject to the right of either party to terminate upon 14 days' prior written
notice. Mr. Jeffrey W. Gilles' employment agreement provides for his
employment as an officer of the Company through December 31, 1997, subject to
the right of either party to terminate upon prior written notice. Each such
employment agreement other than Mr. Gilles' provides for termination by the
Company for cause effective immediately upon notice to the employee. In
addition, each such employment agreement provides for an annual bonus based
upon the achievement of goals (such as revenue and income) as set annually by
the Board of Directors and also contains other terms customarily found in
executive officer agreements, including provisions relating to the
reimbursement of certain business expenses, participation in employee benefit
plans available to other executive officers and employees of the Company,
confidentiality, non-competition and non-solicitation.
41
<PAGE>
CERTAIN TRANSACTIONS
On February 28, 1997, the Company repurchased, 100,000 shares of Common
Stock at $9.75 per share from Jeffrey W. Gilles, the Company's Vice President
of Training Business Development, and 30,000 shares of Common Stock at $9.75
per share from Stephen Brugger, an employee of the Company and beneficial
owner of more than 5% of the Common Stock prior to the closing of this
Offering. The Company repurchased these shares following discussions between
two third parties unaffiliated with the Company and certain shareholders of
the Company regarding the third parties' interest in acquiring an equity stake
in the Company and obtaining a seat on the Board of Directors. The Board of
Directors determined that the repurchase was in the best interests of, and on
terms fair and reasonable to, the Company.
42
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Stock as of March 31, 1997 by:
(i) each of the directors and Named Executive Officers of the Company; (ii)
each other person known by the Company to own beneficially more than 5% of the
Common Stock; (iii) each Selling Shareholder; and (iv) all directors and
executive officers of the Company as a group.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE THE OWNED AFTER THE
OFFERING SHARES OFFERING
----------------------- BEING -----------------------
NUMBER PERCENT(1)(2) OFFERED NUMBER PERCENT(1)(2)
--------- ------------- ------- --------- -------------
<S> <C> <C> <C> <C> <C>
NAMED EXECUTIVE OFFICERS
AND DIRECTORS
Paul Y. Song(3)......... 3,948,000 53.2% -- 3,948,000 .
6720 Fort Dent Way,
Suite 250
Seattle, Washington
98188-2555
Jeffrey W. Gilles....... 460,000 6.2% -- 460,000 .
6720 Fort Dent Way,
Suite 250
Seattle, Washington
98188-2555
Kendall W. Kunz......... 320,000 4.3% -- 320,000 .
6720 Fort Dent Way,
Suite 250
Seattle, Washington
98188-2555
John Y. Song............ 195,500 2.6% -- 195,500 .
6720 Fort Dent Way,
Suite 250
Seattle, Washington
98188-2555
Bruce R. Kennedy........ 12,500 * -- 12,500 *
16430 Ambaum Boulevard
South
Seattle, Washington
98148
Kenneth A. Williams..... -- * -- -- *
8434 North Mercer Way
Mercer Island,
Washington 98040
OTHER 5% SHAREHOLDERS
Tina J. Song(3)......... 1,172,000 15.8% -- 1,172,000 .
6720 Fort Dent Way,
Suite 250
Seattle, Washington
98188-2555
Song Family Ltd.
Partnership............ 650,000 8.8% -- 650,000 .
3700 First Interstate
Center
999 Third Avenue
Seattle, Washington
98104
Stephen J. Brugger(4)... 505,494 6.8% -- 505,494 .
6720 Fort Dent Way,
Suite 250
Seattle, Washington
98188-2555
SELLING SHAREHOLDERS
Ian C.H. Cunningham..... 66,500 * 13,300 52,200 *
Shepherd's Cottage
Oxford OX44 9DB
United Kingdom
Hugh Simpson-Wells...... 103,460 1.4% 7,500 95,960 .
33 Hurst Rise Road
Oxford OX2 9HE
United Kingdom
ALL DIRECTORS AND
EXECUTIVE OFFICERS AS A
GROUP (12 PERSONS)..... 5,633,960 75.9% 7,500 5,626,460 .
</TABLE>
- -------
* Less than 1%
(1) Assumes no exercise of the Underwriters' over-allotment option.
(2) Beneficial ownership is determined in accordance with the rules of the
Commission and generally includes voting or investment power with respect
to securities. Common Stock subject to options currently exercisable or
exercisable within 60 days of March 31, 1997 are deemed outstanding for
purposes of computing the percentage ownership of the person holding such
option but are not deemed outstanding for purposes of computing the
percentage ownership of any other person. Except where indicated, and
subject to community property laws where applicable, the persons in the
table above have sole voting and investment power with respect to all
Common Stock shown as beneficially owned by them.
(3) Includes 650,000 shares registered in the name of Song Family Limited
Partnership, over which Paul Song and Tina Song share voting and
dispositive power.
(4) Includes 2,000 shares registered in the name of Aidan J. Brugger Trust,
40,000 shares registered in the name of Brugger Family Children Trust, and
2,760 shares registered in the name of Aidan J. Brugger, over all of which
Stephen J. Brugger exercises voting and dispositive power.
43
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon approval of the Restated Articles at an annual meeting of shareholders
to be held on April 25, 1997, the authorized capital of the Company will
consist of 100,000,000 shares of Common Stock and 5,000,000 shares of
preferred stock, without par value (the "Preferred Stock"). The following
summary description of the Company's capital stock is qualified in its
entirety by reference to the Restated Articles and the Restated Bylaws of the
Company, copies of which are filed as exhibits to the Registration Statement
of which this Prospectus forms a part.
COMMON STOCK
On March 31, 1997, there were 7,423,900 shares of Common Stock outstanding,
held of record by 60 shareholders. Holders of Common Stock are entitled to one
vote per share on all matters submitted to a vote of shareholders. There are
no cumulative voting rights for the election of directors. Holders of Common
Stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor, subject to
preferences that may be applicable to any outstanding Preferred Stock. In the
event of the liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after
payment of liabilities and the liquidation preference of any outstanding
Preferred Stock. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. All outstanding shares of Common Stock are,
and all shares of Common Stock to be outstanding upon completion of this
Offering will be, fully paid and nonassessable.
PREFERRED STOCK
Upon approval of the Restated Articles, the Company's Board of Directors
will have the authority, without further action by the shareholders, to issue
up to 5,000,000 shares of Preferred Stock in one or more series and to fix
designations and powers, preferences and relative rights of such shares, and
to increase or decrease the number of shares of any series subsequent to the
issue of that series, but not below the number of shares of such series then
outstanding. Shares of Preferred Stock which may be redeemed, purchased or
acquired by the Company may be reissued except as otherwise provided by law.
The issuance of Preferred Stock in certain circumstances may delay, deter or
prevent a change in control of the Company, may discourage bids for the Common
Stock at a premium over its market price and may adversely affect the market
price of, and the voting and other rights of the holders of, the Common Stock.
The Company currently has no plans to issue any Preferred Stock.
WARRANT
On March 31, 1997, there was one warrant outstanding to purchase 4,000
shares of Common Stock at a purchase price of $10.00 per share. The warrant is
currently exercisable in whole or in part, at any time and from time to time
until February 2002. The warrant contains certain protections against dilution
resulting from stock splits, stock dividends and similar events. The warrant
may be exercised for cash or pursuant to certain cashless exercise provisions.
REGISTRATION RIGHTS
In connection with the October 1996 purchase of SofTeach, the Company
granted certain registration rights to the former shareholders of SofTeach
(the "SofTeach Shareholders") who
44
<PAGE>
hold an aggregate of 42,000 shares of Common Stock. In connection with the
February 1997 acquisition of Oxford, the Company granted certain "piggy-back"
registration rights to the former shareholders of Oxford (the "Oxford
Shareholders") who hold an aggregate of 280,000 shares of Common Stock. At any
time and from time to time after the date of this Prospectus under certain
circumstances and limitations, the SofTeach Shareholders and the Oxford
Shareholders may include their shares in any registration of the Company's
Common Stock under the Securities Act on a form which permits registration of
secondary shares, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a transaction under Rule
145 of the Securities Act, a transaction relating solely to the sale of debt
or convertible debt instruments or a registration on any form (other than Form
S-1, S-2 or S-3, or their successor forms) which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of such shares of Common Stock. In
addition, one of the Oxford Shareholders, Mr. Ian C.H. Cunningham, has the
right to include up to 13,300 shares of Common Stock in this Offering, and has
elected to do so. See "Principal and Selling Shareholders" and "Shares
Eligible for Future Sale."
WASHINGTON ANTI-TAKEOVER STATUTE
Washington law contains certain provisions that may have the effect of
delaying or discouraging a hostile takeover of the Company. In addition,
Chapter 23B.19 of the Washington Business Corporation Act prohibits a
corporation, with certain exceptions, from engaging in certain significant
business transactions with an "Acquiring Entity" (defined as a person who
acquires 10% or more of the corporation's voting securities without the prior
approval of the corporation's board of directors) for a period of five years
after such acquisition. The prohibited transactions include, among others, a
merger with, disposition of assets to, or issuance or redemption of stock to
or from, the Acquiring Entity, or allowing the Acquiring Entity to receive any
disproportionate benefit as a shareholder. An Acquiring Entity is further
prohibited from engaging in significant business transactions with the target
corporation unless the per share consideration paid to holders of outstanding
shares of Common Stock and other classes of stock of the target corporation
meet certain minimum criteria. These provisions may have the effect of
delaying, deterring or preventing a change in control of the Company.
CERTAIN PROVISIONS IN RESTATED ARTICLES AND RESTATED BYLAWS
Upon shareholder approval of the Restated Articles, the Board of Directors
of the Company will be divided into three classes, as nearly equal in number
as possible. One class will be elected at each annual meeting of the
shareholders, with the members of each class to hold office for a three-year
term and until successors of such class have been elected and qualified. Upon
shareholder approval of the Restated Bylaws: (i) the Board of Directors will
consist of seven persons or so many as may from time to time be designated by
the then-existing Board of Directors: (ii) vacancies in the Board of Directors
may be filled by the affirmative vote of a majority of the remaining directors
in office though less than a quorum of the Board of Directors; (iii) the
entire Board of Directors, or any member thereof, may be removed only by the
affirmative vote of at least two-thirds of shares then present and entitled to
vote at an election of such directors at a special meeting of shareholders
called expressly for that purpose; and (iv) director nominations not made in
accordance with certain notice provisions may, at the discretion of the
Chairman of the Board, be disregarded. It is possible that the provisions
discussed above may delay, deter or prevent a change in control of the
Company.
DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY
The Restated Articles provide that no director shall be personally liable to
the Company or its shareholders for monetary damages for conduct as a
director, excluding, however, liability
45
<PAGE>
for acts or omissions involving intentional misconduct or knowing violations
of law, illegal distributions or transactions from which the director receives
benefits to which the director is not legally entitled. In addition, the
Restated Bylaws provide for broad indemnification by the Company of its
officers and directors in accordance with Washington law. Insofar as the
indemnity for liabilities arising under the Securities Act may be permitted to
directors or officers of the Company pursuant to the foregoing provisions, the
Company has been informed that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, 520 Pike Street, Suite 1220, Seattle, Washington 98101.
46
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, the Company will have . shares of Common
Stock outstanding, assuming no exercise of the over-allotment option and no
exercise of outstanding options and warrants. All of the . shares of Common
Stock sold in this Offering are freely tradeable without restriction or
further registration under the Securities Act, except for any shares purchased
by affiliates of the Company ("Affiliates") (as defined in Rule 144 under the
Securities Act). The 7,423,900 shares of Common Stock outstanding prior to
this Offering were issued and sold without registration under the Securities
Act and public sale thereof in the United States will be restricted except to
the extent such shares are registered under the Securities Act or sold in
accordance with an applicable exemption from registration. Of the 7,423,900
shares of Common Stock outstanding prior to this Offering, 280,000 shares were
issued to persons whom the Company believed to be outside the United States at
the time of issuance (the "Non-United States Shares"), and thus are subject to
the restrictions imposed on the resale of such shares pursuant to Regulation
S. The remaining 7,143,900 shares were issued to persons in the United States
in transactions exempt from registration pursuant to the Securities Act. A
total of 20,800 of the Non-United States Shares are being sold pursuant to
this Offering. Pursuant to Regulation S, the remaining 259,200 Non-United
States Shares may, under certain circumstances, be resold in the United States
by persons other than Affiliates without registration under the Securities
Act, immediately after the date of this Prospectus, subject to the Lock-up
Agreements.
A total of 7,327,920 shares of Common Stock held by existing shareholders
are subject to the Lock-up Agreements with Deutsche Morgan Grenfell Inc. and
may not be offered or sold or otherwise transferred until 180 days following
the closing of this Offering. Taking into account restrictions imposed by the
Securities Act, rules promulgated by the Commission thereunder and the Lock-up
Agreements, the number of additional shares that will be available for sale in
the public market, subject in some cases to the volume and other restrictions
of Rule 144 under the Securities Act, will be as follows: 6,528,160 shares
will be eligible for sale beginning 180 days after the closing of this
Offering, and 850,020 shares will be eligible for sale pursuant to Rule 144
upon the expiration of applicable holding periods, which will expire between
November 1, 1997 and March 10, 1999. Deutsche Morgan Grenfell Inc. may, in its
sole discretion and at any time without notice, release all or any portion of
the shares subject to the Lock-up Agreements. Upon the closing of this
Offering, holders of 301,200 shares of Common Stock are entitled to certain
rights with respect to the registration of such shares under the Securities
Act. In addition, the Company intends to file a registration statement on Form
S-8 under the Securities Act approximately 180 days after the closing of this
Offering to register approximately 1,951,700 shares of Common Stock reserved
for issuance under the Company's 1995 Stock Option Plan and 1997 Stock Option
Plan. In addition, up to 4,000 shares of Common Stock issuable upon exercise
of an outstanding warrant will become available for sale in the public market
following the expiration of the Rule 144 holding period on February 24, 1998,
if exercised pursuant to cashless exercise provisions, or one year following
the exercise of the warrant for cash.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated under Rule 144), including an Affiliate, who has
beneficially owned restricted securities for a period of at least one year
from the later of the date such restricted securities were acquired from the
Company or the date on which they were acquired from an Affiliate, is entitled
to sell, within any three-month period commencing 90 days after the date of
this Prospectus, a number of shares that does not exceed the greater of 1.0%
of the then outstanding shares of Common Stock (approximately . shares
immediately after this Offering) or the average weekly trading volume in the
Common Stock during the four calendar weeks preceding such sale. Sales under
Rule 144 are also subject to certain other provisions relating to notice of
sale and the availability of current public information about the Company.
However,
47
<PAGE>
under Rule 144(k), if a period of at least two years has elapsed between the
later of the date the restricted securities were acquired from the Company or
the date on which they were acquired from an Affiliate of the Company, a
holder of such restricted securities, who is not an Affiliate at the time of
the sale and has not been an Affiliate for at least three months prior to the
sale, would be entitled to sell the shares immediately, without regard to the
availability of public information about the Company, volume, manner of sale
and notice limitations described above.
Prior to this Offering, there has been no public market for the Common
Stock, and any sale of substantial amounts of the Common Stock in the open
market, or the availability of shares for sale, may adversely affect the
market price of the Common Stock and the ability of the Company to raise funds
through equity offerings in the future.
UNDERWRITING
The underwriters named below (the "Underwriters"), for whom Deutsche Morgan
Grenfell Inc., Montgomery Securities and Piper Jaffray Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions of the underwriting agreement (the form of which will be
filed as an exhibit to the Company's Registration Statement of which this
Prospectus is a part) (the "Underwriting Agreement"), to purchase from the
Company and the Selling Shareholders the number of shares of Common Stock set
forth below opposite their respective names:
<TABLE>
<CAPTION>
NUMBER
OF
SHARES
-------
<S> <C>
Deutsche Morgan Grenfell Inc......................................
Montgomery Securities.............................................
Piper Jaffray Inc.................................................
-------
Total.........................................................
=======
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, including approval of certain
matters by counsel, and that the Underwriters will purchase all shares of
Common Stock offered hereby if any such shares are purchased.
The Representatives have advised the Company and the Selling Shareholders
that the Underwriters propose to offer the Common Stock to the public at the
initial public offering price set forth on the cover page of this Prospectus.
The Underwriters may allow selected dealers a concession of not more than $ .
per share. The selected dealers may reallow a concession of not more than $ .
to certain other dealers. The Common Stock is offered subject to receipt and
acceptance by the Underwriters and to certain other conditions, including the
right to reject orders in whole or in part. After the Offering, the price,
concessions and re-allowances to dealers and other selling terms may be
changed by the Representatives. The Underwriters do not intend to sell any of
the shares of Common Stock offered hereby to accounts for which they exercise
discretionary authority.
The Company has granted an option to the Underwriters to purchase up to .
additional shares of Common Stock at the initial public offering price, less
underwriting discounts, to cover over-allotments, if any. Such option may be
exercised at any time until 30 days after the date of the Underwriting
Agreement. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment, subject to certain conditions,
to purchase such
48
<PAGE>
additional shares in approximately the same proportion as set forth in the
above table, and the Company will be obligated to sell such shares to the
Underwriters. The Underwriters may exercise such option only to cover over-
allotments made in the Offering, if any.
Certain persons participating in this Offering may engage in over-allotments
or effect transactions that stabilize, maintain or otherwise affect the market
price of the Common Stock at levels above those which might otherwise prevail
in the open market, including by entering stabilizing bids, effecting
syndicate covering transactions or imposing penalty bids. Over-allotment
involves syndicate sales in excess of the offering size, which creates a
syndicate short position. A stabilizing bid means the placing of any bid for
or effecting of any purchase of the Common Stock for the purpose of pegging,
fixing or maintaining the price thereof. A syndicate covering transaction
involves the placing of any bid for or the effecting of any purchase of the
Common Stock on behalf of the underwriting syndicate to cover a short position
created in connection with this Offering. A penalty bid means an arrangement
that permits the Underwriters to reclaim a selling concession granted to a
syndicate member in connection with this Offering when shares of Common Stock
sold by the syndicate member are purchased in syndicate covering transactions.
Such transactions may be effected on the Nasdaq Stock Market, in the over-the-
counter market, or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.
In connection with the Offering, the Company, the officers and directors of
the Company, and certain other shareholders of the Company have agreed not to
offer or sell or otherwise transfer any Common Stock until the expiration of
180 days following the closing of this Offering without the prior written
consent of Deutsche Morgan Grenfell Inc.
The Underwriting Agreement provides that the Company and the Selling
Shareholders will indemnify the several Underwriters and their controlling
persons against certain liabilities, including civil liabilities under the
Securities Act, or will contribute to payments the Underwriters may be
required to make in respect thereof.
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price will be determined by negotiation between
the Company and the Representatives. The principal factors to be considered in
determining the public offering price include the information set forth in
this Prospectus and otherwise available to the Representatives, the history
and the prospects for the industry in which the Company competes, the ability
of the Company's management, the prospects for future earnings of the Company,
the present state of the Company's development and its current financial
condition, the general condition of the securities markets at the time of the
Offering, and the recent market prices of, and the demand for, publicly traded
common stock of generally comparable companies. Each of the Representatives
has informed the Company that it currently intends to make a market in the
shares subsequent to the effectiveness of the Offering, but there can be no
assurance that the Representatives will take any action to make a market in
any securities of the Company.
49
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the legality of the Common Stock offered
by this Prospectus will be passed upon for the Company and the Selling
Shareholders by Van Valkenberg Furber Law Group P.L.L.C., Seattle, Washington.
Certain legal matters in connection with the Offering will be passed upon for
the Underwriters by Stoel Rives LLP, Seattle, Washington.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1996
and 1995 and for each of the three years in the period ended December 31,
1996, and the financial statements of SofTeach for the nine-month period ended
September 30, 1996 included in this Prospectus have been so included in
reliance on the reports of Price Waterhouse LLP, independent accountants,
given on the authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement, of which
this Prospectus constitutes a part, under the Securities Act with respect to
the shares of Common Stock offered hereby. This Prospectus omits certain
information contained in the Registration Statement, and reference is made to
the Registration Statement and the exhibits thereto for further information
with respect to the Company and the Common Stock offered hereby. Statements
contained herein concerning the provisions of any documents are not
necessarily complete, and in each instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference. The Registration
Statement, including exhibits filed therewith, may be inspected without charge
at the public reference facilities maintained by the Commission at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at 7 World Trade Center, Suite
1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such materials may be obtained
from the Public Reference Section of the Commission, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The
Commission maintains a Web site (http://www.sec.gov) that contains reports,
proxy and information statements and other information regarding registrants,
such as the Company, that file electronically with the Commission. Information
concerning the Company is also available for inspection at the offices of the
Nasdaq National Market, Reports Section, 1735 K Street, N.W., Washington, D.C.
20006.
The Company intends to furnish to its shareholders annual reports containing
consolidated financial statements audited by an independent public accounting
firm and quarterly reports for the first three quarters of each fiscal year
containing unaudited consolidated financial information.
50
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARIS CORPORATION
Report of Independent Accountants......................................... F-2
Consolidated Balance Sheet................................................ F-3
Consolidated Statement of Income.......................................... F-4
Consolidated Statement of Changes in Shareholders' Equity................. F-5
Consolidated Statement of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................ F-7
SOFTEACH CORPORATION
Report of Independent Accountants......................................... F-19
Statement of Income....................................................... F-20
Statement of Changes in Shareholders' Equity.............................. F-21
Statement of Cash Flows................................................... F-22
Notes to Financial Statements............................................. F-23
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Unaudited Pro Forma Combined Balance Sheet................................ F-26
Unaudited Pro Forma Combined Statement of Income.......................... F-27
Notes to Unaudited Pro Forma Combined Balance Sheet and Statement of
Income................................................................... F-28
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Shareholders of
ARIS Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of changes in shareholders' equity and of
cash flows present fairly, in all material respects, the financial position of
ARIS Corporation and its subsidiaries at December 31, 1996 and 1995 and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Seattle, Washington
March 21, 1997
F-2
<PAGE>
ARIS CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................................... $1,241 $ 177
Investments in marketable securities.......................... 1,250 1,396
Accounts receivable, net of allowance for doubtful accounts of
$279,000 and $300,000........................................ 2,738 5,169
Consulting contracts in progress.............................. 20 428
Income tax receivable......................................... -- 186
Prepaid expenses and other assets............................. 311 438
------ -------
Total current assets........................................ 5,560 7,794
------ -------
Property and equipment, net..................................... 1,202 2,517
------ -------
Intangible and other assets, net................................ 81 2,645
------ -------
Total assets................................................ $6,843 $12,956
====== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................................. $ 150 $ 787
Accrued payroll............................................... 300 902
Other accrued expenses........................................ 160 294
Notes payable................................................. -- 1,500
Deferred revenue.............................................. 238 199
Income taxes payable.......................................... 383 --
Deferred income taxes......................................... 303 351
------ -------
Total current liabilities................................... 1,534 4,033
------ -------
Deferred income taxes........................................... 667 713
------ -------
Commitments and contingencies (Note 9)
Shareholders' equity:
Common stock, no par value; 10,000,000 shares authorized...... 419 1,943
Retained earnings............................................. 4,028 6,042
Net unrealized holding gain on investments.................... 195 225
------ -------
Total shareholders' equity.................................. 4,642 8,210
------ -------
Total liabilities and shareholders' equity.................. $6,843 $12,956
====== =======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-3
<PAGE>
ARIS CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Revenue:
Consulting................................... $ 6,132 $ 9,725 $ 16,312
Training..................................... 551 4,821 9,385
Software..................................... 369 205 1,201
--------- --------- ---------
Total revenue.............................. 7,052 14,751 26,898
--------- --------- ---------
Cost of sales:
Consulting and training...................... 3,637 7,176 13,353
Software..................................... 47 42 354
--------- --------- ---------
Total cost of sales........................ 3,684 7,218 13,707
--------- --------- ---------
Gross profit............................... 3,368 7,533 13,191
Operating expenses:
Selling, general and administrative.......... 2,077 4,548 9,351
Research and development..................... -- -- 171
In-process research and development ......... -- -- 307
Amortization of intangible assets............ -- 4 116
--------- --------- ---------
Income from operations..................... 1,291 2,981 3,246
--------- --------- ---------
Other income (expense):
Investment income............................ 15 57 89
Interest income (expense), net............... (4) 18 35
Other income (expense)....................... -- 40 (9)
--------- --------- ---------
11 115 115
--------- --------- ---------
Income before income tax................... 1,302 3,096 3,361
Income tax expense............................. 476 1,086 1,347
--------- --------- ---------
Net income..................................... $ 826 $ 2,010 $ 2,014
========= ========= =========
Net income per share........................... $ 0.13 $ 0.24 $ 0.24
========= ========= =========
Weighted average number of common and common
equivalent shares outstanding................. 6,554,987 8,366,429 8,461,990
========= ========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-4
<PAGE>
ARIS CORPORATION
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
-----------------
NET
UNREALIZED
HOLDING TOTAL
SHARES RETAINED GAIN ON SHAREHOLDERS'
ISSUED AMOUNT EARNINGS INVESTMENTS EQUITY
--------- ------ -------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 4,200,000 $ 14 $1,192 $ 80 $1,286
Net income.............. 826 826
Unrealized holding gain
on investments......... 4 4
--------- ------ ------ ---- ------
Balance at December 31,
1994................... 4,200,000 14 2,018 84 2,116
Shares issued in
acquisition............ 1,400,000 263 263
Stock options exercised. 1,191,000 64 64
Tax benefit related to
stock options
exercised.............. 78 78
Net income.............. 2,010 2,010
Unrealized holding gain
on investments......... 111 111
--------- ------ ------ ---- ------
Balance at December 31,
1995................... 6,791,000 419 4,028 195 4,642
Shares issued in
acquisitions........... 790,900 1,614 1,614
Stock redemption........ (40,000) (100) (100)
Stock options exercised. 14,000 2 2
Tax benefit related to
stock options
exercised.............. 8 8
Net income.............. 2,014 2,014
Unrealized holding gain
on investments......... 30 30
--------- ------ ------ ---- ------
Balance at December 31,
1996................... 7,555,900 $1,943 $6,042 $225 $8,210
========= ====== ====== ==== ======
</TABLE>
Common stock shares reflect a two-for-one split effective August 29, 1996.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-5
<PAGE>
ARIS CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 826 $ 2,010 $ 2,014
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 69 201 661
(Gain) loss on sale of property and equipment.... -- (18) 6
Loss on sale of investments...................... 9 -- --
Purchased research and development............... -- -- 307
Changes in assets and liabilities net of effects
of acquisitions:
(Increase) in accounts receivable.............. (1,147) (484) (1,548)
(Increase) in consulting contracts in progress. (69) (49) (408)
(Increase) in income tax receivable............ -- -- (186)
(Increase) in prepaid expenses and other
assets........................................ (35) (36) (21)
Increase (decrease) in accounts payable........ 222 (178) 140
Increase in accrued expenses................... 282 116 704
Increase (decrease) in deferred revenue........ -- 124 (363)
Increase (decrease) in income taxes payable.... 55 320 (383)
Increase (decrease) in deferred income taxes... 265 196 (217)
------- ------- -------
Net cash provided by operating activities...... 477 2,202 706
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments in marketable
securities...................................... (368) (381) (462)
Sales of investments in marketable securities.... 306 -- 362
Purchase of property and equipment............... (220) (911) (1,196)
Acquisition of businesses, net of cash acquired.. -- (112) (1,427)
Proceeds from sale of property and equipment..... -- 27 43
------- ------- -------
Net cash used in investing activities.......... (282) (1,377) (2,680)
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock options exercised.......................... -- 64 2
Repurchase of common stock....................... -- -- (100)
Tax benefit related to stock options exercised... -- 78 8
Payments on notes payable........................ -- -- (500)
Proceeds from notes payable...................... -- -- 1,500
------- ------- -------
Net cash provided by financing activities...... -- 142 910
------- ------- -------
Net increase (decrease) in cash and cash
equivalents....................................... 195 967 (1,064)
Cash and cash equivalents at beginning of year..... 79 274 1,241
------- ------- -------
Cash and cash equivalents at end of year........... $ 274 $ 1,241 $ 177
======= ======= =======
</TABLE>
See Note 12 for supplemental cash flow information.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART
OF THESE CONSOLIDATED FINANCIAL STATEMENTS.
F-6
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
ARIS Corporation (the Company) provides information technology consulting
and training services with offices in Seattle and Bellevue, Washington;
Beaverton, Oregon; Denver, Colorado; Dallas, Texas; Fairfax, Virginia; Tampa,
Florida; and Redding, England. The Company also develops software programs
which it has licensed in the United States and Europe.
The Company has qualified as a minority-owned enterprise under the Section
8(a) Program administered by the U.S. Small Business Administration. To
maintain qualification in this program, the Company must meet certain on-going
financial and reporting requirements. Total Section 8(a) sales were $261,
$2,051 and $2,430 during 1994, 1995 and 1996, respectively. The Company ceased
to qualify under Section 8(a) subsequent to December 31, 1996.
The Company utilizes the significant accounting policies summarized below in
preparing its consolidated financial statements.
CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include short-term investments with an original
maturity of three months or less.
INVESTMENT SECURITIES
The Company's investment securities at December 31, 1996 are classified as
available-for-sale and are recorded at fair value. Fair value is based upon
quoted market prices. The increase or decrease in market value from period to
period relating to available-for-sale marketable securities, net of deferred
income tax, is included as a separate component of shareholders' equity. The
Company held both available-for-sale and held-to-maturity marketable
securities at December 31, 1995. Held-to-maturity securities are recorded at
amortized cost in the accompanying consolidated financial statements. Cost of
securities sold is determined using the specific identification method.
F-7
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Expenditures for maintenance and
repairs are charged to income as incurred. Additions, improvements and major
replacements are capitalized. For financial reporting purposes, depreciation
is provided using the straight-line method over the estimated useful lives of
depreciable assets. Estimated useful lives of property and equipment range
from three to ten years.
INTANGIBLE ASSETS
Intangible assets represent the cost of business acquisitions allocated to
capitalized software development costs, non-compete agreements and goodwill
which are amortized over approximately three years for capitalized software
development costs, approximately two years for non-compete agreements and
fifteen years for goodwill. Capitalized software development cost amortization
is computed as described below while the straight-line method is used for
other intangible assets.
The carrying value of intangible assets is assessed for any permanent
impairment by evaluating the operating performance and future undiscounted
cash flows of the underlying assets. Adjustments are made if the sum of the
expected future net cash flows is less than book value in accordance with
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
which requires that long-lived assets be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of assets
may not be recoverable.
SOFTWARE DEVELOPMENT COSTS
Software development costs incurred in conjunction with product development
are charged to product development expense until technological feasibility is
established. Thereafter, through general release of product, all software
product development costs are capitalized and reported at the lower of
unamortized cost or net realizable value of each product. The establishment of
technological feasibility and the on-going assessment of the recoverability of
costs require considerable judgment by the Company with respect to certain
external factors, including, but not limited to, anticipated future gross
product revenues, estimated economic life and changes in the software and
hardware technology. After consideration of the above factors, the Company
amortizes capitalized software costs at the greater of the amount computed
using (a) the ratio of current revenues for a product to the total of current
and anticipated future revenues, or (b) the straight-line method over the
remaining estimated economic life of the product. Capitalized software
development costs are included in intangible and other assets in the
accompanying consolidated balance sheet.
RESEARCH AND DEVELOPMENT
Expenditures relating to the development of new products and processes,
including significant improvements and refinements to existing products, are
expensed as incurred. The costs of business acquisitions allocated to in-
process research and development is expensed immediately.
REVENUE RECOGNITION
Time and material consulting contracts
The Company recognizes revenue as services are rendered.
F-8
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Fixed-price consulting contracts
Revenue from fixed-price contracts is recognized on the percentage-of-
completion method, measured by the cost incurred to date to estimated total
costs for the contract. This method is used because management considers
expended costs to be the best available measure of contract performance.
Contract costs include all direct labor, material and any other costs related
to contract performance. Selling, general and administrative costs are charged
to expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined. Changes
in job performance, job conditions and estimated profitability, including
those arising from contract penalty provisions, and final contract settlements
may result in revisions to costs and income and are recognized in the period
in which the revisions are determined. Consulting contracts in progress in the
accompanying consolidated financial statements represent the excess of revenue
earned on fixed-price consulting contracts over amounts billed to customers.
Education and training
Tuition revenue is recognized on the last day the class is held. Tuition
received prior to the classes being held is deferred and included as deferred
revenue in the accompanying consolidated balance sheet.
Software
The Company accounts for software revenue in accordance with the American
Institute of Certified Public Accountants' Statement of Position 91-1,
Software Revenue Recognition. Revenue earned under software license agreements
with end users is generally recognized when the software has been shipped,
collectibility is probable, and there are no significant obligations
remaining.
INCOME TAXES
Provision for income taxes has been recorded in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). Under the liability method of SFAS 109, deferred tax assets and
liabilities are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using enacted tax
rates and laws that will be in effect when the differences are expected to be
recovered or settled.
ADVERTISING COSTS
Advertising costs are expensed as incurred. Advertising expenses amounted to
$38, $95 and $80 in 1994, 1995 and 1996, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of cash and cash equivalents and other current assets
and liabilities such as accounts receivable, accounts payable and accrued
liabilities as presented in the consolidated financial statements approximates
fair value based on the short-term nature of these instruments. The recorded
amount of long-term debt approximates fair value as the actual interest rates
approximate current competitive rates. Investments in marketable securities
are carried at fair value in the accompanying consolidated balance sheet.
F-9
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement
No. 123, "Accounting for Stock-Based Compensation," which was effective for
the Company beginning in 1996. Under the provisions of this Statement,
employee stock-based compensation expense is measured using either the
intrinsic-value method as prescribed by Accounting Principles Board Opinion
No. 25 or the fair value method described in Statement No. 123. Companies
choosing the intrinsic-value method are required to disclose the pro forma
impact of the fair value method on net income and net income per share. The
Company has elected to continue accounting for its employee stock-based
compensation under the provisions of Accounting Principles Board Opinion No.
25. The Company is required to implement Statement No. 123 for stock-based
awards to other than employees; however, the impact on the Company's financial
position at December 31, 1996 and results of operations for the year then
ended is immaterial.
NET INCOME PER SHARE
Net income per share is based on the weighted average number of shares of
common stock and common stock equivalents outstanding during the periods,
computed using the treasury stock method for stock options. In accordance with
Staff Accounting Bulletin Number 83 of the Securities and Exchange Commission,
stock options granted and stock issued at prices below the proposed initial
public offering price and issued during the twelve-month period immediately
preceding the initial public offering, have been considered outstanding for
all periods using the treasury stock method and the estimated initial public
offering price. Fully diluted earnings per share do not differ materially from
primary earnings per share.
2. ACQUISITIONS
The Company has embarked upon an acquisition program which included the
acquisition of one company during 1995, and three companies during 1996. All
of these acquisitions have been accounted for by the purchase method of
accounting. Accordingly, the purchase price has been allocated to the assets
acquired and liabilities assumed based on management's estimates, arms-length
negotiations with the sellers and in some cases, independent appraisals.
Legal, accounting and other direct costs of these acquisitions were
immaterial. The common stock issued as consideration in these acquisitions has
been recorded at its estimated fair value at the date the acquisition was
announced. The results of operations of the acquired companies have been
included in consolidated results of operations of the Company from the date of
the acquisitions. The following is a description of the terms of the various
acquisitions:
1995
On January 1, 1995, the Company acquired the stock of Clarity, Inc., a
training company based in Bellevue, Washington in exchange for 1,400,000
shares of the Company's common stock and cash.
A summary of the purchase price paid is as follows:
<TABLE>
<S> <C>
Consideration:
Cash................................................................. $117
Value of common stock................................................ 263
Liabilities assumed.................................................. 250
----
$630
====
</TABLE>
F-10
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The cost allocated to Clarity Inc.'s assets and liabilities at the date of
the acquisition, as determined in accordance with the purchase method of
accounting, is presented in the table below.
<TABLE>
<S> <C>
Cash............................................................... $ 5
Accounts receivable................................................ 300
Prepaid and other current assets................................... 76
Goodwill........................................................... 64
Property and equipment............................................. 185
Accounts payable and accrued liabilities........................... (250)
-----
$ 380
=====
</TABLE>
The following unaudited pro forma summary presents the consolidated results
of operations of the Company as if Clarity, Inc. had been acquired as of
January 1, 1994, including the impact of certain adjustments.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------
<S> <C>
Revenue...................................................... $9,383
Net income................................................... $1,088
Net income per share......................................... $ 0.14
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the year presented. In
addition, they are not intended to be a projection of future results and do
not reflect any synergies that might be achieved from combined operations.
1996
On May 1, 1996, the Company acquired the stock of SQLSoft, Inc., a training
company based in Bellevue, Washington in exchange for 708,900 shares of the
Company's common stock.
On October 1, 1996, the Company acquired the assets and liabilities of
SofTeach Corporation, a training company based in Denver, Colorado in exchange
for 42,000 shares of the Company's common stock and a combination of notes
payable and cash.
On October 1, 1996, the Company acquired the stock of Noetix Corporation, a
software development company which develops software modules which interface
with Oracle Financials software in exchange for 40,000 shares of the Company's
common stock and cash.
A summary of the purchase price paid for the 1996 acquisitions is as
follows:
<TABLE>
<CAPTION>
SQLSOFT, SOFTEACH NOETIX
INC. CORP. CORP.
-------- -------- ------
<S> <C> <C> <C>
Consideration:
Cash................................................. $ 750 $ 835
Note payable......................................... 500
Value of common stock................................ $1,317 152 145
Acquisition costs.................................... 26
Liabilities assumed.................................. 759 12 377
------ ------ ------
$2,076 $1,414 $1,383
====== ====== ======
</TABLE>
F-11
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The cost preliminarily allocated to the assets and liabilities at the date
of the acquisition, as determined in accordance with the purchase method of
accounting for these acquisitions, is presented in the table below.
<TABLE>
<CAPTION>
SQLSOFT, SOFTEACH NOETIX
INC. CORP. CORP.
-------- -------- ------
<S> <C> <C> <C>
Cash................................................ $ 60 $ 124
Accounts receivable................................. 537 73 $ 273
Prepaid and other current assets.................... 73 35
Intangible assets:
Software technology--completed.................... 384
Software technology--in progress.................. 307
(Charged to research and development expense)
Non-compete agreements............................ 150
Goodwill.......................................... 942 956 260
Property and equipment.............................. 464 226 9
Accounts payable and accrued liabilities............ (759) (12) (377)
------ ------ ------
$1,317 $1,402 $1,006
====== ====== ======
</TABLE>
The following unaudited pro forma summary presents the consolidated results
of operations of the Company as if SQLSoft, Inc., SofTeach Corporation and
Noetix Corporation had been acquired as of the beginning of the periods
presented, including the impact of certain adjustments.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------
1995 1996
------- -------
<S> <C> <C>
Revenue................................................... $21,003 $30,306
Net income................................................ $ 2,220 $ 2,139
Net income per share...................................... $ 0.27 $ 0.25
</TABLE>
The pro forma results are not necessarily indicative of what actually would
have occurred if the acquisitions had been in effect for the years presented.
In addition, they are not intended to be a projection of future results and do
not reflect any synergies that might be achieved from combined operations.
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Computer equipment........................................ $1,125 $2,528
Furniture and fixtures.................................... 244 503
Software.................................................. 109 157
Other..................................................... 83 166
------ ------
1,561 3,354
Less: Accumulated depreciation............................ (359) (837)
------ ------
$1,202 $2,517
====== ======
</TABLE>
F-12
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
4. INTANGIBLE AND OTHER ASSETS
Intangible and other assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1995 1996
----- ------
<S> <C> <C>
Goodwill................................................... $ 64 $2,221
Capitalized software costs................................. 58 430
Non-compete agreements..................................... 150
Prepaids and other......................................... 274 404
----- ------
396 3,205
Less: Accumulated amortization............................. (4) (122)
----- ------
392 3,083
Less: Current portion...................................... (311) (438)
----- ------
Total noncurrent intangibles and other assets.............. $ 81 $2,645
===== ======
</TABLE>
5. INVESTMENTS
Investments in marketable securities at December 31, 1996 consist of equity
fund investments totaling $1,396. This investment has been classified as
available-for-sale and, accordingly, the excess of fair value over cost, net
of tax, of $225 has been included as a separate component of shareholders'
equity at December 31, 1996. Investments in marketable securities at December
31, 1995 consist of $362 classified as held-to-maturity and $888 classified as
available-for-sale securities. The held-to-maturity securities are carried at
amortized cost and the excess of fair value over cost, net of tax, of $195
related to the available-for-sale securities has been included as a separate
component of shareholders' equity at December 31, 1995.
6. MAJOR CUSTOMERS
During 1994, 1995 and 1996, the Company had consulting sales to one customer
that aggregated 20%, 22% and 9%, respectively, of total revenue and a second
customer that aggregated 6%, 16% and 12%, respectively, of total revenue.
Accounts receivable from the first customer were, 22% and 7% of total accounts
receivable and, 36% and 23% of total accounts receivable from the second
customer at December 31, 1995 and 1996, respectively.
7. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
1994 1995 1996
---- ------ ------
<S> <C> <C> <C>
Current:
Federal................................................... $135 $ 763 $1,429
State..................................................... 14 40 110
---- ------ ------
149 803 1,539
---- ------ ------
Deferred:
Federal................................................... 305 264 (204)
State..................................................... 22 19 12
---- ------ ------
327 283 (192)
---- ------ ------
Total tax expense........................................... $476 $1,086 $1,347
==== ====== ======
</TABLE>
F-13
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The principal reasons for the variation from the customary relationship
between income taxes at the statutory federal rate and that shown in the
consolidated statement of income are as follows:
<TABLE>
<CAPTION>
1994 1995 1996
----- ------ ------
<S> <C> <C> <C>
Statutory federal income tax rate.......................... $ 443 $1,053 $1,143
Goodwill................................................... -- 1 17
State income taxes, net of federal income tax benefit...... 24 39 80
Purchased research and development......................... -- -- 104
Other...................................................... 9 (7) 3
----- ------ ------
$ 476 $1,086 $1,347
===== ====== ======
</TABLE>
Temporary differences which give rise to a significant portion of deferred
tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER
31,
-----------
1995 1996
---- ------
<S> <C> <C>
Adjustments to cash basis accounting for tax purposes.............. $782 $ 672
Depreciation and amortization...................................... 81 333
Unrealized gain on marketable securities........................... 107 124
Other.............................................................. -- 1
---- ------
Gross deferred tax liabilities................................... 970 1,130
---- ------
Bad debt allowance................................................. -- 8
Accrued vacation and bonuses....................................... -- 39
Research and development credit.................................... -- 19
---- ------
Gross deferred tax assets........................................ -- 66
---- ------
$970 $1,064
==== ======
</TABLE>
8. DEBT
At December 31, 1996 the Company had borrowings of $1,000 outstanding on a
$3,000 line of credit. Interest on this line bears interest at the prime rate
(8.25% at December 31, 1996). This revolving line of credit was replaced on
March 14, 1997 with a $8,000 line of credit which is collateralized by all of
the Company's assets. Both the $3,000 and $8,000 lines of credit include
various affirmative and negative covenants which require, among other things,
maintenance of a certain level of working capital and a certain current ratio.
(See Note 14).
The Company has a note payable of $500 in connection with the acquisition of
SofTeach Corporation (Note 2). The note bears interest at 6% and matures in
installments of $250 on April 1, 1997 and July 1, 1997. This note is secured
by the assets acquired in the SofTeach acquisition.
F-14
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
9. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company rents all its office space under non-cancelable operating leases
with initial terms in excess of one year. Future minimum rental commitments
under operating leases for years ending December 31 are as follows:
<TABLE>
<S> <C>
1997............................................................... $1,152
1998............................................................... 806
1999............................................................... 625
2000............................................................... 546
2001............................................................... 213
Thereafter......................................................... --
------
$3,342
======
</TABLE>
Rent expense for 1994, 1995 and 1996 was $65, $253 and $702, respectively.
LEGAL PROCEEDINGS
The Company is involved in certain legal proceedings that have arisen in the
normal course of business. Based on the advice of legal counsel, management
does not anticipate that these matters will have a material effect on the
Company's consolidated financial position or results of operations.
10. STOCK OPTIONS
Prior to January 1995, the Company from time to time granted non-qualified
stock options to key employees. These grants were not made pursuant to any
formal policy or plan.
In January 1995, the Company adopted the ARIS Corporation 1995 Stock Option
Plan (the 1995 Plan) which provides for the granting of qualified or non-
qualified stock options to employees, directors, officers and certain non-
employees of the Company as determined by the Plan Administrator. The Company
authorized 1,600,000 shares of its common stock for issuance under the 1995
Plan. The date of grant, option price, vesting period and other terms specific
to options granted under the 1995 Plan are to be determined by the Plan
Administrator. The option price for stock options granted is based on the fair
market value of the Company's stock on the date of grant. Options granted
under the 1995 Plan expire seven years from the date of grant and vest over
periods of up to four years. The Company ended grants under the 1995 Plan in
March 1997.
In March 1997, the Company adopted the ARIS Corporation 1997 Stock Option
Plan (the 1997 Plan) which provides for the granting of qualified or non-
qualified stock options to employees, directors, officers and non-employee
directors of the Company as determined by the Plan Administrator. The Company
authorized 2,000,000 shares of its common stock for issuance under the 1997
Plan, subject to certain adjustments, less that number of shares that have
been granted and have not subsequently become available for grant under the
1995 Plan. The 1997 Plan provides for automatic, non-discretionary grants of
5,000 non-qualified stock
F-15
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
options to non-employee directors for each year of service of the Company's
non-employee directors. For all other grants under the 1997 Plan, the date of
grant, option price, vesting period and other terms specific to options
granted under the 1997 Plan are to be determined by the Plan Administrator.
The option price for stock options granted is based on the fair market value
of the Company's stock on the date of grant. Options granted under the 1997
Plan expire ten years from the date of grant and vest over periods of up to
four years.
A summary of the activity for qualified and non-qualified stock options
granted prior to 1995 and under the 1995 Stock Option Plan is presented below:
<TABLE>
<CAPTION>
1994 1995 1996
------------------- --------------------- ------------------
WEIGHTED- WEIGHTED- WEIGHTED-
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- --------- ---------- --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 946,000 $0.03 1,205,000 $0.05 134,000 $0.30
Granted................. 259,000 0.13 120,000 0.34 262,000 2.79
Exercised............... -- -- (1,191,000) 0.05 (14,000) 0.09
Forfeited............... -- -- -- (28,300) 0.78
Outstanding at end of
year................... 1,205,000 0.05 134,000 0.30 353,700 2.12
Options exercisable at
year-end............... 939,000 0.04 111,000 0.29 117,598 0.67
Weighted-average fair
value of options
granted during the
year................... -- 0.08 0.50
</TABLE>
The following table summarizes information about stock options outstanding
under the Plans at December 31, 1996:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
- ----------------------------------------------------- ---------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF REMAINING AVERAGE AVERAGE
EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- -------- ----------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$0.19-$9 353,700 6.1 years $2.12 117,598 $0.67
</TABLE>
The Company applies Accounting Principles Board Opinion No. 25, Accounting
for Stock Issued to Employees, and related Interpretations in accounting for
stock options issued to employees. Had compensation cost for the Plans been
determined based upon the fair value at the grant date consistent with the
methodology prescribed under Statement of Financial Accounting Standards No.
123, Accounting for Stock-Based Compensation, the Company's net income would
have decreased by approximately $2 and $21, respectively, in 1995 and 1996
(unaudited). The fair value of the options granted was calculated using an
option-pricing model with the following assumptions: dividend yield of zero
percent, volatility of zero percent, risk free interest rate ranging from
5.36% to 7.05%, and an expected life of 4.75 years.
F-16
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
11. PROFIT SHARING PLAN
The Company maintains a qualified defined contribution profit sharing 401(k)
plan which covers full time employees with one year of service. Contributions
to the plan are discretionary. There were no employer contributions to the
plan for 1994, 1995 or 1996.
12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION AND NON-CASH INVESTING
AND FINANCING ACTIVITIES
The Company paid interest of $4, $3 and $34 during 1994, 1995 and 1996,
respectively. The Company paid $153, $423 and $2,123 in income taxes during
1994, 1995 and 1996, respectively.
As more fully described in Note 2, the Company acquired Clarity, Inc. in
1995 in exchange for shares of its common stock and cash and acquired SQLSoft,
Inc., SofTeach Corporation and Noetix Corporation in 1996 in exchange for a
combination of stock, cash and notes payable.
13. OPERATING BUSINESS GROUPS
The Company is engaged in information technology consulting and training
services and software sales. Total revenue by segment represents sales to
unaffiliated customers. Inter-segment sales are not material. Operating profit
represents total revenue less operating expenses. In computing operating
profit none of the following items have been added or deducted: general
corporate expenses, interest expense or income taxes.
Identifiable assets are those assets used in the operations of each industry
segment. Corporate assets primarily consist of cash, investments and certain
prepaid expenses.
Summarized financial information by business group for 1994, 1995 and 1996
is as follows:
<TABLE>
<CAPTION>
CONSULTING TRAINING SOFTWARE CORPORATE TOTAL
---------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
1994:
Revenue.......................... $6,132 $ 551 $369 $ 7,052
Operating profit................. 2,138 79 281 $(1,207) 1,291
Identifiable assets.............. 2,246 20 14 1,040 3,320
Depreciation and amortization.... 49 4 3 13 69
Capital expenditures............. 160 11 10 39 220
1995:
Revenue.......................... $9,725 $4,821 $205 $14,751
Operating profit................. 3,645 1,161 (22) $(1,803) 2,981
Identifiable assets.............. 2,740 1,189 16 2,898 6,843
Depreciation and amortization.... 58 127 4 12 201
Capital expenditures............. 201 500 6 204 911
</TABLE>
F-17
<PAGE>
ARIS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994, 1995 AND 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
CONSULTING TRAINING SOFTWARE CORPORATE TOTAL
---------- -------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
1996:
Revenue.......................... $16,312 $9,385 $1,201 $26,898
Operating profit................. 3,884 1,381 (325) $(1,694) 3,246
Identifiable assets.............. 5,437 3,880 1,659 1,980 12,956
Depreciation and amortization.... 20 439 68 128 655
Capital expenditures............. 28 1,001 31 136 1,196
</TABLE>
14. SUBSEQUENT EVENTS
In February 1997, the Company acquired the stock of Oxford Computer Group
Limited (Oxford), a company that provides information technology consulting
and training services with offices in Oxford, London and Birmingham. The
shareholders of Oxford exchanged their shares for 280,000 shares of the
Company's common stock. The acquisition will be accounted for by the purchase
method. Accordingly, the results of operations of Oxford will be included with
the results of operations of the Company for periods subsequent to the date of
acquisition. In connection with the acquisition of Oxford, 195,041 stock
options were granted to certain key employees of Oxford. Terms of the option
agreements include an exercise price of $9.40 and vesting over four years.
Oxford had revenues of (Pounds)4,730 (approximately $7,384)(unaudited) and
net income of (Pounds)109 (approximately $170)(unaudited) for the year ended
December 31, 1996.
The unaudited pro forma combined results of operations of the Company and
Oxford for 1996 are as follows:
<TABLE>
<S> <C>
Revenue........................................................... $34,282
Net income........................................................ $ 2,083
Net income per share.............................................. $ 0.25
</TABLE>
As described in Note 8, the Company entered into an $8,000 line of credit
agreement on March 14, 1997. The amounts outstanding under the Company's
existing line of credit were refinanced under the new line of credit.
Additionally, the Company used $3,900 of the line of credit to repurchase
415,000 shares of the Company's common stock at $8.50 and $9.75 per share from
certain shareholders of the Company.
In January 1997, 569,000 stock options were granted to certain employees of
the Company with terms that include an exercise price of $5.00 per share and
vesting over five years.
F-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders of
SofTeach Corporation
In our opinion, the accompanying statements of income, of changes in
shareholders' equity and of cash flows present fairly, in all material
respects, the results of operations and cash flows of SofTeach Corporation for
the nine months ended September 30, 1996, in conformity with generally
accepted accounting principles. 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. We conducted our
audit of these statements in accordance with generally accepted auditing
standards which 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, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Denver, Colorado
March 14, 1997
F-19
<PAGE>
SOFTEACH CORPORATION
STATEMENT OF INCOME
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1996
-------------
<S> <C>
Training revenue.................................................. $1,507,717
Cost of training.................................................. 655,319
----------
Gross profit.................................................. 852,398
Selling, general and administrative expense....................... 504,707
----------
Income from operations............................................ 347,691
Interest income................................................... 9,021
Other income...................................................... 2,683
----------
Net income........................................................ $ 359,395
==========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL
PART OF THESE FINANCIAL STATEMENTS.
F-20
<PAGE>
SOFTEACH CORPORATION
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK
-------------
ADDITIONAL TOTAL
SHARES PAID-IN RETAINED SHAREHOLDERS'
ISSUED AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1995..................... 62 $ 6 $9,770 $480,830 $490,606
Net income................ 359,395 359,395
Shareholder distributions. (575,394) (575,394)
--- --- ------ -------- --------
Balance at September 30,
1996..................... 62 $ 6 $9,770 $264,831 $274,607
=== === ====== ======== ========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-21
<PAGE>
SOFTEACH CORPORATION
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
1996
-------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................................... $ 359,395
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................. 41,240
Changes in assets and liabilities:
Increase in accounts receivable............................. (8,234)
Increase in inventories..................................... (10,409)
Increase in prepaid expenses and other assets............... (7,556)
Decrease in accounts payable................................ (18,268)
Increase in unearned revenue................................ 7,991
---------
Net cash provided by operating activities..................... 364,159
---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment............................ (6,216)
---------
Net cash used in investing activities......................... (6,216)
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Shareholder distributions..................................... (575,394)
---------
Net cash used in financing activities......................... (575,394)
---------
NET DECREASE IN CASH AND CASH EQUIVALENTS....................... (217,451)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD................ 340,006
---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD...................... $ 122,555
=========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRALPART OF THESE FINANCIAL STATEMENTS.
F-22
<PAGE>
SOFTEACH CORPORATION
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND OPERATIONS
SofTeach Corporation (the "Company") provides information technology
training to clients throughout Denver and the Colorado front range.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Expenditures for maintenance and repairs are charged to expense as incurred.
Additions, improvements and major replacements are capitalized. For financial
reporting purposes, depreciation is provided using the straight-line method
over the estimated useful lives of five years.
REVENUE RECOGNITION
Tuition revenue is recognized on the last day the class is held. Tuition
received prior to the classes being held is deferred.
INCOME TAXES
The Company has elected to be taxed under the provisions of the "S"
corporation section of the Internal Revenue Code. Under those provisions, the
Company does not pay corporate income taxes, nor does it receive the benefit
of net operating loss carryforwards or carrybacks. Instead, the shareholders
are liable for individual income taxes on their respective shares of the
Company's taxable income or include their respective shares of the Company's
taxable income or include their respective shares of the Company's net
operating loss in their individual income tax returns.
ADVERTISING COSTS
Advertising costs are expensed as incurred and included in selling, general
and administrative expense. Advertising expenses amounted to $40,739 for the
nine months ended September 30, 1996.
2. CONCENTRATION OF CREDIT RISK
The Company provides instructor-led informational technology training
specializing in Microsoft technologies. During the nine month period ended
September 30, 1996, the Company had sales to two major customers that
aggregated 20% of total sales. Accounts receivable from these customers was
23% of total accounts receivable at September 30, 1996. The overall credit
F-23
<PAGE>
SOFTEACH CORPORATION
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
risk associated with the Company's trade receivables is minimal due to the
large number of customers in differing industries. Historically, the Company
has not experienced significant losses on trade receivables.
3. LEASE COMMITMENTS
The Company rents all its office space and computer training equipment under
non-cancelable operating leases. All lease agreements are guaranteed by the
shareholders of the Company. Rent expense for the nine months ended September
30, 1996 was $67,010.
4. EMPLOYEE RETIREMENT PLANS
Employees of the Company participate in a savings plan. All employees are
eligible to participate in the plan after six months of employment and
attaining the age of 21. SofTeach contributes 3% of the average employee's
annual salary in four equal quarterly distributions. Employees vest
immediately in employer contributions. Employees may contribute up to 15% of
their salary before income taxes. During the year, SofTeach recognized
expenses of and contributed cash to the savings plan in the amount of $10,507.
5. SUBSEQUENT EVENT
Effective October 1, 1996, SofTeach Corporation sold substantially all of
its assets and liabilities to ARIS Corporation under an asset purchase
agreement and liquidated the corporation. Under the terms of the agreement,
SofTeach's stockholders received approximately $1.25 million in cash and notes
from ARIS plus ARIS common stock valued at $152,000. The notes from ARIS are
secured by the SofTeach assets sold to ARIS.
F-24
<PAGE>
ARIS CORPORATION
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma combined balance sheet of ARIS Corporation at
December 31, 1996 gives effect to the acquisition of Oxford Computer Group
limited as if it was consummated on December 31, 1996. The unaudited pro forma
combined statement of income of ARIS Corporation for the year ended December
31, 1996 gives effect to the acquisition of SQLSoft, Inc., SofTeach
Corporation, Noetix Corporation and Oxford Computer Group Limited as if such
businesses were acquired on January 1, 1996.
The unaudited pro forma combined balance sheet and statement of income are
presented for informational purposes only and do not purport to represent what
the Company's financial position and results of operation for the year ended
December 31, 1996 would actually have been had the acquisitions, in fact,
occurred on January 1, 1996, or the Company's results of operations for any
future period. The unaudited pro forma combined balance sheet and statement of
income should be read in conjunction with the Consolidated Financial
Statements and related notes thereto included elsewhere in this Prospectus and
the information set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
F-25
<PAGE>
ARIS CORPORATION
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO
FORMA
ARIS OXFORD ADJUSTMENTS COMBINED
------- ------ ----------- --------
<S> <C> <C> <C> <C>
Cash and cash equivalents.................. $ 177 $ 1 $ 178
Investments in marketable securities....... 1,396 1,396
Accounts receivable........................ 5,169 1,448 6,617
Other current assets....................... 1,052 445 1,497
Property and equipment, net................ 2,517 1,224 3,741
Intangible and other assets................ 2,645 32 $ 970 (a) 3,647
------- ------ ------ -------
Total assets........................... $12,956 $3,150 $ 970 $17,076
======= ====== ====== =======
Current liabilities........................ $ 3,994 $2,613 $ 6,607
Long-term debt and other................... 752 107 859
Common stock............................... 1,943 $1,400 (a) 3,343
Retained earnings.......................... 6,042 394 (394)(b) 6,042
Unrealized holding gain.................... 225 225
Currency translation adjustment............ 36 (36)(b) --
------- ------ ------ -------
Total liabilities and equity........... $12,956 $3,150 $ 970 $17,076
======= ====== ====== =======
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS.
F-26
<PAGE>
ARIS CORPORATION
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
TOTAL TOTAL
INDIVIDUALLY INDIVIDUALLY
INSIGNIFICANT INSIGNIFICANT
1996 1997 PRO FORMA
ARIS SOFTEACH ACQUISITIONS ACQUISITIONS ADJUSTMENTS COMBINED
--------- -------- ------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Revenues, net
Consulting............. $ 16,312 $1,933 $ 18,245
Training............... 9,385 $1,508 1,079 5,451 17,423
Software............... 1,201 821 2,022
--------- ------ ----- ------ ---------
Total revenues....... 26,898 1,508 1,900 7,384 37,690
--------- ------ ----- ------ ---------
Cost of sales
Consulting and
training.............. 13,353 655 273 3,277 17,558
Software sales and
other................. 354 434 788
--------- ------ ----- ------ ---------
Total cost of sales.. 13,707 655 707 3,277 18,346
--------- ------ ----- ------ ---------
Gross profit ........ 13,191 853 1,193 4,107 19,344
Selling, general and
administrative......... 9,351 505 1,025 3,837 14,718
Research and
development............ 171 171
In-process research and
development............ 307 307
Amortization of
intangible assets 116 $ 317 (c) 433
--------- ------ ----- ------ ----- ---------
Income from operations.. 3,246 348 168 270 (317) 3,715
Other income (expense) 115 11 7 (46) (23)(d) 64
--------- ------ ----- ------ ----- ---------
Income before income
tax.................... 3,361 359 175 224 (340) 3,779
Income tax expense...... 1,347 14 54 156 (e) 1,571
--------- ------ ----- ------ ----- ---------
Net income.............. $ 2,014 $ 359 $ 161 $ 170 $(496) $ 2,208
========= ====== ===== ====== ===== =========
Net income per share.... $ 0.24 $ 0.26
========= =========
Weighted average number
of common and common
equivalent shares
outstanding............ 8,460,990 8,460,990
========= =========
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS.
F-27
<PAGE>
ARIS CORPORATION
NOTES TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET AND STATEMENT OF INCOME
AS OF AND FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
1. BASIS OF PRESENTATION
The pro forma combined balance sheet gives effect to the acquisition of
Oxford Computer Group Limited as if it was consummated on December 31, 1996.
The pro forma adjustments are based on consideration exchanged, including the
estimated fair value of assets acquired, liabilities assumed and common stock
issued. The actual adjustments, which will be based on valuations of fair
value as of the date of acquisition, may differ from that made herein.
The pro forma combined statement of income gives effect to the acquisition
of (1) SofTeach Corporation, (2) other individually insignificant 1996
acquisitions (Noetix Corporation and SQLSoft, Inc.) and (3) other individually
insignificant 1997 acquisitions (Oxford Computer Group Limited), as if these
entities had been acquired as of January 1, 1996. The results of operations of
SofTeach Corporation, Noetix Corporation and SQLSoft, Inc. have been included
in the consolidated results of operations of ARIS Corporation as of the dates
the acquisitions were consummated which are October 1, 1996, May 1, 1996 and
October 1, 1996, respectively. As Oxford Computer Group Limited was acquired
subsequent to December 31, 1996, the consolidated results of operations of
ARIS for the year ended December 31, 1996 do not include any amounts related
to Oxford Computer Group Limited. Accordingly, the SofTeach, Oxford Computer
Group Limited, Noetix Corporation and SQLSoft, Inc. results of operations
included in the pro forma statement of income reflect the results of
operations for the period January 1, 1996 to September 30, 1996, the year
ended December 31, 1996, the period January 1, 1996 to September 30, 1996 and
the period January 1, 1996 to April 30, 1996, respectively.
The pro forma combined financial statements are presented for illustrative
purposes only and should not be construed to be indicative of the actual
combined results of operations as may exist in the future. The pro forma
adjustments are based on the cash, notes payable and common stock
consideration exchanged by the Company for the fair value of the assets
acquired and liabilities assumed.
2. PRO FORMA ADJUSTMENTS
(a) To record the February 1997 acquisition of Oxford Computer Group as
follows:
<TABLE>
<S> <C>
Purchase price................................................ $1,400
Net assets acquired........................................... (430)
------
Purchase price allocated to intangible assets................. $ 970
======
</TABLE>
The purchase price of Oxford Computer Group was 280,000 shares of the
Company's common stock which was valued at $5.00 per share which was the fair
value of the Company's common stock on the date the acquisition was announced
publicly.
(b) To eliminate the equity of the acquired business.
(c) To record amortization of goodwill, non-compete agreement and
capitalized software development costs for periods prior to the acquisition
dates of the entities acquired. The purchased research and development cost of
$307 recorded in the Noetix Corporation acquisition was charged to research
and development expense in the 1996 consolidated
F-28
<PAGE>
statement of income of ARIS Corporation. Goodwill is amortized over fifteen
years, non-compete agreement over approximately two years and capitalized
software development costs over approximately three years. Capitalized
software development costs are amortized at the greater of the amount computed
using (a) the ratio of current revenues for a product to the total of current
and anticipated future revenues, or (b) the straight-line method over the
remaining estimated economic life of the product. The straight-line method is
used for other intangible assets.
(d) To record interest expense on note payable issued as consideration in
acquisition of SofTeach Corporation.
(e) To record income tax expense on combined pro forma income before income
tax adjusted for nondeductible goodwill amortization of $148 based on the
effective tax rate of ARIS Corporation for the year ended December 31, 1996 of
40%.
F-29
<PAGE>
[WORLD MAP SHOWING LOCATIONS WHERE ARIS HAS CONDUCTED CONSULTING AND TRAINING
AND LOCATIONS OF CONSULTING AND TRAINING OFFICES.]
[TRADEMARKS AND SERVICE MARKS OF THE COMPANY]
The ARIS name and logo are service marks, and the Noetix, NoetixViews and
ARIS DFRAG names are trademarks of the Company. This Prospectus also includes
tradenames, trademarks and service marks of other companies.
<PAGE>
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDERS OR THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
ANY OFFER TO BUY, THE COMMON STOCK IN ANY JURISDICTION WHERE, OR TO ANY
PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary...................................................... 1
Risk Factors............................................................ 3
Use of Proceeds......................................................... 10
Dividend Policy......................................................... 10
Capitalization.......................................................... 11
Dilution................................................................ 12
Selected Consolidated and Pro Forma Combined Financial Data............. 13
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 15
Business................................................................ 24
Management.............................................................. 37
Certain Transactions.................................................... 42
Principal and Selling Shareholders...................................... 43
Description of Capital Stock............................................ 44
Shares Eligible for Future Sale......................................... 47
Underwriting............................................................ 48
Legal Matters........................................................... 50
Experts................................................................. 50
Additional Information.................................................. 50
Index to Financial Statements........................................... F-1
</TABLE>
UNTIL , 1997, (25 DAYS FROM THE DATE OF THIS PROSPECTUS) ALL DEALERS
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
[LOGO OF ARIS(SM)]
SHARES
COMMON STOCK
DEUTSCHE MORGAN GRENFELL
MONTGOMERY SECURITIES
PIPER JAFFRAY INC.
PROSPECTUS
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated fees and expenses of this
Offering (excluding underwriting discounts and commissions):
<TABLE>
<CAPTION>
AMOUNT(1)
---------
<S> <C>
SEC Registration Fee............................................ $10,691
NASD Filing Fee................................................. 4,028
Nasdaq National Market Listing Fee.............................. 42,310
Legal Fees and Expenses......................................... *
Accounting Fees and Expenses.................................... *
Blue Sky Qualification Fees and Expense......................... *
Transfer Agent and Registrar Fees............................... *
Printing Expenses............................................... *
Insurance Policy Premiums....................................... *
Miscellaneous Expenses.......................................... *
-------
Total....................................................... *
=======
</TABLE>
- --------
* To be completed by amendment.
(1) All amounts have been estimated except the SEC, NASD and Nasdaq fees. All
of the above expenses will be payable by the Company.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act authorize a court to award, or a corporation's board of
directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
Securities Act). Article 9 of the registrant's Amended and Restated Bylaws,
which were approved by the board of directors of the registrant and have been
submitted to its shareholders for approval at an annual meeting scheduled for
April 25, 1997, provides for indemnification of the registrant's directors,
officers, employees and agents to the fullest extent permitted by law.
Section 23B.08.320 of the Washington Business Corporation Act authorizes a
corporation to limit a director's liability to the corporation or its
shareholders for monetary damages for acts or omissions as a director, except
in certain circumstances involving intentional misconduct, knowing violations
of law or illegal corporate loans or distributions, or any transaction from
which the director personally receives a benefit in money, property or
services to which the director is not legally entitled. Article VI of the
registrant's Amended and Restated Articles of Incorporation, which were
approved by the board of directors of the registrant and have been submitted
to its shareholders for approval at an annual meeting scheduled for April 25,
1997, contains provisions implementing, to the fullest extent permitted by
Washington law, such limitations on a director's liability to the registrant
and its shareholders.
The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification
by the Underwriters of the registrant and its executive officers and
directors, and by the registrant of the Underwriters, for certain liabilities,
including liabilities arising under the Securities Act, in connection with
matters specifically provided by the Underwriters for inclusion in this
Registration Statement.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The Company has made the following sales of its securities for the
consideration indicated during the past three years, which sales were not
registered under the Securities Act, and none of which sales involved an
underwriter. As to all such securities except those issued in connection with
stock splits (as to which there was no "sale" within the meaning of the
Securities Act), the Company relied upon Section 4(2) of the Securities Act,
Regulation D promulgated thereunder or Regulation S promulgated thereunder, as
transactions by an issuer not involving a public offering. The issuance of
securities upon the exercise of stock options as described below were deemed
to be exempt from registration under the Securities Act in reliance on Rule
701 promulgated thereunder as transactions pursuant to a compensatory benefit
plan and a written contract relating to compensation. The recipients of
securities in each such transaction represented their intentions to acquire
the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the share certificates and warrants issued in such transactions.
The Company made no sales of its securities in 1994.
Between January 1, 1995 and February 1, 1997, the Company issued an
aggregate of 1,208,000 shares of Common Stock at prices ranging from $0.03 to
$5.00 per share to 16 employees upon the exercise of stock options.
On January 1, 1995, the Company issued an aggregate of 1.4 million shares of
Common Stock to the four shareholders of Clarity, Inc. as consideration for
the Company's acquisition of the capital stock of that company.
On May 1, 1996, the Company issued an aggregate of 708,900 shares of Common
Stock to the five shareholders of SQLSoft, Inc. as consideration for the
Company's acquisition of the capital stock of that company.
On September 30, 1996, the Company issued 42,000 shares of Common Stock to
SofTeach Corporation as partial consideration for the Company's acquisition of
the assets of that company.
On October 1, 1996, the Company issued 40,000 shares of Common Stock to one
of the shareholders of Noetix Corporation as partial consideration for the
Company's acquisition of the capital stock of that company.
On February 24, 1997, the Company issued a five-year warrant to purchase up
to 4,000 shares of Common Stock at an exercise price of $10.00 per share to
Van Valkenberg Furber Law Group P.L.L.C. as consideration for services
rendered to the Company.
On February 28, 1997, the Company issued an aggregate of 280,000 shares of
Common Stock to the ten shareholders of Oxford Computer Group Limited as
consideration for the Company's acquisition of the capital stock of that
company.
II-2
<PAGE>
ITEM 16. EXHIBITS
The following is a complete list of Exhibits and Schedules filed as part of
this Registration Statement and which are incorporated herein.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
1.1* --Underwriting Agreement.
3.1* --Amended and Restated Articles of Incorporation.
3.2* --Amended and Restated Bylaws.
4.1* --Articles IV and V of the Amended and Restated Articles (filed as
Exhibit 3.1).
4.2* --Articles II, IV, VI, VII, IX, X and XI of the Amended and Restated
Bylaws (filed as Exhibit 3.2).
4.3* --Form of Common Stock Certificate.
5.1* --Opinion of Van Valkenberg Furber Law Group, P.L.L.C. as to legality
of shares to be issued.
10.1 --ARIS Corporation 1995 Stock Option Plan.
10.2* --ARIS Corporation 1997 Stock Option Plan.
10.3* --1997 Consulting Incentive Compensation Plan.
10.4 --Employment Agreement dated July 22, 1992 between the Company and
Kendall W. Kunz.
10.5 --Employment Agreement effective as of December 31, 1994 between the
Company and Jeffrey W. Gilles.
10.6 --Employment Agreement dated February 11, 1991 between the Company
and John Y. Song.
10.7 --Summary of Key Person Insurance Policy dated February 13, 1996,
written by New York Life Insurance Company, owned by the Company,
naming Paul Y. Song as the insured.
10.8 --Summary of Insurance held by the Company prepared by Acordia
Northwest, Inc. on March 10, 1997.
10.9 --Credit Agreement between the Company and U.S. Bank of Washington,
National Association, dated March 14, 1997.
10.10 --Registration Rights Agreement dated as of February 28th, 1997 by
and between the Company and certain holders of Common Stock.
10.11 --Registration Rights Agreement dated as of February 28th, 1997 by
and between the Company and Charles Henderson Cunningham.
10.12 --Promissory Note in the amount of $500,000 dated September 30, 1996
by the Company, as Maker, and SofTeach Corporation, as Holder.
10.13 --Promissory Note in the amount of $1,240,800 dated October 1, 1996
by ARIS Software, Inc. as Maker, and the Company, as Holder.
10.14 --Promissory Note Intercompany Loan dated October 1, 1996 by ARIS
Software, Inc. as Maker, and the Company as Holder.
10.15** --Office Building Lease dated May 5, 1994 between the Company, as
tenant and John C. Radovich, as landlord, for the administrative
offices located at Fort Dent One, as amended.
10.16** --Office Building Lease dated August 25, 1992 between the Company, as
tenant and John C. Radovich, as landlord, for the consulting offices
and intra-company training center located at Fort Dent Two, as
amended.
10.17** --Office Lease for Cornell Oaks Corporate Center dated February 29,
1996, by and between Tolcott Realty I Limited Partnership, as
landlord, and the Company, as tenant, for administrative offices and
training center in Beaverton, Oregon, as amended.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.18** --Office/Warehouse/Showroom Lease dated December 20, 1994 by and
between Century Properties Fund XIII, as landlord, and SQLSoft, as
predecessor in interest to the Company, as tenant, for
administrative offices and training center in Bellevue, Washington,
as modified.
10.19** --Office Lease dated September 1, 1994, between KOLL/OPIC Northwest,
as landlord, and Clarity, Inc., as predecessor in interest to the
Company, as tenant, for administrative offices and training center
in Bellevue, Washington, as amended.
10.20** --Standard Colorado Lease dated May 20, 1992, between Aetna Life
Insurance Company, as landlord, and SofTeach Corporation, as
predecessor in interest to the Company, as tenant, for
administrative offices and training center in Denver, Colorado, as
amended.
10.21** --Deed of Lease dated May 21, 1996, by and between Fairwill Limited
Partnership, as landlord, and the Company, as tenant, for
administrative offices and training center in Fairfax, Virginia.
10.22** --Lease dated August 26, 1994, from The Mayor and Commonality and
Citizens of the City of London Trustees of the Bridge House Estates
to Oxford Computer Group Limited ("Oxford"), for administrative
offices and training center in London, England.
10.23** --Lease dated August 22, 1996, from The Mayor and Commonality and
Citizens of the City of London Trustees of the Bridge House Estates
to Oxford, for administrative offices and training center in London,
England.
10.24** --Lease dated December 18, 1991, between Naroti Resources SA, as
landlord, and Oxford Computer Training Services Limited, as tenant,
for administrative offices and training center in London, England.
10.25** --Lease dated January 30, 1995, between Birmingham Business Park
Limited, as landlord, and Oxford, as tenant, for administrative
offices and training center in London, England.
10.26** --Lease dated January 30, 1995, between Birmingham Business Park
Limited, as landlord, and Oxford, as tenant, for administrative
offices and training center in London, England.
10.27** --Sub-Lease dated September 20, 1995, between Wolsey Hall Oxford
Limited, as landlord, and Oxford, as tenant, for administrative
offices and training center in Oxford, England.
10.28** --Lease dated April 12, 1990, between Oxford Examination Research
Centre Limited, as landlord, and Oxford, as tenant, for
administrative offices and training center in Oxford, England.
10.29** --Lease dated December 25, 1992, between Oxford Examination Research
Centre Limited, as landlord, and Oxford, as tenant, for
administrative offices and training center in Oxford, England.
10.30 --Agreement and Plan of Merger dated as of December 31, 1994, among
Clarity, Inc., the Company and the shareholders of Clarity.
10.31 --Agreement and Plan of Merger dated as of April 15, 1996, among
SQLSoft, Inc., the Company and the shareholders of SQLSoft.
10.32 --Asset Purchase Agreement dated as of August 5, 1996, between Cray
Research, Inc. and the Company.
10.33 --Stock Purchase Agreement dated as of September 30, 1996, by and
among Dewayne Cowles, Mark Turner, Steve Masters, Noetix Corporation
and the Company.
10.34 --Asset Purchase Agreement effective as of September 30, 1996, by and
Among SofTeach Corporation, Terri Olson, Greg Olson and the Company.
10.35 --Agreement for the sale and purchase of the entire issued share
capital of Oxford Computer Group Limited dated February 14, 1997, by
and among the Company and the Shareholders of Oxford Computer Group
Limited.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
10.36 --Sun Microsystems Educational Services U.S. Strategic Alliance
Agreement by and between SunService, a division of Sun Microsystems
Inc. and the Company.
10.37 --Microsoft Solution Provider Agreement and Microsoft Authorized
Technical Education Center Addendum, current through December 31,
1997, between Microsoft Corporation and the Company.
10.38* --Oracle vendor contracts
10.39 --Form of ARIS Corporation Professional Services Agreement.
10.40** --Master Agreement dated April 8, 1994, between Tektronix, Inc. and
the Company.
10.41** --Software Integration Services Agreement dated April 30, 1996,
between ESCO Corporation and the Company.
10.42** --Award/Contract dated September 16, 1994, issued by the Internal
Revenue Service naming the Company as Contractor.
10.43 --Contract BN40790 for Implementation of Oracle Software Accounts
Receivable and Order Entry Modules between the King County Department
of Metropolitan Services and the Company effective September 8, 1995.
10.44* --Boeing Information and Support Services Engineering/Technical
Contract Labor Terms and Conditions, effective as of July 1996,
between The Boeing Company and the Company.
10.45 --Master Services Agreement and Intellectual Property Assignment
effective as of November 20, 1996, between Microsoft Corporation and
the Company.
10.46 --ARIS Corporation Professional Services Agreement dated December 5,
1995, between Oregon Health Sciences University and the Company.
10.47** --Master Consulting Agreement #HY941108, effective as of April 8,
1994, between the Company and General Services Administration.
10.48 --ARIS Corporation Professional Services Agreement dated May 22, 1996,
between The Gates Rubber Company and the Company.
10.49 --ARIS Corporation Professional Services Agreement dated April 30,
1996 between Quebecor Printing (USA) Corp. and the Company.
10.50 --Computer Services Agreement dated August 31, 1994, by and between
the Company and Tosco Northwest Company.
10.51 --ARIS Corporation Professional Services Agreement dated February 13,
1995 between Weyerhaeuser and the Company.
10.52** --Consulting and Professional Services Agreement dated February 2,
1994 between NIKE, Inc. and the Company.
10.53* --British Telecom agreement
10.54 --Stock Redemption Agreements dated as of February 28, 1997, by and
between the Company and certain shareholders.
10.55** --Lease dated February 14, 1997 between Oxford Business Park Limited,
as landlord, and Oxford, as tenant, for administrative offices and
training center in Oxford, England.
11.1 --Statement re computation of per share earnings
15.1* --Letter re unaudited interim financial information
21.1 --List of the Company's Subsidiaries.
23.1* --Consent of Van Valkenberg Furber Law Group P.L.L.C. (Included in
Exhibit 5.1).
23.2 --Consent of Price Waterhouse LLP, independent certified public
accountants for the Company.
24.1 --Power of Attorney (Included in the signature page to this
Registration Statement).
27.1 --Financial Data Schedule
99.1 --Financial Statement Schedule II--Valuation and Qualifying Accounts
and Reserves.
</TABLE>
- --------
(*) To be filed by amendment.
(**) Filed pursuant to Rule 202 of Regulation S-T.
II-5
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement, certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
II-6
<PAGE>
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and
(2) For purposes of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-7
<PAGE>
SIGNATURES
In accordance with 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 Oxford,
England, on April 18, 1997.
ARIS CORPORATION
/s/ Paul Y. Song
By___________________________________
Paul Y. Song
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each individual whose signature appears
below constitutes and appoints Paul Y. Song and Thomas W. Averill, or either
of them, such person's true and lawful attorneys-in-fact and agents, with full
power of substitution, and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and
necessary to be done as fully to all intents and purposes as such person might
or could do in person, hereby ratify and confirming all that said attorneys-
in-fact and agents, or any substitute or substitutes of any of them, may
lawfully do or cause to be done by virtue hereof.
In accordance with 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Paul Y. Song April 18, 1997
- ------------------------------------
Paul Y. Song Chairman, President and
Chief Executive Officer
(Principal Executive
Officer)
/s/ Thomas W. Averill April 18, 1997
- ------------------------------------
Thomas W. Averill Vice President, Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ Kendall W. Kunz April 18, 1997
- ------------------------------------
Kendall W. Kunz Senior Vice President of
Western Operations and
Director
/s/ Bruce R. Kennedy April 18, 1997
- ------------------------------------
Bruce R. Kennedy Director
/s/ Kenneth A. Williams April 18, 1997
- ------------------------------------
Kenneth A. Williams Director
</TABLE>
II-8
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1* --Underwriting Agreement.
3.1* --Amended and Restated Articles of Incorporation.
3.2* --Amended and Restated Bylaws.
4.1* --Articles IV and V of the Amended and Restated
Articles (filed as Exhibit 3.1).
4.2* --Articles II, IV, VI, VII, IX, X and XI of the Amended
and Restated Bylaws (filed as Exhibit 3.2).
4.3* --Form of Common Stock Certificate.
5.1* --Opinion of Van Valkenberg Furber Law Group, P.L.L.C.
as to legality of shares to be issued.
10.1 --ARIS Corporation 1995 Stock Option Plan.
10.2* --ARIS Corporation 1997 Stock Option Plan.
10.3* --1997 Consulting Incentive Compensation Plan.
10.4 --Employment Agreement dated July 22, 1992 between the
Company and Kendall W. Kunz.
10.5 --Employment Agreement effective as of December 31,
1994 between the Company and Jeffrey W. Gilles.
10.6 --Employment Agreement dated February 11, 1991 between
the Company and John Y. Song.
10.7 --Summary of Key Person Insurance Policy dated February
13, 1996, written by New York Life Insurance Company,
owned by the Company, naming Paul Y. Song as the
insured.
10.8 --Summary of Insurance held by the Company prepared by
Acordia Northwest, Inc. on March 10, 1997.
10.9 --Credit Agreement between the Company and U.S. Bank of
Washington, National Association, dated March 14,
1997.
10.10 --Registration Rights Agreement dated as of February
28th, 1997 by and between the Company and certain
holders of Common Stock.
10.11 --Registration Rights Agreement dated as of February
28th, 1997 by and between the Company and Ian Charles
Henderson Cunningham.
10.12 --Promissory Note in the amount of $500,000 dated
September 30, 1996 by the Company, as Maker, and
SofTeach Corporation, as Holder.
10.13 --Promissory Note in the amount of $1,240,800 dated
October 1, 1996 by ARIS Software, Inc. as Maker, and
the Company, as Holder.
10.14 --Promissory Note Intercompany Loan dated October 1,
1996 by ARIS Software, Inc. as Maker, and the Company
as Holder.
10.15** --Office Building Lease dated May 5, 1994 between the
Company, as tenant and John C. Radovich, as landlord,
for the administrative offices located at Fort Dent
One, as amended.
10.16** --Office Building Lease dated August 25, 1992 between
the Company, as tenant and John C. Radovich, as
landlord, for the consulting offices and intra-company
training center located at Fort Dent Two, as amended.
10.17** --Office Lease for Cornell Oaks Corporate Center dated
February 29, 1996, by and between Tolcott Realty I
Limited Partnership, as landlord, and the Company, as
tenant, for administrative offices and training center
in Beaverton, Oregon, as amended.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.18** --Office/Warehouse/Showroom Lease dated December 20,
1994 by and between Century Properties Fund XIII, as
landlord, and SQLSoft, as predecessor in interest to
the Company, as tenant, for administrative offices and
training center in Bellevue, Washington, as modified.
10.19** --Office Lease dated September 1, 1994, between
KOLL/OPIC Northwest, as landlord, and Clarity, Inc.,
as predecessor in interest to the Company, as tenant,
for administrative offices and training center in
Bellevue, Washington, as amended.
10.20** --Standard Colorado Lease dated May 20, 1992, between
Aetna Life Insurance Company, as landlord, and
SofTeach Corporation, as predecessor in interest to
the Company, as tenant, for administrative offices and
training center in Denver, Colorado, as amended.
10.21** --Deed of Lease dated May 21, 1996, by and between
Fairwill Limited Partnership, as landlord, and the
Company, as tenant, for administrative offices and
training center in Fairfax, Virginia.
10.22** --Lease dated August 26, 1994, from The Mayor and
Commonality and Citizens of the City of London
Trustees of the Bridge House Estates to Oxford
Computer Group Limited ("Oxford"), for administrative
offices and training center in London, England.
10.23** --Lease dated August 22, 1996, from The Mayor and
Commonality and Citizens of the City of London
Trustees of the Bridge House Estates to Oxford, for
administrative offices and training center in London,
England.
10.24** --Lease dated December 18, 1991, between Naroti
Resources SA, as landlord, and Oxford Computer
Training Services Limited, as tenant, for
administrative offices and training center in London,
England.
10.25** --Lease dated January 30, 1995, between Birmingham
Business Park Limited, as landlord, and Oxford, as
tenant, for administrative offices and training center
in London, England.
10.26** --Lease dated January 30, 1995, between Birmingham
Business Park Limited, as landlord, and Oxford, as
tenant, for administrative offices and training center
in London, England.
10.27** --Sub-Lease dated September 20, 1995, between Wolsey
Hall Oxford Limited, as landlord, and Oxford, as
tenant, for administrative offices and training center
in Oxford, England.
10.28** --Lease dated April 12, 1990, between Oxford
Examination Research Centre Limited, as landlord, and
Oxford, as tenant, for administrative offices and
training center in Oxford, England.
10.29** --Lease dated December 25, 1992, between Oxford
Examination Research Centre Limited, as landlord, and
Oxford, as tenant, for administrative offices and
training center in Oxford, England.
10.30 --Agreement and Plan of Merger dated as of December 31,
1994, among Clarity, Inc., the Company and the
shareholders of Clarity.
10.31 --Agreement and Plan of Merger dated as of April 15,
1996, among SQLSoft, Inc., the Company and the
shareholders of SQLSoft.
10.32 --Asset Purchase Agreement dated as of August 5, 1996,
between Cray Research, Inc. and the Company.
10.33 --Stock Purchase Agreement dated as of September 30,
1996, by and among Dewayne Cowles, Mark Turner, Steve
Masters, Noetix Corporation and the Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.34 --Asset Purchase Agreement effective as of September
30, 1996, by and Among SofTeach Corporation, Terri
Olson, Greg Olson and the Company.
10.35 --Agreement for the sale and purchase of the entire
issued share capital of Oxford Computer Group Limited
dated February 14, 1997, by and among the Company and
the Shareholders of Oxford Computer Group Limited.
10.36 --Sun Microsystems Educational Services U.S. Strategic
Alliance Agreement by and between SunService, a
division of Sun Microsystems Inc. and the Company.
10.37 --Microsoft Solution Provider Agreement and Microsoft
Authorized Technical Education Center Addendum,
current through December 31, 1997, between Microsoft
Corporation and the Company.
10.38* --Oracle vendor contracts
10.39 --Form of ARIS Corporation Professional Services
Agreement.
10.40** --Master Agreement dated April 8, 1994, between
Tektronix, Inc. and the Company.
10.41** --Software Integration Services Agreement dated
April 30, 1996, between ESCO Corporation and the
Company.
10.42** --Award/Contract dated September 16, 1994, issued by
the Internal Revenue Service naming the Company as
Contractor.
10.43 --Contract BN40790 for Implementation of Oracle
Software Accounts Receivable and Order Entry Modules
between the King County Department of Metropolitan
Services and the Company effective September 8, 1995.
10.44* --Boeing Information and Support Services
Engineering/Technical Contract Labor Terms and
Conditions, effective as of July 1996, between The
Boeing Company and the Company.
10.45 --Master Services Agreement and Intellectual Property
Assignment effective as of November 20, 1996, between
Microsoft Corporation and the Company.
10.46 --ARIS Corporation Professional Services Agreement
dated December 5, 1995, between Oregon Health Sciences
University and the Company.
10.47** --Master Consulting Agreement #HY941108, effective as
of April 8, 1994, between the Company and General
Services Administration.
10.48 --ARIS Corporation Professional Services Agreement
dated May 22, 1996, between The Gates Rubber Company
and the Company.
10.49 --ARIS Corporation Professional Services Agreement
dated April 30, 1996 between Quebecor Printing (USA)
Corp. and the Company.
10.50 --Computer Services Agreement dated August 31, 1994, by
and between the Company and Tosco Northwest Company.
10.51 --ARIS Corporation Professional Services Agreement
dated February 13, 1995 between Weyerhaeuser and the
Company.
10.52** --Consulting and Professional Services Agreement dated
February 2, 1994 between NIKE, Inc. and the Company.
10.53* --British Telecom agreement
10.54 --Stock Redemption Agreements dated as of February 28,
1997, by and between the Company and certain
shareholders.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
10.55** --Lease dated February 14, 1997 between Oxford Business
Park Limited, as landlord, and Oxford, as tenant, for
administrative offices and training center in Oxford,
England.
11.1 --Statement re computation of per share earnings
15.1* --Letter re unaudited interim financial information
21.1 --List of the Company's Subsidiaries.
23.1* --Consent of Van Valkenberg Furber Law Group P.L.L.C.
(Included in Exhibit 5.1).
23.2 --Consent of Price Waterhouse LLP, independent
certified public accountants for the Company.
24.1 --Power of Attorney (Included in the signature page to
this Registration Statement).
27.1 --Financial Data Schedule
99.1 --Financial Statement Schedule II--Valuation and
Qualifying Accounts and Reserves.
</TABLE>
- --------
(*) To be filed by amendment.
(**) Filed pursuant to Rule 202 of Regulation S-T.
<PAGE>
EXHIBIT 10.1
ARIS CORPORATION
1995 STOCK OPTION PLAN
(Including amendments through August 13, 1996)
This Stock Option Plan (the "Plan") provides for the grant of options
to acquire shares of Common Stock, without par value (the "Common Stock"), of
ARIS Corporation, a Washington corporation (the "Company"). Stock options
granted under this Plan that qualify under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), are referred to in this Plan as
"Incentive Stock Options." Incentive Stock Options and stock options that do
not qualify under Section 422 of the Code ("Non-Qualified Stock Options")
granted under this Plan are referred to as "Options."
1. PURPOSES.
--------
The purposes of this Plan are to retain the services of valued
key employees and consultants of the Company and such other persons as the Plan
Administrator shall select in accordance with Section 3 below, to encourage such
persons to acquire a greater proprietary interest in the Company, thereby
strengthening their incentive to achieve the objectives of the shareholders of
the Company, and to serve as an aid and inducement in the hiring of new
employees, consultants and other persons selected by the Plan Administrator.
2. ADMINISTRATION.
--------------
This Plan shall be administered by the Board of Directors of the
Company (the "Board"). If the Board so desires, the Plan shall be administered
by a committee designated by the Board and composed of one (1) or more members
of the Board, which committee (the "Committee") may be an executive,
compensation or other committee, including a separate committee especially
created for this purpose. In the event the Company is or becomes subject to the
provisions of Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Board shall attempt to provide for administration of the
Plan, insofar as it relates to the participation of officers, directors or
shareholders of the Company who are subject to the reporting and liability
provisions of Section 16 of the Exchange Act (the "Insiders"), in a manner which
shall qualify the grant, exercise, expiration or surrender of Options under this
Plan for the treatment afforded by Securities and Exchange Commission Rule 16b-
3, as amended from time to time, or any successor rule or regulatory
requirements (the "Rule"). The Committee shall have the powers and authority
vested in the Board hereunder (including the power and authority to interpret
any provision of this Plan or of any Option). The members of any such Committee
shall serve at the pleasure of the Board. A majority of the members of the
Committee shall constitute a quorum, and all actions of the Committee shall be
taken by a majority of the members present. Any action may be taken by a
written instrument signed by all of the members of the Committee and any action
so taken shall be fully effective as if it had been taken at a
Page 1
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
meeting. The Board, or any committee thereof appointed to administer the Plan,
is referred to herein as the "Plan Administrator."
Subject to the provisions of this Plan, and with a view to effecting
its purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to (a) construe and interpret this Plan; (b) define the terms used
in this Plan; (c) prescribe, amend and rescind rules and regulations relating to
this Plan; (d) correct any defect, supply any omission or reconcile any
inconsistency in this Plan; (e) determine the individuals to whom Options shall
be granted under this Plan and whether the Option is an Incentive Stock Option
or a Non-Qualified Stock Option; (f) determine the time or times at which
Options shall be granted under this Plan; (g) determine the number of shares of
Common Stock subject to each Option, the exercise price of each Option, the
duration of each Option and the times at which each Option shall become
exercisable; (h) determine all other terms and conditions of Options; and (i)
make all other determinations necessary or advisable for the administration of
this Plan. In addition, the Plan Administrator may grant to any officer of the
Company the authority to grant options and otherwise administer the Plan solely
with respect to persons who are not Insiders. All decisions, determinations and
interpretations made by the Plan Administrator shall be binding and conclusive
on all participants in this Plan and on their legal representatives, heirs and
beneficiaries.
3. ELIGIBILITY.
-----------
Incentive Stock Options may be granted to any individual who, at
the time the Option is granted, is an employee of the Company or any Related
Corporation (as defined below), including employees who are directors of the
Company ("Employees"). Non-Qualified Stock Options may be granted to Employees
and to such other persons other than directors who are not Employees as the Plan
Administrator shall select. Options may be granted in substitution for
outstanding Options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization between
such other corporation and the Company or any subsidiary of the Company.
Options also may be granted in exchange for outstanding Options. Any person to
whom an Option is granted under this Plan is referred to as an "Optionee."
As used in this Plan, the term "Related Corporation," when referring
to a subsidiary corporation, shall mean any corporation (other than the Company)
in an unbroken chain of corporations beginning with the Company if, at the time
of the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent (50%) or more
of the total combined voting power of all classes of stock of one of the other
corporations in such chain. When referring to a parent corporation, the term
Page 2
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
"Related Corporation" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of
granting of the Option, each of the corporations other than the Company owns
stock possessing 50 percent (50%) or more of the total combined voting power of
all classes of stock of one of the other corporations in such chain.
4. STOCK.
-----
The Plan Administrator is authorized to grant Options to acquire
up to a total of 800,000 shares of the Company's authorized but unissued, or
reacquired, Common Stock. The number of shares with respect to which Options
may be granted hereunder is subject to adjustment as set forth in Section 5(m)
hereof. In the event that any outstanding Option expires or is terminated for
any reason, the shares of Common Stock allocable to the unexercised portion of
such Option may again be subject to an Option to the same Optionee or to a
different person eligible under Section 3 of this Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
-------------------------------
Each Option granted under this Plan shall be evidenced by a
written agreement approved by the Plan Administrator (the "Agreement").
Agreements may contain such additional provisions, not inconsistent with this
Plan, as the Plan Administrator in its discretion may deem advisable. All
Options also shall comply with the following requirements:
(a) Number of Shares and Type of Option.
-----------------------------------
Each Agreement shall state the number of shares of Common
Stock to which it pertains and whether the Option is intended to be an Incentive
Stock Option or a Non-Qualified Stock Option. In the absence of action to the
contrary by the Plan Administrator in connection with the grant of an Option,
all Options shall be Non-Qualified Stock Options. The aggregate fair market
value (determined at the Date of Grant, as defined below) of the stock with
respect to which Incentive Stock Options are exercisable for the first time by
the Optionee during any calendar year (granted under this Plan and all other
Incentive Stock Option plans of the Company, a Related Corporation or a
predecessor corporation) shall not exceed $100,000, or such other limit as may
be prescribed by the Code as it may be amended from time to time. Any Option
which exceeds the annual limit shall not be void but rather shall be a Non-
Qualified Stock Option.
Page 3
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
(b) Date of Grant.
-------------
Each Agreement shall state the date the Plan Administrator
has deemed to be the effective date of the Option for purposes of this Plan (the
"Date of Grant").
(c) Option Price.
------------
Each Agreement shall state the price per share of Common
Stock at which it is exercisable. The exercise price shall be fixed by the Plan
Administrator at whatever price the Plan Administrator may determine in the
exercise of its sole discretion in good faith; provided, that the per share
--------
exercise price for any Option granted shall be determined according to the
valuation provisions set forth in Section 8 of the Shareholders Agreement (a
copy of which is attached as Exhibit A); provided further, that the per share
--------- -------- -------
exercise price for an Incentive Stock Option shall not be less than the fair
market value per share of the Common Stock at the Date of Grant as determined by
the Plan Administrator in good faith; provided further, that with respect to
-------- -------
Incentive Stock Options granted to greater-than-10 percent (>10%) shareholders
of the Company (as determined with reference to Section 424(d) of the Code),
the exercise price per share shall not be less than 110 percent (110%) of the
fair market value per share of the Common Stock at the Date of Grant; and,
provided further, that Options granted in substitution for outstanding options
- -------- -------
of another corporation in connection with the merger, consolidation, acquisition
of property or stock or other reorganization involving such other corporation
and the Company or any subsidiary of the Company may be granted with an exercise
price equal to the exercise price for the substituted option of the other
corporation, subject to any adjustment consistent with the terms of the
transaction pursuant to which the substitution is to occur.
(d) Duration of Options.
-------------------
At the time of the grant of the Option, the Plan
Administrator shall designate, subject to paragraph 5(g) below, the expiration
date of the Option, which date shall not be later than 10 years from the Date of
Grant in the case of Incentive Stock Options; provided, that the expiration date
--------
of any Incentive Stock Option granted to a greater-than-10 percent shareholder
of the Company (as determined with reference to Section 424(d) of the Code)
shall not be later than five years from the Date of Grant. In the absence of
action to the contrary by the Plan Administrator in connection with the grant of
a particular Option, and except in the case of Incentive Stock Options as
described above, all Options granted under this Plan shall expire 7 years from
the Date of Grant.
Page 4
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
(e) Vesting Schedule.
----------------
No Option shall be exercisable until it has vested. The
vesting schedule for each Option shall be specified by the Plan Administrator at
the time of grant of the Option; provided, that if no vesting schedule is
--------
specified at the time of grant, the Option shall vest according to the following
schedule:
<TABLE>
<CAPTION>
Number of Years Percentage of Total
Following Date of Grant Option Vested
----------------------- -------------------
<S> <C>
1 ____ 20%
2 ____ 40%
3 ____ 60%
4 ____ 80%
5 ____ 100%
</TABLE>
(f) Acceleration of Vesting
-----------------------
If an Optionee's employment terminates by reason of death
[or Disability (as defined in Section 5(g)], any Option held by such Optionee
who has been Continuously Employed by the Company or Related Corporation for a
minimum of 2 years shall become fully vested and exercisable and may thereafter
be exercised during the term of the Option set forth in Section 5(g).
"Continuously Employed" shall mean the absence of any interruption or
termination of service. Continuous Employment with the Company or Related
Corporation shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the Company or Related
Corporation or in the case of transfers between locations of the Company or
between the Company, Related Corporations or their successors; provided, that
--------
the Optionee continues to be an employee of the Company or any Related
Corporation. The vesting of Options also shall be accelerated under the
circumstances described in Section 5(m) below.
(g) Term of Option.
--------------
Vested Options shall terminate, to the extent not previously
exercised, upon the occurrence of the first of the following events: (i) the
expiration of the Option, as designated by the Plan Administrator in accordance
with Section 5(d) above; (ii) the expiration of 30 days from the date of an
Optionee's termination of employment or contractual relationship with the
Company or any Related Corporation for any reason whatsoever other than death or
Disability (as defined below) unless, in the case of a Non-Qualified Stock
Option, the
Page 5
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
exercise period is extended by the Plan Administrator until a date not later
than the expiration date of the Option; or (iii) the expiration of one year from
(A) the date of death of the Optionee or (B) cessation of an Optionee's
employment or contractual relationship by reason of Disability (as defined
below) unless, in the case of a Non-Qualified Stock Option, the exercise period
is extended by the Plan Administrator until a date not later than the expiration
date of the Option. If an Optionee's employment or contractual relationship is
terminated by death, any Option held by the Optionee shall be exercisable only
by the person or persons to whom such Optionee's rights under such Option shall
pass by the Optionee's will or by the laws of descent and distribution of the
state or county of the Optionee's domicile at the time of death. For purposes of
the Plan, unless otherwise defined in the Agreement, "Disability" shall have the
same meaning as "disability" under any long term disability insurance naming
Optionee as the insured; or if there is no such insurance, "Disability shall
mean any physical, mental or other health condition which substantially impairs
the Optionee's ability to perform her or his assigned duties for one hundred
twenty (120) days or more in any two hundred forty (240) day period or that can
be expected to result in death. The Plan Administrator shall determine whether
an Optionee has incurred a Disability on the basis of medical evidence
acceptable to the Plan Administrator. Upon making a determination of Disability,
the Plan Administrator shall, for purposes of the Plan, determine the date of an
Optionee's termination of employment or contractual relationship. Unvested
Options shall terminate immediately upon the termination of employment of the
Optionee by the Company for any reason whatsoever, including death or
disability.
Unless accelerated in accordance with Section 5(f) above, unvested
Options shall terminate immediately upon termination of employment of the
Optionee by the Company for any reason whatsoever, including death or
Disability. If, in the case of an Incentive Stock Option, an Optionee's
relationship with the Company changes (e.g., from an Employee to a non-Employee,
----
such as a consultant), such change shall constitute a termination of an
Optionee's employment with the Company and the Optionee's Incentive Stock Option
shall terminate in accordance with this subsection. For purposes of this Plan,
transfer of employment between or among the Company and/or any Related
Corporation shall not be deemed to constitute a termination of employment with
the Company or any Related Corporations. For purposes of this subsection with
respect to Incentive Stock Options, employment shall be deemed to continue while
the Optionee is on military leave, sick leave or other bona fide leave of
absence (as determined by the Plan Administrator). The foregoing
notwithstanding, employment shall not be deemed to continue beyond the first
ninety (90) days of such leave, unless the Optionee's re-employment rights are
guaranteed by statute or by contract.
Page 6
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
(h) Exercise of Options.
-------------------
Options shall be exercisable, either all or in part, at any
time after vesting, until termination; provided, however, that after
-------- -------
registration of any of the Company's securities under Section 12 of the Exchange
Act and regardless of when the Option is exercised, any Optionee who is an
Insider shall be precluded from selling or transferring any Common Stock or
other security underlying an Option during the six (6) months immediately
following the grant of that Option. If less than all of the shares included in
the vested portion of any Option are purchased, the remainder may be purchased
at any subsequent time prior to the expiration of the Option term. No portion
of any Option for less than 100 shares (as adjusted pursuant to Section 5(m)
below) may be exercised; provided, that if the vested portion of any Option is
--------
less than 100 shares, it may be exercised with respect to all shares for which
it is vested. Only whole shares may be issued pursuant to an Option, and to the
extent that an Option covers less than one (1) share, it is unexercisable.
Options or portions thereof may be exercised by giving written notice to the
Company, which notice shall specify the number of shares to be purchased, and be
accompanied by payment in the amount of the aggregate exercise price for the
Common Stock so purchased, which payment shall be in the form specified in
Section 5(i) below. The Company shall not be obligated to issue, transfer or
deliver a certificate of Common Stock to any Optionee, or to his personal
representative, until the aggregate exercise price has been paid for all shares
for which the Option shall have been exercised and adequate provision has been
made by the Optionee for satisfaction of any tax withholding obligations
associated with such exercise. During the lifetime of an Optionee, Options are
exercisable only by the Optionee.
(i) Payment upon Exercise of Option.
-------------------------------
Upon the exercise of any Option, the aggregate exercise
price shall be paid to the Company in cash or by certified or cashier's check.
(j) Rights as a Shareholder.
-----------------------
An Optionee shall have no rights as a shareholder with
respect to any shares covered by an Option until such Optionee becomes a record
holder of such shares, irrespective of whether such Optionee has given notice of
exercise. Subject to the provisions of Section 5(m) hereof, no rights shall
accrue to an Optionee and no adjustments shall be made on account of dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights declared on, or created in, the Common Stock for
which the record date is prior to the date the Optionee becomes a record holder
of the shares of Common Stock covered by the Option, irrespective of whether
such Optionee has given notice of exercise.
Page 7
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
(k) Transfer of Option.
------------------
Unless otherwise specified in the Agreement or by the Plan
Administrator, Options granted under this Plan and the rights and privileges
conferred by this Plan may not be transferred, assigned, pledged or hypothecated
in any manner (whether by operation of law or otherwise) other than by will or
by applicable laws of descent and distribution, and shall not be subject to
execution, attachment or similar process. Upon any attempt to transfer, assign,
pledge, hypothecate or otherwise dispose of any Option or of any right or
privilege conferred by this Plan contrary to the provisions hereof, or upon the
sale, levy or any attachment or similar process upon the rights and privileges
conferred by this Plan, such Option shall thereupon terminate and become null
and void.
(l) Securities Regulation and Tax Withholding.
-----------------------------------------
(1) Shares shall not be issued with respect to an Option
unless the exercise of such Option and the issuance and delivery of such shares
shall comply with all relevant provisions of law, including, without limitation,
any applicable state securities laws, the Securities Exchange Act of 1933, as
amended, the Exchange Act, the rules and regulations thereunder and the
requirements of any stock exchange upon which such shares may then be listed,
and such issuance shall be further subject to the approval of counsel for the
Company with respect to such compliance, including the availability of an
exemption from registration for the issuance and sale of such shares. The
inability of the Company to obtain from any regulatory body the authority deemed
by the Company to be necessary for the lawful issuance and sale of any shares
under this Plan, or the unavailability of an exemption from registration for the
issuance and sale of any shares under this Plan, shall relieve the Company of
any liability with respect to the non-issuance or sale of such shares.
As a condition to the exercise of an Option, the Plan Administrator
may require the Optionee to represent and warrant in writing at the time of such
exercise that the shares are being purchased only for investment and without any
then-present intention to sell or distribute such shares. At the option of the
Plan Administrator, a stop-transfer order against such shares may be placed on
the stock books and records of the Company, and a legend indicating that the
stock may not be pledged, sold or otherwise transferred unless an opinion of
counsel is provided stating that such transfer is not in violation of any
applicable law or regulation, may be stamped on the certificates representing
such shares in order to assure an exemption from registration. The Plan
Administrator also may require such other documentation as may from time to time
be necessary to comply with federal and state securities laws. THE COMPANY HAS
NO OBLIGATION TO UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF STOCK
ISSUABLE UPON THE EXERCISE OF OPTIONS.
Page 8
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
(2) As a condition to the exercise of any Option granted
under this Plan, the Optionee shall make such arrangements as the Plan
Administrator may require for the satisfaction of any federal, state or local
withholding tax obligations that may arise in connection with such exercise.
(3) The issuance, transfer or delivery of certificates of
Common Stock pursuant to the exercise of Options may be delayed, at the
discretion of the Plan Administrator, until the Plan Administrator is satisfied
that the applicable requirements of the federal and state securities laws and
the withholding provisions of the Code have been met.
(m) Stock Dividend, Reorganization or Liquidation.
---------------------------------------------
(1) If (i) the Company shall at any time be involved in a
transaction described in Section 424(a) of the Code (or any successor provision)
or any "corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common Stock or (iii) any other event with substantially the same effect shall
occur, the Plan Administrator shall, with respect to each outstanding Option,
proportionately adjust the number of shares of Common Stock and/or the exercise
price per share so as to preserve the rights of the Optionee substantially
proportionate to the rights of the Optionee prior to such event, and to the
extent that such action shall include an increase or decrease in the number of
shares of Common Stock subject to outstanding Options, the number of shares
available under Section 4 of this Plan shall automatically be increased or
decreased, as the case may be, proportionately, without further action on the
part of the Plan Administrator, the Company or the Company's shareholders.
(2) If the Company is liquidated or dissolved, the Plan
Administrator may allow the holders of any outstanding Options to exercise all
or any part of the unvested portion of the Options held by them; provided,
--------
however, that such Options must be exercised prior to the effective date of such
liquidation or dissolution. If the Option holders do not exercise their Options
prior to such effective date, each outstanding Option shall terminate as of the
effective date of the liquidation or dissolution.
(3) The foregoing adjustments in the shares subject to
Options shall be made by the Plan Administrator, or by any successor
administrator of this Plan, or by the applicable terms of any assumption or
substitution document.
(4) The grant of an Option shall not affect in any way the
right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of
Page 9
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
its capital or business structure, to merge, consolidate or dissolve, to
liquidate or to sell or transfer all or any part of its business or assets.
6. EFFECTIVE DATE; TERM.
--------------------
This Plan shall be effective as of January 1, 1995. Incentive
Stock Options may be granted by the Plan Administrator from time to time
thereafter until December 31, 2004. Non-Qualified Stock Options may be granted
until this Plan is terminated by the Board in its sole discretion. Termination
of this Plan shall not terminate any Option granted prior to such termination.
Any Options granted by the Plan Administrator prior to the approval of this Plan
by a majority of the shareholders of the Company shall be granted subject to
ratification of this Plan by the shareholders of the Company within twelve (12)
months after this Plan is adopted by the Board, and if shareholder ratification
is not obtained, each and every Option granted under this Plan shall be null and
void and shall convey no rights to the holder thereof.
7. NO OBLIGATIONS TO EXERCISE OPTION.
---------------------------------
The grant of an Option shall impose no obligation upon the
Optionee to exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
------------------------------------
Whether or not any Options are to be granted under this Plan
shall be exclusively within the discretion of the Plan Administrator, and
nothing contained in this Plan shall be construed as giving any person any right
to participate under this Plan. The grant of an Option shall in no way
constitute any form of agreement or understanding binding on the Company or any
Related Company, express or implied, that the Company or any Related Company
will employ or contract with an Optionee for any length of time, nor shall it
interfere in any way with the Company's or, where applicable, a Related
Company's right to terminate Optionee's employment at any time, which right is
hereby reserved.
9. APPLICATION OF FUNDS.
--------------------
The proceeds received by the Company from the sale of Common
Stock issued upon the exercise of Options shall be used for general corporate
purposes, unless otherwise directed by the Board.
Page 10
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
10. INDEMNIFICATION OF PLAN ADMINISTRATOR.
-------------------------------------
In addition to all other rights of indemnification they may have
as members of the Board, members of the Plan Administrator shall be indemnified
by the Company for all reasonable expenses and liabilities of any type or
nature, including attorneys' fees, incurred in connection with any action, suit
or proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement is
approved by independent legal counsel selected by the Company), except to the
extent that such expenses relate to matters for which it is adjudged that such
Plan Administrator member is liable for willful misconduct; provided, that
--------
within fifteen (15) days after the institution of any such action, suit or
proceeding, the Plan Administrator member involved therein shall, in writing,
notify the Company of such action, suit or proceeding, so that the Company may
have the opportunity to make appropriate arrangements to prosecute or defend the
same.
11. AMENDMENT OF PLAN.
-----------------
The Plan Administrator may, at any time, modify, amend or
terminate this Plan and Options granted under this Plan, including, without
limitation, such modifications or amendments as are necessary to maintain
compliance with applicable statutes, rules or regulations; provided however,
-------- -------
that any amendment for which shareholder approval is required by the Rule in
order for the Plan to be eligible or continue to qualify for the benefits of the
Rule shall be subject to approval of the requisite percentage of the
shareholders of the Company in accordance with the Rule. Without limiting the
generality of the foregoing, the Plan Administrator may modify grants to persons
who are eligible to receive Options under this Plan who are foreign nationals or
employed outside the United States to recognize differences in local law, tax
policy or custom.
Date Approved by Board of Directors of Company: December 22, 1994.
/s/ Paul Song
----------------------------
Paul Song, Secretary
Page 11
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
Date Approved by Shareholders of Company: December 22, 1994.
/s/ Paul Song
-------------------------------
Paul Song, Secretary
Page 12
<PAGE>
ARIS 1995 Stock Option Plan
Adopted December 22, 1994;
as amended through August 13th, 1996
EXHIBIT A
The Price shall be determined from time to time pursuant to the
independent appraisal and valuation report of Corporate Advisory Associates in
Seattle, Washington.
Page 13
<PAGE>
EXHIBIT 10.4
[ARIS Corporation logo]
ARIS Corporation
25411 126/th/ Avenue S.E.
Kent, Washington 98031
(206) 630-8398
FAX (206) 852-1469
EMPLOYMENT AGREEMENT OF
APPLIED RELATIONAL INFORMATION SYSTEMS, INC.
Employment Agreement between Applied Relational Information Systems, Inc., a
Washington corporation ("ARIS"), and Kendall Kunz ("Employee").
1. Employment. ARIS hereby employs Employee and Employee hereby accepts
employment under the terms and conditions herein after set forth.
2. Terminable at Will. Subject to the provisions of termination in Paragraph 7,
employment is terminable at will, by either ARIS or Employee.
3. Compensation and Benefits. ARIS agrees to provide Employee with the
compensation and benefits set forth in the offer letter dated July 13, 1992
attached hereto and incorporated by this reference.
4. Duties. ARIS reserves the right to assign and delegate work and specific
responsibilities to the Employee. Employee shall devote (his/her) full time and
attention and best efforts to the utmost of (his/her) skill to the rendering of
professional services for ARIS and cannot practice his profession except as an
employee of ARIS.
5. Covenant Not To Compete. During the term of this Agreement and for a period
of one year thereafter, Employee shall not directly or indirectly, for
Employee's benefit, or for or with any person, firm or business entity of any
kind other than ("ARIS contact or provide products or services for any client or
potential client of ARIS with whom employee has had contact in the 12 months
preceding the termination of this Agreement, for the purposes of soliciting,
attempting to solicit, or providing any products or services that are similar to
or in competition with that in which ARIS provides.
6. Confidential and Proprietary Information. Unless authorized by ARIS,
Employee agrees not to exploit, use or disclose to anyone not employed by ARIS
directly or indirectly, confidential and proprietary information which is
defined to include, but is not limited to, the following:
A. Customer and employee lists of ARIS, marketing and sales plans, product
development plans, competitive analyses, business and financial plans or
forecasts, non-public financial information and agreements.
B. Any information or material not described above which relates to ARIS' trade
secrets, inventions, technological developments, "know-how", purchasing,
accounting, merchandising or licensing.
C. Any information of the type described above which ARIS has legal obligation
to treat as confidential and proprietary, or which ARIS treats as confidential
and proprietary, whether or not owned or developed by ARIS.
D. Software developed or licensed by or for ARIS or licensed to ARIS by a third
party, and any documentation or listing pertaining to such software. The term
"software" as used in this
<PAGE>
paragraph refers to software in various stages of development and includes
without limitation the literal elements of a program (source code, object code
or otherwise), its audio visual components (menus, screens, structure and
organization), and human or machine readable form of the program, and any
writing or medium in which the program or the information therein is stored,
written, inscribed, including without limitation, diagrams, flow charts,
designs, drawings, specifications, models, data, bug reports, and customer
information.
Employee further agrees to promptly disclose to ARIS all ideas, processes,
inventions, modifications, improvements and concepts, whether or not patentable
or copyrightable (hereinafter referred to as "Discoveries") relating to any work
or business conducted by ARIS whether or not conceived by Employee alone or with
others, and whether or not conceived during regular business hours. All such
Discoveries shall be the sole and exclusive property of ARIS, and Employee
agrees to execute without receiving additional compensation any and all
documents necessary to assign such Discoveries to ("ARIS and to obtain a patent,
register or copyright, or enforce ARIS' rights in such Discoveries.
The obligations of nondisclosure in this paragraph 7 shall continue beyond the
cessation of the Employee's term of employment.
Upon cessation of employment, Employee agrees to return all ARIS property
including, but not limited to, confidential and proprietary information
(originals and copies).
Proprietary Information shall not include information known publicly or
generally employed in the trade, nor shall it include generic knowledge that
employee would have learned in the source of similar employment elsewhere.
7. Termination. This Agreement shall be terminated a) by the death or
disability of the employee, b) for cause or c) if either party provides the
other with 30 days prior written notice.
For purposes of this Agreement, "for cause" means:
Breach of any Company personnel Policy or work rule, breach of any covenant in
this Agreement, moral turpitude, gross professional neglect, or incompetence.
Disability is defined as not being able to effectively perform one's duties and
responsibilities for 30 days or more due to a medical condition or as defined by
the insurance company if employee has disability insurance.
Termination for cause shall be effective immediately upon the receipt by
Employee of written notice of said termination which will state the reasons
therefor.
8. Notices. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered or certified mail to
Employee's residence, and in the case of ARIS, to its principal office.
9. Dispute Resolution. Any dispute over the meaning or performance of this
Agreement shall be settled by binding arbitration in accordance with the rules
then obtaining of the Christian Conciliation Service of Puget Sound, and
judgment upon the award rendered may be entered in King County Superior Court.
The prevailing party shall recover its reasonable attorneys' fees from the non-
prevailing party.
10. Venue; Choice of Law. Any disputes arising out of this Agreement shall be
adjudicated in King County, Washington, subject to the preceding paragraph, and
shall be governed by the laws of the State of Washington.
11. Relationship of the Parties. This Agreement establishes an employment
relationship between the parties and shall not be construed to create any other
relationship, including but not limited to, a partnership or joint venture.
<PAGE>
12. Remedies. Employee acknowledges the breach of any of the covenants in
paragraphs 6 and 7 shall cause irreparable harm to ARIS that may not be
completely remedied by an award of damages, and, therefore, Employee stipulates
to entry of an injunction against continuation of such breach, in addition to
any other legal remedies available to ARIS.
13. Entire Agreement. This Agreement supersedes any prior or contemporaneous
representations or agreements, written or oral, between the parties and contains
the entire agreement of the parties. Both parties agree that any modification
or amendment to this Agreement shall require a written agreement signed by both
parties.
14. Continuation. In the event that Employee becomes a shareholder of ARIS,
this Agreement shall nevertheless remain fully effective and binding on the
Employee in accordance with its terms and conditions.
15. Assignment This Agreement shall be binding upon and inure to the benefit of
ARIS' successors and assigns and Employee's heirs. Employee's duties herein
shall not be delegable without ARIS' written consent.
APPLIED RELATIONAL INFORMATION EMPLOYEE:
SYSTEMS, INC.
By: /s/ Paul Song /s/ Kendall W. Kunz
Date: July 13, 1992 July 22, 1992
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated effective as of the Effective
Date, is entered into between Applied Relational Information Systems, Inc., a
Washington corporation ("ARIS" or "Employer"), and Jeffrey Gilles ("Employee").
RECITALS
A. ARIS, Employee, Clarity, Inc., and the shareholders of Clarity, Inc., have
entered that Agreement and Plan of Merger dated as of December 31, 1994 (the
"Merger Agreement"), pursuant to which Clarity shall be merged with and into
ARIS, with ARIS being the surviving corporation as of the Effective Date of the
Merger;
B. Employee possesses valuable skills and experience of a special and personal
nature and has unique, personal and confidential knowledge of Clarity's
business, which is being purchased by ARIS according to the terms of the Merger
Agreement;
C. Clarity and ARIS wish to assure that Employee will make such skills,
experience and knowledge available to Employer after the consummation of the
transactions contemplated by the Merger Agreement;
D. Employee wishes to become an employee of Employer under the terms and
conditions set forth herein,
E. Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Merger Agreement.
AGREEMENT
Employer and Employee hereby agree as follows:
ARTICLE I
Employment
SECTION 1.01 Term. Employer shall employ Employee, and Employee shall serve
Employer, for a term commencing on the Effective Date, and ending on December
31, 1997, unless sooner terminated pursuant to the provisions of this Agreement
(the "Term of Employment"); provided that if the Merger Agreement shall be
terminated pursuant to Article XIII thereof, or the Option is exercised pursuant
to the Option Agreement, this Agreement shall terminate at such time without any
liability on the part of the parties. At least 90 days prior to the expiration
of the Term of Employment, the parties may agree in writing to extend the Term
of Employment beyond December 31, 1997.
SECTION 1.02 Duties. During the Term of Employment, Employee shall assume and
perform the duties and responsibilities of Vice President - Education of
Employer, subject to the control of the Board of Directors of Employer (the
"Board"). During the Term of Employment, the Employee shall, on a full-time
basis, conscientiously and in good faith use his skills, knowledge, expertise
and judgment, and render services to the best of his ability, in supervising and
managing the business affairs and policies of Employer and shall, in addition,
perform such duties consistent with his position as the Board shall from time to
time direct.
SECTION 1.03 Compensation. For all services rendered by the Employee under this
Agreement, Employee shall initially receive an annualized salary, and shall be
eligible for a performance bonus in accordance with the attached Exhibit A. Such
salary and any bonus shall be paid in such amounts and at such times in
accordance with the Company's normal payroll cycle or as set forth in the
attached bonus plan. All compensation paid to the Employee hereunder shall be
subject to any and all payroll and withholding deductions as are required by the
law of any applicable federal, state or local jurisdiction with taxing authority
with respect to such compensation.
SECTION 1.04 Expenses and Benefits. (a) During the Term of Employment, Employer
shall promptly reimburse Employee for reasonable and necessary travel expenses
incurred and advanced by Employee in carrying out Employee's duties under this
Agreement so long as Employee promptly shall present to Employer an itemized
account of such expenses in such form as may be required by Employer. This
reimbursement of expenses shall be subject to Employer's rules, guidelines and
limitations on such expenses.
(b) During the Term of Employment hereunder, Employee shall be entitled to
participate in any benefit plans maintained by Employer for its employees
generally, or for the officer and other senior management employees, to the
extent that Employee is eligible for participation therein under the general
terms and provisions of such benefit plans.
SECTION 1.05 Observer's Rights. Employee shall be provided notice of all
regular and special Board meetings in the same manner as to be provided to
directors under Employer's bylaws and applicable law, and Employee shall be
entitled to attend any and all such Board meetings; provided, that Employee
shall not have the right or power to vote on any matter which may come before
the Board.
ARTICLE II
Termination
SECTION 2.01 Termination for Cause. (a) Employer has the right and may elect to
terminate this Agreement for Cause. With respect to Employee, "Cause" shall mean
(i) acts or omissions involving willful or intentional malfeasance or misconduct
which is materially injurious to Employer, (ii) conviction of a felony, (iii)
breach of the fiduciary duty Employee would owe toward Employer and its
shareholders as if Employee were a director of
<PAGE>
Employer, and (iv) material breach of any provision of the Operative Agreements.
Employer will serve written notice upon Employee in accordance with Section 5.03
prior to terminating Employee pursuant to this provision. Such notice will
specify in reasonable detail the reasons for such termination. Following the
receipt of such notice, Employee shall have 90 days to cure completely the
events and consequences giving rise to Employer's right to terminate Employee
for cause (if such matters and consequences are capable of being cured
completely). Pending the earlier of (a) completion of such 90-day cure period
and (b) the date on which such events and consequences are cured completely, the
Board may elect to require Employee to take a leave of absence with pay.
Termination pursuant to this Section 2.01(a) shall become effective at the
expiration of such 90-day period, such date being referred to herein as a
"Termination Date".
(b) Death or Disability. (i) This Agreement and the Employee's employment
hereunder shall terminate upon the death of Employee. The date of the Employee's
death is referred to herein as a "Termination Date".
(ii) If the Employee is substantially unable to perform the duties and functions
of his position because of a disability within the meaning of Section 22(e)(3)
of the Code for an uninterrupted period of 120 days (or any 180 days out of any
365 days) from the date on which the Employee was first substantially unable to
perform his duties, and the Board, in its reasonable judgment, determines that
the exigencies created by the Employee's disability are such that termination is
warranted, Employer shall have the right and may elect to terminate the services
of the Employee by delivering to the Employee a written notice of disability
termination which sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Employee's employment pursuant to
this Section 2.01(b). The day after such notice is delivered to the Employee
shall be referred to herein as a Termination Date.
(c) Without Cause. Employer shall have the absolute right to terminate the
Employee's employment without Cause at any time. If Employee terminates the
Employee without Cause, Employer shall give 30 days prior written notice to the
Employee. Thirty days after such notice is delivered is referred to herein as a
Termination Date.
(d) Resignation. Employee shall have the absolute right to terminate Employee's
employment hereunder at any time upon 30 days' prior written notice of
resignation delivered to Employer. Thirty days after such notice is delivered is
referred to herein as a Termination Date.
(e) Compensation and Benefits Upon Termination. If the employment of the
Employee is terminated pursuant to any of the provisions of this Article II, the
Employee shall not be entitled to any benefits or salary pursuant to Sections
1.03 or 1.04 under this Agreement for any period after a Termination Date,
except as required by applicable law.
ARTICLE III
Noncompetition and Nondisclosure Agreements
SECTION 3.01 Noncompetition and Nondisclosure Agreements. Contemporaneously with
the execution of this Agreement, Employee shall execute the Noncompetition
Agreement in substantially the form attached hereto as Exhibit B, and shall
execute the Agreement Regarding Confidential Information and Intellectual
Property in substantially the form attached hereto as Exhibit C.
ARTICLE IV
Miscellaneous
SECTION 4.01 Entire Agreement. Other than the Operative Agreements, this
Agreement constitutes the entire agreement of the parties hereto in respect of
the subject matter hereof and supersedes all prior agreements, understandings,
arrangements, negotiations and discussions, whether oral or written, of the
parties, and there are no warranties, representations or other agreements,
express or implied, made by any party to any other party in connection with the
subject matter hereof.
SECTION 4.02 No Modification or Waiver. No supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby and, in the case of the Employer, approved in writing
as an amendment hereto by the Board. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof, nor shall such waiver constitute a continuing waiver.
SECTION 4.03 Notices. Any and all notices, demands, requests or other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given (a) when delivered in person or (b) when
dispatched by telegram or electronic facsimile transfer or (c) if sent by
certified or registered mail, return receipt requested, when received, to the
parties at their respective addresses set forth below:
If to Employee:
Jeffrey Gilles
9719 159th Place NE
Redmond, WA 98052
Telephone: 206-451-1711
Facsimile: 206-451-1567
<PAGE>
with a copy to:
Robert Condie, Esq.
Law Offices of Robert Condie
800 Bellevue Way NE, Suite 300
Bellevue, WA 98004
Telephone: 206-637-3063
Facsimile: 206-646-2851
If to Employer:
Paul Song, President
ARIS Corporation
6720 Fort Dent Way, No. 150
Seattle, WA 98188-2555
Telephone: 206-322-2081
Facsimile: 206-433-1182
with a copy to:
Bert Sugayan
Harris & Sugayan, P.C.
1420 5th Avenue, Suite 2200
Seattle, WA 98101
Telephone: 206-224-5657
Facsimile: 206-224-5659
or to such other person or address as may be designated by such addressees by a
notice given in conformity herewith.
SECTION 4.04 Assignment. None of the rights, obligations or liabilities of any
party hereunder shall be assignable without the prior written consent of the
other parties.
SECTION 4.05 Governing Law; Jurisdiction and Venue. This Agreement shall be
governed by and construed in accordance with the laws of the State of Washington
applicable to agreements made and performed entirely within such State. Venue
for any suit, action or proceeding arising out of or relating this Agreement,
shall be the Washington State Superior Court located in Seattle, King County,
Washington.
SECTION 4.06 Severability. In the event any one or more provisions contained in
this Agreement should be held invalid, illegal, or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 4.07 Effective Date. Notwithstanding anything herein to the contrary,
this Agreement shall be of no force and effect unless and until the occurrence
of the Closing Date.
In witness whereof, this Agreement has been executed as of the day and year
first above written.
EMPLOYER: EMPLOYEE:
Applied Relational Information Systems, Inc.
By: /s/ Paul Song, President /s/ Jeffrey Gilles
EXHIBIT A
1995 Compensation Plan for Jeff Gilles, Vice President of Education
Base Salary
$96,000
Car Allowance
$6,000
1. Education Revenue Goal
Goal = $4,500,000
<TABLE>
<CAPTION>
Comm Rate Target
<S> <C> <C>
Up to Goal 0.25% $11,250
Above Goal 0.35%
</TABLE>
<PAGE>
. Goal is based on education revenue from services and excludes expense
reimbursement revenue.
. Goal does not include revenue from consulting, products, or reselling of
hardware or software.
2. Consulting Profit Goal
Goal = $1,900,000
<TABLE>
<CAPTION>
Comm Rate Target
<S> <C> <C>
Up to Goal 1.0% $19,000
Above Goal 1.5%
</TABLE>
. Consulting Profits are based on pre-tax net income as stated on quarterly
Financial Statements on Consulting services.
3. Education Profit Goal
Goal = $900,000
<TABLE>
<CAPTION>
Comm Rate Target
<S> <C> <C>
Up to Goal 2.0% $18,000
Above Goal 3.0%
</TABLE>
. Education Profits are based on pre-tax net income as stated on quarterly
Financial Statements on education services.
. Adjustments may be made for special expenditures and investments in new
corporate directions as deemed appropriate by the President of ARIS.
Total Incentive Compensation Goal:
1. $11,250 Education Revenue
2. $19,000 Consulting Profit
3. $18,000 Education Profit
$48,250
Total Compensation:
$ 96,000 Base Salary
$ 6,000 Car Allowance
$ 48,250 Incentive Compensation
$150,250
NOTES:
. Bonus only applies to revenue from Education services and profits from
Consulting and Education services.
. Bonus is pro-rated quarterly based on annual goal.
. For 1996 and 1997, same incentive compensation levels to be achieved at 25%
higher targets (based on budget)
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (the "Agreement"), dated effective as of the
Effective Date, is entered into between Applied Relational Information Systems,
Inc., a Washington corporation ("ARIS" or "Employer"), and Jeffrey Gilles
("Employee").
RECITALS
A. ARIS, Employee, Clarity, Inc., and the shareholders of Clarity, Inc., have
entered that Agreement and Plan of Merger dated as of December 31, 1994 (the
"Merger Agreement"), pursuant to which Clarity shall be merged with and into
ARIS, with ARIS being the surviving corporation as of the Effective Date of the
Merger;
B. Employee shall become an employee of Employer and shall have access to
certain confidential and proprietary information and trade secrets of Employer;
C. Employer wishes to obtain from Employee certain agreements relating to the
terms and conditions of Employee's employment;
D. It is a condition of Employee's employment with Employer pursuant to the
Employment Agreement of even date herewith between Employer and Employee (the
"Employment Agreement") that Employee enter into this Agreement.
E. Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Merger Agreement.
AGREEMENT
Employer and Employee hereby agree as follows:
SECTION 1. Effective Date; Scope of Competition. (a) This Agreement shall be
effective at the Effective Date; provided that if the Merger Agreement shall be
terminated pursuant to Article XIII thereof, this Agreement shall terminate at
such time without any liability on the part of the parties.
<PAGE>
(b) Employee agrees that Employee will not, during Employee's employment and for
a period three years from the Effective Date, directly or indirectly be employed
by, own, manage, operate, join, control or participate in the ownership,
management, operation or control of or be connected with in any manner any
business (whether or not for profit) that has or develops products or services
that are produced, provided or marketed by Employer anywhere in the world where
Employer's products or services are produced, provided or marketed to, unless
Employee is released from the obligations of this Section in writing by
Employer's Board of Directors. Employee shall be deemed to be connected with
such business if such business is carried on by a Person in which he is a
general or limited partner, or of which he is a shareholder, officer, director,
employee, member, consultant or agent; provided however, that nothing herein
shall prevent the purchase or beneficial ownership by Employee of shares which
constitute less than one percent of the outstanding equity securities, on a
fully diluted basis, of a publicly or privately held person.
(c) Employee agrees that, for a period of one year from the date of any
termination of Employee's employment after the expiration of three years from
the Effective Date, Employee will not, directly or indirectly, own, manage,
operate, join, control or participate in the ownership, management, operation or
control of or be connected with in any manner any business (whether or not for
profit) that has or develops products or services that are produced, provided or
marketed by Employer anywhere in the world where Employer's products or services
are produced, provided or marketed to, unless Employee is released from the
obligations of this Section in writing by Employer's Board of Directors.
Employee shall be deemed to be connected with such business if such business is
carried on by a Person in which he is a general or limited partner, or of which
he is a shareholder, of ricer, director, member, consultant or agent; provided
however, that nothing herein shall prevent the purchase or beneficial ownership
by Employee of shares which constitute less than one percent of the outstanding
equity securities, on a fully diluted basis, of a publicly or privately held
person; and provided further, that nothing in this subparagraph (c) shall
restrict Employee from working solely in the capacity of a computer education
and training instructor, either as an employee or independent contractor, for
any such business.
(d) Notwithstanding the provisions of paragraphs (b) and (c) above, if Employee
is terminated for any reason at the instigation of Employer prior to the
expiration of three years from the Effective Date, Employee shall be subject
only to the restrictions set forth in paragraph (c) above for the greater of one
year from the date of any such termination, or the expiration of the three year
period from the Effective Date remaining from the date of such termination.
(e) If Employee voluntarily terminates his/her employment during the first three
years of employment with Employer, Employee may either (i) be subject to all
provisions of this Noncompetition Agreement and retain his/her rights in full to
put his/her shares to ARIS stock at the Option Price set forth in Employee's Put
Option Agreement during the remaining term of this Noncompetition Agreement; or
(ii) waive his/her rights to put his/her respective shares of ARIS stock at the
Option Price and lose his/her rights of appraisal under the Shareholders'
Agreement and be subject solely to the less restrictive provisions of paragraph
(c) above.
SECTION 1.02 Nonsolicitation. (a) Employee shall not directly or indirectly
solicit, influence, entice or encourage any Person who is then, or had been
within one year of such action, an employee or teaching or product development
consultant of Employer or Clarity, Inc., or to cease his relationship with
Employer or solicit, influence, entice encourage or in any way divert any
customer or supplier of Employer or to do business with any business described
in Section 1, or otherwise interfere with, disrupt or attempt to disrupt any
past, present or prospective relationship, contractual or otherwise, between
Employer and any of its customers, suppliers or employees; provided, however,
that an Employee who has terminated employment with the Employer and who is
subject to the provisions of Section 1(c) will not be in violation under this
Section 1.02 if a client or customer of Employee becomes a client or customer of
Employee's then employer based merely upon Employee's reputation as an
instructor, so long as there is no direct or indirect solicitation by such
Employee or his then employer. This Section 1.02(a) shall apply during the three
year period following the date on which Employee's employment with Employer
terminates or expires (regardless of the circumstances under which such
employment terminates or expires).
(b) Employee further agrees that for a period of three years from the date on
which his employment with Employer terminates or expires (regardless of the
circumstances under which such employment terminates or expires), he will not
hire or attempt to hire, whether as an employee, teaching or product development
consultant or otherwise, any person who was employed by Employer during the term
of Employee's employment or who will be employed by Employer during the period
of time commencing on the date when Employee's employment with Employer expires
and ending two years from such date.
SECTION 3. Equitable Relief. Employee acknowledges that the provisions of
Sections 1(b) and 2 are essential to Employer and are reasonable and necessary
to protect the legitimate interests of Employer, that damages sustained by
Employer as a result of a breach of the agreements contained in such Sections
will cause irreparable damage to Employer because of the special and unique
services that were performed by Employee, that recovery of damages at law will
not be an adequate remedy and that the provisions hereof will not reasonably
interfere with Employee's ability to obtain gainful employment following his
employment with Employer. Employee further agrees that
<PAGE>
Employer, in addition to any other remedy it may have under this Agreement or at
law, shall be entitled to injunctive, declaratory and other equitable relief to
prevent or curtail any breach of any provision of this Agreement. In the event
any suit or action is instituted to enforce this Agreement, or any of the terms
or conditions hereof, including suit for preliminary injunction, the prevailing
party shall be entitled to costs and reasonable attorney's fees.
SECTION 4. Definition of Employer. For purposes of this Agreement, "Employer"
shall include all subsidiaries or Employer, if any, and any business ventures in
which Employer or its subsidiaries may participate.
SECTION 5. No Agreement for Employee. This Agreement is not, and nothing in this
Agreement shall be construed as, an agreement to provide employment to Employee.
The provisions of Sections 1(b) and 2 of this Agreement shall be operative
regardless of the reasons for any termination of Employee's employment with
Employer and regardless of the performance or nonperformance by any party under
any other section of this Agreement or the Employment Agreement executed of even
date herewith.
SECTION 6. Miscellaneous.
(a) Entire Agreement. Other than the Operative Agreements, this Agreement
constitutes the entire agreement of the parties hereto in respect of the subject
matter hereof and supersedes all prior agreements, understandings, arrangements,
negotiations and discussions, whether oral or written, of the parties, and there
are no warranties, representations or other agreements, express or implied, made
by any party to any other party in connection with the subject matter hereof.
(b) No Modification or Waiver. No supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby and, in the case of the Employer, approved in writing
as an amendment hereto by the Board. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof, nor shall such waiver constitute a continuing waiver.
(c) Notices. Any and all notices, demands, requests or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given (a) when delivered in person or (b) when dispatched by telegram
or electronic facsimile transfer or (c) if sent by certified or registered mail,
return receipt requested, when received, to the parties at their respective
addresses set forth below:
If to Employee:
Jeffrey Gilles
9719 159th Place NE
Redmond, WA 98052
Telephone: 206-451-1711
Facsimile: 206-451-1567
with a copy to:
Robert Condie, Esq.
Law Offices of Robert Condie
800 Bellevue Way NE, Suite 300
Bellevue, WA 98004
Telephone: 206-637-3063
Facsimile: 206-646-2851
If to Employer:
Paul Song, President
ARIS Corporation
6720 Fort Dent Way, No. 150
Seattle, WA 98188-2555
Telephone: 206-322-2081
Facsimile: 206-433-1182
with a copy to:
Bert Sugayan
Harris & Sugayan, P.C.
1420 5th Avenue, Suite 2200
Seattle, WA 98101
Telephone: 206-224-5657
Facsimile: 206-224-5659
or to such other person or address as may be designated by such addressees by a
notice given in conformity herewith.
<PAGE>
(d) Assignment. None of the rights, obligations or liabilities of any party
hereunder shall be assignable without the prior written consent of the other
parties.
(e) Governing Law; Jurisdiction and Venue. This Agreement shall be governed by
and construed in accordance with the laws of the State of Washington applicable
to agreements made and performed entirely within such State. Venue for any suit,
action or proceeding arising out of or relating this Agreement, shall be the
Washington State Superior Court located in Seattle, King County, Washington.
Each party hereto hereby waives, to the fullest extent permitted by applicable
law, any right it may have to a trial by jury in respect of any litigation
directly or indirectly arising out of, under or in connection with this
Agreement.
(f) Severabilitv. In the event any one or more provisions contained in this
Agreement should be held invalid, illegal, or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby. The parties shall
endeavor in good faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
(g) Effective Date. Notwithstanding anything herein to the contrary, this
Agreement shall be of no force and effect unless and until the occurrence of the
Closing Date.
In witness whereof, this Agreement has been executed as of the day and year
first above written.
EMPLOYER: EMPLOYEE:
Applied Relational Information Systems, Inc.
By: /s/ Paul Song, President /s/ Jeffrey Gilles
AGREEMENT REGARDING CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY
This Agreement (the "Agreement"), dated effective as of the Effective Date, is
entered into between Applied Relational Information Systems, Inc., a Washington
corporation ("ARIS" or "Employer"), and Jeffrey Gilles ("Employee").
RECITALS
A. ARIS, Employee, Clarity, Inc., and the shareholders of Clarity, Inc., have
entered that Agreement and Plan of Merger dated as of December 31, 1994 (the
"Merger Agreement"), pursuant to which Clarity shall be merged with and into
ARIS, with ARIS being the surviving corporation as of the Effective Date of the
Merger;
B. Employee shall become an employee of Employer and shall have access to
certain confidential and proprietary information and trade secrets of Employer;
C. Employer wishes to obtain from Employee certain agreements relating to the
terms and conditions of Employee's employment;
D. It is a condition of Employee's employment with Employer pursuant to the
Employment Agreement of even date herewith between Employer and Employee (the
"Employment Agreement") that Employee enter into this Agreement.
E. Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Merger Agreement.
AGREEMENT
Employer and Employee hereby agree as follows:
SECTION 1. Effective Date; Nondisclosure. (a) This Agreement shall be effective
at the Effective Date.
(b) Employee will not, without Employer's prior written permission, disclose to
anyone outside of Employer and its affiliates or use in other than Employer's
and its affiliates' business, either during or after Employee's employment, any
confidential information or material of Employer or its affiliates or any
information or material received in confidence from third parties such as
suppliers or customers, by Employer or its affiliates. If Employee leaves the
employ of Employer, Employee will return to Employer all property in Employee's
possession, whether or not containing confidential information, including but
not limited to diskettes and other storage media, drawings,
notebooks, reports, and other documents that belong to Employer or its
affiliates received from any third party by Employer or any of its affiliates.
Confidential information or material of Employer or its affiliates is any
information or material: (a) generated or collected by or utilized in the
operations of Employer or its affiliates, (b) received from any third party, or
(c) suggested by or resulting from any task assigned to Employee or work
performed by Employee for or on behalf of Employer or its affiliates, and which
has not been made available generally to the public, whether or not expressed in
a document or other medium and whether or not marked "Employer Confidential" or
with any similar legend of Employer or any third party.
<PAGE>
SECTION 2. Nonincorporation of Copyrighted Materials of Third Parties. Employee
will not disclose to Employer or its affiliates, use in their business, or cause
them to use, any information or material which is confidential to any third
party except to the extent authorized in writing to by the third party. In
addition, Employee will not incorporate into any product used and/or sold by
Employer or its affiliates any copyrighted materials of any third party, unless
such incorporation by Employer or its affiliates has been authorized.
Confidential information or material may include, but is not limited to, past,
present or future development, manufacturing activities, marketing or business
plans, personnel matters, technical specifications, drawings, designs,
prototypes, computer programs or databases.
SECTION 3. Compliance with Applicable Laws. Employee will comply, and do all
things necessary for Employer and its affiliates to comply, with the laws and
regulations of all governments under which Employer and its affiliates do
business, and with the provisions of contracts between any such government or
its contractors and Employer or its affiliates that relate to intellectual
property or to the safeguarding of information.
SECTION 4. Assignment of Developments. Employee hereby assigns to Employer
Employee's entire right, title and interest in any idea, concept, technique,
invention, design (whether the design is ornamental or otherwise), computer
programs and related documentation, courseware, other works of authorship, mask
works and the like (all hereinafter called "Developments"), hereafter made,
conceived, written or otherwise created solely or jointly by Employee, whether
or not such Developments are patentable, subject to copyright protection or
susceptible to any other form of protection which: (a) relate to the actual or
anticipated business or research or development of Employer or its affiliates,
or (b) are suggested by or result from any task assigned to Employee or work
performed by Employee for or on behalf of Employer or its affiliates.
In the case of any "other works of authorship", such assignment shall be limited
to those works of authorship which meet both conditions (a) and (b) above.
The above provisions concerning assignment of Developments apply to Developments
created while Employee is employed by Employer in an executive, managerial,
professional product or technical planning, technical research, programming or
engineering capacity (including development, courseware preparation, product,
manufacturing, systems, applied science, and field engineering).
Excluded are any Developments that Employee cannot assign to Employer because of
prior agreement with [blank line] which is effective until [blank line] (give
name and date or write "none").
Employee acknowledges that the copyright and any other intellectual property
right in designs, computer programs and related documentation, and other works
of authorship, created within the scope of Employee's employment, belong to
Employer by operation of law.
SECTION 5. Disclosure to Employer, etc. In connection with any Developments
assigned by Section 4: (a) Employee will promptly disclose them in writing to
Employer; and (b) Employee will, on Employer's request, promptly execute a
specific assignment of title to Employee or its designee, and do anything else
reasonably necessary to enable Employer or such designee to secure a patent,
copyright or other form of protection therefore in the United States and other
countries.
SECTION 6. No Authorship. Employer, its affiliates, licensees, successors and
assigns (direct or indirect) are not required to designate Employee as an author
of any item which is subject to Section 4, when such item is distributed,
publicly or otherwise, or to secure Employee's permission to change or otherwise
alter the integrity of any such item. Employee hereby waives and releases, to
the extent permitted by law, all rights in and to such designation and any
rights Employee may have concerning modifications of such items.
Employee understands that any rights, waivers, releases and assignments herein
granted and made by Employee are freely assignable by Employer and are for the
benefit of Employer and its affiliates, licensees, successors and assigns.
SECTION 7. Certain Developments. Employee has identified all Developments not
assigned by Section 4 in which Employee has any right, title or interest, and
which were previously made or conceived solely or jointly by Employee, or
written wholly or in part by Employee, but neither published nor filed in any
patent office.
If Employee does not have any to identify, Employee has written "none" on this
line: [blank line]
In addition, Employee agrees to promptly notify Employer in writing of any
patent in which Employee is any inventor but which is not assigned to Employer
and which discloses or claims any Development made, conceived, or written while
Employee is employed by Employer.
SECTION 8. Miscellaneous.
(a) Entire Agreement. Other than the Operative Agreements, this Agreement
constitutes the entire agreement of the parties hereto in respect of the subject
matter hereof and supersedes all prior agreements, understandings, arrangements,
negotiations and discussions, whether oral or written, of the parties, and there
are no warranties, representations or other agreements, express or implied, made
by any party to any other party in connection with the subject matter hereof.
<PAGE>
(b) No Modification or Waiver. No supplement, modification, waiver or
termination of this Agreement shall be binding unless executed in writing by the
party to be bound thereby and, in the case of the Employer, approved in writing
as an amendment hereto by the Board. No waiver of any of the provisions of this
Agreement shall be deemed or shall constitute a waiver of any other provision
hereof, nor shall such waiver constitute a continuing waiver.
(c) Notices. Any and all notices, demands, requests or other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given (a) when delivered in person or (b) when dispatched by telegram
or electronic facsimile transfer or (c) if sent by certified or registered mail,
return receipt requested, when received, to the parties at their respective
addresses set forth below:
If to Employee:
Jeffrey Gilles
9719 159th Place NE
Redmond, WA 98052
Telephone: 206-451-1711
Facsimile: 206-451 -1567
with a copy to:
Robert Condie, Esq.
Law Offices of Robert Condie
800 Bellevue Way NE, Suite 300
Bellevue, WA 98004
Telephone: 206-637-3063
Facsimile: 206-646-2851
SECTION 9. Non-covered Developments. (If Employee has entered "none" in Section
7, do not complete this Section 9.)
The following are developments not covered by Section 4, in which Employee has
any right, title or interest, and which were previously conceived or written
wholly or in part by Employee, but neither published nor filed in any patent
office:
<TABLE>
<CAPTION>
Title of Document Date on Document Name of Witness
<S> <C> <C>
1.
2.
3.
</TABLE>
In witness whereof, this Agreement has been executed as of the day and year
first above written.
EMPLOYER: EMPLOYEE:
Applied Relational Information Systems, Inc.
By: /s/ Paul Song, President /s/ Jeffrey Gilles
January 1, 1995
ARIS Corporation
6720 Fort Dent Two, Suite 150
Seattle, WA 98188-2555
Dear Sirs:
I, the undersigned employee of ARIS Corporation, a Washington corporation
("Employer"), hereby acknowledge that I have read and understood the notice set
forth below and have retained a copy of this letter.
NOTICE
In accordance with Employer's policy and the law of the State of Washington, the
Agreement Regarding Confidential Information and Intellectual Property between
Employer and the undersigned (other than the last sentence of Section 7 thereof)
does not apply to, and the Employee has no obligation to assign to Employer, any
invention for which no Employer (or Employer's affiliates) trade secrets and no
equipment, supplies, or facilities of Employer or its affiliates were used and
which was developed entirely on Employer's own time, unless: (a) the invention
relates directly to the
<PAGE>
business of Employer or its affiliates, (b) the invention relates to actual or
demonstrably anticipated research or development work or Employer or its
affiliates, or (c) the invention results from any work performed by Employee for
Employer or its affiliates.
Very truly yours,
/s/ Jeffrey Gilles
<PAGE>
EXHIBIT 10.6
[ARIS logo]
ARIS Corporation
25411 126/th/ Avenue S.E.
Kent, Washington 98031
(206) 630-8398
FAX (206) 852-1469
EMPLOYMENT AGREEMENT OF APPLIED RELATIONAL INFORMATION SYSTEMS, INC.
Employment Agreement between Applied Relational Information Systems, Inc., a
Washington corporation ("ARIS"), and John Song ("Employee").
1. Employment. ARIS hereby employs Employee and Employee hereby accepts
employment under the terms and conditions herein.
2. Terminable at Will. Subject to the provisions of termination in Paragraph 7,
employment is terminable at will, by either ARIS or Employee.
3. Compensation and Benefits. ARIS agrees to provide Employee with the
compensation and benefits set forth in the offer letter dated February 11, 1991
attached hereto and incorporated by this reference.
4. Duties. ARIS reserves the right to assign and delegate work and specific
responsibilities to the Employee. Employee shall devote (his/her) full time and
attention and best efforts to the utmost of (his/her) skill to the rendering of
professional services for ARIS, and cannot practice his profession except as an
employee of ARIS.
5. Covenant Not To Compete. During the term of this Agreement and for a period
of two years thereafter, Employee shall not directly or indirectly, for
Employee's benefit, or for or with any person, firm or business entity of any
kind other than ARIS, engage in any employment or any business similar to or in
competition with that in which ARIS is engaged in the State of Washington and
other states of the United States in which ARIS does such business.
6. Confidential and Proprietary Information. Unless authorized by ARIS, Employee
agrees not to exploit, use or disclose to anyone not employed by ARIS, directly
or indirectly, confidential and proprietary information which is defined to
include, but is not limited to, the following:
A. Customer and employee lists of ARIS, marketing and sales plans, product
development plans, competitive analyses, business and financial plans or
forecasts, non-public financial information and agreements.
B. Any information or material not described above which relates to ARIS' trade
secrets, inventions, technological developments, "know-how," purchasing,
accounting, merchandising or licensing.
C. Any information of the type described above which ARIS has legal obligation
to treat as confidential and proprietary, or which ARIS treats as confidential
and proprietary, whether or not owned or developed by ARIS.
D. Software developed or licensed by or for ARIS or licensed to ARIS by a third
party, and any documentation or listing pertaining to such software. The term
"software," as used in this paragraph refers to software in various stages of
development and includes without limitation the literal elements of a program
(source code, object code or otherwise), its audio visual components (menus,
screens, structure and organization), and human or machine readable form of the
program, and any writing or medium in which the program or the information
therein is stored, written, inscribed, including without limitation, diagrams,
flow charts, designs, drawings, specifications, models, data, bug reports, and
customer information.
Employee further agrees to promptly disclose to ARIS all ideas, processes,
inventions, modifications, improvements and concepts, whether or not patentable
or copyrightable (hereinafter referred to as "Discoveries") relating to any work
or business conducted by ARIS, whether or not conceived by
<PAGE>
Employee alone or with others, and whether or not conceived during regular
business hours. All such Discoveries shall be the sole and exclusive property of
ARIS, and Employee agrees to execute without receiving additional compensation
any and all documents necessary to assign such Discoveries to ARIS and to obtain
a patent, register or copyright, or enforce ARIS' rights in such Discoveries.
The obligations of nondisclosure in this paragraph 7 shall continue beyond the
cessation of the Employee's term of employment.
Upon cessation of employment, Employee agrees to return all ARIS property
including, but not limited to, confidential and proprietary information
(originals and copies).
7. Termination. This Agreement shall be terminated a) by the death or disability
of the employee, b) for cause or c) if either party provides the other with 14
days prior written notice.
For purposes of this Agreement, "for cause" means:
Breach of any Company personnel policy or work rule, breach of any covenant in
this Agreement, moral turpitude, gross professional neglect, or incompetence.
Termination for cause shall be effective immediately upon the receipt by
Employee of written notice of said termination which will state the reasons
therefor.
8. Notices. Any notice required or permitted to be given under this Agreement
shall be sufficient if in writing and if sent by registered or certified mail to
Employee's residence, and in the case of ARIS, to its principal office.
9. Dispute Resolution. Any dispute over the meaning or performance of this
Agreement shall be settled by binding arbitration in accordance with the rules
then obtaining of the Christian Conciliation Service of Puget Sound, and
judgment upon the award rendered may be entered in King County Superior Court.
The prevailing party shall recover its reasonable attorneys' fees from the non-
prevailing party.
10. Venue; Choice of Law. Any disputes arising out of this Agreement shall be
adjudicated in King County, Washington, subject to the preceding paragraph, and
shall be governed by the laws of the State of Washington.
11. Relationship of the Parties. This Agreement establishes an employment
relationship between the parties and shall not be construed to create any other
relationship, including but not limited to, a partnership or joint venture.
12. Indemnification. Employee agrees to indemnify and hold ARIS harmless,
including its directors, officers, employees and agents, from and against all
claims, liabilities, judgments, decrees, fines, penalties, fees, amounts paid in
settlement or any other costs, losses, expenses (including, but not limited to,
attorneys' fees and court costs incurred by legal counsel of ARIS' selection)
directly or indirectly arising from any threatened or pending action, suit or
proceedings, whether civil or criminal, and any appeals related thereto,
allegedly based (in whole or in part) upon Employee's conduct, whether negligent
or otherwise, or any other actions or omissions of Employee arising from
Employee's duties and obligations under this Agreement.
13. Remedies. Employee acknowledges the breach of any of the covenants in
paragraphs 6 and 7 shall cause irreparable harm to ARIS that may not be
completely remedied by an award of damages, and, therefore, Employee stipulates
to entry of an injunction against continuation of such breach, in addition to
any other legal remedies available to ARIS.
14. Entire Agreement. This Agreement supersedes any prior or contemporaneous
representations or agreements, written or oral, between the parties and contains
the entire agreement of the parties. Both parties agree that any modification or
amendment to this Agreement shall require a written agreement signed by both
parties.
15. Continuation. In the event that Employee becomes a shareholder of ARIS, this
Agreement shall nevertheless remain fully effective and binding on the Employee
in accordance with its terms and conditions.
<PAGE>
16. Assignment. This Agreement shall be binding upon and inure to the benefit of
ARIS' successors and assigns and Employee's heirs. Employee's duties herein
shall not be delegable without ARIS' written consent.
APPLIED RELATIONAL INFORMATION EMPLOYEE:
SYSTEMS, INC.
By: /s/ Paul Song /s/ John Song
Date: February 11, 1991 February 11, 1991
<PAGE>
EXHIBIT 10.7
Policy Number: 45706342 Insured: Mr. Paul Y. Song
Policy Date: 02/13/1996 Owner: ARIS Corporation
Policy Status: PREM PAY Plan: Five Year Term
Paid to Date: 02/13/1998 Face Amount: $2,000,000.00
Prepared on: 03/21/1997 Ad Series: AD94 MODIFIED ENDOWMENT: NO
POLICY VALUES SUMMARY:
Policy Cash Value: Policy Death Benefits: 2,000,000.00
Dividend Cash Value: Death Benefits from Dividends:
OPP Rider Cash Value: OPP Rider Death Benefit:
Gross Cash Value: 1 Year Term Death Benefit:
Outstanding Loan Amount: Term Rider Death Benefit:
Loan Interest Due: Gross Death Benefit: 2,000,000.00
Accumulated Adjustments:*** Outstanding Loan Amount:
Net Cash Value:** Loan Interest Due:
Accumulated Adjustments:*** 1,320.78
Net Death Benefit: $2,001,320.78
**May be subject to withholding
***Includes unused premium, premium due, surrender charges, term, dividend, etc.
DIVIDEND DETAILS:
Cash Values Death Benefit
Paid Up Additions: Paid Up Additions:
Dividend Accumulations: Dividend Accumulations:
Whole Life Additions: Whole Life Additions:
Total Dividend Cash Value:** Total Dividend Death Benefit:
**May be subject to withholding 1 Year Term Death Benefit:
**Maximum Dividends Available:
Current Dividend Option: REDUCE PREMIUM/LOAN INTEREST
Last Anniversary Date: 1997 Last Anniversary Dividend:
LOAN DETAILS:
Current Loan Information
Outstanding Loan Amount: Loan Interest Paid to Date:
Loan Interest Due: C-O-M Loan Repay Amount:
Loan Interest Rate:
Available Loan Information:
**Maximum Loan Value **May be subject to withholding
Values reflect transactions processed by the Company up to the "Prepared On"
Date. Values may vary due to unprocessed transactions. For further details,
call your New York Life agent or your New York Life Service Center.
Policy Number: 45706342 Insured: Mr. Paul Y. Song
Policy Date: 02/13/1996 Owner: ARIS Corporation
Policy Status: PREM PAY Plan: Five Year Term
Paid to Date: 02/13/1998 Face Amount: $2,000,000.00
Prepared on: 03/21/1997 Ad Series: AD94 MODIFIED ENDOWMENT: NO
CASH VALUE INCREASE & TAXATION DETAILS:
Cash Value Increase Surrender Taxation Information
<PAGE>
Last Anniversary Date: 1997 **Federal Taxable Gain:
Last Anniversary Dividend: **State Taxable Gain:
Prior Year CV Increase: Surrender Cost Basis:
Total Prior Year Increase:
1035 Exchange Taxation Information
Base Annualized Premium: $1,430 **Federal Taxable Gain:
Current Year CV Increase: **State Taxable Gain:
1035 Exchange Amount:
**May be subject to withholding 1035 Exchange Cost Basis:
PREMIUM SUMMARY:
Premium Mode: ANNUAL Current POP Status:
Policy Premium: $1,585.00
Partial POP Amount:
Out of Pocket Premium: **POP Date:
Last Prem Activity: 03/03/1997
OPP Mode: Next Bill Date: 02/13/1998
OPP Amount: Default Premium Payment Option: NC
**Based on our current dividend scale, which is not guaranteed, no out-of-pocket
cash premium payment is required with the policy anniversary date shown. This
does NOT make the policy paid-up or reduce the number of premiums that must be
paid. Premiums are assumed to be paid by application of dividend values. A
reduction in the current scale could require additional out-of-pocket cash
outlays in future years.
POLICY COMPONENTS:
<TABLE>
<S> <C> <C>
Component: BASE PLAN Name: Paul Y. Song Rating: PREFERRED
Face Amount: $2,000,000.00 ANNUAL Premium: $1,380.00 Units: Rider ID:
Issue Age: 32 Date Added: 02/13/1996 AD Series: AD94
Component: BASE FEES Name: Paul Y. Song Rating: PREFERRED
Face Amount: $2,000,000.00 ANNUAL Premium: $50.00 Units: Rider ID:
Issue Age: 32 Date Added: 02/13/1996 AD Series: AD94
Component: BASE-WP Name: Paul Y. Song Rating: PREFERRED
Face Amount: $2,000,000.00 ANNUAL PREMIUM: $155.00 Units: Rider ID:
Date Added: 02/13/1996 AD Series: AD94
</TABLE>
Values reflect transactions processed by the Company up to the "Prepared On"
Date. Values may vary due to unprocessed transactions. For further details,
call your New York Life agent or your New York Life Service Center.
Policy Number: 45706342 Insured: Mr. Paul Y. Song
Policy Date: 02/13/1996 Owner: ARIS Corporation
Policy Status: PREM PAY Plan: Five Year Term
Paid to Date: 02/13/1998 Face Amount: $2,000,000.00
Prepared on: 03/21/1997 Ad Series: AD94 MODIFIED ENDOWMENT: NO
ALTERNATE PREMIUM MODES:
Annual: 1,585.00
Semi-Annual: 846.30
Quarterly: 446.85
Monthly: 152.74
COM/Nyla: 148.76
<PAGE>
BENEFICIARY DETAILS:
02/13/1996 1/ST/ ARIS CORPORATION
CLIENT DETAILS:
Part II Type: Paramedical Part II Date: 12/08/1995
Name: ARIS Corporation Role: PRIMARY OWNER
Address: ARIS Corp. Phone: DOB: Sex:
6720 Fort Dent Way, Suite 150 SSN/Tax ID #: 91-1497147
Seattle, WA 98188-2580
Client ID: 007460924 Household ID: 9604090002997704
Name: Mr. Paul Y. Song Role: PRIMARY INSURED
Address: Phone: 206-839-6116 DOB: 02/13/1964
HOME Sex: M
SSN/TaxID #: ###-##-####
Client ID: 005081097 Household ID:
AGENT DETAILS:
Name: Freda J. Zimmerman, CLU Percentage:
Code #: 309999 Role: ORIGINAL
Status: ACTIVE Phone: 206-389-4833
General Office: PUGET SOUND GENERAL OFFICE Expiration Date:
Values reflect transactions processed by the Company up to the "Prepared On"
Date. Values may vary due to unprocessed transactions. For further details,
call your New York Life agent or your New York Life Service Center.
<PAGE>
EXHIBIT 10.8
SUMMARY OF INSURANCE
for
ARIS CORPORATION
sk(5)
Account Executives: William E. (Ned) Sander (206)447-3828
Bob Weller (206)447-3818
Account Administrator: Jean M. Mercliff (206)447-0500
Claims: Rosie Dore (206)447-5687
sk(3)
POLICY TERM: 11/22/96 to 01/01/98 Package
11/22/96 to 01/01/98 Non-Washington Workers Compensation
11/22/96 to 01/01/98 International Extensions
10/03/96 to 01/01/98 Fiduciary Liability
Account Administrator: Jean M. Mercliff (206)447-0500
Claims: Rosie Dore (206)447-5687
sk(3)
POLICY TERM: 11/22/96 to 01/01/98 Package
11/22/96 to 01/01/98 Non-Washington Workers Compensation
11/22/96 to 01/01/98 International Extensions
10/03/96 to 01/01/98 Fiduciary Liability
01/01/97 to 01/01/98 Employment Practices Liability
The general descriptions contained herein of proposed insurance coverages
do not amend, alter, or replace the terms, conditions, exclusions and other
provisions of the policies which would be issued to you, or which may be
required by applicable laws, regulations, rating rules or plans. In
addition, placement of proposed coverages is
11/22/96 to 01/01/98 International Extensions
10/03/96 to 01/01/98 Fiduciary Liability
01/01/97 to 01/01/98 Employment Practices Liability
The general descriptions contained herein of proposed insurance coverages
do not amend, alter, or replace the terms, conditions, exclusions and other
provisions of the policies which would be issued to you, or which may be
required by applicable laws, regulations, rating rules or plans. In
addition, placement of proposed coverages is contingent upon receipt of
necessary applications, claims data, your authorization to bind and
underwriters acceptance and confirmation of its binding of the requested
coverages.
<PAGE>
Date Prepared: date(MDY,T, ,',')
you, or which may be required by applicable laws, regulations, rating rules
or plans. In addition, placement of proposed coverages is contingent upon
receipt of necessary applications, claims data, your authorization to bind
and underwriters acceptance and confirmation of its binding of the
requested coverages.
Date Prepared: date(MDY,T, ,',')
CHANGES IN EXPOSURES
PLEASE NOTE that the insurance policies summarized herein do not usually
contain automatic coverage for all entities, properties, operations, etc.
We request that you notify us of changes.
Some examples could pertain to:
1. Changes in organizational structure:
Incorporation, merger, acquisition, partnerships, new subsidiaries,
business name changes.
2. Changes in business operation:
Products, services, markets, territories, operating procedures,
distribution, advertising.
Some examples could pertain to:
1. Changes in organizational structure:
Incorporation, merger, acquisition, partnerships, new subsidiaries,
business name changes.
2. Changes in business operation:
Products, services, markets, territories, operating procedures,
distribution, advertising.
3. Change in projects and forecasts:
Sales, revenues, payrolls, cash flows, borrowing.
4. Acquisition/lease/rental/use of the following:
Real estate, equipment, vehicles, aircraft, watercraft,
<PAGE>
mobile equipment.
Products, services, markets, territories, operating procedures,
distribution, advertising.
3. Change in projects and forecasts:
Sales, revenues, payrolls, cash flows, borrowing.
4. Acquisition/lease/rental/use of the following:
Real estate, equipment, vehicles, aircraft, watercraft, mobile equipment.
5. Significant fluctuations in:
Inventory, transportation, cash, accounts receivable.
6. Written or informal agreements with:
Contractors, labor agreements suppliers, customers, others.
Real estate, equipment, vehicles, aircraft, watercraft, mobile equipment.
5. Significant fluctuations in:
Inventory, transportation, cash, accounts receivable.
6. Written or informal agreements with:
Contractors, labor agreements suppliers, customers, others.
A Potential claim (or Loss) would not represent a "change" but we emphasize
the importance of promptly reporting all claims, including the reporting of
incidents that may result in a claim.
If you are in doubt, a few minutes of telephone discussion can be time well
spent of each of us.
Contractors, labor agreements suppliers, customers, others.
A Potential claim (or Loss) would not represent a "change" but we emphasize
the importance of promptly reporting all claims, including the reporting of
incidents that may result in a claim.
If you are in doubt, a few minutes of telephone discussion can be time well
spent of each of us.
LOSS REPORTING PROCEDURES
<PAGE>
1. In the event of physical damage to, or loss of, your property:
a. Notify Acordia/Pettit-Morry Company immediately, regardless of the
extent of the damage.
b. Take all necessary steps to stop further damage to the property from
any cause.
2. In the event of damage to property of third parties or bodily
1. In the event of physical damage to, or loss of, your property:
a. Notify Acordia/Pettit-Morry Company immediately, regardless of the
extent of the damage.
b. Take all necessary steps to stop further damage to the property from
any cause.
2. In the event of damage to property of third parties or bodily injury
to third parties:
a. Notify Acordia/Pettit-Morry immediately of any accident or
occurrence (by phone if bodily injury is possibly involved).
b. Obtain names and addresses of any witnesses.
c. Take reasonable steps to prevent further damage or injury from
2. In the event of damage to property of third parties or bodily injury
to third parties:
a. Notify Acordia/Pettit-Morry immediately of any accident or
occurrence (by phone if bodily injury is possibly involved).
b. Obtain names and addresses of any witnesses.
c. Take reasonable steps to prevent further damage or injury from the
same cause.
ARIS CORPORATION
6720 Fort Dent Way, Suite 250
Seattle, Washington 98188
Locations: See attached schedule.
* * * * * * * * * * * * * * * * * * * * * * * * * * * *
<PAGE>
PACKAGE POLICY
Fidelity & Guaranty Insurance Company
Policy No.: 1MP301203485
Term: 11/22/96 to 1/1/98
sk(4)
PROPERTY
Limits of Insurance: $2,668,500 Blanket Personal Property and
Electronic Data Processing Equipment
$689,000 Blanket Business Income/Extra Expense
sk(4)
PROPERTY
Limits of Insurance: $2,668,500 Blanket Personal Property and
Electronic Data Processing Equipment
$689,000 Blanket Business Income/Extra Expense
Coverage Extensions: $250,000 Property at Temporary/Unnamed
Locations
$100,000 Personal Property in Transit
$100,000 Valuable Papers
Deductible: $1,000
Valuation: Replacement Cost
Coverage: Risks of Direct Physical Loss, subject to policy
conditions and exclusions. Earthquake, Flood
and Mechanical Breakdown are covered perils for
all Electronic Data Processing Equipment
ARIS CORPORATION
LOCATION SCHEDULE:
<PAGE>
1) 6720 Fort Dent Way, Suite 150, Seattle, WA 98188
2) 6720 Fort Dent Way, Suite 250, Seattle, WA 98188
3) 6840 Fort Dent Way, Suite 125, Seattle, WA 98188
1) 6720 Fort Dent Way, Suite 250, Seattle, WA 98188
2) 6720 Fort Dent Way, Suite 125, Seattle, WA 98188
3) 6840 Fort 6th Avenue NE, Suite 200, Bellevue, WA 98004
4) 1417 112th Avenue N.E., Suite B101, Bellevue, WA 98004
5) 1750 11W Greenbrier Parkway, Bldg A-1, Beaverton, OR 97006
6) 15201 N
7) 717 17th St., Suite 1510, Denver, CO 80202
8) 1355 S. Colorado Blvd., Suite 606, Denver, CO 80222
9) 5430 LBJ Freeway, Suite 950, Dallas, TX 97240
10) 3040 Williams Dr., Suite 100, Fairfax, VA 22030
11) 9887 4th St. N., Suite 307, St Petersburg, FL 33702
ARIS CORPORATION
NAMED INSUREDS:
ARIS Corporation
<PAGE>
ARIS UK, LTD.
ARIS Software Co.
NOETIX Corp.
ARIS/Oxford Computer Group
CRIME
sk(5)
Limits of Insurance: $150,000 Blanket Employee Dishonesty
$10,000 Check Forgery
Extensions: 401(K) Endorsement
Deductible: $1,000
GENERAL LIABILITY
sk(4)
Limits of Insurance: $2,000,000 General Aggregate (Other than
Products/Completed Operations)
$2,000,000 Products/Completed Operations
Aggregate
$1,000,000 Personal and Advertising Injury
$1,000,000 Each Occurrence
$ 50,000 Fire Damage
$ 5,000 Medical Expenses
Coverage: Occurrence Form with no deductible applying.
Extensions: Employee Benefits Liability
$3,000,000 Aggregate
$1,000,000 Each Occurrence
$ 1,000 Deductible (per claim)
Claims-Made Policy; Retroactive Date 11/22/95
Employers' Liability (Stop Gap)
$1,000,000 Each Employee, Each Disease
ERRORS AND OMISSIONS LIABILITY
sk(4)
Limits of Insurance: $1,000,000 Per Occurrence
<PAGE>
$1,000,000 Yearly Aggregate
Defense costs are inside the limits of insurance.
Deductible: $ 100,000 Each Claim
Coverage: Claims-made form with a retroactive date
of 11/22/95.
BUSINESS AUTO
sk(4)
Limits of Insurance: $1,000,000 Combined Single Limit Bodily Injury
and Property Damage Liability.
$1,000,000 Underinsured Motorists
$ 5,000 Medical Payments (per person)
Deductibles: $ 500 Comprehensive
(Physical Damage) $ 500 Collision
Coverage: Comprehensive Form including Non-Owned and Hired
or Borrowed Liability.
Vehicles: 1) 1995 BMW 740 Sedan S#WBAGF63285DH00535
2) 1996 Saab 900SE S#YS3DF78N0T005454
sk(4)
UMBRELLA LIABILITY
sk(4)
Limits of Insurance: $2,000,000 Annual Aggregate Limit
$2,000,000 Each Occurrence Limit
Self-Insured
Retention: $ 10,000
Excess of: $2,000,000 General Aggregate
(Other than Products)
$2,000,000 Products-Completed Operations
Aggregate
$1,000,000 Each Occurrence
$2,000,000 Each Occurrence Limit
<PAGE>
Self-Insured
Retention: $ 10,000
Excess of: $2,000,000 General Aggregate
(Other than Products)
INTERNATIONAL EXTENSIONS
U.S.F. & G Insurance Company
Policy No.: 9MP1410558930
Term: 11/22/96 to 1/1/98
* * * * * * * * * * * * * * * * * * * * * * * *
Limits of Insurance: $1,000,000 Foreign General Liability
$1,000,000 Foreign "Difference In Conditions"
Automobile Liability
$1,000,000 Foreign Voluntary Worker's
Compensation
$ 250,000 Repatriation Expense Sublimit
Deductible: $ Nil
Coverage: Blanket Insurance coverage for incidental
International Operations
FIDUCIARY LIABILITY
Federal Insurance Company
Policy No.: 81463022
Term: 10/3/96 to 1/1/98
* * * * * * * * * * * * * * * * * * * * * * * * *
Named Insureds: 1) Aris Corporation
2) Applied Relational Information Systems, Inc.
401(k) Profit Sharing Plan
3) Any "Benefit Programs" sponsored, operated,
maintained, or administered by the "Sponsor
Organization" for the Benefit of the "Sponsor
Organization" located anywhere in the World.
<PAGE>
Limits of Insurance: $1,500,000 Each Occurrence
Named Insureds: 1) Aris Corporation
2) Applied Relational Information Systems, Inc.
401(k) Profit Sharing Plan
3) Any "Benefit Programs" sponsored, operated,
maintained, or administered by the "Sponsor
Organization" for the Benefit of the "Sponsor
Organization" located anywhere in the World.
Limits of Insurance: $1,500,000 Each Occurrence
$1,500,000 Each Policy Year
Deductible: $ Nil
or Officer of the Corporation stee, Director,
4) Any Fiduciary Named in the Declarations of
Notes: Claims Made Coverage with a
RETRO DATE of 10/3/96
OUT-OF-STATE WORKER'S COMPENSATION:
Zurich-American Ins. Group
Rated A++ "Superior" by A.M. Best
Policy No. WC2268368 (other than California)
Policy No. WC2270352 (California)
Term: 11/22/96 to 1/1/98
* * * * * * * * * * * * * * * * * * * * * * * * * *
Named Insured: ARIS CORPORATION
Employees: 98
Payroll: 6,574,685
Coverage: Statutory Worker's Compensation Insurance and
Employer's Liability Insurance.
<PAGE>
States Covered: California, Colorado, Florida, Georgia,
Massachusetts, Missouri, New York, North
Carolina, Oregon, Texas, Utah, Virginia, Texas &
Alaska
Item 3C - Other States Coverage applies to all
states except monopolistic states (Maine, Nevada,
North Dakota, Ohio, Washington, West Virginia,
& Wyoming).
Limits: Statutory Requirements
Employers Liability (Stop Gap)
$ 100,000 Bod. Inj. by Accident
$ 500,000 Bod. Inj. by Disease, Policy Limit
$ 100,000 Bod. Inj. by Disease, Ea. Employee
Audit Period: Annual audit.
EMPLOYMENT PRACTICES LIABILITY INSURANCE
Federal Insurance Company
Policy No. 81463022
Term: 1/1/97 to 1/1/98
* * * * * * * * * * * * * * * * * * * * *
Limits of Insurance: $2,000,000 Each Loss
$2,000,000 Aggregate Limit (Each Policy Period)
Deductible: $ 50,000 Per Claim
Coverage: Insurance shall pay on behalf of the insured all
Settlements, Judgements and Defense costs that
Settlements, Judgements and Defense costs that the
Insured is obligated to pay due to actual or alleged
Wrongful Employment Acts committed by the insured during
or prior to the policy period. Defense costs are within
the limits.
Defense (Outside Counsel):
a. Davis, Wright, Tremaine
<PAGE>
b. Williams, Kastner & Gibbs
Insureds:
a. ARIS Corporation and its Subsidiaries
b. Any past, present or future director, officer or
employee of the organization
Extensions:
Pay on behalf coverage
Full prior acts coverage
Mental Anguish/Emotional Distress coverage
Severability of coverage
Worldwide coverage territory
Exclusions: Loss of Property or Use
Intentional/Fraudulent Acts
ERISA violations
OSHA violations
Pending or Prior Litigation
PREMIUM SUMMARY
sk(5)
Package
Property $ 8,439
Crime 490
General Liability 9,041
Errors & Omissions Liability 19,385
Business Auto 4,348
Umbrella Liability 13,290
International Extensions 2,857
Fiduciary Liability 1,945
Non-Washington Workers Compensation 46,425
Employment Practices Liability 17,550
Total $123,770
<PAGE>
SOME POSSIBLE EXPOSURES TO LOSS NOT PRESENTLY INSURED (MOST OF THE
FOLLOWING MAY BE PROTECTED FOR AN ADDITIONAL PREMIUM).
AIRCRAFT
- Owned and Nonowned
AUTOMOBILE
- Drive Other Car Liability
- Hired Automobile Physical Damage
BOILER AND MACHINERY
CRIME - Boiler & Machinery y Business Income
- Kidnap and Ransom
- Robbery and Safe Burglary
EMPLOYEE BENEFITS
- Accident and Health
- Disability
- Travel Accident
- Life Insurance
INLAND MARINE
- Bailee's Customer's Goods
- Cargo Loss of Market/Loss of Use
- Exhibition Floater
- Fine Arts
- Installation Floater
- Mobile Equipment
- Mobile Phones
- Registered Mail
- Salesperson's Samples
- Signs
- Signs
SOME POSSIBLE EXPOSURES TO LOSS NOT PRESENTLY INSURED
LIABILITY
- Joint Ventures
- Pollution/Contamination
- Products Recall
- Punitive Damages Liability
- Waiver of Subrogation Endorsement
- Watercraft Liability
<PAGE>
- Wrongful Witholding
- Wrongful Acts of Management
- Lateral Hire Professional Liability
- Outside Board Wrongful Acts
- Buy/Sell Agreement
- Disability
- Disability
- Estate Planning
- Executive Bonus Plan
- Group
- Keyman
- Retirement
- Travel Accident
PROPERTY
- Contingent Business Income
- Earthquake and Flood (Earthquake Sprinkler Leakage is covered)
- Extended Period of Indemnity of Business Income
- Off-Premises Power Failure Business Interruption
- Peak Season Endorsement
- Pollution/Contamination - Property
- Waiver of Subrogation Endorsement
<PAGE>
EXHIBIT 10.9
CREDIT AGREEMENT
Between
ARIS CORPORATION
and
U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE 1
<TABLE>
<C> <S> <C>
DEFINITIONS.............................. 1
1.1 Accounts......................................................... 1
--------
1.2 Advances......................................................... 1
--------
1.3 Available Amounts................................................ 1
-----------------
1.4 Borrowing Base................................................... 2
--------------
1.5 Business Day..................................................... 2
------------
1.6 Cash Flow........................................................ 2
---------
1.7 Credit Limit..................................................... 2
------------
1.8 Current Assets................................................... 2
--------------
1.9 Current Liabilities.............................................. 2
-------------------
1.10 Debt............................................................. 2
----
1.11 Debt Service..................................................... 3
------------
1.12 EBITDA........................................................... 3
------
1.13 Eligible Accounts................................................ 3
-----------------
1.14 ERISA............................................................ 5
-----
1.15 Fixed Charges.................................................... 5
-------------
1.16 Funded Debt...................................................... 5
-----------
1.17 GAAP............................................................. 5
----
1.18 LIBOR Amount..................................................... 5
------------
1.19 LIBOR Interest Period............................................ 6
---------------------
1.20 LIBOR Rate....................................................... 6
----------
1.21 LIBOR Related Rate............................................... 7
------------------
1.22 Intangibles...................................................... 7
-----------
1.23 Inventory........................................................ 7
---------
1.24 IPO.............................................................. 7
---
1.25 L/C Agreement.................................................... 7
-------------
1.26 Letters of Credit................................................ 7
-----------------
1.27 Loan Documents................................................... 7
--------------
1.28 Note............................................................. 7
----
1.29 OCG.............................................................. 8
---
1.30 Obligations...................................................... 8
-----------
1.31 Payment Date..................................................... 8
------------
1.32 Person........................................................... 8
------
1.33 Plan............................................................. 8
----
1.34 Prime Rate....................................................... 8
----------
1.35 Prime Rate Loans................................................. 8
----------------
1.36 Prime-Related Rate............................................... 8
------------------
1.37 Subordinated Debt................................................ 9
-----------------
1.38 Subsidiary....................................................... 9
----------
1.39 Tangible Net Worth............................................... 9
------------------
1.40 Termination Date................................................. 9
----------------
ARTICLE 2
REVOLVING LOAN............................. 9
2.1 Revolving Loan Facility.......................................... 9
-----------------------
</TABLE>
- ii -
<PAGE>
<TABLE>
<C> <S> <C>
2.2 Term Loan Option................................................. 10
----------------
2.3 Sublimit for Letters of Credit................................... 10
------------------------------
2.4 Interest......................................................... 10
--------
2.5 Revolving Note................................................... 10
--------------
2.6 Procedure for Advances........................................... 11
----------------------
2.7 Facility Fee..................................................... 11
------------
ARTICLE 3
THE ISSUANCE OF COMMERCIAL OR STANDBY
LETTERS OF CREDIT........................... 11
3.1 Issuance......................................................... 11
--------
3.2 Fees............................................................. 12
----
3.3 Yield Indemnity.................................................. 12
---------------
ARTICLE 4
THE LIBOR RELATED RATE OPTION ................... 12
4.1 Procedure for LIBOR Related Rate Quotes.......................... 12
---------------------------------------
4.2 Procedure for LIBOR Related Rate Advances........................ 12
-----------------------------------------
4.3 No Prepayment.................................................... 13
-------------
4.4 Inability to Participate in Market............................... 13
----------------------------------
4.5 Increased Costs.................................................. 13
---------------
4.6 Prepayment Costs................................................. 14
----------------
4.7 Basis of Quotes.................................................. 14
---------------
4.8 No Change to Other Terms......................................... 15
------------------------
ARTICLE 5
COLLATERAL SECURITY........................ 15
5.1 Collateral....................................................... 15
----------
5.2 Maintenance of Security.......................................... 15
-----------------------
5.3 Negative Pledge.................................................. 15
---------------
5.4 Setoff........................................................... 16
------
ARTICLE 6
GUARANTIES.............................. 16
ARTICLE 7
CONDITIONS OF LENDING........................ 16
7.1 Authorization.................................................... 16
-------------
7.2 Representations and Warranties................................... 16
------------------------------
7.3 Compliance....................................................... 17
----------
7.4 Documentation.................................................... 17
-------------
7.5 Guaranties....................................................... 17
----------
7.6 Proof of Insurance............................................... 17
------------------
ARTICLE 8
REPRESENTATIONS AND WARRANTIES.................. 17
8.1 Corporate Existence.............................................. 17
-------------------
8.2 Subsidiary....................................................... 18
----------
8.3 No Intent to Defraud............................................. 18
--------------------
</TABLE>
- iii -
<PAGE>
<TABLE>
<C> <S> <C>
8.4 Solvency......................................................... 18
--------
8.5 Enforceability................................................... 18
--------------
8.6 No Legal Bar..................................................... 18
------------
8.7 Financial Information............................................ 18
---------------------
8.8 Liens and Encumbrances........................................... 19
----------------------
8.9 Litigation....................................................... 19
----------
8.10 Payment of Taxes................................................. 19
----------------
8.11 Employee Benefit Plan............................................ 19
---------------------
8.12 Misrepresentations............................................... 20
------------------
8.13 No Default....................................................... 20
----------
8.15 Margin Stock..................................................... 20
------------
8.16 Laws, Regulations, and Ordinances................................ 20
---------------------------------
ARTICLE 9
AFFIRMATIVE COVENANTS........................ 20
9.1 Use of Proceeds.................................................. 21
---------------
9.2 Supply Pro Forma Statements for All Acquisitions................. 21
------------------------------------------------
9.3 Tangible Net Worth............................................... 21
------------------
9.4 Current Ratio.................................................... 21
-------------
9.5 Working Capital.................................................. 21
---------------
9.6 Fixed Charges Coverage Ratio..................................... 21
----------------------------
9.7 Funded Debt to EBITDA............................................ 21
---------------------
9.8 Financial Information............................................ 21
---------------------
9.8.1 Interim Financial Statements............................ 21
----------------------------
9.8.2 Annual Financial Statements............................. 22
---------------------------
9.8.3 Borrowing Base Certificate.............................. 22
--------------------------
9.8.4 Aging Report............................................ 23
------------
9.8.5 Tax Returns............................................. 23
-----------
9.8.6 Other Certificates...................................... 23
------------------
9.8.7 Additional Financial Information........................ 23
--------------------------------
9.9 Maintenance of Existence......................................... 23
------------------------
9.10 Books and Records................................................ 24
-----------------
9.11 Access to Premises and Records................................... 24
------------------------------
9.12 Notice of Events................................................. 24
----------------
9.12.1 Proceedings............................................. 24
-----------
9.12.2 Material Development.................................... 25
--------------------
9.12.3 Defaults................................................ 25
--------
9.12.4 Adverse Effect.......................................... 25
--------------
9.13 Payment of Debts and Taxes....................................... 25
--------------------------
9.14 Deposit Accounts................................................. 25
----------------
9.15 Insurance........................................................ 25
---------
9.15.1 Property Insurance...................................... 25
------------------
9.15.2 Liability Insurance..................................... 26
-------------------
9.15.3 Additional Insurance.................................... 26
--------------------
9.16 Insurance Reports................................................ 26
-----------------
ARTICLE 10
NEGATIVE COVENANTS.......................... 26
10.1 Debt............................................................. 26
----
</TABLE>
- iv -
<PAGE>
<TABLE>
<C> <S> <C>
10.1.1 Unsecured Trade Credit.................................. 26
----------------------
10.1.2 Existing Obligations.................................... 26
--------------------
10.1.3 OCG Credit Line......................................... 27
---------------
10.1.4 Lease Agreements........................................ 27
----------------
10.1.5 Ordinary Course......................................... 27
---------------
10.2 Liens and Encumbrances........................................... 27
----------------------
10.2.1 Existing Liens.......................................... 27
--------------
10.2.2 Liens of Bank........................................... 27
-------------
10.2.3 OCG Credit Line......................................... 27
---------------
10.2.4 Tax Liens............................................... 27
---------
10.2.5 Incidental Liens........................................ 27
----------------
10.3 Guaranties....................................................... 27
----------
10.3.1 Negotiable Instruments.................................. 27
----------------------
10.3.2 Performance Bonds....................................... 27
-----------------
10.3.3 Guaranty of OCG......................................... 28
---------------
10.4 Disposition of Assets............................................ 28
---------------------
10.5 Mergers.......................................................... 28
-------
10.6 Capital Structure................................................ 28
-----------------
10.7 Wage and Hour Laws............................................... 28
------------------
10.8 ERISA............................................................ 28
-----
10.9 Dissolution.......................................................... 28
-----------
10.10 Business Activities................................................. 29
-------------------
10.11 Dividends........................................................... 29
---------
10.12 Contributions to Capital of Subsidiaries............................ 29
----------------------------------------
10.13 Permissible Loans and Investments................................... 29
---------------------------------
10.13.1 Certificates of Deposit................................. 29
-----------------------
10.13.2 Commercial Paper........................................ 29
----------------
10.13.3 U. S. Government Paper.................................. 29
----------------------
10.13.4 Similar Businesses...................................... 29
------------------
10.13.5 Loans to Officers and Employees......................... 29
-------------------------------
ARTICLE 11
EVENTS AND CONSEQUENCES OF DEFAULT................. 29
11.1 Events of Default................................................ 29
-----------------
11.1.1 Nonpayment.............................................. 30
----------
11.1.1.1 Breach of Warranty...................................... 30
------------------
11.1.2 Failure to Perform...................................... 30
------------------
11.1.3 Borrowing Base.......................................... 30
--------------
11.1.4 Defaults on Other Obligations........................... 30
-----------------------------
11.1.5 Defaults on Other Obligations........................... 30
-----------------------------
11.1.6 Financial Condition..................................... 31
-------------------
11.1.7 Guaranties.............................................. 31
----------
11.1.8 Loss, Destruction, or Condemnation of Property.......... 31
----------------------------------------------
11.1.9 Attachment Proceedings and Insolvency................... 31
-------------------------------------
11.1.10 Judgments............................................... 31
---------
11.1.11 Government Approvals.................................... 32
--------------------
11.2 Notification of Default.......................................... 32
-----------------------
11.3 Remedies Upon Default............................................ 32
---------------------
11.3.1 Terminate Commitments................................... 32
---------------------
</TABLE>
- v -
<PAGE>
<TABLE>
<C> <S> <C>
11.3.2 Accelerate.............................................. 32
----------
11.3.3 Setoff.................................................. 32
------
11.3.4 All Remedies............................................ 32
------------
11.4 Default Interest................................................. 32
----------------
11.5 Default Late Charge.............................................. 33
-------------------
11.6 Alleged Default by Bank.......................................... 33
-----------------------
ARTICLE 12
MISCELLANEOUS............................ 33
12.1 Manner of Payments............................................... 33
------------------
12.1.1 Payments on Nonbusiness Days............................ 33
----------------------------
12.1.2 Payments................................................ 33
--------
12.1.3 Application of Payments................................. 33
-----------------------
12.1.4 Recording of Payments................................... 34
---------------------
12.2 Notices.......................................................... 34
-------
12.3 Costs and Expenses............................................... 34
------------------
12.3.1 Out-of-Pocket Expenses.................................. 34
----------------------
12.3.2 Collection Expenses..................................... 35
-------------------
12.4 Waiver........................................................... 35
------
12.5 Assignment....................................................... 35
----------
12.6 Merger........................................................... 35
------
12.7 Amendments....................................................... 36
----------
12.8 Jurisdiction and Venue........................................... 36
----------------------
12.9 Construction..................................................... 36
------------
</TABLE>
EXHIBITS:
Exhibit A -- Revolving Note
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT ("Agreement") is made between ARIS CORPORATION
("Borrower"), and U.S. Bank of Washington, National Association, a national
banking association ("Bank"). The parties agree as follows:
ARTICLE ARTICLE 1
DEFINITIONS
All terms defined below shall have the meaning indicated. All references in
this Agreement to:
(a) "dollars" or "$" shall mean U.S. dollars;
(b) "Article," "Section," or "Subsection" shall mean articles,
sections, and subsections of this Agreement, unless otherwise indicated;
and
(c) equipment, fixtures, general intangibles, chattel paper,
instruments, and deposit accounts shall have the meanings assigned them
under the Uniform Commercial Code, RCW 62A.9-101 et seq; and;
(d) an accounting term not otherwise defined in this Agreement shall
have the meaning assigned to it under GAAP.
1.1 Accounts shall mean all of Borrower's receipts, accounts, drafts,
--------
acceptances, contract rights of and for moneys and performances due or to become
due, chattel paper, and other forms of receivables, now owned or later acquired,
which derive from or arise out of the conduct of Borrower's business, sale of
its inventory, or the furnishing of services, together with all guaranties and
security interests for, and the cash and noncash proceeds of, all the foregoing.
1.2 Advances shall mean the disbursement of loan proceeds and the issuance
--------
of Letters of Credit under the Revolving Loan.
1.3 Available Amounts shall mean at any time the amount of the Credit Limit
-----------------
or the Borrowing Base, whichever is less, minus the face amount of all Letters
of Credit outstanding, minus the
- 1 -
<PAGE>
unpaid balance of the Revolving Note.
1.4 Borrowing Base shall mean 80% of Eligible Accounts.
--------------
1.5 Business Day shall mean any day other than a Saturday, Sunday, or other
------------
day on which commercial banks in Seattle, Washington, and New York, New York are
authorized or required by law to close.
1.6 Cash Flow shall mean the following measured on a rolling/trailing four
---------
quarter basis: EBITDA, plus the amount of increase of long term Debt, plus the
amount of new equity raised from the sale of stock.
1.7 Credit Limit shall mean $8,000,000.00.
------------
1.8 Current Assets shall mean all consolidated assets of Borrower, on a
--------------
GAAP basis, which may be properly classified as current assets in accordance
with GAAP; provided, that short-term investments shall be valued at cost or
market, whichever is less.
1.9 Current Liabilities shall mean all consolidated indebtedness of
-------------------
Borrower, on a GAAP basis, maturing on demand or within a period of one year
from the date when Borrower's current liabilities are determined and which may
be properly classified as current liabilities in accordance with GAAP.
1.10 Debt shall mean all consolidated obligations, on a GAAP basis,
----
included in the liability section of a balance sheet of Borrower including,
without limitation and without duplication of such amounts, and regardless of
whether such items would otherwise not be shown on the liability side of a
balance sheet:
(a) Guaranties. All obligations guaranteed or assumed by Borrower,
----------
directly or indirectly in any manner, or endorsed (other than for
collection and deposit in the ordinary course of business) or discounted by
Borrower with recourse, including all debt guaranteed by Borrower through
any agreement, contingent or otherwise;
(b) Contingent Reserves. The aggregate amount of reserves established
-------------------
on the books of Borrower with respect to contingent liabilities (except
reserves which are properly
- 2 -
<PAGE>
treated as deductions from assets);
(c) Leases. All obligations for the payment of money or other property
------
pursuant to capital leases under which Borrower is leasing real or personal
property; and
(d) Partnership Debts. All obligations of any partnership or joint
-----------------
venture of which Borrower is a member, if Borrower is legally liable for
such obligations.
(e) Letters of Credit. All obligations, as account party, in
-----------------
connection with letters of credit issued on Borrower's behalf.
1.11 Debt Service shall mean the aggregate amount, determined in accordance
------------
with GAAP, of principal payments and interest payments scheduled to be made
during the relevant period on all Debt.
1.12 EBITDA shall mean Borrower's earnings before charges against income
------
consisting of depreciation of real and personal property, amortization or
write-off of goodwill and other intangibles, other non-cash charges (such as the
expense of purchased research and development), interest expense, income tax
expense, and extraordinary gains or losses. 1.13 Eligible Accounts shall mean on
any given date those Accounts in which Bank holds a perfected first lien
security interest which are:
(a) Identified by Borrower in a description submitted to Bank in such
form as is ordinarily available from Borrower's data systems and supported
by such documents as Bank may from time to time reasonably require;
(b) Earned or have arisen in the ordinary course of business and
represent the present and unimpaired right to payment of money from solvent
U.S. debtors (excluding affiliates or subsidiaries of Borrower) for
services rendered or goods delivered by Borrower;
(c) Billed and to be paid within 90 days of the original date of sales
invoice;
- 3 -
<PAGE>
(d) Not more than 60 days past due under the terms of the sales
invoice;
(e) Not Accounts due from an account debtor which is in violation of
subsection (d) above as to more than 25% of its aggregate account owing to
Borrower;
(f) Unconditional, fully earned, free of all rights of offset or
counterclaims, and not encumbered in any way;
(g) Not credit card receivables, dated billings, retainages, cash
sales, COD sales or service charges;
(h) Not affected by any receivership, insolvency, or bankruptcy
proceeding, whether voluntarily or involuntarily instituted, including,
without limitation, any reorganization of assets, deferment or arrangement
of debts, or any similar proceeding.
(i) Not Accounts with respect to which the account debtor is an
officer, an employee or agent of Borrower;
(j) Not Accounts with respect to which the account debtor is a Person
related to Borrower or its shareholders, officers, or directors;
(k) Not Accounts with respect to which goods are placed on
consignment, guaranteed sale, or other terms by reason of which the payment
by the account debtor may be conditional;
(l) Not Accounts with respect to which Borrower is or may become
liable to the account debtor for goods sold or services rendered by the
account debtor to Borrower;
(m) Not Accounts with respect to which the goods have not been shipped
or delivered, or the services have not been rendered, to the account
debtor;
(n) Not Accounts of any account debtor who has become insolvent of
fails generally to pay its debts (including its payrolls) as such debts
become due; and
(o) Not that portion of the Accounts with respect to which the account
debtor is the United States government or
- 4 -
<PAGE>
any department or agency of the United States, which exceeds 20% of all
Borrower's Accounts.
Notwithstanding the above, Bank shall have the right to exclude any
account, and deem it ineligible, if Bank, in its good faith judgment, determines
that account to have higher than normal indices of risk of collection.
1.14 ERISA shall mean the Employee Retirement Income Security Act of 1974,
-----
as amended.
1.15 Fixed Charges shall mean the current portion of Borrower's long term
-------------
Debt (including the current portion of capitalized leases), plus interest
expense, plus cash income taxes paid (or should have been paid), plus dividends
or any other form of distributions to shareholders, plus increases in all assets
which are not Current Assets.
1.16 Funded Debt shall mean, as of any date, the sum of the following
-----------
without duplication: (a) all Debt, including capitalized leases, which would be
classified as "funded indebtedness" or "long term indebtedness" on a balance
sheet of Borrower prepared as of such date in accordance with GAAP; (b) all
Debt, whether secured or unsecured, of Borrower, having a final maturity, or
which is renewable or extendable at the option of the obligor for a period
ending more than one year after the date of creation thereof, notwithstanding
the fact that payments in respect thereof (whether installment, serial maturity,
or sinking fund payments, or otherwise) are required to be made by the obligor
less than one year after the date of the creation thereof.
1.17 GAAP shall mean generally accepted accounting principles as in effect
----
from time to time in the United States and as consistently applied by Borrower.
1.18 LIBOR Amount shall mean each principal amount for which Borrower
-----
chooses to have the LIBOR Related Rate apply for any specified LIBOR Interest
Period.
1.19 LIBOR Interest Period shall mean as to any LIBOR Amount, a period of
-----
1, 2, 3, 6, 9 or 12 months commencing on the
- 5 -
<PAGE>
date the LIBOR Related Rate becomes applicable thereto; provided, however, that:
(A) no LIBOR Interest Period shall be selected which would extend beyond the
Termination Date; (B) no LIBOR Interest Period shall extend beyond the date of
any required principal payment, unless the sum of the principal amounts bearing
interest at the Prime Related Rate, plus LIBOR Amounts with LIBOR Interest
Periods ending on or before the scheduled date of such principal payment, plus
principal amounts remaining unborrowed under the Revolving Loan, equal or
exceeds the amount of such principal payment; (C) any LIBOR Interest Period
which would otherwise expire on a day which is not a Business Day, shall be
extended to the next succeeding Business Day, unless the result of such
extension would be to extend such LIBOR Interest Period into another calendar
month, in which event the LIBOR Interest Period shall end on the immediately
preceding Business Day; and (D) any LIBOR Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such LIBOR
Interest Period) shall end on the last Business Day of a calendar month.
1.20 LIBOR Rate shall mean the rate per annum (computed on the basis of a
----------
360-day year and the actual number of days elapsed) equal to the arithmetic
average (rounded upward to the nearest 1/16 of 1%) of the rates per annum
determined by Bank as of the times specified in Section 4.1 the date two (2)
Business Days prior to the first day of such LIBOR Interest Period as the rates
offered to Bank by three Eurodollar money market dealers in such Eurodollar
market as may be selected by Bank for U.S. dollar deposits to be delivered on
the first day of such LIBOR Interest Period for the number of months therein;
provided, however, that Bank's LIBOR Rate shall be adjusted to take into account
- --------
the maximum reserves required to be maintained for Eurocurrency liabilities by
banks during each such LIBOR Interest Period as specified in Regulation D of the
Board of Governors of the Federal
- 6 -
<PAGE>
Reserve System or any successor regulation.
1.21 LIBOR Related Rate shall mean the following as measured at the close
------------------
of the preceding fiscal quarter: if the Borrower's Funded Debt to EBITDA Ratio
is 1.00:1 or less, the Bank's LIBOR Rate plus 175 basis points; if the
Borrower's Funded Debt to EBITDA Ratio is 1.50:1 or less, but greater than
1.00:1, the Bank's LIBOR Rate plus 250 basis points; and, if the Borrower's
Funded Debt to EBITDA Ratio exceeds 1.50:1 but is less than 2.00:1 the Bank's
LIBOR Rate plus 300 basis points.
1.22 Intangibles shall mean all personal property other than goods,
-----------
accounts, chattel paper, documents, instruments, and money, including, without
limitation, trademarks, trademark rights, trade names, copyrights, patents,
patent rights, goodwill, royalties, licenses, permits, claims, causes of action,
unamortized debt, discounts, marketing expenses, and deferred research and
development costs.
1.23 Inventory shall mean all goods and raw material wherever situated
---------
which are now owned or hereafter acquired or held by Borrower for sale, lease,
or delivery, or processing prior to sale, in the ordinary course of business,
and all products and proceeds thereof.
1.24 IPO shall mean an initial public offering of Borrower's shares.
---
1.25 L/C Agreement means Bank's standard form Application and Agreement for
-------------
Standby Letters of Credit or Application and Agreement for Commercial Letters of
Credit as the case may be.
1.26 Letters of Credit shall mean Standby or Commercial Letters of Credit.
-----------------
1.27 Loan Documents shall mean collectively this Agreement, the Note, and
--------------
all other documents, instruments, and agreements now or later executed in
connection with this Agreement.
1.28 Note shall mean the Revolving Note.
----
1.29 OCG shall mean Oxford Computer Group Limited and its subsidiaries, if
---
any.
- 7 -
<PAGE>
1.30 Obligations shall mean the Note, Borrower's obligation to reimburse
-----------
Bank for all Advances, all amounts drawn under Letters of Credit, all fees,
costs, expenses, and indemnifications due to Bank under this Agreement, all
guaranties by Borrower to Bank, and all other present and future indebtedness,
direct or contingent, of Borrower to Bank.
1.31 Payment Date shall mean the first day of every month.
------------
1.32 Person shall mean any individual, partnership, corporation, business
------
trust, unincorporated organization, joint venture, or any governmental entity,
department, agency, or political subdivision.
1.33 Plan shall mean any employee benefit plan or other plan maintained for
----
Borrower's employees and covered by Title IV of ERISA, excluding any plan
created or operated by or for any labor union.
1.34 Prime Rate shall mean the floating commercial loan reference rate of
----------
Bank, publicly announced from time to time as its "prime rate" or "reference
rate" (calculated on the basis of actual number of days elapsed over a year of
360 days), with any change in the Prime Rate to be effective on the date the
"prime rate" or "reference rate" changes. The Prime Rate is not necessarily the
lowest rate of interest which it collects from any borrower or class of
borrowers.
1.35 Prime Rate Loans shall mean those portions of principal of the
----------------
Revolving Note accruing interest at the Prime Related Rate.
1.36 Prime-Related Rate shall mean the following as measured at the close
------------------
of the preceding fiscal quarter: if Borrower's Funded Debt to EBITDA Ratio is
1.50:1 or less, the Prime Rate; and, if Borrower's Funded Debt to EBITDA Ratio
exceeds 1.50:1 but is less than 2.00:1, the Prime Rate plus one quarter percent
(.25%) per annum.
1.37 Subordinated Debt shall mean Debt fully subordinated to all
-----------------
Obligations, in form satisfactory to Bank.
1.38 Subsidiary shall mean all direct and
---------
- 8 -
<PAGE>
indirect subsidiaries of Borrower now in existence or in the future formed or
acquired, including without limitation ARIS Software, Inc., Noetix Corporation
and OCG.
1.39 Tangible Net Worth shall mean all assets appearing on the consolidated
------------------
balance sheet of Borrower, on a GAAP basis, plus Subordinated Debt less, without
limitation and without duplication of deductions, the sum of:
(a) Debt (excluding Subordinated Debt);
(b) All amounts due from Subsidiaries, affiliates, officers, employees
and shareholders;
(c) All reserves established by Borrower for anticipated losses and
expenses; and
(d) Net book value of all assets of Borrower which are treated as
Intangibles in accordance with GAAP.
1.40 Termination Date shall mean June 1, 1998, except as provided in
----------------
Section 2.2 for Advances within the Term Loan Sublimit which are outstanding as
of June 1, 1998.
ARTICLE 2
REVOLVING LOAN
2.1 Revolving Loan Facility. Subject to the terms and conditions of this
-----------------------
Agreement, Bank shall make Advances to Borrower from time to time, until June 1,
1998 ("Revolving Loan"), with the aggregate principal amount at any one time
outstanding not to exceed the lesser of the Credit Limit minus the face amount
of all Letters of Credit or the Borrowing Base minus the face amount of all
Letters of Credit. After June 1, 1998, no further Advances shall be permitted.
Borrower may use the Revolving Loan by borrowing, prepaying, and reborrowing the
Available Amounts, in whole or in part.
2.2 Term Loan Option. Borrower may convert up to $5,000,000.00 of the
----------------
Advances under the Revolving Loan ("Term Loan Sublimit") to term loans as
follows:
2.2.1 Capital Stock Repurchase. Within the Term Loan Sublimit,
------------------------
Borrower may use up to $4,000,000.00 for a one-time
- 9 -
<PAGE>
capital stock repurchase in contemplation of an IPO occurring before
September 30, 1997 (the "IPO Anticipation Loan"). If an IPO has not
occurred by September 30, 1997, Borrower shall commence repayment of the
IPO Anticipation Loan in 36 equal payments of principal, plus all accrued
interest beginning November 1, 1997. The IPO Anticipation Loan shall be due
and payable in full within 10 days of the closing date of an IPO.
2.2.2 Fixed Asset Purchases and Mergers and Acquisitions. The Term
--------------------------------------------------
Loan Sublimit may be used to provide funding for fixed asset purchases and
mergers and acquisitions ("Fixed Asset Purchase and Merger and Aquisition
Loans"). Fixed Asset Purchase and Merger and Aquisition Loans shall require
Bank's consent prior to funding which shall not be unreasonably withheld.
Fixed Asset Purchase and Merger and Aquisition Loans shall be repayable in
36 equal payments of principal, plus all accrued interest.
2.3 Sublimit for Letters of Credit. Up to $1,000,000 of the Revolving Loan
------------------------------
shall be available to Borrower for the issuance of Letters of Credit.
2.4 Interest. Borrower shall pay interest on the Revolving Loan at the
--------
following interest rates, as selected by Borrower:
(a) the Prime Related Rate; or
(b) the LIBOR Related Rate.
All interest will be computed at the applicable rate based on a 360-day year and
applied to the actual number of days elapsed.
2.5 Revolving Note. The obligation of Borrower to repay the Revolving Loan
--------------
shall be evidenced by a promissory note ("Revolving Note") made by Borrower to
the order of Bank, and shall bear interest in accordance with Section 2.4 of
this Agreement. Borrower shall pay principal payments and all accrued interest
on each Payment Date. The entire balance of principal, interest and fees shall
be payable in full on the Termination Date. The Revolving Note shall be secured
as provided in Article 5 and shall be in substantially the same form as Exhibit
A
- 10 -
<PAGE>
attached.
2.6 Procedure for Advances. Borrower may borrow under the Revolving Loan on
----------------------
any Business Day. Borrower shall give Bank irrevocable notice (written or oral)
specifying the amount to be borrowed and the requested borrowing date. Bank must
receive such notice on or before 11:30 a.m., Seattle time, on the day borrowing
is requested. All Advances shall be discretionary to the extent notification by
Borrower is given subsequent to that time.
2.7 Facility Fee. Borrower shall pay to Bank upon execution of this
------------
Agreement, a facility fee of $10,000.00. Borrower shall pay to Bank 1/8% on the
unused balance of the Revolving Loan quarterly in arrears. Borrower shall pay to
Bank at the time of the IPO Anticipation Loan a loan fee in the amount of 1/2%
of the Advance at the time of the Advance and an additional 1/2% of the Advance
if the IPO Anticipation Loan has not been paid in full by September 30, 1997.
Borrower shall pay to Bank at the time of each of the Fixed Asset Purchase and
Merger and Acquisition Loans, a loan fee of 1/2% of the Advance at the time of
the Advance.
ARTICLE 3
THE ISSUANCE OF COMMERCIAL OR STANDBY
LETTERS OF CREDIT
3.1 Issuance. Upon Borrower's execution of an L/C Agreement Bank shall
--------
issue on Borrower's behalf a Letter of Credit. If there is a draw under a Letter
of Credit, Borrower shall on demand immediately reimburse Bank for the amount of
the draw, together with interest on the amount drawn, from the date of draw
until paid, at a floating rate equal to the Prime Rate plus 5% per annum. If
Borrower fails to reimburse Bank for the amount of such draw by 2:30 p.m.,
Seattle time, Bank may on that date make an Advance in the amount of the draw,
whether or not a Default exists or Borrower has requested an Advance. Bank shall
in addition have all rights provided in the L/C Agreement. Any default in the
L/C Agreement shall be a Default.
- 11 -
<PAGE>
3.2 Fees. Borrower shall pay to Bank in advance, upon issuance of the
----
Letters of Credit issuance fees and transaction fees negotiated at the time of
issuance, and reimburse Bank for all out-of-pocket costs, legal fees, and
expenses.
3.3 Yield Indemnity. If any law or regulation imposes or increases any
---------------
reserve, special deposit, or similar requirement against letters of credit
issued by Bank or subjects Bank to any tax, charge, fee, deduction, or
withholding of any kind in regard to the Letters of Credit, Borrower shall
promptly on demand indemnify Bank for any such increased costs, taxes, or
charges.
ARTICLE 4
THE LIBOR RELATED RATE OPTION
4.1 Procedure for LIBOR Related Rate Quotes. Borrower may obtain LIBOR
---------------------------------------
Related Rate quotes from Bank between 8:00 a.m. and 12:00 noon (Seattle time) on
any Business Day. Any LIBOR Related Rate quoted (A) before 10:00 a.m. shall be
based on Bank's LIBOR Rate determined as of approximately 8:00 a.m. on such day,
and Borrower may request an Advance at such rate only by giving Bank notice in
accordance with Section 4.2, before 10:00 a.m. on such day; and (B) between
10:00 a.m. and 12:00 noon shall be based on Bank's LIBOR Rate determined as of
approximately 10:00 a.m. on such day, and Borrower may request an Advance at
such rate only by giving Bank notice in accordance with Section 4.2, not later
than 12:00 noon on such day.
4.2 Procedure for LIBOR Related Rate Advances. Whenever Borrower desires to
-----------------------------------------
use the LIBOR Related Rate option, Borrower shall give Bank irrevocable notice
(either in writing or orally and promptly in writing) between 8:00 a.m. and
12:00 noon (Portland, Oregon time) two (2) Business Days in advance of the
desired effective date of such rate. Any oral notice shall be given by, and any
written notice or confirmation of an oral notice shall be signed by, the
person(s) authorized, and shall specify the requested effective date of the
rate, LIBOR Interest Period and LIBOR Amount, and whether Borrower is requesting
a new Advance
- 12 -
<PAGE>
at the LIBOR Related Rate under the Revolving Loan, conversion of any portion of
the principal balance bearing interest at the Prime Related Rate to a LIBOR
Amount, or a new LIBOR Interest Period for an outstanding LIBOR Amount. Borrower
may elect the LIBOR Related Rate in the minimum principal amount of
$1,000,000.00 and in integral multiples of $100,000.00.
4.3 No Prepayment. Borrower may not prepay all or any part of any LIBOR
-------------
Amount(s).
4.4 Inability to Participate in Market. If at any time Bank's LIBOR Rate is
----------------------------------
unascertainable or unavailable to Bank or if LIBOR Rate loans become unlawful,
the option to select the LIBOR Related Rate shall terminate immediately. If the
LIBOR Related Rate is then in effect, (A) it shall terminate automatically with
respect to all LIBOR Amounts (i) on the last day of each then applicable LIBOR
Interest Period, if Bank may lawfully continue to maintain such loans, or (ii)
immediately if Bank may not lawfully continue to maintain such loans through
such day, and (B) provided Borrower is not in default, the Prime Related Rate
automatically shall become effective as to such amounts upon such termination.
4.5 Increased Costs. If at any time after the date hereof (A) any revision
---------------
in or adoption of any applicable law, rule, or regulation or in the
interpretation or administration thereof (i) shall subject Bank or its
Eurodollar lending office to any tax, duty, or other charge, or change the basis
of taxation of payments to Bank with respect to any loans bearing interest based
on Bank's LIBOR Rate, or (ii) shall impose or modify any reserve, insurance,
special deposit, or similar requirements against assets of, deposits with or for
the account of, or credit extended by Bank or its Eurodollar lending office, or
impose on Bank or its Eurodollar lending office any other condition affecting
any such loans, and (B) the result of any of the foregoing is (i) to increase
the cost to Bank of making or maintaining any such loans or (ii) to reduce the
amount of any sum receivable under hereunder by Bank or its Eurodollar lending
office, Borrower shall pay Bank within 15 days
- 13 -
<PAGE>
after demand by Bank such additional amount as will compensate Bank for such
increased cost or reduction. The determination hereunder by Bank of such
additional amount shall be conclusive in the absence of manifest error. If Bank
demands compensation under this Section 4.5, Borrower may upon three (3)
Business Days' notice to Bank pay the accrued interest on all LIBOR Amounts,
together with any additional amounts payable under this Section 4.5. Provided
Borrower is not in default, upon Borrower's paying such accrued interest and
additional costs, the Prime Related Rate immediately shall be effective with
respect to the unpaid principal balance of such LIBOR Amounts.
4.6 Prepayment Costs. Upon any termination of any LIBOR Related Rate
----------------
(including but not limited to conversion to another rate) or payment of all or
any portion of any LIBOR Amount on a date other than the last day of the then
applicable LIBOR Interest Period, including without limitation (A) acceleration
in the event of default or (B) repayment in response to a notice under Section
4.5, Borrower shall pay to Bank on demand such amount as Bank reasonably
determines (determined as though 100% of the applicable LIBOR Amount had been
funded in the applicable Eurodollar market) is equivalent to all direct or
indirect losses, expenses, liabilities, or reductions in yield to Bank resulting
therefrom, whether incurred in connection with liquidation or reemployment of
funds or otherwise.
4.7 Basis of Quotes. If Borrower chooses the LIBOR Related Rate, Borrower
---------------
shall pay interest based on such rate, plus any other applicable taxes or
charges hereunder, even though Bank may have obtained the funds loaned to
Borrower from sources other than the applicable Eurodollar market. Bank's
determination of the LIBOR Related Rate and any such taxes or charges shall be
conclusive in the absence of manifest error.
4.8 No Change to Other Terms. Notwithstanding any other term of the Loan
------------------------
Documents, Borrower may not select the LIBOR Related Rate if an event of default
hereunder has occurred and is
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<PAGE>
continuing. Nothing contained in this Article 4, including without
limitation the determination of any LIBOR Interest Period or Bank's
quotation of any LIBOR Related Rate, shall be construed to prejudice Bank's
right, if any, to decline to make any requested Advance or to require
payment on demand.
ARTICLE 5
COLLATERAL SECURITY
5.1 Collateral. Except as otherwise agreed by Bank, as security for the
----------
prompt payment and performance of all Obligations Borrower and each Subsidiary
(except OCG) has granted or will grant to Bank a first lien security interest in
the following collateral (the "Collateral"): all assets including accounts
receivable, inventory, furniture, equipment, leasehold improvements and general
intangibles, including trademarks, copyrights and trade secrets and including
the capital stock of the Subsidiaries.
5.2 Maintenance of Security. Borrower and each Subsidiary shall execute and
-----------------------
deliver to Bank, whenever requested, such security instruments as Bank deems
necessary, in its sole opinion, for the preservation of its security interest or
to ensure the priority of each security interest. Borrower hereby irrevocably
appoints Bank as its attorney-in-fact, solely for the purpose of executing on
Borrower's behalf any financing statement or other security document deemed
necessary by Bank to carry out the purposes of this Article, which appointment
shall continue so long as this Agreement remains in effect or any Obligations
remain outstanding.
5.3 Negative Pledge. So long as any amount is payable by Borrower under
---------------
this Agreement, Borrower and each Subsidiary (except OCG in accordance with the
terms of this Agreement) shall not allow any Collateral to be transferred or
encumbered, except in the ordinary course of business or to secure the
obligations under this Agreement.
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<PAGE>
5.4 Setoff. Bank may exercise the right of setoff, assert its banker's
------
lien, or counterclaim against any interest of Borrower in each deposit account
which Borrower or any Subsidiary may now or later have with Bank, or any
property which is now or shall later be in Bank's possession.
ARTICLE 6
GUARANTIES
The Obligations shall be absolutely and unconditionally guaranteed by each
Subsidiary, jointly and severally.
ARTICLE 7
CONDITIONS OF LENDING
Bank's obligation to issue Letters of Credit and to make each Advance is
subject to the following conditions precedent, unless waived by Bank in writing:
7.1 Authorization. Borrower shall have delivered to Bank a certified copy
-------------
of the resolution of Borrower's board of directors authorizing the transactions
contemplated by this Agreement and the execution, delivery, and performance of
all Loan Documents. Each Subsidiary shall have delivered to Bank a certified
copy of a resolution of such Subsidiary's board of directors, satisfactory in
form to Bank authorizing the transactions contemplated by this Agreement and the
execution, delivery, and performance of all security documents evidencing the
Collateral and authorizing its guaranty. The board of directors of each
Subsidiary shall have passed a resolution, which continues in full force and
effect, to the effect that such corporation, after considering the benefits and
detriments of the transaction, reasonably expects to benefit, directly or
indirectly, from the Revolving Loan and its guaranty thereof.
7.2 Representations and Warranties. The representations and warranties made
------------------------------
by Borrower in the Loan Documents and in any certificate, document, or financial
statement furnished at any time shall continue to be true and correct, except to
the extent that such representations and warranties expressly relate to an
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<PAGE>
earlier date.
7.3 Compliance. No Default or other event which, upon notice or lapse of
----------
time or both would constitute a Default, shall have occurred and be continuing,
or shall exist after giving effect to the advance of credit to be made.
7.4 Documentation. Borrower and each Subsidiary shall have executed and
-------------
delivered to Bank all documents to reflect the existence of the Obligations and
to perfect, as a first lien, the security interests granted to Bank.
7.5 Guaranties. Each Subsidiary shall have executed and delivered its
----------
guaranty to Bank, and each such guaranty shall remain in full force and effect.
7.6 Proof of Insurance. Proof of insurance as required by Section 9.14 has
------------------
been provided to Bank.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
To induce Bank to enter into this Agreement, Borrower represents, warrants,
and covenants to Bank as follows:
8.1 Corporate Existence. Borrower, and each Subsidiary (i) is duly
-------------------
incorporated, validly existing and in good standing under the laws of its state
of incorporation; (ii) has all corporate powers and all governmental licenses,
authorizations, consents, approvals and authority, and legal right to own and
operate its property or lease the property it operates required to carry on its
business as now conducted, and (iii) is duly qualified to transact business as a
foreign corporation in each jurisdiction where the Collateral will be located
and in the jurisdiction where its principal place of business is located.
Borrower and each Subsidiary has the full power and corporate authority to
execute, deliver and perform Borrower's and such Subsidiary's obligations under
the Loan Documents.
8.2 Subsidiary. The capital stock of each Subsidiary is subject to no
----------
subscription, option, warrant, call, right, agreement or commitment relating to
the issuance, sale, delivery
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<PAGE>
or transfer by its parent (including any right of conversion or exchange under
any outstanding security or other instrument) of such Subsidiary's capital
stock.
8.3 No Intent to Defraud. Neither Borrower nor any Subsidiary has entered
--------------------
into this transaction with the intent to hinder, delay or defraud any of its
creditors.
8.4 Solvency. Neither Borrower nor any Subsidiary is insolvent. Neither
--------
Borrower nor any Subsidiary (i) is engaged in or about to engage in a business
for which its remaining assets were unreasonably small in relation to its
business or (ii) intends to incur, or believes or reasonably should believe it
will incur, debts beyond its ability to repay as they become due. Except as
specifically permitted by this Agreement, no Subsidiary owes, or expects to owe,
any debt to any person other than to the Bank, Borrower or to an affiliate or
subsidiary.
8.5 Enforceability. The Loan Documents, when executed and delivered by
--------------
Borrower, shall be enforceable against Borrower in accordance with their
respective terms.
8.6 No Legal Bar. The execution, delivery, and performance by Borrower of
------------
the Loan Documents, and the use of the loan proceeds, shall not violate any
existing law or regulation applicable to Borrower; any ruling applicable to
Borrower of any court, arbitrator, or governmental agency or body of any kind;
Borrower's articles of incorporation or bylaws; any security issued by Borrower;
or any mortgage, indenture, lease, contract, undertaking, or other agreement to
which Borrower is a party or by which Borrower or any of its property may be
bound.
8.7 Financial Information. By submitting each of the financial statements
---------------------
required by Subsection 0 and 0 Borrower is deemed to represent and warrant that:
(a) such statement is complete and correct and fairly presents the financial
condition of Borrower as of the date of such statement; (b) such statement
discloses all liabilities of Borrower that are required to be reflected or
reserved against under GAAP, whether liquidated or
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<PAGE>
unliquidated, fixed or contingent; and (c) such statement has been prepared in
accordance with GAAP. As of this date, there has been no adverse change in
Borrower's financial condition since preparation of such financial statements
which would materially impair Borrower's ability to repay the Obligations.
8.8 Liens and Encumbrances. As of this date, Borrower and each Subsidiary
----------------------
has good and marketable title to its property free and clear of all security
interests, liens, encumbrances, or rights of others, except as included in
Borrower's financial statements delivered to Bank pursuant to Sections 9.8.1 and
9.8.2, and except for taxes which are not yet delinquent and for conditions,
restrictions, easements, and rights of way of record which do not materially
affect the use of any of Borrower's property.
8.9 Litigation. Except as disclosed in writing to Bank, there is no
----------
threatened (to Borrower's knowledge) or pending litigation, investigation,
arbitration, or administrative action which may materially adversely affect
Borrower's or a Subsidiary's business, property, operations, or financial
condition.
8.10 Payment of Taxes. Borrower and each Subsidiary has filed or caused to
----------------
be filed all tax returns when required to be filed; and has paid all taxes,
assessments, fees, licenses, excise taxes, franchise taxes, governmental liens,
penalties, and other charges levied or assessed against Borrower or any
Subsidiary or any of their property imposed on it by any governmental authority,
agency, or instrumentality that are due and payable (other than those returns or
payments of which the amount, enforceability, or validity are contested in good
faith by appropriate proceedings and with respect to which reserves in
conformity with GAAP are provided on Borrower's books).
8.11 Employee Benefit Plan. Borrower and each Subsidiary is in compliance
---------------------
in all respects with the provisions of ERISA and the regulations and published
interpretations thereunder. Borrower and each Subsidiary has not engaged in any
acts or omissions which
- 19 -
<PAGE>
would make Borrower or any Subsidiary liable to the Plan, to any of its
participants, or to the Internal Revenue Service, under ERISA.
8.12 Misrepresentations. No information, exhibits, data, or reports
------------------
furnished by Borrower or delivered to Bank in connection with Borrower's
application for credit misstates any material fact, or omits any fact necessary
to make such information, exhibits, data, or reports not misleading.
8.13 No Default. Borrower is not in default in any Loan Document, or in any
----------
contract, agreement, or instrument to which it is a party.
8.14 No Burdensome Restrictions. No contract or other instrument to which
--------------------------
Borrower or any Subsidiary is a party, or order, award, or decree of any court,
arbitrator, or governmental agency, materially impairs Borrower's or any
Subsidiary's ability to repay the Obligations.
8.15 Margin Stock. Borrower is not engaged, nor shall it engage,
------------
principally or as one of its important activities, in the business of extending
credit for the purpose of "purchasing" or "carrying" margin stock under
Regulation U of the Board of Governors of the Federal Reserve System. Borrower
shall not use any part of the proceeds of any Advance for any purpose which
violates or is inconsistent with the provisions of Regulation G, T, U, or X of
such Board of Governors, as the same may be amended, supplemented, or modified
from time to time.
8.16 Laws, Regulations, and Ordinances. Borrower is not, to Borrower's
---------------------------------
knowledge, in violation with any applicable governmental laws, regulations or
ordinances.
ARTICLE 9
AFFIRMATIVE COVENANTS
So long as this Agreement shall remain in effect, or any liability exists
under the Loan Documents (with Sections 9.3 through 9.7 tested quarterly on a
consolidated basis based on Borrower's most recent financial statement),
Borrower shall:
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<PAGE>
9.1 Use of Proceeds. Use the proceeds of the Revolving Loan for general
---------------
corporate purposes including payables, payroll, accrued expenses, capital
expenditures and acquisitions and use the proceeds of Advances within the Term
Loan Sublimit as provided in Section 2.2. Borrower shall obtain Bank's prior
written approval prior to requesting Advances in connections with acquisitions
or mergers.
9.2 Supply Pro Forma Statements for All Acquisitions. Provide Bank with
------------------------------------------------
proforma statements showing compliance with all financial covenants in
connection with all mergers and acquisitions, prior to any such transaction.
9.3 Tangible Net Worth. Maintain a minimum Tangible Net Worth of not less
------------------
than $1,000,000.00. After an IPO, Borrower shall maintain a Tangible Net Worth
of not less than $1,000,000 plus 80% of IPO proceeds plus 70% of Borrower's
annual net income after the IPO.
9.4 Current Ratio. Maintain a ratio of Current Assets to Current
-------------
Liabilities of not less than 1.50 to 1.
9.5 Working Capital. Maintain Current Assets which exceed Current
---------------
Liabilities by at least $3,000,000.00. After an IPO, Borrower shall maintain
Current Assets which exceed Current Liabilities by at least $8,000,000.00.
9.6 Fixed Charges Coverage Ratio. Maintain Cash Flow to Fixed Charges in a
----------------------------
ratio greater than or equal to 1.10 to 1.
9.7 Funded Debt to EBITDA. Maintain a ratio of Funded Debt to EBITDA of
---------------------
less than or equal to 2.00 to 1. 9.8 Financial Information. Maintain a standard
system of accounting in accordance with GAAP and furnish to Bank the following:
9.8.1 Interim Financial Statements. As soon as available and, in any
----------------------------
event, within 45 days after the end of each fiscal quarter except the last
fiscal quarter of each fiscal year, a copy of the consolidated statement of
income and retained earnings of Borrower for the quarter and for the
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<PAGE>
current fiscal year through such quarter, and for each such quarter a copy
of the consolidated balance sheet, consolidated statement of shareholders'
equity, and consolidated statement of cash flow of Borrower as of the end
of such quarter, setting forth, in each case, in comparative form, figures
for the corresponding period of the preceding fiscal year, all in
reasonable detail and satisfactory in scope to Bank and in form and
substance satisfactory to Bank, prepared by the chief financial officer or
chief accounting officer of Borrower certifying that such statement is
complete and correct and fairly presents without qualification the
financial condition of Borrower for such period and is prepared in
accordance with GAAP;
9.8.2 Annual Financial Statements. As soon as available and, in any
---------------------------
event, within 90 days after the end of each fiscal year, a copy of the
consolidated balance sheet, consolidated statement of income and retained
earnings, consolidated statement of shareholders' equity, and consolidated
statement of cash flow of Borrower for such year, setting forth in each
case, in comparative form, corresponding figures from the preceding annual
statements, each audited by independent certified public accountants of
recognized standing selected by Borrower and satisfactory to Bank
certifying that such statement is complete and correct, fairly presents
without qualification the financial condition of Borrower for such period,
is prepared in accordance with GAAP, and has been audited in conformity
with generally accepted auditing standards, all in reasonable detail and
satisfactory in scope to Bank;
9.8.3 Borrowing Base Certificate. Monthly or more frequently as
--------------------------
requested by Bank, and upon each request for an Advance, a borrowing base
certificate in form and substance satisfactory to Bank;
9.8.4 Aging Report. Monthly or more frequently as
------------
- 22 -
<PAGE>
requested by Bank, a report providing the agings of Accounts, and a summary
listing of accounts payable, in form and substance satisfactory to Bank;
9.8.5 Tax Returns. Provide copies of all federal tax returns and
-----------
evidence of payment of any amounts due; and
9.8.6 Other Certificates. Together with the delivery of the financial
------------------
statements required by Subsection 9.8.1 and Subsection 9.8.2, a certificate
of the chief financial officer or chief accounting officer of Borrower
which certifies that:
(a) Such statement is complete and correct, fairly presents,
without qualification, the financial condition of Borrower for such
period, and is prepared in accordance with GAAP;
(b) Borrower is in compliance with the financial covenants set
forth in Sections 9.3 through 9.7, with attached materials showing
detailed calculations of covenant compliance; and
(c) No Default exists, or no event which, with lapse of time or
upon the giving of notice would constitute a Default, but, if a
Default shall exist, the certificate shall specify the nature and
period of existence of such Default, and what action Borrower has
taken or proposes to take with respect thereto; and
9.8.7 Additional Financial Information. As soon as available and, in
--------------------------------
any event, within ten days after request, such other data, information, or
documentation as Bank may reasonably request.
9.9 Maintenance of Existence. Preserve and maintain Borrower's and each
------------------------
Subsidiary's corporate existence, powers, and privileges in the jurisdiction of
its incorporation, and qualify and remain qualified in each jurisdiction in
which its presence is necessary or desirable in view of its business,
operations, or ownership of its property. Borrower and each Subsidiary shall
- 23 -
<PAGE>
also maintain and preserve all of its property which is necessary or
useful in the proper course of its business, in good working order and
condition, ordinary wear and tear excepted.
9.10 Books and Records. Keep accurate and complete financial statements in
-----------------
which complete entries shall be made in accordance with GAAP, reflecting all
financial transactions of Borrower.
9.11 Access to Premises and Records. At all reasonable times and as often
------------------------------
as Bank may reasonably request with prior advance notification, permit any
authorized representative designated by Bank to have access to the premises,
property, and financial records of Borrower, including all records relating to
the finances, operations, and procedures of Borrower, and to make copies of or
abstracts from such records. If Borrower now or at any time hereafter maintains
any records (including without limitation computer generated records and
computer software programs for the generation of such records) in the possession
of a third party, Borrower, upon request of Bank, shall notify such party to
permit Bank free access to such records at all reasonable times and to provide
Bank with copies of any records it may request, all at Borrower's expense. Bank
will take reasonable care to avoid disruption to Borrower's on-going operations
during any such exam or inspection.
9.12 Notice of Events. Furnish Bank prompt written notice of:
----------------
9.12.1 Proceedings. Any proceeding instituted by or against Borrower
-----------
or any Subsidiary in any court or before any commission or regulatory body,
or any proceeding threatened against it in writing by any governmental
agency which if adversely determined would have a material adverse effect
on Borrower's business, property, or financial condition, or where the
amount involved is $100,000.00 or more and not covered by insurance;
9.12.2 Material Development. Any material development
--------------------
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<PAGE>
in any such proceeding referred to in Subsection 0;
9.12.3 Defaults. Any accident, event, or condition which is or, with
--------
notice or lapse of time or both, would constitute a Default, or a default
under any other agreement to which Borrower is a party; and
9.12.4 Adverse Effect. Any other action, event, or condition of any
--------------
nature which could result in a material adverse effect on the business,
property, or financial condition of Borrower.
9.13 Payment of Debts and Taxes. Pay all Debt and perform all obligations
--------------------------
promptly and in accordance with their terms, and pay and discharge promptly all
taxes, assessments, and governmental charges or levies imposed upon Borrower,
its property, or revenues prior to the date on which penalties attach thereto,
as well as all lawful claims for labor, material, supplies, or otherwise which,
if unpaid, might become a lien or charge upon Borrower's property. Borrower
shall not, however, be required to pay or discharge any such tax, assessment,
charge, levy, or claim so long as its enforceability, amount, or validity is
contested in good faith by appropriate proceedings.
9.14 Deposit Accounts. To the extent practical, and excluding deposit
----------------
accounts of its international Subsidiaries, maintain all primary business
deposit accounts with Bank.
9.15 Insurance. Maintain commercially adequate levels of coverage with
---------
financially sound and reputable insurers as are acceptable to Bank, including,
without limitation:
9.15.1 Property Insurance. Insurance on all property of a character
------------------
usually insured by organizations engaged in the same or similar type of
business as Borrower against all risks, casualties, and losses through
extended coverage or otherwise and of the kind customarily insured against
by such organizations, with such policy or policies naming Bank as loss
payee, as its interests may appear;
9.15.2 Liability Insurance. Public liability insurance
-------------------
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<PAGE>
against tort claims which may be asserted against Borrower; and
9.15.3 Additional Insurance. Such other insurance as may be required
--------------------
by law.
9.16 Insurance Reports. Furnish to Bank, upon request of Bank, reports on
-----------------
each existing insurance policy showing such information as Bank may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the properties
insured; (e) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (f) the
expiration date of the policy. In addition, upon request of Bank after an event
of Default exists (however not more often than annually), Borrower will have an
independent appraiser satisfactory to Bank determine, as applicable, the actual
cash value or replacement cost of any Collateral. The cost of such appraisal
shall be paid by Borrower.
ARTICLE 10
NEGATIVE COVENANTS
So long as this Agreement shall remain in effect, or any liability shall
exist under the Loan Documents, Borrower shall not, without prior written
consent of Bank, which consent shall not be unreasonably withheld:
10.1 Debt. Create, incur, assume, permit to exist, or otherwise become
----
committed for any Debt except any:
10.1.1 Unsecured Trade Credit. Unsecured, short-term Debt arising from
----------------------
current operations by purchasing on credit goods, services, supplies, or
merchandise and not constituting borrowings;
10.1.2 Existing Obligations. Debt owing to Bank, or in existence as of
--------------------
this date and disclosed to Bank, and all renewals, modifications, and
extensions thereof;
10.1.3 OCG Credit Line. A credit line to OCG by a foreign bank, not to
---------------
exceed a maximum liability of $600,000.
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<PAGE>
10.1.4 Lease Agreements. Debt incurred in connection with capital
----------------
leases calling for payments in the aggregate not exceeding $250,000 in any
one fiscal year; and
10.1.5 Ordinary Course. Debt incurred in the ordinary course of
---------------
business and appearing on the liability section of the balance sheet of
Borrower, prepared in accordance with GAAP, including, without limitation,
accrued liabilities and taxes payable.
10.2 Liens and Encumbrances. Create, incur, or assume, or agree to create,
----------------------
incur, or assume any lien, whether consensual or nonconsensual, on any of its
property, or to enter into any lease with respect to any of its property except:
10.2.1 Existing Liens. Liens in effect as of this date;
--------------
10.2.2 Liens of Bank. Liens in favor of Bank;
-------------
10.2.3 OCG Credit Line. Liens on the assets of OCG to secure a credit
---------------
line permitted under Section 10.1.3.
10.2.4 Tax Liens. Liens for taxes not yet due or which are being
---------
contested in good faith by appropriate proceedings; and
10.2.5 Incidental Liens. Other liens incidental to the conduct of its
----------------
business or the ownership of its property which are not incurred in
connection with the borrowing of money or the obtaining of credit, and
which do not in the aggregate materially impair the value or use of
property.
10.3 Guaranties. Assume, guaranty, endorse, become a surety for, indemnify,
----------
or otherwise in any fashion become responsible for, directly or indirectly, any
obligation of any Person, except:
10.3.1 Negotiable Instruments. Endorsements on negotiable instruments
----------------------
for deposit or collection in the ordinary course of business;
10.3.2 Performance Bonds. Performance bonds as required in the
-----------------
ordinary course of Borrower's business; and
10.3.3 Guaranty of OCG. A guaranty of a credit line to
---------------
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<PAGE>
OCG by a foreign bank, not to exceed a maximum liability of $600,000.
10.4 Disposition of Assets. Sell, transfer, lease, or otherwise assign or
---------------------
dispose of a substantial portion of its property to any Person, outside the
ordinary course of business.
10.5 Mergers. Become a party to any merger, consolidation, or like
-------
corporate change, or make any substantial transfer or contribution to, or
material investment in, stock, shares, or licenses of any Person except with a
computer software consulting and training company as long as the cost of such
transaction is not more than 10% of the GAAP book value of Borrower's total
assets per transaction and 25% of the GAAP book value of Borrower's total assets
on an aggregate annual basis, prior to such transaction and Borrower is not in
default prior to or as a result of the proposed transaction.
10.6 Capital Structure. Issue, purchase, retire, or redeem any of its
-----------------
capital stock or otherwise effect any change in Borrower's capital structure
other than: pursuant to an acquisition by purchase or merger of computer
consulting or training companies as provided in Section 10.5; pursuant to the
share repurchase transaction described in Section 2.2.1; in connection with an
IPO of up to one-quarter (25%) of Borrower's issued and outstanding shares; or,
pursuant to an executive stock option or qualified employee stock ownership
plan.
10.7 Wage and Hour Laws. Violate the federal Fair Labor Standards Act or
------------------
any comparable state wage and hour law.
10.8 ERISA. Engage in any act or omission which would make Borrower liable
-----
under ERISA to the Plan, to any of its participants, or to the Internal Revenue
Service.
10.9 Dissolution. Adopt any agreement or resolution for dissolving,
-----------
terminating, or substantially altering Borrower's present business activities.
10.10 Business Activities. Engage or enter into any activity which is
-------------------
unusual to Borrower's existing business.
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<PAGE>
10.11 Dividends. Declare or pay any dividend.
---------
10.12 Contributions to Capital of Subsidiaries. Make any contributions to
----------------------------------------
capital to any foreign Subsidiary.
10.13 Permissible Loans and Investments. Make any loan or advance money or
---------------------------------
assets to any Person otherwise than in the ordinary course of business, or make
any investment outside the ordinary course of Borrower's business, except:
10.13.1 Certificates of Deposit. Investments in certificates of
-----------------------
deposit maturing within one year from the date of acquisition from any one
or more of the top 100 commercial banks in the United States;
10.13.2 Commercial Paper. Prime commercial paper with maturities of
----------------
less than one year;
10.13.3 U. S. Government Paper. Obligations issued or guaranteed by
----------------
the United States Government or its agencies;
10.13.4 Similar Businesses. Acquisition by purchase or merger
------------------
of consulting or training businesses; and
10.13.5 Loans to Officers and Employees. Loans to officers and
-------------------------------
employees up to $350,000 in the aggregate outstanding amount, and except
for the Promissory Note in the amount of $500,000 payable to Terri Olson
which is payable $250,000 on April 1, 1997 and $250,000 payable on July 1,
1997.
ARTICLE 11
EVENTS AND CONSEQUENCES OF DEFAULT
11.1 Events of Default. Any of the following events shall, at the option of
-----------------
Bank and at any time without regard to any previous knowledge on the part of
Bank, constitute a default by Borrower under the terms of this Agreement, the
Note, Letters of Credit, and all other Loan Documents ("Default"):
11.1.1 Nonpayment. Any payment or reimbursement due or demanded under
----------
this Agreement or any Loan Document is not made when due;
11.1.1.1 Breach of Warranty. Any representation or warranty made in
------------------
connection with this Agreement or any other Loan Document, or any
certificate, notice, or
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<PAGE>
report furnished pursuant hereto, is determined by Bank to be false in any
respect when made, and is relied upon by Bank to its detriment;
11.1.2 Failure to Perform. Any other term, covenant, or agreement contained
------------------
in any Loan Document is not performed or satisfied, and, if remediable, such
failure continues unremedied for 30 days after written notice thereof has been
given to Borrower by Bank;
11.1.3 Borrowing Base. The Borrowing Base shall become less than the face
--------------
amount of the Letters of Credit, plus the outstanding principal balance plus
accrued interest of the Revolving Note, and shall remain so after three days
notice from Bank;
11.1.4 Defaults on Other Obligations. There exists a default by Borrower in
-----------------------------
the performance of any other agreement or obligation for the payment of borrowed
money, for the deferred purchase price of property or services, or for the
payment of rent under any lease, whether by acceleration or otherwise, which
would permit such obligation to be declared due and payable prior to its stated
maturity; and such default continues for 30 days after Borrower receives written
notice thereof from the creditor so affected;
11.1.5 Defaults on Other Obligations. There exists a default in the
-----------------------------
performance by any Subsidiary of any agreement or obligation for the payment of
borrowed money, for the deferred purchase price of property or services, or for
the payment of rent under any lease, whether by acceleration or otherwise, which
would permit such obligation to be declared due and payable prior to its stated
maturity; and such default continues for 30 days after such Subsidiary receives
written notice thereof from the creditor so affected;
11.1.6 Financial Condition. Bank, in good faith, deems itself insecure due
-------------------
to material adverse deterioration in Borrower's financial condition.
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<PAGE>
11.1.7 Guaranties. Any guarantor of all or any portion of the
----------
Obligations revokes or attempts to revoke such guaranty, whether with
respect to future transactions or outstanding Obligations, or otherwise
breaches the terms and conditions of such guaranty;
11.1.8 Loss, Destruction, or Condemnation of Property. A portion of
----------------------------------------------
Borrower's property is affected by any uninsured loss, damage, destruction,
theft, sale, or encumbrance other than created herein or is condemned,
seized, or appropriated, the effect of which materially impairs Borrower's
financial condition or its ability to pay its debts as they come due;
11.1.9 Attachment Proceedings and Insolvency. Borrower, any
-------------------------------------
Subsidiary, or any of Borrower's or any Subsidiary's property is affected
by any:
(a) Judgment lien, execution, attachment, garnishment, general
assignment for the benefit of creditors, sequestration, or forfeiture,
to the extent Borrower's financial condition or its ability to pay its
debts as they come due is thereby materially impaired; or
(b) Proceeding under the laws of any jurisdiction relating to
receivership, insolvency, or bankruptcy, whether brought voluntarily
or involuntarily, including, without limitation, any reorganization of
assets, deferment or arrangement of debts, or any similar proceeding,
and, if such proceeding is involuntarily brought, it is not dismissed
within 60 days;
11.1.10 Judgments. Final judgment on claims not covered by insurance
---------
which, together with other outstanding final judgments against Borrower,
exceeds $100,000, is rendered against Borrower and is not discharged,
vacated, or reversed, or its execution stayed pending appeal, within 60
days after
- 31 -
<PAGE>
entry, or is not discharged within 60 days after the expiration of
such stay; or
11.1.11 Government Approvals. Any governmental approval, registration,
--------------------
or filing with any governmental authority, now or later required in
connection with the performance by Borrower of its obligations under the
Loan Documents, is revoked, withdrawn, or withheld, or fails to remain in
full force and effect, except Borrower shall have 60 days after notice of
any such event to take whatever action is necessary to obtain all necessary
approvals, registrations, and filings.
11.2 Notification of Default. Bank shall promptly furnish Borrower with
-----------------------
written notice of the nature and extent of any Default after Bank has actual
knowledge thereof.
11.3 Remedies Upon Default. If any Default occurs and is continuing, Bank
---------------------
may at its option, by notice to Borrower:
11.3.1 Terminate Commitments. Refuse to make further Advances or issue
---------------------
new Letters of Credit;
11.3.2 Accelerate. Declare all or any of the Note, together with all
----------
accrued interest, to be immediately due and payable without presentment,
demand, protest, or notice of any kind, all of which are hereby expressly
waived by Borrower;
11.3.3 Setoff. Exercise its right of setoff against deposit accounts
------
of Borrower with Bank; and/or 11.3.4 All Remedies. Pursue all available
legal and equitable remedies. All of Bank's rights and remedies in all Loan
Documents shall be cumulative and can be exercised separately or
concurrently.
11.4 Default Interest. Upon Default, whether or not acceleration has
----------------
occurred, all unpaid principal shall, at Bank's option, accrue interest at a
fluctuating rate per annum of 5% above the Prime Rate.
11.5 Default Late Charge. While in Default, if any payment
-------------------
- 32 -
<PAGE>
is 15 days or more past due, Borrower shall be charged a late charge of 5% of
the amount of the delinquent payment.
11.6 Alleged Default by Bank. In the event that Borrower at any time
-----------------------
concludes that Bank has defaulted in any respect under this Agreement or any of
the Loan Documents, Borrower shall promptly give notice thereof to Bank and
provide Bank with a period of not less than 30 days in which to cure such
alleged default; provided, however, that in no event shall this Section 0 or the
Borrower's giving such notice to Bank extend the time period(s) granted to the
Borrower to cure any Default under Section 0. Failure of the Borrower to provide
such notice to Bank shall waive the Borrower's right to assert a claim against
Bank for such alleged default.
ARTICLE 12
MISCELLANEOUS
12.1 Manner of Payments.
------------------
12.1.1 Payments on Nonbusiness Days. Whenever any event is to occur or
----------------------------
any payment is to be made under any Loan Document on any day other than a
Business Day, such event may occur or such payment may be made on the next
succeeding Business Day and such extension of time shall be included in
computation of interest in connection with any such payment.
12.1.2 Payments. All payments and prepayments to be made by Borrower
--------
shall be made to Bank when due, at Bank's office as may be designated by
Bank, without offsets or counterclaims for any amounts claimed by Borrower
to be due from Bank, in U.S. dollars and in immediately available funds.
12.1.3 Application of Payments. All payments made by Borrower shall be
-----------------------
applied first against fees, expenses, and indemnities due; second, against
interest due; and third, against principal.
12.1.4 Recording of Payments. Bank is authorized to record on a
---------------------
schedule or computer-generated statement the date
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<PAGE>
and amount of each Advance, all conversions between interest rate options, and
all payments of principal and interest. All such schedules or statements shall
constitute prima facie evidence of the accuracy of the information so recorded.
12.2 Notices. Bank may make Advances and conversions between interest
-------
rates, based on telephonic, telex, and oral requests made by any Person whom
Bank in good faith believes to be authorized to act on behalf of Borrower. All
other notices, demands, and other communications to be given pursuant to any of
the Loan Documents shall be in writing and shall be deemed received the earlier
of when actually received, or two days after being mailed, postage prepaid and
addressed as follows, or as later designated in writing:
Bank: Borrower:
U.S. BANK OF WASHINGTON, ARIS CORPORATION
NATIONAL ASSOCIATION 6729 Fort Dent Way, Suite 250
Washington Corporate Banking Seattle, WA 98188-2555
10800 N.E 8th Street, Ste. 100 Attention: Paul Song and
Bellevue, WA 98004 Thomas Averill
Attention: Tom Gunder
12.3 Costs and Expenses. Borrower shall pay, reimburse, and indemnify Bank
------------------
for:
12.3.1 Out-of-Pocket Expenses. All Bank's reasonable costs and
----------------------
expenses, including, without limitation, all reasonable accounting,
appraisal, and report preparation fees or expenses, all reasonable
attorneys' fees, legal expenses, escrow fees and recording or filing fees,
incurred in connection with the negotiation, preparation, execution, and
administration of this Agreement and all other Loan Documents, and all
amendments, supplements, or modifications thereto, and the perfection of
all security interests, liens, or encumbrances that may be granted to Bank;
and
12.3.2 Collection Expenses. All Bank's costs, expenses, and reasonable
-------------------
attorneys' fees (including the reasonable
- 34 -
<PAGE>
value of the services of staff counsel) incurred in connection with the
enforcement or preservation of any right under this Agreement or any other
Loan Document, whether or not suit is brought. This subsection shall
survive the termination of this Agreement.
12.4 Waiver. No failure to exercise and no delay in exercising, on the part
------
of Bank, any right, power, or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power, or
privilege hereunder preclude any other or further exercise thereof, or the
exercise of any other right, power, or privilege. Further, no waiver or
indulgence by Bank of any Default shall constitute a waiver of Bank's right to
declare a subsequent similar failure or event to be a Default.
12.5 Assignment. This Agreement is made expressly for the sole benefit of
----------
Borrower and for the protection of Bank and its successors and assigns. The
rights of Borrower hereunder shall not be assignable by operation of law or
otherwise, without the prior written consent of Bank. Bank may at any time sell,
assign, grant participations in, or otherwise transfer to any other financial
institution (a "Participant") all or any part of its rights under this
Agreement, without notice to Borrower. Bank acknowledges and agrees that any
such disposition will not alter or affect Bank's direct obligations under this
Agreement and under the Letters of Credit. Borrower acknowledges that any such
Participant will become an owner pro rata of the Obligations, and Borrower
waives any right it may have to setoff the Obligations against any claims or
counterclaims it may have against Bank.
12.6 Merger. The rights and obligations set forth in this Agreement shall
------
not merge into or be extinguished by any of the Loan Documents, but shall
continue and remain valid and enforceable. This Agreement and the other Loan
Documents constitute Bank's entire agreement with Borrower, and supersede all
prior writings and oral negotiations. No oral or written
- 35 -
<PAGE>
representation, covenant, commitment, waiver, or promise of either Bank or
Borrower shall have any effect, whether made before or after the date of this
Agreement, unless contained in this Agreement or another Loan Document, or in an
amendment complying with Section 0. ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN
MONEY, TO EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE
NOT ENFORCEABLE UNDER WASHINGTON LAW.
12.7 Amendments. Any amendment or waiver of, or consent to any departure by
----------
Borrower from any provision of, this Agreement shall be in writing signed by
each party to be bound thereby, and shall be effective only in the specific
instance and for the specific purpose for which given.
12.8 Jurisdiction and Venue. Borrower irrevocably consents to the personal
----------------------
jurisdiction of the state and federal courts located in the State of Washington
in any action brought under this Agreement or any other Loan Document, and any
action based upon the transactions encompassed by this agreement, whether or not
based in contract. Venue of any such action shall be laid in King County,
Washington, unless some other venue is required for Bank to fully realize upon
any collateral or guaranties.
12.9 Construction. Each term of this Agreement and each Loan Document shall
------------
be binding to the extent permitted by law and shall be governed by the laws of
the State of Washington, excluding its conflict of laws rules. If one or more of
the provisions of this Agreement should be invalid, illegal, or unenforceable in
any respect, the remaining provisions of this Agreement shall remain effective
and enforceable. If there is a conflict among the provisions of any Loan
Documents, the provisions of this Agreement shall be controlling. The captions
and organization of this Agreement are for convenience only, and shall not be
construed to affect any provision of this Agreement.
DATED this 14th day of March, 1997.
- 36 -
<PAGE>
Borrower: Bank:
ARIS CORPORATION U.S. BANK OF WASHINGTON,
NATIONAL ASSOCIATION
/s/ Thomas Averill /s/ Thomas G. Gunder
By:_________________________ By: Tom Gunder
Title: Vice President & CFO Title: Vice President
CONSENT OF EACH SUBSIDIARY
Each Subsidiary acknowledges receipt of a copy of the above Agreement and
consents to its contents.
DATED this 14th day of March, 1997.
ARIS SOFTWARE, INC.
/s/ Thomas Averill
By:_______________________
Its: Vice President & CFO
NOETIX CORPORATION
/s/ Thomas Averill
By:_______________________
Its: Vice President & CFO
OXFORD COMPUTER GROUP LIMITED
/s/ Thomas Averill
By:_______________________
Its: Vice President & CFO
- 37 -
<PAGE>
EXHIBIT A TO CREDIT AGREEMENT
REVOLVING NOTE
ARIS CORPORATION
$8,000,000.00 Dated: March 14, 1997
Seattle, Washington
ARIS CORPORATION ("Borrower") unconditionally promises to pay to the
order of U.S. BANK OF WASHINGTON, NATIONAL ASSOCIATION ("Bank") at its
Washington Corporate Banking office, on or before June 1, 1998 or as otherwise
provided in the Credit Agreement, in immediately available funds, the principal
sum of Eight Million Dollars ($8,000,000.00), or such lesser sum as may be
advanced hereunder, together with interest on the daily unpaid principal balance
from the date of each Advance until paid in full in accordance with the terms,
conditions, and definitions of the Credit Agreement dated March 14, 1997
("Agreement") between Borrower, as Borrower, and Bank.
This Note is the Revolving Note referred to in the Agreement, and the
Agreement is incorporated herein.
If all or any portion of the principal amount or any installment of
interest is not paid when due, and such default is not cured within the
applicable grace, notice, and/or cure periods provided for in the Agreement, the
entire unpaid principal amount of this Note, together with all accrued interest,
shall become immediately due and payable at the option of the holder hereof,
with interest accruing from the date of default at a fluctuating rate per annum
equal to five percent (5%) above the Prime Rate, as it may vary from time to
time.
Advances under this Note may be made by Bank at the oral or written
request of Paul Song or Thomas Averill any one acting alone, or at the oral or
written request of Cindy T. Ryden, Tina Song or Kendall Kunz any two acting
together, who are authorized to request advances and direct the disposition of
any such advances until written notice of the revocation of such authority is
received by Bank at its office indicated above. Any such advance shall be
conclusively presumed to have been made to or for the benefit of Borrower when
made in accordance with such requests and directions, or when said advances are
deposited to the credit of the account of Borrower with Bank, regardless of the
fact that persons other than those authorized under this paragraph may have
authority to draw against such account.
Except as otherwise expressly set forth in the Agreement, Borrower
hereby waives presentment, demand, protest, and notice of dishonor hereof. Each
party signing or endorsing this Note signs
- 38 -
<PAGE>
as borrower and principal, and not as guarantor, surety, or accommodation party.
This Note shall be governed by and construed in accordance with the
laws of the State of Washington.
Borrower:
ARIS CORPORATION
__________________________
By:_______________________
Its:______________________
- 39 -
<PAGE>
EXHIBIT 10.10
ARIS CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of February 28, 1997, by and among ARIS
Corporation, a Washington corporation (the "Company"), and the persons listed on
the signature page(s) hereof (the "Holders").
RECITAL
The Company desires to provide the Holders certain registration rights and
state in this Agreement the obligations with respect to registration rights.
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, the Company and the Holders agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Commission" shall mean the Securities and Exchange Commission,
or any other federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(c) "Holder" shall mean any holder of outstanding Registrable
Securities or anyone who holds outstanding Registrable Securities to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement.
(d) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws of such states in which Holders notify the Company of
their intention to offer Registrable Securities.
(e) "Registrable Securities" shall mean all of the following to the
extent the same have not been sold to the public (i) any and all shares of
Common Stock of the Company originally issued by the Company to the persons
listed as a "Holder" on the signature page(s) hereof; or (ii) stock issued in
respect of stock referred to in (i) above in any reorganization; or (iii) stock
issued in respect of the stock referred to in (i) or (ii) above as a result of a
stock split, stock dividend, recapitalization or combination. Notwithstanding
the foregoing, Registrable Securities shall not include otherwise Registrable
Securities (i) sold by a person in a transaction in which his rights under this
Agreement are not properly assigned; or (ii) (A) sold to or through a broker or
dealer or underwriter in a public distribution or a public securities
transaction, or (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Securities Act under Section 4(1)
thereof so that all transfer restrictions, and restrictive legends with respect
thereto, if any, are removed upon the consummation of such sale or (C) if the
registration rights associated with such securities have been terminated
pursuant to Section 13 of this Agreement.
(f) "Rule 144" shall mean Rule 144 under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144A.
(g) "Rule 144A" shall mean Rule 144A under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144.
-1-
<PAGE>
(h) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
2. RESTRICTIONS ON TRANSFERABILITY.
-------------------------------
The Registrable Securities shall not be sold, assigned, transferred or
pledged except upon the conditions specified in this Agreement, which conditions
are intended to ensure compliance with the provisions of the Securities Act.
Each Holder will cause any proposed purchaser, assignee, transferee, or pledgee
of the Registrable Securities held by a Holder to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Agreement.
3. RESTRICTIVE LEGEND.
------------------
Each certificate representing Registrable Securities shall (unless
other permitted by the provisions of Section 4 below) be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws or otherwise):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENTS COVERING THE
PURCHASE OF THESE SHARES AND RIGHTS TO REGISTER THESE SHARES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Each Holder consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Registrable Securities in
order to implement the restrictions on transfer established in this Agreement.
4. NOTICE OF PROPOSED TRANSFER.
---------------------------
The Holder of each certificate representing Registrable Securities, by
acceptance thereof, agrees to comply in all respects with the provisions of this
Section 4. Each such Holder agrees not to make any disposition of all or any
portion of any Registrable Securities unless and until:
(a) There is in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and
(ii) If reasonably requested by the Company, such Holder shall
furnish the Company with an opinion of counsel, reasonably satisfactory to the
Company that such disposition shall not require registration of such shares
under the Securities Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above,
no such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder which is a limited liability company or partnership to a
member or partner of such limited liability company or partnership or a retired
member or partner of such limited liability company or partnership who retires
after the date hereof, or to the estate of any such member or partner or retired
member or partner or the transfer by gift, will, or intestate succession of any
member or partner to his spouse or siblings, lineal descendants or ancestors of
such member or partner or spouse, provided, that such transferee agrees in
writing to be subject to all of the terms hereof to the same extent as if he
were an original Holder hereunder.
-2-
<PAGE>
5. PIGGYBACK REGISTRATION.
----------------------
(a) If at any time or from time to time after the Company's initial
registration, the Company shall determine to register any of its securities, for
its own account or the account of any of its shareholders, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to an SEC Rule 145 transaction, a transaction relating solely to
the sale of debt or convertible debt instruments or a registration on any form
(other than Form S-1, S-2 or S-3, or their successor forms) which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of Registrable Securities, the
Company will:
(i) give to each Holder written notice thereof as soon as
practicable prior to filing the registration statement; and
(ii) include in such registration and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within ten (10) days after receipt of such written notice from
the Company, by any Holder or Holders, except as set forth in subsection (b)
below.
(b) If the registration is for a registered public offering involving
an underwriting, the Company shall so advise the Holders as a part of the
written notice given pursuant to subsection 5(a)(i). In such event, the right
of any Holder to registration pursuant to Section 5 shall be conditioned upon
such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein. All Holders proposing to distribute their securities through such
underwriting shall (together with the Company and the other holders distributing
their securities through such underwriting) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this Section
5, if the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the managing underwriter
may limit the number of Registrable Securities to be included in the
registration and underwriting to not less than thirty percent (30%) of the total
number of securities to be included in the registration and underwriting. The
Company shall so advise all Holders and the other Holders distributing their
securities through such underwriting pursuant to piggyback registration rights
similar to this Section 5, and the number of shares of Registrable Securities
and other securities that may be included in the registration and underwriting
shall be allocated among all Holders and other holders in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities held by such
Holders and other securities held by other holders at the time of filing the
registration statement. If any Holder disapproves of the terms of any such
underwriting, he may elect to withdraw therefrom by written notice to the
Company and the managing underwriter. If, by the withdrawal of such Registrable
Securities, a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the limit imposed by the underwriters),
the Company shall offer to all Holders who have included Registrable Securities
in the registration the right to include additional Registrable Securities. Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from such registration.
6. EXPENSES OF REGISTRATION.
------------------------
In addition to the fees and expenses contemplated by Section 7 hereof,
all expenses incurred in connection with registrations pursuant to Section 5
hereof, including without limitation all registration, filing and qualification
fees, printing expenses, fees and disbursements of counsel for the Company and
expenses of any special audits of the Company's financial statements incidental
to or required by such registration, shall be borne by the Company, except that
the Company shall not be required to pay underwriters' fees, discounts or
commissions relating to Registrable Securities or fees of a separate legal
counsel of a Holder.
7. REGISTRATION PROCEDURES.
-----------------------
In the case of each registration effected by the Company pursuant to
this Agreement, the Company will keep each Holder participating therein advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense the Company will:
-3-
<PAGE>
(a) keep such registration effective for a reasonable period as
necessary to permit the Holder or Holders to complete the distribution described
in the registration statement relating thereto;
(b) promptly prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act, and to keep such registration statement effective for that period of time
specified in Section 7(a) above;
(c) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(d) use reasonable best efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practical moment;
(e) register or qualify such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions as any Holder
or underwriter reasonably requires, and keep such registration or qualification
effective during the period set forth in Section 7(a) above;
(f) cause all Registrable Securities covered by such registrations to
be listed on each securities exchange, including Nasdaq, on which similar
securities issued by the Company are then listed or, if no such listing exists,
use reasonable best efforts to list all Registrable Securities on one of the New
York Stock Exchange, the American Stock Exchange or Nasdaq; and
(g) cause its accountants to issue to the underwriter, if any, or the
Holders, if there is no underwriter, comfort letters and updates thereof, in
customary form and covering matters of the type customarily covered in such
letters with respect to underwritten offerings;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably, request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) notify each Holder, at any time a prospectus covered by such
registration statement is required to be delivered under the Securities Act, of
the happening of any event of which it has knowledge as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; and
(k) take such other actions as shall be reasonably requested by any
Holder.
8. INDEMNIFICATION.
---------------
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act, the Company will indemnify and hold
harmless each Holder of such Registrable Securities thereunder, each underwriter
of such Registrable Securities thereunder and each other person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such Holder, underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims,
-4-
<PAGE>
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in any registration statement under which such Registrable Securities
were registered under the Securities Act, any final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of any rule or regulation promulgated under the
Securities Act or any state securities law applicable to the Company and
relating to action or inaction required of the Company in connection with any
such registration, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any
reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action, provided that the Company will not be liable in any such case to the
extent that any such claim, loss, damage or liability arises out of or is based
on any untrue statement or omission based upon information furnished to the
Company by such Holder or underwriter specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or issuable
to such Holder are included in the securities as to which such registration is
being effected, indemnify and hold harmless the Company, each of its directors
and officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company and each
underwriter within the meaning of the Securities Act, and each other such
Holder, each of its officers, directors and partners and each person controlling
such Holder, against all claims, losses, expenses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, partners, persons or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with information furnished
to the Company by such Holder specifically for use therein.
(c) Each party entitled to indemnification under this Section 8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claims as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless such failure resulted in actual detriment to
the Indemnifying Party. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
(d) Notwithstanding the foregoing, to the extent that the provisions
on indemnification contained in the underwriting agreements entered into among
the selling Holders, the Company and the underwriters in connection with the
underwritten public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall be controlling as to the
Registrable Securities included in the public offering.
(e) The indemnification provided by this Section 8 shall be a
continuing right to indemnification and shall survive the registration and sale
of any securities by any Person entitled to indemnification hereunder and the
expiration or termination of this Agreement.
-5-
<PAGE>
9. INFORMATION BY HOLDER.
---------------------
The Holder or Holders of Registrable Securities included in any
registration shall promptly furnish to the Company such information regarding
such Holder or Holders and the distribution proposed by such Holder or Holders
as the Company may request in writing and as shall be required in connection
with any registration referred to herein.
10. RULE 144 AND 144A REPORTING.
---------------------------
With a view to making available to Holders of Registrable Securities
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees at all times after ninety (90) days after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 and Rule 144A; and
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act.
For purposes of facilitating sales pursuant to Rule 144A, so long as
the Company is not subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, each Holder and any prospective purchaser of such Holder's
securities shall have the right to obtain from the Company, upon request of the
Holder prior to the time of sale, a brief statement of the nature of the
business of the Company and the products and services it offers; and the
Company's most recent balance sheet and profit and loss and retained earnings
statements, and similar financial statements for the two preceding fiscal years
(the financial statements should be audited to the extent reasonably available).
11. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
-------------------------------
register Registrable Securities of a Holder and keep information available
granted to a Holder by the Company under Sections 5, 6 and 7 may be assigned by
a Holder to any partner or shareholder of such Holder, to any other Holder, or
to a transferee or assignee who receives the lesser of 50,000 shares of
Registrable Securities (as adjusted for stock splits and the like) or all of the
shares of Registrable Securities originally issued by the Company to the persons
listed as a "Holder" on the signature page(s) hereof; provided, that the Company
is given written notice by the Holder at the time of or within a reasonable time
after said transfer, stating the name and address of said transferee or assignee
and identifying the securities with respect to which such registration rights
are being assigned.
12. TERMINATION OF RIGHTS.
---------------------
(a) The rights of any particular Holder to cause the Company to
register securities under Sections 5 shall terminate with respect to such Holder
at such time as such Holder is able to dispose of all of his Registrable
Securities in one three-month period pursuant to the provisions of Rule 144.
(b) Notwithstanding the provisions of paragraph (a) of this Section
12, all rights of any particular Holder under this Agreement shall terminate at
5:00 p.m. Pacific Standard Time on the date five (5) years after the closing
date of the Company's initial registration.
13. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
---------------------------------------------
and warrants to the Holders as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Articles of Incorporation or Bylaws of the Company or any
provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation
-6-
<PAGE>
or imposition of any lien, charge or encumbrance of any nature whatsoever upon
any of the properties or assets of the Company.
(b) This Agreement has been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to:
(i) applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance and moratorium laws and other laws of general application
affecting enforcement of creditors' rights generally and
(ii) the availability of equitable remedies as such remedies
may be limited by equitable principles of general applicability (regardless of
whether enforcement is sought in a proceeding in equity or at law).
17. MISCELLANEOUS.
-------------
(a) Amendments. This Agreement may be amended only by a writing
----------
signed by the Holders of more than fifty percent (50%) of the Registrable
Securities, as constituted from time to time. The Holders hereby consent to
future amendments to this Agreement that permit future investors, including
without limitation employees, officers or directors of the Company, to be made
parties hereto and to become Holders of Registrable Securities; provided,
--------
however, that no such future amendment may materially impair the rights of the
- -------
Holders hereunder without obtaining the requisite consent of the Holders, as set
forth above.
(b) Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which shall constitute a single instrument.
(c) Notices, Etc. All notices, requests, consents and other
------------
communications required or provided for herein to any party shall be deemed to
be sufficient if contained in a written instrument, and shall be deemed to be
given when: (a) delivered in person; (b) delivered by overnight receipted
courier service; or (c) sent by facsimile transmission with delivery confirmed
and followed by delivery pursuant to Subsection (b) hereof, which notice is
addressed to the party at the address set forth below, or such other address as
may hereafter be designated in writing by the party.
If to the Company: ARIS Corporation
Suite 150
6720 Fort Dent Way
Seattle, Washington 98188-2555
Attention: General Counsel or President
Telephone: (206) 433-2081
Facsimile: (206) 433-1182
If to Holders: To the address set forth on the signature
page(s) hereof.
(d) Nonpublic Information. Any other provisions of this Agreement to
---------------------
the contrary notwithstanding, the Company's obligation to file a registration
statement, or cause such registration statement to become and remain effective,
shall be suspended for a period not to exceed ninety (90) days (and for periods
not exceeding, in the aggregate, one hundred eighty (180) days in any twenty-
four (24) month period) if there exists at the time material non-public
information relating to the Company which, in the reasonable opinion of the
Company, should not be disclosed.
(e) Delay of Registration. No Holder shall have the right to take
---------------------
any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Agreement.
-7-
<PAGE>
(f) Severability. If any provision of this Agreement shall be held
------------
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(g) Dilution. If, and as often as, there is any change in the Common
--------
Stock or the Preferred Stock by way of a stock split, stock dividend,
combination or reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby shall continue with respect to the Common Stock or the
Preferred Stock as so changed.
(h) Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Washington without regard to principles of
conflict of law.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date first above written.
COMPANY: ARIS CORPORATION,
a Washington corporation
By: /s/ Paul Song
--------------------------------
Its:_______________________________
HOLDERS: /s/ Bahram Bckhradnia
-----------------------------------
Bahram Bckhradnia
Address: 25 St. Margarets Road
Oxford
England
Telephone: 011-44-1865-512-675
Facsimile:_________________________
/s/ David Turnbull
-----------------------------------
David James Turnbull
Address: 59 Mill Street
Kidlington
Oxford
England
Telephone: 011-44-1865-512-675
Facsimile:_________________________
/s/ Hugh Simpson-Wells
-----------------------------------
Hugh Simpson-Wells
Address: 33 Hurst Rise Road
Oxford
England
-8-
<PAGE>
Telephone: 011-44-1865-512-675
Facsimile:_________________________
/s/ Hugh Simpson-Wells as attorney
-----------------------------------
Steven Edward Forrest Mitchell
Address: 51 Home Close
Wolvercote
Oxford
England
Telephone: 011-44-1865-512-675
Facsimile:_________________________
/s/ James Bevis Winterburn Cowling
-----------------------------------
James Bevis Winterburn Cowling
Address: 64 Oxford Road
Old Marston
Oxford
England
Telephone: 011-44-1865-512-675
Facsimile:_________________________
/s/ Kenneth Meadley
-----------------------------------
Kenneth Meadley
Address: 13 Harlow Way
Marston Village
Oxford
England
Telephone: 011-44-1865-512-675
Facsimile:_________________________
/s/ Hugh Simpson-Wells as attorney
-----------------------------------
Michael Lawrence Day
Address: Avon Cliffe
Clay Coton
Northampton
England
Telephone: 011-44-1865-512-675
Facsimile:_________________________
-9-
<PAGE>
/s/ Hugh Simpson-Wells as attorney
-----------------------------------
Neil Slater
Address: 57 WestWater Way
Didcot
Oxon
England
Telephone: 011-44-1865-512-675
Facsimile:_________________________
/s/ Hugh Simpson-Wells as attorney
___________________________________
Peter Hayward
Address: Fairview Cottage
Wilton
Marlborough
Wiltshire
England
Telephone: 011-44-1865-512-675
Facsimile:_________________________
/s/ Terry J. Olson
-----------------------------------
Terri Olson
Address: 2547 Taft Court
Lakewood, Colorado 80214
Telephone: 303-237-6777
Facsimile: 303-237-6777
/s/ Greg Olson
-----------------------------------
Greg A. Olson
Address: 2547 Taft Court
Lakewood, Colorado 80214
Telephone: 303-237-6777
Facsimile: 303-237-6777
-10-
<PAGE>
EXHIBIT 10.11
ARIS CORPORATION
REGISTRATION RIGHTS AGREEMENT
This Agreement is made as of February 28, 1997, by and between ARIS
Corporation, a Washington corporation (the "Company") and Ian Charles Henderson
Cunningham (the "Holder").
RECITAL
The Company desires to provide the Holder certain registration rights and
state in this Agreement the obligations with respect to registration rights.
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein, the Company and the Holder agree as follows:
1. DEFINITIONS.
-----------
As used in this Agreement, the following terms shall have the
following meanings:
(a) "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
(b) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
(c) "Holder" shall mean any holder of outstanding Registrable
Securities or anyone who holds outstanding Registrable Securities to whom the
registration rights conferred by this Agreement have been transferred in
compliance with this Agreement.
(d) "Register," "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement, and compliance with applicable
state securities laws of such states in which Holders notify the Company of
their intention to offer Registrable Securities.
(e) "Registrable Securities" shall mean all of the following to the
extent the same have not been sold to the public (i) any and all shares of
Common Stock of the Company originally issued by the Company to Ian Charles
Henderson Cunningham; or (ii) stock issued in respect of stock referred to in
(i) above in any reorganization; or (iii) stock issued in respect of the stock
referred to in (i) or (ii) above as a result of a stock split, stock dividend,
recapitalization or combination. Notwithstanding the foregoing, Registrable
Securities shall not include otherwise Registrable Securities (i) sold by a
person in a transaction in which his rights under this Agreement are not
properly assigned; or (ii) (A) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or (B)
sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions, and restrictive legends with respect thereto, if any, are
removed upon the consummation of such sale or (C) if the registration rights
associated with such securities have been terminated pursuant to Section 13 of
this Agreement.
(f) "Rule 144" shall mean Rule 144 under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144A.
(g) "Rule 144A" shall mean Rule 144A under the Securities Act or any
successor or similar rule as may be enacted by the Commission from time to time,
but shall not include Rule 144.
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<PAGE>
(h) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
2. RESTRICTIONS ON TRANSFERABILITY.
-------------------------------
The Registrable Securities shall not be sold, assigned, transferred or
pledged except upon the conditions specified in this Agreement, which conditions
are intended to ensure compliance with the provisions of the Securities Act.
Each Holder will cause any proposed purchaser, assignee, transferee, or pledgee
of the Registrable Securities held by a Holder to agree to take and hold such
securities subject to the provisions and upon the conditions specified in this
Agreement.
3. RESTRICTIVE LEGEND.
------------------
Each certificate representing Registrable Securities shall (unless
other permitted by the provisions of Section 4 below) be stamped or otherwise
imprinted with a legend substantially in the following form (in addition to any
legend required under applicable state securities laws or otherwise):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THESE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION THEREFROM UNDER SAID ACT. COPIES OF THE AGREEMENTS COVERING THE
PURCHASE OF THESE SHARES AND RIGHTS TO REGISTER THESE SHARES AND RESTRICTING
THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
Each Holder consents to the Company making a notation on its records
and giving instructions to any transfer agent of the Registrable Securities in
order to implement the restrictions on transfer established in this Agreement.
4. NOTICE OF PROPOSED TRANSFER.
---------------------------
The Holder of each certificate representing Registrable Securities, by
acceptance thereof, agrees to comply in all respects with the provisions of this
Section 4. Each such Holder agrees not to make any disposition of all or any
portion of any Registrable Securities unless and until:
(a) There is in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) Such Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and
(ii) If reasonably requested by the Company, such Holder shall
furnish the Company with an opinion of counsel, reasonably satisfactory to the
Company that such disposition shall not require registration of such shares
under the Securities Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by a Holder which is a limited liability company or partnership to a
member or partner of such limited liability company or partnership or a retired
member or partner of such limited liability company or partnership who retires
after the date hereof, or to the estate of any such member or partner or retired
member or partner or the transfer by gift, will, or intestate succession of any
member or partner to his spouse or siblings, lineal descendants or ancestors of
such member or partner or spouse, provided, that such transferee agrees in
writing to be subject to all of the terms hereof to the same extent as if he
were an original Holder hereunder.
-2-
<PAGE>
5. PIGGYBACK REGISTRATION.
----------------------
(a) If at any time or from time to time the Company shall determine to
register any of its securities, for its own account or the account of any of its
shareholders, other than a registration relating solely to employee benefit
plans, or a registration relating solely to an SEC Rule 145 transaction, a
transaction relating solely to the sale of debt or convertible debt instruments
or a registration on any form (other than Form S-1, S-2 or S-3, or their
successor forms) which does not include substantially the same information as
would be required to be included in a registration statement covering the sale
of Registrable Securities, the Company will:
(i) give to each Holder written notice thereof as soon as
practicable prior to filing the registration statement; and
(ii) include in such registration and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within ten (10) days after receipt of such written notice from
the Company, by any Holder or Holders, except as set forth in subsection (b)
below.
(b) If the registration is for a registered public offering involving
an underwriting, the Company shall so advise the Holders as a part of the
written notice given pursuant to subsection 5(a)(i). In such event, the right of
any Holder to registration pursuant to Section 5 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting by the
Company. Notwithstanding any other provision of this Section 5, if the managing
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, the managing underwriter may limit the number of
Registrable Securities to be included in the registration and underwriting
solely to sales in connection with the exercise, if any, of the underwriter's
over-allotment. The Company shall so advise all Holders and the other Holders
distributing their securities through such underwriting pursuant to piggyback
registration rights similar to this Section 5, and the number of shares of
Registrable Securities and other securities that may be included in the
registration and underwriting shall be allocated among all Holders and other
holders in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders and other securities held by other
holders at the time of filing the registration statement. If any Holder
disapproves of the terms of any such underwriting, he may elect to withdraw
therefrom by written notice to the Company and the managing underwriter. If, by
the withdrawal of such Registrable Securities, a greater number of Registrable
Securities held by other Holders may be included in such registration (up to the
limit imposed by the underwriters), the Company shall offer to all Holders who
have included Registrable Securities in the registration the right to include
additional Registrable Securities. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
6. EXPENSES OF REGISTRATION.
------------------------
In addition to the fees and expenses contemplated by Section 7 hereof,
all expenses incurred in connection with registrations pursuant to Section 5
hereof, including without limitation all registration, filing and qualification
fees, printing expenses, fees and disbursements of counsel for the Company and
expenses of any special audits of the Company's financial statements incidental
to or required by such registration, shall be borne by the Company, except that
the Company shall not be required to pay underwriters' fees, discounts or
commissions relating to Registrable Securities or fees of a separate legal
counsel of a Holder.
7. REGISTRATION PROCEDURES.
-----------------------
In the case of each registration effected by the Company pursuant to
this Agreement, the Company will keep each Holder participating therein advised
in writing as to the initiation of each registration and as to the completion
thereof. At its expense the Company will:
-3-
<PAGE>
(a) keep such registration effective for a reasonable period as
necessary to permit the Holder or Holders to complete the distribution described
in the registration statement relating thereto;
(b) promptly prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act, and to keep such registration statement effective for that period of time
specified in Section 7(a) above;
(c) furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request;
(d) use reasonable best efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification of any of the Registrable Securities for sale in
any jurisdiction, at the earliest practical moment;
(e) register or qualify such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as any Holder or
underwriter reasonably requires, and keep such registration or qualification
effective during the period set forth in Section 7(a) above;
(f) cause all Registrable Securities covered by such registrations to
be listed on each securities exchange, including Nasdaq, on which similar
securities issued by the Company are then listed or, if no such listing exists,
use reasonable best efforts to list all Registrable Securities on one of the New
York Stock Exchange, the American Stock Exchange or Nasdaq; and
(g) cause its accountants to issue to the underwriter, if any, or the
Holders, if there is no underwriter, comfort letters and updates thereof, in
customary form and covering matters of the type customarily covered in such
letters with respect to underwritten offerings;
(h) enter into such customary agreements (including underwriting
agreements in customary form) and take all such other actions as the holders of
a majority of the Registrable Securities being sold or the underwriters, if any,
reasonably, request in order to expedite or facilitate the disposition of such
Registrable Securities (including, without limitation, effecting a stock split
or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to such
registration statement, and any attorney, accountant or other agent retained by
any such seller or underwriter, all financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement;
(j) notify each Holder, at any time a prospectus covered by such
registration statement is required to be delivered under the Securities Act, of
the happening of any event of which it has knowledge as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing; and
(k) take such other actions as shall be reasonably requested by any
Holder.
8. INDEMNIFICATION.
---------------
(a) In the event of a registration of any of the Registrable
Securities under the Securities Act, the Company will indemnify and hold
harmless each Holder of such Registrable Securities thereunder, each underwriter
of such Registrable Securities thereunder and each other person, if any, who
controls such Holder or underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
such Holder, underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
untrue statement
-4-
<PAGE>
or alleged untrue statement of any material fact contained in any registration
statement under which such Registrable Securities were registered under the
Securities Act, any final prospectus contained therein, or any amendment or
supplement thereof, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of any rule or regulation promulgated under the Securities Act or any
state securities law applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration, and
will reimburse each such Holder, each of its officers, directors and partners,
and each person controlling such Holder, each such underwriter and each person
who controls any such underwriter, for any reasonable legal and any other
expenses incurred in connection with investigating, defending or settling any
such claim, loss, damage, liability or action, provided that the Company will
not be liable in any such case to the extent that any such claim, loss, damage
or liability arises out of or is based on any untrue statement or omission based
upon information furnished to the Company by such Holder or underwriter
specifically for use therein.
(b) Each Holder will, if Registrable Securities held by or issuable to
such Holder are included in the securities as to which such registration is
being effected, indemnify and hold harmless the Company, each of its directors
and officers, each underwriter, if any, of the Company's securities covered by
such a registration statement, each person who controls the Company and each
underwriter within the meaning of the Securities Act, and each other such
Holder, each of its officers, directors and partners and each person controlling
such Holder, against all claims, losses, expenses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
the Company, such Holders, such directors, officers, partners, persons or
underwriters for any reasonable legal or any other expenses incurred in
connection with investigating, defending or settling any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with information furnished
to the Company by such Holder specifically for use therein.
(c) Each party entitled to indemnification under this Section 8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claims as to which indemnity may be sought, and
shall permit the Indemnifying Party to assume the defense of any such claim or
any litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations hereunder, unless such failure resulted in actual detriment to
the Indemnifying Party. No Indemnifying Party, in the defense of any such claim
or litigation, shall, except with the consent of each Indemnified Party, consent
to entry of any judgment or enter into any settlement which does not include as
an unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect of such claim or
litigation.
(d) Notwithstanding the foregoing, to the extent that the provisions
on indemnification contained in the underwriting agreements entered into among
the selling Holders, the Company and the underwriters in connection with the
underwritten public offering are in conflict with the foregoing provisions, the
provisions in the underwriting agreement shall be controlling as to the
Registrable Securities included in the public offering.
(e) The indemnification provided by this Section 8 shall be a
continuing right to indemnification and shall survive the registration and sale
of any securities by any Person entitled to indemnification hereunder and the
expiration or termination of this Agreement.
9. INFORMATION BY HOLDER.
---------------------
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<PAGE>
The Holder or Holders of Registrable Securities included in any
registration shall promptly furnish to the Company such information regarding
such Holder or Holders and the distribution proposed by such Holder or Holders
as the Company may request in writing and as shall be required in connection
with any registration referred to herein.
10. RULE 144 AND 144A REPORTING.
---------------------------
With a view to making available to Holders of Registrable Securities
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees at all times after ninety (90) days after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public to:
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 and Rule 144A; and
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act.
For purposes of facilitating sales pursuant to Rule 144A, so long as
the Company is not subject to the reporting requirements of Section 13 or 15(d)
of the Exchange Act, each Holder and any prospective purchaser of such Holder's
securities shall have the right to obtain from the Company, upon request of the
Holder prior to the time of sale, a brief statement of the nature of the
business of the Company and the products and services it offers; and the
Company's most recent balance sheet and profit and loss and retained earnings
statements, and similar financial statements for the two preceding fiscal years
(the financial statements should be audited to the extent reasonably available).
11. TRANSFER OF REGISTRATION RIGHTS. The rights to cause the Company to
-------------------------------
register Registrable Securities of a Holder and keep information available
granted to a Holder by the Company under Sections 5, 6 and 7 may be assigned by
a Holder to any partner or shareholder of such Holder, to any other Holder, or
to a transferee or assignee who receives at least 50,000 shares of Registrable
Securities (as adjusted for stock splits and the like); provided, that the
Company is given written notice by the Holder at the time of or within a
reasonable time after said transfer, stating the name and address of said
transferee or assignee and identifying the securities with respect to which such
registration rights are being assigned.
12. TERMINATION OF RIGHTS.
---------------------
(a) The rights of any particular Holder to cause the Company to
register securities under Sections 5 shall terminate with respect to such Holder
at such time as such Holder is able to dispose of all of his Registrable
Securities in one three-month period pursuant to the provisions of Rule 144.
(b) Notwithstanding the provisions of paragraph (a) of this Section
12, all rights of any particular Holder under this Agreement shall terminate at
5:00 p.m. Pacific Standard Time on the date five (5) years after the closing
date of the Company's initial registration.
13. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
---------------------------------------------
and warrants to the Holders as follows:
(a) The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Articles of Incorporation or Bylaws of the Company or any
provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
-6-
<PAGE>
(b) This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to:
(i) applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance and moratorium laws and other laws of general application affecting
enforcement of creditors' rights generally and
(ii) the availability of equitable remedies as such remedies may be
limited by equitable principles of general applicability (regardless of whether
enforcement is sought in a proceeding in equity or at law).
17. MISCELLANEOUS.
-------------
(a) Amendments. This Agreement may be amended only by a writing
----------
signed by the Holders of more than fifty percent (50%) of the Registrable
Securities, as constituted from time to time. The Holders hereby consent to
future amendments to this Agreement that permit future investors, including
without limitation employees, officers or directors of the Company, to be made
parties hereto and to become Holders of Registrable Securities; provided,
--------
however, that no such future amendment may materially impair the rights of the
- -------
Holders hereunder without obtaining the requisite consent of the Holders, as set
forth above.
(b) Counterparts. This Agreement may be executed in any number of
------------
counterparts, all of which shall constitute a single instrument.
(c) Notices, Etc. All notices, requests, consents and other
------------
communications required or provided for herein to any party shall be deemed to
be sufficient if contained in a written instrument, and shall be deemed to be
given when: (a) delivered in person; (b) delivered by overnight receipted
courier service; or (c) sent by facsimile transmission with delivery confirmed
and followed by delivery pursuant to Subsection (b) hereof, which notice is
addressed to the party at the address set forth below, or such other address as
may hereafter be designated in writing by the party.
If to the Company: ARIS Corporation
Suite 150
6720 Fort Dent Way
Seattle, Washington 98188-2555
Attention: General Counsel or President
Telephone: (206) 433-2081
Facsimile: (206) 433-1182
If to Holder: To the address set forth on the signature
page(s) hereof.
(d) Nonpublic Information. Any other provisions of this Agreement to
---------------------
the contrary notwithstanding, the Company's obligation to file a registration
statement, or cause such registration statement to become and remain effective,
shall be suspended for a period not to exceed ninety (90) days (and for periods
not exceeding, in the aggregate, one hundred eighty (180) days in any twenty-
four (24) month period) if there exists at the time material non-public
information relating to the Company which, in the reasonable opinion of the
Company, should not be disclosed.
(e) Delay of Registration. No Holder shall have the right to take any
---------------------
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Agreement.
(f) Severability. If any provision of this Agreement shall be held to
------------
be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
-7-
<PAGE>
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(g) Dilution. If, and as often as, there is any change in the Common
--------
Stock or the Preferred Stock by way of a stock split, stock dividend,
combination or reclassification, or through a merger, consolidation,
reorganization or recapitalization, or by any other means, appropriate
adjustment shall be made in the provisions hereof so that the rights and
privileges granted hereby shall continue with respect to the Common Stock or the
Preferred Stock as so changed.
(h) Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of Washington without regard to principles of
conflict of law.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
COMPANY: ARIS CORPORATION,
a Washington corporation
By:/s/ Paul Song
-----------------------------
Its:
----------------------------
HOLDER: /s/ Ian Cunningham
--------------------------------
Ian Charles Henderson Cunningham
Address: Shepherds Cottage
11 Pettiwell
Garsington, Oxford
England
Telephone: 011-44-1865-512-675
-8-
<PAGE>
EXHIBIT 10.12
PROMISSORY NOTE
$500,000.00 Denver, Colorado
September 30, 1996
FOR VALUE RECEIVED, and at the times hereinafter specified, the
undersigned, ARIS Corporation, a Washington corporation (hereinafter referred to
as "Maker"), hereby promises and agrees to pay to the order of SofTeach
Corporation, a Colorado corporation (hereinafter referred to, together with each
subsequent holder of this Note, as "Holder"), at 1355 South Colorado Boulevard,
Suite 606, Denver, Colorado 80222, or at such other address as may be designated
from time to time by any Holder, the principal sum of five hundred thousand
($500,000.00) dollars in lawful currency of the United States of America
together with interest on the principal indebtedness outstanding from time to
time from the date hereof until maturity at the rate of six (6%) percent per
annum. The Note shall be payable as follows:
two hundred fifty thousand ($250,000.00) dollars together with
all interest then accrued on April 1, 1997, and
two hundred fifty thousand ($250,000.00) dollars together with
accrued interest thereon on July 1, 1997.
The Note shall be due and payable on or before July 1, 1997. This Note may
be prepaid, in whole or in part, at any time or times without penalty and
without prior notice, after January 1, 1997.
Payments shall be applied first to accrued and unpaid interest, then
to the reduction of principal.
If any payment required to be made hereunder is not paid within five (5)
days after the date when due hereunder, such amount shall bear interest from the
expiration of such five (5) day period until paid at a rate of twelve percent
(12%) per annum (the "Default Rate"). Further, if the entire balance of
principal, interest and other sums due is not paid upon maturity of the loan
evidenced by this Note, whether by acceleration or otherwise, such balance
thereafter shall bear interest until paid at the Default Rate.
This Note is secured by a Security Agreement of even date herewith (the
"Security Agreement"). Any default of any sum due hereunder or in the
performance of any covenant or agreement contained herein which is not cured
within any applicable grace or cure period shall constitute an event of default
under the Security Agreement, and any default under the Security Agreement which
is not cured within any applicable grace or cure period shall constitute an
event of default hereunder.
Events of Default. Any of the following stated below shall constitute an
Event of Default:
(a) if any sum of money herein or in the Security Agreement provided
to be paid by Maker shall not be paid;
(b) if any agreement, term, condition or covenant herein or in the
Security Agreement provided to be performed by the Maker (other than same as
shall require the payment of money) is not performed in accordance with the
terms thereof, and such nonperformance shall continue for a period of thirty
(30) days after written demand for performance thereof shall have been
delivered by Holder to Maker; provided, however, that no Event of Default shall
be deemed to have occurred hereunder if, within said thirty (30) day period,
Maker shall have expeditiously commenced remedial action and thereafter shall
diligently pursue same to completion;
(c) if the Maker shall:
(i) apply for or consent to or have appointed a receiver,
trustee or liquidator of the Maker or of all or substantially all of its assets;
or
<PAGE>
(ii) file a voluntary or have filed an involuntary petition
in bankruptcy under any chapter of the Bankruptcy Act, and the Maker shall
fail to either contest the jurisdiction or shall otherwise be in default
hereunder; or
(iii) make a general assignment for the benefit of creditors;
or
(iv) file an answer admitting material allegations of a
petition filed against the Maker in any bankruptcy, reorganization or insolvency
proceeding.
If Maker defaults in the payment of any amount due hereunder on the date
which it shall fall due or in the performance of any of the agreements,
conditions, covenants, provisions or stipulations contained in this Note or in
the Security Agreement, and if such default shall continue beyond any grace
period provided for so as to constitute an Event of Default shall continue
beyond any grace period provided for so as to contitute an Event of Default
thereunder, then Holder, at its option and without further notice to Maker, may
declare immediately due and payable the entire unpaid principal balance of this
Note, together with interest thereon at an annual rate after the date of such
default equal to the Default Rate, together with all sums due by Maker under
the Security Agreement, anything herein or in the Security Agreement to the
contrary notwithstanding. Any payment hereunder may be enforced and recovered in
whole or in part at such time by one or more of the remedies provided to Holder
in this Note or in the Security Agreement. In the event that: (i) this Note or
the Security Agreement is placed in the hands of an attorney for collection or
enforcement or is collected or enforced through any legal proceeding; (ii) an
attorney is retained to represent Holder in any bankruptcy, reorganization,
receivership, or other proceedings affecting creditors' rights which involves a
claim under this Note or the Security Agreement; or (iii) an attorney is
retained to foreclose or enforce the lien of the Security Agreement, then Maker
shall pay to Holder all reasonable attorney's fees, costs and expenses incurred
in connection therewith, inclding costs of apppeal, together with interest on
any judgment obtained by Holder at the Default Rate.
Maker and all parties now or hereafter liable for the payment hereof,
primarily or secondarily, directly or indirectly, and whether as endorser,
guarantor, surety, or otherwise, hereby severally (a) waive notice, presentment,
demand, protest, notice of protest and/or dishonor, all other demands or notices
of any sort whatever with respect to this Note, (b) consent to impairment or
release of collateral, extension of time for payment, and acceptance of partial
payments before, at, or after maturity, (c) waive any right to require Holder to
proceed against any security for this Note before proceeding hereunder, and (d)
agree to pay all costs and expense, including reasonable attorneys' fees, which
may be incurred in the collection of this Note or any part thereof or in
preserving, securing possession of, and realizing upon any security for this
Note.
If any provision of this Note or of any other document securing or
related to the indebtedness evidenced hereby is, for any reason and to any
extent, invalid or unenforceable, then neither the remainder of the document in
which such provision is contained, nor the appilcation of the provision to other
persons, entities, circumstances, nor any other document referred to herein,
shall be affected thereby, but instead shall be enforceable to the maximum
extent permitted by law.
The remedies of Holder hereof, as provided herein or in any other
agreements securing or relating to this Note, shall be cumulative and
concurrent, and may be pursued singularly, successively or together, at the sole
discretion of the Holder hereof, any may be exercised as often as occasion
therefor shall arise. No act of omission or commission of the Holder, including
specifically any failure to exercise any right, remedy, or recourse, shall be
deemed to be a waiver or release of same, such waiver or release to be effected
only through a written document executed by Holder and then only to the extent
specifically recited therein. A waiver or release reference to any one event
shall not be construed as continuing, as a bar to, or as a waiver or release of,
as subsequent right, remedy or recourse as to a subsequent event.
<PAGE>
This Note may not be assigned by Holder except to its shareholders,
Terri J. Olson and Greg A. Olson.
This Note shall be governed by and construed and enforced in accordance
with the laws of the State of Colorado.
IN WITNESS WHEREOF, Maker has executed this Promissory Note as of the
day and year first above written.
ARIS Corporation, a Washington corporation
By:_______________________________________
Its President
<PAGE>
EXHIBIT 10.13
PROMISSORY NOTE
$1,240,800.00 October 1, 1996
For value received, ARIS Software, Inc. (hereinafter referred to as
"Maker"), promises to pay to ARIS Corporation ("ARIS") the sum of One Million
Two Hundred and Forty Thousand Eight Hundred and 00/100 United States Dollars
($1,240,800.00), together with interest calculated at the then current LIBOR
rate plus 175 basis points per annum, compounded monthly, and payable as
follows:
Maker shall pay thirty six (36) monthly installments of principal and
interest each month according to the attached amortization schedule.
Payments shall be due and payable on the first day of each month.
All payments shall be made in lawful money of the United States of America
and shall be made at such place as ARIS may designate in writing from time to
time. Payments shall be applied first to accrued but unpaid interest, then to
reduction of the outstanding principal balance. This note may be prepaid in
whole or in part at any time or times without penalty and without prior notice.
This note shall be in default if the payment required hereunder is not paid
when due and within ten (10) days after written notice of such default is given
by ARIS. Upon or at any time after a default in this note, at the option of
ARIS, without further notice, the entire debt evidenced hereby shall become due
and payable and shall thereafter bear interest at twelve percent (12%) per annum
until paid. ARIS' failure to exercise this option in the event of a default
shall not constitute a waiver of ARIS' right to exercise this option as a result
of any other default or any subsequent default of the same or similar kind.
This note may not be assigned by ARIS.
Maker and any assignees thereof who are at any time liable for payment of
this note or other sum required hereby waive presentment for payment, notice of
dishonor and protest and consent that the terms of payment of any part or the
whole of the debt evidenced by this note may be modified or extended at any time
by agreement between ARIS and Maker.
Any notice or demand by ARIS shall be sufficient if in writing and
delivered or mailed, certified or registered United States mail, postage
prepaid, to the address stated below for notice purposes or to such other
address as shall be designated in writing from time to time by the persons who
are then liable upon this note and received by ARIS.
This note is made with reference to and shall be construed and enforced in
accordance with the laws of the State of Washington without regard to its choice
of law provisions.
MAKER:
ARIS SOFTWARE, INC.
By /s/ Dave Melin
Dave Melin, President
<PAGE>
EXHIBIT 10.14
PROMISSORY NOTE
Intercompany Loan
October 1, 1996
For value received, ARIS Software, Inc. (hereinafter referred to as
"Maker"), promises to pay to ARIS Corporation ("ARIS") the sums set forth from
time to on the financial statements of ARIS as intercompany loans from ARIS to
Maker, together with interest at the prime rate established from time to time by
US Bank of Washington, N.A. plus one-half percent (0.5%) per annum, payable upon
demand.
All payments shall be made in lawful money of the United States of America
and shall be made at such place as ARIS may designate in writing from time to
time. Payments shall be applied first to accrued but unpaid interest, then to
reduction of the outstanding principal balance. This note may be prepaid in
whole or in part at any time or times without penalty and without prior notice.
This note shall be in default if the payment required hereunder is not paid
when due and within ten (10) days after written notice of such default is given
by ARIS. Upon or at any time after a default in this note, at the option of
ARIS, without further notice, the entire debt evidenced hereby shall become due
and payable and shall thereafter bear interest at twelve percent (12%) per annum
until paid. ARIS' failure to exercise this option in the event of a default
shall not constitute a waiver of ARIS' right to exercise this option as a result
of any other default or any subsequent default of the same or similar kind.
This note may not be assigned by ARIS.
Maker and any assignees thereof who are at any time liable for payment of
this note or other sum required hereby waive presentment for payment, notice of
dishonor and protest and consent that the terms of payment of any part or the
whole of the debt evidenced by this note may be modified or extended at any time
by agreement between ARIS and Maker.
Any notice or demand by ARIS shall be sufficient if in writing and
delivered or mailed, certified or registered United States mail, postage
prepaid, to the address stated below for notice purposes or to such other
address as shall be designated in writing from time to time by the persons who
are then liable upon this note and received by ARIS.
This note is made with reference to and shall be construed and enforced in
accordance with the laws of the State of Washington without regard to its choice
of law provisions.
MAKER:
ARIS SOFTWARE, INC.
By /s/ Dave Melin
Dave Melin, President
<PAGE>
EXHIBIT 10.30
[The Registrant shall furnish supplementally a copy of any omitted schedule to
the Commission upon request.]
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of December
31, 1994, among CLARITY INC., a Washington corporation ("CLARITY"), APPLIED
RELATIONAL INFORMATION SYSTEMS, INC., a Washington corporation ("ARIS"; ARIS and
CLARITY sometimes being collectivey referred to herein as the "Constituent
Corporations"); and JEFFREY GILLES, DONNA COOMBS, WILLIAM LANE and DAVID GRAMS,
who collectively own all of the issued and outstanding shares of the no par
value common stock of CLARITY, and are sometimes individually referred to herein
as a "Shareholder", and collectively as "Shareholders".
Each of the Constituent Corporations has adopted the plan of merger
embodied in this Agreement, and the Constituent Corporations and their
respective boards of directors deem it advisable and in the best interest of
each of the Constituent Corporations that CLARITY be merged with and into ARIS
pursuant to the applicable laws of the State of Washington and Section 368 of
the Internal Revenue Code of 1986, as amended. To facilitate the merger and
this Agreement, Shareholders have agreed to undertake certain obligations, as
further provided herein.
In consideration of the foregoing and the representations, warranties,
covenants and agreements herein contained, the parties agree to merge on the
terms and conditions herein provided:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) The following terms, as used herein,
-----------
shall have the following meanings:
"Balance Sheet" means the balance sheet prepared by CLARITY with
respect to the Business dated as of September 30, 1994 (the "Balance Sheet
Date"), a copy of which is attached as Exhibit B.
---------
"Business" means the computer training and education services and any
other business or services provided by CLARITY.
"Employment Agreements" means the Employment Agreements,
Noncompetition Agreements, and Agreements Regarding Confidential Information and
Intellectual Property, between ARIS and each Shareholder, in the form attached
as Exhibits C-1 through C-4, respectively.
--------------------------------------
<PAGE>
"Initial Operating Budget" means the operating budget relating to the
Business and the computer education and training services of the Constituent
Corporations post-Closing, a copy of which is attached as Exhibit D.
---------
"Intellectual Property Right" means any trademark, service mark,
registration thereof or application therefor, tradename, invention, patent,
patent application, trade secret, know-how, copyright, copyright registration,
application for copyright registration, or any other similar type of proprietary
intellectual property right, in each case which is owned or licensed by CLARITY
and used or held for use in the Business.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"Materials" means any work of authorship, including literary works
(including computer programs), pictorial works, graphic works (including logos
and designs), motion pictures, sound recordings and audiovisual works,
regardless of the nature of the material objects such as courseware, documents,
manuscripts, periodicals, disks, memory storage devices, tapes, film, and
phonorecords in which the works are embodied, that has been created by or used
by CLARITY or has been or is being used by or for CLARITY or in connection with
the Business.
"Material Adverse Change" means a material adverse change in the
business, assets, condition (financial or otherwise), result of operations or
prospects of the Business taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets, results, operations or
prospects of the Business taken as a whole.
"Operative Agreements" means this Agreement, the Shareholder
Agreement, the Option Agreement, and the Employment Agreements.
"Option Agreement" means the Option Agreements between ARIS and
Jeffrey Gilles, ARIS and Donna Coombs, ARIS and William Lane, and ARIS and David
Grams in the forms attached as Exhibits E-1 through E-4, respectively.
------------------------
"Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
Page 2
<PAGE>
"Shareholder Agreement" means the Shareholder Agreement among ARIS,
the existing shareholders of ARIS, and the Shareholders, in the form of Exhibit
-------
F.
- -
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
ARIS Securities 6.01(b)
Assets 5.08(c)
Clarity Securities 5.01(b)
Closing 4.01
Closing Date 4.01
Contracts 5.12
Effective Date 2.02
Financial Statements 5.06
Indemnified Party 12.03
Indemnifying Party 12.03
Loss 12.02
Merger 2.01
Other Consent 5.05
Permit 5.13
Permitted Lien 5.08
Real Property 5.08
Required Consent 5.05
SBA Approval 6.03
Transferred Employee 10.01
</TABLE>
ARTICLE II
PLAN OF MERGER
Section 2.01. Merger. Upon the terms and subject to the conditions of
------
this Agreement, CLARITY shall be merged with and into ARIS in accordance with
the applicable laws of the State of Washington (the "Merger"). ARIS shall be
the surviving corporation and shall be governed by the laws of the State of
Washington.
Section 2.02 Effective Date. The "Effective Date" of the Merger shall be
--------------
12:01 a.m., January 1, 1995.
Page 3
<PAGE>
Section 2.03 Share Conversion. On the Effective Date, by virtue of the
----------------
Merger and without any action on the part of the holders thereof, all
outstanding shares of the common stock of CLARITY, no par value per share, shall
be cancelled, and, in exchange therefore, each Shareholder shall receive 350
shares of the common stock, no par value per share, of ARIS, for each share of
CLARITY common stock held by such Shareholder.
ARTICLE III
EFFECT OF MERGER
Section 3.01 Rights, Privileges, Etc. On the Effective Date, ARIS,
-----------------------
without further act, deed or other transfer, shall retain or succeed to, as the
case may be, and possess and be vested with all the rights, privileges,
immunities, powers, franchises and authority, of a public as well as of a
private nature, of the Constituent Corporations; all property of every
description and every interest therein and all debts and other obligations of or
belonging to or due to the Constituent Corporations on whatever account shall
thereafter be taken and deemed to be held by or transferred to, as the case may
be, or vested in ARIS without further act or deed; title to any real estate, or
any interest therein, vested in the Constituent Corporations shall not revert or
in any way be impaired by reason of the Merger; and all of the rights of
creditors of the Constituent Corporations shall be preserved unimpaired, and all
liens upon the property of the Constituent Corporations shall be preserved
unimpaired, and such debts, liabilities, obligations and duties of the
Constituent Corporations shall thenceforth remain with or attach to, as the case
may be, ARIS and may be enforced against it to the same extent as if all of such
debts, liabilities, obligations and duties had been incurred or contracted by
it.
Section 3.02 Articles of Incorporation and Bylaws. The Articles of
------------------------------------
Incorporation of ARIS as in effect on the Effective Date shall, from and after
the Effective Date, be and continue to be the Articles of Incorporation of ARIS
without change or amendment until thereafter amended in accordance with the
provisions thereof and applicable laws. The Bylaws of ARIS as in effect on the
Effective Date shall, from and after the Effective Date, be and continue to be
the Bylaws of ARIS without change or amendment until thereafter amended in
accordance with the provisions thereof, the Articles of Incorporation of ARIS
and applicable laws.
Section 3.03 Directors and Officers. The directors and officers of the
----------------------
surviving corporation shall be the persons listed on Exhibit G to this
---------
Agreement, until their successors shall have been elected and qualified.
Section 3.04 Further Action. From time to time, as and when requested by
--------------
ARIS, or by its successors or assigns, any party hereto shall execute and
deliver or cause to be
Page 4
<PAGE>
executed and delivered all such deeds and other instruments, and shall take or
cause to be taken all such further or other actions, as ARIS, or its successors
or assigns, may deem necessary or desirable in order to vest in and confirm to
ARIS, and its successors or assigns, title to and possession of all the
property, rights, privileges, powers and franchises referred to herein and
otherwise to carry out the intent and purposes of this Agreement.
ARTICLE IV
CLOSING
Section 4.01. Closing. The "Closing" of the Merger and the transactions
-------
contemplated thereby shall be December 31st, 1994 at 10:00 a.m. (the "Closing
Date") at the principal offices of ARIS, or at such other time and place as
CLARITY and ARIS may agree. At the Closing:
(a) Each Shareholder shall receive a share certificate representing
the number of shares of the common stock of ARIS set forth opposite their
respective names on the attached Exhibit H.
---------
(c) Shareholders shall enter into and deliver the Employment
Agreements to ARIS.
(d) Shareholders shall enter into the Shareholders Agreement.
(e) ARIS shall enter into an Option Agreement with each Shareholder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF CLARITY AND SHAREHOLDERS
CLARITY and each Shareholder represents and warrants to ARIS that:
5.01 Corporate Existence and Power; Capitalization. (a) CLARITY is a
---------------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the state of Washington, and has all corporate power and all
governmental licenses, authorizations, consents, permits and approvals required
to carry on the Business as now conducted. CLARITY is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities make such qualification necessary. CLARITY has
Page 5
<PAGE>
heretofore delivered to ARIS true and complete copies of the certificate of
incorporation and bylaws of CLARITY as currently in effect.
(b) The authorized capital of CLARITY consists of 50,000 authorized
shares, no par value per share. As of the date hereof, there were outstanding
2000 shares of the common stock of CLARITY. All outstanding shares of capital
stock of CLARITY have been duly authorized and validly issued and are fully
paid. Except as set forth in this Section, there are no outstanding (i) shares
of capital stock or other voting securities of CLARITY, (ii) securities of
CLARITY convertible into or exchangeable for share of capital stock or voting
securities of CLARITY or (iii) options or other rights to acquire from CLARITY,
and there is no obligation for CLARITY to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of CLARITY (collectively, "CLARITY Securities"). There are no
outstanding obligations of CLARITY to issue or deliver or to repurchase, redeem
or otherwise acquire any CLARITY Securities. Shareholders are and will be at
the Closing the record and beneficial owners of the common stock of CLARITY,
free and clear of any Liens, and will transfer and deliver to ARIS at the
Closing valid title to such common stock free and clear of any Lien.
5.02 Corporate Authorization. The execution, delivery and performance by
-----------------------
CLARITY of this Agreement and the consummation by CLARITY of the transactions
contemplated hereby are within CLARITY's corporate powers and have been duly
authorized by all necessary corporate action on the part of the CLARITY. This
Agreement constitutes a binding and valid agreement of CLARITY.
5.03 Governmental Authorization. The execution, delivery and performance
--------------------------
by CLARITY of this Agreement require no action by or in respect of, or filing
with, any governmental body, agency, official or authority.
5.04 Noncontravention. The execution, delivery and performance by CLARITY
----------------
of this Agreement do not and will not (i) contravene or conflict with the
certificate of incorporation or bylaws of CLARITY, (ii) assuming compliance with
the matters referred to in Section 5.03, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to CLARITY or the
Business; (iii) assuming the obtaining of all Required and Other Consents,
constitute a default under or give rise to any right of termination,
cancellation, or acceleration of any right or obligation of ARIS or to a loss of
any benefit relating to the Business to which CLARITY is entitled under any
provision of any agreement, contract or other instrument binding upon CLARITY or
any license, franchise, permit or other similar authorization held by CLARITY or
(iv) result in the creation or imposition of any Lien on any Asset, other than
the Permitted Liens.
Page 6
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5.05. Required and Other Consents. (a) Schedule 5.05(a) sets forth each
--------------------------- ----------------
agreement, contract or other instrument binding upon CLARITY or any license,
franchise, permit or other similar authorization held by CLARITY, requiring a
consent as a result of the execution, delivery and performance of this Agreement
or the Merger that if not received by the Closing Date may have a Material
Adverse Effect (each such consent, a "Required Consent" and together the
----------------
"Required Consents").
-----------------
(b) Schedule 5.05(b) sets forth every other consent (each such
---------------
Consent, an "Other Consent" and together the "Other Consents") under such
------------- --------------
agreements, contracts or other instruments or such licenses, franchises, permits
or other similar authorizations that is necessary with respect to the execution,
delivery and performance of this Agreement and the consummation of the Merger.
5.06. Financial Statements. The Balance Sheet and the related statements
--------------------
of operations for the Business taken as a whole for the years ended December 31,
1993 and December 31, 1992, the interim balance sheet relating to the Business
for the ten months ended September 30, 1994, and the projected balance sheet for
year ended December 31, 1994 (collectively, the "Financial Statements") of the
--------------------
Business fairly present, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the financial position of the Business taken as a whole as of
the dates thereof and its results of operations and cash flows for the periods
then ended.
5.07. Absence of Certain Changes. Since the Balance Sheet Date, CLARITY
--------------------------
has conducted the Business in the ordinary course consistent with past
practices, and there has not been:
(a) any Material Adverse Change or any event, occurrence, development
or state of circumstances or facts which could reasonably be expected to result
in a Material Adverse Change;
(b) any incurrence, assumption or guarantee by CLARITY of any
indebtedness for borrowed money with respect to the Business other than in the
ordinary course of business and in amounts and on terms consistent with past
practices;
(c) any creation or assumption by CLARITY of any Lien on any Asset
other than in the ordinary course of business consistent with past practices;
(d) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Business or any Asset which, individually or
in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect;
Page 7
<PAGE>
(e) any transaction or commitment made, or any contract or agreement
entered into, by CLARITY relating to the Business or any Asset (including the
acquisition or disposition of any assets) or any relinquishment by CLARITY of
any contract or other right, in either case, material to the Business taken as a
whole, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(f) any change in any method of accounting or accounting practice by
CLARITY with respect to the Business;
(g) any (i) grant of any severance or termination pay to any employee
of the Business, (ii) entering into of any similar agreement (or any amendment
to any such existing agreement) with any employee of the Business, (iii)
increase in benefits payable under an existing severance or termination pay
policies or employment agreements or (iv) increase in compensation, bonus or
other benefits payable to employees of the Business; or
(h) any capital expenditure, or commitment for a capital expenditure,
or additions or improvements to property, plant and equipment.
5.08. Properties. (a) Schedule 5.08(a) correctly describes all real
---------- ----------------
property used in the Business included in the Assets (the "Real Property"),
-------------
which CLARITY owns, leases or subleases, any title insurance policies and
surveys with respect thereto, and any Liens thereon, specifying in the case of
leases or subleases, the name of the lessor or sublessor, the lease term and
basic annual rent.
(b) Schedule 5.08(b) correctly describes all personal property used
----------------
in the Business included in the Assets, including but not limited to the
Materials, equipment, furniture, vehicles, spare and replacement parts, and
other trade fixtures and fixed assets, which CLARITY owns, leases or subleases,
and any Liens thereon, specifying in the case of leases or subleases, the name
of the lessor or sublessor, the lease term and basic annual rent.
(c) (i) CLARITY has good and marketable, indefeasible, fee simple
title to, or in the case of leased Real Property has valid leasehold interests
in, all Assets (whether real, personal, tangible or intangible) reflected on the
Balance Sheet or acquired after the Balance Sheet Date (the "Assets"), except
for the properties and assets sold since the Balance Sheet Date in the ordinary
course of business consistent with past practices.
(ii) All leases of Real Property or personal property are in
good standing and are valid, binding and enforceable in accordance with their
respective terms, and there does not exist under any such lease of real property
or personal property any
Page 8
<PAGE>
material default or any event which with notice or lapse of time or both would
constitute a material default.
(d) No Asset is subject to any Lien, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been established on the
Balance Sheet); or
(iii) Liens which do not materially detract from the value of
such Asset as now used, or materially interfere with any present or intended use
of such Asset (clauses (i), (ii) and (iii) are, collectively, the "Permitted
---------
Liens").
- -----
5.09. Sufficiency of and Title to the Assets. The Assets constitute, and
--------------------------------------
on the Closing Date will constitute, all of the assets or property used or held
for use in the Business. Upon consummation of the transactions contemplated
hereby, ARIS will have acquired good and marketable title in and to, or a valid
leasehold interest in, each of the Assets, free and clear of all Liens, except
for Permitted Liens.
5.10. No Undisclosed Material Liabilities. There are no liabilities of
-----------------------------------
the Business of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, other than (i) liabilities disclosed or provided for in
the Balance Sheet; and (ii) liabilities incurred in the ordinary course of
business consistent with past practice since the Balance Sheet Date, which in
the aggregate are not material to the Business, taken as a whole.
5.11. Litigation. Except as set forth on Schedule 5.11, there is no
---------- -------------
action, suit, investigation or proceeding (or any basis therefor) pending
against, or to the knowledge of CLARITY, threatened against or affecting, the
Business or any Asset before any court or arbitrator or any governmental body,
agency or official which, if determined or resolved adversely in accordance with
the plaintiff's demands would reasonably be expected to have a Material Adverse
Effect or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated hereby.
5.12. Material Contracts. (a) Except for the Contracts disclosed in
------------------
Schedule 5.12 or any other Schedule to this Agreement, with respect to the
- -------------
Business, CLARITY is not a party to or subject to:
(i) any lease;
Page 9
<PAGE>
(ii) any contract for the purchase of materials, supplies,
goods, services, equipment or other assets;
(iii) any sales, distribution or other similar agreement
providing for the sale by CLARITY of materials, supplies, goods, services,
equipment or other assets;
(iv) any partnership, joint venture or other similar contract
arrangement or agreement;
(v) any contract relating to indebtedness for borrowed money
or the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset);
(vi) any license agreement, franchise agreement or agreement in
respect of similar rights granted to or held by CLARITY;
(vii) any agency, dealer, sales representative or other similar
agreement;
(viii) any contract or other document that substantially limits
the freedom of CLARITY to compete in any line of business or with any
Person or in any area or which would so limit the freedom of the ARIS after
the Closing Date; or
(ix) any other contract or commitment not made in the ordinary
course of business which is material to the Business taken as a whole.
(b) Each Contract disclosed in any Schedule to this Agreement or
required to be disclosed pursuant to Section 5.12(a) is a valid and binding
---------------
agreement of CLARITY and is in full force and effect, and neither CLARITY nor,
to the knowledge of CLARITY, any other party thereto is in default in any
material respect under the terms of any such Contract.
5.13. Licenses and Permits. Schedule 5.13 correctly describes each
-------------------- -------------
license, permit or other governmental authorization affecting, or relating in
any way to, the Business, together with the name of the government agency or
entity issuing such license or permit (the "Permits"). Such Permits are valid
-------
and in full force and effect and, assuming the related Required Consents and
Other Consents have been obtained prior to the Closing Date, are transferable by
CLARITY. Except as set forth on Schedule 5.13, none of such Permits will,
-------------
assuming the related Required Consents and Other Consents
Page 10
<PAGE>
have been obtained prior to the Closing Date, be terminated or impaired or
become terminable as a result of the transactions contemplated hereby, and upon
consummation of such transactions, ARIS, will have all of the right, title and
interest therein.
5.14. Insurance Coverage. Schedule 5.14 lists all insurance policies
------------------ -------------
covering the Assets, the operations of the Business and CLARITY's employees,
copies of which have been furnished to ARIS. All premiums payable under all
such policies and bonds have been paid and CLARITY is otherwise in full
compliance with the terms and conditions of all such policies.
5.15. Compliance with Laws. CLARITY is not in violation of any applicable
--------------------
provisions of any laws, statutes, ordinances or regulations applicable to the
conduct of the Business.
5.16. Inventories. The inventories set forth in the Balance Sheet were
-----------
properly stated therein at the lesser of cost or fair market value determined in
accordance with generally accepted accounting principles consistently maintained
and applied by CLARITY. Since the Balance Sheet Date, the inventories related
to the Business have been maintained in the ordinary course of business. All
such inventory is owned free and clear of all Liens.
5.17. Receivables. All accounts, notes receivable and other receivables
-----------
(other than receivables collected since the Balance Sheet Date) reflected on the
Balance Sheet are, and all accounts and notes receivable arising from or
otherwise relating to the Business at the Closing Date will be, valid, genuine
and fully collectible in the aggregate amount thereof, subject to normal and
customary trade discounts, less any reserves for doubtful accounts recorded on
the Balance Sheet. All accounts, notes receivable and other receivables arising
out of or relating to the Business at the Balance Sheet Date have been included
in the Balance Sheet, and all accounts, notes receivable and other receivables
arising out of or relating to the Business at the Closing Date will be included
in the Closing Balance Sheet, in accordance with generally accepted accounting
principles applied on a consistent basis.
5.18. Intellectual Property. (a) Schedule 5.18 sets forth a list of all
--------------------- -------------
Intellectual Property Rights, specifying as to each, as applicable: (i) the
nature of such Intellectual Property Right; (ii) the owner of such Intellectual
Property Right; (iii) the jurisdictions by or in which such Intellectual
Property Right is recognized without regard to registration or has been issued
or registered or in which an application for such issuance or registration has
been filed, including the respective registration or application numbers; and
(iv) material licenses, sublicenses and other agreements as to which CLARITY or
any of its affiliates is a party and pursuant to which any Person is authorized
to use such
Page 11
<PAGE>
Intellectual Property Right, including the identity of all parties thereto, a
description of the nature and subject matter thereof, the applicable royalty and
the term thereof.
(b)(i) CLARITY has not been sued or charged in writing with or been
a defendant in any claim, suit, action or proceeding relating to its business
that has not been finally terminated prior to the date hereof and that involves
a claim of infringement of any patents, trademarks, service marks or copyrights,
and (ii) CLARITY has no knowledge of any other claim or infringement by CLARITY,
and no knowledge of any continuing infringement by any other Person of any
Intellectual Property Rights.
5.19. Employees. Schedule 5.19 sets forth a true and complete list of (a)
--------- -------------
the names, titles, annual salaries and other compensation of all employees of
the Business. None of such employees has indicated to CLARITY that he intends
to resign or retire as a result of the transactions contemplated by this
Agreement.
5.20. Other Information. None of the documents or information delivered
-----------------
to ARIS in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
The financial projections relating to the Business delivered to ARIS constitute
CLARITY's best estimate of the information purported to be shown therein, and
CLARITY is now aware of any fact or information that would lead it to believe
that such projections are incorrect or misleading in any material respect.
5.21. Environmental Compliance. No notice, notification, demand, request
------------------------
for information, citation, summons or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review is
pending, or to CLARITY's knowledge, threatened by any governmental or other
entity (i) with respect to any alleged violation by CLARITY of any environmental
law, ordinance, rule, regulation or order of any governmental entity in
connection with the conduct of the Business, (ii) with respect to any alleged
failure by CLARITY to have any environmental permit, certificate, license,
approval, registration or authorization required in connection with the conduct
of the Business.
5.22 Purchase for Investment. The Shareholders are receiving the shares of
-----------------------
common stock of ARIS in connection with the Merger for investment for their own
account and not with a view to, or for sale in connection with, any distribution
thereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ARIS
Page 12
<PAGE>
ARIS hereby represents and warrants to CLARITY that:
6.01. Organization and Existence; Capitalization. (a) ARIS is a
------------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Washington and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
(b) At Closing, the authorized capital of ARIS consists of 3,000,000
authorized shares, no par value per share. As of the date hereof, there were
outstanding 2.,100,000 shares of the common stock of ARIS, plus stock options to
purchase an aggregate of 617,000 shares of ARIS common stock. All outstanding
shares of capital stock of ARIS have been duly authorized and validly issued and
are fully paid. Except as set forth in this Section, there are no outstanding
(i) shares of capital stock or other voting securities of ARIS, (ii) securities
of ARIS convertible into or exchangeable for share of capital stock or voting
securities of ARIS or (iii) options or other rights to acquire from ARIS, and
there is no obligation for ARIS to issue any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of ARIS (collectively, "ARIS Securities"). There are no outstanding
obligations of the ARIS to issue or deliver or to repurchase, redeem or
otherwise acquire any ARIS Securities. At Closing, ARIS shares of common stock
issued to Shareholders shall be free and clear of any Liens, and Shareholders
shall be be the record and beneficial owners of such ARIS common stock.
6.02. Corporate Authorization. The execution, delivery and performance by
-----------------------
ARIS of this Agreement and the consummation by ARIS of the transactions
contemplated hereby are within the corporate powers of ARIS and have been duly
authorized by all necessary corporate action on the part of ARIS. This
Agreement constitutes a valid and binding agreement of ARIS.
6.03. Governmental Authorization. The execution, delivery and performance
--------------------------
by ARIS of this Agreement require no action by or in respect of, or filing with,
any governmental body, agency, official or authority other than approval of the
Small Business Administration with respect to ARIS's continued qualification
after the Closing Date under the Minority Small Business and Capital Ownership
Development Program, Sections 8(a) and 7(j) of the Small Business Act, 15 U.S.C.
637(a) and 637(j), as amended ("SBA Approval").
6.04. Non-Contravention. The execution, delivery and performance by ARIS
-----------------
of this Agreement do not and will not (i) contravene or conflict with the
certificate of incorporation or bylaws of ARIS or (ii) assuming compliance with
the matters referred to
Page 13
<PAGE>
in Section 4.03, contravene or conflict with any provision of any law,
regulation, judgment, injunction, order or decree binding upon ARIS.
ARTICLE VII
COVENANTS OF CLARITY AND SHAREHOLDERS
CLARITY and each Shareholder agrees that:
7.01. Conduct of Business. From the date hereof until the Closing Date,
-------------------
CLARITY shall conduct the Business in the ordinary course consistent with past
practice, use its best efforts to preserve intact the business organizations and
relationships with third parties and keep available the services of the present
employees of the Business.
7.02. Access to Information. From the date hereof until the Closing Date,
---------------------
CLARITY (a) will give ARIS, its counsel, financial advisors, auditors and other
authorized representatives full access to the offices, properties, books and
records of CLARITY relating to the Business, (b) will furnish to ARIS, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information relating to the Business as
such Persons may reasonably request and (c) will instruct the employees, counsel
and financial advisors of CLARITY to cooperate with ARIS in its investigation of
the Business; provided that no investigation pursuant to this Section shall
--------
affect any representation or warranty given by CLARITY hereunder; and provided
--------
further that any investigation pursuant to this Section shall be conducted in
- -------
such manner as not to interfere unreasonably with the conduct of the business of
CLARITY.
7.03. Notices of Certain Events. CLARITY shall promptly notify ARIS of:
-------------------------
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
Merger or the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the Merger or the
transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving or otherwise affecting CLARITY or the Business that, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant
Page 14
<PAGE>
to Section 5.11 or that relate to the Merger or the consummation of the
transactions contemplated by this Agreement.
ARTICLE VIII
COVENANTS OF ARIS
ARIS agrees that:
8.01. Confidentiality. Prior to the Closing Date and after any
---------------
termination of this Agreement, ARIS will hold, and will use their best efforts
to cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all confidential documents and information concerning the Business or CLARITY
furnished to ARIS in connection with the transactions contemplated by this
Agreement, except to the extent that such information can be shown to have been
(i) previously known on a nonconfidential basis to ARIS, (ii) in the public
domain through no fault of ARIS or (iii) later lawfully acquired by ARIS from
sources other than CLARITY; provided that ARIS may disclose such information to
--------
its officers, directors, employees, accountants, counsel, consultants, advisors
and agents in connection with the transactions contemplated by this Agreement so
long as such Person are informed by ARIS of the confidential nature of such
information and are directed by ARIS to treat such information confidentially.
The obligation of ARIS to hold any such information in confidence shall be
satisfied if ARIS exercises the same care with respect to such information as
ARIS would take to preserve the confidentiality of its own similar information.
ARTICLE IX
COVENANTS OF ALL PARTIES
The parties hereto agree that:
9.01. Best Efforts; Further Assurances. Subject to the terms and
--------------------------------
conditions of this Agreement, each party will use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement. CLARITY, Shareholders and ARIS
each agree to execute and deliver such other documents, certificates, agreements
and other writings and to take such other actions as may be necessary or
desirable in order to consummate or implement expeditiously the
Page 15
<PAGE>
transactions contemplated by this Agreement and to vest in ARIS good and
marketable title to the Assets.
ARTICLE X
EMPLOYEES
10.01. Employees and Offers of Employment. On the Effective Date, ARIS
----------------------------------
shall offer employment to all active employees of the Business as set forth on
Schedule 5.19, provided, that ARIS may terminate at any time after the Effective
- ------------- --------
Date the employment of any employee who accepts such offer. Any such offers
shall be at such salary or wage and benefit levels and on such other terms and
conditions as ARIS shall in its sole discretion deem appropriate. The employees
who accept and commence employment with ARIS are hereinafter collectively
referred to as the "Transferred Employees." CLARITY and Shareholders will not
take any action which would impede, hinder, interfere or otherwise compete with
ARIS's effort to hire any Transferred Employees. ARIS shall not assume
responsibility for any Transferred Employee until such employee commences
employment with ARIS.
ARTICLE XI
CONDITIONS TO CLOSING
11.01. Conditions to the Obligations of Each Party. The obligations of
-------------------------------------------
ARIS and CLARITY to consummate the Closing are subject to the satisfaction of
the following conditions:
(a) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall (i) prohibit the consummation
of the Closing or (ii) restrain, prohibit or otherwise interfere with the
effective operation or enjoyment by ARIS of all or any material portion of
the Business.
(b) All actions by or in respect of or filings with any
governmental body, agency, official or authority required to permit the
consummation of the Closing, including SBA Approval, shall have been
obtained.
11.02. Conditions to Obligation of ARIS. The obligation of ARIS to
--------------------------------
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) CLARITY and each Shareholder shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Closing Date, (ii) the representations and warranties of
CLARITY and each
Page 16
<PAGE>
Shareholder contained in this Agreement and in any certificate or other writing
delivered by CLARITY or any Shareholder pursuant hereto, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true at and as of the Closing Date, as if made
at and as of such time with only such exceptions as would not in the aggregate
reasonably be expected to have a Material Adverse Effect and (iii) ARIS shall
have received a certificate signed by the President of CLARITY to the foregoing
effect.
(b) No court, arbitrator or governmental body, agency or
official shall have issued any order, and there shall not be any statute, rule
or regulation, restraining or prohibiting the consummation of the Closing or the
effective operation by ARIS of the Assets after the Closing Date, and no
proceeding challenging this Agreement or the transactions contemplated hereby or
seeking to prohibit, alter, prevent or materially delay the Closing shall have
been instituted by any Person before any court, arbitrator or governmental body,
agency or official and be pending.
(c) ARIS shall have received an opinion of CLARITY's counsel
dated the Closing Date to the effect specified in Sections 5.01 through 5.04 and
5.11. In rendering such opinion, such counsel may rely upon certificates of
public officers, copies of which shall be contemporaneously delivered to ARIS,
and as to matters of fact, upon certificates of officers of CLARITY.
(d) CLARITY shall have received all Required Consents and all
consents, authorizations or approvals from the governmental agencies referred to
in Section 5.03(a), in each case in form and substance reasonably satisfactory
to ARIS, and no such consent, authorization or approval shall have been revoked.
(e) ARIS shall have received all documents it may reasonably
request relating to the existence of CLARITY and the authority of CLARITY for
this Agreement, all in form and substance satisfactory to ARIS.
11.03. Conditions to Obligation of CLARITY. The obligation of CLARITY
-----------------------------------
to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a)(i) ARIS shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or prior to the
Closing Date, and (ii) the representations and warranties or other writing
delivered by ARIS pursuant hereto shall be true in all material respects at and
as of the Closing Date, as if made at and as of such time.
Page 17
<PAGE>
(b) ARIS shall have received all consents, authorizations or
approvals from governmental agencies referred to in Section 6.03, and no such
consent, authorization or approval shall have been revoked.
(c) CLARITY shall have received all documents it may reasonably
request relating to the existence of ARIS and the authority of ARIS for this
Agreement, all in form and substance satisfactory to CLARITY.
ARTICLE XII
SURVIVAL; INDEMNIFICATION
12.01. Survival. The covenants, agreements, representations and
--------
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing until the third anniversary of the Closing Date or
until expiration of the applicable statutory period of limitations (giving
effect to any waiver, mitigation or extension thereof), if later.
Notwithstanding the preceding sentence, any covenant, agreement, representation
or warranty in respect of which indemnity may be sought under Section 12.02 or
12.03 shall survive the time at which it would otherwise terminate pursuant to
the preceding sentence, if notice of the inaccuracy or breach thereof giving
rise to such right to indemnity shall have been given to the party against whom
such indemnity may be sought prior to such time.
12.02. Indemnification. (a) CLARITY and each Shareholder, jointly and
---------------
severally, hereby indemnifies ARIS against and agrees to hold it harmless from
any and all damage, loss, liability and expense (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding) (collectively, "Loss")
incurred or suffered by ARIS arising out of any misrepresentation or breach of
warranty, covenant or agreement made or to be performed by CLARITY or any
Shareholder pursuant to this Agreement.
(b) ARIS hereby indemnifies CLARITY against and agrees to hold
it harmless from any and all Loss incurred or suffered by CLARITY arising out of
any misrepresentation or breach of warranty, covenant or agreement made or to be
performed by the ARIS pursuant to this Agreement.
12.03. Procedures. The party seeking indemnification under Section 12.02
----------
(the "Indemnified Party") agrees to give prompt notice to the party against whom
indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or
the commencement of any suit, action or proceeding in respect of which indemnity
may be sought under such
Page 18
<PAGE>
Section; provided however, that no Indemnified Party shall seek indemnification
----------------
until the aggregate of all claims for which indemnification is sought exceeds
$25,000.00. The Indemnifying Party may, and at the request of the Indemnified
Party shall, participate in and control the defense of any such suit, action or
proceeding at its own expense. The Indemnifying Party shall not be liable under
Section 12.02 for any settlement effected without its consent of any claim,
litigation or proceeding in respect of which indemnity may be sought hereunder.
ARTICLE XIII
TERMINATION
13.01. Grounds for Termination. This Agreement may be terminated at any
-----------------------
time prior to the Closing:
(i) by mutual written agreement of CLARITY and ARIS;
(ii) by either CLARITY or ARIS if the Closing shall not have
been consummated on or before December 31, 1994; or
(iii) by either CLARITY or ARIS if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction.
The party desiring to terminate this Agreement pursuant to
clauses (ii) or (iii) shall give notice of such termination to the other party.
13.02. Effect of Termination. If this Agreement is terminated as
---------------------
permitted by Section 13.01, such termination shall be without liability of
either party (or any shareholder, director, officer, employee, agent, consultant
or representative of such party) to the other party to this Agreement; provided
--------
that if such termination shall result from the willful failure of either party
to fulfill a condition to the performance of the obligations of the other party
or to perform a covenant of this Agreement or from a willful breach by either
party to this Agreement, such party shall be fully liable for any and all Losses
incurred or suffered by the other party as a result of such failure or breach.
The provisions of Section 12.02 shall survive any termination hereof pursuant to
Section 13.01.
Page 19
<PAGE>
ARTICLE XIV
MISCELLANEOUS
14.01. Notices. All notices, requests and other communications to
-------
either party hereunder shall be in writing (including telex, telecopy or similar
writing) and shall be given,
if to ARIS, to:
Paul Song, President
ARIS Corporation
6720 Fort Dent Way, Suite 150
Seattle, WA 98188-2555
Phone: 206-433-2081
Telecopy: 206-433-1182
with a copy to:
Bert Sugayan
Harris & Sugayan, P.C.
1420 5th Avenue, Suite 2200
Seattle, WA 98201
Phone: 206-224-5657
Telecopy: 206-224-5659
if to CLARITY, to:
Jeffrey Gilles
9719 159th Place N.E.
Redmond, WA 98052
Phone: 206-451-1711
Telecopy: 206-451-1567
with a copy to:
Robert Condie, Esq.
Law Offices of Robert Condie
800 Bellevue Way NE, Suite 300
Bellevue, WA 98004
Phone: 206-637-3063
Telecopy: 206-646-2851
Page 20
<PAGE>
14.02. Amendments; No Waivers. (a) Any provision of this Agreement may
----------------------
be amended or waived prior to the Closing Date if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by the all of
the parties hereto, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall nay
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
14.03. Expenses. Except as otherwise provided herein, all costs and
--------
expenses incurred in connection with this Agreement shall be paid by the party
incurring such cost or expense.
14.04. Successors and Assigns. The provisions of this Agreement shall
----------------------
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that neither party may assign,
--------
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other party hereto.
14.05. Governing Law. This Agreement shall be construed in accordance
-------------
with the laws of the State of Washington.
14.06. Counterparts; Effectiveness. This Agreement may be signed in any
---------------------------
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument. This
Agreement shall become effective when each party hereto shall have received a
counterpart hereof signed by the other party hereto.
14.07. Entire Agreement. The Operative Agreements constitute the entire
----------------
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter of this
Agreement. No representation, inducement, promise, understanding, condition or
warranty not set forth herein has been made or relied upon by either party
hereto. Neither this Agreement nor any provision hereof is intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
Page 21
<PAGE>
14.08. Captions. The captions herein are included for convenience of
--------
reference only and shall be ignored in the construction or interpretation
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
APPLIED RELATIONAL SHAREHOLDERS:
INFORMATION SYSTEMS, INC.
/s/ Jeffrey Gilles
------------------------------
By /s/ Paul Song JEFFREY GILLES
----------------------------
Paul Song, President /s/ Donna Coombs
------------------------------
DONNA COOMBS
CLARITY, INC.
/s/ William Lane
------------------------------
By /s/ Jeffrey Gilles WILLIAM LANE
- ------------------------------
Jeffrey Gilles, President /s/ David Grams
------------------------------
DAVID GRAMS
Page 22
<PAGE>
EXHIBIT 10.31
[The Registrant shall furnish supplementally a copy of any omitted schedule to
the Commission upon request.]
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") is dated as of April
15, 1996, among SQLSoft, Inc., a Washington corporation ("SQLSoft"), and Applied
Relational Information Systems, Inc., a Washington corporation ("ARIS"; ARIS and
SQLSoft sometimes being collectively referred to herein as the "Constituent
Corporations"); and the shareholders of SQLSoft set forth on the signature page
hereto, who collectively own all of the issued and outstanding shares of the no
par value common stock of SQLSoft, and are sometimes individually referred to
herein as a "Shareholder", and collectively as "Shareholders".
Each of the Constituent Corporations has adopted the plan of merger
embodied in this Agreement, and the Constituent Corporations and their
respective boards of directors deem it advisable and in the best interest of
each of the Constituent Corporations that SQLSoft be merged with and into ARIS
pursuant to the applicable laws of the State of Washington and Section 368 of
the Internal Revenue Code of 1986, as amended. To facilitate the merger and
this Agreement, Shareholders have agreed to undertake certain obligations, as
further provided herein.
In consideration of the foregoing and the representations, warranties,
covenants and agreements herein contained, the parties agree to merge on the
terms and conditions herein provided:
ARTICLE 1
DEFINITIONS
Section 1.01. Definitions. (a) The following terms, as used herein,
-----------
shall have the following meanings:
"Balance Sheet" means the balance sheet of SQLSoft as compiled by
Grant Thornton with respect to the Business dated as of December 31, 1995 (the
"Balance Sheet Date"), a copy of which is attached as Exhibit B.
---------
"Business" means the computer training and education services and any
other business or services provided by SQLSoft.
"Employment Agreements" means the Employment Agreement to be entered
into between ARIS and each Shareholder, in the forms attached as Exhibit C.
---------
Page 1
<PAGE>
"Intellectual Property Right" means any trademark, service mark,
registration thereof or application therefor, tradename, invention, patent,
patent application, trade secret, know-how, copyright, copyright registration,
application for copyright registration, or any other similar type of proprietary
intellectual property right, in each case which is owned or licensed by SQLSoft
and used or held for use in the Business.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
"Materials" means any work of authorship, including literary works
(including computer programs), pictorial works, graphic works (including logos
and designs), motion pictures, sound recordings and audiovisual works,
regardless of the nature of the material objects such as courseware, documents,
manuscripts, periodicals, disks, memory storage devices, tapes, film, and
phonorecords in which the works are embodied, that has been created by or used
by SQLSoft or has been or is being used by or for SQLSoft or in connection with
the Business.
"Material Adverse Change" means a material adverse change in the
business, assets, condition (financial or otherwise), result of operations or
prospects of the Business taken as a whole.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets, results, operations or
prospects of the Business taken as a whole.
"Operative Agreements" means this Agreement, the Shareholder
Agreement, the Option Agreement, and the Employment Agreements.
"Person" means an individual, a corporation, a partnership, an
association, a limited liability company, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Shareholder Agreement" means the Shareholder Agreement among ARIS,
the existing shareholders of ARIS, and the Shareholders, in the form of Exhibit
-------
D.
- -
(b) Each of the following terms is defined in the Section set forth
opposite such term:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
ARIS Securities 6.01(b)
</TABLE>
Page 2
<PAGE>
<TABLE>
<S> <C>
Assets 5.08(c)
Clarity Securities 5.01(b)
Closing 4.01
Closing Date 4.01
Contracts 5.12
Effective Date 2.02
Financial Statements 5.06
Indemnified Party 12.03
Indemnifying Party 12.03
Loss 12.02
Merger 2.01
Other Consent 5.05
Permit 5.13
Permitted Lien 5.08
Real Property 5.08
Required Consent 5.05
SBA Approval 6.03
Transferred Employee 10.01
</TABLE>
ARTICLE II
PLAN OF MERGER
Section 2.01. Merger . Upon the terms and subject to the conditions of
-------
this Agreement, SQLSoft shall be merged with and into ARIS in accordance with
the applicable laws of the State of Washington (the "Merger"). ARIS shall be
the surviving corporation and shall be governed by the laws of the State of
Washington.
Section 2.02 Effective Date. The "Effective Date" of the Merger shall be
--------------
12:01 a.m., April 1, 1996.
Section 2.03 Share Conversion. On the Effective Date, by virtue of the
----------------
Merger and without any action on the part of the holders thereof, all
outstanding shares of the common stock of SQLSoft, no par value per share,
shall be canceled, and, in exchange therefore, each Shareholder shall receive
10.12964 shares (rounded to the nearest whole share and subject to any
adjustment pursuant to Section 5.01(b) hereof), of the common stockno par value
per share, of ARIS, for each share of SQLSoft common stock held by such
Shareholder. As a result of the Merger, a total of 353,950 shares of ARIS no
par value common stock will be exchanged for 34,942 shares of the no par value
common stock of SQLSoft.
Page 3
<PAGE>
ARTICLE III
EFFECT OF MERGER
Section 3.01 Rights, Privileges, Etc. On the Effective Date, ARIS,
------------------------
without further act, deed or other transfer, shall retain or succeed to, as the
case may be, and possess and be vested with all the rights, privileges,
immunities, powers, franchises and authority, of a public as well as of a
private nature, of the Constituent Corporations; all property of every
description and every interest therein and all debts and other obligations of or
belonging to or due to the Constituent Corporations on whatever account shall
thereafter be taken and deemed to be held by or transferred to, as the case may
be, or vested in ARIS without further act or deed; title to any real estate, or
any interest therein, vested in the Constituent Corporations shall not revert or
in any way be impaired by reason of the Merger; and all of the rights of
creditors of the Constituent Corporations shall be preserved unimpaired, and all
liens upon the property of the Constituent Corporations shall be preserved
unimpaired, and such debts, liabilities, obligations and duties of the
Constituent Corporations shall thenceforth remain with or attach to, as the case
may be, ARIS and may be enforced against it to the same extent as if all of such
debts, liabilities, obligations and duties had been incurred or contracted by
it.
Section 3.02 Articles of Incorporation and Bylaws. The Articles of
------------------------------------
Incorporation of ARIS as in effect on the Effective Date shall, from and after
the Effective Date, be and continue to be the Articles of Incorporation of ARIS
without change or amendment until thereafter amended in accordance with the
provisions thereof and applicable laws. The Bylaws of ARIS as in effect on the
Effective Date shall, from and after the Effective Date, be and continue to be
the Bylaws of ARIS without change or amendment until thereafter amended in
accordance with the provisions thereof, the Articles of Incorporation of ARIS
and applicable laws.
Section 3.03 Directors and Officers. The directors and officers of the
----------------------
surviving corporation shall be the persons listed on Exhibit E to this
---------
Agreement, until their successors shall have been elected and qualified.
Section 3.04 Further Action. From time to time, as and when requested by
--------------
ARIS, or by its successors or assigns, any party hereto shall execute and
deliver or cause to be executed and delivered all such deeds and other
instruments, and shall take or cause to be taken all such further or other
actions, as ARIS, or its successors or assigns, may deem necessary or desirable
in order to vest in and confirm to ARIS, and its successors or assigns, title to
and possession of all the property, rights, privileges, powers and franchises
referred to herein and otherwise to carry out the intent and purposes of this
Agreement.
Page 4
<PAGE>
ARTICLE IV
CLOSING
Section 4.01. Closing. The "Closing" of the Merger and the transactions
-------
contemplated thereby shall be May 1,1996 at 12:01a.m. (the "Closing Date") at
the principal offices of ARIS, or at such other time and place as SQLSoft and
ARIS may agree. At the Closing:
(a) Each Shareholder shall receive a share certificate representing
the number of shares of the common stock of ARIS set forth opposite their
respective names on the attached Exhibit F.
----------
(c) Shareholders shall enter into and deliver the Employment
Agreements to ARIS.
(d) Shareholders shall enter into the Shareholders Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF SQLSOFT AND SHAREHOLDERS
SQLSoft and each Shareholder represents and warrants to ARIS that:
5.01 Corporate Existence and Power; Capitalization. (a) SQLSoft is a
---------------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the state of Washington, and has all corporate power and all
governmental licenses, authorizations, consents, permits and approvals required
to carry on the Business as now conducted. SQLSoft is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
where the character of the property owned or leased by it or the nature of its
activities make such qualification necessary. SQLSoft has heretofore delivered
to ARIS true and complete copies of the certificate of incorporation and bylaws
of SQLSoft as currently in effect.
(b) The authorized capital of SQLSoft consists of 300,000 authorized
shares, no par value per share. As of the Closing date, there will be
outstanding 34,942 shares of the common stock of SQLSoft. All outstanding
shares of capital stock of SQLSoft have been duly authorized and validly issued
and are fully paid. Except as set forth in this Section, there are no
outstanding (i) shares of capital stock or other voting securities of SQLSoft,
(ii) securities of SQLSoft convertible into or exchangeable for share of capital
Page 5
<PAGE>
stock or voting securities of SQLSoft or (iii) options or other rights to
acquire from SQLSoft, and there is no obligation for SQLSoft to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of SQLSoft (collectively, "SQLSoft
Securities"), other than the SQLSoft Securities to be issued to Mark Riley and
Steve Schwartz. There are no outstanding obligations of SQLSoft to issue or
deliver or to repurchase, redeem or otherwise acquire any SQLSoft Securities,
other than as set forth herein. Shareholders are and will be at the Closing the
record and beneficial owners of the common stock of SQLSoft, free and clear of
any Liens, and will transfer and deliver to ARIS at the Closing valid title to
such common stock free and clear of any Lien.
5.02 Corporate Authorization. The execution, delivery and
-----------------------
performance by SQLSoft of this Agreement and the consummation by SQLSoft of the
transactions contemplated hereby are within SQLSoft's corporate powers and have
been duly authorized by all necessary corporate action on the part of the
SQLSoft. This Agreement constitutes a binding and valid agreement of SQLSoft.
5.03 Governmental Authorization. The execution, delivery and
--------------------------
performance by SQLSoft of this Agreement require no action by or in respect of,
or filing with, any governmental body, agency, official or authority.
5.04 Noncontravention. The execution, delivery and performance by
----------------
SQLSoft of this Agreement do not and will not (i) contravene or conflict with
the certificate of incorporation or bylaws of SQLSoft, (ii) assuming compliance
with the matters referred to in Section 5.03, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to SQLSoft or the
Business; (iii) assuming the obtaining of all Required and Other Consents,
constitute a default under or give rise to any right of termination,
cancellation, or acceleration of any right or obligation of ARIS or to a loss of
any benefit relating to the Business to which SQLSoft is entitled under any
provision of any agreement, contract or other instrument binding upon SQLSoft or
any license, franchise, permit or other similar authorization held by SQLSoft or
(iv) result in the creation or imposition of any Lien on any Asset, other than
the Permitted Liens.
5.05. Required and Other Consents. (a) Schedule 5.05(a) sets forth each
--------------------------- ----------------
agreement, contract or other instrument binding upon SQLSoft or any license,
franchise, permit or other similar authorization held by SQLSoft, requiring a
consent as a result of the execution, delivery and performance of this Agreement
or the Merger that if not received by the Closing Date may have a Material
Adverse Effect (each such consent, a "Required Consent" and together the
----------------
"Required Consents").
-----------------
(b) Schedule 5.05(b) sets forth every other consent (each such
---------------
Consent, an "Other Consent" and together the "Other Consents") under such
------------- --------------
agreements,
Page 6
<PAGE>
contracts or other instruments or such licenses, franchises, permits or other
similar authorizations that is necessary with respect to the execution, delivery
and performance of this Agreement and the consummation of the Merger.
5.06. Financial Statements. The unaudited Balance Sheet and the related
--------------------
statements of income, cash flows and retained earnings for the Business taken as
a whole for the years ended December 31, 1995, December 31, 1994 and December
31, 1993, the projected balance sheet relating to the Business for the quarter
ending March 31, 1996, (collectively, the "Financial Statements") of the
--------------------
Business fairly present, in conformity with generally accepted accounting
principles applied on a consistent basis (except as may be indicated in the
notes thereto), the financial position of the Business taken as a whole as of
the dates thereof and its results of operations and cash flows for the periods
then ended.
5.07. Absence of Certain Changes. Since the Balance Sheet Date, SQLSoft
--------------------------
has conducted the Business in the ordinary course consistent with past
practices, and there has not been:
(a) any Material Adverse Change or any event, occurrence, development
or state of circumstances or facts which could reasonably be expected to result
in a Material Adverse Change;
(b) any incurrence, assumption or guarantee by SQLSoft of any
indebtedness for borrowed money with respect to the Business other than in the
ordinary course of business and in amounts and on terms consistent with past
practices;
(c) any creation or assumption by SQLSoft of any Lien on any Asset
other than in the ordinary course of business consistent with past practices;
(d) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the Business or any Asset which, individually or
in the aggregate, has had or would reasonably be expected to have a Material
Adverse Effect;
(e) any transaction or commitment made, or any contract or agreement
entered into, by SQLSoft relating to the Business or any Asset (including the
acquisition or disposition of any assets) or any relinquishment by SQLSoft of
any contract or other right, in either case, material to the Business taken as a
whole, other than transactions and commitments in the ordinary course of
business consistent with past practices and those contemplated by this
Agreement;
(f) any change in any method of accounting or accounting practice by
SQLSoft with respect to the Business;
Page 7
<PAGE>
(g) any (i) grant of any severance or termination pay to any employee
of the Business, (ii) entering into of any similar agreement (or any amendment
to any such existing agreement) with any employee of the Business, (iii)
increase in benefits payable under an existing severance or termination pay
policies or employment agreements or (iv) increase in compensation, bonus or
other benefits payable to employees of the Business; or
(h) any capital expenditure, or commitment for a capital expenditure,
or additions or improvements to property, plant and equipment.
5.08. Properties. (a) Schedule 5.08(a) correctly describes all real
---------- ----------------
property used in the Business included in the Assets (the "Real Property"),
-------------
which SQLSoft owns, leases or subleases, any title insurance policies and
surveys with respect thereto, and any Liens thereon, specifying in the case of
leases or subleases, the name of the lessor or sublessor, the lease term and
basic annual rent.
(b) Schedule 5.08(b) correctly describes all personal property used
----------------
in the Business included in the Assets, including but not limited to the
Materials, equipment, furniture, vehicles, spare and replacement parts, and
other trade fixtures and fixed assets, which SQLSoft owns, leases or subleases,
and any Liens thereon, specifying in the case of leases or subleases, the name
of the lessor or sublessor, the lease term and basic annual rent.
(c) (i) SQLSoft has good and marketable, indefeasible, fee simple
title to, or in the case of leased Real Property has valid leasehold interests
in, all Assets (whether real, personal, tangible or intangible) reflected on the
Balance Sheet or acquired after the Balance Sheet Date (the "Assets"), except
for the properties and assets sold since the Balance Sheet Date in the ordinary
course of business consistent with past practices.
(ii) All leases of Real Property or personal property are in
good standing and are valid, binding and enforceable in accordance with their
respective terms, and there does not exist under any such lease of real property
or personal property any material default or any event which with notice or
lapse of time or both would constitute a material default.
(d) No Asset is subject to any Lien, except:
(i) Liens disclosed on the Balance Sheet;
(ii) Liens for taxes not yet due or being contested in good
faith (and for which adequate accruals or reserves have been established on the
Balance Sheet); or
Page 8
<PAGE>
(iii) Liens which do not materially detract from the value of
such Asset as now used, or materially interfere with any present or intended use
of such Asset (clauses (i), (ii) and (iii) are, collectively, the "Permitted
---------
Liens").
5.09. Sufficiency of and Title to the Assets. The Assets constitute, and
--------------------------------------
on the Closing Date will constitute, all of the assets or property used or held
for use in the Business. Upon consummation of the transactions contemplated
hereby, ARIS will have acquired good and marketable title in and to, or a valid
leasehold interest in, each of the Assets, free and clear of all Liens, except
for Permitted Liens.
5.10. No Undisclosed Material Liabilities. There are no liabilities of
-----------------------------------
the Business of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, other than (i) liabilities disclosed or provided for in
the Balance Sheet; and (ii) liabilities incurred in the ordinary course of
business consistent with past practice since the Balance Sheet Date, which in
the aggregate are not material to the Business, taken as a whole.
5.11. Litigation. Except as set forth on Schedule 5.11, there is no
---------- -------------
action, suit, investigation or proceeding (or any basis therefor) pending
against, or to the knowledge of SQLSoft, threatened against or affecting, the
Business or any Asset before any court or arbitrator or any governmental body,
agency or official which, if determined or resolved adversely in accordance with
the plaintiff's demands would reasonably be expected to have a Material Adverse
Effect or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated hereby.
5.12. Material Contracts. (a) Except for the Contracts disclosed in
------------------
Schedule 5.12 or any other Schedule to this Agreement, with respect to the
- -------------
Business, SQLSoft is not a party to or subject to:
(i) any lease;
(ii) any contract for the purchase of materials, supplies,
goods, services, equipment or other assets;
(iii) any sales, distribution or other similar agreement
providing for the sale by SQLSoft of materials, supplies, goods, services,
equipment or other assets;
(iv) any partnership, joint venture or other similar contract
arrangement or agreement;
Page 9
<PAGE>
(v) any contract relating to indebtedness for borrowed money
or the deferred purchase price of property (whether incurred, assumed,
guaranteed or secured by any asset);
(vi) any license agreement, franchise agreement or agreement in
respect of similar rights granted to or held by SQLSoft;
(vii) any agency, dealer, sales representative or other similar
agreement;
(viii) any contract or other document that substantially limits
the freedom of SQLSoft to compete in any line of business or with any
Person or in any area or which would so limit the freedom of the ARIS after
the Closing Date;
(ix) any contract or other document with respect to
confidential and proprietary information or other non-disclosure
obligations; or
(x) any other contract or commitment not made in the ordinary
course of business which is material to the Business taken as a whole.
(b) Each Contract disclosed in any Schedule to this Agreement or
required to be disclosed pursuant to Section 5.12(a) is a valid and binding
---------------
agreement of SQLSoft and is in full force and effect, and neither SQLSoft nor,
to the knowledge of SQLSoft, any other party thereto is in default in any
material respect under the terms of any such Contract.
5.13. Licenses and Permits. Schedule 5.13 correctly describes each
-------------------- -------------
license, permit or other governmental authorization affecting, or relating in
any way to, the Business, together with the name of the government agency or
entity issuing such license or permit (the "Permits"). Such Permits are valid
-------
and in full force and effect and, assuming the related Required Consents and
Other Consents have been obtained prior to the Closing Date, are transferable by
SQLSoft. Except as set forth on Schedule 5.13, none of such Permits will,
-------------
assuming the related Required Consents and Other Consents have been obtained
prior to the Closing Date, be terminated or impaired or become terminable as a
result of the transactions contemplated hereby, and upon consummation of such
transactions, ARIS, will have all of the right, title and interest therein.
5.14. Insurance Coverage. Schedule 5.14 lists all insurance policies
------------------ -------------
covering the Assets, the operations of the Business and SQLSoft's employees
(including any professional liability and errors and omissions coverage with
respect to SQLSoft consultants), copies of which have been furnished to ARIS.
All premiums payable under all such policies and bonds have been paid and
SQLSoft is otherwise in full compliance with the terms and conditions of all
such policies.
Page 10
<PAGE>
5.15. Compliance with Laws. SQLSoft is not in violation of any applicable
--------------------
provisions of any laws, statutes, ordinances or regulations applicable to the
conduct of the Business.
5.16. Inventories. The inventories set forth in the Balance Sheet were
-----------
properly stated therein at the lesser of cost or fair market value determined in
accordance with generally accepted accounting principles consistently maintained
and applied by SQLSoft. Since the Balance Sheet Date, the inventories related
to the Business have been maintained in the ordinary course of business. All
such inventory is owned free and clear of all Liens.
5.17. Receivables. All accounts, notes receivable and other receivables
-----------
(other than receivables collected since the Balance Sheet Date) reflected on the
Balance Sheet are, and all accounts and notes receivable arising from or
otherwise relating to the Business at the Closing Date will be, valid, genuine
and fully collectible in the aggregate amount thereof, subject to normal and
customary trade discounts, less any reserves for doubtful accounts recorded on
the Balance Sheet. All accounts, notes receivable and other receivables arising
out of or relating to the Business at the Balance Sheet Date have been included
in the Balance Sheet, and all accounts, notes receivable and other receivables
arising out of or relating to the Business at the Closing Date will be included
in the Closing Balance Sheet, in accordance with generally accepted accounting
principles applied on a consistent basis.
5.18. Intellectual Property. (a) Schedule 5.18 sets forth a list of all
--------------------- -------------
Intellectual Property Rights, specifying as to each, as applicable: (i) the
nature of such Intellectual Property Right; (ii) the owner of such Intellectual
Property Right; (iii) the jurisdictions by or in which such Intellectual
Property Right is recognized without regard to registration or has been issued
or registered or in which an application for such issuance or registration has
been filed, including the respective registration or application numbers; and
(iv) material licenses, sublicenses and other agreements as to which SQLSoft or
any of its affiliates is a party and pursuant to which any Person is authorized
to use such Intellectual Property Right, including the identity of all parties
thereto, a description of the nature and subject matter thereof, the applicable
royalty and the term thereof.
(b)(i) SQLSoft has not been sued or charged in writing with or been a
defendant in any claim, suit, action or proceeding relating to its business that
has not been finally terminated prior to the date hereof and that involves a
claim of infringement of any patents, trademarks, service marks or copyrights,
and (ii) SQLSoft has no knowledge of any other claim or infringement by SQLSoft,
and no knowledge of any continuing infringement by any other Person of any
Intellectual Property Rights.
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<PAGE>
5.19. Employees. Schedule 5.19 sets forth a true and complete list of (a)
--------- -------------
the names, titles, annual salaries and other compensation of all employees of
the Business. None of such employees has indicated to SQLSoft that he intends
to resign or retire as a result of the transactions contemplated by this
Agreement.
5.20. Other Information. None of the documents or information delivered
-----------------
to ARIS in connection with the transactions contemplated by this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein not misleading.
The financial projections relating to the Business delivered to ARIS constitute
SQLSoft's best estimate of the information purported to be shown therein, and
SQLSoft is not aware of any fact or information that would lead it to believe
that such projections are incorrect or misleading in any material respect.
5.21. Environmental Compliance. No notice, notification, demand, request
------------------------
for information, citation, summons or order has been issued, no complaint has
been filed, no penalty has been assessed and no investigation or review is
pending, or to SQLSoft's knowledge, threatened by any governmental or other
entity (i) with respect to any alleged violation by SQLSoft of any environmental
law, ordinance, rule, regulation or order of any governmental entity in
connection with the conduct of the Business, (ii) with respect to any alleged
failure by SQLSoft to have any environmental permit, certificate, license,
approval, registration or authorization required in connection with the conduct
of the Business.
5.22 Purchase for Investment. The Shareholders are receiving the shares of
-----------------------
common stock of ARIS in connection with the Merger for investment for their own
account and not with a view to, or for sale in connection with, any distribution
thereof.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ARIS
ARIS hereby represents and warrants to SQLSoft that:
6.01. Organization and Existence; Capitalization. (a) ARIS is a
------------------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Washington and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
(b) At Closing, the authorized capital of ARIS consists of 4,000,000
authorized shares, no par value per share. As of the date hereof, there were
outstanding
Page 12
<PAGE>
3,383,500 shares of the common stock of ARIS, plus stock options to purchase an
aggregate of 81,000 shares of ARIS common stock. All outstanding shares of
capital stock of ARIS have been duly authorized and validly issued and are fully
paid. Except as set forth in this Section, there are no outstanding (i) shares
of capital stock or other voting securities of ARIS, (ii) securities of ARIS
convertible into or exchangeable for share of capital stock or voting securities
of ARIS or (iii) options or other rights to acquire from ARIS, and there is no
obligation for ARIS to issue any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of ARIS
(collectively, "ARIS Securities"). There are no outstanding obligations of the
ARIS to issue or deliver or to repurchase, redeem or otherwise acquire any ARIS
Securities. At Closing, ARIS shares of common stock issued to Shareholders
shall be free and clear of any Liens, and Shareholders shall be be the record
and beneficial owners of such ARIS common stock.
6.02. Corporate Authorization. The execution, delivery and performance by
-----------------------
ARIS of this Agreement and the consummation by ARIS of the transactions
contemplated hereby are within the corporate powers of ARIS and have been duly
authorized by all necessary corporate action on the part of ARIS. This
Agreement constitutes a valid and binding agreement of ARIS.
6.03. Governmental Authorization. The execution, delivery and performance
--------------------------
by ARIS of this Agreement require no action by or in respect of, or filing with,
any governmental body, agency, official or authority other than approval of the
Small Business Administration with respect to ARIS's continued qualification
after the Closing Date under the Minority Small Business and Capital Ownership
Development Program, Sections 8(a) and 7(j) of the Small Business Act, 15 U.S.C.
637(a) and 637(j), as amended ("SBA Approval").
6.04. Non-Contravention. The execution, delivery and performance by ARIS
-----------------
of this Agreement do not and will not (i) contravene or conflict with the
certificate of incorporation or bylaws of ARIS or (ii) assuming compliance with
the matters referred to in Section 6.03, contravene or conflict with any
provision of any law, regulation, judgment, injunction, order or decree binding
upon ARIS.
ARTICLE VII
COVENANTS OF SQLSOFT AND SHAREHOLDERS
SQLSoft and each Shareholder agrees that:
7.01. Conduct of Business. From the date hereof until the Closing Date,
-------------------
SQLSoft shall conduct the Business in the ordinary course consistent with past
practice,
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<PAGE>
use its best efforts to preserve intact the business organizations and
relationships with third parties and keep available the services of the present
employees of the Business.
7.02. Access to Information. From the date hereof until the Closing Date,
---------------------
SQLSoft (a) will give ARIS, its counsel, financial advisors, auditors and other
authorized representatives full access to the offices, properties, books and
records of SQLSoft relating to the Business, (b) will furnish to ARIS, its
counsel, financial advisors, auditors and other authorized representatives such
financial and operating data and other information relating to the Business as
such Persons may reasonably request and (c) will instruct the employees, counsel
and financial advisors of SQLSoft to cooperate with ARIS in its investigation of
the Business; provided that no investigation pursuant to this Section shall
--------
affect any representation or warranty given by SQLSoft hereunder; and provided
--------
further that any investigation pursuant to this Section shall be conducted in
- -------
such manner as not to interfere unreasonably with the conduct of the business of
SQLSoft.
7.03. Notices of Certain Events. SQLSoft shall promptly notify ARIS of:
-------------------------
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
Merger or the transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the Merger or the
transactions contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the best of its knowledge threatened against, relating to
or involving or otherwise affecting SQLSoft or the Business that, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Section 5.11 or that relate to the Merger or the
consummation of the transactions contemplated by this Agreement.
ARTICLE VIII
COVENANTS OF ARIS
ARIS agrees that:
8.01. Confidentiality. Prior to the Closing Date and after any
---------------
termination of this Agreement, ARIS will hold, and will use their best efforts
to cause their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or
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<PAGE>
by other requirements of law, all confidential documents and information
concerning the Business or SQLSoft furnished to ARIS in connection with the
transactions contemplated by this Agreement, except to the extent that such
information can be shown to have been (i) previously known on a nonconfidential
basis to ARIS, (ii) in the public domain through no fault of ARIS or (iii) later
lawfully acquired by ARIS from sources other than SQLSoft; provided that ARIS
--------
may disclose such information to its officers, directors, employees,
accountants, counsel, consultants, advisors and agents in connection with the
transactions contemplated by this Agreement so long as such Person are informed
by ARIS of the confidential nature of such information and are directed by ARIS
to treat such information confidentially. The obligation of ARIS to hold any
such information in confidence shall be satisfied if ARIS exercises the same
care with respect to such information as ARIS would take to preserve the
confidentiality of its own similar information.
ARTICLE IX
COVENANTS OF ALL PARTIES
The parties hereto agree that:
9.01. Best Efforts; Further Assurances. Subject to the terms and
--------------------------------
conditions of this Agreement, each party will use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable under applicable laws and regulations to consummate the
transactions contemplated by this Agreement. SQLSoft, Shareholders and ARIS
each agree to execute and deliver such other documents, certificates, agreements
and other writings and to take such other actions as may be necessary or
desirable in order to consummate or implement expeditiously the transactions
contemplated by this Agreement and to vest in ARIS good and marketable title to
the Assets.
ARTICLE X
EMPLOYEES
10.01. Employees and Offers of Employment. On the Effective Date, ARIS
----------------------------------
shall offer employment to all active employees of the Business as set forth on
Schedule 5.19, at such compensation, including incentive compensation, as may be
- -------------
agreed between the parties, provided, that ARIS may terminate at any time after
--------
the Effective Date the employment of any employee who accepts such offer, except
as specifically provided under the terms of any Shareholder's Employment
Agreement. Any such offers shall be at such salary or wage and benefit levels
and on such other terms and conditions as ARIS shall in its sole discretion deem
appropriate. The employees who accept and commence employment with ARIS are
hereinafter collectively referred to as the "Transferred
Page 15
<PAGE>
Employees." SQLSoft and Shareholders will not take any action which would
impede, hinder, interfere or otherwise compete with ARIS's effort to hire any
Transferred Employees. ARIS shall not assume responsibility for any Transferred
Employee until such employee commences employment with ARIS.
ARTICLE XI
CONDITIONS TO CLOSING
11.01. Conditions to the Obligations of Each Party. The obligations of
-------------------------------------------
ARIS and SQLSoft to consummate the Closing are subject to the satisfaction of
the following conditions:
(a) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall (i) prohibit the consummation of the
Closing or (ii) restrain, prohibit or otherwise interfere with the
effective operation or enjoyment by ARIS of all or any material portion of
the Business.
(b) All actions by or in respect of or filings with any governmental
body, agency, official or authority required to permit the consummation of
the Closing shall have been obtained.
11.02. Conditions to Obligation of ARIS. The obligation of ARIS to
--------------------------------
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) SQLSoft and each Shareholder shall have performed in all
material respects all of its obligations hereunder required to be performed by
it at or prior to the Closing Date, (ii) the representations and warranties of
SQLSoft and each Shareholder contained in this Agreement and in any certificate
or other writing delivered by SQLSoft or any Shareholder pursuant hereto,
disregarding all qualifications and exceptions contained therein relating to
materiality or Material Adverse Effect, shall be true at and as of the Closing
Date, as if made at and as of such time with only such exceptions as would not
in the aggregate reasonably be expected to have a Material Adverse Effect and
(iii) ARIS shall have received a certificate signed by the President of SQLSoft
to the foregoing effect.
(b) No court, arbitrator or governmental body, agency or official
shall have issued any order, and there shall not be any statute, rule or
regulation, restraining or prohibiting the consummation of the Closing or the
effective operation by ARIS of the Assets after the Closing Date, and no
proceeding challenging this Agreement or the transactions contemplated hereby or
seeking to prohibit, alter, prevent or materially delay the Closing shall have
been instituted by any Person before any court, arbitrator or governmental body,
agency or official and be pending.
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<PAGE>
(c) ARIS shall have received an opinion of SQLSoft's counsel dated
the Closing Date to the effect specified in Sections 5.01 through 5.04 and 5.11.
In rendering such opinion, such counsel may rely upon certificates of public
officers, copies of which shall be contemporaneously delivered to ARIS, and as
to matters of fact, upon certificates of officers of SQLSoft.
(d) SQLSoft shall have received all Required Consents and all
consents, authorizations or approvals from the governmental agencies referred to
in Section 5.03(a), in each case in form and substance reasonably satisfactory
to ARIS, and no such consent, authorization or approval shall have been revoked.
(e) ARIS shall have received all documents it may reasonably request
relating to the existence of SQLSoft and the authority of SQLSoft for this
Agreement, all in form and substance satisfactory to ARIS.
11.03. Conditions to Obligation of SQLSoft. The obligation of SQLSoft to
-----------------------------------
consummate the Closing is subject to the satisfaction of the following further
conditions:
(a)(i) ARIS shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date, and (ii) the representations and warranties or other writing delivered by
ARIS pursuant hereto shall be true in all material respects at and as of the
Closing Date, as if made at and as of such time.
(b) ARIS shall have received all consents, authorizations or
approvals from governmental agencies referred to in Section 6.03, and no such
consent, authorization or approval shall have been revoked.
(c) SQLSoft shall have received all documents it may reasonably
request relating to the existence of ARIS and the authority of ARIS for this
Agreement, all in form and substance satisfactory to SQLSoft.
ARTICLE XII
SURVIVAL; INDEMNIFICATION
12.01. Survival. The covenants, agreements, representations and
--------
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection herewith
shall survive the Closing until the third anniversary of the Closing Date or
until expiration of the applicable statutory period of limitations (giving
effect to any waiver, mitigation or extension thereof), if later.
Page 17
<PAGE>
Notwithstanding the preceding sentence, any covenant, agreement, representation
or warranty in respect of which indemnity may be sought under Section 12.02 or
12.03 shall survive the time at which it would otherwise terminate pursuant to
the preceding sentence, if notice of the inaccuracy or breach thereof giving
rise to such right to indemnity shall have been given to the party against whom
such indemnity may be sought prior to such time.
12.02. Indemnification. (a) SQLSoft and each Shareholder, jointly and
---------------
severally, hereby indemnifies ARIS against and agrees to hold it harmless from
any and all damage, loss, liability and expense (including, without limitation,
reasonable expenses of investigation and reasonable attorneys' fees and expenses
in connection with any action, suit or proceeding) (collectively, "Loss")
incurred or suffered by ARIS arising out of any misrepresentation or breach of
warranty, covenant or agreement made or to be performed by SQLSoft or any
Shareholder pursuant to this Agreement.
(b) ARIS hereby indemnifies SQLSoft against and agrees to hold it
harmless from any and all Loss incurred or suffered by SQLSoft arising out of
any misrepresentation or breach of warranty, covenant or agreement made or to be
performed by the ARIS pursuant to this Agreement.
12.03. Procedures. The party seeking indemnification under Section 12.02
----------
(the "Indemnified Party") agrees to give prompt notice to the party against whom
indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or
the commencement of any suit, action or proceeding in respect of which indemnity
may be sought under such Section; provided however, that no Indemnified Party
----------------
shall seek indemnification until the aggregate of all claims for which
indemnification is sought exceeds $50,000.00. The Indemnifying Party may, and
at the request of the Indemnified Party shall, participate in and control the
defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under Section 12.02 for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder.
ARTICLE XIII
TERMINATION
13.01. Grounds for Termination. This Agreement may be terminated at any
-----------------------
time prior to the Closing:
(i) by mutual written agreement of SQLSoft and ARIS;
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<PAGE>
(ii) by either SQLSoft or ARIS if the Closing shall not have been
consummated on or before May 1, 1996, unless otherwise extended by the
written agreement of the parties; or
(iii) by either SQLSoft or ARIS if consummation of the transactions
contemplated hereby would violate any nonappealable final order, decree or
judgment of any court or governmental body having competent jurisdiction.
The party desiring to terminate this Agreement pursuant to clauses
(ii) or (iii) shall give notice of such termination to the other party.
13.02. Effect of Termination. If this Agreement is terminated as
---------------------
permitted by Section 13.01, such termination shall be without liability of
either party (or any shareholder, director, officer, employee, agent, consultant
or representative of such party) to the other party to this Agreement; provided
--------
that if such termination shall result from the willful failure of either party
to fulfill a condition to the performance of the obligations of the other party
or to perform a covenant of this Agreement or from a willful breach by either
party to this Agreement, such party shall be fully liable for any and all Losses
incurred or suffered by the other party as a result of such failure or breach.
The provisions of Section 12.02 shall survive any termination hereof pursuant to
Section 13.01.
ARTICLE XIV
MISCELLANEOUS
14.01. Notices. All notices, requests and other communications to either
-------
party hereunder shall be in writing and shall be given and deemed effective as
of the date of delivery if delivered by overnight courier, certified or
registered mail, facsimile or other means which provide evidence of receipt, or
three days after deposit into the mail for items sent by regular mail, if sent
to the following:
if to ARIS, to:
Paul Song, President
ARIS Corporation
6720 Fort Dent Way, Suite 150
Seattle, WA 98188-2555
Phone: 206-433-2081
Telecopy: 206-433-1182
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<PAGE>
if to SQLSoft, to:
Stephen Brugger
1750 112/th/ Avenue NE, Suite B-101
Bellevue, WA 98004
Phone: 206-688-8977
Telecopy: 206-688-8978
with a copy to:
Scott Wonder, Esq.
Goddard & Wetherall
500 108/th/ Avenue Northeast
Bellevue, WA 98004
Phone: 206-453-9200
Telecopy: 206-453-0528
14.02. Amendments; No Waivers. (a) Any provision of this Agreement may
----------------------
be amended or waived prior to the Closing Date if, and only if, such amendment
or waiver is in writing and signed, in the case of an amendment, by the all of
the parties hereto, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by either party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall nay
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
14.03. Expenses. Except as otherwise provided herein, all costs and
--------
expenses incurred in connection with this Agreement through the close of
business March 31, 1996, shall be paid by the party incurring such cost or
expense.
14.04. Successors and Assigns. The provisions of this Agreement shall be
----------------------
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns; provided that neither party may assign, delegate or
--------
otherwise transfer any of its rights or obligations under this Agreement without
the consent of the other party hereto.
14.05. Governing Law. This Agreement shall be construed in accordance
-------------
with the laws of the State of Washington.
14.06. Counterparts; Effectiveness. This Agreement may be signed in any
---------------------------
number of counterparts, each of which shall be an original, with the same effect
as if the
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<PAGE>
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective when each party hereto shall have received a counterpart
hereof signed by the other party hereto.
14.07. Entire Agreement. The Operative Agreements constitute the entire
----------------
agreement between the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings and negotiations, both written
and oral, between the parties with respect to the subject matter of this
Agreement. No representation, inducement, promise, understanding, condition or
warranty not set forth herein has been made or relied upon by either party
hereto. Neither this Agreement nor any provision hereof is intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
14.08. Captions. The captions herein are included for convenience of
--------
reference only and shall be ignored in the construction or interpretation
hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
APPLIED RELATIONAL SQLSoft, INC.
INFORMATION SYSTEMS, INC.
By /s/ Paul Song By /s/ Stephen Brugger
-------------------------- --------------------------------
Paul Song, President Stephen Brugger, President
Page 21
<PAGE>
SHAREHOLDERS:
/s/ Stephen Brugger
- ------------------------------
STEVE BRUGGER
/s/ Mark Scott
- ------------------------------
MARK SCOTT
/s/ Gale Baullinger
- ------------------------------
GALE BAULLINGER
/s/ Steve Schwartz
- ------------------------------
STEVE SCHWARTZ
/s/ Mark Riley
- ------------------------------
MARK RILEY
<PAGE>
EXHIBIT 10.32
[The Registrant shall furnish supplementally a copy of any omitted schedule to
the Commission upon request.]
EXECUTION COPY ASSET PURCHASE AGREEMENT
ASSET PURCHASE AGREEMENT, dated as of August 5, 1996 (as hereafter amended,
modified or supplemented, this "Agreement"), between CRAY RESEARCH, INC., a
corporation organized and existing under the laws of the State of Delaware
("Seller"), and ARIS CORPORATION, a corporation organized and existing under the
laws of the State of Washington ("Purchaser");
WITNESSETH
WHEREAS, Seller, though its Cray Solutions division ("Cray Solutions"), is
engaged in the business of providing certain software consulting services in the
United States; and
WHEREAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, all right, title and interest of Seller in and to certain
of the property and assets used in connection with the business of Cray
Solutions, and in connection therewith Purchaser is willing to assume certain
liabilities of Seller relating thereto, all upon the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing, the payment by Purchaser
to Seller of the amount of $10.00 and the mutual agreements and covenants
hereinafter set forth and other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, and intending to be legally bound
hereby, the parties hereto hereby agree as follows:
SECTION 1. Assets to Be Sold. (a) On the terms and subject to the
conditions of this Agreement, Seller shall, on the Closing Date, sell, assign,
transfer, convey and deliver to Purchaser or cause to be sold, assigned,
transferred, conveyed and delivered to Purchaser, and Purchaser shall acquire
from Seller, on the Closing Date, all of Seller's right, title and interest in
and to the following assets, in each case owned or leased by Seller and used
primarily or, in the case of clause (iv) of this Section 1, solely in connection
with the business of Cray Solutions at the Closing Date (collectively, the
"Assets"):
(i) the office lease agreement, dated October 20, 1993, between
Metropolitan Life Insurance Company, as landlord, and Cray Research, Inc. (as
successor in interest of Savant Systems, Inc.), as tenant (the "Dallas Lease");
(ii) all furniture, fixtures, equipment, machinery and other tangible
personal property at 5430 LBJ Freeway, Suite 950, Dallas, Texas 75240 (the
"Dallas Facility");
<PAGE>
(iii) all books of account, general, financial, tax and personnel
records, invoices, supplier lists, correspondence and other documents, records
and files and all computer software and programs and any rights thereto;
(iv) all intellectual property, goodwill, trade secrets and other
intangible personal property;
(v) all sales and promotional literature, customer lists and other
sales-related materials; and
(vi) all rights under all contracts, subcontracts, licenses,
sublicenses, agreements, leases, purchase orders, customer orders, commitments
and similar binding arrangements of Seller, including, without limitation, all
non-compete agreements between Seller and any Transferred Employee.
(b) Notwithstanding the foregoing, the Assets shall exclude the following
assets owned or leased by Seller (the "excluded Assets"):
(i) all cash, cash equivalents and bank accounts;
(ii) all accounts receivable, notes and other amounts receivable from
third parties (including, without limitation, customers and employees) arising
from the conduct of the business of Cray Solutions on or before the Closing
Date, including, without limitation, all amounts receivable under invoices for
services performed by Cray Solutions on or before July 31, 1996;
(iii) all claims, causes of action, chases in action, rights of
recovery and rights of set-off of any kind (including rights to insurance
proceeds) pertaining to, arising out of or inuring to the benefit of the
business of Cray Solutions on or before the Closing Date;
(iv) all rights of Seller in and to the names "Cray" and "Cray
Solutions" ;
(v) all rights of Seller under the consulting services agreement,
dated March 1, 1995 (the "TIG Agreement"), between TIG Insurance Company and
Cray Research, Inc.; and
(vi) all rights of Seller under this Agreement and any agreements
ancillary hereto.
2
<PAGE>
SECTION 2. Assumption and Exclusion of Liabilities. (a) Purchaser shall, on
the Closing Date, assume and shall pay, perform and discharge when due all
liabilities of Seller as at the Closing Date arising out of or relating to (i)
the Assets, (ii) to the extent arising on or after the Closing Date, the
Transferred Employees (as defined below), and (iii) severance benefits under the
terms of the 1995 Cray Severance Plan claimed by any Employee upon the
termination of any such Employee on or after the Closing Date (the "Assumed
Liabilities"), including, without limitation, (A) liabilities under all
contacts, agreements and purchase orders listed on Schedule I attached hereto,
(B) all accounts payable arising after the Closing.
(b) Seller shall retain, and shall be responsible for paying, performing
and discharging when due, and Purchaser shall not assume or have any
responsibility for, all liabilities of Seller as of the Closing Date other than
the Assumed Liabilities (the "Excluded Liabilities"), including, without
limitation, (i) all liabilities relating to or arising out of the Excluded
Assets and (ii) liabilities for vacation time, sick leave, personal leave and
other compensated time off accrued by the Employees as of the Closing Date.
SECTION 3. Closing. Subject to the terms and conditions of this Agreement,
the sale and purchase of the Assets and the assumption of the Assumed
Liabilities contemplated by this Agreement shall take place at a closing (the
"Closing") to be held at the offices of Shearman & Sterling, 555 California
Street, San Francisco, California (telephone: (415) 616-1100; telecopier: (415)
616-1199), August 5, 1996 or at such other place or at such other time or on
such other date as Seller and Purchaser may mutually agree upon in writing (the
day on which the Closing takes place being the "Closing Date").
SECTION 4. Conditions to Closing. (a) The obligation of Purchaser to
consummate the transactions contemplated by this Agreement shall be subject to
the receipt by Seller, at or prior to the Closing, of TIG's written agreement
(the "Termination Agreement") to terminate the TIG Agreement and release Seller
of any liability thereunder, in the form attached hereto as Exhibit D. After the
Closing, Purchaser shall perform, at no cost to TIG (other than documented
expenses), such services as TIG may reasonably request in an aggregate amount of
$250,000 of consulting services. As consideration of performing such services,
(i) Seller shall pay to Purchaser the sum of $175,000 within 30 days of the
Closing Date; provided that Purchaser and TIG shall have entered into a contract
with respect to the full amount of the $250,000 of services to be provided by
Purchaser to TIG as referenced above; and (ii) Seller shall pay to Purchaser the
sum of $135,000 in accordance with the payment schedule set forth on Schedule II
hereto, which payments Seller shall make within 30 days of receipt of
Purchaser's invoice.
3
<PAGE>
(iii) The obligations of Seller and Purchaser to consummate the transactions
contemplated by this Agreement shall be subject to (iv) the receipt by Seller,
at or prior to the Closing, of the landlord's written consent to the assignment
of the Dallas Lease to Purchaser, and (v) the delivery by Seller and Purchaser
of joint termination notices to the customers under each of the customer
contracts listed on Schedule I hereto.
SECTION 5. Closing Deliveries. At the Closing, (a) Seller shall deliver or
cause to be delivered to Purchaser an executed bill of sale and executed
counterparts of an assignment and assumption agreement for the Dallas Lease and
an assignment and assumption agreement for the other Assets; and (b) Purchaser
shall deliver to Seller executed counterparts of the assignment and assumption
agreement for the Dallas Lease and the assignment and assumption agreement for
the other Assets. The foregoing documents shall be in the form attached hereto
as Exhibits A, B and C.
SECTION 6. Consents. Seller shall use reasonable efforts to obtain any
required consents to assignment of all contracts, licenses, sublicenses,
agreements and leases included among the Assets, and shall use its best efforts
to obtain the consent of the landlord to assignment of the Dallas Lease;
provided, however, that Seller shall not be required to pay any amount to any
person to obtain any such consents. Purchaser shall use its best effort in
assisting and cooperating with Seller to obtain the consent of the landlord to
the assignment of the Dallas Lease.
SECTION 7. Use of Intellectual Property. Cray will retain all rights to the
names "Cray" and "Cray Solutions," and Purchaser shall not use the name "Cray,"
either alone or in combination with any other names, as a trademark, service
mark, trade name or corporate name or for any other purpose whatsoever;
provided, however, that Purchaser may, for a period not to exceed three months
following the Closing Date, refer to its division carrying on business with the
Assets acquired pursuant hereto as "formerly known as Cray Solutions. "
SECTION 8. Employee Matters. (a) As of the Closing Date, Purchaser shall
offer employment to each of the employees of Cray Solutions listed on Schedule
III hereto (each an "Employee," and each such Employee who accepts such offer a
"Transferred Employee"), with employment grade, credit for years of service,
base compensation and incentive bonuses not less than that set forth opposite
such Employees name on Schedule III.
(b) Purchaser shall provide each Transferred Employee whose employment
with Purchaser is terminated at any time on or within one year after the Closing
Date with severance benefits in an amount not less than the amount of severance
payable to such Transferred Employee under the terms of the 1995 Cray Severance
Plan, as amended April 24, 1996.
4
<PAGE>
SECTION 9. Indemnification. (a) Purchaser shall be indemnified and held
harmless by Seller for any and all liabilities, losses, damages, claims, costs
and expenses, interest, awards, judgments and penalties (including, without
limitation, reasonable attorneys' fees and expenses) actually suffered or
incurred by it (collectively "Losses") and arising out of, resulting from or
relating to (i) the Excluded Liabilities, (ii) the Excluded Assets, (iii) claims
by any Transferred Employee relating to facts and circumstances occurring before
the Closing Date, and (iv) claims by any customer under any customer contract
listed on Schedule I hereto relating to facts and circumstances occurring before
the Closing Date.
(b) Seller shall be indemnified and held harmless by Purchaser for any and
all Losses arising out of or resulting from (i) the Assumed Liabilities, (ii)
the Assets and (iii) claims by any Transferred Employee relating to facts and
circumstances occurring on or after the Closing Date.
(c) In no event shall Seller or Purchaser be liable for consequential
damages under this Agreement or any documents or instruments delivered by such
parties at the Closing.
SECTION 10. Representations and Warranties. (a) Seller and Purchaser each
hereby represents and warrants to the other that (i) it is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all necessary corporate power and
authority to enter into this Agreement and any agreements ancillary hereto, to
carry out its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby; (ii) the execution and delivery of
this Agreement and any agreements ancillary hereto by it, the performance by it
of its obligations hereunder and thereunder and the consummation by it of the
transactions contemplated hereby and thereby have been duly authorized and
approved by all requisite action on its part; and (iii) this Agreement has been,
and upon their execution any agreements ancillary hereto will be, duly executed
and delivered by it, and (assuming due authorization, execution and delivery by
the other party) this Agreement constitutes, and upon their execution any
agreements ancillary hereto will constitute, legal, valid and binding
obligations of it enforceable against it in accordance with their respective
terms.
(b) Seller hereby represents and warrants to Purchaser that it has not
received from the landlord under the Dallas Lease prior to the Closing any
written notice of default under such lease which remains uncured as of the date
hereof.
(c) EXCEPT WITH RESPECT TO THE EXPRESS REPRESENTATIONS AND WARRANTIES
SPECIFICALLY SET FORTH HEREIN, SELLER MAKES NO, AND EXPRESSLY DISCLAIMS ANY,
REPRESENTATION OR WARRANTY OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, ORAL OR
WRITTEN, WHETHER OF MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR A
PARTICULAR
5
<PAGE>
PURPOSE OR QUALITY OF THE ASSETS, OR ANY PART THEREOF, OR AS TO THE CONDITION,
WORKMANSHIP OR VALUE THEREOF OR THE ABSENCE OF ANY DEFECTS THEREIN, WHETHER
LATENT OR PATENT. IT IS UNDERSTOOD BY THE PARTIES THAT THE ASSETS ARE TO BE
CONVEYED HEREUNDER "AS-IS" AND "WHERE-IS" ON THE CLOSING DATE AND IN THEIR THEN
PRESENT CONDITION, AND THE PURCHASER SHALL RELY SOLELY UPON ITS OWN
INVESTIGATION AND EXAMINATION THEREOF.
SECTION 11. Prorations; Taxes. Except as expressly provided herein,
prorations will be made with regard to the amount of rents, real and personal
property taxes, telephone and other utilities relating to the Assets as of the
Closing Date, with Seller liable for such items to the extent relating to the
period prior to the Closing Date and Purchaser liable for such items to the
extent relating to the period on and after the Closing Date. Seller and
Purchaser shall each be liable for one-half of any sales, use, registration,
transfer or similar taxes, charges or fees incurred in connection with the
transactions contemplated by this Agreement.
SECTION 12. Confidentiality. The confidentiality agreement, dated July 15,
1996, between Seller and Purchaser shall remain in full force and effect, and
the terms and conditions of this Agreement shall be deemed to constitute, and
shall be treated as, confidential or proprietary information under such
confidentiality agreement.
SECTION 13. Public Announcements. Neither party hereto shall make, or cause
to be made, any press release or other public announcement with respect to this
Agreement or the transactions contemplated hereby without the prior written
consent of the other party, and in any event, no such press release or other
public announcement shall disclose any of the terms or conditions of this
Agreement.
SECTION 14. Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable law,
and execute and deliver such documents and other papers, as may be required to
carry out the provisions of this Agreement and consummate and make effective the
transactions contemplated hereby.
SECTION 15. Expenses. All costs and expenses, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses, whether or not the Closing shall have occurred.
SECTION 16. Headings. The descriptive headings contained in this Agreement
are for convenience of reference only and shall not affect in any way the
meaning, construction or interpretation of this Agreement.
6
<PAGE>
SECTION 17. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any law or public policy,
all other terms and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner in order
that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
SECTION 18. Entire Agreement. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements, representations, undertakings and
understandings, both written and oral, between Seller and Purchaser with respect
to the subject matter hereof.
SECTION 19. Assignment. This Agreement may not be assigned by operation of
law or otherwise without the express written consent of Seller and Purchaser
(which consent may be granted or withheld in the sole discretion of Seller and
Purchaser).
SECTION 20. No Third Party Beneficiaries. This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their permitted
assigns and nothing herein, express or implied, is intended to or shall confer
upon any other person, including, without limitation, any employee or former
employee of Seller, any legal or equitable right, benefit or remedy of any
nature whatsoever, including, without limitation, any rights of employment for
any specified period, under or by reason of this Agreement.
SECTION 21. Amendment. This Agreement may not be amended, modified or
supplemented except by an instrument in writing signed by, or on behalf of,
Seller and Purchaser.
SECTION 22. Arbitration. All disputes, differences, controversies or claims
between the parties hereto arising out of or relating to this Agreement or the
transactions contemplated hereby shall be finally settled under binding
arbitration in the city of San Francisco, California. Any such arbitration shall
be governed by the Commercial Arbitration Rules of the American Arbitration
Association.
SECTION 23. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
7
<PAGE>
SECTION 24. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity, without the necessity of demonstrating the inadequacy
of money damages.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have caused this Agreement
to be executed by their respective officers "hereunto duly authorized as of the
date first written above.
CRAY RESEARCH, INC.
By: /s/ Robert H. Ewald
-----------------------------
Name: Robert H. Ewald
Title: President and Chief Operating Officer
c/o Silicon Graphics, Inc.
2011 North Shoreline Boulevard
Mountain View, California 94039-7311
Attention: Ed Malysz
Telephone: (415) 933-3013 Telecopy: (415) 933-0466
ARIS CORPORATION
By: /s/ Paul Song
-----------------------------
Name: Paul Song Title: President
6720 Fort Dent Way Suite 150
Seattle, Washington 98188-2555
Attention: Paul Song
Telephone: (206) 433-2081 Telecopy: (206) 433-1182
9
<PAGE>
EXHIBIT 10.33
[The Registrant shall furnish supplementally a copy of any omitted schedule to
the Commission upon request.]
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of September 30, 1996, by and among
Dewayne Cowles ("Cowles"), Mark Turner ("Turner") and Steve Masters ("Masters")
(together, the "Sellers"), ARIS Corporation, a Washington corporation (the
"Buyer"), and Noetix Corporation, an Oregon corporation (the "Company").
RECITALS
A. Sellers are together the owners of 100% of the outstanding shares of
common stock of the Company.
B. Sellers desire to sell and Buyer desires to purchase all of the shares of
common stock of the Company owned by them upon the terms and conditions set
forth herein.
ARTICLE 1
PURCHASE AND SALE OF SHARES
---------------------------
1.1 Purchase and Sale. Subject to the terms and conditions of this Agreement,
-----------------
Sellers agree to sell to Buyer, and Buyer agrees to purchase from Sellers, at
the Closing, the number of shares of common stock of the Company set forth below
(the "Shares"):
<TABLE>
<CAPTION>
Seller Shares Sold
------ -----------
<S> <C>
Cowles 6167
Turner 6167
Masters 1666
</TABLE>
1.2 Purchase Price and Payment. The aggregate purchase price for the Shares
--------------------------
(the "Purchase Price") shall be $835,000 in cash and 40,000 shares of the no par
value common stock of ARIS Corporation (the "ARIS Shares"), which shall be
payable at Closing as follows:
(a) Cowles shall receive the ARIS Shares and $255,917.48 in cash;
(b) Turner shall receive $455,917.52 in cash;
(c) Masters shall receive $123,165.00 in cash.
-1-
<PAGE>
ARTICLE 2
CLOSING
-------
2.1 Closing. The closing of the transaction contemplated in this Agreement
-------
(the "Closing") shall take place at the offices of Buyer located at 6720 Fort
Dent Way, Suite 250, Seattle, Washington at 10:00 a.m. on September 30, 1996, or
at such other place, date and time as may be agreed upon by the parties (the
"Closing Date").
2.2 Deliveries at Closing. At or prior to the Closing, the parties will
---------------------
deliver or cause to be delivered all documents or instruments required to be
delivered by them pursuant to this Agreement. At the Closing, Sellers will
deliver to Buyer certificates representing all of the Shares, duly endorsed in
blank or with appropriate stock powers, against payment of the Purchase Price as
required by this Agreement.
2.3 Effective Date; Pro-Rates. The effective date of this Agreement shall be
-------------------------
September 1, 1996 (the "Effective Date"). As of the Effective Date, all income
and expenses incurred by the Company in the ordinary course of business or
otherwise accepted by Buyer after midnight, August 31, 1996 shall be deemed the
income and expenses of Buyer. Title to the Shares of the Company shall pass to
Buyer as of the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 Representations and Warranties of the Company and Sellers. Sellers and
---------------------------------------------------------
the Company each jointly and severally represent and warrant to Buyer as
follows:
(a) Corporate Existence. The Company is a corporation duly organized,
-------------------
validly existing and in good standing under the laws of the State of Oregon, and
the Company has all necessary corporate power and authority to own, lease and
operate its properties and assets and to carry on its business as now conducted
and as proposed to be conducted. The Company has not filed any documentation
for the purpose of doing business with any state or federal governmental body
other than the State of Oregon.
(b) Capitalization and Title to Stock. The authorized capital stock of
---------------------------------
the Company consists of (i) 100,000 shares of common stock, $1.00 par value (the
"Company Common Stock"), 14,000 shares of which are issued and outstanding. The
outstanding shares of Company Common Stock are owned beneficially and of record
as set forth on Schedule 3.1(b)(i), free and clear of all pledges, security
------------------
interests, liens, charges, encumbrances, equities, claims, options or
limitations, except as set forth on Schedule 3.1(b)(i). All currently
------------------
-2-
<PAGE>
outstanding shares of Company Common Stock are validly issued, fully paid and
nonassessable. No shares of Company Common Stock have been issued in violation
of any preemptive or similar rights granted pursuant to the Company's Articles
of Incorporation or otherwise. Except as set forth on Schedule 3.1(b)(i), (i)
there are no subscriptions, options, warrants, calls, rights, agreements or
commitments relating to the issuance, sale, delivery or transfer by the Company
or Sellers (including any right of conversion or exchange under any outstanding
security or other instrument) of the Company's Common Stock and (ii) the Company
has no outstanding obligations to repurchase, redeem or otherwise acquire any of
its outstanding shares of Common Stock.
(c) Title to Shares. At the Closing, Buyer will acquire good title to
---------------
the Shares, free and clear of all pledges, security interests, liens, charges,
encumbrances, equities, claims, options or limitations of whatever nature.
(d) Authority and Validity. The Company has the full corporate power and
----------------------
corporate authority, and each Seller has full power and authority, to enter into
this Agreement and to carry out the terms of this Agreement. The Company has
taken all corporate action necessary to authorize the execution, delivery and
performance of this Agreement. This Agreement has been duly and validly
executed and delivered by Sellers and the Company, and is binding upon and
enforceable against each of them in accordance with its terms.
(e) No Adverse Consequences. Except as disclosed in the Schedules
-----------------------
attached hereto, neither the execution and delivery of this Agreement by the
Company and Sellers nor the consummation of the transactions contemplated in
this Agreement will (i) result in the creation or imposition of any lien, charge
or encumbrance on any of the assets or properties of the Company, (ii) violate
any provision of the Articles of Incorporation or Bylaws of the Company, (iii)
violate any law, judgment, order, injunction, decree, rule, regulation or ruling
of any governmental authority applicable to the Company, or (iv) either alone or
with the giving of notice or the passage of time or both, conflict with,
constitute grounds for termination of, result in the breach of the terms,
conditions or provisions of, or constitute a default under any agreement,
instrument, license or permit to which the Company is a party or by which it is
bound.
(f) Financial Statements. The Company has previously furnished to Buyer
--------------------
(i) balance sheets as January 31, 1995 and 1996, as prepared internally on a
modified accrual basis, (ii) the related statements of income, as prepared
internally on a modified accrual basis, and statements of stockholders' equity
for the periods then ended; (iii) an unaudited balance sheet as of June 30,
1996 (the "Current Balance Sheet"); and (iv) the related statements of income
(the " Current Income Statement"), stockholders' equity and cash flows through
June 30, 1996; (all the balance sheets and statements referred to in clauses (i)
through (iv) are collectively referred to herein as the "Financial Statements").
The Financial Statements are attached hereto as Exhibit A. Except as provided
---------
on Schedule 3.1 (f), the Financial Statements are accurate in all material
----------------
respects as of the respective dates thereof. The Current Balance
-3-
<PAGE>
Sheet and the Current Income Statement present fairly (A) the financial position
of the Company as of the date indicated, and (B) the results of operations for
the period then ended, all in conformity with generally accepted accounting
principles applied on a consistent basis. Buyer shall have the right to audit
the Financial Statements for any and all periods covered thereby and Sellers
shall provide reasonable assistance to Buyer in the conduct of such audit or
audits.
(g) Litigation. Except as disclosed in Schedule 3.1(g), there is no
---------- ---------------
claim, litigation, proceeding or investigation of any kind pending or threatened
by or against the Company and, to the best knowledge of Sellers and the Company,
there is no basis for any such claim, litigation, proceeding or investigation.
(h) Compliance with Laws. To the best knowledge of Sellers, the Company
--------------------
has at all relevant times conducted its business in compliance with its Articles
of Incorporation, Bylaws, and all applicable laws and regulations. The Company
is not in violation of any applicable laws or regulations. The Company is not
subject to any outstanding order, writ, injunction or decree, and the Company
has not been charged with, or threatened with a charge of, a violation of any
provision of any federal, state or local law or regulation. The Company is in
compliance with any reporting requirements of all federal, state, local and
other regulatory bodies.
(i) Employment Matters.
------------------
(i) Labor Matters. The Company is not a party or otherwise subject
-------------
to any collective bargaining or other agreement governing the wages, hours or
terms of employment of its employees. Other than as disclosed in Schedule
--------
3.1(i)(i) the Company is and has always been in compliance with all applicable
- ---------
laws regarding employment and employment practices, terms and conditions of
employment, wages and hours and are not and have not been engaged in any unfair
labor practice. Sellers have no knowledge of the existence or threat of, and
the Company has never been involved in, any (A) unfair labor practice complaint,
(B) labor strike, slowdown or work stoppage, (C) representation petition brought
before the National Labor Relations Board, or (D) grievance or arbitration
proceeding arising out of or under any collective bargaining agreements.
(ii) Employee Benefits. Schedule 3.1(i)(ii) lists all pension,
----------------- ------------------
retirement, profit sharing, deferred compensation, bonus, commission, incentive,
life insurance, health and benefit plans or arrangements established, maintained
or adopted by the Company ("Benefit Arrangements"). Complete, accurate copies
of all documents relating to the establishment, terms or funding of such Benefit
Arrangements (including contracts or agreements with trustees and insurance
companies) have been provided to Buyer. No accumulated funding deficiency
exists and no waiver of the minimum funding standards of Section 412 of the
Internal Revenue Code of 1986, as amended (the "Code") has been requested with
respect to a Pension Plan (as defined in Section 3(2) of the Employee Retirement
Income Security Act of
-4-
<PAGE>
1974, as amended ("ERISA")) that is subject to Section 412 of the Code. The
Company does not have any potential "withdrawal liability" as defined in Section
4201 of ERISA. No Employee Benefit Plan (within the meaning of Section 3(3) of
ERISA) has not engaged or become involved in a prohibited transaction (as
defined in Section 406 of ERISA or Section 4975 of the Code) to which an
exemption did not apply. No Welfare Plan (as defined in Section 3(1) of ERISA)
provides benefits for former employees or their dependents except as required by
Section 4980B of the Code. Each Benefit Arrangement has been and is maintained,
operated and administered in all material respects in compliance with its terms
and any related documents or agreements, and in all material respects in
compliance with all applicable laws. Sellers are not aware of any pending or
threatened assessment, complaint, proceeding, or investigation of any kind with
respect to any Benefit Arrangement, or any material claims for benefits or
expenses under such arrangements.
(iii) Employment Agreements. Each of the employees of the Company is
---------------------
an "at-will" employee, and there are no written employment, commission,
independent contractor or compensation agreements of any kind between the
Company and any employees or contractors, except as set forth on Schedule
--------
3.1(i)(iii). Schedule 3.1(i)(iii) lists all of the employment or supervisory
- ----------- --------------------
manuals, employment or supervisory policies, and written information generally
provided to employees (such as applications or notices) by the Company, and true
and complete copies of those manuals, policies and written information have been
provided to Buyer. Complete and accurate copies of all agreements listed on
Schedule 3.1(i)(iii) have been furnished to Buyer. The Company does not have any
- --------------------
agreements or understandings with employees except as reflected on Schedules
---------
3.1(i)(ii) and 3.1(i)(iii).
- --------------------------
(j) Real Property. Schedule 3.1(j) contains a complete and accurate list
------------- ---------------
of all real property owned or leased by the Company ("Real Property").
(k) Leases. Schedule 3.1(k) contains a complete and accurate list of all
------ ---------------
real property leases under which the Company is a lessee.
(l) Certain Contracts and Arrangements. Schedule 3.1(l) contains a
---------------------------------- ---------------
complete and accurate list of each of the following types of agreements to which
either the Company is a party or by which it is bound: (i) any mortgage, note
or other instrument or agreement relating to the borrowing of money or the
incurrence of indebtedness by the Company or the guaranty by the Company of any
obligation for the borrowing of money; (ii) contracts, agreements, purchase
orders or acknowledgment forms for the purchase, sale, support, lease, license
or other disposition of equipment, products, materials or capital assets of the
Company, or for the performance of services; (iii) contracts or agreements for
the joint performance of work or services, and all other joint venture
agreements excluding those identified in 3.1(i)(iii); and (iv) any other
contract, instrument, agreement or obligation not described on any other
Schedule to which the Company is a party or by which it is bound and which
contains material unfulfilled obligations of the Company. However, the Company,
in the ordinary course of business, has made oral statements, representations,
promises,
-5-
<PAGE>
arrangements and agreements with some or all of its present customers pertaining
to: (a) Oracle related products, including upgrades and technical support, up
through and including Oracle Applications Release 11, providing such customers
pay an annual maintenance fee; and (b) production of and support for additional
modules of Noetix Views for Oracle Project Billing, Project Costing, Oracle
M.R.P., Oracle Application Object Library and Oracle Human Resources, none of
which has yet been produced, and including discussions regarding purchase
prices, and maintenance fees for a reasonable time, for Oracle Project Billing,
Project Costing and Oracle M.R.P. Some of these oral statements, representations
and/or arrangements may constitute binding agreements or contracts.
(m) Title and Condition of Tangible Assets. The Company owns the Real
--------------------------------------
Property described on Schedule 3.1(j) as indicated on such Schedule, and, except
---------------
as disclosed in the Schedules attached hereto, all of their respective other
assets and property, whether tangible or intangible, is also owned free and
clear of all mortgages, pledges, security interests, claims, charges or other
encumbrances or restrictions of any kind. A complete and accurate list of the
tangible assets of the Company is attached as Schedule 3.1(m). The Company has
---------------
good and absolute fee simple title to any Real Property owned by them and good
and absolute title to their tangible personal property.
(n) Intellectual Property. The Company owns, or has a valid and binding
---------------------
license or licenses (as to all of which there are no defaults by any of the
parties thereto) to use, all patents, trademarks, service marks, trade names,
copyrights, trade secrets, technology, know-how and other intellectual property
necessary to or used in the conduct of its business as now conducted and as
proposed to be conducted (the "Intellectual Property") as follows. The Company
has not registered or taken any steps to protect the name "Noetix Views" and
"Noetix" other than by the process of incorporation in the State of Oregon. The
Company does not own, claim or use any other trademark or trade name. The
Company has not registered or taken any steps to protect its source codes or
user's manuals other than by including thereon a statement or symbol that a
copyright is claimed. The Company has provided Buyer complete and accurate
lists of all issued patents, patent applications, registered trademarks and
registered service marks and related applications, registered trade names and
registered copyrights owned by or licensed to the Company, and a description of
any material agreements relating to the acquisition by the Company of any such
Intellectual Property in the form attached as Schedule 3.1(n). No Seller nor
---------------
the Company, nor any employee, agent or representative thereof, has distributed
or disclosed confidential, proprietary information of the Company except under
the terms of licenses or confidentiality agreements identified on Schedule
3.1(1). The Company owns or possesses adequate licenses or other rights to use,
- ------
sell and license or dispose of all of the Intellectual Property, and has the
exclusive right to bring actions for the infringement of any of Intellectual
Property owned by it, subject to the Company's Cooperative Development and
Marketing and Technology License Agreements dated April 22, 1996 with Oracle
Corporation (the "Oracle Agreement") . The Company has good and marketable title
or license rights to all of the Intellectual Property and owns such property
free and clear of all security interests, liens, encumbrances, claims and rights
of any
-6-
<PAGE>
kind or nature. Other than as set forth in the Oracle Agreement, no person or
entity other than the Company has any right to market the Intellectual Property,
make any derivative of the Intellectual Property, or make any sale of or
involving any Intellectual Property. Except as set forth on Schedule 3.1(n) and
---------------
in the Oracle Agreement, there are no royalties, honoraria, fees or other
payments payable by the Company to any person or entity by reason of the
ownership, use, license, sale or disposition of the Intellectual Property.
Except as set forth in Schedule 3.1(n) with respect to the Microsoft Help
---------------
compiler, the conduct of the business of the Company does not conflict with or
infringe upon any intellectual property rights of any other person, and no
claims of conflict or infringement are pending or threatened against the
Company.
(o) Status of Contracts. Each of the contracts, agreements, leases,
-------------------
commitments and instruments listed on Schedule 3.1(k) and Schedule 3.1(l)
-----------------------------------
(collectively, the "Contracts") is valid, binding and enforceable by the Company
in accordance with its terms and is in full force and effect. Complete and
accurate copies of all Contracts have been delivered to Buyer. There is no
existing default or violation by the Company under any Contract, and no event
has occurred which (whether with or without notice, lapse of time or both) would
constitute a default of the Company under any Contract. There is no pending or
threatened proceeding which would interfere with the quiet enjoyment of any
leasehold of which the Company is lessee or sublessee. Except for accounts
receivable referred for collection and claims by the Company covered by Section
3.1(g), Sellers are not aware of any default by any other party to any Contract
or of any event which (whether with or without notice, lapse of time or both)
would constitute a default by any other party under any Contract. To the
knowledge of Sellers and the Company there are no facts that exist indicating
that any of the Contracts may be totally or partially terminated or suspended by
the other parties. Other than the employment and independent contractor
agreements identified on Schedule 3.1(l), the Company is not a party to, nor is
----------------
it bound by, any contract or agreement that Sellers reasonably foresee will
result in any loss to the Company upon the performance thereof (including any
liability for penalties or damages, whether liquidated, direct, indirect,
incidental or consequential). No consent from any other parties to the
Contracts is necessary for the consummation of the transactions contemplated by
this Agreement.
(p) Taxes.
-----
(i) Returns. The Company has timely filed all federal, state and
-------
other returns, reports and information returns required to be filed by them
prior to the Closing Date with respect to Taxes (as defined below) which relate
to the business, results of operations or financial condition of the Company
(collectively, the "Returns") and have timely paid all Taxes due. No extensions
of time have been requested for Returns which have not been filed. The federal
and state income tax returns of the Company have been examined by the applicable
taxing authorities or the applicable statutory periods of limitation have
expired, for all periods to and including those set forth on Schedule 3.1(p)
---------------
and, except as set forth on Schedule 3.1(p), the Company has not received any
---------------
notice of audit and there are no
-7-
<PAGE>
outstanding agreements or waivers extending the applicable statutory periods of
limitation for such Taxes for any period. All Returns filed are complete and
accurate in all respects and, except for timing adjustments, no additional Taxes
are owed by the Company with respect to the periods covered by the Returns. The
Company has provided the Buyer with complete and accurate copies of the Returns
since the date of the Company's incorporation through 1995.
(ii) Taxes Paid or Reserved. All deficiencies in Taxes asserted or
----------------------
assessments made by any taxing authority have been fully paid or finally
settled. To the best knowledge of Sellers, the reserves for Taxes reflected in
the Current Balance Sheets are adequate for payment of Taxes with respect to the
Company in respect of the period ending on or before the date of the Current
Balance Sheets. All reserves for Taxes have been determined in accordance with
generally accepted accounting principles consistently applied. All Taxes,
including any estimated tax payments, which the Company has been required to
collect or withhold have been withheld or collected and, to the extent required,
have been paid to the proper taxing authority as of the Closing Date. The
Company has not elected to be treated as a consenting corporation pursuant to
Section 341(f) of the Code.
(iii) Definition. "Taxes" means all taxes, charges, fees, levies or
----------
other assessments, including without limitation income, excise, property, sales,
use and franchise taxes imposed by the United States or any state, county, local
or foreign government or subdivision or agency thereof, and including any
interest, penalties or additions.
(q) Certain Interests. Except as disclosed in Schedule 3.1(q), neither
----------------- ---------------
any Seller nor any officer or director of the Company (or any entity owned or
controlled by one or more of such parties) (i) has any interest in any property,
real or personal, tangible or intangible, used in or pertaining to the business
of the Company or, (ii) is indebted to the Company. The Company is not indebted
to any shareholder, director or officer (or any entity owned or controlled by
one or more of such persons) except for amounts due under normal salary
arrangements and for reimbursement of ordinary business expenses. The
consummation of the transactions contemplated by this Agreement will not either
alone or upon the occurrence of any act or event, or with the lapse of time, or
both, result in any payment (severance or other) becoming due from the Company
to any of its shareholders, officers, directors, or employees (or any entity
owned or controlled by one or more of such parties).
(r) No Restrictions. Except as set forth in any Schedule hereto: (i) No
---------------
power of attorney or similar authorization given by the Company is presently in
effect or outstanding; and (ii) no contract or agreement to which the Company is
a party or is bound or to which any of its properties or assets is subject
limits the freedom of the Company to compete in any line of business or with any
person.
(s) Undisclosed Liabilities. The Company does not have any liability or
-----------------------
obligation (whether absolute, accrued, contingent or other, and whether due or
to become due) not otherwise disclosed on the Schedules attached hereto or
accrued, reserved against or
-8-
<PAGE>
otherwise disclosed in the Financial Statements as of August 31, 1996, except
those liabilities, such as utilities, telephone services, office supplies, and
similar operational expenses incurred in the ordinary course of business within
60 days of the date of the Current Balance Sheets for which the Company was not
invoiced by such date and except for those liabilities incurred after such date
in the ordinary course of business.
(t) Absence of Certain Changes or Events. Since August 31, 1996, and
------------------------------------
except as otherwise disclosed in the Schedules attached hereto, there has not
been:
(i) Adverse Changes. Any material adverse change in the business,
---------------
results of operations, financial condition or prospects of the Company;
(ii) Dividends. Any direct or indirect declaration, setting aside
---------
or payment of any dividend or other distribution (whether in cash, stock,
property or any combination thereof) in respect of the Company's Common Stock or
any direct or indirect repurchase, redemption or other acquisition by the
Company of any shares of its capital stock, or any payment by the Company to or
for the account of any Seller;
(iii) Damage. Any material damage, destruction or casualty loss,
------
whether insured against or not, to any of the assets or properties of the
Company;
(iv) Increased Compensation. Except as set forth on Schedule 3.1
---------------------- ------------
(t)(iv), and except for increases in the base compensation rates for each of
- -------
Cowles, Turner and Masters for the month of September 1996 to such levels as are
equal to the base rates set forth in their employment and consulting agreements
attached as Exhibits C, D and E, any increase in the rate or terms of
-------------------
compensation payable or to become payable by the Company to its directors,
officers or key employees; any increase in the rate or terms of any bonus,
insurance, pension or other employee benefit plan, payment or arrangement made
to, for or with any such directors, officers or key employees; any special bonus
or remuneration paid; or any written employment contract executed or amended;
(v) Expenditures. Any entry into any agreement, commitment or
------------
transaction (including without limitation any borrowing, capital expenditure or
capital financing or any amendment, modification or termination of any existing
agreement, commitment or transaction) by the Company that is material to the
business, results of operations, financial condition or prospects of the
Company, except agreements, commitments or transactions in the ordinary course
of business or as contemplated in this Agreement;
(vi) Accounting Changes. Any change by the Company in accounting
------------------
methods, principles or practices;
(vii) Sales of Stock. Any issuance or sale of any capital stock of
--------------
the Company;
-9-
<PAGE>
(viii) Options. Any option or right granted to purchase any capital
-------
stock of the Company;
(ix) Business Not in the Ordinary Course. Except as set forth on
-----------------------------------
Schedule 3.1(t)(ix), any conduct of business which is outside the ordinary
- -------------------
course of business or not substantially in the manner that the Company
previously conducted its business;
(x) Acquisitions. Any purchase or other acquisition of property,
------------
any sale, lease or other disposition of property, or any expenditure, except in
the ordinary course of business;
(xi) Liabilities. Any incurrence of any liability which, either
-----------
singly or in the aggregate, materially and adversely affects the business,
results of operations, financial condition or prospects of the Company;
(xii) Encumbrances. Any encumbrance or consent to encumbrance of
------------
any property or assets, except in the ordinary course of business; or
(xiii) Adverse Changes. Any change in the assets, liabilities,
---------------
licenses, permits or franchises of the Company, or in any agreement to which the
Company is a party or is bound, which has had or reasonably could be expected to
have a material adverse effect on the business, results of operations, financial
condition or prospects of the Company.
(u) Permits and Licenses. Schedule 3.1(u) contains a complete and
-------------------- ---------------
correct list of all governmental licenses, permits, franchises, easements and
authorizations (collectively, "Permits") held by the Company. The Company
holds, and at all times has held, all Permits necessary for the lawful conduct
of its business pursuant to all applicable statutes, laws, ordinances, rules and
regulations of all governmental bodies, agencies and other authorities having
jurisdiction over it or any part of its operations. The Company is in
compliance with all the terms of each Permit, and there are no claims or
violation by the Company of any Permit. Complete and accurate copies of all
Permits have been delivered to Buyer.
(v) Certain Payments. Neither any Seller nor any person or other entity
----------------
has, directly or indirectly, on behalf of or with respect to the Company or its
business or operations, made or received any payment that was not legal to make
or receive under federal, state or local laws of the United States or any other
country or territory.
(w) Environmental Condition.
-----------------------
(i) Compliance. The business and assets of the Company, including
----------
without limitation the Real Property, are in compliance with all Environmental
-10-
<PAGE>
Laws. Any wastes generated in connection with the business of the Company are
and have been transported and disposed of in compliance with all Environmental
Laws.
(ii) Hazardous Substances. To the best knowledge of Sellers, no
--------------------
Hazardous Substance has been disposed of, spilled, leaked or otherwise released
on, in, under or from the Real Property or has otherwise come to be located in
the soil or water (including surface and ground water) on or under the Real
Property. None of the assets or Real Property of the Company incorporate any
Hazardous Substance that is prohibited, restricted or regulated. No Hazardous
Substance is or has been generated, manufactured, treated, stored, transported,
used or otherwise handled on the Real Property or in connection with the
business of the Company. There are no underground storage tanks on the Real
Property (whether or not regulated and whether or not out of service, closed or
decommissioned).
(iii) Definitions. As used in this Agreement, (A) "Environmental
-----------
Law" means any federal, state or local statute, ordinance or regulation
pertaining to the protection of human health or the environment and any
applicable orders, judgments, decrees, permits, licenses or other authorizations
or mandates under such statutes, ordinances or regulations, and (B) "Hazardous
Substance" means any hazardous, toxic, radioactive or infectious substance,
material or waste as defined, listed or regulated under any Environmental Law,
and includes without limitation petroleum oil and its derivatives.
(x) Consents and Approvals. Other than Oracle Corporation, no consent,
----------------------
approval, or authorization of any court, regulatory authority, governmental
body, or any other entity or person not a party to this Agreement is required
for the consummation of the transactions described in this Agreement by Sellers
or the Company. Sellers and the Company have obtained, or shall have obtained
prior to the Closing, all consents, authorizations or approvals of any third
parties required in connection with the execution, delivery or performance of
this Agreement by them or the consummation of the transactions contemplated by
this Agreement.
(y) Accounts Receivable. Schedule 3.1(y) contains a complete and
-------------------
accurate list of all of the receivables of the Company (including accounts
receivable, loans receivable, advances and theft loss recovery) (collectively,
the "Receivables"). Each of the Receivables has arisen only from bona fide
transactions in the ordinary course of business and can be fully collected
within 120 days after Closing, without resort to litigation and without offset
or counterclaim, except to the extent of the normal allowance for doubtful
accounts with respect to accounts receivable. Buyer shall give reasonable notice
to Sellers regarding the status of the collection of the Receivables, and
Sellers shall have the right to assist the Company in the collection of
Receivables.
(z) Accuracy of Representations and Warranties. None of the
------------------------------------------
representations or warranties made by Sellers in this Agreement or any of the
Schedules contain or will contain any untrue statement of any material fact or
omit or misstate a material fact necessary to make
-11-
<PAGE>
the statements contained in this Agreement not misleading. Sellers and the
Company know of no fact that has resulted or that, in their reasonable judgment
will result, in any material change in the business, results of operation,
financial condition or prospects of the Company that has not been set forth in
this Agreement. Sellers have not represented or warranted to Buyer the amount of
any future revenues the Company will earn or that Noetix Views software is free
of bugs or similar defects.
3.2 Representations and Warranties of Buyer. Buyer represents and warrants
---------------------------------------
to Sellers and the Company as follows:
(a) Existence. Buyer is a corporation duly organized and existing under
---------
the laws of the State of Washington, and Buyer has all necessary corporate power
and authority to own, lease and operate its properties and assets and to carry
on its business as now conducted and as proposed to be conducted.
(b) Authority and Validity. Buyer has the full corporate power and
----------------------
corporate authority to enter into this Agreement and to carry out the terms of
this Agreement. Buyer has taken all corporate action necessary to authorize the
execution, delivery and performance of this Agreement. This Agreement has been
duly and validly executed and delivered by Buyer, and is binding upon and
enforceable against Buyer in accordance with its terms, except as enforceability
may be limited or affected by applicable bankruptcy, insolvency, reorganization
or other laws of general application relating to or affecting the rights of
creditors, and except as enforceability may be limited by rules of law governing
specific performance, injunctive relief or other equitable remedies.
3.3. Representation and Warranty of Cowles. Cowles represents and warrants to
-------------------------------------
Buyer as follows:
(a) Investment Intent. Cowles acknowledges that the issuance of the ARIS
-----------------
Shares to Cowles is a limited offering and that no federal, state or other
agency has made any finding or determination as to the fairness of the sale of
the ARIS Shares nor made any recommendation or endorsement of the ARIS Shares.
Cowles, by reason of his knowledge and experience in financial and business
matters, is capable of evaluating the risks and merits of an investment in the
ARIS Shares. Cowles recognizes that the ARIS Shares are speculative and that
investments in the ARIS Shares involves a high degree of risk. Cowles is
prepared to bear the economic risk of an investment in the ARIS Shares and is
able to withstand a total loss of his investment in the ARIS Shares. Cowles
acknowledges that the purchase of ARIS Shares hereunder is being made for his
own account, for investment purposes only and not with the present intention of
distributing or reselling the ARIS Shares in whole or in part. Cowles further
understands that the ARIS Shares have not been registered under the Securities
Act of 1933, as amended (the "Act"), or under any state securities laws by
reason of specific exemptions therefrom, which depend upon, among other things,
the accuracy of the representations expressed in this Agreement by Cowles.
Cowles acknowledges that the ARIS Shares are subject to
-12-
<PAGE>
restrictions on resale pursuant to the Act and applicable state securities laws.
The certificates representing the ARIS Shares will contain a legend describing
the restrictions on transfer imposed by the Act. Cowles has had the opportunity
to discuss all aspects of this transaction with management of ARIS Corporation,
has made or has had the opportunity to make such inspection of the books and
records of ARIS Corporation as Cowles has deemed necessary in connection with
this investment, and any questions asked have been answered to the satisfaction
of Cowles.
ARTICLE 4
COVENANTS
---------
4.1 Covenants of the Sellers. Sellers and the Company jointly and severally
------------------------
agree that between the date of this Agreement and the Closing Date, unless Buyer
consents in writing:
(a) Business Operations. The business of the Company will be operated in
-------------------
the ordinary course consistent with past practice, and no new method of
operation will be introduced. Sellers and the Company will use their best
efforts to preserve the ongoing business and assets of the Company and will not
take any action that might impair the business, results of operations, financial
condition or prospects of the Company or take or fail to take any action that
would cause or permit the representations made by them in this Agreement to be
materially inaccurate on the Closing Date or preclude them from making such
representations and warranties at the Closing.
(b) Access. Sellers and the Company will permit Buyer and its authorized
------
representatives full access to, and make available for inspection, all of the
assets and business of the Company, including their employees, customers,
suppliers and creditors. Sellers, and the Company will furnish to Buyer all
documents, records and information with respect to the affairs of the Company as
Buyer and its representatives may reasonably request.
(c) Dividends; Changes in Capital Stock. Other than distributions of net
-----------------------------------
earnings for the period from June 30 through the Closing Date, which Buyer has
agreed the Company is entitled to distribute to Sellers, the Company will not
(i) declare, set aside or pay any dividends on, or make any distributions in
respect of, any of its Common Stock, (ii) split, combine or reclassify any it is
capital stock or issue, authorize, or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for shares of its
capital stock, or (iii) repurchase, redeem or otherwise acquire any shares of
its capital stock or any other outstanding securities.
(d) No Issuance of Securities. The Company will not issue, deliver or
-------------------------
sell, or agree to or authorize or propose the issuance, delivery or sale of (i)
any shares of its capital stock or any other securities, or (ii) any rights,
warrants or options to acquire any such securities.
-13-
<PAGE>
(e) Articles and Bylaws. The Company will not amend or propose to amend
-------------------
its Articles of Incorporation or Bylaws.
(f) No Acquisitions. The Company will not acquire or agree to acquire by
---------------
merger or consolidation with, or by purchase of a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets.
(g) No Dispositions. The Company will not sell, lease, encumber, pledge,
---------------
grant a security interest in, or otherwise dispose of, or agree to sell, lease
or otherwise dispose of, any of its assets or any interest in any of its assets,
except in the ordinary course of business consistent with prior practice.
(h) Employee Compensation. Except as set forth on Schedule 4.1(h) or in
--------------------- ---------------
Section 3.1(t), the Company will not grant any increase in the compensation or
rate of compensation payable or to become payable to any officer, employee or
director. No bonus, profit sharing, retirement, insurance, death, fringe
benefit, severance or other extraordinary or indirect compensation shall accrue,
be set aside, or be paid to, for or on behalf on any such person, other than as
required by plans or agreements in effect on the date of this Agreement, except
that accrued bonuses set forth on the attached Schedule 3.2(h) shall be paid
---------------
before Closing. The Company will not amend or make any commitment to enter into
or amend any employment, consulting, employee benefit or other similar
agreement.
(i) Contracts. The Company will not waive any material right or cancel
---------
any material contract, debt or claim or assume or enter into any contract,
lease, license, obligation, indebtedness, commitment, purchase or sale, except
in the ordinary course of business.
(j) Confidentiality. Neither Sellers nor the Company will disclose to
---------------
any person other than their officers, directors, agents and representatives (or
cause or permit any of their respective affiliates, employees, officers,
directors, agents or other representatives to disclose) any of the terms or
conditions of this Agreement, except as may be required by law, valid legal
process or administrative order. If such disclosure is required, Sellers will
provide Buyer a copy of the proposed disclosure at least two business days prior
to making the disclosure.
(k) No Solicitation. Neither Sellers nor the Company will, directly or
---------------
indirectly, solicit or encourage any person, entity or group (other than Buyer)
or enter into any negotiations, discussions or communications with such persons,
concerning any merger, sale of substantial assets not in the ordinary course of
business, or sale of any capital stock of the Company. Sellers and the Company
will each promptly communicate to Buyer the terms of any proposal which they may
receive in respect of any such transactions.
-14-
<PAGE>
(l) Material Changes. Until the Closing of this transaction, Sellers and
----------------
the Company will promptly inform Buyer in writing of (i) any material adverse
change (or any condition, event or development that could cause a material
adverse change) in the business, properties, assets, liabilities,
capitalization, shareholders' equity, condition (financial or other),
operations, or prospects of the Company, (ii) any governmental complaints,
investigations or hearings (or threat thereof), and (iii) the institution or
threat of litigation involving the Company or any of its capital stock.
(m) Failure to Fulfill Conditions. If any of Sellers or the Company
-----------------------------
determine that they will be unable to fulfill, at or before the Closing, any of
their obligations under this Agreement or any of their conditions to Closing,
they will promptly notify Buyer.
(n) Supplements to Schedules. Sellers and the Company will supplement or
------------------------
amend the Schedules to this Agreement with respect to any matter hereafter
arising that, if existing or occurring on the date of this Agreement, would have
been required to be set forth or described in such Schedule. No supplement or
amendment to any Schedule made pursuant to this section shall be deemed to cure
any breach of any representation or warranty made in this Agreement unless Buyer
specifically agrees thereto in writing.
(o) Further Assurances. Upon the request of Buyer from time to time,
------------------
Sellers and the Company shall each provide to Buyer certificates or other
documentation requested by Buyer to the effect that they have complied with all
of their covenants contained in this Agreement.
4.2 Covenants of Buyer. Buyer agrees that between the date of this Agreement
------------------
and the Closing Date, unless Sellers consent in writing:
(a) Confidentiality. Buyer will not disclose to any person other than
---------------
its officers, directors, agents and representatives (or cause or permit any of
its affiliates, employees, officers, directors, agents or other representatives
to disclose) any of the terms or conditions of this Agreement, except as may be
required by law, valid legal process or administrative order. If such
disclosure is required, Buyer will provide Sellers a copy of the proposed
disclosure at least two business days prior to making the disclosure.
(b) Financial Capacity. Buyer will not enter into any transaction that
------------------
would materially impair its financial capacity to consummate the transactions
contemplated in this Agreement.
(c) Failure to Fulfill Conditions. If Buyer determines that it will be
-----------------------------
unable to fulfill, on or before Closing, any of its obligations under this
Agreement or any of its conditions to Closing, it will promptly notify Sellers.
-15-
<PAGE>
(d) Oracle Consent. Buyer will work together with and assist Sellers and
---------------
the Company to obtain the consent of Oracle Corporation to the transactions
contemplated in this Agreement.
(e) Employee Agreements. Buyer shall offer employment agreements to
-------------------
Teresa Norbraten, Cindy Manning-Star and Yvonne Ostrom in form and content
satisfactory to Buyer and containing the following terms: (i) a compensation
rate at least equal to the employee's current compensation rate with the
Company; (ii) employee benefits of a type at least equal to those available to
employees of ARIS Corporation and its affiliated companies to their employees;
(iii) days of service credit for each day that employee was an employee of the
Company; and (iv) relocation severance terms equal to those contained in
Exhibits D and E.
- ----------------
(f) Support for Company Commitments. Buyer acknowledges the considerable
--------------------------------
goodwill and personal reputations the Company and each of the Sellers have built
as a result of their efforts in founding and growing the Company. Buyer shall
honor the relationships Sellers and the Company have developed with customers,
suppliers, employees, independent contractors and partners by using its best
efforts to perform the Company's business related promises and commitments with
respect to Oracle Applications Release 11 and five modules which have not yet
been released, subject, however, to Buyer's reasonable business judgment. Buyer
shall honor the terms of any commitments made by Seller in the ordinary conduct
of its business which are reasonably disclosed to Buyer at Closing, including
any offers or proposals outstanding at Closing to sell and/or support the Noetix
Views software. Provided that the rights of the Company under the Oracle
Agreement are assigned to Buyer, Buyer shall perform all of the Company's
obligations under the Oracle Agreement. Buyer's covenants contained in this
Article 4.2 (f) shall survive for a period of two years from the Closing Date.
-16-
<PAGE>
ARTICLE 5
CONDITIONS PRECEDENT TO CLOSING
-------------------------------
5.1 Condition to Each Party's Obligations. The obligations of each party
-------------------------------------
hereunder are subject to the condition that, at Closing, there shall be no
pending or threatened claim, action, suit, investigation or proceeding against
Buyer, Sellers and the Company for the purpose of enjoining or preventing the
consummation of the transactions contemplated in this Agreement or otherwise
claiming that this Agreement or the consummation of the transactions
contemplated herein are illegal.
5.2 Conditions to Buyer's Obligations. The obligations of Buyer hereunder
---------------------------------
are subject to the fulfillment, at or prior to Closing, of the following
conditions (unless waived in writing by Buyer):
(a) Representations and Warranties. The representations and warranties
------------------------------
of Sellers and the Company contained herein shall be true and correct in all
material respects as of the Closing as if made on and as of the Closing Date,
and Sellers and the Company shall each have delivered to Buyer a certificate,
executed by a person acceptable to Buyer, dated as of the Closing Date, with
respect to their respective representations and warranties.
(b) Covenants. Sellers and the Company shall each have performed and
---------
complied with all covenants or conditions required by this Agreement to be
performed and complied with by them prior to Closing, and Sellers and the
Company shall each have delivered to Buyer a certificate, executed by a person
acceptable to Buyer, dated as of the Closing Date, with respect to their
respective covenants and conditions.
(c) Opinion of the Company's Counsel. Buyer shall have received an
--------------------------------
opinion from Gary Bisaccio, Esq., counsel to the Company, dated as of the
Closing Date, in substantially the form set forth on Exhibit B to this
---------
Agreement.
(d) No Material Adverse Change. Other than as expressly allowed by this
--------------------------
Agreement, there shall not have been any material adverse change (or any
condition, event or development that could cause a material adverse change) in
the business, properties, assets, liabilities, capitalization, shareholders'
equity, condition (financial or other), operations, or prospects of the Company
between the date of this Agreement and the Closing.
(e) Consents. The Company shall have obtained all consents and approvals
--------
necessary to the execution, delivery and performance of this Agreement by them.
(f) Corporate Proceedings. All corporate proceedings necessary to be
---------------------
taken by the Company in connection with the transactions contemplated in this
Agreement and all documents reflecting or evidencing such proceedings shall be
reasonably satisfactory to Buyer
-17-
<PAGE>
and its legal counsel, and Buyer and its legal counsel shall have received all
such counterpart original, certified or other copies of such documents as they
may reasonably request.
(g) Shareholders Agreement. Cowles shall have executed and delivered the
-----------------------
ARIS Corporation Shareholders Agreement.
(h) Share Certificates. Sellers shall have delivered to Buyer
------------------
certificates representing the Shares, duly endorsed in blank or with appropriate
stock powers.
(i) Consulting, Employment, and Noncompetition Agreements. Masters shall
-----------------------------------------------------
have executed and delivered to the Buyer a Consulting Agreement in the form
attached as Exhibit C. Cowles and Turner shall have executed and delivered to
---------
the Buyer Employment Agreements in the forms attached as Exhibit D and Exhibit
--------- -------
E, respectively.
- -
(j) Shareholder Loans. The outstanding balance of any loans previously
-----------------
made to the Company, as shown on the Current Balance Sheets, and any interest
accrued thereon after the date of the Current Balance Sheets, shall have been
contributed to the capital of the Company, and no one shall have received any
payment with respect thereto since the date of the Current Balance Sheet.
(k) Agreements with Respect to Taxes. Sellers shall each have executed
--------------------------------
agreements acceptable to Buyer agreeing to reimburse the Company in full for any
tax liability it may incur as a result of disallowance of any deductions taken
by the Company for compensation paid to them prior to Closing. Sellers shall
have the right to control the representation of themselves in any tax audit or
administrative or legal proceeding with respect to such taxes.
(l) Release from Tenancy Obligations. The Company shall have been fully
--------------------------------
released and held harmless from any continuing obligations under its office
tenancy for the premises located at 10550 S.W. Allen Boulevard, Suite 223,
Beaverton, Oregon.
(m) Buyer's Due Diligence. Buyer shall have completed its due diligence
---------------------
review of the Company and its business, properties, products and prospects
(which shall include a review of the schedules to be provided by the Company to
Buyer and attached hereto) no later than September 27, 1996 in good faith and
shall be reasonably satisfied with the results thereof.
5.3 Conditions to Sellers' Obligations. The obligations of Sellers and the
----------------------------------
Company hereunder are subject to the fulfillment, at or prior to Closing, of the
following conditions (unless waived in writing by Sellers and the Company):
(a) Representations and Warranties. The representations and warranties
------------------------------
of Buyer contained herein shall be true and correct in all material respects as
of the Closing as if
-18-
<PAGE>
made on and as of the Closing Date, and Buyer shall have delivered to Sellers
and the Company a certificate of its President, dated as of the Closing Date,
with respect to its representations and warranties.
(b) Covenants. Buyer shall have performed and complied with all
---------
covenants or conditions required by this Agreement to be performed and complied
with by it prior to Closing, and Buyer shall have delivered to Sellers and the
Company a certificate of its President, dated as of the Closing Date, with
respect to its covenants and conditions.
(c) Purchase Price. Buyer shall have delivered to Sellers the Purchase
--------------
Price as required by this Agreement.
(d) Due Diligence by Cowles. Buyer shall give Cowles and his
-----------------------
professional advisors reasonable access to all books, records and financial
information of Buyer in connection with Cowles' receipt of the ARIS Shares, and
he shall be reasonably satisfied with the results thereof.
ARTICLE 6
TERMINATION
-----------
6.1 Right to Terminate. Notwithstanding anything to the contrary in this
------------------
Agreement, this Agreement may be terminated and the transactions contemplated
herein abandoned at any time prior to the Closing:
(a) by mutual consent of Buyer and the Company;
(b) by either Buyer or Sellers if the Closing shall not have occurred by
October 1, 1996; provided, however, that the right to terminate this Agreement
under this Section 6.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement (or, with respect to the Company,
the failure of any Seller) has been the cause of, or resulted in, the failure of
the Closing Date to occur on or before such date;
(c) by either Buyer or the Company if a court of competent jurisdiction
shall have issued an order, decree or ruling permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable;
(d) by Sellers if Buyer breaches any of Buyer's representations and
warranties in any material respect or fails to comply in any material respect
with any of Buyer's covenants or agreements contained herein; or
-19-
<PAGE>
(e) by Buyer if any of Sellers or the Company breaches any of their
representations and warranties in any material respect or fails to comply in any
material respect with any of their covenants or agreements contained herein.
6.2 Obligations to Cease. If this Agreement is terminated pursuant to
--------------------
Section 6.1, all obligations of the parties to this Agreement shall terminate
and there shall be no liability of any party hereto to any other party except
(i) as set forth in Section 8.13 and (ii) that nothing herein will relieve any
party from liability for any willful breach of this Agreement.
ARTICLE 7
INDEMNIFICATION
---------------
7.1 Definitions. For the purpose of this Article 7, the "Indemnitor" shall
-----------
be either Sellers and the Company, jointly and severally, or the Buyer,
whichever is obligated to the other under this Article 7, and the "Indemnitee"
shall be the party with the right to indemnification.
7.2 Indemnification. Subject to Sections 7.5 and 8.1, the Indemnitor agrees
---------------
to defend, indemnify and hold harmless the Indemnitee and any of its
subsidiaries, affiliates, employees, officers, directors, agents, successors and
assigns from and against any loss, claim, cause of action, damage, liability,
expense or cost of any kind or amount, including without limitation any loss of
earnings or diminution in the fair market value of the Shares, or any taxes,
reasonable attorneys', actuaries', and accountants' fees and expenses, and
liabilities arising under ERISA or the Code, which may be incurred by the
Indemnitee, which results from: (i) any breach of or material inaccuracy in any
representation, warranty or agreement made by or on behalf of the Indemnitor; or
(ii) any material misrepresentations in or any omission from any certificate or
other document furnished or to be furnished by or on behalf of the Indemnitor.
The Indemnitor shall not be liable hereunder with respect to amounts as to which
a claim shall have not been made within the appropriate period provided in
Section 7.3 of this Agreement, and the liability of the Indemnitor hereunder
shall be reduced by any insurance proceeds, tax refunds or other benefit related
to the indemnified claim. However, except for Receivables governed by Sections
3.1(y) and 7.5, no single breach, inaccuracy, misrepresentation or omission
shall be deemed material where the loss, claim, cause of action, damage or
liability to the Buyer, the Company (before the addition of any reasonable
attorneys' actuaries' or accountants' fees or other expenses incurred in
connection therewith) is less than $5,000.
7.3 Notice. The Indemnitee shall notify the Indemnitor in writing of any
------
claim for indemnification under this Agreement, specifying each breach,
misrepresentation, omission, exercise, pension claim, or failure forming the
basis for such claim, and the amount being claimed as a result thereof, which
notice shall be given within 90 days of the discovery of such breach,
misrepresentation, omission, exercise, pension claim, or failure and prior to
the
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<PAGE>
expiration of the applicable survival period stated in Section 8.1. With respect
to any third-party claim, the parties hereto shall make mutually available to
each other all relevant information in their possession material to any such
claim. The Indemnitor shall have the right to defend at its expense any such
third-party claim against the Indemnitee, in which defense the Indemnitee shall
cooperate with the Indemnitor, and the Indemnitor shall have the right to
dispose of any such claim as it sees fit, as long as such disposition is without
prejudice to the Indemnitee or to any subsidiary or affiliate of the Indemnitee.
7.4 Limitation on Indemnification by the Company and the Sellers. The
------------------------------------------------------------
obligations of the Company pursuant to this Article 7 to indemnify Buyer or any
of Buyer's subsidiaries, affiliates, employees, officers, directors, agents,
successors and assigns from and against any loss, claim, cause of action,
damage, liability, expense or cost shall terminate immediately upon the Closing,
and such termination shall have no effect upon the joint and several obligations
of Sellers pursuant to this Article 7. The aggregate liability of the Sellers
pursuant to this Article 7 shall not exceed the Purchase Price.
7.5 Uncollected Receivables. Upon Closing, the Company will use its best
-----------------------
efforts to collect the Receivables. In the event that any of the Receivables
remains uncollected within 120 days following Closing, Sellers agree, jointly
and severally, to repurchase any such uncollected Receivables, within 20 days
after receipt of a written request from Buyer, for cash in the face amount of
such Receivable shown on Schedule 3.1(y) or the balance thereof, whichever is
less; provided that for the purposes of determining the purchase price of any
Receivables repurchased pursuant to this Section 7.5, (i) the allowance for
doubtful accounts reflected on the Current Balance Sheets shall be subtracted
from the purchase price otherwise determined pursuant to this section until all
of the allowance for doubtful accounts has been applied and (ii) any late
charges collected after Closing by the Company with respect to Receivables
existing at Closing shall be credited against any amounts owing pursuant to this
Section 7.5, so long as such late charges were not reflected on the Financial
Statements of the Company at Closing. So long as Sellers comply with the terms
of this section, this section shall be the only remedy of Buyer for a breach of
the representations and warranties contained in Section 3.1(y).
7.6 Notice of Claim of Indemnification; Right of Offset. Buyer acknowledges
---------------------------------------------------
Sellers right of contribution against each other in any claim for
indemnification or lawsuit arising under this Agreement. In each event for
which Buyer claims indemnification by Indemnitor hereunder, Buyer shall provide
notice of such claim for indemnification to each of the Sellers at the addresses
set forth in Section 8.5. Buyer agrees to name each of Sellers as co-defendants
in any lawsuit arising hereunder. Each Seller expressly acknowledges and agrees
that Buyer shall have the right to offset against any obligation of Buyer under
the Notes or future remuneration payable to such Seller under the terms of any
employment, consulting and/or noncompetition agreement between such Seller and
Buyer, any obligations of the Company or any Seller which have been resolved in
favor of the Company and which are subject to a claim for indemnification by
Buyer under this Article 7. Buyer agrees that in any such circumstance,
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<PAGE>
it shall be obligated to offset amounts due first against the Notes (or any
Note) if the Notes or any Note are outstanding, and only if offset against the
Notes or a Note is inadequate to satisfy the liability in full shall it have the
right to seek offset against remuneration payable to a Seller.
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<PAGE>
ARTICLE 8
GENERAL PROVISIONS
------------------
8.1 Survival of Representations and Warranties. Except as stated below, the
------------------------------------------
representations and warranties contained in this Agreement shall survive for a
period of two years after the Closing Date. The representations and warranties
contained in Sections 3.1(p) (taxes) and 3.1(w) (environmental condition) shall
survive for a period equal to the statute of limitations for such matters. From
and after the Closing, the representations and warranties contained in Article 3
shall be deemed to be joint and several representations of Sellers only.
8.2 Reliance. The parties recognize and agree that the parties shall be
--------
entitled to rely upon the representations and warranties set forth this
Agreement.
8.3 Schedules. Each of the Schedules to this Agreement shall be read and
---------
construed separately, and any information set forth on one Schedule shall not be
deemed to be disclosed for purposes of another Schedule unless it is
specifically set forth on such other Schedule.
8.4 Assignment. Neither this Agreement nor any right or obligation created
----------
hereby may be assigned by any party without the prior written consent of the
other parties or their successors, provided however, that Buyer shall be free to
assign this Agreement at any time prior to or after the Closing to its wholly-
owned subsidiary, ARIS Software, Inc.
8.5 Notices. All notices or other communications required or permitted to be
-------
given hereunder shall be in writing, shall be addressed as provided below and
shall be considered as properly given (i) if delivered in person, (ii) if sent
by overnight delivery service, (iii) if mailed by first-class United States
mail, postage prepaid, registered or certified with return receipt requested, or
(iv) if sent by prepaid telegram or by telex or facsimile copy and confirmed.
Notice so given shall be effective upon receipt by the addressee; provided,
however, that if any notice is tendered to an addressee and the delivery thereof
is refused by such addressee, such notice shall be effective upon tender. For
the purposes of notice, the addresses of the parties shall be as noted below;
provided that any party shall have the right to change its address for notice
hereunder by giving written notice to the other parties. The initial addresses
and facsimile numbers of the parties are as follows:
BUYER: ARIS Corporation
Attn: General Counsel
6720 Fort Dent Way, Suite 250
Seattle, Washington 98188-2555
Fax: (206) 433-1182
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<PAGE>
COMPANY: Noetix Corporation
Attn: Dewayne Cowles
10550 S.W. Allen Blvd., Suite 223
Beaverton, Oregon 97005
Fax: (503)
Copy to: Gary Bisaccio, Esq.
3718 S.W. Condor, Suite 100
Portland, Oregon 97201
Fax: (503) 223-3511
SELLERS: Dewayne Cowles
15558 N.W. Overton Drive
Beaverton, OR 97006
Mark Turner
5205 S.W. Menefee Drive
Portland, OR 97201
Steve Masters
7810 S.W. 66th
Portland, OR 97223
8.6 Arbitration; Governing Law Any dispute or claim arising under or related
--------------------------
to the transactions contemplated by this Agreement shall be settled through
binding arbitration in front of a single arbitrator within 90 days of the filing
of such arbitration. Any claim for arbitration by the Company or Sellers (or
any of them) shall be filed with the Judicial Arbitration and Mediation Service
in Seattle, Washington in accordance with their rules and procedures. Any claim
for arbitration by Buyer shall be filed with a similar arbitration and mediation
service in Portland, Oregon in accordance with the rules and procedures of the
American Arbitration Association.
8.7 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original, and all of which together shall constitute a
single agreement.
8.8 Severability. If any provision of this Agreement shall be held to be
------------
invalid, illegal or unenforceable, the same shall not affect any other provision
of this Agreement, but this Agreement shall be construed in a manner which, as
nearly as possible, reflects the original intent of the parties.
8.9 Amendment and Modification. This Agreement may be amended or modified
--------------------------
only by written agreement executed by all parties hereto.
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<PAGE>
8.10 Waiver. Any waiver of any of the provisions or conditions of this
------
Agreement or any of the rights of a party hereto shall be valid only if set
forth in an instrument in writing signed by the party granting such waiver. Any
waiver or failure to insist upon strict compliance with any obligation,
covenant, agreement or condition shall not operate as a waiver of any other
provision.
8.11 Binding Effect. This Agreement shall inure to the benefit of and be
--------------
binding upon the parties, their legal representative, successors, and permitted
assigns.
8.12 Further Assurances. Subject to the terms and conditions of this
------------------
Agreement, each of the parties hereto will use its best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations, to
consummate and make effective the transactions contemplated in this Agreement.
8.13 Transaction Expenses. Whether or not the transactions contemplated in
--------------------
this Agreement are consummated, each party shall bear its own costs and expenses
(including without limitation attorneys' fees and expenses).
8.14 Entire Agreement. This Agreement, including the Schedules and Exhibits
----------------
hereto, sets forth the entire understanding and agreement of the parties hereto
relating to the purchase and sale of the Shares and supersedes any and all other
understandings, negotiations or agreements between the parties hereto relating
to the purchase and sale of the Shares.
8.15 Attorneys' Fees. In the event of a dispute with respect to the
---------------
interpretation of or a party's performance under this Agreement, the prevailing
party in such dispute shall be entitled to recover from the non-prevailing party
the prevailing party's reasonable attorneys' fees and costs.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth above.
BUYER:
ARIS CORPORATION
By /s/ Paul Song
--------------------------------
Paul Song, President
SELLERS:
/s/ Dewayne Cowles
----------------------------------
Dewayne Cowles
/s/ Mark Turner
----------------------------------
Mark Turner
/s/ Steve Masters
----------------------------------
Steve Masters
THE COMPANY:
NOETIX CORPORATION
By /s/ Dewayne Cowles
--------------------------------
Dewayne Cowles
President
-26-
<PAGE>
LIST OF SCHEDULES AND EXHIBITS
Exhibit A Financial Statements
---------
Exhibit B Opinion of Company's Counsel
---------
Exhibit C Masters Consulting Agreement
---------
Exhibit D Cowles Employment Agreement
---------
Exhibit E Turner Employment Agreement
---------
Schedule 3.1 (b)(i) Capitalization
-------------------
Schedule 3.1 (f) Financial Statements
----------------
Schedule 3.1 (g) Litigation
----------------
Schedule 3.1 (i)(i) Labor Matters
-------------------
Schedule 3.1 (i)(ii) Employee Benefits
--------------------
Schedule 3.1 (i)(iii) Employee Agreements
---------------------
Schedule 3.1 (j) Real Property
----------------
Schedule 3.1 (k) Real Property Leases
----------------
Schedule 3.1 (l) Certain Contracts and Arrangements
----------------
Schedule 3.1 (m) Tangible Assets
----------------
Schedule 3.1 (n) Intellectual Property Audit
----------------
Schedule 3.1 (p) Taxes
----------------
Schedule 3.1 (q) Certain Interests
----------------
Schedule 3.1(t)(iv) Increased Compensation
-------------------
Schedule 3.1(t)(ix) Business not in the Ordinary Course
-------------------
Schedule 3.1 (u) Permits and Licenses
----------------
Schedule 3.1 (y) Accounts Receivable
----------------
Schedule 4.1 (h) Bonuses
----------------
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<PAGE>
EXHIBIT 10.34
[The Registrant shall furnish supplementally a copy of any omitted Schedule to
the Commission upon request.]
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made and entered into this 3rd day of
October, 1996, to be effective as of September 30, 1996, by and among SOFTEACH
CORPORATION, a Colorado corporation ("Seller"), ARIS CORPORATION, a Washington
corporation ("Purchaser"), and Terri J. Olson and Greg A. Olson (sometimes
referred to herein as the "Indemnifying Shareholders"). The parties have joined
in the execution of this Agreement for the purposes herein provided, including
the indemnification obligations undertaken by them as herein provided.
RECITALS
WHEREAS, Seller is engaged in the business of among other things, providing
computer and software training services to individuals, organizations, groups,
and entities (the "Business");
WHEREAS, the Indemnifying Shareholders own an aggregate of 100% of the
issued and outstanding capital stock of Seller on a fully diluted basis and are
officers, directors and key employees of the Seller, and have joined into the
execution hereof in consideration of the direct or indirect benefits expected to
be derived by them from the sale of the Business to the Purchaser, as herein
provided; and
WHEREAS, Purchaser desires to purchase from Seller and Seller desires to
sell to Purchaser substantially all of Seller's assets and the Business pursuant
to the terms hereof, and in connection therewith provide for related
arrangements and agreements, all in accordance with and pursuant to the terms,
conditions and provisions contained in this Agreement;
NOW, THEREFORE, for and in consideration of the mutual promises contained
in this Agreement and of other good and valuable consideration, Purchaser and
Seller agree as follows:
ARTICLE I
Purchase and Sale
1.1 Transaction. On and subject to the terms, conditions and provisions
-----------
of this Agreement, at the Closing:
(a) Purchaser will purchase from Seller, and Seller will sell,
transfer, and assign to Purchaser, the Acquired Assets, as hereinafter
defined and described.
(b) Purchaser will pay the Purchase Price, will deliver the ARIS
Stock, and will assume the obligation for payment or discharge of the
Assumed Liabilities, in each case as hereinafter defined and described.
-1-
<PAGE>
1.2 Acquired Assets. As used in this Agreement, the term "Acquired
---------------
Assets" means the assets, properties and rights which are owned or used by
Seller in connection with the conduct of the Business, including without
limitation the assets reflected on the Financial Statements, all of which shall
be transferred at the Closing to the Purchaser free and clear of any liens,
encumbrances or rights in any other party except the Assumed Liabilities.
Without limiting the generality of the foregoing, the Acquired Assets include
the following assets of the Business:
(a) Cash and Accounts Receivable. All of Seller's cash, including
----------------------------
cash on hand and in bank accounts, time deposits, certificates of deposit,
marketable and other securities, billed and unbilled accounts receivable
(whether or not the same have arisen in the ordinary course of business of
the Seller) and proceeds of accounts receivable held by Seller at Closing,
including specifically and without limitation those described or referred
to on SCHEDULE 1.2(a) (the "Cash and Accounts Receivable"). Notwithstanding
the foregoing, Seller is not selling and Purchaser is not purchasing any
cash constituting a part of the Purchase Price or designated by Seller as a
reserve for the payment of the liabilities and obligations of Seller not
assumed by Purchaser at the time of Closing including amounts withheld to
pay taxes, employee salaries, and accounts payable which are incurred in
the ordinary course of the Business and which come due prior to Closing
(the "Cash Reserve"), and which are specifically identified on SCHEDULE
1.2(a). The excluded cash and Cash Reserve of Seller specifically
identified on SCHEDULE 1.2(a) as not constituting a part of "Cash and
Accounts Receivable" are not included within the definition of "Cash and
Accounts Receivable".
(b) Furniture, Equipment and Tangible Personal Property. All of
---------------------------------------------------
Seller's furniture, equipment, computer hardware, instruments of all kinds,
office equipment, automobiles and other vehicles, and including
specifically and without limitation those described or referred to on
SCHEDULE 1.2(b) (the "Personal Property"). Notwithstanding the foregoing,
Seller is not selling and Purchaser is not purchasing certain items of
tangible personal property specifically identified on SCHEDULE 1.2(b) as
not constituting a part of "Personal Property" and not included within the
definition of "Personal Property".
(c) Inventories. All of Seller's inventories, wherever located and on
-----------
all mediums, of computer hardware and software manuals, training programs,
courseware, and materials, all computer programs, disks, printed products,
including, without limitation, those inventories described on SCHEDULE
1.2(c) (the "Inventories").
(d) Contracts.
---------
(1) Customer Contracts. Subject to the consequences of
------------------
assignment and without warranty of assignability, Seller's rights
under those certain orders,
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<PAGE>
contracts and commitments for the purchase of goods or services listed
on SCHEDULE 1.2(d)(1) (collectively, the "Customer Contracts"). Seller
agrees that it will use its best efforts to seek applicable third-
party consents to the transfer and assignment of such Customer
Contracts as may be reasonably requested by Purchaser.
(2) Pending Contracts and Proposals. Without warranty as to
-------------------------------
transfer or assignability, Seller's rights under those certain orders,
contracts, proposals and commitments for goods or services by Seller
listed on SCHEDULE 1.2(d)(2) (collectively, the "Proposals"). Seller
agrees that it will use its best efforts to seek applicable third-
party consents to the transfer and assignment of such Proposals as may
be reasonably requested by Purchaser.
(3) Agency Contracts. Subject to the consequences of assignment
----------------
and without warranty of assignability, Seller's rights under those
certain sales representative and trainer agreements related to the
Seller's Business and other service or sales agency agreements or
arrangements listed on SCHEDULE 1.2(d)(3) (the "Agency Contracts").
Seller agrees that it will use its best efforts to seek applicable
third-party consents to the transfer and assignment of such Agency
Contracts as may be requested by Purchaser.
(4) Material Contracts. Seller's rights under those certain
------------------
contracts and leases listed on SCHEDULE 1.2(d)(4) (the "Material
Contracts").
(5) General Contracts and Commitments. Subject to the
---------------------------------
consequences of assignment and without warranty of assignability,
Seller's rights under all other contracts, leases, licenses,
warranties, arrangements and other agreements not otherwise specified
herein (the "General Contracts"). Seller agrees that it will use its
best efforts to seek applicable third-party consents to the transfer
and assignment of such General Contracts as may be requested by
Purchaser.
(6) Prepaids and Deposits. All of Seller's prepayments, deposits
---------------------
and similar items, including, without limitation, all prepaid
expenses, deferred charges, advance payments, purchase rebates,
utility or other product or service deposits and other prepaid items,
and including specifically and without limitation those prepaid
expenses, deferred charges, advance payments, deposits and other items
described or referred to on SCHEDULE 1.2(d)(6) the "Prepaid Items and
Deposits").
(e) Intellectual Property. All of Seller's (i) patents and patent
---------------------
applications (including renewals, extensions, or modifications thereof);
(ii) confidential and proprietary information and trade secrets, including
without limitation, know-how, inventions, computerized data and
information, computer software and programs,
-3-
<PAGE>
business records, files and data, discoveries, processes and techniques,
testing and quality control processes and techniques, drawings, customer
and client lists; (iii) all trademarks, service marks (including
SofTeach(R)), and any applications for registration of same; (iv)
copyrights; (v) trade names (including SofTeach Corporation); (vi) computer
software, courseware, books, technical specifications, manuals, and (vii)
other intellectual property owned by Seller or used in connection with the
Business, whether presently existing or in process of development, and
including specifically and without limitation the intellectual property
described or referred to on the Intellectual Property Questionnaire
attached hereto as SCHEDULE 1.2(e) (the "Intellectual Property").
(f) Permits. To the extent transferrable or assignable, those certain
-------
permits, approvals, qualifications, authorizations, licenses, consents,
certifications or clearances and the like held, used or required in the
conduct of the Business issued by any government or governmental unit,
agency, board, body, or instrumentality, whether federal, state or local,
and all applications therefor, including specifically and without
limitation the permits, approvals and qualifications described or referred
to on SCHEDULE 1.2(f) (the "Permits").
(g) Books and Records. All business books and records, including
-----------------
without limitation all financial, operating, inventory, legal, personnel
and payroll records of those employees of Seller who are hired by Purchaser
at Closing, customer lists and records, supplier lists and records, and all
sales and promotional literature, correspondence and files related to the
business and all original plans, drawings, specifications, building
permits, certificates of occupancy, governmental licenses for improvements,
and architectural documents pertaining to the facility and including
specifically and without limitation the books and records described or
referred to on SCHEDULE 1.2(g) (the "Books and Records"). Notwithstanding
the foregoing, Seller is not selling and Purchaser is not purchasing
Seller's corporate minute book, stock transfer records and legal files and
records related to this Agreement or to the organization, governance and
dissolution of the Seller, and the minute book, stock transfer records and
legal files and records related to this Agreement or to the organization,
governance and dissolution of the Seller are not included within the
definition of "Books and Records."
(h) Post Office Box, Telephone and Electronic Addresses. All of
---------------------------------------------------
Seller's post office boxes, telephone and facsimile numbers, and e-mail
and/or internet domain addresses and/or web sites used in connection with
the Business including without limitation those described on SCHEDULE
1.2(h).
1.3 Assumed Liabilities. As used in this Agreement, the term "Assumed
-------------------
Liabilities" means only the liabilities and obligations of Seller assumed by
Purchaser and described in this Section 1.3 as such items shall exist at the
time of the Closing. The Assumed Liabilities include only the following
liabilities:
-4-
<PAGE>
(a) Trade Accounts Payable. Accrued accounts payable to suppliers of
----------------------
Seller incurred in the ordinary course of business of the Business as of
the date of Closing as listed and set forth on SCHEDULE 1.3(a), plus an
amount for additional accounts payable which are unknown to Seller or not
billed on the date of Closing not to exceed $10,000 in the aggregate (the
"Trade Payables").
(b) Contract Obligations. The obligations of Seller under contracts
--------------------
and agreements listed on SCHEDULES 1.2(d)(1), 1.2(d)(2), 1.2(d)(3),
1.2(d)(4) and 1.2(d)(6) but only to the extent that such obligations have
arisen in the ordinary course of business of the Seller, and other
contracts assumed by the Purchaser, and have not been performed prior to
the Closing (the "Contract Obligations").
(c) Office Lease. Obligations of Seller arising from and after the
------------
date hereof under that certain Lease Agreement dated May 20, 1992, as
amended, for the Seller's office suite commonly known as Suite 606, 1355
South Colorado Boulevard, Denver, Colorado 80222 (the "Lease").
Purchaser shall not assume, and does not hereby assume, any obligation of Seller
except as expressly set forth herein. Purchaser hereby agrees to indemnify,
defend, and hold Seller and the Indemnifying Shareholders harmless from and
against any and all liabilities, penalties, damages, losses, claims, costs and
expenses (including reasonable attorneys' fees and expenses for the defense of
any claim which, if proved, would give rise to an obligation of indemnity
hereunder), but not including lost profits or consequential damages, arising out
of or resulting directly or indirectly from the Purchaser's failure to fully pay
or satisfy or cause to be paid or satisfied any liabilities expressly assumed by
Purchaser pursuant to the terms hereof.
1.4 Purchase Price. Subject to the terms and conditions of this
--------------
Agreement, the purchase price (the "Purchase Price") to be paid by the Purchaser
to the Seller for the Acquired Assets, upon consummation of the Closing, is as
follows:
(a) Cash Payment. At the Closing, Purchaser will pay Seller Seven
------------
Hundred Fifty Thousand and No/100ths Dollars ($750,000.00) by wire transfer
to an account designated by the Seller in writing at least three business
days prior to the Closing.
(b) ARIS Stock. At the Closing, and upon Seller's execution of a
----------
subscription agreement in a form substantially similar to that set forth as
SCHEDULE 1.4(b), Purchaser will deliver to Seller Forty-Two Thousand
(42,000) shares of no par common stock in ARIS Corporation (the "ARIS
Stock"). Seller shall be free to assign or transfer all or any portion of
the ARIS Stock to Terri J. Olson or Greg A. Olson ("ARIS Stock
Transferees"), so long as the ARIS Stock Transferees shall execute the ARIS
Corporation Amended and Restated Shareholders Agreement and a subscription
agreement in a form
-5-
<PAGE>
substantially similar to that set forth as SCHEDULE 1.4(b) (the
"Subscription Agreement"), and thus agree to be bound by all terms and
conditions thereof.
(c) Balance of Purchase Price. At the Closing, Purchaser will deliver
-------------------------
to Seller its promissory note in the principal amount of Five Hundred
Thousand and No/100ths Dollars ($500,000.00), bearing interest at the rate
of six percent per annum (6% A.P.R.), payable as follows: Two Hundred Fifty
Thousand and No/100ths Dollars ($250,000.00) plus then-accrued interest on
April 1, 1997, with the balance of all unpaid principal and accrued
interest payable on July 1, 1997 (the "Promissory Note").
(d) Collateral. Purchaser agrees to execute at Closing such security
----------
agreement and other documents requested by Seller, in a form acceptable to
Purchaser, evidencing a grant of a security interest in the Acquired
Assets. Such security interest in the Acquired Assets (the "Security
Interest") shall not be a purchase money security interest and shall be in
any event subordinate to the security interest in all of Purchaser's
assets, including the Acquired Assets, held by U.S. Bank of Washington,
N.A. of Seattle, Washington.
The Purchase Price shall be allocated among the Acquired Assets as provided in
SCHEDULE 1.4.
1.5 Closing Financial Statements. At the time of Closing, Seller shall
----------------------------
deliver to Purchaser a balance sheet, income statement and other financial
statements of the Seller as of the date of Closing (the "Closing Financial
Statements"), which shall be prepared in accordance with generally accepted
accounting principles, consistently applied.
ARTICLE II
Representations and Warranties
2.1 Representations and Warranties of Seller and Indemnifying
---------------------------------------------------------
Shareholders. Seller and each Indemnifying Shareholder hereby jointly and
severally represent and warrant to the Purchaser, both as of the date hereof and
as of the time of Closing:
(a) Accounts Receivable. SCHEDULE 1.2(a) includes a true and complete
-------------------
list of all billed and unbilled accounts receivable of the Seller as of the
date thereof. The Accounts Receivable represent all receivables of the
Business. All of the Accounts Receivable have been generated by Seller in
the ordinary course of business of the Business. Except as specifically
identified on SCHEDULE 1.2(a), all obligations of Seller under the
contracts generating the Accounts Receivable have been fully and completely
performed or otherwise satisfied and any products or services related
thereto have been delivered.
(b) Inventories. Subject to any vendor's lien associated with any of
-----------
the Trade Payables, Seller has good and marketable title to the
Inventories, free and clear of any
-6-
<PAGE>
lien, claim, encumbrance or other right of any third party.
(c) Equipment and Other Personal Property.
-------------------------------------
(1) Seller has good and marketable title to the Personal
Property, free and clear of any lien, claim, charge, encumbrance or
other right of any third party. All of the personal property listed as
owned is owned by Seller free and clear of any lien or encumbrance,
and all of the personal property listed as leased is leased under
valid and existing leases to possess and control as lessee all of such
tangible personal property listed as leased and neither Seller nor any
lessor is in default under any such lease agreement.
(2) The Personal Property to be purchased hereunder (or for which
this Agreement contemplates the assumption by Purchaser of the related
lease agreement) constitutes all of the tangible assets necessary or
desirable for the continued operation of the Business by Purchaser
following the Closing in a manner consistent with the historical
practice of Seller in the conduct of the Business.
(3) All of the Personal Property is in good operation and repair.
(d) Real Property. Seller has, and following the Closing Purchaser
-------------
will have, full right, power and authority to use the leasehold premises
presently used in connection with the Business under the terms of the
Lease. Seller has not received any notice of any special assessments being
contemplated against Seller related to Seller's use of the leasehold
premises. All water, sewer, electric and telephone facilities and all other
utilities required by law for the normal operation of the Business are in
good working order and are adequate to serve the operation of the Business
to the best of Seller's knowledge after reasonable inquiry. The Seller's
occupancy, operation and use of the leasehold premises do not violate any
state, federal, county or city statute, ordinance, code, rule or regulation
or the terms of the Lease.
(e) Contracts.
---------
(1) Subject to the provisions contained in Section 1.2(d)(1)
hereof, SCHEDULE 1.2(d)(1) constitutes a complete and accurate list of
all Customer Contracts to be acquired by Purchaser categorized by
customer, project, pricing and training schedule and payment status.
(2) Subject to the provisions contained in Section 1.2(d)(2)
hereof, SCHEDULE 1.2(d)(2) constitutes a complete list of all
Proposals to be acquired by Purchaser which have associated with them
any continuing obligation of
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<PAGE>
performance or liability, including, without limitation, any liability
in the nature of continuing service or warranty (whether express or
implied) or arising by course of conduct or business. Each such order,
contract or proposal is accurately identified and categorized by
customer, project, pricing, training schedule and any other material
term or condition. Any such arrangements with any entity related to
Seller or any shareholder is so indicated on SCHEDULE 1.2(d)(2).
(3) Subject to the provisions contained in Section 1.2(d)(3)
hereof, SCHEDULE 1.2(d)(3) constitutes a complete and accurate list of
all Agency Contracts to be acquired by Purchaser under the terms
hereof.
(4) SCHEDULE 1.2(d)(4) constitutes a complete and accurate list
of the Material Contracts to be acquired by Purchaser under the terms
hereof.
(5) The appropriate Schedules referenced in this Section 2.1(e)
indicate all prepaid and similar items related to the subject matter
thereof, including, without limitation, all prepaid expenses,
deposits, deferred charges, advance payments, and other prepaid items
held by Seller with respect to the Business.
Except as otherwise disclosed on the respective Schedules described in this
Section 2.1(e): (1) each of the contracts, commitments, arrangements or
obligations referred to therein is a valid and binding obligation of Seller
and the other party or parties thereto and was made and entered into in the
ordinary course of business of the Seller; (2) all of such contracts,
commitments, other arrangements or obligations are included in the Acquired
Assets, and constitute substantially all of such contracts, commitments,
arrangements or obligations involved in the Business; (3) except as noted,
none of the parties to any of such contracts, commitments, arrangements or
obligations has terminated, canceled or substantially modified such
contract, commitment, arrangement or obligation to the best of Seller's
knowledge after reasonable inquiry; and (4) neither Seller nor any other
party is in default thereunder.
(f) Permits. SCHEDULE 1.2(f) constitutes a complete and accurate list
-------
of the Permits. Seller is not in default, breach or noncompliance under
any of the Permits and the Permits constitute all of such items as are
necessary for the conduct of the Business.
(g) Books and Records. The Books and Records are located at the
-----------------
business office of the Seller and copies of excerpts from the Books and
Records provided to Purchaser are true, correct and complete copies of the
originals.
(h) Post Office Boxes, Telephone Numbers and Electronic Addresses.
-------------------------------------------------------------
The post office boxes, telephone and facsimile numbers, and e-mail and/or
internet domain
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<PAGE>
addresses and/or web sites set forth on SCHEDULE 1.2(h) constitute all of
the active post office boxes and telephone and facsimile numbers used in
the Business during the three (3) year period prior to the date of this
Agreement.
(i) Trade Payables. SCHEDULE 1.3(A) constitutes a complete and
--------------
accurate list of the Trade Payables. The Trade Payables have been accrued
by Seller in the ordinary course of business of the Business and none of
which are aged beyond forty-five (45) days. There are no accounts payable
of the Business except for the items listed in the Trade Payables.
(j) Certain Secured Obligations. All accrued interest and previously
---------------------------
payable lease or other payments have been made on the leases, and Seller is
not in default with respect to any provision of such obligations. The
amount due by Seller on the leases are not in excess of the amounts
indicated on the Latest Balance Sheet.
(k) Disclosure. Neither the financial statements nor any
----------
representation or warranty contained herein, nor any information delivered
or to be delivered by the Seller pursuant to this Agreement, contains or
shall contain an untrue statement of a material fact, nor do the financial
statements, representations, warranties and other information omit to
state, nor will they omit to state, any material fact necessary in order to
make the statements made not misleading.
(l) Intellectual Property. Seller owns, or has a valid and binding
---------------------
license or licenses (as to all of which there are no defaults by any of the
parties thereto) to use, all Intellectual Property necessary to or used in
the conduct of its business as now conducted and as proposed to be
conducted. Seller has provided Purchaser, via the Intellectual Property
Questionnaire attached as SCHEDULE 1.2(e), with complete and accurate lists
of all issued patents, patent applications, registered trademarks and
registered service marks and related applications, registered trade names
and registered copyrights owned by or licensed to Seller, and a description
of any material agreements relating to the acquisition by Seller of any
such Intellectual Property in the form attached as SCHEDULE 1.2(e).
Neither Seller, nor, to the best of Seller's belief after reasonable
inquiry, any employee, agent or representative of Seller, has distributed
or disclosed confidential, proprietary information of Seller except under
the terms of a confidentiality agreement. Seller owns or possesses
adequate licenses or other rights to use, sell and license or dispose of
all of the Intellectual Property, and has the exclusive right to bring
actions for the infringement of any Intellectual Property owned by it.
Seller has good and marketable title or license rights to all of the
Intellectual Property and owns such property free and clear of all security
interests, liens, encumbrances, claims and rights of any kind or nature.
No person or entity other than Seller has any right to market the
Intellectual Property, make any derivative of the Intellectual Property, or
make any sale of or involving any Intellectual Property. Except as set
forth on SCHEDULE 1.2(e), there are no royalties,
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<PAGE>
honoraria, fees or other payments payable by Seller to any person or entity
by reason of the ownership, use, license, sale or disposition of the
Intellectual Property. The conduct of the business of Seller does not
conflict with or infringe upon any intellectual property rights of any
other person, and no claims of conflict or infringement are pending or
threatened against Seller.
(m) Organization and Existence. Seller is a corporation duly
--------------------------
organized, validly existing, and in good standing under the laws of the
State of Colorado. The Indemnifying Shareholders own an aggregate of 100%
of the issued and outstanding stock of the Seller.
(n) Power and Authority. Seller has full right, power and authority
-------------------
to execute, deliver and perform this Agreement. Seller is not a party to
any contract and is not subject to any other legal restrictions that would
prevent or restrict complete fulfillment of any of the terms and conditions
of this Agreement or compliance with any of Seller's obligations hereunder.
(o) Authorization. The Indemnifying Shareholders hold all of the
-------------
capital stock of the Seller or any rights to acquire or subscribe to
capital stock of the Seller. The execution, delivery, and performance of
this Agreement by Seller has been duly authorized by all requisite
corporate action on its part, including action by both the directors and
shareholders of Seller.
(p) Binding Effect. This Agreement is a valid, binding, and legal
--------------
obligation of Seller, enforceable against Seller and each Indemnifying
Shareholder in accordance with the terms hereof.
(q) No Default. Neither the execution and delivery of this Agreement
----------
nor the Seller's and the Indemnifying Shareholders' full performance of
their respective obligations hereunder will violate or breach, or otherwise
constitute or give rise to a Default under the terms or provisions of
Seller's Articles of Incorporation, Seller's Bylaws, any regulations or any
material contract, commitment, instrument, notice, writ, injunction, order
or decree of any court, agency, or other governmental authority or other
obligation to which Seller or any Indemnifying Shareholder is a party.
(r) Finders. Neither Seller nor any Indemnifying Shareholder has
-------
engaged, nor is directly or indirectly obligated to anyone acting as a
broker, finder, or in any other similar capacity in connection with the
sale of the Acquired Assets or any other transaction contemplated by this
Agreement.
(s) Liens and Encumbrances. Except for the Assumed Liabilities, the
----------------------
Acquired Assets are, and at Closing will be, owned by Seller free and clear
of any and all liens, claims, charges or encumbrances whatsoever and any
right of any party other than
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<PAGE>
Seller.
(t) Financial Statements. SCHEDULE 2.1(t) is a listing of financial
--------------------
statements, information and schedules, covering the Business, true, correct
and complete copies of which have been previously delivered to Purchaser
(collectively, the "Financial Statements"). Each of the Financial
Statements is (and upon the preparation thereof the Closing Financial
Statements will be) true, correct and complete in all material respects and
fairly presents (or, in the case of the Closing Financial Statements, will
fairly present) the financial condition as of the date indicated and the
results of operations for any period including therein, in each case in
accordance with generally accepted accounting principles, consistently
applied.
(u) Liabilities for Payment. SCHEDULE 2.1(u) contains a complete and
-----------------------
accurate list of all indebtedness (including accrued interest and taxes)
related to the Business with respect to which Seller is liable. Seller is
not in default under any note, bond, debenture, mortgage, indenture,
security agreement, guaranty, or other instrument of indebtedness, or any
other material agreement or commitment, or pursuant to which, with the
passage of time, would Seller be in default thereunder.
(v) Litigation. There is no litigation, proceeding, action, claim, or
----------
governmental investigation pending or threatened against or relating to the
Acquired Assets or the Business which would, individually or in the
aggregate, have a material or adverse effect on the Business, and neither
Seller nor any Indemnifying Shareholder has knowledge of any facts or
circumstances which could give rise to any such litigation, proceeding or
investigation. Neither Seller nor any Indemnifying Shareholder is subject
to any notice, writ, injunction, order, or decree of any court, agency, or
other governmental authority which would materially or adversely affect the
Business or the consummation of the transaction contemplated hereby.
(w) Employees. SCHEDULE 2.1(w) constitutes a complete and accurate
---------
listing of (i) all employees currently involved in the operation of the
Business and all contracts or other arrangements under which they are
currently employed, and (ii) all pension, retirement, profit-sharing,
employee stock option or stock purchase, bonus, deferred compensation,
incentive compensation, life insurance, health insurance, fringe benefit,
or other employee benefit plans of Seller, or applicable to the Business or
its employees.
(x) Compliance with Laws. Seller is, and at all times prior to the
--------------------
date hereof has been, in full compliance with all statutes, ordinances,
codes, restrictions, regulations, and other governmental requirements
applicable to the Business or the operation thereof. Without in any manner
limiting the generality of the foregoing, Seller specifically represents
that Seller is in compliance with the Americans With Disabilities Act and
regulations promulgated thereunder.
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<PAGE>
(y) Payment of Taxes; Tax Liens. All tax returns, declarations of
---------------------------
estimated tax and tax reports ("Tax Returns") required to be filed by
Seller have been filed in timely fashion with the appropriate government
agency, and all federal, state and local income, profits, employment,
franchise, sales, use, occupation, property, excise or other taxes or
charges ("Tax Liability") reported or due with respect to Seller's Tax
Returns for the last six (6) years have been paid and all required
estimated payments of Tax Liability applicable to the Business have been
paid when due and Seller has withheld and paid to the appropriate taxing
authority or jurisdiction any and all amounts required by law or agreement
to be withheld from the wages or salaries of its employees. There are no
agreements by Seller for the extension of the time for the assessment of
any Tax Liability. The Acquired Assets are not in any manner encumbered by
or vulnerable to liens arising out of any Tax Liability nor shall any such
lien arise on account of any Tax Liability for any period prior to the
Closing. Seller has provided Purchaser with a copy of any audit report
resulting from any audit performed with respect to any tax return filed or
required to be filed by Seller in the past three (3) years.
(z) No Material Events. Other than as disclosed herein, the Business
------------------
has been conducted only in the ordinary and usual course since May 1991,
and no event, condition, circumstance, or occurrence which has had or is
likely to have a material or adverse effect on the Business or the
properties, assets, liabilities (fixed or otherwise) or condition
(financial or otherwise) of the Business has occurred since such date.
(aa) Environmental Matters. Neither Seller nor, to the knowledge of
---------------------
Seller, any other person has generated, processed, stored, transported,
disposed of or otherwise handled any Hazardous Materials in any manner on
the Seller's premises (1355 South Colorado Boulevard, Suite 606, Denver,
Colorado) or at any other site from which the Business was conducted (the
"Business Premises") that has resulted, or that could result, in a
Hazardous Materials Contamination on the Business Premises. Neither Seller
nor any Shareholder has received any notice from any governmental authority
or other person respecting or related to any actual, threatened or
potential release of Hazardous Materials, and no investigation or
proceeding with respect to Hazardous Materials or Hazardous Materials
Contamination is threatened, anticipated or in existence with respect to
the Business Premises.
As used herein, the term "Hazardous Materials" shall include any hazardous
waste, as defined by the Resource Conservation and Recovery Act of 1976 (42
U.S.C. Section 6901 et seq.), as amended from time to time, and regulations
promulgated thereunder, and any hazardous substance, as defined by the
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (42 U.S.C. Section 9601 et seq.) ("CERCLA"), as amended from time to
time, and regulations promulgated thereunder. As used herein, the term
"Hazardous Materials Contamination" shall mean contamination (whether
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<PAGE>
presently existing or hereafter occurring) of premises, buildings,
facilities, soil, groundwater, air or other elements as a result of
Hazardous Materials.
(bb) Labor Relations; Collective Bargaining Agreements. Seller has
-------------------------------------------------
good and amicable relations with its employees, and there are no
controversies pending or, to the knowledge of Seller or any Indemnifying
Shareholder threatened between Seller and its employees. Seller is not a
party to any collective bargaining or union contract and, to the knowledge
of Seller and the Indemnifying Shareholders, there exists no current union
organizational effort with respect to employees of Seller.
(cc) True and Complete Copies. Seller has delivered or made available
------------------------
to Purchaser true, complete and accurate copies of all contracts,
agreements and documents referred to in this Agreement or related to the
Business, together with all modifications thereof and amendments thereto,
and all business books and records, including without limitation all
financial, operating, inventory, legal, personnel, payroll, customer lists
and records, supplier lists and records, and all sales and promotional
literature, correspondence and files of Seller with respect to the
Business.
(dd) Safety Requirements. The operation of the Business is presently
-------------------
in full compliance with, and at all times prior to the date of the Closing
will have been in full compliance with, any and all job safety requirements
applicable thereto, including without limitation any and all requirements
of the Occupational Safety and Health Act of 1970, as amended, and any
other requirements of any governmental authority with respect to the health
or safety of workers. Seller has received no notice of any failure to
comply with any such law, order, rule or regulation, nor is any such
complaint pending or threatened from any other party. Seller has provided
Purchaser with a copy of any report resulting from any audit, study or
review performed with respect to health or safety of workers employed by
Seller. Seller has not entered into any agreements with respect to health
or safety matters, nor has Seller been subject to any complaint with
respect to worker safety or health, nor is Seller or any Shareholder aware
of any fact or circumstance which would give rise to any such claim.
(ee) Disclosure. Neither the Financial Statements nor any
----------
representation or warranty contained herein, nor any information delivered
or to be delivered by the Seller or the Indemnifying Shareholders, pursuant
to this Agreement, contains or shall contain an untrue statement of a
material fact, nor do the financial statements, representations, warranties
and other information omit to state, nor will they omit to state, any
material fact necessary in order to make the statements made not
misleading.
2.2 Purchaser's Representations and Warranties. Purchaser hereby
------------------------------------------
represents and warrants to Seller that as of the time of Closing:
(a) Organization and Existence. Purchaser is a Washington corporation
--------------------------
duly
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<PAGE>
organized, validly existing, and in good standing under the laws of the
State of Washington, and will be qualified as a foreign corporation in
Colorado prior to Closing or as soon thereafter as is reasonably
practicable.
(b) Power and Authority. Purchaser has full corporate power and
-------------------
authority under its Articles of Incorporation, Bylaws and the laws of the
State of Washington to execute, deliver and perform this Agreement.
Purchaser is not a party to any contract and is not subject to any other
legal restriction that would prevent or restrict complete fulfillment of
any of the terms and conditions of this Agreement or compliance with any of
Purchaser's obligations hereunder.
(c) Authorization. The execution, delivery, and performance of this
-------------
Agreement have been duly authorized by all requisite corporate actions on
the part of Purchaser.
(d) Binding Effect. This Agreement is a valid, binding, and legal
--------------
obligation of Purchaser, enforceable in accordance with its terms.
(e) No Default. Neither the execution and delivery of this Agreement
----------
nor Purchaser's full performance of its obligations hereunder will violate
or breach, or otherwise constitute or give rise to a default under, the
terms or provisions of the Purchaser's Articles of Incorporation, bylaws
laws or any material contract, commitment, instrument, notice, writ,
injunction, order or decree of any court, agency, or other governmental
authority or other obligation to which the Purchaser is a party.
(f) Finders. Purchaser has not engaged, nor is directly or indirectly
-------
obligated to anyone acting as a broker, finder, or in any other similar
capacity in connection with the sale of the Acquired Assets or any other
transaction contemplated by this Agreement.
(g) ARIS Stock. In reliance on the representations and warranties
----------
contained in the executed Subscription Agreement, Purchaser believes that
the transfer of the ARIS Stock to Seller, pursuant to this Agreement, does
not require the ARIS Stock to be registered pursuant to the Securities Act
of 1933 and, again in reliance on the representations and warranties
contained in the executed Subscription Agreement, that any subsequent
transfer by Seller of the ARIS Stock to the Transferees only shall not
violate any federal securities law, Colorado Blue Sky law, or any other law
regulating the transfer of corporate securities. When issued, the ARIS
Stock will be fully paid and nonassessable.
ARTICLE III
Actions Before Closing
3.1 General Inspection. Between the date hereof and the Closing, Seller
------------------
covenants to
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<PAGE>
Purchaser that Seller will afford Purchaser and Purchaser's counsel, accountants
and other representatives full access, during normal business hours, to all of
Seller's assets, properties, books, records, personnel, accountants, attorneys,
customers, clients, contractors and suppliers and will furnish Purchaser during
such period with all such information concerning the Business as Purchaser may
reasonably request. Seller specifically covenants that it will permit duly
authorized representatives of Purchaser to conduct an audit of Seller's Books
and Records and such tests of the assets, including such physical inspection,
inventory and evaluation as Purchaser may request, provided that any such tests
are performed in such a manner as will not disrupt the operation of the
Business. In addition, Seller will permit such representatives to make abstracts
from, or take copies of, such books, records or other documentation, or to
obtain temporary possession of any thereof as may be reasonably required by
Purchaser, and Seller will furnish to Purchaser such information concerning the
Business, and its assets, liabilities, or condition, as Purchaser may reasonably
request.
3.2 Interim Conduct of the Business. Seller hereby covenants to Purchaser
-------------------------------
that, from the date of this Agreement to the Closing, Seller will conduct the
Business only in the ordinary and usual course, subject to Purchaser's approval
of certain transactions pursuant to Section 3.3. Without limiting the
generality of the foregoing, Seller hereby covenants to Purchaser that, insofar
as the Business is concerned, Seller will use its best efforts to:
(a) Preserve intact the Business's relationships with suppliers,
customers, employees, creditors, and others having business dealings with
the Business.
(b) Maintain in full force and effect its existing policies of
insurance which affect the Business.
(c) Preserve, protect and maintain the Acquired Assets.
(d) Take no action which would interfere with or prevent performance
and consummation of this Agreement.
(e) Continue performance in the ordinary course of its obligations
under contracts, commitments, or other obligations.
(f) Take all reasonable action to consummate the transaction
contemplated by this Agreement, including cooperating with Purchaser's
representatives for purposes of facilitating the orderly transfer to
Purchaser of the Acquired Assets and the Business.
(g) Not solicit from any other person, firm or corporation any
inquiries or proposals related to the disposition of all or any substantial
potion of the Acquired Assets or the Business or pursue or engage in
discussions with respect thereto.
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<PAGE>
(h) Not waive any right, cancel any debt or claim, or voluntarily
suffer any extraordinary loss.
3.3 Purchaser's Approval of Certain Transactions. Seller hereby covenants
--------------------------------------------
to Purchaser that, except as may otherwise be required under this Agreement,
from the date hereof to the Closing, insofar as the Business is concerned,
Seller will not directly or indirectly take any of the following actions without
the prior written consent of Purchaser:
(a) Incur or permit the incurrence of any debt for borrowed money or
incur any obligation or other liability except in the ordinary course of
business.
(b) Enter into any lease of real or personal property or any renewals
thereof involving a rental obligation.
(c) Permit any encumbrances against any of the Acquired Assets.
(d) Not make any dividend or other distribution to shareholders.
(e) Pay any bonus or increase the rate of compensation payable to any
of the employees of the Business or otherwise enter into or alter any
employment, consulting, or managerial services agreement affecting the
Business.
(f) Commence, enter into, or alter any pension, retirement, profit-
sharing, employee stock option or stock purchase, bonus, deferred
compensation, incentive compensation, life insurance, health insurance,
fringe benefit, employment contracts or other employee benefit plan or
arrangement affecting employees of the Business.
(g) Except with respect to the excluded tangible personal property
identified on SCHEDULE 1.2(b), make any commitments or increase any
previous commitments for capital expenditures or sell or otherwise dispose
of any capital asset.
(h) Accelerate or delay any performance of a contract for goods or
services, except as may be necessary in the ordinary course of business.
(i) Enter into or materially modify any transaction, contract or
commitment, other than modifications to Seller's employment agreements with
Terri J. Olson, whether or not in the ordinary course of business, or waive
any right, cancel any debt or claim, or voluntarily suffer any
extraordinary loss, however nothing herein shall preclude Seller from
employing such professional consultants (including accountants and
attorneys) to advise Seller with respect to the transactions contemplated
by this Agreement.
(j) Acquire, maintain or hold Inventories in excess of that required
for a
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<PAGE>
particular project or in excess of the amount of Inventories reasonably
required for operation of the Business in the ordinary course.
(k) Sell, assign, transfer, license, or convey any of the Intellectual
Property to be included as part of the Acquired Assets.
3.4 UCC Searches. Within five (5) business days from the date of this
------------
Agreement, Seller shall furnish to Purchaser certificates from the Secretary of
the State of Colorado providing a listing of all financing statements and all
other documents on file in that office, including but not limited to,
continuation, amendment, release or assignment statements, in each case filed
with the Colorado Secretary of State's office against Seller or any of the
Acquired Assets, together with true and complete copies of said financing
statements (the "UCC Searches"). Effective as of the date of the Closing, Seller
shall cause the UCC Searches to be updated. In each case, the Acquired Assets
shall be subject only to liens and encumbrances expressly consented to in
writing by the Purchaser. Any additional liens and encumbrances on the Acquired
Assets shall be satisfied and the Seller shall, prior to Closing, file, or cause
to be filed with the Colorado Secretary of State's office, a termination
statement for any lien or encumbrance affecting any of the Acquired Assets not
consented to by Purchaser.
ARTICLE IV
Conditions
4.1 Conditions to Purchaser's Obligations. The obligation of Purchaser to
-------------------------------------
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions at or prior to the Closing:
(a) Each representation and warranty of Seller or any Indemnifying
Shareholder contained in this Agreement shall be true, accurate and
complete in all material respects as of the date of Closing and shall be
deemed to have been remade at and as of the date of Closing.
(b) Seller and each Indemnifying Shareholder shall have performed and
complied with all agreements and conditions required by this Agreement to
be performed or complied with by Seller or any Indemnifying Shareholder
prior to or at the Closing and shall have delivered to Purchaser all
documents, certificates, and instruments required to be delivered under the
terms of this Agreement. In addition, Purchaser shall have received an
opinion, dated as of the date of Closing, of Seller's counsel in form and
content satisfactory to Purchaser in Purchaser's reasonable discretion.
(c) Seller shall have obtained all of the consents, approvals, and
novations, or effective waivers thereof, which Seller is required to obtain
under the terms of this Agreement.
-17-
<PAGE>
(d) There shall not have been issued and in effect any injunction or
similar legal order prohibiting or restraining consummation of any of the
transactions contemplated by this Agreement and no legal action or
governmental investigation which might reasonably be expected to result in
any such injunction or order shall be pending or threatened.
(e) Purchaser shall have entered into employment or consulting
agreements with the employees of Seller described on SCHEDULE 4.1(e) upon
such terms and conditions as are satisfactory to Purchaser in Purchaser's
reasonable discretion, but which will give credit to such employees for
their years of service with the Seller as if same had occurred in the
employ of Purchaser for purposes of determining vacation and annual leave
benefits.
(f) There shall not have occurred any material adverse change, or any
event or circumstance which could result in a material adverse change in
the Business or its prospects.
(g) Seller shall have provided to Purchaser a certificate executed by
Seller's president verifying that Seller has obtained all necessary and
appropriate consents required for Seller to execute, deliver and perform
this Agreement.
(h) Seller shall have provided to Purchaser a certificate executed by
Seller's president verifying that Seller has given any employee
notification required under applicable laws, if any, and has received the
approval of any governmental authority required in order to consummate the
transactions herein described, if any is so required.
(i) At the Closing, Seller shall provide Purchaser with evidence that
Seller has amended its Articles of Incorporation, effective no later than
three (3) days after the Closing Date, to change its corporate name to a
name that does not contain the word "SofTeach" or any word or words similar
thereto, and that Seller has abandoned any assumed name containing the word
"SofTeach" or any word or words similar thereto.
4.2 Conditions to Seller's Obligations. The obligation of Seller to
----------------------------------
consummate the transactions contemplated by this Agreement is subject to the
satisfaction of the following conditions at or prior to Closing:
(a) Each representation and warranty of Purchaser contained in this
Agreement shall be true, accurate, and complete in all material respects as
of the date of Closing and shall be deemed to have been remade at and as of
the date hereof and as of the Closing.
(b) Purchaser shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied with
by Purchaser
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<PAGE>
prior to or at the Closing and shall have delivered all documents,
certificates, and instruments required to be delivered under the terms of
this Agreement.
(c) Purchaser shall have taken all corporate and other actions and
obtained all of the consents necessary for Purchaser to execute, deliver
and perform this Agreement.
(d) There shall not have been issued and in effect any injunction or
similar legal order prohibiting or restraining consummation of any of the
transactions contemplated by this Agreement and no legal action or
governmental investigation which might reasonably be expected to result in
any such injunction or order shall be pending or threatened.
(e) There shall not have occurred any material adverse change, or any
event or circumstance which could result in a material adverse change to
the business of the Purchaser.
(f) The ARIS Stock will not be required to be registered, pursuant to
the Securities Act of 1933, and thus shall be exempt from registration, as
a consequence of the transaction contemplated by this Agreement.
ARTICLE V
Closing
5.1 The Closing. As used in this Agreement, the term "Closing" means the
-----------
time at which the transactions contemplated hereby will be consummated after
satisfaction or waiver of the conditions set forth in Article IV.
5.2 Time, Date, and Place of Closing. The Closing shall occur at 11:00
--------------------------------
a.m. (Mountain Time) on October 3, 1996, but effective as of September 30, 1996
(the "Closing Date"). The Closing shall take place at the offices of ANTONIO
BATES BERNARD Professional Corporation, 3200 Cherry Creek South Drive, Suite
380, Denver, Colorado 80209, or at such other place as the parties may agree in
writing.
5.3 Purchaser's Obligations. At the Closing, Purchaser shall deliver the
-----------------------
following:
(a) Purchaser shall execute and deliver to Seller the following
documents, certificates, and other items:
(i) Bill of Sale and Assumption Agreement in the form attached
hereto as SCHEDULE 5.3(a)(i);
(ii) The ARIS Stock;
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(iii) The Promissory Note;
(iv) Officer's Certificate, including an incumbency
certification and further certifying as to the existence
and good standing of the Purchaser, the accuracy of all
representations and warranties of the Purchaser, and the
adoption by the Board of Directors of the Purchaser of
resolutions authorizing and approving the transaction;
(v) A Certificate of Good Standing of the Purchaser issued by
the office of the Secretary of State of Washington dated as
of a date within fifteen (15) days prior to Closing;
(vi) Executed employment agreements between Purchaser and
certain individuals formerly employed by Seller, which
employment agreements will become effective upon Closing;
and
(vii) Such other documents, certificates, and other items as may
be required to be delivered by the Purchaser pursuant to
the terms of this Agreement or as may be reasonably
requested by the Seller to effectuate the transaction
herein described.
(b) Purchaser shall deliver to Seller the amount of the cash payment
to be made to the Seller as specified in Section 1.4(a) hereof.
5.4 Seller's Obligations. At the Closing, Seller shall deliver the
--------------------
following:
(a) Seller shall execute and deliver to Purchaser the following
documents, certificates, and other items:
(i) Bill of Sale and Assumption Agreement in the form attached
hereto as SCHEDULE 5.3(a)(i);
(ii) Officer's Certificate, including an incumbency
certification and further certifying as to the existence
and good standing of the Seller, the accuracy of all
representations and warranties of the Seller, the adoption
by the Board of Directors and shareholders of the Seller of
resolutions authorizing and approving the transaction;
(iii) Certificate of Good Standing of the Seller issued by the
Office of Secretary of State of Colorado dated as of a date
not more than ten (10) days prior to the Closing; and
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<PAGE>
(iv) Such other documents, certificates, and other items as may
be required to be delivered by the Seller pursuant to the
terms of this Agreement or as may be reasonably requested
by the Purchaser to effectuate the transaction herein
described.
(b) Seller shall deliver to Purchaser ownership of and title to the
Acquired Assets, free and clear of any and all liens, claims and
encumbrances, except as otherwise herein contemplated;
(c) Seller shall deliver to Purchaser such confirmations of the
consent to assumption of the Assumed Liabilities as may be requested by
Purchaser; and
(d) Seller shall have provided Purchaser with an opinion of Seller's
counsel, in form and content as herein contemplated.
5.5 Closing Costs and Expenses. Each party hereto shall bear its own
--------------------------
expenses of the transaction herein described.
ARTICLE VI
Actions After Closing
6.1 Further Conveyances. After the Closing, Seller and each Indemnifying
-------------------
Shareholder will, without further cost or expense to Purchaser, execute and
deliver to Purchaser (or cause to be executed and delivered to Purchaser) such
additional instruments of conveyance and transfer and take such other and
further actions as Purchaser may reasonably request more effectively to convey,
transfer to and vest in Purchaser, and to put Purchaser in possession and
operating control of, all or any part of the Acquired Assets and the Business
and otherwise effect the terms of this Agreement. In case of contracts and
rights, if any, which cannot be transferred effectively without the consent of
third parties, which consent is unobtainable, Seller and the Indemnifying
Shareholders shall use their best efforts to secure Purchaser the benefits
thereof.
6.2 Further Consents to Assignment. As and to the extent Seller shall
------------------------------
have failed to obtain prior to Closing the consent or approval (or an acceptable
effective waiver thereof) of any person or persons in respect of any item
described in Section 4.1 hereof or the parties shall have failed to obtain any
other consent to the assumption of any contract included as a part of the
Acquired Assets or Assumed Liabilities, if Purchaser shall nonetheless have
elected to proceed to purchase the Acquired Assets, Seller and the Indemnifying
Shareholders shall continue to use their best efforts to obtain from such person
or persons the consents or approvals (or effective waivers thereof).
6.3 Right of Access. For a period of not less than five (5) years from
---------------
the date of
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<PAGE>
Closing, Purchaser shall retain the Books and Records and each party shall have
reasonable access to the Books and Records which shall be stored in the Denver,
Colorado metropolitan area unless otherwise agreed by the parties.
6.4 Right to Audit. For a period of not less than five (5) years from the
--------------
date of Closing, Purchaser, at its sole expense, shall have the right to conduct
such audits of all books and records maintained by Seller after Closing or not
otherwise within the definition of Books and Records set forth in SECTION 1.2(g)
hereof.
6.5 Registration Rights. Purchaser has agreed to grant Indemnifying
-------------------
Shareholders registration rights regarding the ARIS Stock. Within thirty (30)
days of the Closing, Purchaser and Indemnifying Shareholders shall enter into an
agreement setting forth, defining and describing such registration rights.
ARTICLE VII
Employees and Employee Benefits
7.1 Employment. Purchaser shall offer to employ such of Seller's
----------
employees, on such terms and with such compensation, as Purchaser may determine
in its sole discretion.
7.2 Accrued Commissions, Vacation. Seller shall be responsible for, and
-----------------------------
shall pay as of the time of Closing or segregate funds for the payment of, all
obligations of Seller to all current and former employees of the Business for
accrued payroll, commissions and other compensation, and any and all SARSEP
contributions, deferred compensation or vacation owed to current or former
employees of the Business as of the Closing.
7.3 Workers' Compensation. Seller will bear the entire cost and expense
---------------------
of all workers compensation claims arising out of injuries identifiably
sustained by employees of the Business on or before the Closing Date. Purchaser
will bear the entire cost and expense of all workers compensation claims arising
out of injuries identifiably sustained by employees of the Business after the
Closing Date. As to any workers' compensation claims arising out of injuries
without an identifiable date of occurrence either before or after the Closing
Date, the Purchaser and Seller agree to work together to reasonably allocate the
cost and expenses arising from said claims.
ARTICLE VIII
Indemnification
8.1 Indemnification of Purchaser. Seller and each Indemnifying
----------------------------
Shareholder, jointly and severally, hereby agree to indemnify, defend, and hold
Purchaser harmless from and against any and all liabilities, penalties, damages,
losses, claims, costs, and expenses (including reasonable attorneys fees and
expenses for the defense of any claim which, if proved, would give
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<PAGE>
rise to an obligation of indemnity hereunder whether or not such claim may be
ultimately proved), arising out of or resulting directly or indirectly from (a)
any misrepresentation or breach of any representation or warranty by Seller or
any Indemnifying Shareholder; (b) failure of Seller to fully pay or satisfy or
cause to be paid or satisfied any liabilities not expressly assumed by Purchaser
pursuant to the terms hereof; (c) nonperformance of any obligations or covenants
on the part of Seller or Indemnifying Shareholder under this Agreement,
including, without limitation, the failure of Seller to pay accrued
compensation, retirement, pension, or vacation of current or former employees of
Seller; and (d) the conduct of the Business prior to the Closing (other than
liabilities expressly assumed by the Purchaser pursuant to the terms hereof),
including any violation of laws occurring or alleged to have occurred prior to
the Closing provided, however, that Purchaser shall not have caused or procured
such event through its own acts.
8.2 Responsibility for Defense. Within thirty (30) days after receipt of
--------------------------
any notice of a claim made under Section 8.1 hereof, but not less than five (5)
working days prior to the time Purchaser is required to respond to a Claim,
Seller and each Indemnifying Shareholder will, by giving written notice to
Purchaser, have the right to assume responsibility for the defense of the Claim
in the name of Purchaser or otherwise as Seller and each Indemnifying
Shareholder may elect; provided that Seller and each Indemnifying Shareholder
also acknowledge in writing their responsibility to indemnify Purchaser with
respect to such Claim; and provided further that failure of Seller and the
Indemnifying Shareholders to exercise their rights to assume responsibility for
the defense of the Claim shall not restrict the ability of Purchaser from
subsequently joining such indemnitor as a party in any litigation respecting
such Claim, nor shall Purchaser be obligated to permit Seller or any
Indemnifying Shareholder to assume responsibility for the defense if Purchaser
shall have a reasonable basis to believe that its ability to receive full
indemnification hereunder is in jeopardy for any reason, including without
limitation the financial solvency of Seller or the Indemnifying Shareholder. In
such event, Purchaser shall have the right to defend the Claim and shall be
automatically deemed to have reserved all of its rights against Seller and each
Indemnifying Shareholder. Seller and the Indemnifying Shareholders are herein
sometimes called the "Defending Party." Notwithstanding a Defending Party's
responsibility for the defense of a Claim, the other party shall have the right
to participate, at its own expense and with its own counsel, in the defense of a
Claim and the Defending Party will consult with the other party from time to
time on matters relating to the defense of such Claim and will provide such
information and assistance as the parties deem reasonably necessary to defend
the Claim. The Defending Party will provide the other party with copies of all
pleadings and correspondence relating to such Claim and will keep the other
party appraised of proposed adjustment, compromises and settlements.
Notwithstanding anything herein to the contrary, the Defending Party shall not
be entitled to compromise or settle any such action without the prior written
consent of the Purchaser.
8.3 Payment of Fees and Expenses. If Purchaser shall be entitled under
----------------------------
this Article VIII to indemnification for fees and expenses, Purchaser shall be
entitled to currently offset any amounts due Seller upon the submission to the
Seller of a request for reimbursement setting forth
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<PAGE>
in reasonable detail such costs and expenses to be reimbursed.
8.4 Right to Offset. At any time that Purchaser shall have a right of
---------------
indemnification against Seller or any Indemnifying Shareholder under this
Article VIII, Purchaser shall be entitled to offset any claim against any
amounts then owing by Purchaser to Seller or any Indemnifying Shareholder.
8.5 Environmental Indemnification. In addition to any other
-----------------------------
indemnification rights contained herein, Seller and each Indemnifying
Shareholder, jointly and severally, hereby specifically indemnify, defend and
hold harmless Purchaser from any and all liabilities, actions, demands,
penalties, losses, costs or expenses (including, without limitation, attorney's
fees and cost of suit), suits, cost of settlement or judgment, and claims of any
and every kind whatsoever which now or in the future may be paid, incurred or
suffered by or asserted against Purchaser or any person holding by, through or
under Purchaser, as a direct or indirect result of, the presence on or under, or
the escape, seepage, leakage, spillage, discharge, emission or release of any
Hazardous Materials or any Hazardous Materials Contamination occurring on the
Business Premises at any time prior to Closing.
ARTICLE IX
Amendment, Waiver, and Termination
9.1. Amendment. This Agreement may be amended at any time prior to the
---------
Closing only by written instrument executed by all of the parties hereto.
9.2 Waiver. Either party may at any time waive compliance by the other of
------
any covenants or conditions contained in this Agreement but only by written
instrument executed by the party waiving such compliance. No such waiver,
however, shall be deemed to constitute the waiver of any such covenant or
condition in any other circumstance or the waiver of any other covenant or
condition. The failure of Purchaser to enforce, at any time or for any period of
time, any of the provisions of this Agreement shall not constitute a waiver of
such provisions.
9.3 Termination. In addition to any right of termination herein provided,
-----------
this Agreement may be terminated at any time prior to the Closing, but only by
written instrument signed by both parties.
ARTICLE X
Miscellaneous
10.1 Cooperation. Each of Purchaser, Seller and each Indemnifying
-----------
Shareholder will cooperate with the other party, at the other party's request
and expense, in furnishing information, testimony, and other assistance in
connection with any actions, proceedings, arrangements, and disputes with other
persons, or governmental inquiries or investigations involving Seller or
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<PAGE>
Purchaser's conduct of the Business or the transactions contemplated hereby.
10.2 Confidentiality. After the Closing, Seller and each Indemnifying
---------------
Shareholder will hold all information related to the Business or the operation
thereof in strictest confidence and will use neither such information nor other
information concerning the Business that Seller or any Indemnifying Shareholder
may retain after the Closing for any purpose intended to result in a competitive
economic gain to Seller or any Indemnifying Shareholder, whether or not such
undertaking might actually be competitively disadvantageous to Purchaser or the
Business. Seller and Purchaser shall not issue any press release concerning the
transaction herein described unless such press release is either jointly issued
or has been approved by the other party.
10.3 Severability. If any term or provision of this Agreement or the
------------
application thereof to any person or circumstance shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement or the application of
such term or provision to persons or circumstances other than those as to which
it is invalid or unenforceable shall not be affected thereby, and each term and
provision of this Agreement shall be valid and enforceable to the extent
permitted by law.
10.4 Expenses. Except as otherwise expressly provided in this Agreement,
--------
each party will bear its own expenses incurred in connection with this Agreement
and the transaction contemplated hereby, whether or not such transaction shall
be consummated.
10.5 Transfer Taxes. Purchaser will bear any state, federal or foreign
--------------
transfer, sales or use taxes, if any, which may result from the transfer of the
Acquired Assets from Seller to Purchaser.
10.6 Notices. All notices, offers, approvals and other communications
-------
hereunder shall be in writing and shall be deemed given upon mailing by
registered or certified United States mail, postage prepaid and return receipt
requested, to the other party addressed as follows:
If to Purchaser: ARIS Corporation
6720 Ft. Dent Way, Suite 250
Seattle, Washington 98188-2555
Attention: General Counsel
With a copy to: ANTONIO BATES BERNARD
Professional Corporation
3200 Cherry Creek South Drive, Suite 380
Denver, Colorado 80209
Attention: Brian E. Bates, Esq.
If to Seller: SofTeach Corporation
1355 South Colorado Boulevard, Suite 606
Denver, Colorado 80222
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<PAGE>
Attention: Terri J. Olson
With a copy to: Roger L. Simon, Esq.
1355 South Colorado Boulevard, Suite 600
Denver, Colorado 80222
Any writing which may be mailed pursuant to the foregoing may also be delivered
by hand or transmitted by telecopier and in such event shall be effective when
actually received by the addressee. Either party may from time to time specify
as its address for purposes of this Agreement any other address within the
continental United States upon the giving of ten (10) days written notice
thereof to the other party.
10.7 Assignment. This Agreement and the rights, obligations and
----------
liabilities hereunder shall be binding upon and inure to the benefit of the
successors and assignees of each of the parties hereto, but no rights,
obligations or liabilities hereunder shall be assignable or delegable by any
party without the prior written consent of the other parties hereto.
10.8 No Third Parties. This Agreement is not intended to, and shall not,
----------------
create any rights in or confer any benefits upon any person other than the
parties hereto.
10.9 Incorporation by Reference. All Schedules, Appendices and other
--------------------------
attachments to this Agreement constitute integral parts to this Agreement and
are hereby incorporated into this Agreement by this reference for all relevant
purposes. The Schedules referred to herein have been separately compiled, and
initialed by the undersigned representatives of Seller, the Indemnifying
Shareholders and Purchaser.
10.10 Counterparts and Facsimile Copies. This Agreement may be executed
---------------------------------
in two or more counterparts, each of which shall be deemed an original, and it
shall not be necessary in making proof of this Agreement to produce or account
for more than one counterpart. A facsimile copy, including a facsimile copy of
a signature, shall have the same force and effect as an original.
10.11 Entire Agreement; Time is of the Essence. This Agreement, together
----------------------------------------
with the instruments and other documents described or referred to herein,
including those employment agreements referred to in Section 4.1(e) herein and
SCHEDULE 4.1(e) hereof, constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes any prior oral or
written agreement. Time is of the essence of this Agreement.
10.12 No Waiver of Rights. While Purchaser shall have the opportunity, as
-------------------
provided herein, to make inspections, reviews and evaluations and to obtain or
give consents related to the Business, under no circumstances shall Purchaser be
liable with respect to any such consents or be limited in any manner whatsoever
in its ability to rely upon the covenants and representations
-26-
<PAGE>
of Seller or any Indemnifying Shareholder made herein.
10.13 Interpretation. Any headings in this Agreement are for convenience
--------------
of reference only and shall not define or limit any of the terms or provisions
hereof. All pronouns shall be deemed to refer to the masculine, feminine,
neuter, singular or plural as the identity of the person or persons referred to
may require. Each defined term identified herein with initial capital letters
shall have the meaning ascribed to such term herein. Each party agrees that the
language and all parts of this Agreement shall be construed as a whole according
to its fair meaning, and irrespective of any party or its counsel's role in
drafting this Agreement shall not be strictly construed for or against any
party. The parties acknowledge that each has reviewed this Agreement and has had
the opportunity to have it reviewed by its attorney and that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting party shall not apply in the interpretation of this Agreement or any
part thereof or attachment thereto.
10.14 Survival of Representations and Covenants. All statements contained
-----------------------------------------
in any certificate or other instrument delivered by or on behalf of Seller or
any Indemnifying Shareholder pursuant to this agreement or in connection with
the transactions contemplated hereby shall be deemed representations and
warranties by Seller and each Indemnifying Shareholder hereunder. With respect
to all representations, warranties, covenants and agreements made by Seller and
any Indemnifying Shareholder in this Agreement or as provided herein, the
liabilities of Seller and each Indemnifying Shareholder shall be joint and
several. All representations, warranties, covenants and agreements made in this
Agreement or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and the Closing of the transaction herein described
without limitation.
10.15 Choice of Law. This Agreement and its validity, interpretation,
-------------
performance and enforcement shall be governed by the laws of the State of
Colorado.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
SELLER:
SOFTEACH CORPORATION,
a Colorado corporation
By: /s/ Terri J. Olson
-------------------------------
Terri J. Olson, President
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<PAGE>
INDEMNIFYING SHAREHOLDERS:
/s/ Terri J. Olson
-------------------------------
Terri J. Olson
/s/ Greg A. Olson
-------------------------------
Greg A. Olson
PURCHASER:
ARIS CORPORATION,
a Washington corporation
By: /s/ Paul Song
----------------------------
Paul Song, President
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<PAGE>
EXHIBIT 10.35
[The Registrant shall furnish supplementally a copy of any omitted schedule to
the Commission upon request.]
THIS AGREEMENT is made on 14 February 1997
--------------
BETWEEN:
-------
(1) THE PERSONS whose names and addresses are set out in Schedule 2
("the Sellers")
(2) ARIS CORPORATION of 6720 Fort Dent Way, Suite 250, Seattle, WA
98188-2555, U.S.A. ("the Buyer").
IT IS HEREBY AGREED as follows:-
-------------------
1. INTERPRETATION
--------------
1.1 In this Agreement unless the context otherwise requires:-
"Associate" means any person, firm or company
which is a connected person (as
defined in Section 839 ICTA) of a
Seller
"the Buyer's Group" means the Buyer and any subsidiary,
fellow subsidiary, holding company
or Associate of the Buyer
"the Buyer's Shares" means 280,000 fully paid,
nonassessable shares in the common
stock of the Buyer
"the Buyer's Solicitors" means Clyde & Co of 51 Eastcheap,
London, EC3M 1JP
"CA 1985" means the Companies Act 1985
"the Company" means Oxford Computer Group Limited,
brief details of which are set out
in Schedule 1
"Completion" means completion of the sale and
purchase of the Shares in accordance
with clause 4
"the Consideration" means the consideration set out in
clause 3
"Directors" means the directors of the Company
or (where appropriate) of a
Subsidiary of the Company
immediately before the execution of
this Agreement
"the Disclosure Letter" means the letter of today's date
from the Sellers' Solicitors to the
Buyer's Solicitors to be updated at
Completion
"the Employees" means the employees of the Company
and of the Subsidiaries of the
Company listed in the Disclosure
Letter
"Environmental Laws" means all regulations, directions
and other environmental protection,
occupational, health and safety or
similar laws, regulations,
restrictions, licences, rules, and
European
<PAGE>
Community directives as in force in
the United Kingdom, including but
not limited to the Environmental
Protection Act 1990, the Water Act
1989, the Control of Substances
Hazardous to Health Regulations, the
Control of Pollution Act 1974 and
the Radioactive Substances Act 1960
"Escrow Agent" means the escrow agent named and
defined as such in the Escrow
Agreement
"Escrow Agreement" means an agreement to be entered
into and made between the Buyer and
the Indemnifying Sellers
"Escrowed Shares" means the Buyer's Shares to be
placed in escrow pursuant to the
terms of clause 3.2 and in
accordance with the provisions of
the Escrow Agreement, or such fewer
number of Buyer's Shares to be held
in escrow from time to time, reduced
in accordance with the terms of the
Escrow Agreement
"event" includes (without limitation) the
death of any person, any change in
the residence of any person for the
purposes of Taxation, any payment,
transaction, action, omission or
occurrence of whatever nature and a
failure to make sufficient dividend
payments to avoid a shortfall
apportionment or deemed distribution
of income, and references to an
event occurring on or before
Completion shall include the
combined result of two or more
events the first of which shall have
taken place (or shall be deemed to
have taken place) or the
commencement of which shall have
occurred (or shall be deemed to have
occurred) on or before Completion,
and shall also include Completion
"FA" means Finance Act
"Holding Company" means a holding company as defined
in Section 736 CA 1985
"ICTA" means the Income and Corporation
Taxes Act 1988
"Indemnifying Sellers" means David James Turnbull, Hugh
Simpson-Wells, Ian Charles Henderson
Cunningham and Bahram Bekhradnia
"Intellectual Property" means patents, trade marks, service
marks, designs, applications and
rights to apply for any of the
foregoing, copyright (including all
copyright in any drawings, plans,
specifications, manuals, designs,
and computer software)
2
<PAGE>
inventions, trade secrets, financial
information, know how and other
confidential information, and
business names and any similar
rights, whether registrable or
registered or not, in any part of
the world, in each case owned by or
used by the Company or any
Subsidiary of the Company for the
purpose of its business
"the Last Accounts" means the audited balance sheet of
the Company as at the Last Accounts
Date, the audited profit and loss
account of the Company for the
financial period ended on the Last
Accounts Date, and the auditor's and
the directors' reports and notes
thereon
"the Last Accounts Date" means 31 December 1996
"liabilities" means as at any relevant date, all
actual or contingent liabilities,
whether liquidated, quantified or
unliquidated, known or not, arising
out of any event occurring before,
or from circumstances subsisting, at
that date
"the Planning Acts" means the Town and Country Planning
Act 1990, the Planning (Listed
Buildings and Conservation Areas)
Act 1990, the Planning (Hazardous
Substances) Act 1990 and the
Planning (Consequential Provisions)
Act 1990
"the Property" means the freehold and leasehold
land and buildings briefly described
in Schedule 4
"the Securities Act" means the U.S. Securities Act of
1933, as amended
"the Sellers' Solicitors" means Bower & Bailey of Riverside
House, 3 Witan Way, Witney, Oxon OX8
6HF
"the Shares" means the whole of the issued share
capital of the Company
"SSAP" means either a Statement of Standard
Accounting Practice published by the
Institute of Chartered Accountants
in England and Wales or a Financial
Reporting Standard as issued by the
Accounting Standards Board
"the Stock Exchange" means the International Stock
Exchange of the United Kingdom and
the Republic of Ireland Limited
"Subsidiary" means a subsidiary as defined in
Section 736 CA 1985
"Supplemental Agreement" means any deed or document to be
entered into
3
<PAGE>
pursuant to or contemplated by the
terms of this Agreement
"TCGA" means the Taxation of Chargeable
Gains Act 1992
"Taxation" means all forms of taxation,
charges, duties, imposts,
withholdings, rates, levies and
governmental charges (whether
national, state, provincial or
local) in the nature of or
corresponding to tax, whatsoever and
whenever created, enacted or
imposed, and whether of the United
Kingdom or elsewhere, including
without limitation, corporation tax,
advance corporation tax, income tax
(including income tax required to be
deducted or withheld from or
accounted for in respect of any
payment), surtax, national insurance
and other social security
contributions, capital gains tax,
capital transfer tax, inheritance
tax, estate duty, development land
tax, value added tax, petroleum
revenue tax, duties of customs and
excise, stamp duty, capital duty,
stamp duty reserve tax, any
liability arising under Section 601
ICTA, uniform business rates,
general rates and water rates and
any payment whatever which the
Company may be or become bound to
make to any person or authority as a
result of any enactment relating to
taxation and any taxation
corresponding to, similar to,
replaced by or replacing any of them
and all fines, penalties, interest,
costs, charges and expenses
connected therewith regardless of
whether any such taxation, charges,
duties, imposts, withholdings,
rates, levies, governmental charges,
fines, penalties, interest, costs
and expenses are chargeable directly
or primarily against or attributable
directly or primarily to the Company
or any other person and of whether
any amount in respect of them is
recoverable from any other person
under this Agreement or the Tax
Covenant and "tax" shall be
construed accordingly
"Taxation Statutes" means statutes (and all regulations
and arrangements whatsoever made
thereunder) whether of the United
Kingdom or elsewhere, and whether
enacted before or after the date of
this Agreement, providing for or
imposing any Taxation
"Tax Covenant" means a deed relating to Taxation in
the agreed form to be executed and
delivered by the Indemnifying
Sellers, the Company and the
Company's Subsidiaries at Completion
4
<PAGE>
"Tax Evasion" means failure to comply with any
obligations in relation to Taxation
imposed on the Company, its
Subsidiaries and/or any of its or
their officers, directors, employees
or agents prior to Completion which
shall constitute a criminal offence
under the laws of any country where
the Company and/or the Company's
Subsidiaries conducts business
"Threshold Amount" means twenty five thousand US
dollars (US$25,000)
"the Warranties" means the warranties representations
and undertakings set out in Schedule
3
1.2 The Schedules form part of this Agreement and take effect as if
set out in this Agreement and references to this Agreement
include the Schedules.
1.3 References to a statute or statutory provision include all
subordinate legislation made pursuant to it, and include any
statute, statutory provision or subordinate legislation which,
before, on or after the date of this Agreement, amends,
consolidates or replaces it.
1.4 Unless the context otherwise requires, references to the singular
include the plural and vice versa, references to any gender
include all genders, and references to "person" include a body
corporate, a natural person, a firm, an unincorporated
association, a business, and a partnership.
1.5 Clause headings are for information only and shall not affect the
construction of this Agreement.
1.6 References to "in the agreed form" mean in the form agreed in
writing between the Sellers and the Buyer and for the purpose of
identification initialled by the Sellers' Solicitors and the
Buyer's Solicitors.
2. SALE AND PURCHASE
-----------------
2.1 Each of the Sellers shall sell with full title guarantee and the
Buyer shall buy the Shares free from all claims, liens, charges
and encumbrances, and together with all benefits and rights
attaching to the Shares, including all dividends declared, and
distributions made or paid, on or after the date of this
Agreement.
2.2 Each of the Sellers hereby waives any pre-emption rights he may
have in relation to any of the Shares under the Articles of
Association of the Company or otherwise.
3. CONSIDERATION
-------------
3.1 In consideration for the sale of the Shares by the Sellers to the
Buyer, the Buyer shall, on Completion, allot and issue to each
Seller the number of Buyer's Shares set out opposite such
Seller's name in column (4) of Schedule 2.
3.2 Twenty eight thousand (28,000) of the Buyer's Shares (being ten
percent (10%) of the total number of Buyer's Shares to be
allotted and issued by the Buyer to the Sellers hereunder) shall,
on Completion, be placed in escrow by the Indemnifying Sellers in
accordance with the terms of the Escrow Agreement.
5
<PAGE>
4. COMPLETION
----------
4.1 Completion shall take place at the offices of the Buyer's
Solicitors on 28 February 1997 when the matters set out in this
clause shall be carried out.
4.2 At Completion, the Sellers shall use their best endeavours to
deliver to the Buyer's Solicitors all Supplemental Agreements,
the documentation and all other items and property required to be
delivered by the Sellers pursuant to Schedule 5 and shall do all
such other acts or things attributable to the Sellers as set out
in Schedule 5.
4.3 At Completion, the Buyer will deliver to each Seller the number
of Buyer's Shares set out opposite such Seller's name in column 4
of Schedule 2.
4.4 The Buyer will not be obliged to complete the purchase of any of
the Shares unless the Sellers comply with all their obligations
under Schedule 5.
4.5 At Completion, the parties shall have executed a certificate of
Completion, certifying that all Supplemental Agreements shall
have been executed and entered into in the agreed form, and that
all actions to be taken prior to Completion and all conditions
precedent to Completion set forth in the attached Schedule 5
shall have been completed to the reasonable satisfaction of the
parties, or waived.
4.6 If the Sellers do not comply with any of their obligations under
Schedule 5 on the date agreed for Completion, or any subsequent
date to which the Buyer agrees to defer Completion, or if the
Buyer considers that the Sellers are in breach of any provision
of clause 5.1 below, the Buyer may (without prejudice to any
accrued rights of the Buyer) rescind this Agreement. If the
Buyer agrees to defer Completion to another date in accordance
with this clause 4.6, the provisions of this Agreement shall
apply as if that other date is the date set for Completion in
clause 4.1 above.
5. SELLERS' WARRANTIES
-------------------
5.1 The Sellers, jointly and severally, to the extent and subject as
set out in this clause 5, warrant, represent and undertake to the
Buyer that the Warranties are true, accurate and complete as at
the date of this Agreement, and shall continue up to and
including Completion to be, true, accurate and complete in all
respects. For this purpose only, any reference (whether express
or implied) in a Warranty (i) to "the date of this Agreement"
shall also be construed as a reference to "the date of
Completion", and (ii) to "the date of Completion" shall also be
construed as a reference to "the date of this Agreement".
5.2 Each of the Warranties is given subject to the matters fully,
fairly and specifically disclosed in the Disclosure Letter.
5.3 Each Warranty in respect of "the Company" shall be deemed to be a
Warranty given in respect of the Company and each Subsidiary of
the Company and (unless the context or subject matter otherwise
requires) the expression "the Company" in this clause and
Schedule 3 shall be construed accordingly to include each
Subsidiary of the Company.
5.4 Each of the Warranties is a separate and independent Warranty and
no Warranty or clause in this Agreement restricts or limits the
extent or application of any other Warranty or other clause.
6
<PAGE>
5.5 The Buyer's rights and remedies in respect of any breach of the
Warranties or under any other provision in this Agreement shall
not be regarded as modified or varied by Completion, by any
investigation made by or on behalf of the Buyer into the affairs
of the Company, by the Buyer's rescinding or failing to rescind
this Agreement, or by its failure to exercise or delay in
exercising any right or remedy available to it.
5.6 The Indemnifying Sellers, jointly and severally, undertake to the
Buyer (for itself and as trustee for the Company and each of the
Company's Subsidiaries) to indemnify the Buyer, the Company and
each of the Subsidiaries of the Company against any diminution in
the value of their respective assets, or any increase in their
respective liabilities, and/or any payment necessarily made or
required to be made by any of them as a result of or in
connection with, any breach of any of the Warranties, or required
to put them in the position in which they would have been had
there been no such breach of the Warranties, and against all
costs and expenses incurred in connection therewith. This
indemnity shall be without prejudice to any other rights and
remedies of the Buyer in relation to the breach.
Without prejudice to any other rights of the Buyer it is agreed
that the Buyer shall not make any claim under this clause 5.6 or
under the Tax Covenant until after the first anniversary date of
Completion. Except as provided in clause 5.7 below, the
Indemnifying Sellers shall not be liable to the Buyer under this
clause 5.6 or under the Tax Covenant (i) unless the aggregate
amount of all claims thereunder by the Buyer exceeds the
Threshold Amount, (ii) for more than the value of the Escrowed
Shares, and (iii) beyond the third anniversary date of
Completion. Upon the Buyer's claims under this clause 5.6 or
under the Tax Covenant reaching or exceeding the Threshold
Amount, the Indemnifying Sellers shall be liable for payment of
the entire Threshold Amount together with any legitimate claims
of the Buyer in excess thereof limited as aforesaid.
5.7 The Indemnifying Sellers, jointly and severally, undertake to the
Buyer (for itself and as trustee for the Company and each of the
Company's Subsidiaries) to indemnify the Buyer, the Company and
each of the Subsidiaries of the Company against any diminution in
the value of their respective assets, or any increase in their
respective liabilities, and/or any payment necessarily made or
required to be made by any of them as a result of or in
connection with, any Tax Evasion on the part of the Company, any
Subsidiaries of the Company and/or any of its or their officers,
directors, employees or agents, or required to put the Buyer, the
Company and/or any of the Subsidiaries of the Company in the
position in which they would have been had there been no such Tax
Evasion, and against all costs and expenses incurred in
connection therewith.
Notwithstanding anything contained in this Agreement or any
Supplemental Agreement, the Indemnifying Sellers' liability to
the Buyer under this clause 5.7 shall be for a period of eighty
(80) years; provided however, that (i) the Indemnifying Sellers
----------------
shall not be liable to the Buyer under this clause 5.7 unless the
aggregate amount of all claims by the Buyer under this clause 5.7
exceeds the Threshold Amount and (ii) the liability of the
Indemnifying Sellers under this clause 5.7 shall not exceed one
million four hundred thousand US dollars (US$1,400,000). Upon
the Buyer's claims under this clause 5.7 reaching or exceeding
the Threshold Amount, the Indemnifying Sellers shall be liable
for payment of the entire Threshold Amount together with any
legitimate claims of the Buyer in excess thereof limited as
aforesaid.
The provisions of this clause 5.7 shall be in addition to, and
not limitation of, any other rights and remedies which the Buyer
may have under this Agreement, any Supplemental Agreement or
otherwise.
7
<PAGE>
5.8 The Sellers warrant and represent in relation to any Warranty
which refers to the knowledge, information, belief and/or
awareness of the Sellers or any similar expression that the
Sellers have made full, due and careful enquiry into the subject
matter of that Warranty.
5.9 Between the execution of this Agreement and Completion, the
Sellers shall (i) use their best endeavours to procure that the
Company and each of its Subsidiaries complies in all respects
with Schedule 5, and (ii) notify the Buyer immediately in the
event that any of the Sellers becomes aware of any breach of this
clause 5.9 or of clause 5.1 or any fact or circumstance which has
resulted or will or is likely to result in any of the Warranties
ceasing to be true, complete and accurate prior to Completion.
5.10 Each Seller shall not offer, sell or otherwise transfer the
Buyer's Shares, prior to the date which is one year after
Completion except (A) pursuant to a registration statement that
has been declared effective under the Securities Act, (B)
pursuant to offers and sales that occur outside the United States
to non-U.S. citizens within the meaning of Regulation S under the
Securities Act in a transaction meeting the Requirements of Rules
903 and 904 under the Securities Act, or (C) pursuant to another
available exemption from the registration requirements of the
Securities Act, subject to the Buyer's right prior to any offer,
sale or transfer pursuant to clause (B) or (C) to require the
delivery of an opinion of counsel, certificates and/or other
information reasonably satisfactory to the Buyer.
5.11 The Sellers undertake (for themselves and any nominees) that so
long as they remain the registered holder of any of the Shares
they will:-
(a) not represent themselves as the beneficial owners of any of
the Shares;
(b) exercise all powers, rights and privileges vested in the
registered holder of the Shares only in accordance with the
written directions of the Buyer; and
(c) hold the Shares and any dividends or other distributions of
profits or assets in respect thereof in trust for the Buyer.
6. BUYER'S WARRANTIES
------------------
6.1 The Buyer represents and warrants that:
(a) it is a corporation duly organised and existing under the
laws of the State of Washington, U.S.A. and that the Buyer
has all necessary corporate power and authority to own,
lease and operate its properties and assets and to carry on
its business as now conducted and as proposed to be
conducted;
(b) it has the full corporate power and corporate authority to
enter into this Agreement and to carry out the terms of this
Agreement. The Buyer has taken all corporate action
necessary to authorise the execution, delivery and
performance of this Agreement. This Agreement has been duly
and validly executed and delivered by the Buyer, and is
binding upon and enforceable against the Buyer in accordance
with its terms, except as enforceability may be limited or
affected by applicable bankruptcy, insolvency,
reorganisation or other laws of general application relating
to or affecting the rights of creditors, and except as
enforceability may be limited by rules of law governing
specific
8
<PAGE>
performance, injunctive relief or other equitable remedies;
(c) financial statements provided by the Buyer to the Seller at
Completion shall be true, complete and accurate in all
material respects, and that such financial statements shall
not vary by greater than five percent (5%) from the audited
financial statements for such period currently being
prepared by Price Waterhouse (other than any restatements of
such financial statements or disallowance of credits and
deductions); and
(d) it will use its best endeavours to select an underwriter to
assist it in preparing an Initial Public Offering.
7. RESTRICTIVE COVENANTS
---------------------
7.1 In this clause 7:-
(a) "the Business" means offering computer training and
education services as a Microsoft
Authorised Training and Education
Centre and/or systems integration
and consulting services on Microsoft
BackOffice products or Oracle
database applications only
(b) "the Prohibited Area" means England, Wales, Scotland,
Northern Ireland, Eire, Channel
Isles and the Isle of Man
7.2 In further consideration of the sale and purchase effected by
this Agreement and in order to protect the goodwill of the
Company and of the Subsidiaries of the Company, each Indemnifying
Seller hereby undertakes with the Buyer as follows:-
(a) he shall not at any time hereafter divulge or communicate to
any person for his own or any other person's benefit or to
the detriment or possible detriment of the Company, any
Subsidiary of the Company or the Buyer, any of the trade
secrets or other confidential information of the Company,
any Subsidiary of the Company or the Business, or of any
client, customer or supplier of the Company or any of its
Subsidiaries, which has or may come to his knowledge;
(b) if he has obtained trade secrets or other confidential
information belonging to any third party under an agreement
which contained restrictions on disclosure he will not at
any time infringe such restrictions;
(c) he will not either directly or indirectly as a director,
partner or greater than five percent (5%) shareholder within
one year after Completion carry on, or be engaged, concerned
or interested in carrying on the Business within the
Prohibited Area in competition with the Company or any
Subsidiary of the Company; provided however, that this
----------------
clause 7.2(c) shall not preclude Ian Charles Henderson
Cunningham from acting solely as an instructor or consultant
in the Prohibited Area, or from prohibiting David James
Turnbull from continuing to provide consulting services
through Camel Services Ltd, which are the same as or
substantially similar to those which have been provided
through Camel Services Ltd prior to the date hereof;
(d) in connection with any business competing or likely to
compete with the Business, he will not use any business
name, trade mark or logo used by the
9
<PAGE>
Company or any Subsidiary of the Company within the two
years preceding Completion, or any confusingly similar
business name, trade mark or logo;
(e) he will not within one year after Completion solicit the
custom of, interfere with, or endeavour to entice away from
the Company or any Subsidiary of the Company, any person who
at any time during the two years immediately preceding
Completion was a customer of the Company or any Subsidiary
of the Company in relation to goods sold or services
provided to that person by the Company or any of its
Subsidiaries;
(f) he will not within one year after Completion employ, seek to
employ, interfere with, or endeavour to entice away from the
Company or any Subsidiary of the Company, any person
employed by the Company or any of its Subsidiaries at any
time during the last two years immediately preceding
Completion; and
(g) he will not do any of the above-mentioned things directly or
indirectly, with or for or on behalf of any other person.
7.3 Subject to the provisions of this clause 7, each of the Sellers
undertakes to procure that each of his Associates shall be bound
by and observe the provisions of this clause as if they were
parties covenanting with the Buyer.
7.4 Nothing in this clause shall preclude a Seller from owning (for
investment purposes only) not more than five percent (5%) of the
equity share capital of any company listed on The Stock Exchange.
7.5 The parties confirm that they consider the restrictions contained
in this clause 7 to be reasonable in all respects, but if any
such restriction is held to be invalid or ineffective, but would
not be so held if some part of it were deleted, or some
modification were made to its terms, the parties agree that such
restriction shall apply with such deletion or modification as may
be necessary to make it valid and effective.
7.6 The provisions of sub-clauses 7.2(a) to (g) are separate and
severable undertakings and shall be enforceable accordingly.
8. GENERAL
-------
8.1 This Agreement shall enure for the benefit of the successors in
title and assigns of each party: but no party may transfer its
obligations hereunder. The Buyer may assign all or any of its
rights under this Agreement or any Supplemental Agreement to any
other member for the time being of the Buyer's Group.
8.2 Any assignment by the Buyer of its rights under this Agreement
may be partial; so that the benefit of the Warranties or the Tax
Covenant or any other indemnities and guarantees in this
Agreement or any Supplemental Agreement may enure to the benefit
of the holders of the Shares in proportion to their respective
interests.
8.3 The Sellers undertake that they and any necessary third party
shall execute and perform all such further acts, deeds or
assurances as may be required to vest the Shares in the Buyer and
otherwise to fulfil the provisions of this Agreement.
8.4 Insofar as any provisions of this Agreement are not performed at
Completion or are not expressly waived by the Buyer they will
remain in full force and effect notwithstanding Completion.
10
<PAGE>
8.5 Unless expressly stated otherwise, all obligations of the Sellers
under this Agreement and any Supplemental Agreement are joint and
several obligations.
8.6 The Buyer may release or compromise the liability of, or grant
any time, forbearance or indulgence to, any Seller under this
Agreement and any Supplemental Agreement without modifying,
affecting or prejudicing its rights against any other Seller.
8.7 The Buyer's rights and remedies under this Agreement are
additional to any other rights and remedies which may be
available to it; and its exercise of or failure to exercise, any
right or remedy will not constitute a waiver of any other right
or remedy.
8.8 If any term or provision of this Agreement or any Supplemental
Agreement is held to be wholly or partly illegal or unenforceable
at law, that term or provision shall to that extent be deemed not
to form part of this Agreement or that Supplemental Agreement but
the enforceability of the remainder of this Agreement or that
Supplemental Agreement shall not be affected.
8.9 None of the Sellers will make any announcement in connection with
this Agreement without the Buyer's written approval, unless
required by law or The Stock Exchange, and then only after prior
consultation with the Buyer.
8.10 Each party will bear all professional or other fees and expenses
incurred by it in connection with the negotiation and completion
of this Agreement, and all acts and events contemplated by it.
8.11 Time shall be of the essence of this agreement except as
expressly varied by the Buyer, both as regards the dates and
periods specifically mentioned, and as to any substituted dates
and periods agreed in writing by the parties.
8.12 This Agreement and all Supplemental Agreements together
constitute the entire agreement between the parties relating to
the sale and purchase of the Shares and no variation of its or
their terms will have effect unless it is in writing and signed
by each party.
8.13 This Agreement shall be governed by and construed in accordance
with English Law and the parties submit to the jurisdiction of
the English Courts.
9. NOTICES
-------
9.1 Any notice to be given under this Agreement or any Supplemental
Agreements shall be in writing, and may be delivered by hand, or
sent by facsimile or international overnight courier, addressed
to the party to be served (in the case of an individual) at the
address herein stated and (in the case of a company) at its
principal place of business for the time being or (in either
case) to such other address as the addressee may from time to
time have notified for the purpose of this clause.
9.2 Notices delivered by hand shall be deemed to have been served at
the time of actual delivery. Notices sent by facsimile shall be
deemed to have been served three hours after transmission if
transmitted before 2 p.m. on a business day, and otherwise by 11
a.m. on the next business day. Notices sent by international
overnight courier shall be deemed to have been served three
business days after having been deposited with an international
overnight courier.
9.3 In proving service by international overnight courier it shall be
sufficient to prove that
11
<PAGE>
the envelope containing the notice was properly addressed, and
deposited with an international overnight courier.
AS WITNESS the hands of the parties or their duly authorised representatives the
- ----------
day and year first before written.
SIGNED by BAHRAM BEKHRADNIA ) /s/ Hugh Simpson-Wells, as attorney
in the presence of: )
/s/ DJ Bowers
Solicitors Oxford
SIGNED by DAVID JAMES TURNBULL ) /s/ David Turnbull
in the presence of: )
/s/ DJ Bowers
Solicitors Oxford
SIGNED by HUGH SIMPSON-WELLS ) /s/ Hugh Simpson-Wells
in the presence of: )
/s/ DJ Bowers
Solicitors Oxford
SIGNED by IAN CHARLES ) /s/ Ian Cunningham
HENDERSON CUNNINGHAM )
in the presence of: )
/s/ DJ Bowers
Solicitors Oxford
SIGNED by STEVEN EDWARD ) /s/ S. Mitchell
FORREST MITCHELL )
in the presence of: )
/s/ DJ Bowers
Solicitors Oxford
SIGNED by JAMES BEVIS ) /s/ Hugh Simpson-Wells, as attorney
WINTERBURN COWLING )
in the presence of: )
/s/ DJ Bowers
Solicitors Oxford
SIGNED by KENNETH MEADLEY ) /s/ K. Meadley
in the presence of: )
/s/ DJ Bowers
Solicitors Oxford
SIGNED by MICHAEL LAWRENCE DAY ) /s/ Hugh Simpson-Wells, as attorney
in the presence of: )
/s/ DJ Bowers
Solicitors Oxford
SIGNED by NEIL SLATER ) /s/ Hugh Simpson-Wells, as attorney
in the presence of: )
/s/ DJ Bowers
Solicitors Oxford
12
<PAGE>
SIGNED by PETER HAYWARD ) /s/ Hugh Simpson-Wells, as attorney
in the presence of: )
/s/ DJ Bowers
Solicitors Oxford
SIGNED by PAUL SONG ) /s/ Paul Song
duly authorised to sign for and )
on behalf of ARIS CORPORATION )
in the presence of: )
/s/ Bert Sugayan, General Counsel
Aris Corporation
13
<PAGE>
SCHEDULE 1
----------
DETAILS OF THE COMPANY AND THE SUBSIDIARIES
Part 1: The Company
-------------------
Company Number: 1717794
Date and Place of incorporation: 25 April 1983 in England and Wales
Share Capital: Authorised Allotted and Issued
---------- -------------------
(Pounds)100 divided into 2,000 2000 ordinary shares of
shares of 5 pence each 5 pence each
Issued Shares held by:
Shareholder and Beneficial Owner Number of Shares
- -------------------------------- ----------------
Bahram Bekhradnia 229
David James Turnbull 300
Hugh Simpson-Wells 739
Ian Charles Cunningham 475
Steven Edward Forrest Mitchell 79
James Bevis Winterburn Cowling 65
Kenneth Meadley 65
Michael Day 14
Neil Slater 14
Peter Hayward 20
Registered Office: Wolsey Hall
66 Banbury Road
Oxford OX2 6PR
Directors: Jean Margaret Harrison
Hugh Simpson-Wells
David James Turnbull
Ian Charles Henderson Cunningham
Secretary: Ian Charles Henderson Cunningham
Accounting Reference Date: 31 March
Auditors: Shaw & Company
195 Banbury Road
Oxford OX2 7AR
Tax District and Reference Number: Oxford 1 District. Reference 184/31840/0585.
VAT Registration Number and local VAT office: Number 5964492 85 (group
registration including Oxford Computer Training Limited and Oxford Computer
Applications Limited); VAT Office: Oxford.
14
<PAGE>
DETAILS OF THE COMPANY AND THE SUBSIDIARIES
Part 2: The Subsidiaries of the Company
---------------------------------------
Name of Subsidiary: Oxford Computer Applications Limited
Company Number: 2739929
Date and Place of Incorporation: 14 August 1992 in England and Wales
Share Capital: Authorised Allotted and Issued
---------- -------------------
(Pounds)100 divided into 100 100 ordinary shares of
shares of (Pounds)1 each (Pounds)1 each
Issued Shares held by:
Shareholder and Beneficial Owner Number of Shares
- -------------------------------- ----------------
Oxford Computer Group Limited 100
Registered Office: Wolsey Hall
66 Banbury Road
Oxford OX2 6PR
Directors: Ian Charles Henderson Cunningham
Hugh Simpson-Wells
Steven Edward Forrest Mitchell
Secretary: Ian Charles Henderson Cunningham
Accounting Reference Date: 31 March
Auditors: Shaw & Company
195 Banbury Road
Oxford OX2 7AR
Tax District and Reference Number: Oxford 1 District. Reference
184/31840/06655.
VAT Registration Number and local VAT office: Number 5964492 85 (group
registration including Oxford Computer Training Limited and Oxford Computer
Group Limited); VAT Office: Oxford.
15
<PAGE>
DETAILS OF THE COMPANY AND THE SUBSIDIARIES
Part 2: The Subsidiaries of the Company
---------------------------------------
Name of Subsidiary: Oxford Computer Training Limited
Company Number: 2739585
Date and Place of Incorporation: 14 August 1992 in England and Wales
Share Capital: Authorised Allotted and Issued
---------- -------------------
(Pounds)100 divided into 100 100 ordinary shares of
shares of (Pounds)1 each (Pounds)1 each
Issued Shares held by:
Shareholder and Beneficial Owner Number of Shares
- -------------------------------- ----------------
Oxford Computer Group Limited 100
Registered Office: Wolsey Hall
66 Banbury Road
Oxford OX2 6PR
Directors: Hugh Simpson-Wells
Kenneth Meadley
Ian Charles Henderson Cunningham
James Bevis Winterburn Cowling
Secretary: James Bevis Winterburn Cowling
Accounting Reference Date: 31 March
Auditors: Shaw & Company
195 Banbury Road
Oxford OX2 7AR
Tax District and Reference Number: Oxford 1 District. Reference
184/61840/06662.
VAT Registration Number and local VAT office: Number 5964492 85 (group
registration including Oxford Computer Group Limited and Oxford Computer
Applications Limited); VAT Office: Oxford.
16
<PAGE>
DETAILS OF THE COMPANY AND THE SUBSIDIARIES
Part 2: The Subsidiaries of the Company
---------------------------------------
Name of Subsidiary: Online College Oxford Limited
Company Number: 3138907
Date and Place of Incorporation: 18 December 1995 in England and Wales
Share Capital: Authorised Allotted and Issued
---------- -------------------
(Pounds)100 divided into 100 2 ordinary shares of
shares of (Pounds)1 each (Pounds)1 each
Issued Shares held by:
Shareholder and Beneficial Owner Number of Shares
- -------------------------------- ----------------
Oxford Computer Group Limited 2
Registered Office: Wolsey Hall
66 Banbury Road
Oxford OX2 6PR
Directors: Ian Charles Henderson Cunningham
David James Turnbull
Secretary: Ian Charles Henderson Cunningham
Accounting Reference Date: 31 December
Auditors: Shaw & Company
195 Banbury Road
Oxford OX2 7AR
Tax District and Reference Number: Oxford 1 District. Reference 184/49405/66652
AO1
VAT Registration Number and local VAT office: Not registered
17
<PAGE>
DETAILS OF THE COMPANY AND THE SUBSIDIARIES
Part 2: The Subsidiaries of the Company
---------------------------------------
Name of Subsidiary: OCX Limited
Company Number: 2924953
Date and Place of Incorporation: 3 May 1994 in England and Wales
Share Capital: Authorised Allotted and Issued
---------- -------------------
(Pounds)100 divided into 100 100 ordinary shares of
shares of (Pounds)1 each (Pounds)1 each
Issued Shares held by:
Shareholder and Beneficial Owner Number of Shares
- -------------------------------- ----------------
Oxford Computer Group Limited 100
Registered Office: Wolsey Hall
66 Banbury Road
Oxford OX2 6PR
Directors: Ian Charles Henderson Cunningham
Hugh Simpson-Wells
Secretary: Ian Charles Henderson Cunningham
Accounting Reference Date: 31 March
Auditors: Shaw & Company
195 Banbury Road
Oxford OX2 7AR
Tax District and Reference Number: Oxford 1 District. Reference
184/27140/59299.
VAT Registration Number and local VAT office: Not registered.
18
<PAGE>
DETAILS OF THE COMPANY AND THE SUBSIDIARIES
Part 2: The Subsidiaries of the Company
---------------------------------------
Name of Subsidiary: Oxford Computer Training Services Limited
Company Number: 2752224
Date and Place of Incorporation: 1 October 1992 in England and Wales
Share Capital: Authorised Allotted and Issued
---------- -------------------
(Pounds)100 divided into 100 100 ordinary shares of
shares of (Pounds)1 each (Pounds)1 each
Issued Shares held by:
Shareholder and Beneficial Owner Number of Shares
- -------------------------------- ----------------
Oxford Computer Group Limited 100
Registered Office: Wolsey Hall
66 Banbury Road
Oxford OX2 6PR
Directors: Hugh Simpson-Wells
Ian Charles Henderson Cunningham
Secretary: Ian Charles Henderson Cunningham
Accounting Reference Date: 31 March
Auditors: Shaw & Company
195 Banbury Road
Oxford OX2 7AR
Tax District and Reference Number: Oxford 1 District. Reference 184/7095/PA.
VAT Registration Number and local VAT office: Not registered.
19
<PAGE>
DETAILS OF THE COMPANY AND THE SUBSIDIARIES
Part 2: The Subsidiaries of the Company
---------------------------------------
Name of Subsidiary: OCG Limited
Company Number: 2924947
Date and Place of Incorporation: 3 May 1994 in England and Wales
Share Capital: Authorised Allotted and Issued
---------- -------------------
(Pounds)100 divided into 100 100 ordinary shares of
shares of (Pounds)1 each (Pounds)1 each
Issued Shares held by:
Shareholder and Beneficial Owner Number of Shares
- --------------------------------- ----------------
Oxford Computer Group Limited 100
Registered Office: Wolsey Hall
66 Banbury Road
Oxford OX2 6PR
Directors: Ian Charles Henderson Cunningham
Hugh Simpson-Wells
Secretary: Ian Charles Henderson Cunningham
Accounting Reference Date: 31 March
Auditors: Shaw & Company
195 Banbury Road
Oxford OX2 7AR
Tax District and Reference Number: Oxford 1 District. Reference 184/83303.
VAT Registration Number and local VAT office: Not registered.
20
<PAGE>
SCHEDULE 2
----------
THE SELLERS
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Number of
Shares to Buyer's
Full Name Address be sold Shares
--------- ------- --------- -------
<S> <C> <C> <C>
(1) Bahram Bekhradnia 25 St 229 32,060
Margarets Road
Oxford
(2) David James Turnbull 59 Mill Street 300 42,000
Kidlington
Oxford
(3) Hugh Simpson-Wells 33 Hurst Rise 739 103,460
Road
Oxford
(4) Ian Charles Henderson Shepherds 475 66,500
Cunningham Cottage
11 Pettiwell
Garsington
Oxford
(5) Steven Edward Forrest 51 Home Close 79 11,060
Mitchell Wolvercote
Oxford
(6) James Bevis Winterburn 64 Oxford Road 65 9,100
Cowling Old Marston
Oxford
(7) Kenneth Meadley 13 Harlow Way 65 9,100
Marston
Village
Oxford
(8) Michael Lawrence Day Avon Cliffe 14 1,960
Clay Coton
Northampton
(9) Neil Slater 57 WestWater Way 14 1,960
Didcot
Oxon
(10) Peter Hayward Fairview Cottage 20 2,800
Wilton
Marlborough
Wiltshire
----- -------
TOTAL 2,000 280,000
===== =======
</TABLE>
21
<PAGE>
SCHEDULE 3
----------
THE WARRANTIES
1. THE SHARES
----------
The Sellers are the beneficial owners and registered holders of all the
Shares and have full power and authority to sell and transfer the same to
the Buyer on the terms of this Agreement without the consent of any third
party.
2. CAPACITY OF THE SELLERS
-----------------------
2.1 Each Seller, by reason of his or her knowledge and experience in
financial and business matters, is capable of evaluating the risks and
merits of an investment in the Buyer's Shares. Each Seller recognises
that the Buyer's Shares are speculative and that investments in the
Buyer's Shares involves a high degree of risk. Each Seller is prepared to
bear the economic risk of an investment in the Buyer's Shares and is able
to withstand a total loss of his or her investment in the Buyer's Shares.
Each Seller acknowledges that the purchase of Buyer's Shares hereunder is
being made for his or her own account, for investment purposes only and
not with the present intention of distributing or reselling the Buyer's
Shares in whole or in part.
2.2 Each Seller further understands that the Buyer's Shares have not been
registered under the Securities Act, or under any state securities laws
by reason of specific exemptions therefrom, which depend upon, among
other things, the accuracy of the representations expressed in this
Agreement by the Sellers. Each Seller has had the opportunity to discuss
all aspects of this transaction with management of the Buyer, has made or
has had the opportunity to make such inspection of the books and records
of the Buyer as the Sellers have deemed necessary in connection with this
investment, and any questions asked have been answered to the
satisfaction of the Sellers.
2.3 Each Seller acknowledges that he will offer, sell or otherwise transfer
the Buyer's Shares, prior to the date which is one year after Completion
only (A) pursuant to a registration statement that has been declared
effective under the Securities Act, (B) pursuant to offers and sales that
occur outside the United States to a non-U.S. citizen within the meaning
of Regulation S under the Securities Act in a transaction meeting the
requirements of Rules 903 and 904 under the Securities Act, or (C)
pursuant to another available exemption from the registration
requirements of the Securities Act, subject to the Buyer's right prior to
any offer, sale or transfer pursuant to clause (B) or (C) to require the
delivery of an opinion of counsel, certificates and/or other information
reasonably satisfactory to the Buyer and that Buyer shall refuse to
register the transfer of any such shares on its books unless such
transfer complies with clause (A), (B) or (C).
2.4 Each Seller has the requisite power and authority to enter into and
perform this Agreement and the Supplemental Agreements, including but not
limited to the Tax Covenant, the Escrow Agreement and the other documents
executed by any Seller which are to be delivered at Completion.
2.5 Each Seller is either a Director or Manager of the Company as at
Completion, as such terms are used and defined in the Financial Services
Act 1986 and in the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) (No.2) Order 1995 (No. 1536).
2.6 Payment of any Seller's professional fees (including lawyers and
accountants) by the
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Company in connection with this Agreement are in compliance with all
applicable laws (including, without limitation, applicable laws governing
financial assistance), and the amount of all such professional fees paid
by the Company shall not exceed thirty thousand pounds sterling
((Pounds)30,000), excluding Value Added Tax.
3. INFORMATION GIVEN TO BUYER
--------------------------
3.1 All information contained or referred to in the Disclosure Letter or any
documents accompanying it is true, complete and accurate in all respects.
3.2 All information given by the Sellers or their respective professional
advisers to the Buyer or its professional advisers relating to the
business, activities, affairs, assets and liabilities of the Company was
when given and now is true and accurate in all respects. There is no act
or matter which has not been disclosed to the Buyer or its professional
advisers which renders any such information untrue, inaccurate or
misleading or the disclosure of which might reasonably affect the
willingness of the Buyer to enter into this Agreement.
4. CORPORATE MATTERS
-----------------
4.1 The Shares are fully paid and constitute the whole of the issued and
allotted share capital of the Company.
4.2 The Company has complied in all respects with all provisions and
requirements of the Companies Acts and all returns, particulars,
resolutions and other documents, required to be delivered to the
Companies Registry have been properly made and delivered.
4.3 The register of members and other statutory books of the Company have
been properly kept and are complete and up to date.
4.4 Sections 4.1 through 4.4 are true and accurate for all Subsidiaries of
the Company.
5. ACCOUNTS
--------
5.1 All accounts, books, ledgers, financial and other records of the Company
are in its possession and have been fully and accurately maintained and
give a true, complete and fair view of its financial position.
5.2 The Last Accounts:
(a) comply with the provisions of the Companies Acts and other relevant
statutes;
(b) comply with all current SSAPs applicable to a United Kingdom
company;
(c) properly reflect the financial position of the Company at the Last
Accounts Date; and
(d) give a true and fair view of the assets and liabilities of the
Company at the Last Accounts Date and its profits for the financial
period ended on that date.
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6. TRADING
-------
6.1 Since the Last Accounts Date:
(a) the business of the Company has been continued in the ordinary
course;
(b) there has been no deterioration in the turnover or the financial or
trading position or prospects of the Company;
(c) no capital commitments have been entered into by or on behalf of the
Company; and
(d) the Company has paid its creditors in accordance with their
respective terms.
6.2 The Disclosure Letter contains particulars of all material contracts and
engagements, whether written or oral, to which the Company is a party at
the date of this Agreement.
6.3 The Company has not manufactured, sold or supplied products or services
which are or were or will become in any material respect faulty or
defective, or which were negligent, or which do not comply in any respect
with all specifications, warranties and representations, express or
implied, made in relation to them, or with all applicable regulations,
standards and requirements.
6.4 The Company is not liable (save as may be implied by law) to service,
repair, maintain, take back or otherwise do anything in respect of any
goods or services that have been delivered by it.
6.5 No major customer of the Company has ceased to be a customer since the
Last Accounts Date; so far as the Sellers are aware, no such customer
intends to cease to be a customer of the Company or substantially reduce
its existing level of business with it.
6.6 In the conduct of its business, the Company does not infringe any
proprietary right or interest of any other person, and is not liable to
pay any royalty or similar sum, which is material in the context of the
Company's business.
6.7 The Company has not entered into any transaction in which the Sellers,
the directors or managers of the Company or any of their Associates, was
interested, directly or indirectly.
6.8 The Disclosure Letter contains full details of all grants made to the
Company by any governmental department or authority or similar body, the
Company has no liability to repay any such grant and no circumstances
have arisen under which any such body could require repayment.
6.9 The Disclosure Letter contains particulars of all Intellectual Property
of the Company at the date of this Agreement including without limitation
any Intellectual Property licensed to the Company by third parties and
licensed by the Company to any third parties.
6.10 The Company owns or has the right to use all Intellectual Property
necessary for the continuation of the business of the Company as at the
date of Completion.
7. ASSETS
------
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7.1 The Company owned at the Last Accounts Date and still owns, and had and
still has a good and marketable title to, all assets included in the Last
Accounts or acquired since that date, except current assets since sold or
realised in the ordinary course of business.
7.2 The assets (including the Intellectual Property) owned by the Company,
together with the assets held under hire purchase leasing or rental
agreements, comprise all the assets, property and rights which are
necessary for the continuation of the business of the Company as now
conducted.
7.3 All book debts owed to the Company comprised in the Last Accounts were,
and all such book debts as at Completion will be, collected in full in
the ordinary course of business (that is, not more than 6 weeks after the
date the debt was incurred).
8. FINANCE
-------
There are no overdrafts, loans and other financial facilities outstanding
or available to the Company.
9. THE COMPANY'S OFFICERS AND EMPLOYEES
------------------------------------
9.1 The Disclosure Letter contains true, complete and accurate particulars of
all employees of the Company.
9.2 The Company has complied with all statutory and other regulations and
obligations in relation to its employees and former employees.
9.3 The Company is not a party to any bonus, profit-sharing or collective
bargaining arrangement or agreement with employees or a trades union or
similar association.
9.4 The Company has paid up to date all remuneration, pension contributions
and other payments due from it in respect of all employees.
9.5 No officer or employee of the Company is under notice to leave his
employment, given by him or the Company.
10. PENSION SCHEMES
---------------
10.1 The Company has no obligations (whether legally enforceable or not) to
provide any life assurance, retirement, redundancy, termination, pension,
death, health or disability benefit or payment to a director or employee
or former director or employee or consultant of the Company or any spouse
or dependant or any such person.
10.2 For the purposes of the following warranties (a) - (k) "the Pension
Scheme" means both of the Individual Pension Plan for K. Meadley Plan
Number IPP0003081 and the OCG 1993 Pension Scheme Policy Number Q0031 or
such one of those schemes as the context requires.
(a) Save for the Pension Scheme, neither the Company nor any Subsidiary of
the Company is under any legal or moral liability or obligation, or a
party to any ex gratia arrangement or promise whether written or verbal,
to pay pensions, gratuities, superannuation allowances or the like, or
otherwise to provide "relevant benefits" within the meaning of Section
612(1) ICTA to or for any of its past or present officers or employees or
their dependants; and there are not now nor have there at any time
25
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been any retirement benefit, or pension or death benefit, or similar
schemes or arrangements in relation to or binding on the Company and/or
any of its Subsidiaries or to which any of them contributes nor have
there been any announcements as to the introduction of any such scheme or
arrangement.
(b) Full particulars of the Pension Scheme, including particulars of benefits
provided and the basis on which the employer and the employees make or
are liable to make contributions thereto, and the most recent financial
information statements and full and accurate details of the assets and
current membership are contained in or annexed to the Disclosure Letter,
and the Sellers warrant that the Pension Scheme is solely governed by the
deeds and documents, copies of which have been supplied to the Buyer and
are listed in the Disclosure Letter.
(c) The Pension Scheme is approved under Chapter 1 of Part XIV of ICTA as an
exempt approved scheme and so far as the Sellers are aware nothing has
been done or omitted to be done which will or is likely to result in the
Pension Scheme ceasing to be approved or capable of approval as an exempt
approved scheme.
(d) In relation to the OCG 1993 Pension Scheme a contracting-out certificate
(within the meaning of Section 30 of the Social Security Pensions Act
1975) is in force covering the employments of all employees who are
members of the Pension Scheme and so far as the Sellers are aware there
is no ground on which it could be cancelled.
(e) The Pension Scheme has been administered at all times in accordance with
governing documentation and all applicable legislative and regulatory
requirements including without prejudice to the generality of the
foregoing the equal access requirements arising under or as a result of
Article 119 of the Treaty of Rome and Sections 62-66 of the Pensions Act
1995 and subject thereto in accordance with the trusts powers and
provisions of the Pension Scheme.
(f) All lump sum death benefits which may be payable under the Pension Scheme
are fully insured at normal rates with an insurance company of good
repute and the Sellers are not aware of any grounds on which such
insurance might be withdrawn or avoided.
(g) All contributions (including expenses) and premiums which have fallen due
at Completion in respect of members of the Pension Scheme by the Company
or any of the Company's Subsidiaries participating in the Pension Scheme
have been paid.
(h) Other than routine claims for benefits no claim has been made or
threatened against the trustees of the Pension Scheme or any of them or
the Sellers or the Company or any person whom the Sellers are or may be
liable to indemnify or compensate in respect of any act, event, omission
or other matter in respect of the members arising out of or in connection
with the Pension Scheme and the Sellers are not aware of any
circumstances which might give rise to any such claim.
(i) No undertakings or assurances whether verbal or written or legally
binding or otherwise have been given to all or any of past or present
officers or employees of the Company or of the Company's Subsidiaries as
to the continuance of the Pension Scheme, nor the introduction, increase,
variation, augmentation or improvement of any pension rights,
entitlements, disability or death benefits under the Pension Scheme.
(j) The benefits under the Pension Scheme are exclusively money purchase
benefits as defined in Section 181 of the Pension Schemes Act 1993.
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(k) The assets of the Pension Scheme are invested exclusively in policies of
insurance with an insurance company of good repute.
11. INSURANCE
---------
11.1 The Company is and has at all material times been adequately insured
against all such risks prudently or usually covered by companies carrying
on similar businesses.
11.2 The Company's insurances are all valid and in force, nothing has been
done or omitted which might invalidate them, and all premiums have been
paid up to date.
12. LEGAL PROCEEDINGS
-----------------
The Company is not engaged in, or has not threatened to commence or been
threatened with any litigation, prosecution, arbitration or other legal
proceedings, any tribunal, enquiry or commission proceedings, or any
industrial dispute and there are no circumstances which might give rise
to the same.
13. INSOLVENCY
----------
No order has been made or resolution passed to wind up the Company; there
is no outstanding petition to wind up the Company, or appoint an
administrator or receiver of all or any part of its undertaking or
assets.
14. TAXATION
--------
14.1 The Company has deducted and accounted to the Inland Revenue for all
Taxation required to be deducted and accounted for by it under the
Taxation Statutes.
14.2 The Company has paid all Taxation up to date due to be paid to any fiscal
authorities.
14.3 The Company has made in proper time all returns and payments required for
all Taxation purposes and accurately maintained and kept all records and
other documents required by the Taxation Statutes.
15. PROPERTY
--------
15.1 The Company does not own or occupy any land and buildings other than the
Property.
15.2 The Company has a good and marketable title to the Property.
15.3 No person other than the Company is in occupation of or in receipt of any
rents or profits from the Property.
15.4 The Property is free from any mortgage, debenture, charge, rent-charge,
lien or other encumbrance.
15.5 The Property is not subject to any restrictive covenants, stipulations,
easements or other rights vested in third parties.
15.6 The Company's use of the Property is that which is permitted under the
Planning Acts.
15.7 The Company has complied with all applicable statutory and bye law
requirements and
27
<PAGE>
all requirements of any competent authority and all provisions of the
Planning Acts in respect of the Property.
15.8 The Company has paid the rent and observed and performed all the
covenants under the terms of any lease or licence under which the Company
holds or occupies the Property and no rent reviews are currently in
progress affecting the Property.
15.9 Throughout the period of the Company's ownership and/or operation of its
business at the Property, the Company has complied in all respects with
all Environmental Laws in force at the relevant time. To the best of the
Sellers' knowledge and belief, throughout the period of ownership and/or
operation of a business at the Property by any third party prior to the
Company, all such third parties have complied in all respects with all
Environmental Laws in force at the relevant time.
15.10 Neither the Company nor (to the best of the Sellers' knowledge and
belief) any previous owner, lessee, licensee or occupier of the Property
has at any time received notice from any person alleging breach by the
Company or any such previous owner, lessee, licensee or occupier of any
Environmental Laws.
15.11 All leases of Property are leases from the bona fide landlord of such
Property.
15.12 The Company is not subject to any material covenants to repair or
reinstate any Property upon termination of any leasehold.
16. GENERAL
-------
Each Seller acknowledges that the Buyer and others will rely upon the
truth and accuracy of the foregoing representations, Warranties and
agreements and agrees that, if any of the representations, Warranties and
agreements made by such Seller are no longer accurate, it shall promptly
notify the Buyer.
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SCHEDULE 4
----------
THE PROPERTY
Upper Ground Floor Premises
66 Banbury Road
Oxford
Rooms on First Floor of the annex to Wolsey Hall
Oxford
Premises on Lower Ground Floor of 66 Banbury Road
Oxford
Unit 4202
The Waterside Centre
Birmingham Business Park
Unit 4210
The Waterside Centre
Birmingham Business Park
Upper Floors
159 Praed Street
London
4th Floor Premises
Finsbury House
23 Finsbury Circus
London EC2
5th Floor Premises
Finsbury House
aforesaid
Unit C1
The Quorum
Oxford Business Park
Cowly
Oxford
29
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SCHEDULE 5
----------
CONDITIONS PRECEDENT TO COMPLETION
1. The Sellers will deliver to the Buyer's Solicitors:-
(a) duly executed transfers of the Shares in favour of the Buyer or as it
directs;
(b) the certificates for the Shares;
(c) the Tax Covenant duly executed by the Indemnifying Sellers, the
Company and the Subsidiaries of the Company;
(d) the resignation from office of each Director and secretary of the
Company and each of its Subsidiaries (except those whom the Buyer has
notified to the Sellers in writing prior to the date of Completion
that it wishes to continue in office) with a written acknowledgement
under seal from each of them, in such form as the Buyer requires, that
he has no outstanding claim against the Company or any Subsidiary of
the Company;
(e) if requested by the Buyer, the resignation of the auditors to the
Company and each of its Subsidiaries confirming that they have no
outstanding claims of any kind against the Company or any of its
Subsidiaries and containing a statement complying with Section 394(1)
CA 1985;
(f) service agreements in the form to be agreed between the Company and
each of Hugh Simpson-Wells, Steven Edward Forrest Mitchell, James
Bevis Winterburn Cowling and Kenneth Meadley duly executed by each
such individual;
(g) the Escrow Agreement duly executed by the Indemnifying Sellers, the
Company and the Escrow Agent;
(h) Buyer's Share certificates representing the Indemnifying Shareholders'
pro rata portion of the Escrowed Shares;
(i) third party consents to any assignments to the Buyer of any contracts
to which the Company or any of its Subsidiaries is party, where
required by the terms thereof;
(j) written confirmation from the Inland Revenue in the United Kingdom
under (i) section 138 TCGA that section 137 of TCGA will not prevent
section 135 of TCGA from applying to the transaction contemplated by
this Agreement; and (ii) section 707 ICTA that no notice under section
703 of ICTA will be issued in relation to the transaction contemplated
by this Agreement;
(k) written approval from the Inland Revenue to the transfer of all of the
assets of the Subsidiaries to the Company and for the transfer of any
and all minority interests in the Subsidiaries to the Company prior to
Completion;
(l) copies of the Buyer's Stock Subscription Agreement signed by each of
the Sellers and the signed agreement of each Seller to be bound by the
terms of the Buyer's Shareholders' Agreement;
30
<PAGE>
(m) any and all other Supplemental Agreements required to be executed by
the Sellers, the Subsidiaries and/or the Company; and
(n) an updated Disclosure Letter in a form acceptable to the Buyer.
2. The Sellers will procure delivery of the following to the Buyer or as it
may direct:-
(a) the certificate of incorporation, statutory books (duly made up to
Completion) and common seal of the Company and each of the
Subsidiaries of the Company;
(b) the title deeds relating to the Property;
(c) all books of account and documents of record and all other documents
in the possession or control of the Sellers in connection with the
Company and each of the Subsidiaries of the Company, all complete and
up to date;
(d) bank statements of all bank accounts of the Company and each of the
Subsidiaries of the Company to a date not more than two days before
Completion, and reconciliation statements in respect of each such
account up to Completion; and
(e) releases or certificates of non-crystallisation in the form required
by the Buyer of all mortgages or charges affecting the Company and any
of the Subsidiaries of the Company, except as agreed in writing before
execution of this Agreement.
3. Each of the Sellers will and will procure that his Associates will, repay
all monies owing by them to the Company or any of the Subsidiaries of the
Company.
4. The Sellers will hold a Board Meeting of the Company and each of the
Subsidiaries of the Company at which the Directors will:-
(a) register the transfers of the Shares to the Buyer (subject to
stamping);
(b) appoint such persons as the Buyer shall nominate as directors and/or
secretary;
(c) accept the resignations referred to above;
(d) accept if required by the Buyer the resignation of the Auditors and
appoint Price Waterhouse as auditors of the Company and each of the
Subsidiaries of the Company;
(e) approve and authorise for execution service agreements in the agreed
form relating to Hugh Simpson-Wells, Stephen Edward Forrest Mitchell,
James Bevis Winterburn Cowling and Kenneth Meadley ;
(f) replace all current mandates to bankers with new mandates required by
the Buyer;
(g) approve and complete the transfer of all of the assets of all
Subsidiaries operations into the Company; and
(h) approve and authorise the discontinuation of the directors' pension
31
<PAGE>
arrangements.
5. The Buyer will procure:
(a) delivery to the Sellers of a counterpart of the Tax Covenant and the
Escrow Agreement duly executed by the Buyer;
(b) delivery to Hugh Simpson-Wells, Stephen Edward Forrest Mitchell, James
Bevis Winterburn Cowling and Kenneth Meadley counterparts of the
service agreements duly executed by the Company;
(c) payment of any prepaid rents paid by any Seller for any of the
Company's leased Property;
(d) the removal of any personal guarantees of any Seller securing any bank
or other indebtedness of the Company; and
(e) delivery to the Sellers of any and all Supplemental Agreements
required to be executed by the Buyer.
6. The Buyer and the Sellers shall have executed and delivered a registration
rights agreement in the form to be agreed, providing, inter alia, Ian
----- ----
Charles Henderson Cunningham's right to register up to twenty percent (20%)
of his shares in an over-allotment position in the event of an Initial
Public Offering and providing all Sellers' "piggyback" registration rights
to sell Buyer's Shares in any secondary or follow-on offering, on terms and
conditions to be agreed among the parties, which shall not be less
favourable than terms that may be offered by the Buyer to its other
shareholders.
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EXHIBIT 10.36
SUN MICROSYSTEMS EDUCATIONAL SERVICES U.S. STRATEGIC ALLIANCE AGREEMENT
This Agreement is made and entered into by and between SunService, a
division of Sun Microsystems Inc., having its principal place of business
located at 2550 Garcia Avenue, Mountain View, California 94043 ("Sun",) and
Applied Relational Information Systems Corporation, having its principal place
of business located at Fort Dent One, 6720 Fort Dent Way, Suite 150, Seattle,
WA 98188-2555 ("Company").
WITNESSETH:
WHEREAS. Company is in the business of providing educational services; and
WHEREAS Sun is in the business of developing course curriculum
("Materials"), and selling and licensing such intellectual property through its
sales force; and
WHEREAS Sun and ("Company"). agree that the purpose of this agreement is to
broaden Sun's educational Services capability by means of utilizing Company
expertise and resources to provide Educational Services to Sun customers
("Customers");
NOW, THEREFORE, in consideration of the mutual promises contained herein,
Sun and Company agree as follows: 1. Scope
Sun desolates Company and Company accepts such designation as an Educational
Services U.S. Strategic Alliance service provider under the terms of this
Agreement. This Agreement embodies one of Sun's programs to deliver Educational
Services to customers in the United States. Company acknowledges that Sun has
other delivery channels for Educational Services whose terms may vary from the
Strategic Partner program. Company also recognizes that should Company desire
to participate in those other programs, it will be necessary for Company to
apply for program eligibility.
2. Term of Agreement
a. This Agreement shall commence on April 19, 1997 and expire on April
l9,1998. This Agreement may be terminated for convenience by either party by
giving ninety (90) days advance written notice. In the event of termination for
convenience by Sun, Company shall receive fees which have accrued and expenses
which it has incurred as of the effective date of the termination regardless of
the completion status. Any Sun courses scheduled under this Agreement prior to
a party's receipt of such written notice, will be taught by Company and will be
paid for by Sun all in accordance with the terms and conditions of this
Agreement. No Sun courses will be added to Company's schedule after a party's
receipt of such termination notice. Upon such termination date, or the date on
which Company has completed all of the Sun courses, whichever is later, Sun
will pay Company all amounts due under this Agreement. In the event a party
shall be in breach or default of any of the terms and conditions of this
Agreement and such breach or default shall continue for a period of thirty (30)
days after the giving of written notice detailing such default to such
defaulting party, and the parties are unable after good faith negotiations
during the notice period to resolve the dispute, the other party shall have the
right to cancel this Agreement by providing written notice and such
cancellation to the defaulting party.
b. Upon expiration or termination of this Agreement for any reason, Company
shall within five days return to Sun all Materials received under
Page 1
<PAGE>
this Agreement.
3. Company's Duties
a. Acting as an independent contractor, Company shall provide personnel
including certified instructors, equipment, and/or facilities to perform agreed
upon educational services in the United
attached hereto and incorporated in this Agreement ("Services"). The
Schedule(s) shall not be modified or amended except by writing signed by both
parties, which writing shall include a statement of any fee or schedule impact.
b. Company's fees for Services is set forth on the attached Pricing Schedule
D, which may be amended from time to time by the mutual written agreement of
the parties. Company's invoices for fees shall be submitted monthly and shall
be in the form agreed to by the parties.
c. Company is not authorized to incur any additional expenses on behalf of
or otherwise bind Sun without the prior written consent of an authorized
representative of Sun. Sun shall pay the amounts payable to Company hereunder
within thirty (30) days of receipt of statements submitted by Company provided
Sun does not dispute the charges. In the case of dispute, Sun shall pay the
undisputed portion of the charges within said thirty (30) day period pending
resolution of the disputed charges.
d. Company shall provide Services available during normal Company's business
hours, except as agreed to by both parties.
e. Company reserves the right to determine which of its instructors shall be
assigned to provide Services. and to replace or reassign such instructors;
provided that all instructors are certified in accordance with Exhibit "A",
which may be amended from time to time by Sun.
f. It is understood that Company shall provide the services for Sun as a
subcontractor. It is further understood, however. that each party is an
independent contractor and as such will not have any authority to bind or
commit the other to any third party. Nothing herein shall be deemed or
construed to create a joint venture, partnership or agency relationship between
the parties for any purpose.
g. In the event there is any conflict between Company's obligations
hereunder and any request made by a Sun customer, Company's sole responsibility
is to render Services in the manner provided herein unless such customer
request is incorporated as a modification to Schedule "A" as provided hereof.
h. Company represents and warrants that it will use only material authorized
under Schedule "B" in the provision of Services under this Agreement. Company
shall not use any previously existing materials, unless such previously
existing Materials is provided to Company by Sun or listed on a Schedule
covered by this Agreement and signed by the parties.
4. Confidential and Proprietary Information
Except as provided in the Copyright section below, if Sun must furnish any
confidential information to Company under this Agreement, it shall only be
furnished after negotiation and execution on behalf of Company of a separate
written Agreement specifically identifying the documents to be furnished and
setting forth Company rights and obligations with respect thereto.
5. Copyright Software:
i. Sun hereby grants, free of charge, and Company hereby accepts a personal,
non transferable, non exclusive limited license to use Lab Exercise
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<PAGE>
Software ("Licensed Software") on Sun workstations located at the authorized
training locations identified on Schedule "C". Title to all copies of the
Licensed Software remain in Sun. The Licensed Software may not be sold, leased,
sublicensed or otherwise transferred, in whale or in part, by Company, except as
provided in Section l0(g). Company may not disassemble, decompile or otherwise
reverse engineer the Licensed Software.
ii. Sun hereby states and Company acknowledges that the Licensed Software
constitutes a valuable asset of Sun and is to be considered proprietary
information. Company shall treat the proprietary information with the same
degree of care as it treats its own proprietary information, but in all cases
using at least a reasonable degree of care. Notwithstanding any provisions
herein, Company shall have no liability for disclosure or use of any such
information which Company can demonstrate by legally sufficient evidence (a) is
already known to Company without an obligation of confidentiality, (b) is or
becomes publicly known through publication, inspection of product or otherwise
and through no wrongful act of Company, (c) is received from a third party
without similar restriction and without breach of this License, (d) is
independently developed by Company without use of the proprietary information,
(e) is disclosed to a third party by or on behalf of Sun without a similar
restriction on the third party's rights.
6. Taxes
There shall be added to any charges payable by Sun under this Agreement
amounts equal to any and all applicable taxes, however designated, levied or
based on any charges payable under this Agreement or for the services,
including without limitation state and local privilege, excise, sales, and use
taxes and any taxes and amounts in lieu thereof paid or payable by Company, but
excluding taxes based upon the net income of Company.
7. Infringement
If Company promptly notifies Sun in writing of a third party claim against
Company that any Materials delivered hereunder by Sun infringes a presently
existing United States patent, trademark, trade secret, copyright or other
proprietary interest, Sun will defend such claim at its expense and will pay
any settlement and any costs or damages that may be finally awarded against
Company. Sun will not indemnify Company, however, if the claim or infringement
is caused by (1) Company's misuse or modification of the Materials; (2)
Company's failure to use corrections or enhancements made available by Sun; (3)
Company's use of the Materials in combination with any product or information
not owned or developed by Sun; (4) information or materials provided by
Company. Sun must have sole control of the defense of any such claim and all
negotiations for settlement with respect to the Materials. Sun shall not be
obligated to indemnify Company under any such settlement made without Sun's
consent or in the event Company fails to cooperate fully (at Sun's expense) in
the defense of such claims.
8. Warranty
Company warrants that its services shall be of workmanlike quality
conforming to generally accepted Educational Services practices.
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9. Indemnity
Company agrees to hold Sun harmless from and against all personal injury or
property damage claims by third parties arising out of the negligent or
intentional acts or omissions of Company or its employees or representatives.
Company shall carry and pay the premiums for liability insurance to protect Sun
from all such claims.
10. Limitation of Liability
SUN SHALL NOT BE LIABLE TO COMPANY OR TO ANY OTHER PERSON OR ENTITY FOR
SPECIAL, INDIRECT, RELIANCE, INCIDENTAL, OR CONSEQUENTIAL DAMAGES OR LOSS
ARISING OUT OF THE PROVISION OF THE MATERIALS OR SERVICES OR IN ANY WAY ARISING
OUT OF THIS AGREEMENT, WHETHER IN AN ACTION ARISING OUT OF BREACH OF CONTRACT,
BREACH OF WARRANTY, DELAY, NEGLIGENCE, STRICT TORT LIABILITY, PATENT MATTERS,
OR ANY OTHER THEORY WHETHER OR NOT IT HAD ANY KNOWLEDGE, ACTUAL OR
CONSTRUCTIVE, THAT SUCH DAMAGES MIGHT BE INCURRED. EACH PARTY'S ENTIRE
LIABILITY FOR ANY CLAIM OR LOSS DAMAGE OR EXPENSE FROM ANY CAUSE WHATSOEVER
SHALL IN NO EVENT EXCEED ONE HUNDRED THOUSAND DOLLARS.
11. General
a Sun and Company agree, during and for six (6) months subsequent to the
completion, expiration, termination, or cancellation of this Agreement, not to
recruit directly any of the other party's employees who have been involved with
the tasks described therein. As used therein, "recruit" means a personal
contact initiated for purposes of hiring.
b. This Agreement is non-exclusive. Except as expressly set forth herein,
either party may contract for the provision or acquisition of educational
services with any third party.
c. This Agreement is made under and shall be construed in accordance with
the laws of the State of California.
d. This Agreement is not intended to create any third party beneficiary or
duties to or rights to third parties.
e. Any notice in connection with the subject matter of this Agreement shall
be in writing and shall be effective when delivered personally to the party for
whom intended as identified in Schedule A, or five (5) days following deposit
of the same into the United States mail, first class postage prepaid.
f. Nether party shall be liable for any defaults due to circumstances beyond
its control.
g. Neither party shall assign, transfer or sell any of its rights or
delegate any of its responsibilities without the other party's written consent.
Any attempted assignment or delegation in contravention hereof shall be void
and ineffective.
h. This Agreement contains the entire agreement between the parties hereto
with respect to the matters covered herein. No other agreements.
representations, warranties or other matters, oral or written, shall be deemed
to bind the parties hereto with respect to the subject matter hereof. This
Agreement shall not be modified or amended except by writing signed by Sun and
Company.
In order to signify their agreement to the terms stated in this Agreement
the parties have caused their authorized representatives to execute it below.
SUN COMPANY
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By: /s/ Frank Saeb By: /s/ William S. Lane
Education Services Manager Director, Corporate Marketing
Date: March 3, 1997 Date: February 26, 1997
SCHEDULE "A" - STATEMENT OF WORK
1.0 Point of contact
Sun and Company agree that they shall each designate two individual
employees to serve as the points of contact (one individual being the primary
contact) and coordinate all activities described in this agreement on a
national level. This includes and should not be limited to escalation of issues
which my be procedural, technical, or personnel related in nature.
2.0 Delivery of the Sun Educational Services courses
2.1 Sun hereby grants to Company a non exclusive, limited right to use Sun
Educational Services course material, as mentioned herein, to deliver Sun
Educational Services classes on behalf of Sun to students registered by Sun
("Sun customers") (per registration defined in section 3.0).
2.2 Company agrees to deliver Sun Educational Services courses as described
in Schedule "B" which may be amended from time to time by mutual agreement of
both parties. Sun and Company agree that the delivery of such courses will be
based on course schedules developed jointly between parties and such schedules
will be advertised in the Sun Educational Services course catalog and/or
similar publications distributed by Sun.
2.3 Company shall use only certified instructors (at the ratio of two
dedicated per each classroom) employed by Company (on a full time basis) per
the process defined in Exhibit "A" attached herein. Company shall only deliver
Sun courses at Sun approved locations, which shall be defined in Schedule "C"
which may be amended from time to time by mutual agreement of both parties.
2.4 Sun and Company agree that course cancellation policy will be in
accordance with the Sun Educational Services course catalog, a copy of which is
attached hereto as Exhibit "B" for informational purposes only. 2.5 Company
agrees that all Sun Educational Services courses provided under this Agreement,
per the locations determined in Schedule "C" will be open to Sun students as
well as the employees of the Company provided the enrollment procedures
outlined herein are followed.
2.6 Company agrees that classroom set up at all delivery locations (per
Schedule "C") will be substantially similar to one or more of the Sun
recommended models as shown on Exhibit "C". Company has the option to select
which model it will use.
2.7 Company also agrees that the method of delivery and technical
discussions of the courses shall be based on those demonstrated during
instructor certification program and/or cross training of respective courses.
Class discussions and laboratory exercises will be consistent with those
defined in the student and/ or instructor Sun course guides.
3.0 Student Registration and Billing
3.1 Sun and Company agree that all student registration activities will
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be performed by Sun. Students will register for classes according to the process
defined in the then current Sun Educational Services course catalog. Students
who register for such Sun courses may be referred to in this Agreement as "Sun
customers."
3.2 Sun agrees to share enrollment information with Company on a weekly
basis. The final class enrollment data will be sent to Company (via fax or
electronic mail) the Friday prior to the beginning of each class. There shall
be no minimum class size except as may be mutually established by Sun and
Company.
3.3 Sun and Company agree that student billing for the Company sponsored
locations will be handled by Sun in the same manner as other student billing
activities where training takes place at a Sun education facility. Company will
not provide collection services for Sun. Sun shall be solely responsible for
such collection efforts and for handling the "Sun customers" inquiries and
complaints concerning such billing.
3.4 Company agrees to direct all student inquiries, (including employees of
Company and Sun, if applicable) regarding enrollment for Sun training classes
covered by this Agreement to the Sun Educational Services registration office.
3.5 Company agrees to provide information needed to complete student
confirmation package including but not limited to hotel recommendations and
directions to the respective training facility within three weeks after this
Agreement has been executed.
3.6 Sun and Company agree that Sun will issue a purchase order, for billing
purposes only, and Company will invoice Sun against said purchase order to be
compensated for the Educational Services provided by Company on behalf of Sun.
The actual amount that Company invoices Sun will be based on monthly reports
produced and sent by Sun to Company on the tenth day of every month for the
previous month course offerings. Pricing will be according to the percentage
of student course tuition realized by Sun per Schedule "D" as attached hereto.
4.0 Classroom/Lab Requirements
4.1 Company agrees that all classroom/lab equipment, furnishing, and
media/supplies will be based on those shown on Exhibit "D" attached hereto.
5.0 Course Material
5.1 Company shall have no right or license to copy the Sun Educational
Services course material.
5.2 Sun agrees to provide computer software programs to generate student
"Certificate of Completion" and "Name Plates" to Company. Company agrees to
produce the above and to provide them to students during each class as
appropriate.
5.3 All recommendations for Sun course enhancements by Company will be
submitted to Sun through the individuals designated as point of contacts.
Company shall not be allowed to make any changes in any shape or form to the
content and/or organization of any Sun courses provided to Company under this
Agreement.
6.0 Co-Marketing
6.1 Sun and Company agree that they will each include Sun course
descriptions, Sun course schedules and any other information deemed necessary
by both parties, pertaining to Sun training classes, in their relevant training
publications such as course catalogs and relevant field notifications.
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Furthermore, both parties agree that every effort will be made to notify its
sales organizations of such course schedules and training offerings.
6.2 Sun and Company agree that every effort will be made to finalize Sun course
schedules in a timely manner in order to include them in respective course
catalogs and other promotional publications developed by both parties.
6.3 Each party shall bear the cost of its own marketing efforts.
7.0 Quality Assurance
7.1 Company agrees to send all completed student Sun course evaluation forms
to Sun within five business days of the completion of each class.
7.2 Consistent with quality monitoring process at Sun, Sun and Company agree
to review the above course evaluation forms. If scores given to any of
instructor, facility, or overall class categories of the above student course
evaluation terms, are found to be five or lower, Sun shall contact the
student(s) directly, and make inquiries about the class. Sun may take necessary
actions as described in Section 7.4 below.
7.3 Company also agrees to allow Sun to make quarterly quality visits of Sun
courses of the Sun training classes at the Company training locations covered
by this Agreement. Such audits shall be scheduled by agreement of both
parties. Such audits shall include but not be limited to the professionalism
and technical knowledge of instructor, quality of the reproduced course
material, lab organization, and the timeliness associated with the delivery of
each course module.
7.4 In the event that the designated education delivery services are not
performed in a manner consistent with the provisions of this Agreement, Sun may
request that the situation be cured. Upon receipt of such notice, Company and
Sun will jointly develop and implement within thirty days an action plan to
remedy the situation. If the situation is not corrected within a total of
forty-five days after notification of the problem, or within a reasonable
length of time as dictated by the agreed-upon action plan, Sun may after
reasonable consultation with Company, direct Company to take additional
corrective action. If a replacement instructor is required, Company shall bear
the costs associated with replacing the new instructor. If problems persist
beyond an additional remedial action time limit of forty-five days, Sun
reserves the right to sever Company's rights, upon 10 days written notice to
Company, without penalty within the specific city affected.
7.5 Sun and Company agree that no course of dealing or failure of either
party to enforce strictly any term, right, obligation or provision of this
Agreement or to exercise any option provided hereunder or thereunder shall be
construed as a waiver of such provisions.
Exhibit "A" - Instructor Certification Program
In order to achieve a strong business relationship and maintain the quality
of delivery of Sun courseware, it is important to provide Company with the
appropriate training and resources to ensure a successful program. Likewise,
Company must ensure that individuals designated to teach Sun courses have the
basic skills and competencies to make them successful.
The certification program for Company instructors will consist of the
following steps:
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1. Interview and Qualification Process
2. Instructor Observation of a Sun Education course at a Sun facility.
3. Testing of Instructor to ensure technical expertise.
3. Co-teach of a Sun Education course at a Sun facility with an experienced
instructor.
4. Full teach of the course at a Sun facility.
Interview and Qualification Process
Listed below me the desired skills/competencies for an instructor position:
* BSCS/EE degree or equivalent experience.
* 3-5 years of related business experience.
* 1-3 years experience in delivering technical courses.
* Excellent verbal and written communication skills.
* Good working knowledge of the Unix "TM" Operating System.
* Technical expertise in the appropriate area of instruction.
* Excellent customer relations skills.
Interview Process:
Instructor applicants will provide an updated, typewritten resume, including
employer references. Copies of post-class surveys from classes previously
delivered by the candidate would also be helpful. The interview cycle will
include at least one interview with a Sun Education manager and one or more
technical interviews with instructors. The interviewer will be evaluating the
skills/competencies listed above. These interviews will be conducted via the
telephone. Upon completion of the interviews, the manager will conduct a
reference check.
Presentation Skills Evaluation:
During the interview process, it is difficult to assess presentation skills.
Therefore, the instructor applicant must submit a videotape (at least 20
minutes in length) of a presentation on a topic of their choice. If requested,
Sun will provide a module of a course to be presented by the applicant.
Ideally, the presentation will be given interactively with a "live" audience.
Assessment of Interview/Presentation Skills:
Upon completion of the interview and receipt of the presentation videotape,
a Sun Education manager will make an assessment of the applicant's
instructional skills. This assessment will be communicated to Company. Sun
reserves the right to qualify or disqualify applicants teaching under the
Strategic Alliance program.
Observation of a Sun Education course at a Sun facility
Upon successful completion of the interview process, applicants will be
required to attend a Sun Education training class at a Sun facility to observe
the class they are planning to teach. Several courses in our curriculum are
built upon skills which are acquired by taking other classes (see section
entitled "Learning Paths". in the Sun Educational Services Catalog). If an
applicant is planning to teach a course that requires skills which are
presented in another class, the applicant must successfully complete the
required class or receive a waiver from a Sun Education manager.
Company instructor applicants will be registered for the course which they
are designated to teach (free of charge). The Sun Education manager will notify
the Sun instructor that a Company instructor is enrolled in the class. This
will allow the Sun instructor to spend as much time as
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possible with the Company instructor in order to clarify topics and to share
teaching strategies. However, since the Sun instructor must ensure a high-level
of customer satisfaction, he/she may not be able to spend an appropriate amount
of time with the instructor applicant. Therefore, it is strongly suggested that
the instructor applicant is allowed to come back into the Sun facility following
the class to work one-on-one with a Sun instructor. The Sun Education manager
will ensure that an instructor is available to work with the instructor
applicant.
Testing of Instructor to Ensure Technical Expertise
Upon completion of the course, the instructor applicant will take a test to
ensure a technical understanding of the course material. This test will be a
written test and/or a comprehensive lab exercise. The test will be taken on the
last day of class or at an agreed upon date following the class.
Instructor Preparation Schedule
The certification process typically takes 9-11 weeks to complete. This
timeframe may due depending upon the instructor's level of expertise and the
technical level of the course.
Listed below is a model of the timeframe required to become a certified Sun
Educational Services instructor:
Week 1: Instructor attends the class at a Sun facility
Week 2: Instructor studies the course materials and practices the labs
Week 3: Instructor attends the class at a Sun facility
Week 4: Instructor prepares to teach at least 25% of the class modules
Week 5: Instructor co-teaches class at Sun (minimum of 25% of modules)
Week 6: Instructor prepares to teach 50% of the class modules
Week 7: Instructor co-teaches class at Sun (additional 50% of modules)
Week 8: Instructor prepares to teach entire course
Week 9: Instructor teaches the entire course (Sun instructor will be present)
Week 10: Instructor works on areas that need development (if required)
Week 11: Instructor teaches the entire course (if additional training is
required)
Co-teach Sun Education Course
The Company instructor will teach an agreed upon set of modules of their
designated course at a Sun facility. Obviously, the more modules taught by the
Company instructor, the quicker the ramp-up time.
During the presentations given by the Company instructor, the Sun instructor
will assess technical and presentation skills. This feedback will be submitted
to the Sun Education manager and all three individuals will participate in a
meeting to review the assessment upon completion of the course delivery. Post
class survey results will also be reviewed at this time.
Full teach of the Course at a Sun Facility
The Company instructor will deliver the entire Sun Education course at a Sun
facility. An instructor will be present during the entire week and will act as
a resource and lab assistant to the Company instructor. However, if there are
problems in the class, Sun reserves the right to replace the Company instructor
with a Sun Education instructor. A Sun Education Manager may be present to
observe the Company instructor.
The instructor observing the class will assess technical and presentation
skills and provide feedback to the Sun Education manager. Upon completion
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of the course, the Company instructor, Sun Education manager and Sun Education
instructor will participate in a meeting to provide feedback and suggestions to
the Company instructor. Post-class surveys will also be reviewed and discussed.
Company instructors must receive an average rating of 8.0 or above in the
overall instructor rating category on the post class surveys to become a
certified Sun Education/Company instructor.
Exhibit "B" - Sun Educational Services Then Current Course Catalog
Exhibit "C" - Classroom/Lab Setup Configurations
Example #1
[Diagram of classroom and key.]
This configuration is designed to provide the option of moving the students
away from the workstations during formal lectures. This eliminates the
opportunity for students to experiment with the workstations while the
instructor is lecturing. It also decreases the noise level for the student
during the lecture period.
Notes:
1) Minimum three feet of safety egress path for all seating positions.
2) Lab/interactive chairs can be added if desired.
3) Maximum viewing distance: Lecture, 26 feet; Lab/interactive, 33 feet
(project on whiteboard).
4) Maximum viewing angle: Lecture, 55 degrees; Lab/interactive, 45 degrees
(project on whiteboard).
5) View obstructions can be eliminated.
6) 1280 square foot space.
EXAMPLE #2
[Diagram of classroom and key.]
This configuration is designed to provide the option of moving the students
away from the workstations during formal lectures. This eliminates the
opportunity for students to experiment with the workstations while the
instructor is lecturing. It also decreases the noise level for the student
during the lecture period.
Notes:
1) Minimum three feet of safety egress path for all seating positions.
2) Lab/interactive chairs can be added if desired.
3) Maximum viewing distance: Lecture, 25 feet; Lab/interactive, 31 feet
(project on whiteboard).
4) Maximum viewing angle: Lecture, 60 degrees; Lab/interactive, 35 degrees
(project on whiteboard).
5) Viewing obstructions can be minimized.
6) 1155 square foot space.
EXAMPLE #3
[Diagram of classroom and key.]
This configuration is designed to provide the student the opportunity to
work interactively with the instructor and to move slightly to the left
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or right during the formal lectures. During the lecture periods, the instructor
needs to maintain control over the students wishing to experiment.
Notes:
1) Maximum viewing distance: 26 feet
2) Maximum viewing angle: 55 degrees
3) Viewing obstructions can be minimized.
4) 784 square foot space.
Exhibit "D" - Classroom/Lab Requirements
Equipment List: (To be provided by Company installed on an isolated network
dedicated to training)
Quantity Description
Server:
1 Sparcstation 5 or larger, including:
16-inch Monitor, 64-Mbyte
1.05 Gbyte Internal SCSI Disk,
1.44-Mbyte 3.5-inch Internal Floppy Drive
File Server Option Pack
Print Server Option Pad less than
1 Solaris Software (CD-ROM)
Workstations:
14 Sparcstation 5, including:
16-inch Color Monitor, 64-Mbyte,
1.05 Gbyte internal SCSI Disk,
1.44-Mbyte 3.5-inch Internal Floppy Drive
Internal CD
External Tape
14 Solaris Software (CD-ROM)
Classroom List: (To be provided by Company)
Documentation/ Software:
1 Solans Full Manual Set with Binders
14 Solaris Software (CD-ROM)
Networking Supplies:
4 Multiplexors (Multiport Transceivers)
20 Ethernet Cables
Media/Supplies for classes:
1 Overhead Projector (ordering extra bulbs is highly encouraged)
1 Projection Screen
1 4' X 10' Whiteboard
Dry Erase Markers for Whiteboard
6 QIC 150 Tapes (server backup)
20 QIC 150 Tapes (Scratch tapes for System Admin. classes)
1 Podium (optional)
1 Instructional Pointer (optional)
1 Tape of files required for classes (provided by Sun)
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Furniture (See Sample Configurations for Classroom/Lab Setup for Quantity
Requirements):
5' Tables for Computer Equipment
6' Tables for Students
Chairs for Students during lecture
14 Adjustable Computer Chairs
1 Instructor Chair or Stool
SCHEDULE "B" - AUTHORIZED CURRICULUM
Sun Educational Services developed user and system administration courses
per the then current Sun Educational Services course catalog.
SCHEDULE "C" - AUTHORIZED TRAINING LOCATIONS
* Portland, OR
* Seattle, WA
SCHEDULE "D" - PRICING
Sun shall pay Company below percentage of the student tuition invoiced for
each Sun customer to whom Company provides Services under this Agreement:
Sixty five (65%) When Company provides: facility, equipment, and instructor.
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EXHIBIT 10.37
[Microsoft Solution Provider logo]
September 27, 1995
Microsoft Corporation
1 Microsoft Way
Redmond, WA 98052
To whom it may concern:
This letter is to verify that the following company's [sic] are Microsoft
Solution Provider and Authorized Technical Education Center:
ARIS Corporation at:
1417 116th Ave NE Bellevue WA
1750 112th Ave NE Bellevue WA
15201 NW Greenbriar Pkwy Beaverton OR
1355 S Colorado Blvd Ste 606 Denver, CO
3040 Williams Dr Fairfax, VA
If you have any questions regarding the status of this company or the MSP/ATEC
program, please contact a customer service representative at 1-800-SOLPROV.
Sincerely,
/s/ Susan Walker
Microsoft MSP/ATEC representative
Microsoft Corporation
<PAGE>
[Microsoft Logo]
Microsoft Limited
Microsoft Place
Winnersh Wokingham
Berkshire RG41 5TP
Head Office
Telephone 01734270 001
Fax 01734-270 002
Sales Information 0345-00-2000
Technical 01734 271 000
To whom it may concern
Oxford Computer Group (now trading as ARIS/Oxford) is a Solution Provider
Authorised Technical Education Center (ATEC), and has been since the programme
began in the UK, in 1995. The annual application for renewal of the company's
ATEC status is being processed at present, and we fully expect it to be passed
without question as was the company's recent renewal of its Solution Provider
status.
/s/ Sonya Dow
Sonya Dow
Skills Development Manager
Microsoft Ltd UK
Registered office: as above
Registered in England no 1624297 VAT no GB 370 1411 95
<PAGE>
MICROSOFT. SOLUTION PROVIDER AGREEMENT
This Microsoft Solution Provider Agreement is between the Microsoft Corporation
or such other Microsoft subsidiary, affiliate or related company (~MS") as is
specifically identified in the Country Annex, as those terms are defined below,
and the Microsoft Solution Provider (the "MSP") identified in the Country Annex
and in the Final Invoice (MSP), as those terms are defined below. The terms and
conditions of this Agreement shall apply to all business entities authorized as
Microsoft Solution Providers (Member Level, Partner Level) and as Authorized
Technical Education Centers (MSP-ATEC, MSP-ATEC II).
1. DEFINITIONS:
The following definitions shall apply to this Agreement, the Country Annex, the
Site Annex, the MSP Member Program Guide, the Final Invoice (MSP) and to any and
all additional annexes and addendums which currently comprise the Agreement (as
defined below) or which may at a later date comprise the Agreement:
A. "Products" shall mean such Microsoft software products which the MSP is
licensed to use herein, as well as other software products which Microsoft
Corporation or an authorized Microsoft subsidiary may, from time to time,
license the MSP to use, but excluding any Beta Software (defined below).
B. "Microsoft Solution Provider" shall mean the business entity which has met
certain MS established requirements and which provide the Services (defined
below).
C. "Services" shall mean the software integration, consulting, custom and
turnkey development, technical support and training which the Microsoft Solution
Providers may provide to customers.
D. "Sites" shall mean (1 ) separate legal entities controlled by the MSP or
together with the MSP are under the common control of a third party, or (2) the
additional divisions or offices of the MSP which are not located at the MSP's
principal place of business. Unless otherwise provided, the term 'MSP' in this
Agreement shall be deemed to include any Sites.
E. "MSP-ATEC" shall mean a Microsoft Solution Provider which MS has approved as
an Authorized Technical Education Center and which shall provide the Microsoft
Official Curriculum for the MS Courses instructed by Microsoft Certified
Trainers as more fully defined and described in the Authorized Technical
Education Center Addendum.
F. "MSP-ATEC II" shall mean a Microsoft Solution Provider which MS has approved
to be upgraded to the ATEC II level and which must fulfill the additional
requirements set forth in the MSP-ATEC II Program Guide.
G. "MSP Partner Level" shall mean the Microsoft Solution Provider which MS has
approved to be upgraded to the MSP Partner Level and which must fulfill the
additional requirements set forth in the MSP Partner Level Welcome Guide.
H. "Effective Date" shall mean the date of MS's letter of acceptance which shall
be delivered within a Welcome Kit to a new MSP or renewing MSP.
I. "MSP Member Program Guide" shall mean the guide which shall identify the
specific MSP Member requirements and benefits. The MSP Member Program Guide may,
from time to time, be subject to change at MS' sole discretion.
J. "MSP-ATEC Program Guide," "MSP Partner Level Welcome Guide" and "MSP-ATEC II
Program Guide" shall all have the meanings defined in the applicable addendums
or documents. The MSPATEC Welcome Guide, MSP Partner Level Welcome Guide, and
MSP-ATEC II Program Guide may, from time to time, be subject to change at MS'
sole discretion.
K. "Identity Kit" shall mean the guidelines governing the use and placement of
any and all MSP and/or ATEC program logos. The Identity Kit shall be provided to
an approved MSP/ATEC with the applicable Welcome Kit.
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1997 Microsoft Solution Provider Agreement (8/20/96) 098-66551
<PAGE>
L. "Agreement" shall mean this agreement between MS and the MSP with respect to
all terms, conditions, requirements, and benefits appearing herein, including
but not limited to, the Site Annex (if applicable), the Country Annex, the MSP
Member Program Guide, the ATEC Program Guide, the Final Invoice (MSP), and any
other applicable annexes and addendums (e.g., the MSP Partner Level Welcome
Guide, and the Authorized Technical Education Center Addendum). The Site Annex,
the Country Annex, the MSP Member Program Guide and the Final Invoice (MSP) are
attached hereto and incorporated herein by reference.
M. "Term" shall mean the period from the Effective Date to and including
December 31 of the same year, and any subsequent one-year renewal terms as
described in Section 2 below. For any MSP which is providing services in 1996 as
a Microsoft Solution Provider under a Microsoft Solution Provider Agreement, the
Effective Date of the initial Term of this Agreement shall not be earlier than
January 1, 1997.
N. "Territory" shall mean the territory specifically set forth in the Country
Annex.
O. "Microsoft Certified Professional" shall mean the individuals who have been
certified by MS, or a third party authorized by MS, as a Microsoft Certified
Product Specialist, Microsoft Certified Systems Engineer, Microsoft Certified
Solution Developer, Microsoft Certified Trainer, or such other certified
professional designations as may be established.
P. "Final Invoice (MSP)" and "Final Invoice (ATEC)" shall mean, respectively,
the invoice provided to the MSP which indicates the proper Microsoft Solution
Provider fee for the Territory and which requires the MSP to indicate its
acceptance of the terms of this Agreement by signing and resuming the invoice to
MS or the ATEC invoice which may be sent to an MSP approved as an ATEC pursuant
to the ATEC Addendum.
Q. "Beta Software" shall mean the pre-release Territory specific version of
certain Microsoft software products together with written documentation and
related information.
R. "Beta CD" shall mean a compact disk which MS may, from time to time, deliver
to the MSP which shall contain the Beta Software.
S. "Beta Program" shall mean the MS Beta Evaluation Program through which the
MSP may receive Beta CDs containing Beta Software.
2. APPOINTMENT
MS hereby appoints the MSP as a non-exclusive Microsoft Solution Provider at the
Member Level in the Territory, and the MSP accepts such appointment.
Notwithstanding the foregoing, this appointment and this Agreement are
conditioned on MS's final approval of any new applicant or renewing MSP, such
approval shall be indicated by delivery of MS's letter of acceptance delivered
with the Microsoft Solution Provider Welcome Kit. MS' final approval shall be
based on MSP's compliance with the objective obligations and requirements of the
Microsoft Solution Provider program. The MSP understands and agrees that MS has
the right but not the obligation, on a non-exclusive basis, to upgrade the MSP
to the MSP Partner Level and/or approve the MSP as an MSP-ATEC or MSP-ATEC II.
If the MSP is upgraded to the MSP Partner Level and/or is approved to be an MSP-
ATEC or MSPATEC II, then the MSP shall be required to meet certain additional
requirements and obligations and shall receive the additional benefits related
to such appointments or upgrades.
3. TERM AND TERMINATION
A. Term: This Agreement shall take effect on the Effective Date and, unless
earlier terminated as provided herein, shall continue until December 31, 1997.
This Agreement shall renew for additional terms of one year each. Both parties
agree that this Agreement shall be extended provided that the MSP continues to
meet any and all MSP obligations and requirements, including but not limited to,
timely payment of any applicable program fees hereto. Any renewal Term is
conditioned on MS' final approval, such approval shall be indicated by delivery
of MS' letter of acceptance which is contained in the Microsoft Solution
Provider Welcome Kit. If renewing MSP does not receive MS' final approval, this
Agreement shall expire. Upon expiration or earlier termination of this
Agreement, all rights and benefits granted by this Agreement shall revert to MS
and the MSP shall immediately cease use of and destroy (i) all internal use and
training licenses, (ii) MSDN and TechNet licenses, (iii) if applicable, any
licenses granted under the Microsoft Internal Use Product Program, (iv) Beta
Software licenses and (v) the Microsoft Solution Provider logo and any other MS
logos, and shall cease to represent itself as a Microsoft Solution Provider.
Additionally, the MSP shall immediately destroy any and all Beta CDs in the
MSP's possession or control. Termination and/or expiration of this Agreement
shall immediately terminate the MSP's appointment as an MSP (Partner Level),
MSP-ATEC and MSP-ATEC II.
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B. Termination Without Cause: Either party shall have the right to terminate
this Agreement at any time, without cause and without the intervention of the
courts, on the delivery of thirty (30) calendar days' (Japan only: sixty (60)
calendar days') prior written notice. Neither party shall be responsible to the
other for any costs or damages resulting from the termination of this Agreement.
C. Termination With Cause: Without prejudice to MS's other rights or remedies,
MS shall have the right to terminate this Agreement immediately in the event of
one or more of the following occurrences:
(1) If the MSP breaches any of the terms or conditions of this Agreement, and
such breach remains unremedied to MS's satisfaction for thirty (30) calendar
days (Japan only: sixty (60) calendar days) after the MSP receives written
notice of such breach;
(2) If the MSP makes any assignment for the benefit of creditors, files a
petition in bankruptcy, or is adjudged bankrupt or becomes insolvent, or is
placed in the hands of a receiver. The equivalent of any of these proceedings or
acts, though known and/or designated by some other name or term in the
Territory, shall likewise constitute grounds for termination of this Agreement;
or
(3) MSP sells, transfers or assigns a significant portion of stock to a third
party or enters into any transaction which results in MSP's loss of management
control over MSP's organization.
D. Termination of Sites: Upon the expiration or earlier termination of this
Agreement, all Sites authorized herein shall also be terminated. Within thirty
(30) calendar days (Japan only: sixty (60) calendar days) from the effective
date of any termination or expiration of the Agreement, such Sites may apply
independently for authorization to become a Microsoft Solution Provider.
4. MSP SITES
Upon MSP's request, MS may approve the Sites indicated on the Site Annex as
additional Microsoft Solution Providers, provided that such Sites are also
located in the Territory and each individually meets the MSP Member Level
requirements, provided that the MSP shall be responsible for paying the
additional fees arising from the addition of each Site. If the Site is a
separate legal entity, MSP herein unconditionally and irrevocably guarantees the
payment and performance of that Site under the terms and conditions of this
Agreement.
5. PAYMENT
During the initial Term and any renewal Terms, the fee for the appointment as a
Microsoft Solution Provider under this Agreement shall consist of per annum
payments as follows:
A. The Microsoft Solution Provider fee which is the amount determined by the fee
schedule set forth in Table 1 of the Final Invoice (MSP); and
B. The Site fee, which will vary depending on the number of sites, is the amount
determined by the fee schedule set forth in Table 1 of the Final Invoice (MSP).
With respect to any renewing Microsoft Solution Provider, all fees due under
this Agreement shall be received by MS by the date indicated in the Member
Program Guide for the applicable renewal Term. The MSP understands and agrees
that if it is appointed as an ATEC, it shall be required to pay the ATEC fee in
a timely manner. Any fee payments shall be submitted without any deduction
whether by set-off, counterclaim or otherwise.
6. MSP RESPONSIBILITIES AND OBLIGATIONS
A. Trademarks/Logos/Registered Marks: Nothing in this Agreement shall be
construed as granting the MSP with a license to use MS's trademarks, trade
names, or logos other than in the following manner: the MSP is a "Microsoft
Solution Provider" or as is otherwise indicated in the Microsoft Solution
Provider Authorized Technical Education Center Addendum. The specific guidelines
concerning the size, placement and use of the Microsoft Solution Provider name
and logo are set forth in the Identity Kit. The MSP shall use the appropriate
trademark symbol (either "TM" [Standard trademark] or Copyright Symbol
[Registered trademark] in a superscript following the Product name) whenever a
Product name is mentioned in any advertisement, brochure, or material circulated
or published in any form whatsoever by the MSP. The appropriate trademark symbol
must be used in conjunction with references to each Product in all the MSP's
circulations or publications. MS reserves the right to (1) review and approve
all such trademark service names, trade names and logos MSP uses, and (2) to
amend any Microsoft trademarks, trade names, service marks or logos and agrees
to notify the MSP of any such
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B. Termination Without Cause: Either party shall have the right to terminate
this Agreement at any time, without cause and without the intervention of the
courts, on the delivery of thirty (30) calendar days' (Japan only: sixty (60)
calendar days') prior written notice. Neither party shall be responsible to the
other for any costs or damages resulting from the termination of this Agreement.
C. Termination With Cause: Without prejudice to MS's other rights or remedies,
MS shall have the right to terminate this Agreement immediately in the event of
one or more of the following occurrences:
(1) If the MSP breaches any of the terms or conditions of this Agreement, and
such breach remains unremedied to MS's satisfaction for thirty (30) calendar
days (Japan only: sixty (60) calendar days) after the MSP receives written
notice of such breach;
(2) If the MSP makes any assignment for the benefit of creditors, files a
petition in bankruptcy, or is adjudged bankrupt or becomes insolvent, or is
placed in the hands of a receiver. The equivalent of any of these proceedings or
acts, though known and/or designated by some other name or term in the
Territory, shall likewise constitute grounds for termination of this Agreement;
or
(3) MSP sells, transfers or assigns a significant portion of stock to a third
party or enters into any transaction which results in MSP's loss of management
control over MSP's organization.
D. Termination of Sites: Upon the expiration or earlier termination of this
Agreement, all Sites authorized herein shall also be terminated. Within thirty
(30) calendar days (Japan only: sixty (60) calendar days) from the effective
date of any termination or expiration of the Agreement, such Sites may apply
independently for authorization to become a Microsoft Solution Provider.
4. MSP SITES
Upon MSP's request, MS may approve the Sites indicated on the Site Annex as
additional Microsoft Solution Providers, provided that such Sites are also
located in the Territory and each individually meets the MSP Member Level
requirements, provided that the MSP shall be responsible for paying the
additional fees arising from the addition of each Site. If the Site is a
separate legal entity, MSP herein unconditionally and irrevocably guarantees the
payment and performance of that Site under the terms and conditions of this
Agreement.
5. PAYMENT
During the initial Term and any renewal Terms, the fee for the appointment as a
Microsoft Solution Provider under this Agreement shall consist of per annum
payments as follows:
A. The Microsoft Solution Provider fee which is the amount determined by the fee
schedule set forth in Table 1 of the Final Invoice (MSP); and
B. The Site fee, which will vary depending on the number of sites, is the amount
determined by the fee schedule set forth in Table 1 of the Final Invoice (MSP).
With respect to any renewing Microsoft Solution Provider, all fees due under
this Agreement shall be received by MS by the date indicated in the Member
Program Guide for the applicable renewal Term. The MSP understands and agrees
that if it is appointed as an ATEC, it shall be required to pay the ATEC fee in
a timely manner. Any fee payments shall be submitted without any deduction
whether by set-off, counterclaim or otherwise.
6. MSP RESPONSIBILITIES AND OBLIGATIONS
A. Trademarks/Logos/Registered Marks: Nothing in this Agreement shall be
construed as granting the MSP with a license to use MS's trademarks, trade
names, or logos other than in the following manner: the MSP is a Microsoft
Solution Provider" or as is otherwise indicated in the Microsoft Solution
Provider Authorized Technical Education Center Addendum. The specific guidelines
concerning the size, placement and use of the Microsoft Solution Provider name
and logo are set forth in the Identity Kit. The MSP shall use the appropriate
trademark symbol (either "TM" [Standard trademark] or (C) [Registered trademark]
in a superscript following the Product name) whenever a Product name is
mentioned in any advertisement, brochure, or material circulated or published in
any form whatsoever by the MSP. The appropriate trademark symbol must be used in
conjunction with references to each Product in all the MSP's circulations or
publications. MS reserves the right to (1 ) review and approve all such
trademark service names, trade names and logos MSP uses, and (2) to amend any
Microsoft trademarks, trade names, service marks or logos and agrees to notify
the MSP of any such
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<PAGE>
amendments that are relevant to the MSP's business. MSP shall not, at any time,
use or register any name, trademark, service mark, logo or symbol which may be
confusingly similar to any Microsoft or Microsoft Corporation trademark, trade
name, logo, symbol or product name.
B. Reporting: Upon MS's request, the MSP shall provide sales and service
reports, using such forms as MS shall from time to time provide, and deliver
such reports to MS at the address indicated on the reporting form. The MSP
warrants that such reports shall be true and correct to the best of its
knowledge and belief.
C. Membership Application and Profile Report: MSP represents and warrants that
all the information provided on any registration or application form including,
without limitation, its Member Application and/or Profile Report is, in all
material respects, true and correct to the best of its knowledge and belief, and
warrants that the information will continue to be so during the term of this
Agreement unless otherwise notified in writing by MSP to MS. Should there be any
changes in such information during the course of this Agreement, MSP agrees to
promptly inform MS in writing giving details of such changes.
D. Microsoft Certified Professionals: The MSP understands and agrees that it, at
all times, shall employ the number and kind of Maps as set forth in the MSP
Member Program Guide and, if applicable, the ATEC Program Guide.
E. Service Estimate: The MSP shall use its best efforts to realize certain
percentage of its gross revenue from the provision of the MSP Services. Gross
revenues shall be computed from revenues derived from services provided to third
parties. The specific percentage referred to above shall be set forth in the MSP
Member Program Guide. The estimate shall not include those services, support,
training or product distribution provided to any of the MSP's Sites.
F. Piracy: MSP shall use its best efforts to prevent the unauthorized
duplication or pirating of the Product and shall take all available steps to
protect against piracy and to protect MS's right, title and interest in and to
the Product. MSP shall promptly notify MS of any infringement in the Territory
of any copyright or of any trademark of MS.
7. MS RESPONSIBILITIES AND OBLIGATIONS
A. MS License Grants for Internal and Marketing Use:
For internal and marketing uses only, MS hereby grants to the MSP, including
each Site, a non-exclusive, non-transferable, royalty-free, terminable license
to make and use the following:
(1) The number of copies of the Product set forth in the MSP Member Program
Guide. In all cases, use of the copies of the Product are subject to the
additional terms and conditions of the End User License Agreement, including but
not limited to, any limitation and warranties, for the corresponding Product,
except that the copies shall not be resold, transferred or assigned to any third
party. MS reserves the right to change the Products (and number of copies)
licensed above and as may be provided through the Microsoft Internal Use Product
Program, from time to time and in its sole discretion; and
(2) The number of copies set forth in the MSP Member Program Guide of the
materials contained on the MSDN Level II and TechNet compact disks. The MSP will
be provided with updates to one (1) nontransferable set of compact disks to
facilitate this. This grant amends the End User License Agreements of MSDN and
TechNet; however, the provisions of such End User License Agreements where
unamended remain in full force and effect.
B. Training Use Licenses: The MSP, at its sole cost and expense, may offer
training to customers on the Product. MS hereby grants the MSP permission to
make the number of copies set forth in the MSP Member Program Guide for the sole
purpose of providing training on the Microsoft Desktop Product. Training use of
the Product is subject to the following conditions: (i) the MSP shall destroy
all copies used outside of the MSP location upon completion of on-site training;
(ii) the MSP may only reproduce the Product for which the MSP conducts training
classes; (iii) the MSP agrees to be bound by the terms of the Microsoft End User
License Agreement for each copy, except that such Product shall not be resold,
transferred, or assigned to a third party, (iv) the MSP shall strictly control
use of any copies in accordance with the End User License Agreement; and (v) all
copies of the Product shall be true and complete copies, including all copyright
and trademark notices.
C. Product Support: The MSP shall receive the product support benefits set forth
in the MSP Member Program Guide and, if applicable, the ATEC Program Guide.
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D. Advertising Promotional Materials: MS may, in its sole discretion, reference
the MSP in advertising and promotional materials in connection with the sale and
promotion of the Products. Uses of the MSP's name include, but are not limited
to: lists of the MSP's for customer information, advertising of the Microsoft
Solution Provider program containing the MSP's name. When a specific
advertisement or promotion containing only the MSP's name is planned, MS will
obtain the MSP's written permission before such use. MS shall also obtain the
MSP's written permission before use of any logo of the MSP. (C)
E. Changes in the MSP Agreement Features: The MSP understands that MS may
expand, change the scope or contents of, and/or delete, any benefits offered
under the Microsoft Solution Provider program, including but not limited to
expanding, changing the scope or contents of and/or deleting the MSP Member
Program Guide and, if applicable, the MSP-ATEC Program Guide, MSP Partner Level
Welcome Guide, and MSPATEC 11 Program Guide. In the event that MS adversely
changes any program features, and should the MSP be dissatisfied with those
changes, the MSP may terminate this Agreement in accordance with Section 3.B and
will have no other recourse against MS.
8. BETA EVALUATION PROGRAM
MS, at its sole discretion, may periodically provide a Beta CD to the MSP at no
additional charge. The MSP understands and agrees that the Beta CD may be used
only by the MSP and its employees and that it is not entitled to receive any
particular Beta Software or any commercial release version of a MS Software
appearing on any Beta CD. The Beta Software provided herein may not contain all
features ultimately included in the commercial release version of the software
product and may contain features that will disable it at the end of the license
period. MS will not provide any product support for the Beta Software.
Additionally, the following shall apply:
A. End User License Agreement Coverage: An End User License Agreement in printed
and/or electronic form covering each Beta Software product will accompany each
Beta CD. The MSP will be entitled to install and use up to three copies per Beta
Software. The MSP acknowledges that by using a particular Beta Software product
it agrees to the terms and conditions of the End User License Agreement for that
product. If the MSP does not agree with the terms and conditions of such the End
User License Agreement, the MSP is not authorized to use that product.
B. Confidentiality: The MSP acknowledges and agrees that the Beta Software it
receives is proprietary and confidential information of MS and its suppliers and
shall be subject to the terms and conditions of the Microsoft Non-Disclosure
Agreement signed by the MSP, if any. If the MSP has not signed a Microsoft
NonDisclosure Agreement or if the agreement signed is limited in a manner such
that it does not cover pre-release software, then this section shall apply.
Subject to the exceptions set forth below, the MSP agrees not to disclose or
provide the Beta Software or any information the MSP learns about the Beta
Software to any third party, nor disclose any such information in a written
publication. The MSP may, however, disclose the information under judicial or
other governmental order provided that the MSP gives MS reasonable written
notice prior to such disclosure and that the MSP complies with any applicable
protective order or equivalent. With regard to any versions of the Beta Software
for Microsoft (C) Windows(C), Windows NT@, MS-DOS@, and predecessor or successor
versions (including products marketed as replacements) of these products, this
confidentiality provision shall continue in effect until the earlier of one year
from the date that the MSP receives a Beta CD containing any such version(s) or
the date the associated information is made public by MS. For versions of any
other Beta Software, this confidentiality provision will continue in effect
until the earlier of three years from the date the MSP receives a Beta CD
containing such software or the date the associated information is made public
by MS. This confidentiality obligation applies only to Beta CDs and the
associated Beta Software that the MSP receives under the terms of this
Agreement.
9. AUDIT
During the Term, MS and/or its designated representatives, shall have full
access to the MSP's pertinent books and records and shall have the right to make
copies of such materials as is reasonable to verify the MSP's compliance with
this Agreement. The MS shall conduct such audits during the MSP's normal
business hours and, from time to time, as the MS deems necessary.
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10. CONFIDENTIALITY
Except as otherwise provided herein, each party expressly undertakes to retain
in confidence all information and know-how transmitted to the other that the
disclosing party has identified as being proprietary and/or confidential or
that, by the nature of the circumstances surrounding the disclosure, ought in
good faith to be treated as proprietary and/or confidential, and expressly
undertakes to make no use of such information and know-how except under the
terms and during the existence of this Agreement. However, neither party shall
have an obligation to maintain the confidentiality of information that (i) it
received rightfully from a third party prior to its receipt from the disclosing
party; (ii) the disclosing party has disclosed to a third party without any
obligation to maintain such information in confidence; or (iii) is independently
developed by the obligated party. Further, either party may disclose
confidential information as required by governmental or judicial order, provided
such party gives the other party prompt written notice prior to such disclosure
and complies with any protective order (or equivalent) imposed on such
disclosure. Each party shall treat all MS product adaptation materials as
confidential information and shall not disclose, disseminate, or distribute such
materials to any third party without the other's prior written permission. Each
party's obligation under this Section shall extend to the earlier of such time
as the information protected hereby falls into the public domain through no
fault of the obligated party or three (3) years following termination or
expiration of this Agreement.
11. NEW PRODUCTS
Notwithstanding any other provisions of this Agreement, MS may elect at any time
during the term of the Agreement to announce new MS products to which the terms
and conditions of this Agreement may not apply. New versions, updates, and
maintenance releases of existing titles are not considered new MS products.
12. WARRANTIES/LIMITED WARRANTIES A. MS WARRANTIES
EXCEPT FOR ANY LIMITED WARRANTIES PROVIDED IN ANY APPLICABLE END USER LICENSE
AGREEMENT AND AS MAY BE OTHERWISE PROVIDED HEREIN, THE PRODUCTS AND ANY OTHER
SERVICES, MATERIALS AND PRODUCTS PROVIDED BY MS TO MSP, ARE PROVIDED 'AS IS'
WITHOUT WARRANTY OR CONDITION OF ANY KIND. MS SHALL NOT BE LIABLE FOR ANY
CONSEQUENTIAL, ACCIDENTAL, SPECIAL, PUNITIVE, AND INDIRECT DAMAGES WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS
INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE LIKE, ARISING FROM ANY
SOFTWARE OR SERVICES PROVIDED BY MS PURSUANT TO THIS AGREEMENT. TO THE FULLEST
EXTENT OF APPLICABLE LAW, MS, DISCLAIMS ALL OTHER WARRANTIES AND CONDITIONS,
EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, BUT NOT LIMITED TO, IMPLIED
WARRANTIES AND CONDITIONS OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
TITLE AND NON-INFRINGEMENT, OR THAT THE OPERATION OF ANY SERVICES, MATERIALS, OR
SOFTWARE FURNISHED HEREUNDER WILL BE UNINTERRUPTED, ERROR-FREE OR VIRUS-FREE.
SOME JURISDICTIONS DO NOT ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE
ABOVE EXCLUSION MAY NOT APPLY TO THE MSP. THE LIMITED WARRANTIES AND CONDITION
REFERENCED ABOVE GIVE MSP SPECIFIC LEGAL RIGHTS. MSP MAY HAVE OTHERS, WHICH VARY
FROM JURISDICTION TO JURISDICTION. Neither MSP nor any of its employees or
agents shall have the right to make any representation, warranty, or promise or
give any instructions for use of the Product which instruction is not contained
on the Product label or container, or authorized by Microsoft Corporation.
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B. MSP WARRANTIES
MSP hereby represents and warrants to MS as follows:
(1) It will comply with its plans developed pursuant to Section 6(c) above and
that it will achieve the aims and objectives set out in that document.
(2) It warrants that all activities undertaken by it as a Microsoft Solution
Provider, including any and all services offered or provided by it under that
designation, shall be provided with due care and skill and in a manner which
will not in any way, directly or indirectly, bring that designation or any other
designation, name or mark with which MS is associated into disrepute. Without
limitation to the foregoing, MSP shall in particular ensure that any end user
complaint in respect of a product or service shall be dealt with in a reasonable
manner. In this regard MSP shall be deemed to have acted reasonably in respect
of any such complaint if it responds promptly and in good faith to any such
complaint and assists MS to honor the terms and conditions of the End User
License Agreement applicable to the Product which is the subject of any such
complaint.
(3) It hereby agrees to defend, indemnify and hold MS, its successors and their
parents, subsidiaries and affiliates and their employees, officers and
directors, harmless from and against any loss, damage, costs or expenses
(including reasonable attorney's fees) arising out of or in any way connected
with the performance of the services or from the MSP's (or any of its agents or
employees) acts or omissions in connection with this Agreement.
13. LIMITATION OF LIABILITY
Subject to applicable law, neither MS nor anyone else who has been involved in
the creation, production, or delivery of the Product or services that are the
subject of this Agreement shall be liable for any direct, indirect,
consequential or incidental damages (including damages for loss of business
profits, business interruption, loss of business information, and the like)
arising out of the use or inability to use the MS Product, or provision of, or
failure to provide, support, even if MS has been advised of the possibility of
such damages. Because some jurisdictions do not allow the exclusion or
limitation of indirect, consequential or incidental damages, the above
limitation may not apply. In any event, except as otherwise provided by law, the
liability of MS or its suppliers, whether for negligence, breach of contract,
breach of warranty, or otherwise, shall, in the aggregate, not exceed the amount
paid to MS by the MSP hereunder.
14. GENERAL
A. Except as otherwise provided, all notices, authorizations, and requests in
connection with this Agreement shall be in writing and shall be deemed received
two (2) business days after transmission by facsimile, five business days after
being deposited in the mail (prepaid) for delivery in the same country, or ten
business days after being deposited in the mail (prepaid) for delivery between
different countries, at the addresses set forth in the Final Invoice (MSP) or to
such other address as the party to receive the notice so designates by written
notice to the other.
B. This Agreement shall constitute the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior and
contemporaneous communications including all prior and current Microsoft
Solution Provider Agreements. Except as otherwise provided herein, this
Agreement shall only be modified as provided herein or by a written agreement
dated subsequent to the Effective Date and signed by the authorized
representatives of both parties. The parties understand and agree that with
respect to any upgrade to the MSP Partner Level or to the MSP-ATEC 11 which may
occur during the Term, the MSP shall be advised in writing of the additional
benefits and requirements of such programs and shall acknowledge and agree to be
bound to such additional requirements by breaking the seal on the Partner
Welcome Kit or the MSP-ATEC 11 Welcome Kit, whichever applies.
C. This Agreement shall be governed by the laws of the country in which the MSP
has its principal place of business. If either MS or the MSP employs attorneys
to enforce any rights arising out of or relating to this Agreement, the
prevailing party shall be entitled to recover reasonable costs and attorneys
fees.
D. If a particular provision of this Agreement is terminated or held by a court
of competent jurisdiction to be invalid, illegal, or unenforceable, this
Agreement shall remain in full force and effect as to the remaining provisions.
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E. No waiver of any breach of any provisions of this Agreement shall constitute
a waiver of any prior concurrent, or subsequent breach of the same or any other
provisions hereof, and no waiver shall be effective unless made in writing and
signed by an authorized representative of the waiving party.
F. Neither this Agreement, nor any terms and conditions contained herein, shall
be construed as creating a partnership, joint venture, franchise or agency
relationship.
G. The MSP agrees that it shall inform its customers that the MSP is an
independent business from MS, and shall not hold itself out as an agent of MS,
or attempt to bind MS to any third party agreement.
H. Sections 8B, 10, 12, and 13 shall survive the expiration or-earlier
termination of this Agreement.
1. This Agreement, and any rights or obligations hereunder, shall not be
assigned, sublicensed, or sub-contracted by the MSP, without MS's prior written
consent.
J. TO AGREE TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, INCLUDING BUT NOT
LIMITED TO, THE SITE ANNEX (IF APPLICABLE), THE COUNTRY ANNEX, THE MSP MEMBER
PROGRAM GUIDE, THE FINAL INVOICE (MSP) AND ANY OTHER APPLICABLE ANNEXES AND
ADDENDUMS (E.G., THE AUTHORIZED TECHNICAL EDUCATION CENTER ADDENDUM), AN
AUTHORIZED REPRESENTATIVE OF THE MSP MUST COMPLETE ALL REQUIRED INFORMATION AND
SIGN, DATE, AND RETURN TO MS A PAPER COPY OF THE FINAL INVOICE (MSP) AND THE
SITE ANNEX (IF APPLICABLE) TOGETHER WITH A PAYMENT FOR THE APPROPRIATE FEES.
. NOTE THAT NO BINDING AGREEMENT IS FORMED UNTIL MS HAS FINALLY APPROVED MSP AS
A MICROSOFT SOLUTION PROVIDER. IN ADDITION, NOTE THAT NEITHER THE CASHING OF THE
MSP'S CHECK, NOR ACCEPTANCE OF PAYMENT OF FEES IN ANY MANNER WHATSOEVER, SHALL
BE CONSIDERED "ACCEPTANCE" OF THESE AGREEMENTS BY MS. MS'S APPROVAL SHALL BE
INDICATED BY MS' WRITTEN LETTER OF ACCEPTANCE WHICH SHALL BE SENT TO A NEW OR
RENEWING MSP WITHIN A WELCOME KIT.
. NOTE THAT IN EUROPE, THE MSP INVOICE WILL BE DELIVERED TO THE APPLICANT OR
RENEWING MSP AFTER THE BODY OF THIS AGREEMENT HAS BEEN RECEIVED.
Remember, Your Signature On The Final Invoice (MSP) Indicates Your Acceptance Of
The Terms And Conditions Of This Agreement. Keep This Agreement For Your
Records.
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Country Annex Microsoft Solution Provider Agreement MSP/ATEC
The terms and conditions set forth herein are incorporated by reference into the
Microsoft Solution Provider Core Terms and Conditions. To the extent any terms
set forth in this Country Annex are in conflict with the Core Terms and
Conditions, the terms set forth herein shall govern.
MICROSOFT ENTITY: [ENTER THE MS CORPORATE/SUB LEGAL NAME AND ADDRESS]
TERRITORY:
For the purposes of this Agreement, the Territory shall be the country in which
the MSP is located. Notwithstanding the foregoing, if an MSP is located in the
United States or Canada, its Territory shall be deemed to be both the United
States and Canada. As used herein, "United States" shall mean the continental
states and Hawaii.
COUNTRY SPECIFIC LEGAL TERMS
. UNITED STATES AND CANADA: The terms and conditions set forth below
shall be added and
shall only apply to the Agreement in force in the United States and Canada:
SECTION 14(1): The following sentence is added to the end of this Section: It is
the express wish of the parties that this Agreement and all related documents be
drawn up in English. C'est la volente expresse des parties que la presente
convention ainsi que les documents qui s'y rattachent soient rediges en anglais.
2. AUSTRALIA: The terms and conditions set forth below shall be added and
shall only apply to the
Agreement in force in Australia:
SECTION 2: The following sentence is added to the end of this Section:
Copyright Symbol It is an added condition of this Agreement that MSP comply at
all times for the duration of this Agreement with all criteria for the
appointment of Microsoft Solution Providers issued from time to time by
Microsoft and in particular, without limitation, any criteria as to net revenue
flowing to MS arising out of MSPs appointment hereunder. Additionally, all Sites
must meet those same criteria for the appointment of Microsoft Solution
Providers."
SECTION 12A: The following sentence is added after the second sentence of
this Section: "TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, SUBJECT TO
SECTION 7 AND ADDITIONALLY TO ANY PROVISION OF THIS AGREEMENT, THE LIMITED
WARRANTIES GIVEN BY MS IN THIS AGREEMENT ARE EXCLUSIVE AND ARE IN LIEU OF ALL
OTHER WARRANTIES AND CONDITIONS WHATSOEVER, WHETHER EXPRESS, IMPLIED OR
STATUTORY."
SECTION 14: A new subsection (L) is added at the end of Section 14:
Notwithstanding Sections 12A and 13 or any other provision of this Agreement, if
anything arising out of or connected with this Agreement constitutes a supply of
goods or services to a consumer, then Company may have the benefit of certain
rights or remedies pursuant to the Trade Practices Act and similar state and
territory laws in Australia, in respect of which liability may not be excluded
or restricted and nothing in this Agreement will have the effect of so excluding
or restricting those rights or remedies. Insofar as such liability may not be
excluded, then to the maximum extent permitted by law such liability is limited,
at MS' exclusive option, in the case of Services, either by supplying the
services again or the payment of the cost of having the services supplied again
and in the case of goods, to either (a) replacement of the goods; or 8
correction of defects in the goods.
Page 9
1997 Microsoft Solution Provider Agreement Country Annex 098-66551
<PAGE>
SECTION 14: A new subsection (M) is added at the end of Section 14:
NOTHING IN THIS AGREEMENT IS INTENDED TO PREJUDICE, OR HAVE THE EFFECT OF
PREJUDICING, ANY RIGHTS MSP MAY HAVE UNDER AUSTRALIAN LAW OR OF THE STATES OF
AUSTRALIA WHICH CANNOT LEGALLY BE EXCLUDED OR RESTRICTED AND THE TERMS OF THIS
AGREEMENT MUST BE READ ACCORDINGLY.
** Copyright Symbol Copyright Symbol
3. PEOPLE'S REPUBLIC OF CHINA: The terms and conditions set forth below
shall be added and
shall only apply to the Agreement in force in the People's Republic of China.
SECTION 1 (H): This Section is revised to read as follows: "'Effective
Date' shall mean the date on which the appropriate subdivision of the Ministry
of Foreign Trade and Economic Cooperation validly issues to MSP a Certificate of
Registration and Entry into Effect of a Technology and/or Equipment Contract
(the "Certificate") pursuant to the Provisional Measures for the Administration
of Trade in Connection with the Import of Technology and Equipment."
SECTION 2: The following is added before the period of the second sentence
of Section 2: "and is further subject to the issuance of the Certificate by the
local subdivision of the Ministry of Foreign Trade and Economic Cooperation
pursuant to the Provisional Measures for the Administration of Trade in
Connection with the Import of Technology and Equipment"
SECTION 4: The following is added before the period of the last sentence of
Section 4: "and MSP shall ensure that the Certificate is issued in the name of
both itself and the Site."
SECTION 5: The following language is added at the end of Section 5: "MSP is
solely responsible for compliance with all foreign exchange formalities of the
People's Republic of China for the overseas remittance ail fees due and payable
to MS, and failure to obtain any requisite governmental approval for the
remittance of foreign exchange shall not release MSP of its obligations
hereunder. In the event that MSP fails to pay fees on the date set forth
hereunder, MSP shall be liable to pay simple interest to MSP on the deficit from
the time due until the time paid at [two percent (2%)] above the average of the
six month LIBOR for United States dollars during the period of default."
SECTION 6(A): The following language is added at the end of Section 6(A):
"As more fully described in the Identity Kit, MSP shall be obliged to comply
with ail recorded formalities as a trademark licensee under the applicable laws
of the People's Republic of China."
SECTION 12: A new subsection (C) is added at the end of Section 12: "MSP
hereby represents and warrants to MS at the time of the execution of this
Agreement and during the term of this Agreement:
(1) It is validly established as an enterprise legal person under the laws of
the People's Republic of China;
(2) It has been issued a business license which will be valid throughout the
term of this Agreement;
(3) The scope of business set forth on its business license is consistent with
the activities which it will undertake under this Agreement;
(4) It has been established with sufficient registered capital to assume the
obligations set out under this Agreement;
(5) It has authority to directly enter into and perform foreign economic
contracts;
(6) Its legal representative or a person validly authorized in writing by the
legal representative has signed this Agreement, and
(7) Each of the foregoing representations and warranties are true in respect of
any Affiliate which will provide a Site.
Page 10
1997 Microsoft Solution Provider Agreement Country Annex 098-66551
<PAGE>
MSP further covenants that it shall comply with all regulatory requirements
under the Provisional Measures for the Administration of Trade in Connection
with the Import of Technology and Equipment, including, but not limited to, the
procurement of the Certificate, the issuance of which is a precondition for the
effectiveness of this Agreement, and shall promptly send a copy of the
Certificate to MS upon its issuance."
SECTION 14(B): The following replaces the last sentence of this Section:
"The parties understand and agree that with respect to any upgrade to the MSP
Partner Level or to the MSP-ATEC II which may occur during the Term the MSP
shall acknowledge and agree to be bound to such additional requirements by
executing a written acknowledgment, obtaining a Certificate in respect of the
upgrade and resuming a copy of the written acknowledgment and the Certificate to
MS."
SECTION 14(C): The following is added between the first and second
sentences of this Section: "If a dispute arises in connection with the
interpretation or implementation of this Agreement, either Party may submit the
dispute for arbitration to the Singapore International Arbitration Centre for
final decision pursuant to the provisions of the Arbitration Rules of that
Centre. The tribunal shall consist of three arbitrators, with each of MS and MSP
appointing one (1 ) arbitrator. The third arbitrator shall be appointed by the
president of the Arbitration Centre and shall serve as chairman of the panel. "
SECTION 14(D): The following is added at the end of this Section: "Without
limiting the generality of the foregoing, the parties hereby agree that in the
event of any dispute concerning the enforceability of this Agreement, Section 3
of this Country Annex and Section 12(C) shall be interpreted as an independent
agreement between the parties."
SECTION 14(J): The following replaces the bold print sentences at the end
of this Section: "NOTE THAT NO BINDING AGREEMENT IS FORMED UNTIL MS HAS FINALLY
APPROVED IN WRITING MSP AS A MICROSOFT SOLUTION PROVIDER AND THE CERTIFICATE HAS
BEEN ISSUED BY THE LOCAL SUBDIVISION OF THE MINISTRY OF FOREIGN TRADE AND
ECONOMIC COOPERATION. MS'S WRITTEN APPROVAL SHALL BE SENT TO MSP BY ORDINARY
MAIL. "
*******
4. INDONESIA
SECTION 3: A new subsection (E) shall be added as to this Section:
To the extent necessary to implement the termination provisions of this
Agreement, each of the parties hereby waives any right or obligation, it or the
other party may have under any applicable law or regulation, including without
limitation Article 1266 of the Indonesian Civil Code, to request or obtain the
approval, order, decision or judgment of any court to terminate this Agreement.
SECTION 14(1): The following language shall be added to Section 14(H): "It
is the express wish of the parties that this Agreement and all related documents
be drawn up in English."
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1997 Microsoft Solution Provider Agreement Country Annex 098-66551
<PAGE>
Microsoft. Authorized Technical Education Center Addendum Microsoft Solution
Provider Agreement
This addendum (the "ATEC Addendum") is between the Microsoft Corporation or such
other Microsoft subsidiary, affiliate or related company ("MS") as is
specifically identified in the Country Annex to the Microsoft Solution Provider
Agreement and the Microsoft Solution Provider Authorized Technical Education
Center identified in the Final Invoice (ATEC) (the "MSP-ATEC"). This Addendum
forms part of the Agreement between Microsoft and MSP-ATEC.
In consideration of the mutual promises contained herein, the parties agree as
follows:
1. DEFINITIONS
The MSP-ATEC understands and agrees that the defined terms appearing in the
Agreement shall also apply to this ATEC Addendum and any attachments hereto.
Additionally, the following terms shall have the definitions set forth below:
A. "ATEC Site" shall mean the sites which have already met the MS qualifications
for designation as an MSP Site, and which now meet the MS qualifications for
designation as a site providing ATEC services. The ATEC Sites shall be listed in
the ATEC Site Annex, attached hereto and incorporated herein by reference.
Unless otherwise provided herein, the term MSP-ATEC shall be deemed to include
any ATEC Sites. Except as otherwise provide herein, ATEC Sites must be owned or
leased by the MSP-ATEC;
B. "Ed Forum" shall mean the monthly Education Forum newsletter published by MS
containing news, updates, schedules, pricing, and other news regarding MSP-ATEC
Education and Certification.
C. "Trainer" means an individual who has successfully completed the MS Trainer
course and possesses Microsoft Certified Trainer certification for the specific
Microsoft Official Curriculum, defined below.
D. "Students" shall mean all persons, excluding any Trainer, attending the MS
Courses, including but not limited to students auditing the course or MS
representatives.
E. "Trainer-led Course Materials" shall mean written materials developed by MS
designed for delivering Microsoft Courses taught by a Trainer within a classroom
environment.
F. "MS Course(s)" means any Trainer-led course(s) offered in a classroom
environment, Microsoft Online Institute (MOLI) or MS Self-Paced courses
utilizing the MOC, defined below.
G. "Microsoft Official Curriculum" or "MOC" shall mean the written course
materials which MS has developed relating to systems, support and developer
training for computer professionals, including but not limited to Trainer-led
Course Materials and MS Self-Paced Course Materials.
H. Supplemental Materials" shall mean the written course materials created by
the MSP-ATEC to supplement the MOC.
1. "MS Self-Paced Course Materials" shall mean the Microsoft Official Curriculum
designed for individual use outside of the classroom.
J. "MSP-ATEC Program Guide" means the then-current issue of the guide which
shall identify the specific MSP-ATEC requirements and benefits. The MSP-ATEC
Program Guide is attached hereto and incorporated herein by reference. If any
conflicts in terms exist between this ATEC Addendum and the MSPATEC Program
Guide, the ATEC Addendum shall govern. The MSP-ATEC Program Guide may, from time
to time, be subject to change.
K. MCP Logos" shall mean the Microsoft Certified Professional logos which shall
be used as instructed in the Identity Kit.
1997 Microsoft Solution Provider Agreement (8120/96) 1997 Microsoft ATEC
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<PAGE>
L. "ATEC Effective Date" shall mean the date of MS's letter of acceptance which
shall be delivered within a Welcome Kit to a new or renewing MSP-ATEC.
2. APPOINTMENT
MS has appointed the MSP-ATEC as a non-exclusive Microsoft Solution Provider
Authorized Technical Education Center in the Territory, and the MSP-ATEC
represents and warrants that it is currently an MSP in good standing and that it
accepts such appointment. MSP-ATEC shall teach MS Courses according to Section
6.C. below and any additional guidelines set forth in the MSP-ATEC Program Guide
and shall sell at retail the MOC required for MS Self-Paced Courses all in
accordance with any additional guidelines set forth in the MSP-ATEC Program
Guide.
3. TERM AND TERMINATION
A. Term: This ATEC Addendum shall take effect on the ATEC Effective Date and,
unless earlier terminated as provided herein, shall continue until December 31,
1997. This ATEC Addendum shall renew for additional terms of one year. Both
parties agree that this Addendum shall be extended provided that the MSPATEC
continues to meet any and all MSP-ATEC obligations and requirements, including
but not limited to, timely payment of any applicable program fees. Any renewal
Term is conditioned on MS' final approval, such approval shall be indicated by
delivery of MS' letter of acceptance which is contained in the Microsoft
Solution Provider Authorized Technical Education Center Welcome Kit. If the
renewing MSP-ATEC does not receive MS' final approval, this Addendum shall
expire. Upon expiration or earlier termination of this ATEC Addendum, all rights
and benefits granted by this ATEC Addendum shall revert to MS and the MSP-ATEC
(1) shall immediately cease use of and destroy all MOC, (2) immediately cease
use of the Microsoft Solution Provider Authorized Technical Education Center
logo and any other MS logos, (3) delete any Microsoft software which has been
licensed and loaded into MSP-ATEC hardware pursuant to Section 8 below and (4)
shall cease to represent itself as a Microsoft Solution Provider Authorized
Technical Education Center. Termination and/or expiration of the Agreement shall
immediately terminate the MSP-ATEC's appointment as an Microsoft Solution
Provider Authorized Technical Education Center.
B. Termination Without Cause: Either party shall have the right to terminate
this ATEC Addendum at any time, without cause and without the intervention of
the courts, on the delivery of thirty (30) calendar days' (Japan only: sixty
(60) calendar days') prior written notice. Neither parry shall be responsible to
the other for any costs or damages resulting from the termination of this ATEC
Addendum.
C. Termination With Cause: Without prejudice to MS's other rights or remedies,
MS shall have the right to terminate this ATEC Addendum immediately in the event
of one or more of the following occurrences:
(1) If the MSP-ATEC breaches any of the terms or conditions of this ATEC
Addendum, and such breach remains unremedied to MS's satisfaction for thirty
(30) calendar days (Japan only: sixty (60) calendar days') after the MSP-ATEC
receives written notice of such breach;
(2) If the MSP-ATEC makes any assignment for the benefit of creditors, files a
petition in bankruptcy, or is adjudged bankrupt or becomes insolvent, or is
placed in the hands of a receiver. The equivalent of any of these proceedings or
acts, though known and/or designated by some other name or term in the
Territory, shall likewise constitute grounds for termination of this ATEC
Addendum; or
D. Termination of Sites: Upon the expiration or earlier termination of this ATEC
Addendum, all ATEC Sites authorized herein shall also be terminated.
1997 Microsoft Solution Provider Agreement (8120196) 1997 Microsoft ATEC
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<PAGE>
4. MSP-ATEC SITES
Upon MSP-ATEC's request, MS may approve the ATEC Sites indicated on the ATEC
Site Annex as additional Microsoft Solution Provider Authorized Technical
Education Centers, provided that such ATEC Sites are also located in the
Territory and are currently MSP Sites. If-the ATEC Site is a separate legal
entity, the MSPATEC hereby unconditionally and irrevocably guarantees the
payment and performance of that Site under the terms and conditions of this ATEC
Addendum.
5. PAYMENT
During the Term and any renewal Term, the fee for the membership as a Microsoft
Solution Provider Authorized Technical Education Center under this ATEC Addendum
shall consist of per annum payments as follows:
A. The ATEC fee which is the amount determined by the fee schedule set forth in
Table 1 of the Final Invoice (ATEC); and
B. The ATEC Site fee which will vary depending on the number of ATEC Sites, and
which amount is determined by the fee schedule set forth in Table 1 of the Final
Invoice (ATEC).
With respect to any renewing Microsoft Solution Provider Authorized Technical
Education Center, all fees due under this Addendum shall be received by MS by
the date indicated in the Program Guide for the applicable renewal Term Any fee
payments shall be submitted without any deduction whether by set-off,
counterclaim or otherwise.
6. MSP-ATEC RIGHTS AND OBLIGATIONS
A. Trademarks/Logos/Registered Marks: Nothing in this Addendum shall be
construed as granting the MSP-ATEC any license to use MS's trademarks, trade
names, or logos. MS does authorize MSPATEC to use the MCP Logos and the phrases
Microsoft Solution Provider Authorized Technical Education Center" and Microsoft
Official Curriculum" pursuant to the specific guidelines concerning the size and
placement set forth in the applicable Identity Kit. MS reserves the right to (1)
review and approve MSP-ATEC's use of such phrases and MCP Logos, and (2) to
amend any MCP Logos and phrases. MS agrees to notify the MSP-ATEC of any such
amendments that are relevant to the MSP-ATEC's business. MSP-ATEC shall not, at
any time, use or register any name, trademark, service mark, logo or symbol
which may be confusingly similar to any Microsoft or Microsoft Corporation
trademark, trade name, logo, symbol or product name.
B. Business Plan: MSP-ATEC shall provide a written business plan concerning
technical training, on an annual basis. Such business plan shall be due upon the
commencement of each Term, and at such additional times as may be reasonably
required by MS.
C. MS Courses:
(1) Within three (3) months of its authorization as a Microsoft Solution
Provider Authorized Technical Education Center, MSP-ATEC must have and maintain
during the Term a minimum number of Trainers for each ATEC Site as set forth in
the MSP-ATEC Program Guide. MSP-ATEC may also use contractor (third-party)
Trainers as long as MSP-ATEC has a written agreement with such contractor
sufficient to protect the rights of MS as are set forth herein. MS shall be
considered a third-party beneficiary to any such third party agreement. MS
Courses may be taught only by Trainers at ATEC Sites, customer locations (at the
customer's request) and at such other locations which have been previously
approved in writing by MS. Any and all locations where the MS Courses are taught
by Trainers must meet the Equipment Configuration and Facilities requirements
set forth in the MSP-ATEC Program Guide. No audio or video taping, or any other
form of recording of the MS Courses is allowed, except where such recordings are
used by the MSP-ATEC to assure quality control.
1997 Microsoft Solution Provider Agreement (8120196) 1997 Microsoft ATEC
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<PAGE>
(2) MSP-ATEC shall comply with the requirements as set forth in the MSP-ATEC
Program Guide concerning the number of Students which must be trained per
calendar quarter, per ATEC Site. MSP-ATEC shall issue a Microsoft-provided
'Certificate of Completion' to each Student who successfully completes an MS
Course.
(3) MSP-ATEC shall comply with the requirements concerning the number and kind
of MS Courses which must be offered per calendar quarter, per ATEC Site as such
requirements are set forth in the MSP-ATEC Program Guide.
(4) MSP-ATEC shall provide student course evaluation forms to all course
participants, and shall forward such forms to MS. Additional requirements
concerning the student course evaluation forms may be found in the MSP-ATEC
Program Guide.
D. Membership Application and Profile Report: MSP-ATEC represents and warrants
that all the information provided on any registration or application form
including, without limitation, its ATEC Application and/or Profile Report is, in
all material respects, true and correct to the best of its knowledge and belief,
and warrants that the information will continue to be so during the term of this
ATEC Addendum unless otherwise notified in writing by MSP-ATEC to MS. Should
there be any changes in such information during the course of this ATEC
Addendum, MSP-ATEC agrees to promptly inform MS in writing, giving details of
such changes.
E. Microsoft Official Curriculum:
(1) MSP-ATEC must use MOC when it teaches any MS Course for any Product or
technology for a Product. If MS has not developed MOC for a course on a
particular Product or technology, MSP-ATEC is free to develop its own courseware
and offer courses on said Microsoft Product or technology; however, it shall not
offer these courses under the title "MS Course." Notwithstanding the foregoing,
MSPATEC may use Supplemental Materials in conjunction with the MOC so long as
the Supplemental Materials are clearly identified as such. MSP-ATEC shall retain
ownership of such Supplemental Materials.
(2) The phrase "Microsoft Official Curriculum" may be used in advertising,
marketing materials to identify courses which use MOC only or MOC and
Supplemental Materials. Specific guidelines concerning the use of the above
terms are set forth in the MSP-ATEC Program Guide.
(3) MSP-ATEC shall not translate any portion of MOC or any associated
documentation into any other language without the prior written permission of
MS. MSP-ATEC shall not copy, modify, merge, reproduce, reverse engineer, or
disassemble MOC.
- F. Hardware Requirement: MSP-ATEC and each ATEC Site must provide a
personal computer for each Student attending an MS Course as specified in the
MSP-ATEC Program Guide or MOC Trainer material. The MSP-ATEC and each ATEC Site
must also acquire and maintain such additional hardware, software, and audio-
visual equipment as is outlined in the MSP-ATEC Program Guide.
7. REVISIONS AND UPGRADES
If MS makes material revisions which involve upgrades or new versions of the
Products, MS shall notify MSPATEC via the Ed Forum. To teach the new or updated
MS Course, MS may require Trainers to complete one or more of the following
Trainer certification requirements: attend the appropriate MS Course, pass the
Microsoft certification exam on the revised Product, and/or purchase the new
Microsoft Trainer Kit. MSPATEC shall pay the cost of registration, travel and
lodging to attend the applicable training. Further information relating to this
issue may be located in the MSP-ATEC Program Guide.
1997 Microsoft Solution Provider Agreement (8/20/96) 1997 Microsoft ATEC
Addendum (10117/96) 1 096 098-66709
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<PAGE>
8. LICENSES
A. MOC and MS Courses: MS grants to MSP-ATEC a non-exclusive, royalty-free
license to offer MS Courses on the Products to third parties using MOC. Such MS
Courses may be taught and attended only within the Territory and only at the
locations set forth in Section 6.C above. The MOC may only be used for the
purpose of teaching the MS Courses, and not for any other purpose. Except as set
forth above, MS does not grant to MSP-ATEC any right title or interest in any
copyright, trademark-or service mark relating to the MOC.
B. Training Use Licenses: The following Subsection replaces in its entirety
Section 7.B regarding Training Use Licenses in the Agreement. In the event that
MSP-ATEC requires the use of any Microsoft software which is the subject of any
MS Course, and provided MSP-ATEC has at least one legally acquired packaged copy
of the Microsoft software, MSP-ATEC may make copies of such Microsoft software
for use at each ATEC Site for such MS Course, subject to the following
conditions:
(1) MSP-ATEC's use of the Microsoft software shall at all times be governed by
the terms of the accompanying End User License Agreement, except that MS hereby
grants to MSP-ATEC the right to reproduce 100 copies or one copy of the
Microsoft software for each Student attending the MS Course, by installing one
copy of the Microsoft software onto the hard disk of each Student's computer,
whichever is the lesser. Such copies of the Microsoft software shall be used
only by a Student during the MS Course.
(2) The additional rights granted by this Section shall cease and MSP-ATEC shall
immediately delete all Microsoft software from the hard disks of the computers
certify in writing that no such copies exist.
(3) MSP-ATEC may continue to use the original packaged copy to the Microsoft
Software pursuant to the terms of the End User License Agreement. All copies of
the Microsoft software shall be true and complete copies, including all
copyright and trademark notices. No copies of the Microsoft software may be
resold nor transferred to a third party.
9. MARKETING
A. Any print or other media marketing and promotional materials which MSP-ATEC
creates using Microsoft Trademarks, including but not limited to, use of the
phrase "Microsoft Solution Provider Authorized Technical Education Center" or
"Microsoft Official Curriculum," are subject to MS's prior approval. Such
materials must be submitted to the local Microsoft Education and Certification
Manager or Microsoft Education and Certification Field Representative identified
in the MSP-ATEC Program Guide. MSP-ATEC shall use best efforts to include
Microsoft Solution Provider Authorized Technical Education Center, Microsoft
Certified Professional, and Microsoft Official Curriculum "branding" in its and
promotional materials. MSP-ATEC shall clearly state in all advertising,
promotional and other written materials that the MS Courses are taught
independently by MSP-ATEC, and that MSP-ATEC is an independent entity from
Microsoft. MSP-ATEC shall not represent that MS assumes any responsibility for
the quality of MSP-ATEC's instruction received.
B. MSP-ATEC is responsible for marketing and advertising MS Courses. During the
Term, MSP-ATEC shall submit, as outlined in the MSP-ATEC Program Guide, current
course schedules to its local Microsoft Education and Certification Manager.
10. WARRANTIES/LIMITED WARRANTIES
MICROSOFT OFFICIAL CURRICULUM AND ANY INSTRUCTOR/TRAINER GUIDEBOOKS OR LAB
DISKETTES ARE PROVIDED "AS IS" WITHOUT WARRANTY OR CONDITION OF ANY KIND. TO THE
FULLEST EXTENT OF APPLICABLE LAW, MS DISCLAIMS ALL OTHER WARRANTIES AND
CONDITIONS, EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, INCLUDING, BUT NOT LIMITED
TO, IMPLIED WARRANTIES AND CONDITIONS OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR
1997 Microsoft Solution Provider Agreement (8120/96) 1997 Microsoft ATEC
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PURPOSE, AND TITLE, OR THAT THE OPERATION OF ANY SERVICES, MATERIALS, OR
SOFTWARE FURNISHED HEREUNDER, WILL BE UNINTERRUPTED, ERROR-FREE, OR VIRUS FREE.
MS SHALL NOT BE LIABLE FOR ANY CONSEQUENTIAL, INCIDENTAL, SPECIAL, PUNITIVE, AND
INDIRECT DAMAGES WHATSOEVER INCLUDING WITHOUT LIMITATION, DAMAGES FOR LOSS OF
BUSINESS PROFITS, BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE
LIKE, ARISING OUT OF THE USE OF OR INABILITY TO USE THE MICROSOFT OFFICIAL
CURRICULUM, INSTRUCTOR/TRAINER GUIDEBOOKS OR LAB DISKETTES, EVEN IF MS HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. SOME STATES/JURISDICTIONS DO NOT
ALLOW THE EXCLUSION OF IMPLIED WARRANTIES, SO THE ABOVE EXCLUSIONS MAY NOT APPLY
TO THE MSP-ATEC. THE LIMITED WARRANTIES AND CONDITION REFERENCED ABOVE GIVE MSP-
ATEC SPECIFIC LEGAL Copyright Symbol RIGHTS. Neither MSP-ATEC nor any of its
employees or agents shall have the right to make any representation, warranty,
or promise or give any instructions for use of the MOC which have not been
authorized by MS.
11. INDEMNIFICATION
A. In the United States only, MS agrees to defend, indemnify, and hold harmless
MSP-ATEC from and against any and all damages, costs, and expenses, including
reasonable attorneys' fees, incurred in connection with any claim that Microsoft
Official Curriculum and any Instructor/Trainer Guidebooks or Lab diskettes
infringe upon any United States, Australia, United Kingdom, Japan or European
Union copyrights, provided that MSP-ATEC must immediately notify MS of any claim
or threatened or actual suit and MSPATEC shall provide reasonable assistance to
MS in its defense of such claims or suits, which defense shall be at MS'
expense. Notwithstanding the foregoing, MS shall have no liability or obligation
under this Subsection, where the claim of copyright infringement based on MSP-
ATEC's (i) use of other than the then current release of the MOC received from
MS and such claim would have been avoided by the use of the current release,
and/or (ii) use of a combination of the MOC with a non-Microsoft program, data,
or Supplemental Materials.
B. MSP-ATEC agrees to defend, indemnify, and hold harmless MS, its parent,
subsidiaries, and affiliated companies from and against any and all damages,
costs, and expenses, including reasonable attorneys fees, incurred in connection
with MSP-ATEC's provision of MS Courses, the use of MOC in conjunction with
Supplemental Materials and from the MSP-ATEC's (or any of its agents' or
employees') acts or omission in connection with this ATEC Addendum.
12. RECORDS/AUDITS/ QUALITY ASSURANCE
During the Term, MS and/or its designated representatives, shall have full
access to the MSP-ATEC's pertinent books and records and shall have the right to
make copies of such materials as is reasonable to verify the MSP-ATEC's
compliance with this Addendum. MS shall conduct such audits during the MSP-
ATEC's normal business hours and, from time to time, as MS deems necessary.
Additionally, during the Term, MS and/or its designated representative may
audit the MSP-ATEC's MS Courses without notice. Audits may include a formal
written critique of MSP-ATEC Trainer's product knowledge and delivery skills,
and/or a review of the equipment and facilities. If MS determines, in its
reasonable judgment, that MS Courses are not being delivered in a professional
manner, MSP-ATEC is not providing an effective reaming environment and/or
experience, or that facilities and equipment are not sufficient for quality
training to occur, MS shall immediately notify MSP-ATEC in writing. If the
defect is not cured within thirty (30) days, MS may terminate the ATEC Addendum
in accordance with Section 3.
13. GENERAL
A. In the event of a conflict between this ATEC Addendum and the Agreement, this
ATEC Addendum shall control. The terms of this ATEC Addendum shall supersede any
conflicting terms in any purchase order.
1997 Microsoft Solution Provider Agreement (8/20/96) 1997 Microsoft ATEC
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<PAGE>
B. Any MOC or MS Courses which MSP-ATEC distributes or provides to or on behalf
of the United States of America, its agencies and/or instrumentalities (the
"Government"), are provided to MSPATEC with RESTRICTED RIGHTS. Use, duplication
or disclosure by the Government is subject to restriction as set forth in
subparagraph (c)(1)(ii) of the Rights in Technical Data and Computer Software
clause of DFAR 252.227-7013, or as set forth in the particular department or
agency regulations or rules which provide MS protection equivalent to or greater
than the above-cited clause. MSP-ATEC shall comply with any requirements of the
Government to obtain such RESTRICTED RIGHTS protection, including without
limitation, the placement of any restrictive legends on the product software,
product documentation, and any agreements used in connection therewith.
Manufacturer is Microsoft Corporation, One Microsoft Way, Redmond, Washington
98052-6399. Under no circumstances shall Microsoft be obligated to comply with
any Governmental requirements regarding the submission of or the request for
exemption from the submission of cost or pacing data or cost accounting
requirements. For any distribution of the MOC or providing the MS Course(s) to
the Government that would require compliance by Microsoft with Governmental
requirements relating to cost or pricing data or cost accounting requirements,
MSP-ATEC must obtain an appropriate waiver or exemption from such requirements
for the benefit of Microsoft from the appropriate Government authority before
the distribution of the MOC as or providing the MS Course(s) to the Government
C. Any terms and conditions of the Microsoft Solution Provider Agreement which
are unamended by this ATEC Addendum shall remain in full force and effect.
D. The Agreement, this ATEC Addendum, ATEC Site Annex, the MSP-ATEC Program
Guide, and the Final Invoice (ATEC) constitute the entire agreement between the
parties with respect to the subject matter hereof and merges all prior
discussions between them, and shall not be modified. Except as otherwise
provided herein, none of the provisions of this ATEC Addendum shall be deemed to
have been waived by any act or acquiescence on the part of Microsoft, its
agents, or employees, but only by an instrument in writing signed by an
authorized representative of Microsoft. No waiver of any provision of this
Addendum shall constitute a waiver of any other provisions(s) or of the same
provision on another occasion.
E. TO AGREE TO THE TERMS AND CONDITIONS OF THIS ATEC ADDENDUM INCLUDING BUT NOT
LIMITED TO, THE ATEC SITE ANNEX, THE MSP-ATEC PROGRAM GUIDE, THE FINAL INVOICE
(ATEC) AND ANY OTHER APPLICABLE ANNEXES AND ADDENDUMS, AN AUTHORIZED
REPRESENTATIVE OF THE MSP-ATEC MUST COMPLETE ALL REQUIRED INFORMATION AND SIGN,
DATE, AND RETURN A PAPER COPY OF THE FINAL INVOICE (ATEC), AND THE SITE ANNEX
(IF APPLICABLE), TOGETHER WITH A PAYMENT FOR THE APPROPRIATE FEES.
. NOTE THAT NO BINDING AGREEMENT IS FORMED UNTIL MS HAS FINALLY APPROVED MSP-
ATEC AS A MICROSOFT SOLUTION PROVIDER AUTHORIZED TECHNICAL EDUCATION CENTER. IN
ADDITION, NOTE THAT NEITHER THE CASHING OF THE MSP-ATEC'S CHECK, NOR ACCEPTANCE
OF PAYMENT OF FEES IN ANY MANNER WHATSOEVER, SHALL BE CONSIDERED "ACCEPTANCE" OF
THESE AGREEMENTS BY MS. MS'S APPROVAL SHALL BE INDICATED BY MS' WRITTEN LETTER
OF ACCEPTANCE WHICH SHALL BE SENT TO A NEW OR RENEWING MSP-ATEC WITHIN A WELCOME
KIT.
. NOTE THAT IN EUROPE, THE MSP INVOICE WILL BE DELIVERED TO THE APPLICANT OR
RENEWING MSP AFTER THE BODY OF THIS AGREEMENT HAS BEEN RECEIVED.
Remember, Your Signature On The Final Invoice (ATEC) Indicates Your Acceptance
Of The Terms And Conditions Of This Agreement. Keep This Agreement For Your
Records.
1997 Microsoft Solution Provider Agreement (8120/96) 1997 Microsoft ATEC
Addendum (10/17/96) 1086 098-66709
Page 7
<PAGE>
EXHIBIT 10.39
ARIS CONTRACT NO. __________________
ARIS CORPORATION
PROFESSIONAL SERVICES AGREEMENT
This Agreement is entered into as of ______________ (the "Effective Date"),
between ARIS Corporation, a Washington corporation ("ARIS"), and ______________,
a Washington corporation ("Customer").
A. ARIS is a company engaged in the business of providing computer
integration consulting and training services.
B. Customer desires that ARIS provide certain services to Customer, on
the terms and conditions set forth below.
The parties agree as follows:
1. SERVICES.
ARIS agrees to perform the services (the "Services") described on Work Order(s)
which are executed from time to time by authorized representatives of both
parties and which reference the this Agreement.
2. CHARGES; INVOICING AND PAYMENT.
As consideration for ARIS' Services, Customer agrees to pay ARIS the amounts set
forth on the Work Order, at the times and in the manner set forth on the Work
Order. In addition, Customer will pay, unless specifically specified on the
Work Order, (a) ARIS' actual out-of-pocket expenses incurred as a result of
ARIS' performance of Services, provided that all such expenses are substantiated
by appropriate written receipts; and (b) all taxes (except franchise or income
taxes) based on or measured by the charges set forth in this Agreement, or based
on any Services provided.
Invoices will be issued semi-monthly by ARIS. Payment is due within 30 days
after Customer's receipt of the invoice. A delayed payment charge of one and
one-half percent (1.5%) of the invoice amount will be paid by Customer for each
30-day period (or part thereof) of delay in payment beyond the payment due date.
3. TERM AND TERMINATION.
This Agreement will commence on the Effective Date specified above and, unless
earlier terminated as provided below, shall remain in effect until the last
Project Completion Date specified on any Work Order, unless otherwise modified
or extended by the agreement of the parties.
<PAGE>
This Agreement and the obligations of the parties hereunder may terminate early
upon the occurrence of any of the following events: (i) completion of the
Services by ARIS; (ii) the institution of voluntary or involuntary proceedings
by or against any party in bankruptcy or under any insolvency law, or for
corporate reorganization, the appointment of a receiver or petition for the
dissolution of any party or an assignment by a party for the benefit of
creditors; or (iii) upon fourteen (14) days notice given by either party for any
reason or no reason. ARIS shall be paid any amounts owing for Services
performed and expenses incurred through the termination date. Customer shall
also reimburse ARIS for the costs of all non-cancelable committed Services and
materials on order (which shall become Customer's property) resulting from such
termination or suspension of Services.
4. RECORDS AND PROGRESS REPORTS.
ARIS shall keep full and accurate records of all of its labor hours and
reimbursable expenses incurred in connection with this Agreement. ARIS shall
provide access to such records upon Customer's reasonable request. ARIS will
make periodic progress reports to Customer at such times and in such form as is
mutually agreed in the applicable Work Order.
5. OWNERSHIP AND USE OF INTELLECTUAL PROPERTY
During the term of this Agreement, as a result of ARIS' efforts under this
Agreement, ARIS may generate ideas, inventions, suggestions, copyrightable
materials or other information ("Intellectual Property") which fall into one of
two categories:
a. Intellectual Property specifically related to the subject matter of
ARIS' efforts under this Agreement, and directly related to, or
incorporated into, the work product to be produced by ARIS and delivered to
Customer under this Agreement. Title to Intellectual Property described in
this paragraph 5a, that is developed solely by ARIS, or jointly by ARIS and
Customer, shall remain in Customer at all times. ARIS agrees to disclose
and assign to Customer, in a form satisfactory to Customer, all such
Intellectual Property, whether made alone or in conjunction with others,
and to render such assistance as Customer may reasonably require to perfect
such assignments and to protect such Intellectual Property; and
b. Intellectual Property of general applicability, whether or not related
to, or incorporated into, the work product to be produced by ARIS and
delivered to Customer under this Agreement. Title to Intellectual Property
described in this paragraph 5b, including any Intellectual Property
developed by ARIS prior to or outside of this Agreement, shall remain in
ARIS. To the extent such Intellectual Property is incorporated into work
product to be produced by ARIS and delivered to Customer under this
Agreement, ARIS grants and Customer hereby accepts, a perpetual, worldwide,
royalty-free, non-exclusive license to use all such Intellectual Property
as incorporated into the ARIS work product.
-2-
<PAGE>
6. CONFIDENTIALITY OBLIGATIONS.
All information and material that may be disclosed by one party to the other in
the course of this Agreement is considered confidential and proprietary and will
not be used by the receiving party other than for the purposes under this
Agreement for which it was disclosed. The receiving party will protect such
information from disclosure to third parties and hold it as confidential using
the same degree of care as that party uses to protect its own confidential or
proprietary material of like importance, but at least reasonable care. This
obligation will continue for a period of five (5) years following receipt of the
material and will survive any termination of this Agreement, but it will not
cover any information which is disclosed to a third party by the disclosing
party without restrictions on disclosure, any information that has been or is
developed independently by the receiving party without violation of obligations
of confidentiality, any information that falls into the public domain without
fault of the receiving party, any information that is rightly obtained by the
receiving party from a third party without restriction, or any information that
is rightly in the possession of the receiving party at the time of disclosure by
the disclosing party.
7. STATUS OF ARIS AS INDEPENDENT CONTRACTOR.
ARIS shall devote such time and effort to the performance of the Services as may
be necessary to satisfactorily complete the work. ARIS may subcontract any
portion of the work to be performed without the prior written consent of the
Customer. ARIS shall be an independent contractor in the performance of this
Agreement and shall not be deemed an employee or agent of Customer for any
purpose whatsoever.
Neither party shall have power to act as an agent of the other or bind the other
in any respect.
ARIS' performance shall be in compliance with all applicable statutes or
regulations of any jurisdiction or governmental agency.
8. WORKPLACE.
If ARIS is requested by Customer to provide Services on Customer premises,
Customer agrees to provide ARIS personnel a safe workplace whose standards are
consistent with that of its own employees. Customer also agrees to provide
reasonable access to its key personnel necessary for ARIS to perform the
Services. ARIS personnel will observe all safety and other applicable rules in
effect at such workplace, provide that reasonable notice of the rules has been
supplied to ARIS and such personnel.
9. NON-SOLICITATION.
Customer shall not solicit employment from any of ARIS' employees whose work
relates to this Agreement, during the term of this Agreement and for a period of
six months after termination of this Agreement, without ARIS' prior written
consent.
-3-
<PAGE>
10. DISCLAIMER; LIMITATION OF LIABILITY.
Customer must report any deficiencies in the Services provided by ARIS hereunder
within thirty (30) days of the later of the completion of the Services or the
date that such deficiencies were reasonably discoverable by Customer, in no
event, however exceeding 180 days from the date of completion of such Services.
Customer's sole remedy for the breach of any warranty by ARIS under this
Agreement shall be the re-performance of the Services. If ARIS is unable to re-
perform the Services as warranted, Customer shall be entitled to recover the
fees paid to ARIS for the deficient Services.
THE EXPRESS WARRANTIES CONTAINED IN THIS AGREEMENT ARE ARIS' EXCLUSIVE
WARRANTIES. ARIS DISCLAIMS ALL IMPLIED WARRANTIES, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND ANY
WARRANTY OF NON-INFRINGEMENT WITH RESPECT TO INTELLECTUAL PROPERTY. ARIS WILL
NOT BE LIABLE IN ANY EVENT FOR ANY CONSEQUENTIAL, SPECIAL, INCIDENTAL, OR
INDIRECT DAMAGES ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. IN ANY
EVENT, ARIS' MAXIMUM LIABILITY UNDER THIS AGREEMENT SHALL BE LIMITED TO 1.5
TIMES THE AMOUNT PAID BY CUSTOMER UNDER THIS AGREEMENT.
11. MISCELLANEOUS.
This Agreement is governed by the laws of the State of Washington. Any legal
action must be filed within two (2) years after the cause for such action
arises. Venue for any action shall be the Superior Courts of King County,
Washington. The prevailing party to any action shall be entitled to its
reasonable costs and attorneys' fees from the other party.
Notices will be effective when received in writing at the following addresses:
ARIS CORPORATION: TYPE CUSTOMER NAME
6720 Fort Dent Way, Suite 250 Address Line
Seattle, WA 98188-2555 City, State ZIP
Attn: General Counsel Attn:
Fax: (206) 433-1182 Fax: ( ) -
Customer or ARIS may not assign its rights under this Agreement without the
prior written consent of either party.
-4-
<PAGE>
Neither party shall issue any press release concerning this Agreement without
prior written consent of the other party, which shall not be unreasonably
withheld. However, either party may disclose the Agreement to the Government or
otherwise as required to comply with applicable laws or regulations. ARIS may
use Customer's name in its listings of customer names.
This Agreement constitutes the entire agreement of the parties, supersedes any
prior understandings relating to the subject matter hereof, and may be amended
or supplemented only in a written agreement signed by ARIS and Customer. All
preprinted clauses on any order form by Customer are deemed deleted.
CUSTOMER: ARIS CORPORATION
Signature __________________________ Signature __________________________
Paul Song, President
Name _____________________________
Title ______________________________
Date ______________________________ Date _______________________________
-5-
<PAGE>
WORK ORDER
ARIS CONTRACT NO.: __________________
WORK ORDER NO.: __________________
Description of services, estimated time and amounts for completion:
PROJECT DESCRIPTION:
- -------------------
CONSULTING SERVICES
None
EDUCATION SERVICES
None
DBA SERVICES
None
PROPOSED SCOPE OF WORK:
- ----------------------
WORK SCHEDULE:
- -------------
Work will commence immediately upon customer approval and will continue through
a period not to exceed four weeks from the end of the Estimated Completion Date.
ROLES AND RESPONSIBILITIES:
- --------------------------
ARIS' roles and responsibilities shall include the following:
[to be completed by ARIS personnel]
Customer's roles and responsibilities shall include the following:
[to be completed by ARIS personnel]
ARIS and Customer shall jointly perform the following roles and
responsibilities:
[to be completed by ARIS personnel]
-6-
<PAGE>
KEY WORK DEPENDENCIES AND ASSUMPTIONS:
- -------------------------------------
ARIS' ability to meet project expectations are dependent upon various events,
accomplishments and assumptions, including the following:
[to be completed by ARIS representative]
AMOUNTS, TIMES AND MANNER OF PAYMENTS:
- -------------------------------------
As consideration for ARIS' services hereunder, Customer agrees to pay ARIS on a
time and material basis for services rendered at ARIS' current prevailing
standard rates.
CUSTOMER: ARIS CORPORATION
By__________________________ By__________________________
Name:_______________________ Paul Song, President
Title:________________________
Date:________________________ Date:________________________
-7-
<PAGE>
EXHIBIT 10.43
CONTRACT BN40790
for Implementation of Oracle Software Accounts Receivable and Order Entry
Modules between THE KING COUNTY DEPARTMENT OF METROPOLITAN SERVICES and ARIS
CORPORATION
Contract Date: To be effective date of accepting signature
This Contract is between the King County Department of Metropolitan Services
(Metro), a home rule charter county of the State of Washington, and Applied
Relational Information Systems (ARIS) Corporation (Contractor), a Washington
State Corporation.
The parties hereby agree to the following terms and conditions effective on the
date of acceptance.
ARIS CORPORATION
CONTRACT BN40790
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. INTRODUCTION 1
1.1. Purpose of Contract 1
1.2. Price 1
1.3. Conflicts of Interest - Former Employees 1
1.4. Utilization of Minority and Women Businesses 2
2. CONTRACT EXECUTION AND ADMINISTRATION 4
2.1. Contract Term 4
2.2. Contract Award 4
2.3. Contract Value
2.4. Official Notification Address 4
3. GENERAL TERMS AND CONDITIONS 6
3.1. Definition of Words and Terms 6
3 2. Administration 9
3.3. Contract Documents and Precedence 9
3.4. Change Orders 9
3.5. Termination for Convenience/Cause 10
3.5.1. Termination for Convenience 10
3.5.2. Termination for Default 10
3.6. Force Majeure 11
3.7. Payment 11
3.8. Payment Procedures 12
3.9. Additional Work 12
3.10. Work and Materials Omitted 12
3.11. Technical Services 13
3.12. Other Direct Costs 13
3.13. Charges to Contractor 14
3.14. Washington State Sales Tax 14
3.15. Taxes, Licenses, and Certificate Requirements 14
3.16. Warranty Error! Bookmark not defined.
3.17. No Waiver of Warranties and Contract Rights 15
3.18. Assignment 15
3.19. Indemnification 15
3.20. Applicable Law and Forum 15
3.21. Price Warranty 16
3.22. Equal Employment Opportunity Requirements 15
3.23. Conflicts of Interest and Noncompetitive Practices 16
3.23.1. Conflict of Interest 16
3.23.2. Contingent Fees and Gratuities 16
3.24. Disputes, Claims and Appeals 17
3.25. Patents and Royalties 18
3.26. Retention of Records and Audit Access 18
3.26.1. Proof of Compliance with contract 18
3.26.2. Retention of Records 18
3.26.3. Audit Access 19
4. INSURANCE REQUIREMENTS 20
4.1. Evidences and Cancellation of Insurance 20
4.2. Insurance Requirements 20
4.3. Worker's Compensation 22
5. IMPLEMENTATION PROCEDURES 23
5.0. Installation of Test Software 23
5.0.1. Installation of Demo database 23
5.0.2 Installation of Development database 23
5.1. Implementation Procedures 23
5.1.1. 23
5.1.2. 23
5.1.3. Conversion of data 23
5.1.4. Modifications/Interfaces 24
5.1.5. Training 25
5.2. Production Installation 25
5.3. System Acceptance 25
</TABLE>
ATTACHMENTS
A. Technical Services Rate Schedule
B. Sworn Statement Regarding Equal Employment Opportunity
C. Sworn Statement Regarding Minority and Women Business Enterprise Commitment
D. Former Metro or Municipality Employee Disclosure Form
E. Accounts Receivable - Order Entry Implementation Project Plan
F. Agreement
<PAGE>
1. Introduction
1.1. Purpose of Contract
This contract is intended to provide the King County Department of Metropolitan
Services (hereinafter "King County") with the installation, implementation,
training and support from ARIS Corp.(hereinafter "Contractor") necessary for
implementation of Oracle Accounts Receivable and Order Entry (AR/OE) modules for
the Finance Department to provide business support for the following Metro
activities:
General Accounts Receivable
Capacity Charge Accounts Receivable
Warranty Accounts Receivable
Transit Pass Sales
The type of business support required by each of these activities is further
described in the accompanying document "Metro Accounts Receivable/Order Entry
Alternatives Analysis Final Project Report". Preliminary investigation indicates
that this support will also require use of the already-installed Inventory and
Purchasing applications.
The Consultant is expected to provide Oracle system expertise, Accounts
Receivable, Order Entry, Inventory and Purchasing system expertise.
1.2. Price
Attachment A - "Technical Services Rate Schedule" includes the pricing for the
services and products required to implement the Oracle AR/OK Modules. King
County is exempt from Federal Excise taxes. Washington State sales tax shall be
paid by King County and is not included in the prices.
1.3. Conflicts of Interest - Current or Former Employees
The county seeks to eliminate and avoid actual or perceived conflicts of
interest and unethical conduct by current and former County employees in
transactions with the County. Consistent with this policy, no current or former
County employee may contract with, influence, advocate, advise, or consult with
a third party about a County transaction, or assist with the preparation of bids
submitted to the County while employed by the County or within one year after
leaving the County's employment, if he/she was substantially involved in
determining the work to be done or process to be followed while a County
employee.
All contractors, proposers, venders, consultants or contractors who anticipate
contracting with the County must identify at the time of offer, such current or
former County employees involved in preparation of
<PAGE>
bids/proposals or the anticipated performance of the work or services if awarded
the contract. This information should be included in Attachment D - "Current or
Former County Employee Disclosure Form". Failure to identify former County
employees involved in this transaction may result in the County's denying or
terminating this contract. In addition, after award, the contractor is
responsible for notifying the County's project manager of current or former
County employees who may become involved in the contract any time during the
term of the contract. This paragraph is applicable to former Municipality of
Metropolitan Seattle ("Metro") employees.
1.4. Minority and Women Business Enterprise (M/WBE) Requirements 1
As set forth in King County Ordinance 11032, it is the County's policy that
minority and women business enterprises (M/WBEs) shall have the maximum
practicable opportunity to participate in the performance of contracts for the
County. In this regard, the contractor shall take all necessary and reasonable
steps to ensure that M/WBEs have the maximum opportunity to participate in the
performance of subcontracts and agreements hereunder. The contractor shall not
discriminate or tolerate harassment or abuse on the basis of creed, race,
religion, color, sex, sexual orientation, age, national origins or the presence
of any sensory, mental or physical disability in the award and performance of
such contracts and subcontracts.
An M/WBE is any firm certified as such at the date and time of bid by the
Washington State Office of Minority and Women's Business Enterprise (OMWBE).
The County recognizes there may be few contracting opportunities for M/WBEs
involved in performance under this Contract and therefore has not established
M/WBE participation goals. If the contractor subcontracts any work under a
contract awarded pursuant to this Contract, the contractor shall make
affirmative efforts to solicit and use M/WBEs.
Affirmative efforts shall include, at a minimum, that the contractor take the
following steps prior to entering into any subcontracts:
A. Contact the County's Minority/Women Business Enterprise Office to
explain the work to be subcontracted and to obtain a listing of M/WBEs which may
be interested in performing such subcontract work;
B. Solicit bids from such M/WBEs; and
C. Award subcontracts to such M/WBEs which provide reasonable bids.
The contractor shall complete and submit as part of its bid the Sworn Statement
Regarding Minority and Women Business Enterprise Commitment set forth in
Attachment C. Failure to complete and submit such sworn statement shall render
the bid non-responsive.
Failure to comply with the M/WBE requirements will be grounds for contract
termination. If the contractor subcontracts work hereunder and fails to comply
with the M/WBE participation requirements set forth herein, then the County may
declare a breach of contract and avail itself of all remedies under this
contract and by law on account of such breach.
2. Contract Execution and Administration
2.1 Contract Term
The term of this contract shall be until 30 April 1997, commencing on the date
of the final acceptance signature on Attachment F. Performance will be completed
in accordance with the schedule contained in Attachment E "Accounts Receivable -
Order Entry Implementation Project Plan." The period for performance and
contract term may be extended by change order. During extension periods, all
terms and conditions of this contract shall remain in effect except those
amended for the extension period.
2.2. Contract Award
Contract award is contingent upon receipt of the required Insurance Certificate,
Sworn Statement Regarding Equal Employment Opportunity and the signed Agreement
Form. After contract award orders will be placed by King County Procurement
Management at the prices established in Attachment A.
2.3. Contract Value
The contract value will be established by a purchase order issued concurrently
with this contract. Subsequent purchase orders may be issued citing this
contract number and modifying the funds, contract terms and/or work to be
performed.
2.4 Official Notification Address
Any notice required or permitted to be given hereunder shall be deemed to have
been given when received by the party to whom it is directed by personal
service, hand delivery, or mail delivery as follows:
KING COUNTY CONTACTS
<TABLE>
<S> <C> <C>
Accounts Receivable Order Entry Contract
Contract Administrator Contract Administrator Specialist
Dave Buzard Lois Watt Jim Engan
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
King County King County King County Dept.
821 Second Ave. MS 170 821 Second Ave. MS 170 of Metropolitan
Seattle,WA 98104 Seattle, WA 98104 Services
Telephone: (206) 684-1072 Telephone: (206) 689-4550 821 Second Ave. MS 71
FAX: (206) 684-1400 FAX: (206) 684-1400 Seattle, WA 98104
Telephone: (206) 684-1053 FAX: (206) 684-1470
</TABLE>
ARIS CORPORATION CONTACT
Mr. John Song
Director, Business Development
Fort Dent One, Suite 150
6720 Fort Dent Way, Seattle, WA 98188-2555
Telephone: (206) 433-2081
FAX: (206) 433-1183
3. General Terms and Conditions
3.1. Definition of Words and Terms
Where used in the contract documents, the following words and terms shall have
the meanings indicated.
Acceptance Formal action of King County in determining that the
Contractor's work has been completed in accordance with the
contract.
Act of Nature A cataclysmic phenomenon of nature, such as an earthquake, flood
or cyclone.
Change Order Written order issued by King County, with or without notice to
sureties, making changes in the work within the scope of this
contract.
Contract or The writings and drawings embodying the legally binding
Contract obligations between King County and the Contractor for
Documents completion of the services or work under the Contract.
Contract Individual appointed by King County who assists the Contract
Specialist Specialist with documentation, file maintenance, audits, vendor
evaluations and who approves orders, receipts and invoices.
Contract Term The period and time during which the Contractor shall perform
the services or work under the contract.
Contract Price Amount payable to the Contractor under the terms and conditions
of the contract for the satisfactory performance of the services
under the contract.
Contract Individual appointed by King County to resolve and negotiate
Specialist contractual issues arising under this contract.
Contract Time Number of calendar days and/or the intermediate and final
completion dates stated in the contract documents for the
completion of the work specified herein.
Contractor's The individual designated in writing by the Contractor to act on
Representative its behalf under this contract.
Contractor The individual, association, partnership, firm, company,
corporation; or combination thereof, including joint ventures,
contracting with King County for the performance of services or
work under the contract.
<PAGE>
Council The King County Council - the governing body of King County.
Day Calendar day.
Department of King County and the Municipal of Metropolitan Seattle were
Metropolitan merged into a new organization called Metropolitan King County,
Services effective January 1,1994. Metro is now the King County
Department of Metropolitan Services.
Direct Action of King County by which the Contractor is ordered to
perform or refrain from performing service work under the
contract.
Directive Written documentation of the actions of King County in directing
the Contractor.
Interface Data exchange with software or systems outside the Oracle
environment.
May Refers to permissive actions.
Month The period commencing on the first day of a calendar month and
ending on the first day of the next succeeding calendar month.
Person Includes individuals, associations, firms, companies,
corporations, partnerships, and joint ventures.
Project Manager For this contract, the technical functions of Project Management
will be performed by an individual appointed by ARIS Corp. and
approved by King County.
Proposed Work A written document issued by the contract specialist or his/her
Change designee or PWC to the Contractor; identifying contemplated
changes in the work and requesting a price estimate from the
Contractor; such a document shall not be interpreted or
construed to constitute a change order.
Provide Furnish without additional charge.
Purchasing The individual representing King County authorized to enter into
Agent a contract.
RCW The Revised Code of Washington.
Reference Reports, specifications, and drawings which are available to
Documents Contractors for information and reference in preparing proposals
but not as part of this contract.
Requirements See Specifications.
Requisition A document issued by King County after contract award which will
authorize delivery of software or other products, performance of
a software modification, or performance of technical service.
Shall or Will Whenever used to stipulate anything, shall or will means
mandatory by either the Contractor or King County, as
applicable, and
<PAGE>
means that the Contractor or King County, as applicable, has
thereby entered into a covenant with the other party to do or
per form the same.
Software All application and utility programs required to perform
computerized tasks
Specifications Written descriptions of services to be performed or of the
or Technical technical requirements to be fulfilled under this contract.
Specifications
Specify Refers to information described, shown, noted, indicated or
presented in any manner in any part of the contract.
Submittals Information which is submitted by the Contractor to the Contract
Specialists in accordance with the technical specifications.
Subsection For reference or citation purposes, subsection shall refer to
the paragraph, or paragraphs, called out by section and
alphanumeric designator. For example, this definition is found
in subsection 3-1.
WAC Means the state of Washington Administrative Code.
Work Means and includes anything and everything to be done and
provided for the execution, completion and fulfillment of the
contract.
3.2. Administration
This Contract will be between King County and the Contractor who will be
responsible for performing all work and services described herein. King County
is not party to defining the relationship or agreement between the Contractor
and Contractor's subcontractors, if any.
The Contractor represents that it has or will obtain all personnel and equipment
required to perform the services hereunder. The Contractor's personnel shall not
be employees of King County. The Contractor will promptly pay all subcontractors
and suppliers as required under law.
The Contractor's performance under this contract will be monitored and reviewed
by Contract Specialists appointed by King County. The Contractor's required
reports and data shall be delivered to the Contract Specialists. Questions by
the Contractor regarding interpretation of the terms, provisions and
requirements of this contract shall be addressed to the Contract Specialists for
response.
3.3. Contract Documents and Precedence
The documents constituting the contract between King County and the Contractor
are intended to be complementary so that what is required by any one of them
shall be as binding as if called for by all of them. In the event of any
conflicting provisions or requirements within the several parts of the Contract
Documents, they shall take precedence in the following order Change Orders, the
Contract, and finally the Accounts Receivable Order Entry Implementation Project
Plan dated August 18,1995.
3.4. Change Orders
The contract specialist may, at any time, without notice to the sureties, by
written order, make any change in the work within the scope of this contract. No
oral order or conduct by the County will constitute a change order unless
confirmed in writing by the County.
If any change order causes an increase or decrease in the cost of, or the time
required for, performance of any part of the work under this contract, the
contract specialist shall make an equitable adjustment in the contract price,
the delivery schedule, or both, and shall modify the contract.
The contractor must assert its right to an adjustment under this clause within
five calendar days after receipt of a written change order from the County. Upon
request from the contractor, the County may extend the five day period. The
request for equitable adjustment must be in writing and state the general nature
and monetary extent of the claim. The County may require additional supporting
documents and analysis to determine the validity of the claim.
<PAGE>
No claim by the contractor for an equitable adjustment hereunder will be allowed
if asserted after final payment under this contract. No claim will be allowed
for any costs incurred more than ten days before the contractor gives written
notice, as required in this section.
All change orders shall be implemented in accordance with the Minority/Women
Business Enterprise (M/WBE) compliance provisions herein.
3.5. Termination for Convenience/Cause
3.5.1. Termination for Convenience
The County for its convenience may terminate this contract, in whole or in part,
at any time by written notice sent certified mail, return receipt requested, to
the contractor. After receipt of a Notice of Termination, and except as directed
by the contract specialist, the contractor shall immediately stop work as
directed in the Notice, and comply with all other requirements in the Notice.
The contractor shall be paid its costs, including necessary and reasonable
contract close-out costs and profit on that portion of the work satisfactorily
performed up to the date of termination as specified in the notice. The
contractor shall promptly submit its request for the termination payment,
together with detailed supporting documentation. If the contractor has any
property in its possession belonging to the County, the contractor will account
for the same and dispose of it in the manner the County directs.
3.5.2. Termination for Default
In addition to termination for convenience, if the contractor does not deliver
supplies in accordance with the contract delivery schedule, or if the contract
is for services and the contractor fails to perform in the manner called for in
the contract, or if the contractor fails to comply with any other material
provisions of the contract, the County may terminate this contract, in whole or
in part, for default. Termination shall be effected by serving a Notice of
Termination by certified mail (return receipt requested) on the contractor
setting forth the manner in which the contractor is in default and the effective
date of termination; provided, that contractor shall have ten calendar days to
cure the default. The contractor will only be paid for goods delivered and
accepted, or services performed in accordance with the manner of performance set
forth in the contract less any damages to the County caused by such default.
If this contract is terminated, the rights, duties, and obligations of the
parties, including compensation to the contractor, shall be determined in
accordance with Part 49 of the Federal Acquisition Regulation in effect on the
date of this contract. The termination of this contract shall in no way relieve
the contractor from any of its obligations under this contract nor limit the
rights and remedies of the County hereunder in any manner.
3.5.3. Termination for Non-Appropriation
This contract may be canceled at the end of the then current fiscal period for
non-appropriation of funds by the King Countv Council, pursuant to KCC 4.04.040.
Such cancellation shall be upon thirty (30) days written notice to the
contractor. King County's fiscal period ends December 31 of each year. If the
contract is terminated as provided in this subsection:
1. The County will be liable only for payment in accordance with the terms of
this contract for services rendered prior to the effective date of termination;
and
2. The contractor shall be released from any obligation to provide further
services pursuant to the contract as are affected by the termination.
Funding under this contract beyond the current appropriation year is conditional
upon the appropriation by the County Council of sufficient funds to support the
activities described in this contract. Should such an appropriation not be
approved, the contract will terminate at the close of the current appropriation
year.
3.6. Force Majeure
If either Buyer or Seller is rendered unable, wholly or in part, by act of
Nature or any other cause not reasonably within such party's control to perform
or comply with any obligation or condition of this Agreement, upon giving notice
and reasonably full particulars to the other party, such obligation or condition
shall be suspended during the continuance of the inability so caused, and such
party shall be relieved of liability and shall suffer no prejudice for failure
to perform the same during such period provided obligations to make payments
then due for delivered goods or services hereunder shall not be suspended, and
the cause of suspension (other than strikes or lockouts) shall be remedied with
reasonable dispatch. The term "force majeure" shall include without limitation
by the following enumeration, acts of Nature, acts of civil or military
authorities, fire, accidents, shutdowns for purpose of emergency repairs,
strikes, and any other industrial, civil or public disturbances, causing the
inability of Contractor to provide the goods or services hereunder.
In the event of force majeure as described herein, the parties shall be excused
from performance of the Agreement only for the time and to the extent reasonably
necessary to restore normal operations as
<PAGE>
required by this Agreement. In the event Contractor ceases to be excused
pursuant to this provision, then King County shall be entitled to exercise any
remedies otherwise provided for in this Agreement, including the termination for
Default.
3.7. Payment
Invoices with supporting documentation as appropriate will be submitted by the
Contractor for material and/or services provided to:
King County
Accounts Payable, MS 75
Exchange Building
821 Second Avenue
Seattle, WA 98104
IMPORTANT - The Contractor will invoice twice a month, indicating the hours
worked for each person for each module. The invoice will include a progress
report and status of the project. All invoices must include the following
information contract number, date of invoice, invoice number, and total price
for invoice. Failure to comply with this requirement may delay payment.
3.8. Payment Procedures
Within thirty (30) days after receipt of an approved invoice, on the basis set
forth in the Contract, King County will pay the Contractor for authorized
materials and/or services satisfactorily delivered or performed. Acceptance of
such payment by the Contractor shall constitute full compensation for all
supervision, labor, supplies, materials, work, equipment and the use thereof,
and for all other necessary expenses, incurred by the Contractor.
3.9. Additional Work
Additional work means the furnishing of materials or equipment and/or the doing
of work not directly or by implication called for by the contract. If the
country requires additional work, it may direct the Contractor in writing to do
the extra work at unit prices set forth in the contract (if any), or it may
direct the Contractor to do the additional work at a mutually agreed-upon lump
sum or mutually agreed upon unit prices. Performance of additional work without
the prior express written consent of King County shall be at the Contractor's
sole expense.
3.10. Work and Materials Omitted
The Contractor shall, when ordered in writing by King County, omit work,
services and material to be furnished under the contract. The value of the
omitted work and material will be deducted from the contract price and the
project implementation schedule will be revised if appropriate. The value of
omitted work, services and material will be a lump sum or unit price, mutually
agreed upon in writing by the Contractor and King County. If the parties cannot
agree on an appropriate deduction, King County reserves the right to issue a
unilateral change order adjusting the price.
3.11. Technical Services
Subject to the provisions negotiated between the parties, the ISD Manager may
authorize work, services, consulting, or training to be provided by the
Contractor's staff. The amount to be paid to the Contractor shall be computed at
the agreed-to rates as set forth in this contract and hours pre-approved by the
ISD Manager. In addition to the direct labor costs, other direct costs may be
approved for compensation by the ISD Manager as set forth in this contract.
3.12. Other Direct Costs
Other direct costs, incurred through the use of the Contractor's staff for
technical services approved in advance by the ISD manager, shall be billed at
cost without markup. These costs shall include the following described costs and
expenses actually incurred by the Contractor's staff for project work:
A. The reimbursement rate paid for the operation, maintenance and depreciation
of company or individually owned vehicles for that portion of time they are used
for project work shall not exceed the rate currently in effect at King County at
the time the charges are incurred. The reimbursement rate is currently 30 cents
per mile.
B. Reimbursement for meals inclusive of tips shall not exceed the rate currently
in effect at King County at the time the charges are incurred. The reimbursement
rates are currently $8.00 for breakfast, $9.00 for lunch and $18.00 for dinner
or a maximum of $35.00 per day.
C. Accommodations shall be at a reasonably priced hotel/motel.
D. Air travel shall be by coach class at the lowest price available.
E. Cost for equipment, materials and supplies, including but not limited to
approved equipment rental; telephone, telegraph and cable expenses; reproduction
costs including blueprinting, photographing,
<PAGE>
telecopying, mimeographing, photocopying and printing; express charges;
commercial printing, binding, artwork and models; and, computer programming and
keypunching costs.
F. Authorized subcontract services; provided that the limitations set forth in
item (A) above shall be applicable to such subcontract services.
G. Other direct costs, if any, not included above but which had prior approval
of the ISD manager.
3.13. Charges to Contractor
Charges which are the obligation of the Contractor under the terms of the
contract shall be paid by the Contractor to King County on demand and may be
deducted by King County from any money due or to become due to the Contractor
under the contract and may be recovered by King County from the Contractor or
its surety.
3.14. Washington State Sales Tax
The County will make payment directly to the State for all applicable State
sales taxes in case the contractor is not registered for payment of sales taxes
in the State of Washington. If the contractor is so registered, it shall add the
sales tax to each invoice and upon receipt of payment from the County, promptly
remit appropriate amounts to the State of Washington.
3.15. Taxes, Licenses, and Certificate Requirements
This contract and any of the services or supplies provided hereunder are
contingent and expressly conditioned upon the ability of the Contractor to
provide the specified service or supplies consistent with federal, state and
local law and regulations. If, for any reason, the Contractor's required
license(s) or certificate(s) are terminated, suspended, revoked or in any manner
modified from its status at the time this Agreement becomes effective, the
Contractor shall notify King County immediately of such condition in writing.
The Contractor shall maintain and be liable for all taxes, fees, licenses and
costs as may be required by federal, state and local laws and regulations for
the conduct of business by the Contractor and any subcontractors and shall
secure and maintain such licenses and permits as may be required to provide the
services or supplies under this contract.
3.16. Warranty
The contractor warrants the professional quality and technical adequacy of all
services provided under this contract. The contractor shall, without additional
compensation, correct or revise any errors, omissions or other deficiencies in
the services provided. This warranty shall cover any errors, omissions or other
deficiencies encountered by King County for a period of one year after
acceptance of the implementation.
3.17. No Waiver of Warranties and Contract Rights
Conducting of tests and inspections, review of specifications or plans, payment
for goods or services or acceptance by King County shall not constitute a
waiver, modification or exclusion of any express or implied warranty or any
right under this contract or by law.
3.18. Assignment
The Contractor shall not assign any interest, obligation or benefit under or in
this contract or transfer any interest in the same, whether by assignment or
novation, without prior written consent of King County. If assignment is
approved this contract shall be binding upon the inure to the benefit of the
successor parties.
3.19. Indemnification
To the maximum extent permitted by law and except to the extent caused by the
sole negligence of the County, the Contractor shall indemnify and hold harmless
King County, its officers, agents and employees, from and against any and all
suits, claims, actions, losses, costs, penalties and damages of whatsoever kind
or nature arising out of, in connection with, or incident to the goods and/or
services provided by or on behalf of the Contractor. In addition, the Contractor
shall assume the defense of King County and its officers and employees in all
legal or claim proceedings arising out of, in connection with, or incident to
such goods and/or services; shall pay all defense expenses, including reasonable
attorney's fees, expert fees and costs incurred by King County on account of
such litigation or claims, and; shall satisfy any judgment rendered in
connection therewith or pay or reimburse King County's payment of any sums
reasonable to settle such litigation or claims. In the event of litigation
between the parties to enforce the rights under this paragraph, reasonable
attorney fees shall be allowed to the prevailing party. This indemnification
obligation shall include, but is not limited to, all claims against King County
by an employee or former employee of the Contractor or its subcontractors, and
the Contractor expressly waives all immunity and limitation on liability under
any industrial insurance act, including Title 51 RCW, other worker's
compensation act, disability benefit act, or other employee benefit act of any
jurisdiction which would otherwise be applicable in the case of such claim.
<PAGE>
3.20. Applicable Law and Forum
Except as hereinafter specifically provided, this contract shall be governed by
and construed according to the laws of the State of Washington, including, but
not limited to, the Uniform Commercial Code, Title 62A RCW. Any suit arising
here from shall be brought in the King County Superior Court, which forum shall
have sole and exclusive jurisdiction and venue.
3.21. Price Warranty
The Contractor warrants that the prices charged King County do not exceed the
prices charged by the Contractor to any other customer purchasing the same
product or services in like or similar quantities, and under similar terms and
conditions.
3.22. Equal Employment Opportunity Requirements During the performance of this
contract, the Contractor agrees as follows:
The Contractor will not discriminate against any employee or applicant for
employment because of creed, race, religion, color, sex, sexual orientation,
age, national origin or the presence of any sensory, mental or physical
disability unless based on a bona fide occupational qualification. The
Contractor will take affirma tive action to ensure that applicants are employed,
and that employees are treated during employment, without regard to their creed,
race, religion, color, sex, sexual orientation, age, national origin or the
presence of any sensory, mental or physical disability. Such action shall
include, but not be limited to the following employment, upgrading, demotion or
transfer, recruitment or recruitment advertising, layoff or termination, rates
of pay or other forms of compensation, and selection for training, including
apprenticeship. The Contractor agrees to post in conspicuous places, available
to employees and applicants for employment, notices setting forth the provisions
of this non-discrimination clause.
3.23. Conflicts of Interest and Noncompetitive Practices Consistent with King
County Ordinance 11032
3.23.1. Conflict of Interest
The Contractor, by entering into this contract with King County to perform or
provide work, services or materials, has thereby covenanted that it has no
direct or indirect pecuniary or proprietary interest, and that it shall not
acquire any interest, which conflicts in any manner or degree with the work,
services or materials required to be performed and/or provided under this
contract and that it shall not employ any person or agent having any such
interests. In the event that the Contractor or its agents, employees or
representatives hereafter acquires such a conflict of interest, it shall
immediately disclose such interest to King County and take action immediately to
eliminate the conflict or to withdraw from this contract, as King County may
require.
3.23.2. Contingent Fees and Gratuities
The Contractor, by entering into this contract with King County to perform or
provide work, services or materials, has thereby covenanted:
1. That no person or selling agency except bona fide employees or designated
agents or representatives of the Contractor has been employed or retained to
solicit or secure this contract with an agreement or understanding that a
commission, percentage, brokerage, or contingent fee would be paid; and
2. That no gratuities, in the form of entertainment, gifts or otherwise, were
offered or given by the Contractor or any of its agents, employees or
representatives, to any official, member or employee of King County or other
governmental agency with a view toward securing this contract or securing
favorable treatment with respect to the awarding or amending, or the making of
any determination with respect to the performance of this contract.
3.24. Disputes, Claims and Appeals
The contractor shall address questions or claims regarding meaning and intent of
the contract or arising from this contract in writing to the contract
specialist, within five (5) calendar days of the date in which the contractor
knows or should know of the question or claim. The contract specialist will
ordinarily respond to the contractor in writing with a decision, but absent such
written response, the question or claim shall be deemed denied upon the tenth
day following receipt by the contract specialist.
In the event the contractor disagrees with any determination or decision of the
contract specialist, the contractor may, within five (5) calendar days of the
date of such determination or decision, appeal the determination or decision in
writing to the contractor specialist. Such written notice of appeal shall
include all documents and other information necessary to substantiate the
appeal. The contractor specialist will review the appeal and transmit a decision
or determination in writing. The decision will be considered final. Appeal to
the contractor specialist shall be a condition precedent to litigation
hereunder.
All claims, counterclaims, disputes and other matters in question between the
County and the contractor that are not resolved between the contractor
specialist and the contractor will be decided in the Superior Court of King
County, Washington, which shall have exclusive jurisdiction and venue over all
matters in question between the County and the contractor. This contract shall
be interpreted and construed in accordance with the laws of the State of
Washington.
<PAGE>
Pending final decision of a dispute hereunder, the contractor shall proceed
diligently with the performance of the contract and in accordance with the
direction of the contractor specialist. Failure to comply precisely with the
time deadlines under this paragraph as to any claim shall operate as a waiver
and release of that claim and an acknowledgment of prejudice to the County.
3.25. Patents and Royalties
The Contractor is responsible for paying all license fees, royalties or the
costs of defending claims for the infringement of any patented invention,
article, process or method that may be used in performing this contract or with
the completed work. The Contractor and the Contractor's sureties shall indemnify
and hold King County, together with its officers and employees, harmless against
any and all demands made for such fees, royalties or claims brought or made by
the holder of any invention or patent. Before final payment is made on the
account of this contract, the Contractor shall, if requested by King County,
furnish acceptable proof of a proper release from all such fees or claims.
Should the Contractor, its agent, servants or employees, or any of them be
enjoined from furnishing or using any invention, article, material, computer
programs or equipment supplied or required to be supplied or used under the
contract, the Contractor shall notify King County in writing an promptly
substitute other articles, materials, computer programs or equipment in lieu
thereof of equal efficiency, quality, finish, suitability and market value, and
satisfactory in all respects to King County.
3.26. Retention of Records and Audit Access
3.26.1. Proof of Compliance with Contract
The Contractor shall, at any time when requested, submit to King County properly
authenticated documents or other satisfactory proof as to the Contractor's
compliance with contract requirements.
In addition, the Contractor will permit King County, to inspect all work,
materials, payrolls, and other data and records involving the Contract.
3.26.2. Retention of Records
1. The Contractor shall maintain books, records and documents of its performance
under this contract in accordance with generally accepted accounting principles.
The Contractor shall maintain and retain for a period of not less than three
years after the date of final acceptance of contract work, all financial
information, data and records (e.g., estimating sheets, take offs, calculations,
designs, etc.) used to prepare and support the Contractor's Best and Final Offer
for this contract and all records pertaining to the performance of the Work
under this contract, including portions of the Work performed under Change
Orders and contracts and agreements with subcontractors and supplies.
2. The Contractor shall ensure each of its subcontractors, suppliers and
Contractors maintains and retains for said period all records pertaining to the
performance by the subcontractors of their portions of the work under this
contract.
3.26.3. Audit Access
1. King County and its authorized representatives and designees shall have
access to all records maintained and retained by the Contractor and its
subcontractors for the purpose of inspection, cost/price analysis, audit or
other reasonable purposes related to this contract. King County and its
representatives and designees shall have access to records and be able to copy
such records during the Contractor's normal business hours. The Contractor shall
provide proper facilities for such access, inspection and copying.
2. In addition to audits conducted after the date of initial acceptance of
contract work, audits may be conducted during or after the contract period for
purposes of evaluating claims by or payments to the Contractor and for any other
reason deemed appropriate and necessary by King County. Audits will be conducted
by auditors selected and paid for by King County. Audits shall be conducted in
accordance with generally accepted auditing standards and/or audit procedure and
guidelines of King County. The Contractor shall fully cooperate with King County
or its auditor(s) during audits and inspections, and provide all requested
documentation.
3. If an audit is commenced more than sixty (60) days after the date of final
acceptance of contract work, King County will give reasonable notice to the
Contractor of the date on which the audit will begin.
4. Insurance Requirements
4.1. Evidences and Cancellation of Insurance
A. Prior to execution of the contract, the Contractor shall file with King
County evidence of insurance from the insurer(s) certifying to the coverage of
all insurance required herein. All evidences of insurance must
<PAGE>
be certified by a properly authorized officer, agent, general agent, or
qualified representative of the insurer(s) and shall certify the name of the
insured, the type, and amount of insurance, the location and operations to which
the insurance applies, the expiration date, and that the insurer(s) shall give,
by registered mail, notice to King County at least thirty (30) days prior to the
effective date of any cancellation, lapse, or material change in the policy,
please refer to Attachment F "Guidelines for Preparation of the Certificate of
Insurance". Any failure to mail such notice shall not relieve the insurance
company, its agents or representatives from obligations and/or liability
hereunder.
B. The Contractor shall, upon demand of King County, deliver to King County a
true and complete copy of such policy or policies of insurance, and all
endorsements and riders, and the receipts for payment of premiums thereon; and
should the Contractor neglect so to obtain and maintain in force any such
insurance or deliver such policy or policies and receipts to King County, then
King County shall request that the Contractor deliver a specific action plan to
acquire such insurance and/or deliver policies and receipts within three (3)
days or before any further performance hereunder, whichever is first.
Failure to provide such insurance in a time-frame acceptable to King County
shall enable King County to suspend or terminate the Contractor's work hereunder
in accordance with Section 3-6, "Termination for Convenience/Cause". Suspension
or termination of this contract shall not relieve the Contractor from its
insurance obligations hereunder.
4.2. Insurance Requirements
A. The Contractor shall obtain and maintain the minimum insurance set forth
below. By requiring such minimum insurance, King County shall not be deemed or
construed to have assessed the risks that may be applicable to the Contractor
under this contract. The Contractor shall assess its own risks and, if it deems
appropriate and/or prudent, maintain greater limits and/or broader coverage.
1. Bodily injury liability affording limits of $500,000 each occurrence,
$500,000 aggregate, for bodily injury or death suffered or alleged to have been
suffered by any person or persons by reason of or in the course of operations
under the contract.
2. Property damage liability affording limits of $500,000 each occurrence and
$500,000 aggregate, for damages to property suffered or alleged to have been
suffered by any person or persons by reason of or in the course of operations
under the contract.
3. If such insurance is written on a combined single limit (CSL) basis, the
limit of liability required in $1,000,000 per occurrence, $1,000,000 aggregate,
CSL.
4. Such liability insurance shall indemnify the Contractor, King County and its
officers, officials, agents, and employees against loss from liability imposed
by law upon, or assumed under agreement by the Contractor and/or subcontractors
for damages on account of bodily injury, property damage, and/or other damages.
Such insurance shall include (1) personal injury, (2) blanket contractual, (3)
broad form property damage, (4) products and completed operations liability, (5)
owned and non-owned vehicles, and (6) Washington Stop-Gap (employer's
liability). Such insurance shall not exclude explosion, collapse or underground
hazards (X,C,U) coverage.
5. Whenever the work under this contract includes "professional services," the
Contractor shall maintain the appropriate professional liability, affording
limits of liability of $500,000 each claim and $1,000,000 aggregate for damages
sustained by reason of or in the course of operations under the contract,
whether occurring by reason of acts, errors or omissions of the Contractor.
6. Whenever the Contractor has vehicles, equipment or other property of King
County in its care, custody or control, the Contractor shall maintain garage
keepers legal liability, or other appropriate legal liability coverage,
affording limits of liability equal to the maximum value of all property of King
County in the Contractor's care, custody or control or $50,000 per occurrence,
whichever is greater. Coverage shall be on an "all risk" form.
7. Whenever the work under this contract involves advertising activities, the
Contractor shall maintain advertisers professional liability affording limits of
$500,000 each occurrence, $1,000,000 aggregate.
8. Whenever the work under this contract involves construction on premises of
King County, the Contractor shall provide owners' and Contractors' protective
coverage for limits as stated in paragraphs A.1, A.2 and A.3 above.
9. Whenever the work under this contract involves the use of water craft, the
Contractor shall (1) provide protection and indemnity coverage affording a
liability limit of $1,000,000 per occurrence and such insurance shall include
coverage for injury to crew Jones Act); and (2) maintain pollution insurance to
satisfy U.S. Coast Guard requirements as respects the Federal Oil Pollution Act
of 1990 and the Comprehensive Environmental Response Compensation and Liability
Act of 1980 as amended.
<PAGE>
10. If applicable, (i.e., if work performed is on or about navigable waterways),
the Contractor shall also maintain United States Longshoremen & Harbor workers'
coverage.
11. Whenever the work under this contract involves pollution risk to the
environment, the Contractor shall provide pollution liability insurance
affording a limit of $1,000,000 each occurrence, $1,000,000 aggregate, for
damages sustained by reason of pollution.
12. Other insurance as may be deemed appropriate by King County.
B. Such insurance shall be maintained through the term of this contract and for
a period of three hundred sixty-five (365) days after termination or completion
and acceptance of the contract, as the case may be. If coverage is on a "claims
made" basis, coverage shall be further extended to cover claims made during one
(1) additional year beyond said period.
C. All liability insurance policies, except as required in paragraphs A.5 and
A.6, shall include King County and its officers, officials, agents and employees
as additional insureds and shall contain "severability of interest" (cross
liability) wording.
D. The Contractor's insurance shall be primary to and not contributing with any
insurance or self-insurance which may be carried by King County.
E. Such insurance shall be provided on forms and by insurance companies
satisfactory to King County.
F. No provision in this section shall be construed to limit the liability of the
Contractor for work not done in accordance with the contract, or express or
implied warranties. The Contractor's liability for the work shall extend as far
as the appropriate periods of limitation provided by law.
4.3. Worker's Compensation
The Contractor and its subcontractors shall maintain worker's compensation
insurance in the amount and type required by law for all employees employed
under this contract who may come within the protection of workers' compensation
laws. The Contractor shall make all payments arising from the performance of
this contract due the State of Washington pursuant to RCW, Titles 50 and 51.
5. Implementation Procedures
5.0. Installation of Test Software
5.0.1. Installation of Demo database
The current version of the software will be installed by King County on a King
County Digital Equipment computer with the Contractor recommended configuration
for demonstration and testing purposes. The Contractor will provide assistance
as required by King County.
5.0.2 Installation of Development database
The A/R and O/E modules will be added to the IBIS development computer by King
County. The Contractor will provide assistance as required by King County.
5.1. Implementation Procedures
The Contractor will use the detailed procedures and schedules as identified in
Phase One of the Implementation Plan (see attachment) for implementing General
A/R, Warranty A/R, Capacity Charge A/R, Pass Sales A/R, Pass Sales O/E and
Warranty O/E. The Contractor will provide an A/R principal and O/E principal to
meet the implementation requirements from installation to production. It is
anticipated that this is an eight (8) month project. The Contractor will provide
project management through December 31, 1995. King County will review the budget
for possible future project management prior to December 31, 1995. The
Contractor will provide assistance and review of procedures to ensure accuracy
and completeness of the functional use of the software. King County reserves the
right to approve any Contractor's staff who will be providing technical services
under this contract.
5.1.1.
The Contractor will demonstrate that the current version of the software meets
the user requirements.
5.1.2.
King County will verify that the current version of the software meets the
requirements.
5.1.3. Conversion of data
The Contractor will work jointly with King County staff to convert existing data
into the Oracle database format. Specifications for detailed translations of the
data and other required data will be provided by the Contractor. King County
will extract data from existing database and the
Contractor will provide conversion programs and load data into the Oracle
database. King County will enter any additional data into the newly created
database.
King County will verify and validate conversion data. It is anticipated that
only Capacity Charge A/R will convert data.
5.1.4. Modifications/Interfaces
<PAGE>
The Contractor will provide detailed specifications, performance standards and
time schedules for all modifications/interfaces. King County will approve these
specifications and performance standards and the Contractor will develop and
implement the modifications/interfaces. The Contractor will demonstrate the
modifications/interfaces when completed and King County will verify that they
meet approved specifications. Written exceptions will be provided by King County
and the Contractor will make necessary corrections.
Anticipated modifications are:
1. The ability to copy information from one invoice to another, general accounts
receivable.
2. The ability to show late fees as an invoice line item, general accounts
receivable.
3. The ability to calculate present value, issue recurring invoices, track
remaining payments,
and prorate balance with change of ownership, capacity charge.
4. The database will handle all customer information for capacity charge.
Validate on property address to avoid duplication and provide a warning message
which can be manually overridden, capacity charge.
5. Ensure key warranty claim data elements are present in both Order Entry and
Accounts Receivable and reflected on the invoice, warranty.
6. Pick/pack slips to enforce sequential release of inventory. Standing sales
order program to allow global changes to effective dates, Pass Sales.
7. Customized reports as necessary.
8. Other modifications may be identified during Mapping process.
5.1.5. Training
The Contractor will provide training to the project team on the use and
functionality of the software. The training will be complete and sufficient so
that the trainees can operate the features of the software independently and are
capable of training additional system users. The contractor and King County will
train end users.
5.2. Production Installation
King County will add A/R and O/E modules to the IBIS production environment. The
Contractor and King County will configure the A/R and O/E production modules,
convert data and make the database ready for production.
5.3. System Acceptance
The Contractor and King County will develop acceptance testing procedures and
specifications. The acceptance test will demonstrate to King County that the
functionality, performance standards, data integrity of the production system
and data are met. King County will verify that the system meets the requirements
of the acceptance test. King County will notify the Contractor in writing of any
exceptions within 60 days. When all exceptions are removed, King County will
approve the acceptance test.
Attachment A
Technical Services Rate Schedule
CONTRACT BN40790
1350 Hours Principal #1 @ $100/hr.
1208 Hours Principal #2 @ $90/hr.
620 Hours Project Manager $105/hr.
Any changes or additions in hours must be justified and approved in advance by
the Manager of ISD Bob Mayer.
Attachment B
Sworn Statement Regarding Equal Employment Opportunity
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
The undersigned, being first duly sworn, on oath states to the King County
Department of Metropolitan Services on behalf of the proposer as follows:
<PAGE>
A. This Sworn Statement Regarding Equal Employment Opportunity constitutes the
proposer's plan of affirmative action to be followed in the event a contract is
awarded to the proposer to ensure equal opportunity in employment is afforded by
the proposer and the proposer's subcontractors while providing specific
materials and supplies or consulting or construction services for Metro.
B. The proposer agrees that submission of the Sworn Statement constitutes an
acknowledgment of Metro's equal employment opportunity requirements as set forth
in King County ordinances, which are incorporated herein by this reference.
C. The proposer hereby designates JOHN YOUNG SONG, DIRECTOR, BUSINESS
DEVELOPMENT, as the person who has been charged by the proposer with the
responsibility for carrying out the reporting the proposer's compliance with
this plan of affirmative action.
D. The proposer gives assurance that this plan of affirmative action will be
communicated to supervisors and other employees of the proposer.
E. The proposer assures that the proposer's work force on the project will
induce substantial percentages of women and minorities and, if additional
persons are employed as part of the work force, the proposer shall make every
reasonable effort to meet the equal employment opportunity goals established by
Metro for this project. The proposer will contact Metro for the specific goals
established for this contract.
F. The proposer assures that the proposer will provide opportunity for training
and advancement for minorities and women including after-school or summer
employment opportunities.
G. The proposer assures that the proposer will make continuing efforts to
recruit minority and female employees, to advertise employment opportunities in
ways which will effectively reach minorities and females, and to include in all
solicitations or advertisement for employees placed by or on behalf of the
proposer a statement that the proposer is an "Equal Opportunity Employer." When
minorities and women are under-represented proposer assures it will consider
minorities and women to file new hire or re-hire positions.
H. The proposer assures that the proposer will communicate to labor unions or
representative of workers with which the proposer has a collective bargaining
agreement or other contract a notice setting forth the proposer's affirmative
action obligations under this Sworn Statement and will post copies of such
notice in conspicuous places available to employees and applicant for
employment.
I. The proposer assures that the proposer will require its subcontractors and
suppliers to enter into similar affirmative action obligations.
K. The proposer assures it will not discriminate nor tolerate harassment or
abuse on the basis of creed, race, religion, color, sex, sexual orientation,
age, national origins or the presence of any sensory, mental or physical
disability in the selection, hiring, promoting, managing or training or conduct
toward workers or Metro's employees.
Name of firm: ARIS Corporation
By: /s/ John Y. Song
SUBSCRIBED AND SWORN to before me this 8/th/ day of September, 1995.
/s/ Teodora Alejandrino
Notary Public in and for the State of Washington
residing at King County
ATTACHMENT C
Sworn Statement Regarding Minority and Women Business
Enterprise Commitment
CONTRACT No. BN40790
STATE OF WASHINGTON )
) ss.
COUNTY OF KING )
A. This Sworn Statement constitutes the Bidder's statement of its efforts to
take all necessary and reasonable steps to ensure that Minority and Women
Business Enterprises have the maximum opportunity to participate in the
performance of subcontracts and agreements hereunder. The Bidder also affirms
that all documentation submitted herewith is true and accurate.
<PAGE>
B. The Proposer hereby designates:
as the person who has been charged by the Proposer with the responsibility for
carrying out and reporting the Proposer's compliance with the County's
requirements for Minority and Women Business Enterprises.
Name: John Song
Title: Director, Business Development
C. There may be few subcontracting opportunities for M/WBEs involved in the
performance under this IFB. The County has not established a M/WBE participation
goal. If the Proposer subcontracts any work under a contract awarded pursuant to
this IFB, the Proposer shall make affirmative efforts to solicit and use M/WBEs.
D. Affirmative efforts shall include at a minimum that the following steps be
taken prior to entering into any subcontract agreements:
1. Contact the County's Minority/Women Business Enterprise Office to explain
the work to be subcontracted and to obtain a listing of certified businesses
which are capable of performing such subcontract work;
2. Solicit bids from such certified businesses; and
3. Award subcontracts to such capable State of Washington-certified businesses
which provide reasonable bids.
ARIS Corporation
By: /s/ John Song
Title: Director, Business Development
SUBSCRIBED AND SWORN to before me this 8/th/ day of September, 1995.
/s/ Teodora Alejandrino
Notary Public in and for the State of Washington
residing at King County
ATTACHMENT D
SOLICITATION NUMBER: BN40790
FORMER METRO or MUNICIPALITY EMPLOYEE DISCLOSURE FORM
(Submit to the King County Department of Metropolitan
Services (Metro) only when applicable)
At time of Proposal submittal, the Proposer is responsible for identifying
former employees of Metro or of the former Municipality of Metropolitan Seattle
involved in the preparation of this bid or the anticipated performance of the
work or services to be provided on this contract.
Name of former employee: N/A
Date of last employment with Metro or the Municipality:
After Proposal submittal, the Proposer is responsible for notifying Metro's
project manager of former Metro or Municipality employees who become involved in
the contract any time during the term of the contract:
Name of firm:
Authorized signature:
Printed name:
Title:
Date:
<PAGE>
EXHIBIT 10.45
MASTER
SERVICES AGREEMENT AND INTELLECTUAL PROPERTY ASSIGNMENT
This Master Services Agreement and Intellectual Property Assignment (the
"Agreement") is made and entered into as of the 20th day of November, 1996 (the
"Effective Date") by and between ARIS CORPORATION ("COMPANY"), and MICROSOFT
CORPORATION ("MS"), a Washington corporation.
RECITALS
ARIS Corporation and Microsoft Corporation entered into a Master Services and
Intellectual Property Assignment on May 16, 1994; and SQL Soft, Inc. and
Microsoft Corporation entered into a Master Services and Intellectual Property
Assignment on January 6, 1995 (collectively, "Prior Agreements")
On May 1, 1996, SQL Soft, Inc. was merged with and into ARIS Corporation, with
ARIS Corporation as the surviving entity.
The parties wish to terminate the Prior Agreements.
In consideration of the covenants and conditions hereinafter set forth, MS and
COMPANY agree as follows:
AGREEMENT
1. Termination of Prior Agreements. As of March 31, 1997 the Prior Agreements
are hereby terminated, and neither party has any further obligation to the other
under the Prior Agreements whatsoever, except that: (i) Sections 4, 5, 6, 7, 9,
and 10 shall survive termination; and (ii) any Schedules of the Prior Agreements
executed by the parties prior to March 31, 1997 (the "Prior Schedules") shall
remain in full force and effect unless and until specifically terminated in
writing by the parties. All provisions of the Prior Agreements shall survive
termination only and until the expiration or cancellation of any Prior
Schedules. Upon expiration or cancellation of the Prior Schedules only Sections
identified in Section l(i) shall survive termination.
2. Services. COMPANY shall perform as a "work for hire" the services for MS that
are described on the Schedules as may be attached hereto from time to time by
mutual written agreement of the parties (the "WORK") in accordance with the
terms and conditions of this Agreement, and on the price, delivery dates and
specifications described in the applicable Schedule for the WORK. The Schedules
shall be in the form attached hereto and shall be signed by both parties,
consecutively numbered (i.e., Schedule A-l, A-2, A-3, etc.), and attached to
this Agreement. COMPANY is not obligated to perform any WORK hereunder and MS
has not contracted for any WORK unless and until a Schedule is executed by both
parties and attached hereto.
3. Delivery Schedule. COMPANY shall complete and deliver the WORK to MS
according to the delivery schedule and in conformance with the specifications
described in the applicable Schedule for such WORK. MS shall evaluate the WORK
and shall submit a written acceptance or rejection to COMPANY within fifteen
(15) days after MS' receipt of the WORK. Conformity to specifications and
COMPANY's warranties herein shall solely determine MS' right to accept or reject
the WORK. If rejected, COMPANY shall promptly correct the WORK. If COMPANY fails
to correct the WORK within fifteen (15) days after notice of rejection, MS may
terminate the applicable Schedule to this Agreement and receive a full refund of
amounts paid under such Schedule. If the WORK is not delivered on the due
date(s) specified in the applicable Schedule, or if the WORK does not meet the
specifications in such Schedule, or if the services provided by COMPANY are not
performed in a professional manner or are not of a high grade, nature, and
quality, MS may, at its option and upon
<PAGE>
[Microsoft logo] 12/06/93 LE912320.003 02/05/97 970360013
written notice to COMPANY, terminate the applicable Schedule for a full refund
of amounts paid under such Schedule and/or have the WORK properly prepared at
COMPANY's expense.
4. Payment. MS shall pay COMPANY for the WORK as described on the applicable
Schedule for such WORK.
5. Non-Disclosure. COMPANY expressly undertakes to retain in confidence all
information and knowhow transmitted to COMPANY by MS that MS has designated as
proprietary and/or confidential or that, by the nature of the circumstances
surrounding the disclosure, ought in good faith to be treated as proprietary
and/or confidential, and will make no use of such information and know-how
except under the terms and during the existence of this Agreement. COMPANY's
obligation under this Section 4 with respect to any particular information shall
extend to the earlier of such time as such information is publicly available
through no fault of COMPANY or ten (10) years following termination of this
Agreement.
6. Ownership of WORK: Assignment of Rights to MS.
(a) The WORK has been specially ordered and commissioned by MS and may be
incorporated in existing MS works as a compilation or collective work. COMPANY
agrees that all copyrights in the WORK shall be owned by MS and the WORK shall
be a "work made for hire" for copyright purposes.
(b) COMPANY hereby assigns to MS, its successors and assigns, all rights, title
and interest in and to the WORK including, without limitation, the following:
(i) any U.S. copyrights that COMPANY may possess or acquire in the WORK and all
copyrights and equivalent rights in the WORK throughout the world, including all
renewals and extensions of such rights that may be secured under the laws now or
hereafter in force and effect in the United States of America or in any other
country or countries;
(ii) all rights in and to any inventions, ideas, designs, concepts, techniques,
discoveries, or improvements, whether or not patentable, embodied in the WORK or
developed in the course of COMPANY's creation of the WORK, including but not
limited to all trade secrets, utility and design patent rights and equivalent
rights in and to such inventions and designs throughout the world regardless of
whether or not legal protection for the WORK is sought;
(iii) any documents, magnetically or optically encoded media, or other materials
created by COMPANY under this Agreement; and
(iv) the right to sue for infringements which may occur before the date of this
Agreement, and to collect and retain damages from any such infringements.
(c) At MS' expense, COMPANY shall execute and deliver such instruments and take
such other action as may be requested by MS to perfect or protect MS' rights in
the WORK and to carry out the assignments contemplated in subparagraph (b) of
this section. In this regard, COMPANY agrees to cooperate with MS in the filing
and prosecution of any copyright or patent applications that MS may elect to
file on the WORK or inventions and designs relating to the WORK. MS acknowledges
that COMPANY has taken no action to assist in the registration of the copyrights
or the WORK and will do so only as and when requested by MS.
7. COMPANY Warranties. COMPANY warrants that:
(a) The WORK as delivered to MS does not infringe any copyright, patent, trade
secret, or other proprietary right held by any third party;
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<PAGE>
(b) The WORK will meet the specifications listed in the applicable Schedule;
(c) The WORK will be created by full-time employees of COMPANY within the scope
of their employment and under obligation to assign inventions to COMPANY, or by
independent contractors under written obligations to assign all rights in the
WORK to COMPANY; and
(d) The services provided by COMPANY shall be performed in a professional manner
and shall be of a high grade, nature, and quality.
8. Indemnity.
(a) COMPANY agrees to indemnify, defend, and hold MS and its successors,
officers, directors and employees harmless from any and all actions, causes of
action, claims, demands, costs, liabilities, expenses and damages arising out of
or in connection with any claim that the WORK, names, and marks furnished by
COMPANY under this Agreement constitute an infringement of any confidential
information, trade secret, patent, copyright, trademark, trade name, or other
legal right of any third party.
(b) If any action shall be brought against MS in respect to which indemnity may
be sought from COMPANY pursuant to the provisions of this Section, MS shall
promptly notify COMPANY in writing, specifying the nature of the action and the
total monetary amount sought or other such relief as is sought therein. MS shall
cooperate with COMPANY at COMPANY's expense in all reasonable respects in
connection with the defense of any such action. COMPANY may upon written notice
thereof to MS undertake to conduct all proceedings or negotiations in connection
therewith, assume the defense thereof, and if it so undertakes, it shall also
undertake all other required steps or proceedings to settle or defend any such
action, including the employment of counsel which shall be satisfactory to MS,
and payment of all expenses. MS shall have the right to employ separate counsel
and participate in the defense thereof. COMPANY shall reimburse MS upon demand
for any payments made or loss suffered by it at any time after the date hereof,
based upon the judgment of any court of competent jurisdiction or pursuant to a
bona fide compromise or settlement of claims, demands, or actions, in respect to
any damages to which the foregoing relates.
(c) If the WORK furnished hereunder is in any action held to constitute an
infringement and its use is enjoined, COMPANY shall immediately and at its
expense:
(i) procure for MS the right to continue use, sale, and marketing of the WORK;
or
(ii) replace or modify the WORK with a version of the WORK that is non-
infringing.
If (i) or (ii) are not available to COMPANY, COMPANY shall refund to MS all
amounts paid to COMPANY by MS hereunder.
(d) This indemnity provision shall survive any termination or expiration of this
Agreement.
9. Termination.
(a) This Agreement shall commence as of the Effective Date and shall terminate
upon sixty (60) days prior written notice by either party, provided COMPANY must
complete all WORK described in any Schedule executed and attached hereto.
(b) MS shall have the right to cancel any Schedule with or without cause. In the
event MS cancels the Schedule, MS will provide COMPANY written notice of such
cancellation. Upon receipt of such notice, COMPANY will discontinue all work
thereunder. Except in cases of cancellation for cause as specified in Section 3
of this Agreement, MS will pay for all work performed by COMPANY up until the
date of receipt of the cancellation notice. In the event of cancellation of a
Schedule, upon
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<PAGE>
request by MS, COMPANY agrees to turn over to MS all work in progress applicable
to such Schedule within ten (10) days.
(c) In the event of termination or expiration of this Agreement for any reason,
Sections 5, 6,7,9, 10 and 11 shall survive termination.
10. Notices.
All notices and requests in connection with this Agreement shall be deemed given
as of the day they are received either by messenger, delivery service, or in the
United States of America mails, postage prepaid, certified or registered, return
receipt requested, and addressed as follows:
NOTICES TO COMPANY:
ARIS Corporation
6720 Fort Dent Way, Suite 150
Seattle, WA 98188-2555
Attention: Bert Sugayan
Telephone: 206-433-2081
Fax: ( )
NOTICES TO MS:
MICROSOFT CORPORATION
One Microsoft Way Redmond, WA 98052-6399
Attention: Senior Vice-President Business Systems Management
Copy to: Law & Corporate Affairs
Fax: (206)936-7329
or to such other address as the party to receive the notice or request so
designates by written notice to the other.
Miscellaneous.
(a) COMPANY is an independent contractor for MS, and nothing in this Agreement
shall be construed as creating an employer-employee relationship, a partnership,
or a joint venture between the parties.
(b) In the event taxes are required to be withheld on payments made hereunder by
any U.S. (state or federal) or foreign government, MS may deduct such taxes from
the amount owed COMPANY and pay them to the appropriate taxing authority. MS
shall in turn promptly secure and deliver to COMPANY an official receipt for any
taxes withheld. MS will use reasonable efforts to minimize such taxes to the
extent permissible under applicable law.
(c) This Agreement shall be governed by the laws of the State of Washington and
COMPANY consents to jurisdiction and venue in the state and federal courts
sitting in the State of Washington. In any action or suit to enforce any right
or remedy under this Agreement or to interpret any provision of this Agreement,
the prevailing party shall be entitled to recover its costs, including
reasonable attorneys' fees.
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<PAGE>
(d) This Agreement does not constitute an offer by MS and it shall not be
effective until signed by both parties. This Agreement constitutes the entire
agreement between the parties with respect to the WORK and all other subject
matter hereof and merges all prior and contemporaneous communications. It shall
not be modified except by a written agreement dated subsequent to the date of
this Agreement and signed on behalf of COMPANY and MS by their respective duly
authorized representatives.
(e) This Agreement may be assigned by MS but shall not be assigned by COMPANY
without MS' prior written approval. Except as otherwise provided, this Agreement
shall be binding upon and inure to the benefit of the parties' successors and
lawful assigns.
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
Effective Date written above.
MICROSOFT CORPORATION
By (Sign) By /s/ Russell A. Stockdale
Name: (Print) Russell A. Stockdale
Title: Group Product Manager
Date: 3-10-97
ARIS CORPORATION
By (Sign) /s/ Kendall Kunz
Name: Kendall W. Kunz
Title: Senior Vice President
Date: March 3, 1997
Company's Federal Employer ID number or Social Security number:
12/06/93 LE912320.003
Reviewed by Microsoft Legal /s/ Khanik, February 27, 1997
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<PAGE>
EXHIBIT 10.46
ARIS Corporation Professional Services Agreement
This Professional Services Agreement (the "Agreement") is between ARIS
Corporation ("ARIS") and Oregon Health Sciences University, ("Client").
1. Services
ARIS Corporation will provide to Client the Services specified on a standard
ARIS Work Order, ARIS Proposal or Client Purchase Order, under the terms of
this Agreement. Each Work Order, Proposal or Purchase Order shall specify the
Services and applicable fees, and will be governed by the terms of this
Agreement. To the extent that the terms and conditions of any ARIS Work Order,
Proposal (or any customer purchase order) entered into between the parties
conflict with or are inconsistent with the terms and conditions of the
Agreement, the terms and conditions of this Agreement shall control.
2. Fees for Services and Termination
Unless otherwise specified in the applicable Work Order, Proposal or
Purchase Order, Services shall be provided to Client on a time and material
basis ("T&M"). Rates must be specified on the attached Rate Structure or on a
standard Work Order or Proposal. If a dollar limit is stated in the applicable
Work Order, Proposal or Purchase Order, the limit shall be deemed an estimate
for Client's budgeting and ARIS' resource scheduling purposes; after the limit
is expended, ARIS will continue to provide the Services on a T&M basis if a
Work Order, Proposal or Purchase Order for continuation of the Services is
signed by the parties. Unless otherwise stated in a Work Order or Proposal,
any T&M Work Order or Proposal may be terminated by providing to ARIS 14 days
written notice of such termination.
3. Incidental Expenses
Unless otherwise stated in the Work Order, Client shall reimburse ARIS for
reasonable travel, communications, and out-of-pocket expenses incurred in
conjunction with the services, plus a 10% administrative fee for such expenses.
4. Invoicing and Payment
ARIS shall invoice Client semi-monthly, unless otherwise expressly specified
in a Work Order or Purchase Order. Charges shall be payable thirty (30) days
from the date of invoice and shall be deemed overdue if they remain unpaid
thereafter. All overdue invoices are subject to an interest charge of 1.5% per
month.
5. Taxes
The charges do not include taxes. If ARIS is required to pay any federal,
state, or local taxes based on the Services provided under this Agreement, the
taxes shall be billed and paid by Client; this shall not apply to taxes based
on ARIS' income.
6. Term
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<PAGE>
10.46
This Agreement shall commence on its Effective Date. Either party may
terminate this Agreement at any time by providing the other party with at least
14 days written notice. Any Work Order outstanding at the time of termination
shall continue to be governed by this Agreement as if it had not been
terminated.
7. Warranty
ARIS warrants that the Services will be performed consistent with generally
accepted industry standards.
8. Limitations on Warranty
CLIENT MUST REPORT ANY DEFICIENCIES IN THE SERVICES TO ARIS IN WRITING
WITHIN THIRTY (30) DAYS OF COMPLETION OF THE SERVICES IN ORDER TO RECEIVE
WARRANTY REMEDIES. THE WARRANTY HEREIN IS EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AS SET FORTH IN PARAGRAPH
9 OF THIS AGREEMENT.
9. Exclusive Remedy
For any breach of the above warranty, Client's exclusive remedy, and ARIS'
entire liability, shall be the reperformance of the Services. If ARIS is
unable to reperform the Services as warranted, Client shall be entitled to
recover the fees paid to ARIS for the deficient services. IN NO EVENT SHALL
ARIS BE LIABLE FOR ANY CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING FROM ANY
SERVICES PROVIDED HEREUNDER, INCLUDING BUT NOT LIMITED TO CLAIMS FOR LOST
PROFITS OR OTHER ECONOMIC DAMAGES.
10. Relationship between the Parties
ARIS is an independent contractor; nothing in this Agreement shall be
construed to create a partnership, joint venture, or agency relationship
between the parties. Each party will be solely responsible for payment of all
compensation owed to its employees, as well as employment related taxes. Each
party will maintain appropriate worker's compensation for its employees as well
as general liability insurance.
11. Authority to Enter Into Agreement
Each party to this Agreement has the authority to enter into and form this
Agreement. The individuals signing the Agreement have the authority to act as
agents of their respective organizations. Each party acknowledges that they
have read this Agreement and will abide by it.
12. Force Majeure
Neither party will be considered to be in default of this agreement as a
result of events beyond their reasonable control. For purposes of this
Agreement, such acts shall include, but are not limited to, acts of God,
catastrophe, or other "force majeure" events beyond the parties' reasonable
control.
13. Assignment of Contract
The Client may not assign the Agreement or its responsibility for payments
to any organization, without written approval by ARIS. ARIS may not assign its
responsibilities for performance under the Agreement to any
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<PAGE>
10.46
organization without written approval of the Client.
14. Hold Harmless; Indemnity
Client asserts it possesses all the rights and interests in the licensed
software necessary to enter into this agreement, and shall indemnify and hold
ARIS, its agents and employees harmless from any loss, damage or liability for
infringement of any United States patent right or copyright with respect to the
use of the licensed software; provided that Client is notified in writing
within ten calendar days of suit or claim against ARIS, that ARIS permits
Client to defend, compromise or settle said claim of infringement and give
Client all available information, assistance and authority to enable Client to
do so, provided ARIS fully observes all terms and conditions of this Agreement.
15. Confidentiality and Non-Disclosure
Except as legally required, the parties agree that neither party shall
directly or indirectly disclose or use any Confidential Information without
prior written permission from the other party.
"Confidential Information" means any type of confidential or proprietary
information or material disclosed to or known by the recipient of such
information ("Recipient") as a consequence of or through its relationship with
the party disclosing such information, and consisting of information conceived,
originated, discovered, or developed in whole or in part by Recipient, which is
not part of the public domain or otherwise generally available to the Recipient
from independent sources, including but not limited to information which
relates to research, development, trade secrets, know-how, inventions,
technical data, hardware, software, source codes, object codes, manufacture,
purchasing, accounting, engineering, marketing, merchandising and selling,
business labs or strategies, and information entrusted by third parties to the
party disclosing such information.
16. Nonsolicitation of Employees
During the period that this Agreement is in effect and for a period of
six (6) months after termination or expiration thereof, each party agrees not to
solicit for employment any technical or professional employees of the other
party assigned to work on the Project without the prior written approval of the
other party.
17. Insurance and Risk of Loss
The Client bears all responsibility for damages to their equipment and
facilities.
18. Survival of Rights
The rights and responsibilities of sections 14, 15, and 16 shall survive
the termination of this Agreement.
19. Severability
All provisions of this Agreement are severable and no provision hereof shall
be affected by the invalidity of any other such provision.
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<PAGE>
10.46
20. Governing Law; Attorney's Fees; Venue
This Agreement shall be governed by and construed in accordance with the
laws of the state of Washington. In the event of a dispute over this
Agreement, the prevailing party shall recover its reasonable attorneys' fees
and costs from the breaching party. Venue shall be in King County, Washington.
21. Entire Agreement
This Agreement constitutes the complete agreement between the parties and
supersedes all previous and contemporaneous agreements, proposals, or
representations, written or oral, concerning the subject matter of this
Agreement. Neither this Agreement nor a Work Order or Purchase Order may be
modified or amended except in writing signed by a duly authorized
representative of each party: no other act, document, usage, or custom shall
be deemed to amend or modify this Agreement, a Work Order, or Purchase Order.
It is expressly agreed that any terms and conditions of Client's purchase order
shall be superseded by the terms and conditions of this Agreement and the
applicable Work Order.
The Effective Date of this Agreement shall be December 5, 1996.
The following individuals, by signing agree to enter into this consulting
agreement and to be bound by its provisions.
<TABLE>
<CAPTION>
ARIS Corporation Client
<S> <C>
Authorized Signature:_______________________________ Authorized Signature:_______________________________
Name: ____________________________________________ Name: ____________________________________________
Title: ____________________________________________ Title: ____________________________________________
</TABLE>
[ARIS Corp logo]
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<PAGE>
EXHIBIT 10.48
ARIS CORPORATION PROFESSIONAL SERVICES AGREEMENT
This Professional Services Agreement (the "Agreement") is between ARIS
Corporation ("ARIS") and The Gates Rubber Company, ("Client").
1. SERVICES
ARIS Corporation will provide to Client the Services specified in ARIS work
orders or Client purchase orders from time to time made a part of this
Agreement. To the extent that the terms and conditions on the back of any
ARIS work order or any customer purchase order conflict with or are
inconsistent with the terms and conditions of the Agreement, the terms and
conditions of this Agreement shall control.
2. FEES FOR SERVICES AND TERMINATION
Unless otherwise specified in the applicable Work Order, Services shall be
provided to Client on a time and material basis ("T&M"). Rates must be
specified on the attached Rate Structure or on a standard Work Order. If a
dollar limit is stated in the applicable Work Order, the limit shall be
deemed an estimate for Client's budgeting and ARIS' resource scheduling
purposes; after the limit is expended, ARIS will continue to provide the
Services on a T&M basis if a Work Order for continuation of the Services is
signed by the parties. Unless otherwise stated in a Work Order, any Work
Order may be terminated by providing to ARIS 14 days written notice of such
termination.
3. INCIDENTAL EXPENSES
Unless otherwise stated in the Work Order, Client shall reimburse ARIS for
reasonable travel, communications, and out-of-pocket expenses incurred in
conjunction with the services.
4. INVOICING AND PAYMENT
ARIS shall invoice Client semi-monthly, unless otherwise expressly specified
in a Work Order. Charges shall be payable thirty (30) days from the date of
invoice and shall be deemed overdue if they remain unpaid thereafter. All
overdue invoices are subject to an interest charge of 1.5% per month.
5. TAXES
The charges do not include taxes. If ARIS is required to pay any federal,
state, or local taxes based on the Services provided under this Agreement,
the taxes shall be billed and paid by Client; this shall not apply to taxes
based on ARIS' income.
6. TERM
This Agreement shall commence on its Effective Date and terminate one year
later. This Agreement may be renewed for additional one (1) year terms by
mutual written agreement of the parties. Client may terminate this Agreement
at any time by providing ARIS with at least 30 days written notice. Any work
order or purchase order outstanding at the time of termination shall
continue to be governed by this Agreement as if it had not been terminated.
Upon termination, ARIS shall deliver to Client: all documents, plans, data,
drawings or papers originally provided by Client to ARIS which relate in any
way to the Services and all work product produced for Client, whether
complete or in process.
7. WARRANTY
ARIS warrants that the Services will be performed consistent with generally
accepted industry standards.
8. LIMITATIONS ON WARRANTY
CLIENT MUST REPORT ANY DEFICIENCIES IN THE SERVICES TO ARIS IN WRITING
WITHIN THIRTY (30) DAYS OF COMPLETION OF THE SERVICES IN ORDER TO RECEIVE
WARRANTY REMEDIES; PROVIDED, HOWEVER, THAT THE WARRANTY PERIOD SHALL BE
<PAGE>
EXTENDED TO ONE HUNDRED AND EIGHTY (180) DAYS OF COMPLETION OF THE SERVICES
FOR ANY LATENT DEFICIENCIES WHICH ARE NOT REASONABLY DISCOVERABLE WITHIN
SUCH THIRTY (30) DAY PERIOD. THE WARRANTY HEREIN IS EXCLUSIVE AND IN LIEU OF
ALL OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED
WARRANTIES OR MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE AS SET
FORTH IN PARAGRAPH 9 OF THIS AGREEMENT.
9. EXCLUSIVE REMEDY
For any breach of the above warranty, Client's exclusive remedy, and ARIS'
entire liability, shall be the reperformance of the Services. If ARIS is
unable to reperform the Services as warranted, Client shall be entitled to
recover the fees paid to ARIS for the deficient services. IN NO EVENT SHALL
EITHER PARTY BE LIABLE FOR ANY CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING
FROM THEIR PERFORMANCE OR NONPERFORMANCE UNDER THIS AGREEMENT, INCLUDING BUT
NOT LIMITED TO CLAIMS FOR LOST PROFITS OR OTHER ECONOMIC DAMAGES.
10. RELATIONSHIP BETWEEN THE PARTIES
ARIS is an independent contractor; nothing in this Agreement shall be
construed to create a partnership, joint venture, or agency relationship
between the parties. Each party will be solely responsible for payment of
all compensation owed to its employees, as well as employment related taxes.
Each party will maintain appropriate worker's compensation for its employees
as well as general liability insurance.
11. AUTHORITY TO ENTER INTO AGREEMENT
Each party to this Agreement has the authority to enter into and form this
Agreement. The individuals signing the Agreement have the authority to act
as agents of their respective organizations. Each party acknowledges that
they have read this Agreement and will abide by it.
12. FORCE MAJEURE
Neither party will be considered to be in default of this agreement as a
result of events beyond their reasonable control. For purposes of this
Agreement, such acts shall include, but are not limited to, acts of God,
catastrophe, or other "force majeure" events beyond the parties' reasonable
control. If any delay in performance due to force majeure continues for a
period of thirty (30) days or more, either party shall have the right to
terminate this Agreement immediately upon written notice.
<PAGE>
13. ASSIGNMENT OF CONTRACT
The Client may not assign the Agreement or its responsibility for payments
to any organization, except to a successor in interest, without written
approval by ARIS. ARIS may not assign its responsibilities for performance
under the Agreement to any organization without written approval of the
Client.
14. HOLD HARMLESS; INDEMNITY
Client asserts it possesses all the rights and interests in the licensed
software necessary to enter into this agreement, and shall indemnify and
hold ARIS, its agents and employees harmless from any loss, damage or
liability for infringement of any United States patent right or copyright
with respect to the use of the licensed software; provided that Client is
notified in writing within ten calendar days of suit or claim against ARIS,
that ARIS permits Client to defend, compromise or settle said claim of
infringement and give Client all available information, assistance and
authority to enable Client to do so, provided ARIS fully observes all terms
and conditions of this Agreement.
15. CONFIDENTIALITY AND NON-DISCLOSURE
Except as legally required, the parties agree that neither party shall
directly or indirectly disclose or use any Confidential Information without
prior written permission from the other party for a period of five (5) years
from the date of any termination or expiration of this Agreement.
"Confidential Information" means any type of confidential or proprietary
information or material disclosed to or known by the recipient of such
information ("Recipient") as a consequence of or through its relationship
with the party disclosing such information, and consisting of information
conceived, originated, discovered, or developed in whole or in part by
Recipient, which is not part of the public domain or otherwise generally
available to the Recipient from independent sources, including but not
limited to information which relates to research, development, trade
secrets, know-how, inventions, technical data, hardware, software, source
codes, object codes, manufacture, purchasing, accounting, engineering,
marketing, merchandising and selling, business labs or strategies, and
information entrusted by third parties to the party disclosing such
information.
16. NONSOLICITATION OF EMPLOYEES
During the period that this Agreement is in effect and for a period of six
(6) months after termination or expiration thereof, each party agrees not to
solicit for employment any technical or professional employees of the other
party assigned to work on the Project without the prior written approval of
the other party.
17. INDEMNITY
Each party agrees to defend, indemnify and hold harmless the other from and
against any and all losses or injuries that either may incur (both personal
and property, including deaths) as a result of the other party's negligence,
intentional acts, or its performance under this Agreement. The provisions of
this indemnification, however, shall not apply to losses or injuries
incurred by one party which arise out of such party's, its employees' or
agents' sole negligence.
18. SURVIVAL OF RIGHTS
The rights and responsibilities of sections 14, 15, and 16 shall survive the
termination of this Agreement.
19. SEVERABILITY
All provisions of this Agreement are severable and no provision hereof shall
be affected by the invalidity of any other such provision.
20. GOVERNING LAW; ATTORNEY'S FEES; VENUE
In the event of a dispute over this Agreement, the prevailing party shall
recover its reasonable attorneys' fees and costs from the breaching party.
The parties agree that any dispute arising out of or relating to this
<PAGE>
Agreement shall be resolved in accordance with the procedures specified in
this section, which shall be the sole and exclusive procedures for the
resolution of disputes. The parties shall attempt in good faith to resolve
any disputes arising out of or relating to this Agreement promptly by
negotiation between executives who have the authority to settle the
controversy. If the matter has not been resolved within sixty (60) days of
the party's request for negotiation, either party may initiate mediation by
notifying the other party in writing. The decision to mediate shall be
binding upon the parties. Mediation shall take place under the then current
Center for Public Resources ("CPR") Model Procedure for Mediation of
Business Disputes. The neutral third party will be selected from the CPR
Panels of Neutrals, with the assistance of CPR. Mediation shall take place
in King County, Washington under Washington law, if Client initiates the
request for mediation and shall take place in Denver, Colorado, under
Colorado law if ARIS initiates the request for mediation. Unless the parties
otherwise agree in writing, if the matter has not been resolved by mediation
within sixty (60) days of the decision to mediate, either party may initiate
litigation upon ten (10) days written notice to the other party.
21. INSURANCE
During the term of this Agreement, ARIS shall maintain at its expense at
least the following insurance, covering activities performed under and
contractual obligations undertaken in this Agreement:
Coverage Limits
Worker Compensation Statutory
Employer's Liability $1,000,000 each
occurrence
Public Liability $1,000,000 combined
(bodily injury and property single limit
damage)
Automobile Liability $1,000,000 combined
(bodily injury and property single limit
damage)
ARIS shall provide Client with a certificate of insurance from its insurance
company or companies demonstrating the coverages required hereunder and
naming Client as an additional insured.
22. OWNERSHIP OF MATERIALS
All data, maps, plans, specifications, drawings or other Client-furnished
property shall remain the exclusive property of Client. ARIS agrees that
such property will be used for no purpose other than for work for Client
under this Agreement. ARIS shall sign and deliver a written itemized receipt
for all such property and shall be responsible for its safekeeping. Upon
conclusion of the Services hereunder, such property and copies thereof shall
be returned to Client.
Client shall have complete and unrestricted right of ownership to all
inventions, materials, programs and documents prepared by ARIS in connection
with its performance of the Services or prepared by Client in connection
with this project. Said inventions, materials, programs and documents are to
be the property of Client, whether patented or patentable, and are not to be
used for the benefit of ARIS or any third party without the prior written
consent of Client. Any work performed hereunder is considered Confidential
Information as described in this Agreement. This section shall survive the
termination of this Agreement.
23. PUBLICITY
<PAGE>
No media releases, public announcements and public disclosures by ARIS or
its respective employees or agents relating to this Agreement and the
Services hereunder shall be issued by ARIS without the prior written
approval of Client. Any inquiry which ARIS may receive from third parties
concerning this Agreement will be referred to Client for response.
Any technical paper, article, publication, or announcement of advances
generated in connection with the Services under this Agreement, during the
period of performance of the Agreement or in the future, shall require
Clients' prior written approval.
24. NOTICES
All notices given hereunder shall be in writing and shall be delivered in
person or sent certified or registered mail, return receipt requested, with
postage prepaid, to the parties at the following addresses (or to such other
or further addresses as the parties may hereafter designate by like notice
similarly sent):
ARIS: ARIS Corporation
6720 Fort Dent Way, Suite 250
Seattle, WA 98188-2555
Attn: General Counsel
Client: The Gates Rubber Company
990 S. Broadway
Denver, CO 80209
Attention: John Alevras
All notices given in accordance with the foregoing shall be deemed given
when delivered in person, or three (3) days after being deposited in the
United States mail in accordance with the foregoing.
25. PROVISION OF SERVICES
The days and periods during which ARIS shall perform the Services shall be
reasonably agreed between ARIS and Client. ARIS and Client agree that any
days and periods for performing Services agreed to between the parties are
approximate and may vary depending upon reasons outside the parties'
control. In the event ARIS is not able to perform the Services during the
days and periods agree to by the parties, ARIS will so notify Client at
least thirty (30) days in advance. Client shall designate where Services are
performed. Client shall be responsible for providing the hardware and all
other necessary devices, peripheral or otherwise, to permit ARIS to perform
the Services on Client premises.
ARIS understands that time is of the essence in the performance of Services
hereunder.
26. ASSIGNMENT OF ARIS PERSONNEL
Client must approve the assignment of all ARIS personnel prior to an
individual's assignment, which approval shall not be unreasonably withheld.
Client reserves the right in its sole discretion to disapprove the
continuing assignment of ARIS personnel provided hereunder. ARIS will remove
any consultant performing work hereunder upon seven (7) days' prior written
request by Client and shall use commercially reasonable efforts to provide a
substitute consultant satisfactory to Client.
27. SUBCONTRACTORS
ARIS's employment of subcontractors to perform Services hereunder shall be
subject to the written approval of Client, which approval shall not be
unreasonably withheld. The approval by Client of any subcontractor shall not
release ARIS from any responsibility or liability in connection with said
subcontractor. ARIS shall enter into written subcontracts with all approved
subcontractors. All
<PAGE>
subcontracts must contain confidentiality and Client ownership of materials
provisions similar to those contained in this Agreement. Client shall be
billed for subcontractor services and expenses on the same terms and at the
same rates as for ARIS personnel.
28. NO WAIVER
The waiver by either party of any default or breach of this Agreement shall
not constitute a waiver of any other or subsequent default or breach.
29. ENTIRE AGREEMENT
This Agreement constitutes the complete agreement between the parties and
supersedes all previous and contemporaneous agreements, proposals, or
representations, written or oral, concerning the subject matter of this
Agreement. Neither this Agreement nor a Work Order or Purchase Order may be
modified or amended except in writing signed by a duly authorized
representative of each party:
The Effective Date of this Agreement shall be May 22, 1996.
The following individuals, by signing agree to enter into this consulting
agreement and to be bound by its provisions.
<TABLE>
<CAPTION>
ARIS CORPORATION CLIENT
<S> <C>
Authorized Signature: //s// Kendal Kunz Authorized Signature: //s// Randall S. Bednar
Name: Kendal Kunz Name: Randall S. Bednar
Title: Vice President Title: Vice President
</TABLE>
<PAGE>
EXHIBIT 10.49
ARIS Corporation Professional Services Agreement
This Professional Services Agreement (the "Agreement") is between ARIS
Corporation ("ARIS") and Quebecor Printing (USA) Corp. ("Client").
1. Services
ARIS Corporation will provide to Client the Services specified on a standard
ARIS Work Order, ARIS Proposal or Client Purchase Order, under the terms of this
Agreement. Each Work Order, Proposal or Purchase Order shall specify the
Services and applicable fees, and will be governed by the terms of this
Agreement. To the extent that the terms and conditions of any ARIS Work Order,
Proposal (or any customer purchase order) entered into between the parties
conflict with or are inconsistent with the terms and conditions of the
Agreement, the terms and conditions of this Agreement shall control.
2. Fees for Services and Termination
Unless otherwise specified in the applicable Work Order, Proposal or Purchase
Order, Services shall be provided to Client on a time and material basis
("T&M"). Rates must be specified on the attached Rate Structure or on a standard
Work Order or Proposal. If a dollar limit is stated in the applicable Work
Order, Proposal or Purchase Order, the limit shall be deemed an estimate for
Client's budgeting and ARIS' resource scheduling purposes; after the limit is
expended, ARIS will continue to provide the Services on a T&M basis if a Work
Order, Proposal or Purchase Order for continuation of the Services is signed by
the parties. Unless otherwise stated in a Work Order or Proposal, any T&M Work
Order or Proposal may be terminated by providing to ARIS 14 days written notice
of such termination.
3. Incidental Expenses
Unless otherwise stated in the Work Order, Client shall reimburse ARIS for
reasonable travel, communications, and out-of-pocket expenses incurred in
conjunction with the services. [Deleted: "plus a 10% administrative fee for such
expenses." Initialed by Kendall Kunz and Paul Song]
4. Invoicing and Payment
ARIS shall invoice Client semi-monthly, unless otherwise expressly specified in
a Work Order or Purchase Order. Charges shall be payable thirty (30) days from
the date of invoice and shall be deemed overdue if they remain unpaid
thereafter. All overdue invoices are subject to an interest charge of 1.5% per
month.
5. Taxes
The charges do not include taxes. If ARIS is required to pay any federal, state,
or local taxes based on the Services provided under this Agreement, the taxes
shall be billed and paid by Client; this shall not apply to taxes based on ARIS'
income.
6. Term
This Agreement shall commence on its Effective Date. Either party may terminate
this Agreement at any time by providing the other party with at least 14 days
written notice. Any
<PAGE>
Work Order outstanding at the time of termination shall continue to be governed
by this Agreement as if it had not been terminated.
7. Warranty
ARIS warrants that the Services will be performed consistent with generally
accepted industry standards.
8. Limitations on Warranty
CLIENT MUST REPORT ANY DEFICIENCIES IN THE SERVICES TO ARIS IN WRITING WITHIN
THIRTY (30) DAYS OF COMPLETION OF THE SERVICES IN ORDER TO RECEIVE WARRANTY
REMEDIES. THE WARRANTY HEREIN IS EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES,
WHETHER EXPRESS OR IMPLIED, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE AS SET FORTH IN PARAGRAPH 9 OF THIS
AGREEMENT.
9. Exclusive Remedy
For any breach of the above warranty, Client's exclusive remedy, and ARIS'
entire liability, shall be the reperformance of the Services. If ARIS is unable
to reperform the Services as warranted, Client shall be entitled to recover the
fees paid to ARIS for the deficient services. IN NO EVENT SHALL ARIS BE LIABLE
FOR ANY CONSEQUENTIAL OR INCIDENTAL DAMAGES ARISING FROM ANY SERVICES PROVIDED
HEREUNDER, INCLUDING BUT NOT LIMITED TO CLAIMS FOR LOST PROFITS OR OTHER
ECONOMIC DAMAGES. [Added: "THE FOREGOING LIMITATION SHALL NOT BE APPPLICABLE IN
THE EVENT OF A BAD FAITH OR WILLLFUL REFUSAL OF ARIS TO PERFORM THE SERVICES."
Initialed by Kendall Kunz and Paul Song]
10. Relationship between the Parties
ARIS is an independent contractor; nothing in this Agreement shall be
construed to create a partnership, joint venture, or agency relationship
between the parties. Each party will be solely responsible for payment of all
compensation owed to its employees, as well as employment related taxes. Each
party will maintain appropriate worker's compensation for its employees as well
as general liability insurance.
11. Authority to Enter Into Agreement
Each party to this Agreement has the authority to enter into and form this
Agreement. The individuals signing the Agreement have the authority to act as
agents of their respective organizations. Each party acknowledges that they
have read this Agreement and will abide by it.
12. Force Majeure
Neither party will be considered to be in default of this agreement as a
result of events beyond their reasonable control. For purposes of this
Agreement, such acts shall include, but are not limited to, acts of God,
catastrophe, or other "force majeure" events beyond the parties' reasonable
control.
13. Assignment of Contract
<PAGE>
The Client may not assign the Agreement or its responsibility for payments
to any organization, without written approval by ARIS [added: ", such approval
not to be unreasonably delayed or withheld." Initialed by Kendall Kunz and
Paul Song] ARIS may not assign its responsibilities for performance under the
Agreement to any organization without written approval of the Client.
14. Hold Harmless; Indemnity
Client asserts it possesses all the rights and interests in the licensed
software necessary to enter into this agreement, and shall indemnify and hold
ARIS, its agents and employees harmless from any loss, damage or liability for
infringement of any United States patent right or copyright with respect to the
use of the licensed software; provided that Client is notified in writing within
ten calendar days of suit or claim against ARIS, that ARIS permits Client to
defend, compromise or settle said claim of infringement and give Client all
available information, assistance and authority to enable Client to do so,
provided ARIS fully observes all terms and conditions of this Agreement.
15. Confidentiality and Non-Disclosure
[Replacement language: "ARIS shall indemnify and hold Client harmless from and
against any and all losses, claims, or damages, including reasonable attorneys'
fees, for patent or copyright infringement and any other claims that any rights
have been infringed by the Services provided by ARIS. Client shall promptly
notify ARIS of any and all losses, claims, or damages, referred to above and
shall afford ARIS opportunity to defend the same for and on behalf of Client.
ARIS shall pay the cost of such defense, whether it shall be conducted by ARIS
or by Client at ARIS's request, provided that notice of suit and the opportunity
to defend it shall have been given as aforesaid. If ARIS elects to defend such
suit, Client may participate in such defense at its own discretion."]
16. Nonsolicitation of Employees
During the period that this Agreement is in effect and for a period of
six (6) months after termination or expiration thereof, each party agrees not to
solicit for employment any technical or professional employees of the other
party assigned to work on the Project without the prior written approval of the
other party.
[Note written by Paul Gaboury: "See attached "Confidentiality and
Disclosure Agreement."]
[Deleted: "17. Insurance and Risk of Loss
The Client bears all responsibility for damages to their equipment and
facilities." Initialed by Kendall Kunz and Paul Song]
18. Survival of Rights
The rights and responsibilities of sections 14, 15, and 16 shall survive the
termination of this Agreement.
19. Severability
All provisions of this Agreement are severable and no provision hereof shall
be affected by the invalidity of any other such provision.
<PAGE>
20. Governing Law; Attorney's Fees; Venue
This Agreement shall be governed by and construed in accordance with the laws of
the state of Washington [changed to "Massachusetts"; initialed by Kendall Kunz
and Paul Song]. In the event of a dispute over this Agreement, the prevailing
party shall recover its reasonable attorneys' fees and costs from the breaching
party. Venue shall be in King [changed to "Suffolk"; initialed by Kendall Kunz
and Paul Song] County, Washington [changed to "Massachusetts"; initialed by
Kendall Kunz and Paul Song].
21. Entire Agreement
This Agreement constitutes the complete agreement between the parties and
supersedes all previous and contemporaneous agreements, proposals, or
representations, written or oral, concerning the subject matter of this
Agreement. Neither this Agreement nor a Work Order or Purchase Order may be
modified or amended except in writing signed by a duly authorized representative
of each party: no other act, document, usage, or custom shall be deemed to amend
or modify this Agreement, a Work Order, or Purchase Order. It is expressly
agreed that any terms and conditions of Client's purchase order shall be
superseded by the terms and conditions of this Agreement and the applicable Work
Order.
The Effective Date of this Agreement shall be April 30, 1996.
The following individuals, by signing agree to enter into this consulting
agreement and to be bound by its provisions.
<TABLE>
<S> <C>
ARIS Corporation Quebecor Printing (USA) Corp.
Authorized Signature: /s/ Kendall Kunz Authorized Signature: /s/ Paul M. Gaboury
Name: Kendall W. Kunz Name: Paul Gaboury
Title: Vice President of Consulting Title: Director, I.S.
["Note change to paragraph #3 above"-note
written by Paul Gaboury under his signature
block.]
</TABLE>
[ARIS logo]
CONFIDENTIALITY AND NONDISCLOSURE AGREEMENT
This Agreement is entered into as of June 10, 1996, between Applied Relational
Information Systems, Inc. d/b/a ARIS Corporation ("ARIS") and Quebecor Printing
(USA) Corp.("Quebecor"). The parties recognize that certain trade secrets and
confidential information of each party may be disclosed to or discovered by the
other party in the course of their
<PAGE>
discussions and negotiations concerning ARIS' possible provision of computer and
systems consulting services to QUEBECOR. The parties are willing to enter into
such discussions, provided each party agrees to protect the other party's
secrets and confidential information according to the terms of this Agreement.
The parties, intending to become legally bound, agree as follows:
1. As used in this Agreement, the term "Trade Secrets" shall mean and include
all trade secrets and confidential information of any nature of either party or
any of its affiliates, whether presently existing or developed hereafter, and
whether communicated orally, in writing, or learned by observation or otherwise,
including without limitation, inventions; formulae; patterns; compilations;
programs (including software object and source codes); devices; designs;
methods; techniques; processes, discoveries and improvements; customer and
supplier lists; non-public financial information; buying and marketing plans and
methods; pricing policies; product ideas; and other nonpublic business,
technical, marketing, or operating information. "Trade Secrets" shall also
include any information obtained by either party from third parties which the
receiving party is obligated to protect as trade secrets or confidential
information hereunder. Trade Secrets shall not include any information that (i)
was in the public domain prior to disclosure to the receiving party, or becomes
so available through no fault of the receiving party; or (ii) is independently
developed by receiving party; or (iii) is received from a third party with no
breach of a duty owned hereunder.
2. The receiving party acknowledges the importance of preserving the
confidentiality of the disclosing party's Trade Secrets and agrees not to use or
disclose at any time, and to prohibit its employees or agents from using or
disclosing at any time, any disclosing party's Trade Secrets to any third party
(other than employees or agents of the receiving party with a need to know such
Trade Secrets) unless and to the extent directed in writing in each instance by
an officer of the disclosing party. The receiving party shall restrict access
and use of the disclosing party's Trade Secrets solely to such of its employees
or agents who need to know such information.
3. The receiving party shall not without the consent of the disclosing party
make or have made or use any copies of any materials containing any disclosing
party's Trade Secrets, and any notices or legends used by the disclosing party
shall be reproduced in all copies. All tangible items embodying or disclosing
any portion of the disclosing party's Trade Secrets, including copies or partial
copies and reproductions thereof, shall remain the property of the disclosing
party and must be returned upon the termination of the panties' business
relationship or the earlier request of an officer or manager of the disclosing
party.
4. No license or right in or to any of the disclosing party's Trade Secrets
or any other trade secrets, confidential information or other rights is granted
hereunder.
5. The receiving party acknowledges that the disclosing party will be
irreparably harmed if any disclosing party's Trade Secrets are disclosed by the
receiving party to third parties or used by the receiving party or others except
as contemplated hereunder, agrees that any remedy at law would be inadequate in
the event of a breach or threatened breach of this Agreement, and agrees that
the disclosing party shall be entitled to injunctive relief, in addition to
money damages or any other remedies, in the event of breach or threatened breach
of this Agreement. Any amounts or property received by the receiving party
through a violation of this Agreement shall be held in constructive trust for
the benefit of the disclosing party.
6. In the event that the receiving party should be requested or required (by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or
<PAGE>
similar process) to disclose any of the disclosing party's trade Secrets, it is
agreed that the receiving party will provide the disclosing party with prompt
notice of such requests so that the disclosing party may seek an appropriate
protective order. It is further agreed that, if the receiving party is, in the
opinion of its counsel, compelled to disclose information concerning the
disclosing party's Trade Secrets to any tribunal or else stand liable for
contempt or suffer other censure or penalty, the receiving party may disclose
such information to such tribunal without liability hereunder.
7. This Agreement shall be governed by the laws of the Commonwealth of
Massachusetts. Each party hereby consents to the personal jurisdiction of the
state and federal courts sitting in Suffolk County, Massachusetts, which courts
shall be proper venue for any action hereunder. Each party agrees the other
shall be awarded its reasonable attorneys' fees and costs if it prevails in any
action to enforce this Agreement.
8. If any provision of this Agreement is found to be unenforceable or invalid in
any context or to any extent, it shall nevertheless be enforced to the fullest
extent allowed by law in that and other contexts and the validity and force of
the remainder of this Agreement shall not be affected thereby.
9. This Agreement shall bind and inure to the benefit of the parties and their
respective successors, assigns directors, officers, shareholders, and parent,
subsidiary and related entities. This Agreement shall not reduce, limit or
supersede any trade secret rights or remedies of either party under applicable
laws, but shall be deemed to supplement same.
10. This Agreement and the obligations arising hereunder shall survive the
expiration or termination of any relationship between the parties. Upon
expiration or termination of any such relationship, each party shall return to
the other all tangible copies of the other's Trade Secrets, wherever located,
including copies or partial copies contained on any computer hard drive, tapes,
floppy disks, other magnetic media or other medium.
11. This Agreement contains the entire agreement of the parties with respect
to its subject matter and supersedes any prior or contemporaneous agreements or
statements relating to the subject matter hereof. Any waiver of either party's
rights under this Agreement must be by a specific written waiver signed by an
officer of such party, and no waiver shall apply to any instance other than
that for which it is given. Any modifications or amendments to this Agreement
must be in a writing signed by an officer of both parties.
Executed by authorized representatives of the parties as of the date first
written above.
ARIS CORPORATION QUEBECOR PRINTING (USA) CORP.
By: /s/ Paul Song, President By: /s/ Paul M. Gaboury, Director, I.S.
<PAGE>
EXHIBIT 10.50
COMPUTER SERVICES AGREEMENT
THIS AGREEMENT, made this 31st day of August, 1994, by and between ARIS
Corporation, who is an [blank line] corporation but, for purposes of
convenience only is hereinafter referred to as "Consultant," and Tosco
Northwest Company, its subsidiaries and affiliates, a division of Tosco
Corporation, a Nevada corporation with its principal office located at 72
Cummings Point Road, Stamford, CT 06902, hereinafter referred to as the
"Company".
W I T N E S S E T H
In consideration of the premises and covenants herein contained, the parties
hereto agree as follows:
1. The Consultant agrees to make available to the Company the services of
specific employee(s) of the Consultant (hereinafter called the "employee(s)")
as specified in the written purchase orders issued by the Company and accepted
in writing by the Consultant with reference to this Agreement (hereinafter
referred to as the "work").
2. Each purchase order hereunder shall refer to this agreement, shall be
governed by the terms and provisions hereof without regard to any of the terms
and provisions printed on the reverse side of such purchase order and shall
indicate the scope of and include any required data or specifications for the
work to be performed pursuant thereto. The Consultant shall not proceed with
any phase of any work prior to the receipt of a purchase order describing such
work and written acceptance of such purchase order. The Consultant shall not
accumulate charges, and the Company shall not be liable for payments, above the
amount specifically authorized by purchase orders issued hereunder. Upon mutual
written agreement, an alternate form may from time to time be substituted for
the purchase order subject to the same provisions as such purchase order.
3. The employee(s) requested by the Company shall perform the work as
specified by the Company, under the direction of the Company's Representative
in accordance with written standards and specifications supplied by the
Company; except that in the absence of any written standards or specifications,
any work performed shall be performed in accordance with Consultant's standards
and specifications.
4. It is understood that Consultant's obligations under this Agreement are
to provide the employee(s) in accordance with the terms hereof only, which
employee(s) shall perform the work required with good workmanship in the arts,
skill and trade consistent with generally accepted data processing procedures.
No increase or decrease in the scope of the work or any modification of the
specifications shall be made by the Company or the Consultant except by written
mutual agreement signed by both parties. Any inspection or approval by the
Company of any work done hereunder, or failure of the Company to so inspect or
approve, shall not be deemed an acceptance of defective work or relieve the
Consultant of its obligations and liabilities with respect to such work.
5. Consultant agrees that any data furnished by the Company and all
programs, tapes and specifications made in connection with the processing of
the Company data shall be treated and maintained by Consultant and its
employees as confidential information and Consultant will not disclose the same
to anyone unless Consultant has first received the Company's written consent,
except to the extent any information or data is now known to the general public
by acts not attributable to Consultant, or
Page 1
<PAGE>
is made available to Consultant as a matter of right be any third party.
Consultant further agrees to advise any of its employees assigned to work
hereunder of the provisions of this paragraph and, at the request of Company, to
request such employees sign a statement acknowledging the provisions herein.
6. No publication or public announcement of this Agreement or of any result
of work performed hereunder shall be made by consultant except in accordance
with the Company's written consent and approval. Any and all information,
programs, tapes, specifications and documentation which is developed as a
result of the performance of the work hereunder or as a result of disclosure of
confidential information to Consultant and which is not published in the public
domain or otherwise generally and properly available to others shall be the
sole and exclusive property of the Company and Consultant shall make no
commercial use of such information or development except in the performance of
work hereunder without the Company's prior written consent.
7. Any and all inventions and/or improvements and/or discoveries and/or
studies, programs and other deliverable products whether patentable or not,
which the Consultant or any employee of the Consultant conceives and/or makes
in the course or performance of work under any purchase order hereunder or
within one (1) year after the completion of such work and (1) as a result of
the performance of such work, or (2) as the result of the knowledge obtained by
the Consultant or such employee of any technical information covered by the
confidentiality provisions of paragraphs 5 and 6 above, shall be the sole and
exclusive property of the Company, and the Consultant shall promptly disclose
and cause to be disclosed to the Company, all such inventions, improvements and
discoveries and at the election of the Company cause the execution and
assignment to the Company of patent applications and letters patent thereon. If
the Company elects not to cause to be filed a patent application and notifies
the Consultant in writing to that effect, the Consultant and/or its employee
shall be free at its own cost to file an application thereon, but the Company
and its licensees shall have the non-transferable, royalty-free, nonexclusive
licenses thereunder. Work produced under this Agreement shall be considered
"work for hire" as defined by copyright law, and for any work not so defined,
copyright is hereby transferred to Company. Consultant shall have the burden of
bringing to Company's attention, in writing, any portion or sub-routine of any
program that is developed under this Agreement that was in Consultant's
possession prior to the date of this Agreement. If such notice is not received
by Company, it is agreed by Consultant that the entire program is "developed"
under this agreement. For those items so identified, Consultant agrees that
Company has the unrestricted free right to use for whatever purposes these
items.
8. The Company shall have access at all reasonable times to all work done and
product made by or for the Consultant hereunder and such work and product shall
be the times. The Consultant shall turn over to the Company all such work done
and product made upon request of the Company at any time during the progress of
the work or at the expiration or termination of the work to be performed under
any purchase order hereunder.
9. The Consultant shall perform all of the work specified in any purchase
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order hereunder as an independent contractor, and nothing contained in this
Agreement shall be deemed to constitute the Consultant and/or its employees as
the agents or representatives of the Company for any purpose whatsoever. The
Consultant shall have no authority to incur any obligations, contractual or
otherwise, in the name of the Company or on behalf of or for the account of the
Company. Consultant shall not subcontract any portion of the work without first
obtaining the written approval of the Company. Only full time employees of
Consultant may be assigned to the work unless prior written consent has been
assigned to perform work under a purchase order, such employees shall not be
replaced except in accordance with Paragraph 13.c or due to causes beyond the
reasonable control of Consultant. The Consultant agrees to maintain Worker's
Compensation or Employer's Liability Insurance sufficient to comply with all
applicable provisions of the Worker's Compensation laws of the state or states
where the work, or any portion thereof, is performed and will supply Company
with an insurance certificate verifying the coverage upon execution of this
Agreement.
10. The Consultant agrees to indemnify and save the Company harmless from
and against any and all loss, cost, damage, expense or liability which the
Company may suffer or sustain or be liable for, and from and against any and
all claims, demands, and suits for injury to or death of any person, including
employees of the Company and the Consultant, and for damage, destruction and
loss of use of property, including property of the Company and Consultant,
caused or alleged to have been caused, directly or indirectly, by any and all
acts or omissions of the Consultant, its employees, arising out of or connected
with the work performed under any purchase order hereunder, and the Consultant
shall defend any such claims or suit asserted against the Company at the
Consultant's sole expense, provided that the Company shall have the right, at
its option and at its own expense, to participate in the defense of such claim
or suit and to employ counsel of its own choosing for such purpose. The
foregoing indemnity shall apply only to acts or omissions of the Consultant
during the actual period of performance of work upon the Company's property.
11. During the term of this Agreement, Consultant will carry Workers'
Compensation insurance in compliance with all State and Federal laws. If any
of the work to be performed under any purchase order hereunder requires the
Consultant and/or its employees to enter upon any property of the Company, the
Consultant agrees that (a) it and its employees will comply with the applicable
safety rules and regulations of the particular location where the work is to be
performed, and the Company agrees that said safety rules and regulations shall
be made available to the Consultant before the commencement of performance of
any such work and (b) before entering upon such property, it will maintain and
keep in force during the performance of the work Comprehensive General
Liability, including Contractual Liability coverage and Automobile Liability,
on all owned, non-owned or hired vehicles, in amounts as specified on the
subject purchase order, or in the absence of any amounts on the purchase order
of at least $100,000 for injuries to each person, and $300,000 for each
occurrence, and $100,000 for property damage. Such insurance shall contain
endorsements waiving
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the insurer's rights of subrogation against Company and shall name the company
as an additional insured. Consultant shall furnish Company insurance
certificates certifying that insurance coverages specified herein are in force
and that Company will be given thirty (30) days written notice prior to any
cancellation or material change.
12. All materials, supplies, facilities and services required by the
employee(s) to perform the work assigned by the Company's Representative shall
be provided at the Company's sole expense. On completion of work performed
hereunder, the employee(s) shall return all remaining materials and supplies to
Company in the same condition as when received, ordinary usage wear and tear
excepted.
13. The employee(s) provided by Consultant to the Company under this
Agreement shall be subject to the following:
a) Employees shall work forty hours per week (based on an eight hour day of
five working days per week) unless overtime work is authorized by the Company's
Representative in writing. For the purpose of computing the hours worked, any
travel time by employee(s) shall not be considered as time worked. In addition,
the Company shall be credited with any absence due to recall by Consultant,
holidays, sick leave, or other absence whether authorized or otherwise.
b) A working day shall be considered Monday through Friday between the hours
of 7:30 A.M. to 4:00 P.M. exclusive of Company's recognized holidays unless
other hours are mutually agreed to.
c) In the event the Company is dissatisfied with the work of any
employee(s), the Company shall have the right, upon written notice first given,
to have such employee(s) replaced; upon receipt of such written notice,
Consultant will withdraw such employee(s) from the work and replace the same
with like employee(s) acceptable to the Company within seven (7) days. If the
Consultant is unable to supply replacement within seven (7) days, the Company
will then be free to select a replacement from any other source deemed
appropriate by the Company.
d) The employee(s) will complete a time card or such accounting forms as may
be requested by the Company to enable the Company to reconcile the number of
hours the employee(s) is engaged in the work hereunder.
e) The Company agrees to pay to Consultant an hourly charge for the
employee(s) as specified in the purchase order. In the event overtime work is
authorized by the Company Representative, the hours will be chargeable at the
same rate as regular hours. In no event will overtime be chargeable if the
employee(s) does not receive overtime compensation at a rate of at least his
normal rate. On request, Consultant will provide Company with information on
the employee(s) regular and overtime rates.
f) Consultant shall correctly invoice the Company for any charges incurred
hereunder on a monthly basis. A correct invoice is one that references the
correct purchase order number, is correctly addressed per the instructions on
such purchase order, shows correct pricing, extensions, and/or discounts, has
signed time sheets attached as requested by Company, and any other supporting
documentation necessary to explain the charges. Such invoices shall be due and
payable within thirty (30) days after receipt.
g) Reimbursable Costs:
In the event the Company requires Consultant's employee(s) to travel
outside the metropolitan area where the services are being performed,
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Consultant shall be reimbursed for its actual cost incurred subsequent to the
effective date of purchase order and paid by Consultant for the items listed
below. Said costs shall exclude all profits to Consultant and are reimbursed
only if directly related to and required for performance of Services and
approved in advance in writing by Company.
g.1) Rail, tourist air travel, rental car, and long distance telephone calls
shall be billed at actual cost to and paid by Consultant. All travel and car
rentals shall be subject to the prior written approval by Company.
g.2) Reasonable living expenses while performing Services requiring travel
shall be billed at actual cost paid by and reimbursed to Consultant's employee
by Consultant. Liquor and entertainment expenses are specifically disallowed.
Meals and/or entertainment for Company personnel are specifically disallowed.
g.3) Reasonable costs for lodging shall be limited to a single person
standard room rate. In locations where Company obtains special rates,
reservations should be made in accordance with Company's guidelines. Company
will assist in securing said rates by making lodging arrangements on request of
Consultant.
g.4) Receipts must be attached for any expenditure over $25.00 and for any
meals other than the
individuals who is requesting reimbursement. Insofar as practical, such
receipts shall be originals.
g.5) Personal expenditures such as newspaper, laundry, shoeshine and
sundries are not reimbursable expenses.
g.6) Costs associated with non-project personnel, e.g., spouses and
children, are not reimbursable expenses.
g.7) Neither the review, certification or approval, nor the payments by
Company of any invoice shall preclude the right of Company from thereafter
disputing any of the items involved. Company may withhold payment on matters
lacking proper support until such support is received. Disputed items will be
deducted from invoices by the Company and referred to Consultant for
clarification to avoid delay in payment of undisputed items.
14. The Company shall designate in each purchase order hereunder its
representative who shall have authority and responsibility to define and agree
upon the scope and specification of the work and the phases of the work to be
performed from time to time, to make changes in the specifications of the work,
to require and receive reports of the progress of the work, to give and receive
notices, to inspect the work and to terminate the performance of the work or
any phase thereof in accordance with the provisions of this Agreement.
15. The Company shall have the right to terminate this agreement without
charge, or any purchase order or orders, in whole or in part, and the work
being performed thereunder, with or without cause at any time by giving written
notice thereof to the Consultant. No such termination shall affect the rights
or obligations of either party hereto with respect to the work performed prior
to the termination, or the Company's obligation to pay in full all amounts due
to the Consultant by the Company for work performed prior to the termination in
accordance with this Agreement and/or any purchase order hereunder. Any
purchase order hereunder and any work being performed thereunder shall
automatically terminate,
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without necessity of notice if the Consultant shall make assignment for the
benefit of creditors or be adjudicated a bankrupt, or file a voluntary petition
in bankruptcy or in corporate reorganization, or if a receiver shall be
appointed for any of its assets. Termination of any purchase order hereunder or
any work being performed thereunder shall not terminate the Consultant's
obligations under paragraphs 3, 5, 6, 7, 9, 10, and 11 above or release either
party from any consequence of a breech by it or any of its obligation under this
Agreement which shall have occurred prior to such termination. The Consultant
shall have the right to terminate this Agreement without charge by giving a
sixty (60) day written notice thereof to the Company, such termination to be
effective only upon the completion of all work to be performed under purchase
order or orders then existing hereunder.
16. During the performance of all the work herein provided for, the
Consultant at all times shall comply with any and all laws and any and all
rules, regulations and orders of public authority applicable thereto, whether
federal, state, or local, including but not limited to federal and state social
security laws. Consultant shall file all reports required to be filed in the
name of Consultant and pay all taxes, fees and charged required by such laws,
rules, regulations, and orders, and shall without reimbursement by Company,
indemnify Company against any and all liabilities and penalties by reason of
any failure on the part of the Consultant to comply with any such laws, orders,
rules, and regulations.
17. This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof, and there are not other
agreements or understandings, written or oral, between the parties relating to
the subject matter of this Agreement and that this Agreement may be amended or
modified only by written agreement between the parties signed below or their
designees; provided, that all terms and conditions additional to those
contained herein may be expressly set forth in any purchase order issued and
accepted hereunder.
18. This Agreement or any obligations thereunder cannot be assigned without
the prior written consent of the other party, which consent shall not be
unreasonably withheld.
19. Consultant agrees to fully comply with all provisions of Executive Order
11246 (non-Segregated facilities). Executive orders 11246 and 11375 (Equal
Opportunity), Title 41 Section 60-1.7 of the code of Federal Regulations (41
CFR 60-1.7) et seq. (Employer Information Report), 41 CFR 60-1.40 et seq.
(Affirmative Action), 41 CFR 60-250.4 et seq. (Disabled and Vietnam Era
Veterans), and 41 CFR 60-741.4 et seq. (Handicapped Workers) are hereby
incorporated by reference and made a part of this Agreement.
20. The construction, validity and interpretation of this Agreement shall be
governed under the laws of the State of Washington.
21. If any provision of this Agreement is held by any Court to be invalid,
void or unenforceable, the remaining provisions shall never the less continue
in force.
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
executed the day and year first above written,
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TOSCO NORTHWEST COMPANY CONSULTANT
/s/ Karen E. Beebe /s/ John Young Song
Procurement Associate Director, Business Development
8/31/94
ARIS Corporation Professional Services Agreement
This Professional Services Agreement (the "Agreement") is between ARIS
Corporation ("ARIS") and Tosco Northwest Company ("Client").
1. Services
ARIS Corporation will provide to Client the Services specified on a standard
ARIS Work Order or Client Purchase Order, under the terms of this Agreement.
Each Work Order or Purchase Order shall specify the Services and applicable
fees, and will be governed by the terms of this Agreement.
2. Fees for Services
Unless otherwise specified in the applicable Work Order or Purchase Order,
Services shall be provided to Client on a time and material basis ("T&M").
Rates must be specified on the attached Rate Structure or on a standard Work
Order. If a dollar limit is stated in the applicable Work Order or Purchase
Order, the limit shall be deemed an estimate for Client's budgeting and ARIS'
resource scheduling purposes; after the limit is expended, ARIS will continue
to provide the Services on a T&M basis if a Work Order or Purchase Order for
continuation of the Services is signed by the parties.
3. Incidental Expenses
Unless otherwise stated in the Work Order, Client shall reimburse ARIS for
reasonable travel, communications, and out-of-pocket expenses incurred in
conjunction with the services. There shall be a 10 percent surcharge for
administrative and tax costs.
4. Invoicing and Payment
ARIS shall invoice Client monthly, unless otherwise expressly specified in a
Work Order or Purchase Order. Charges shall be payable thirty (30) days from
the date of invoice and shall be deemed overdue if they remain unpaid
thereafter.
5. Taxes
The charges do not include taxes. If ARIS is required to pay any federal,
state, or local taxes based on the Services provided under this Agreement, the
taxes shall be billed and paid by Client; this shall not apply to taxes based
on ARIS' income.
6. Term
This Agreement shall commence on its Effective Date. Either party may
terminate this Agreement at any time by providing the other party with written
notice. Any Work Order outstanding at the time of termination
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shall continue to be governed by this Agreement as if it had not been
terminated.
7. Warranty
ARIS warrants that the Services will be performed consistent with generally
accepted industry standards.
8. Limitations on Warranty
Client must report any deficiencies in the services to ARIS in writing
within thirty (30) days of completion of the services in order to receive
warranty remedies. The warranty herein is exclusive and in lieu of all other
warranties, whether express or implied, including the implied warranties of
merchantability and fitness for a particular purpose.
9. Exclusive Remedy
For any breach of the above warranty, Client's exclusive remedy, and ARIS'
entire liability, shall be the reperformance of the Services. If ARIS is
unable to reperform the Services as warranted, Client shall be entitled to
recover the fees paid to ARIS for the deficient services.
10. Relationship between the Parties
ARIS is an independent contractor; nothing in this Agreement shall be
construed to create a partnership, joint venture, or agency relationship
between the parties. Each party will be solely responsible for payment of all
compensation owed to its employees, as well as employment related taxes. Each
party will maintain appropriate worker's compensation for its employees as well
as general liability insurance.
11. Authority to Enter Into Agreement
Each party to this Agreement has the authority to enter into and form this
Agreement. The individuals signing the Agreement have the authority to act as
agents of their respective organizations. Each party acknowledges that they
have read this Agreement and will abide by it.
12. Force Majeure
Neither party will be considered to be in default of this agreement as a
result of events beyond their reasonable control. For purposes of this
Agreement, such acts shall include, but are not limited to, acts of God,
catastrophe, or other "force majeure" events beyond the parties' reasonable
control.
13. Assignment of Contract
The Client may not assign the Agreement or its responsibility for payments
to any organization, without written approval by ARIS. ARIS may not assign its
responsibilities for performance under the Agreement to any organization
without written approval of the Client.
14. Hold Harmless; Indemnity
ARIS asserts it possesses all the rights and interests in the licensed
software necessary to enter into this agreement, and shall indemnify and hold
Client, its agents and employees harmless from any loss, damage or liability
for infringement of any United States patent right or copyright
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<PAGE>
with respect to the use of the licensed software; provided that ARIS is notified
in writing within ten calendar days of suit or claim against Client, that Client
permits ARIS to defend, compromise or settle said claim of infringement and give
Vendor all available information, assistance and authority to enable ARIS to do
so, provided Client fully observes all terms and conditions of this Agreement.
Client asserts it possesses all the rights and interests in the licensed
software necessary to enter into this Agreement, and shall indemnify and hold
ARIS, its agents and employees harmless from any loss, damage or liability for
infringement of any United States patent right or copyright with respect to the
use of the licensed software; provided that Client is notified in writing
within ten calendar days of suit or claim against ARIS, that ARIS permits
Client to defend, compromise or settle said claim of infringement and give
Client all available information, assistance and authority to enable Client to
do so, provided ARIS fully observes all terms and conditions of this Agreement.
15. Confidentiality and Non-Disclosure Except as legally required, the parties
agree that neither party shall directly or indirectly disclose or use any
Confidential Information without prior written permission from the other party.
"Confidential Information" means any type of confidential or proprietary
information or material disclosed to or known by the recipient of such
information ("Recipient") as a consequence of or through its relationship with
the party disclosing such information, and consisting of information conceived,
originated, discovered, or developed in whole or in part by Recipient, which is
not generally known by non-Subject Party personnel, including but not limited
to information which relates to research, development, trade secrets, know-how,
inventions, technical data, hardware, software, source codes, object codes,
manufacture, purchasing, accounting, engineering, marketing, merchandising and
selling, business labs or strategies, and information entrusted by third
parties to the party disclosing such information.
16. Nonsolicitation of Employees
During the period that this Agreement is in effect and for a period of six
(6) months after termination or expiration thereof, each party agrees not to
solicit for employment any technical or professional employees of the other
party assigned to work on the Project without the prior written approval of the
other party. The parties further agree to include the provision in any
resultant contract or subcontract.
17. Insurance and Risk of Loss
The Client bears all responsibility for damages to their equipment and
facilities.
ARIS will hold Client harmless for any liability to ARIS employees who may
be injured while on Client's site, for whatever purpose.
18. Survival of Rights
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The rights and responsibilities of sections 14 and 15 shall survive the
termination of this Agreement.
19. Severability
All provisions of this Agreement are severable and no provision hereof shall
be affected by the invalidity of any other such provision.
20. Governing Law; Attorney's Fees; Venue
This Agreement shall be governed by and construed in accordance with the
laws of the state of Washington. In the event of a dispute over this
Agreement, the prevailing party shall recover its reasonable attorneys' fees
and costs from the breaching party. Venue shall be in King County, Washington.
21. Entire Agreement
This Agreement constitutes the complete agreement between the parties and
supersedes all previous and contemporaneous agreements, proposals, or
representations, written or oral, concerning the subject matter of this
Agreement. Neither this Agreement nor a Work Order or Purchase Order may be
modified or amended except in writing signed by a duly authorized
representative of each party: no other act, document, usage, or custom shall
be deemed to amend or modify this Agreement, a Work Order, or Purchase Order.
It is expressly agreed that any terms and conditions of Client's purchase order
shall be superseded by the terms and conditions of this Agreement and the
applicable Work Order.
The Effective Date of this Agreement shall be [blank line]
The following individuals, by signing, agree to enter into this Professional
Services Agreement and to be bound by its provisions.
ARIS Corporation Tosco Northwest Company
/s/ John Song /s/ Karen E. Beebe
Director, Business Development Procurement Associate
EXHIBIT A
Contractor Insurance Requirements
Type of Insurance: Workers Compensation Employer's Liability
Minimum Limits: Statutory; $500,000/occurrence
Special Provisions: (1) If coverage is provided by a State Fund or if
CONTRACTOR has qualified as a self-insurer, separate certification must be
furnished that coverage is in the State Fund or that CONTRACTOR has approval to
be a self-insurer. (2) Any policy of insurance must contain a provision or
endorsement providing that the insurer's rights of subrogation against OWNER
and its employees are waived. This provision shall not be applicable where
prohibited or limited by the laws of the jurisdiction in which the work is to
be performed.
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Type of Insurance: Comprehensive General Liability
Minimum Limits: $1,000,000 combined single limit each occurrence for
bodily injury and property damage; $1,000,000 combined single-limit---annual
aggregate for completed operations products.
Special Provisions: This insurance policy and any extensions or renewals
thereof must contain the following provisions or endorsements: (1) OWNER is an
additional insured thereunder as respects liability arising out of or from the
WORK performed by CONTRACTOR for OWNER; (2) The insurance coverage is primary
to any comparable liability insurances carried by OWNER.
Type of Insurance: Automobile Liability (Owned, Hired and Non-owned
Vehicles)
Minimum Limits: $1,000,000 combined single limit each occurrence for
bodily injury and property damage.
Special Provisions: This insurance policy and any extensions or renewals
thereof must contain the following provisions and endorsements: (1) OWNER is
an additional insured thereunder as respects liability arising out of or from
the work performed by CONTRACTOR for OWNER; (2) The insurance coverage is
primary to any comparable liability insurances carried by OWNER.
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EXHIBIT 10.51
ARIS Corporation Professional Services Agreement
This Professional Services Agreement (the "Agreement") is between ARIS
Corporation ("ARIS") and Weyerhaeuser ("Client").
1. Services
ARIS Corporation will provide to Client the Services specified on a standard
ARIS Work Order or Client Purchase Order, under the terms of this Agreement.
Each Work Order or Purchase Order shall specify the Services and applicable
fees, and will be governed by the terms of this Agreement.
2. Fees for Services
Unless otherwise specified in the applicable Work Order or Purchase Order,
Services shall be provided to Client on a time and material basis ("T&M").
Rates must be specified on the attached Rate Structure or on a standard Work
Order. If a dollar limit is stated in the applicable Work Order or Purchase
Order, the limit shall be deemed an estimate for Client's budgeting and ARIS'
resource scheduling purposes; after the limit is expended, ARIS will continue
to provide the Services on a T&M basis if a Work Order or Purchase Order for
continuation of the Services is signed by the parties.
3. Incidental Expenses
Unless otherwise stated in the Work Order, Client shall reimburse ARIS for
reasonable travel, communications, and out-of-pocket expenses incurred in
conjunction with the services.
4. Invoicing and Payment
ARIS shall invoice Client monthly, unless otherwise expressly specified in a
Work Order or Purchase Order. Charges shall be payable thirty (30) days from
the date of invoice and shall be deemed overdue if they remain unpaid
thereafter.
5. Taxes
The charges do not include taxes. If ARIS is required to pay any federal,
state, or local taxes based on the Services provided under this Agreement, the
taxes shall be billed and paid by Client; this shall not apply to taxes based
on ARIS' income.
6. Term
This Agreement shall commence on its Effective Date. Either party may
terminate this Agreement at any time by providing the other party with written
notice. Any Work Order outstanding at the time of termination shall continue
to be governed by this Agreement as if it had not been terminated.
7. Warranty
ARIS warrants that the Services will be performed consistent with generally
accepted industry standards.
8. Limitations on Warranty
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1051
Client must report any deficiencies in the services to ARIS in writing
within thirty (30) days of completion of the services in order to receive
warranty remedies. The warranty herein is exclusive and in lieu of all other
warranties, whether express or implied, including the implied warranties of
merchantability and fitness for a particular purpose.
9. Exclusive Remedy
For any breach of the above warranty, Client's exclusive remedy, and ARIS'
entire liability, shall be the reperformance of the Services. If ARIS is
unable to reperform the Services as warranted, Client shall be entitled to
recover the fees paid to ARIS for the deficient services.
10. Relationship between the Parties
ARIS is an independent contractor; nothing in this Agreement shall be
construed to create a partnership, joint venture, or agency relationship
between the parties. Each party will be solely responsible for payment of all
compensation owed to its employees, as well as employment related taxes. Each
party will maintain appropriate worker's compensation for its employees as well
as general liability insurance.
11. Authority to Enter Into Agreement
Each party to this Agreement has the authority to enter into and form this
Agreement. The individuals signing the Agreement have the authority to act as
agents of their respective organizations. Each party acknowledges that they
have read this Agreement and will abide by it.
12. Force Majeure
Neither party will be considered to be in default of this agreement as a
result of events beyond their reasonable control. For purposes of this
Agreement, such acts shall include, but are not limited to, acts of God,
catastrophe, or other "force majeure" events beyond the parties' reasonable
control.
13. Assignment of Contract
The Client may not assign the Agreement or its responsibility for payments
to any organization, without written approval by ARIS. ARIS may not assign its
responsibilities for performance under the Agreement to any organization
without written approval of the Client.
14. Hold Harmless; Indemnity
ARIS asserts it possesses all the rights and interests in the licensed
software necessary to enter into this agreement, and shall indemnify and hold
Client, its agents and employees harmless from any loss, damage or liability
for infringement of any United States patent right or copyright with respect to
the use of the licensed software; provided that ARIS is notified in writing
within ten calendar days of suit or claim against Client, that Client permits
ARIS to defend, compromise or settle said claim of infringement and give Vendor
all available information, assistance and authority to enable ARIS to do so,
provided Client fully observes all terms and conditions of this Agreement.
Client asserts it possesses all the rights and interests in the licensed
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<PAGE>
1051
software necessary to enter into this agreement, and shall indemnify and hold
ARIS, its agents and employees harmless from any loss, damage or liability for
infringement of any United States patent right or copyright with respect to the
use of the licensed software; provided that Client is notified in writing
within ten calendar days of suit or claim against ARIS, that ARIS permits
Client to defend, compromise or settle said claim of infringement and give
Client all available information, assistance and authority to enable Client to
do so, provided ARIS fully observes all terms and conditions of this Agreement.
15. Confidentiality and Non-Disclosure
Except as legally required, the parties agree that neither party shall directly
or indirectly disclose or use any Confidential Information without prior written
permission from the other party.
"Confidential Information" means any type of confidential or proprietary
information or material disclosed to or known by the recipient of such
information ("Recipient") as a consequence of or through its relationship with
the party disclosing such information, and consisting of information conceived,
originated, discovered, or developed in whole or in part by Recipient, which is
not generally known by non-Subject Party personnel, including but not limited
to information which relates to research, development, trade secrets, know-how,
inventions, technical data, hardware, software, source codes, object codes,
manufacture, purchasing, accounting, engineering, marketing, merchandising and
selling, business labs or strategies, and information entrusted by third
parties to the party disclosing such information.
16. Nonsolicitation of Employees
During the period that this Agreement is in effect and for a period of
six (6) months after termination or expiration thereof, each party agrees not to
solicit for employment any technical or professional employees of the other
party assigned to work on the Project without the prior written approval of the
other party. The parties further agree to include the provision in any resultant
contract or subcontract.
17. Insurance and Risk of Loss
The Client bears all responsibility for damages to their equipment and
facilities.
ARIS will hold Client harmless for any liability to ARIS employees who may
be injured while on Client's site, for whatever purpose.
18. Survival of Rights
The rights and responsibilities of sections 14 and 15 shall survive the
termination of this Agreement.
19. Severability
All provisions of this Agreement are severable and no provision hereof shall
be affected by the invalidity of any other such provision.
20. Governing Law; Attorney's Fees; Venue
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1051
This Agreement shall be governed by and construed in accordance with the
laws of the state of Washington. In the event of a dispute over this
Agreement, the prevailing party shall recover its reasonable attorneys' fees
and costs from the breaching party. Venue shall be in King County, Washington.
21. Entire Agreement
This Agreement constitutes the complete agreement between the parties and
supersedes all previous and contemporaneous agreements, proposals, or
representations, written or oral, concerning the subject matter of this
Agreement. Neither this Agreement nor a Work Order or Purchase Order may be
modified or amended except in writing signed by a duly authorized
representative of each party: no other act, document, usage, or custom shall
be deemed to amend or modify this Agreement, a Work Order, or Purchase Order.
It is expressly agreed that any terms and conditions of Client's purchase order
shall be superseded by the terms and conditions of this Agreement and the
applicable Work Order.
The Effective Date of this Agreement shall be February 13, 1995.
The following individuals, by signing, agree to enter into this consulting
agreement and to be bound by its provisions.
ARIS Corporation Weyerhaeuser
/s/ Paul Song, President /s/ Elbert Reed
Weyerhaeuser or its Majority Owned Subsidiary
CONSULTING AGREEMENT
No C-5002
(Attach Addendum "A" when entering into an agreement with more than one
individual or with a company comprised of more than one employee.)
In consideration of the mutual covenants hereinafter defined and the fees to
be paid by Company (Company can be Weyerhaeuser or any of its majority owned
subsidiaries depending upon which entity enters into this Agreement) to the
undersigned Consultant, it is agreed that:
Services:
1. The services provided for this project by the Consultant shall be:
Assist Weyerhaeuser in the design and development of the replacement for the
Boards Software System. The requirements of Addendum B are incorporated into
this agreement
Representatives:
2. Company's representative for this project will be Bill Saul (name), or
such other representative that Company may appoint by written notice to
Consultant, with whom Consultant will consult regarding all matters pertaining
to this project. Said representative will make all arrangements for
consultation by Consultant with employees or designees of Company. Projects
under this agreement and all expenditures therefore shall
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be outlined in writing and approved by said representative before the work is
initiated or the expenditure made. Company understands that the services are to
be provided by the undersigned Consultant. Any sub-consultant service must have
the prior written approval of the Company representative.
Term:
3 The effective date of this agreement is January 7, 1991. Unless the
project is terminated earlier, as hereinafter provided, the Consultants
services shall be provided in the term between the effective date of this
agreement and June 30, 1992. This project may be terminated at any time that
Company considers the contemplated work to be completed or no longer wanted and
so notifies Consultant in writing.
Industrial Safety:
4. Consultant agrees to become familiar with Company's premises and
operations thereon, when any part of Consultants services are rendered on such
premises, and to take all reasonable precautions to avoid injury or damage to
any party or his property. It is understood that some of Company's premises to
which Consultant may be granted access are used for manufacturing, logging and
other heavy industrial activity and are maintained only to the standards
required for such use. Consultant hereby assumes all risks of injury to
Consultant or employees, representatives, or agents of Consultant, and damage
to the property of any of them, in connection with the performance of services
hereunder. Consultant will comply with Company policy with regard to safety and
security requirements.
Records:
5. Consultant shall keep adequate records of all work done under this
project and shall turn such records over to Company upon termination of this
project together with any documents, records, software, computer programs,
drawings, or other papers developed or acquired by Consultant in connection
with this project. All such tangible materials shall be owned by Company and to
the extent there is copyrightable subject matter in any such material
Consultant agrees to fully cooperate during the term hereof and thereafter to
perfect and fully vest such copyright ownership in Company if requested by
Company, such cooperation may include review and execution of transfer
instruments with Consultant being compensated therefore at the agreed upon rate
specified herein and for its out-of-pocket expenses. No claim for additional
compensation shall be made for any proprietary rights that may be obtainable by
Company for Consultant's work.
6. Consultant shall exercise reasonable care to prevent disclosure of
Company's Proprietary information to any third party and will not use for
Consultant's own benefit or that of others such information whether developed
in the course of this project or derived from Company' except as may be
authorized in writing by Company, unless and to the extent that such
information shall become publicly known through no fault of Consultant. This
obligation shall not apply to such Information as Consultant can show was known
to Consultant in written or graphic form prior to the date of this agreement.
All information developed in the course of this project shall be considered
Company Proprietary Information. To the extent allowed by law, all
copyrightable material created by Consultant shall be considered a work for
hire and the property of the Company.
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Inventions, Legal Assistance:
7. Consultant agrees to promptly disclose to said representative all
developments, such as designs, ideas, computer programs, discoveries,
inventions or improvements thereto, whether patentable or not, made by
Consultant during the term of this project and coming within the Field hereof
or deriving from information developed or acquired by Consultant through this
project, including all such developments as are originated or conceived during
the term of this project buy are completed or reduced to practice thereafter,
and further agrees that such developments shall be the property of Company.
Consultant shall assist Company at all times to perfect and maintain domestic
and foreign patent rights to such developments in Company by signing all
necessary papers, including assignments, testifying in legal proceedings, and
rendering whatever other assistance may be requested by Company with Consultant
being compensated at the rate agreed upon herein and for its out-of-pocket
expenses. Consultant warrants that it is not aware of any patents, trade
secrets, copyrights or trademarks or any other proprietary right that Company
might infringe by using the results of Consultant's work resulting from this
agreement. In the event Consultant during the term of the Agreement proposes
to use protected progeny it shall immediately notify Company's representative
in writing and Company shall then have the right to direct Consultant to
propose non-protected alternatives.
8. As full compensation for the obligations of this agreement and the
services to be provided hereunder, Company shall pay the Consultant as follows:
Rates:
___ Straight time basis, $[blank] per [blank]
___ Straight time basis in accordance with attached rate schedule dated
[blank]
x Other (specify) See Addendum B
Expenses:
All necessary out-of-pocket expenditures by Consultant must be approved by
the Company representative in advance. Consultant will provide adequate support
with invoice. All expense reimbursements will be included in Consultant's Form
1099 as reported to the IRS.
Upper Limit:
The total cost for Consultant's services and expenditures under this
agreement shall not exceed $650,000.00. Payment for charges over this amount
will not be made.
Payment:
9. Payment will be made upon receipt of itemized monthly invoices, with
estimate of cost of the work remaining uncompleted. Invoices are to be
addressed to said representative.
Independent Status:
10. Consultant hereby confirms that under the terms of this Consulting
Agreement for services specified herein that he is acting in the capacity
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of an independent Contractor and not as an employee of Company. That in such
capacity he shall not be eligible to participate in Company's Employee Benefits
programs, including but not limited to, group insurance, retirement, vacation,
and such pay benefits. As an independent contractor, Consultant assumes full
responsibility for making all proper federal, state, and social security tax
payments and will file all returns and forms required in connection with
compensation received in connection with this agreement.
IN WITNESS WHEREOF the parties have duly executed this agreement
CONSULTANT: WEYERHAEUSER COMPANY
A.R.I.S. Containerboard Packaging Div.
(Firm Name) Information Systems
[Blank line] /s/ Gene Nusbaum
25411 126th Avenue SE Mail Stop #CH 3K32
Kent, WA 98031 Tacoma, WA 98477
*Applied Relational Information Systems
Attached: Addendum A & Addendum B
cc: Ron Glick
Steve Griswold
Rick Nicholson
Gene Nusbaum
Bill Saul
Weyerhaeuser or Forming Part of Contract No. C-5002
its Majority Owned Subsidiary
ADDENDUM "A"
Indemnity
1. Consultant hereby indemnifies and saves harmless Company from and against
any and all liability or claims of liability of every kind and nature,
including claims or liability for bodily injury, death and property damage
(including, without limitation, Consultant's employees or property), arising
out of Consultant's performance hereunder, regardless of negligence, excepting
herefrom any such liability and claims of liability solely attributable to acts
of Company's direct-payroll employees, and Consultant shall, at Consultant's
own expense, handle all such claims, defend all lawsuits filed against Company
on account thereof, provided, that if Company elects to retain independent
counsel, Consultant shall reimburse Company for all costs reasonably incurred
by Company to defend itself through attorneys of its choice.
2. Prior to commencement of the work, Consultant shall obtain and maintain
in full force and effect during the term hereof, at Consultant's sole expense
the following insurance coverages upon Consultant's operations hereunder:
(a) Comprehensive or Commercial General Liability (occurrence form),
including contractual, products, completed operations, broad form property
damage and independent contractors with combined single limit of $500,000
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or equivalent. Company shall be designated as an additional insured.
(b) Comprehensive Automobile Liability covering owned, hired and non-owned
vehicles with combined single limit of $500,000 or equivalent.
(c) Workers' Compensation or Industrial Accident insurance including
Employer's Liability with limit of $100,000 per accident.
Consultant shall also furnish Company with Certificates of Insurance
evidencing compliance herewith. Consultant shall require insurance carrier to
give Company at least thirty (30) days' written notice prior to any change or
cancellation of said coverage, either in whole or in part.
Rules, Laws and Regulations
3. Consultant and Consultant's employees, representatives and contractors
shall observe all applicable rules, law and regulations, including safety
codes, industrial insurance codes and rules of Company or its insurance
underwriters relating to operations hereunder.
Interference with Operations
4. All work or services to be performed hereunder shall be done in such a
manner as not to interfere with Company's operations, and shall at all times be
subject to the inspection and approval of Company.
Audit & Records
5. Consultant shall maintain records and accounting procedures sufficient to
support invoices. Consultant's records pertaining to the performance of this
agreement shall be subject at reasonable times to inspection and audit by
Company. Consultant shall preserve and make available such records for one year
from the date of final payment.
IN WITNESS WHEREOF the parties have duly executed this agreement.
CONSULTANT: WEYERHAEUSER COMPANY
A.R.I.S. Containerboard Packaging Div.
(Firm Name) Information Systems
[Blank line] /s/ Gene Nusbaum
25411 126th Avenue SE Mail Stop #CH 3K32
Kent, WA 98031 Tacoma, WA 98477
*Applied Relational Information Systems
Attached: Addendum A & Addendum B
cc: Ron Glick
Steve Griswold
Rick Nicholson
Gene Nusbaum
Bill Saul
Weyerhaeuser Company
Agreement Number C-5002
Consulting Agreement
Addendum B
In consideration of the Mutual Covenants contained in the Agreement and
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the following additional requirements, it is agreed that:
A. STARTUP: Consultant agrees to furnish at no charge, the three people
who will initially be assigned to the Analysis & Design Phase of the project
for a three-day period to work with the Company personnel in preparation for
commencement of Analysis & Design.
B. TERM: The forecasted completion date for this work is November 30,
1991. This Agreement shall remain in effect and Company may require work under
this Agreement through June 30, 1992. The termination provisions of Paragraph
3 of the Agreement are deleted and replaced with the following:
Work under this Agreement may be terminated at any time prior to July 1,
1991, for the convenience of Weyerhaeuser, with 30 calendar days advanced
written notice. Termination will become effective at the end of this notice
period, but not before the aggregate amount of work billable under this
contract exceeds the total amount of $100,000. After July 1, termination will
be effective 15 days after notification is provided.
Work under this Agreement may be terminated for cause immediately upon
provision of written notice stating this cause of termination. Such cause must
be non-performance by Consultant or Consultant's employee in order to justify
termination for cause.
C. COMPENSATION: Hourly rates applicable to work performed under this
Agreement are as follows:
DURING ANALYSIS AND DESIGN PHASE
Senior Designer $95 per hour
Designer $80 per hour
DURING BUILD PHASE
Senior Designer $90 per hour
Designer $75 per hour
Programmer $70 per hour
The above rates will remain in effect for the duration of this Agreement.
All work shall be performed at the above straight time rates. Compensation
shall only be granted for work performed while on Weyerhaeuser Federal Way
premises. If travel is specifically authorized to another location outside of
the Puget Sound region, then compensation will be authorized for work performed
at that site. Travel expenses will only be reimbursed for authorized travel to
work at a location outside of the Puget Sound Region.
D. PAYMENT: Consultant agrees to submit an invoice each month for all work
performed during that month.
E. ASSIGNMENT OF PERSONNEL: Personnel assigned by the Consultant to work
on this project must be approved by the Company. Once assigned to the Analysis
and Design Phase, Consultant will not reassign Personnel to other work until
after completion of the Build Phase without the approval of the company. Such
approval shall not be unreasonably withheld. Company may require the immediate
removal of Consultant's employee for non-performance upon provision of written
notice documenting non-performance. Consultant will provide a replacement
employee, suitable to Company, within 15 calendar days.
F. The requirements of this ADDENDUM shall become effective when signed by
both parties and shall remain in effect for the duration of the Agreement.
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G. Except as herein modified, the Terms and Conditions of the Agreement
remain in full force and effect.
By signature below, both parties agree to be bound by the foregoing
provisions and requirements:
CUSTOMER A.R.I.S. WEYERHAEUSER COMPANY
Signature [blank line] /s/ Gene Nusbaum
Title [blank line] I.S. Manager
Date [blank line] 1-31-91
Weyerhaeuser or Its
Majority Owned Subsidiary
CONSULTING AGREEMENT
(Attach Addendum "A" when entering into an agreement with more than one
individual or with a company comprised of more than one employee)
In consideration of the mutual covenants hereinafter defined and the fees to
be paid by Company (Company can be Weyerhaeuser or any of its majority owned
subsidiaries depending upon which entity enters into this Agreement) to the
undersigned Consultant, it is agreed that:
Services:
1. The services provided for this project by the Consultant shall be:
[inserted in handwriting: "modifications to Logsystem software as directed by
Company's representative"].
Representatives:
2. Company's representative for this project will be [inserted in
handwriting "Robert Trantina"], or such other representative that Company may
appoint by written notice to Consultant, with whom Consultant will consult
regarding all matters pertaining to this project. Said representative will
make all arrangements for consultation by Consultant with employees or
designees of Company. Projects under this agreement and all expenditures
therefor shall be outlined in writing and approved by said representative
before the work is initiated or the expenditure made. Company understands that
the services are to be provided by the undersigned Consultant. Any
sub-consultant service must have the prior written approval of the Company
representative.
Term:
3. The effective date of this agreement is [inserted in handwriting
"8-27-90"]. Unless the project is terminated earlier, as hereinafter provided,
the Consultant's services shall be provided in the term between the effective
date of this agreement and [inserted in handwriting "12-31-90"]. This project
may be terminated at any time that Company considers the contemplated work to
be completed or no longer wanted and so notifies Consultant in writing.
Industrial Safety:
4. Consultant agrees to become familiar with Company's premises and
operations thereon, when any part of Consultant's services are rendered on such
premises, and to take all reasonable precautions to avoid injury or damage to
any party or his property. It is understood that some of Company's premises to
which Consultant may be granted access are used for manufacturing, logging and
other heavy industrial activity and are maintained only to the standards
required for such use. Consultant hereby
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1051
assumes all risks of injury to Consultant or employees, representatives, or
agents of Consultant, and damage to the property of any of them, in connection
with the performance of services hereunder. Consultant will comply with Company
policy with regard to safety and security requirements.
Records:
5. Consultant shall keep adequate records of all work done under this
project and shall turn such records over to Company upon termination of this
project together with any documents, records, software, computer programs,
drawings, or other papers developed or acquired by Consultant in connection
with this project. All such tangible materials shall be owned by Company and
to the extent there is copyrightable subject matter in any such material
Consultant acknowledges and agrees Company shall have all right, title and
interest thereto. To the extent required by law, Consultant agrees to fully
cooperate during the term hereof and thereafter to perfect and fully vest such
copyright ownership in Company. If requested by Company, such cooperation may
include review and execution of transfer instruments with Consultant being
compensated therefor at the agreed upon rate specified herein and for its
out-of-pocket expenses. No claim for additional compensation shall be made for
any proprietary rights that may be obtainable by Company for Consultant's work.
Proprietary Information:
6. Consultant shall exercise reasonable care to prevent disclosure of
Company's Proprietary Information to any third party and will not use for
Consultant's own benefit or that of others such information whether developed
in the course of this project or derived from Company, except as may be
authorized in writing by Company, unless and to the extent that such
information shall become publicly known through no fault of Consultant. This
obligation shall not apply to such information as Consultant can show was known
to Consultant in written or graphic form prior to the date of this agreement.
All information developed in the course of this project shall be considered
Company Proprietary Information. To the extent allowed by law, all
copyrightable material created by Consultant shall be considered a work for
hire and the property of the Company.
Inventions, Legal Assistance:
7. Consultant agrees to promptly disclose to said representative all
developments, such as designs, ideas, computer programs, discoveries,
inventions or improvements thereto, whether patentable or not, made by
Consultant during the term of this project and coming within the Field hereof
or deriving from information developed or acquired by Consultant through this
project, including all such developments as are originated or conceived during
the term of this project but are completed or reduced to practice thereafter,
and further agrees that such developments shall be the property of Company.
Consultant shall assist Company at all times to perfect and maintain domestic
and foreign patent rights to such developments in Company by signing all
necessary papers, including assignments, testifying in legal proceedings, and
rendering whatever other assistance may be requested by Company with Consultant
being compensated at the rate agreed upon herein and for its out-of-pocket
expenses. Consultant warrants that it is
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1051
not aware of any patents, trade secrets, copyrights or trademarks or any other
proprietary right that Company might infringe by using the results of
Consultant's work resulting from this agreement. In the event Consultant during
the term of this Agreement proposes to use protected property it shall
immediately notify Company's representative in writing and Company shall then
have the right to direct Consultant to propose non-protected alternatives.
Compensation:
8. As full compensation for the obligations of this agreement and the
services to be provided hereunder, Company shall pay the Consultant as follows:
Rates:
x Straight time basis, $100 per hour
___ Straight time basis in accordance with attached rate schedule dated
[blank]
___ Other (specify)
Expenses:
All necessary out-of-pocket expenditures by Consultant must be approved by
the Company representative in advance. Consultant will provide adequate
support with invoice. All expense reimbursements will be included in
Consultant's Form 1099 as reported to the IRS.
Upper Limit:
The total cost for Consultant's services and expenditures under this
agreement shall not exceed [inserted in handwriting "$5,000.00"]. Payment for
charges over this amount will not be made.
Payment:
9. Payment will be made upon receipt of itemized monthly invoices, with
estimate of cost of the work remaining uncompleted. Invoices are to be
addressed to said representative.
Independent Status:
10. Consultant hereby confirms that under the terms of this Consulting
Agreement for services specified herein that he is acting in the capacity of an
independent contractor and not as an employee of Company. That in such
capacity he shall not be eligible to participate in Company's Employee Benefits
programs, including but not limited to, group insurance, retirement, vacation,
and such pay benefits. As an independent contractor, Consultant assumes full
responsibility for making all proper federal, state, and social security tax
payments and will file all returns and forms required in connection with
compensation received in connection with this agreement.
IN WITNESS WHEREOF the parties have duly executed this agreement
CONSULTANT: [blank line] WEYERHAEUSER COMPANY
(Firm name) or its Majority Owned Subsidiary
By: /s/ Paul Song /s/ Robert Trantina
25411 126th Avenue SE WWC 2E2
Kent, WA 98031 x6037
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Weyerhaeuser or Forming Part of Contract No. [blank]
Its Majority Owned Subsidiary
Addendum "A"
Indemnity:
1. Consultant hereby indemnifies and saves harmless Company from and against
any and all liability or claims of liability of every kind and nature,
including claims or liability for bodily injury, death and property damage
(including, without limitation, Consultant's employees or property), arising
out of Consultant's performance hereunder, regardless of negligence, excepting
herefrom any such liability and claims of liability solely attributable to acts
of Company's direct-payroll employees, and Consultant shall, at Consultant's
own expense, handle all such claims, defend all lawsuits filed against Company
on account thereof, provided, that if Company elects to retain independent
counsel, Consultant shall reimburse Company for all costs reasonably incurred
by Company to defend itself through attorneys of its choice.
The following paragraphs are stricken:
[Insurance:
2. Prior to commencement of the work, Consultant shall obtain and maintain
in full force and effect during the term hereof, at Consultant's sole expense,
the following insurance coverages upon Consultant's operations hereunder:
(a) Comprehensive Commercial General Liability (occurrence form), including
contractual, products, completed operations, broad form property damage and
independent contractors with combined single limit of $500,000 or equivalent.
Company shall be designated as an additional insured.
(b) Comprehensive Automobile Liability covering owned, hired and non-owned
vehicles with combined single limit of $500,000 or equivalent.
(c) Workers' Compensation or Industrial Accident insurance including
Employer's Liability with limit of $100,000 per accident.
Consultant shall also furnish Company with Certificates of Insurance
evidencing compliance herewith. Consultant shall require insurance carrier to
give Company at least thirty (30) days' written notice prior to any change or
cancellation of said coverage, either in whole or in part.]
Rules, Laws and Regulations
3. Consultant and Consultant's employees, representatives and contractors
shall observe all applicable rules, law and regulations, including safety
codes, industrial insurance codes and rules of Company or its insurance
underwriters relating to operations hereunder.
Interference with Operations
4. All work or services to be performed hereunder shall be done in such a
manner as not to interfere with Company's operations, and shall at all times be
subject to the inspection and approval of Company.
Audit & Records
5. Consultant shall maintain records and accounting procedures sufficient to
support invoices. Consultant's records pertaining to the performance of this
agreement shall be subject at reasonable times to inspection and audit by
Company. Consultant shall preserve and make available such records for one
year from the date of final payment.
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IN WITNESS WHEREOF the parties have duly executed this agreement
CONSULTANT: [blank line] WEYERHAEUSER
(Firm name) or its Majority Owned Subsidiary
/s/ Paul Song /s/ Robert Trantina
25411 126th Avenue S.E. WWC 2E2
Kent, WA 98031 x6037
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<PAGE>
EXHIBIT 10.54
STOCK REDEMPTION AND PURCHASE AGREEMENT
THIS STOCK REDEMPTION AND PURCHASE AGREEMENT (the "Agreement") shall be
effective as of February 28, 1997, by and among ARIS Corporation, a Washington
corporation (the "Corporation"), the additional stock purchaser(s) named on the
signature page of this Agreement ("Purchaser(s)") and Rick Brauen, an individual
(the "Seller"), with reference to the following facts:
RECITALS
A. Seller is the record and beneficial owner of one percent (1%) or more
of the issued and outstanding shares of common stock of the Corporation. Seller
would like to sell 15,000 shares of the Corporation's common stock held by
Seller (the "Redemption Shares"), under the terms and conditions of this
Agreement.
B. The Board of Directors of the Corporation has determined that it is
desirable and in the best interests of the Corporation to redeem up to 400,000
shares of the common stock of the Corporation held by shareholders holding one
percent (1%) or more of the issued and outstanding common stock of the
Corporation.
C. Purchaser(s) are willing to purchase any Redemption Shares that are
not redeemed by the Corporation.
D. Seller has determined that it is desirable and in the best interests
of Seller to sell the Redemption Shares to the Corporation and Purchasers at
this point in time, rather than subject Seller to any further market risk with
respect to such Redemption Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, the parties agree as follows:
1. REDEMPTION OF SHARES. Effective as of the date of this Agreement, and
--------------------
subject to the terms and conditions of this Agreement, the Corporation agrees to
redeem and/or the Purchaser(s) agree to purchase from Seller, and the Seller
agrees to sell to the Corporation and/or the Purchaser(s) the Redemption Shares.
2. REDEMPTION PRICE FOR SHARES. The redemption and/or purchase price for
---------------------------
the Redemption Shares shall be Nine Dollars and Seventy Five Cents ($9.75) per
share or an aggregate redemption price of One Hundred Forty Six Thousand Two
Hundred and Fifty Dollars ($146,250.00) (the "Redemption Price").
3. CERTAIN COSTS TO BE BORNE BY PURCHASER(S). Purchaser(s) agree to pay
-----------------------------------------
to the Corporation Five Cents ($0.05) for each Redemption Share purchased by
such Purchaser(s) to cover the Corporation's costs in processing and documenting
the purchase of Redemption Shares by Purchaser(s) from Seller.
4. SETTLEMENT OF FUNDS; SHARE CERTIFICATES. The Corporation, Seller, and
---------------------------------------
Purchaser(s) agree that all funds to be paid in connection with the purchase and
sale of the Redemption Shares and the costs to be borne by Purchaser(s) in
paragraph 4 above shall be paid to the respective parties by the close of
business, Friday, March 14, 1997. The Corporation shall use its best endeavors
to issue share certificates to the parties as soon as practicable after
execution hereof.
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5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
--------------------------------------------
represents and warrants that:
(a) Seller is the owner of the Redemption Shares, free and clear of
any encumbrances or rights of third parties;
(b) Seller has the power and authority to enter into this Agreement
and to perform the same, and is not a party to or obligated under or restricted
by any contract or other provision, which has not been waived, that will be
violated in any material respect by making and performing this Agreement;
(c) Seller has received a copy of the Corporation's confidential
shareholder disclosure materials, including without limitation that certain
valuation report by Corporate Advisory Associates of Seattle, Washington dated
effective August 31, 1996, as updated January 1, 1997 (collectively, the
"Shareholder Disclosure Materials"), and has read and understands their
contents;
(d) Seller acknowledges that Seller is aware of the Corporation's
plans with respect to a possible initial public offering ("IPO") of its common
stock, that it has engaged counsel, auditors and investment bankers to assist
the Corporation in connection with its potential IPO, and that Seller has had
the opportunity to review valuation proposals from various investment banks and
potential underwriters (collectively, the "Valuation Proposals") regarding,
among other things, the potential post-IPO value of the Redemption Shares, and
has read and understands their contents;
(e) Seller, either alone or with the assistance of Seller's
professional advisors, has such knowledge and experience in financial and
business matters that Seller is capable of evaluating the Shareholder Disclosure
Materials, the Valuation Proposals, the likelihood of the Corporation's
potential IPO and, accordingly, the benefits and potential costs of the sale of
the Redemption Shares at this point in time;
(f) Seller has either spoken or met with, or been given reasonable
opportunity to speak with, representatives of the Corporation for the purpose of
asking questions of, and receiving answers and information from, such
representatives concerning the Shareholder Disclosure Materials, the Valuation
Proposals, the potential IPO, and the sale of the Redemption Shares at this
point in time; and
(g) Seller is exercising his or her own judgment regarding Seller's
decision to sell the Redemption Shares, and Seller is not relying upon any other
statements or representations of the Corporation, its officers, directors,
agents or advisors, regarding the merits of this transaction.
6. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation
-------------------------------------------------
represents and warrants that:
(a) The Corporation has full power and is duly authorized by law to
obligate itself to redeem the Redemption Shares; and
(b) The Corporation is not a party to or obligated under or restricted
by its articles of incorporation, bylaws, any contract or other provision, which
has not been waived, that will be violated in any material respect by making and
performing this Agreement.
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<PAGE>
7. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
8. GOVERNING LAW; SURVIVAL OF RIGHTS; SEVERABILITY. This Agreement shall
-----------------------------------------------
be governed by the laws of the State of Washington as such laws are applied by
Washington courts to agreements entered into and to be performed in Washington
by and between residents of Washington, and shall bind and inure to the benefit
of the heirs, executors, personal representatives, successors and assigns of the
parties hereto; provided, that the Corporation and/or the Purchaser(s) may not
--------
assign or delegate any of their rights or obligations hereunder without the
express written consent of Seller. If any provision of this Agreement shall be
held to be invalid, the remainder of this Agreement shall not be affected
thereby.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the subject matter hereof and supersedes any
prior agreement or understandings among them, oral or written, all of which are
hereby canceled. This Agreement may not be modified or amended without the
express written consent of the parties hereto.
10. CAPTIONS; PRONOUNS. The paragraph titles or captions contained in
------------------
this Agreement are inserted only as a matter of convenience of reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. All pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person or persons may require.
11. NO WAIVER. The failure of any party to seek redress for violation, or
---------
to insist on strict performance, of any covenant of this Agreement shall not
prevent a subsequent act which would have constituted a violation from having
the effect of an original violation.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
SELLER
/s/ RICK BRAUEN
-----------------------------
Rick Brauen
ARIS CORPORATION, NUMBER OF REDEMPTION
A WASHINGTON CORPORATION SHARES REDEEMED
--------------------
By /s/ PAUL SONG 15,000
----------------------------- ------
Paul Song, President
3
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Rick Brauen hereby assign, transfer and convey to ARIS
Corporation (the "Company") all of my right, title and interest in and to
Fifteen Thousand (15,000) shares of the common stock, no par value per share, of
ARIS Corporation (the "Company") standing in my name on the books of the Company
and represented by share certificate number 116, and do hereby irrevocably
constitute Norbert W. Sugayan, Jr., as attorney-in-fact to transfer said stock
on the books of the Company with full power of substitution in the premises.
EFFECTIVE February 28, 1997.
/s/ RICK BRAUEN
__________________________________
Rick Brauen
4
<PAGE>
STOCK REDEMPTION AND PURCHASE AGREEMENT
THIS STOCK REDEMPTION AND PURCHASE AGREEMENT (the "Agreement") shall be
effective as of February 28, 1997, by and among ARIS Corporation, a Washington
corporation (the "Corporation"), the additional stock purchaser(s) named on the
signature page of this Agreement ("Purchaser(s)") and Steve Brugger, an
individual (the "Seller"), with reference to the following facts:
RECITALS
A. Seller is the record and beneficial owner of one percent (1%) or more
of the issued and outstanding shares of common stock of the Corporation. Seller
would like to sell 30,000 shares of the Corporation's common stock held by
Seller (the "Redemption Shares"), under the terms and conditions of this
Agreement.
B. The Board of Directors of the Corporation has determined that it is
desirable and in the best interests of the Corporation to redeem up to 400,000
shares of the common stock of the Corporation held by shareholders holding one
percent (1%) or more of the issued and outstanding common stock of the
Corporation.
C. Purchaser(s) are willing to purchase any Redemption Shares that are
not redeemed by the Corporation.
D. Seller has determined that it is desirable and in the best interests
of Seller to sell the Redemption Shares to the Corporation and Purchasers at
this point in time, rather than subject Seller to any further market risk with
respect to such Redemption Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, the parties agree as follows:
1. REDEMPTION OF SHARES. Effective as of the date of this Agreement, and
--------------------
subject to the terms and conditions of this Agreement, the Corporation agrees to
redeem and/or the Purchaser(s) agree to purchase from Seller, and the Seller
agrees to sell to the Corporation and/or the Purchaser(s) the Redemption Shares.
2. REDEMPTION PRICE FOR SHARES. The redemption and/or purchase price for
---------------------------
the Redemption Shares shall be Nine Dollars and Seventy Five Cents ($9.75) per
share or an aggregate redemption price of Nine Hundred Seventy Five Thousand
Dollars ($292,500.00) (the "Redemption Price").
3. CERTAIN COSTS TO BE BORNE BY PURCHASER(S). Purchaser(s) agree to pay
-----------------------------------------
to the Corporation Five Cents ($0.05) for each Redemption Share purchased by
such Purchaser(s) to cover the Corporation's costs in processing and documenting
the purchase of Redemption Shares by Purchaser(s) from Seller.
4. SETTLEMENT OF FUNDS; SHARE CERTIFICATES. The Corporation, Seller, and
---------------------------------------
Purchaser(s) agree that all funds to be paid in connection with the purchase and
sale of the Redemption Shares and the costs to be borne by Purchaser(s) in
paragraph 4 above shall be paid to the respective parties by the close of
business, Friday, March 14, 1997. The Corporation shall use its best endeavors
to issue share certificates to the parties as soon as practicable after
execution hereof.
1
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
--------------------------------------------
represents and warrants that:
(a) Seller is the owner of the Redemption Shares, free and clear of
any encumbrances or rights of third parties;
(b) Seller has the power and authority to enter into this Agreement
and to perform the same, and is not a party to or obligated under or restricted
by any contract or other provision, which has not been waived, that will be
violated in any material respect by making and performing this Agreement;
(c) Seller has received a copy of the Corporation's confidential
shareholder disclosure materials, including without limitation that certain
valuation report by Corporate Advisory Associates of Seattle, Washington dated
effective August 31, 1996, as updated January 1, 1997 (collectively, the
"Shareholder Disclosure Materials"), and has read and understands their
contents;
(d) Seller acknowledges that Seller is aware of the Corporation's
plans with respect to a possible initial public offering ("IPO") of its common
stock, that it has engaged counsel, auditors and investment bankers to assist
the Corporation in connection with its potential IPO, and that Seller has had
the opportunity to review valuation proposals from various investment banks and
potential underwriters (collectively, the "Valuation Proposals") regarding,
among other things, the potential post-IPO value of the Redemption Shares, and
has read and understands their contents;
(e) Seller, either alone or with the assistance of Seller's
professional advisors, has such knowledge and experience in financial and
business matters that Seller is capable of evaluating the Shareholder Disclosure
Materials, the Valuation Proposals, the likelihood of the Corporation's
potential IPO and, accordingly, the benefits and potential costs of the sale of
the Redemption Shares at this point in time;
(f) Seller has either spoken or met with, or been given reasonable
opportunity to speak with, representatives of the Corporation for the purpose of
asking questions of, and receiving answers and information from, such
representatives concerning the Shareholder Disclosure Materials, the Valuation
Proposals, the potential IPO, and the sale of the Redemption Shares at this
point in time; and
(g) Seller is exercising his or her own judgment regarding Seller's
decision to sell the Redemption Shares, and Seller is not relying upon any other
statements or representations of the Corporation, its officers, directors,
agents or advisors, regarding the merits of this transaction.
6. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation
-------------------------------------------------
represents and warrants that:
(a) The Corporation has full power and is duly authorized by law to
obligate itself to redeem the Redemption Shares; and
(b) The Corporation is not a party to or obligated under or restricted
by its articles of incorporation, bylaws, any contract or other provision, which
has not been waived, that will be violated in any material respect by making and
performing this Agreement.
2
<PAGE>
7. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
8. GOVERNING LAW; SURVIVAL OF RIGHTS; SEVERABILITY. This Agreement shall
-----------------------------------------------
be governed by the laws of the State of Washington as such laws are applied by
Washington courts to agreements entered into and to be performed in Washington
by and between residents of Washington, and shall bind and inure to the benefit
of the heirs, executors, personal representatives, successors and assigns of the
parties hereto; provided, that the Corporation and/or the Purchaser(s) may not
--------
assign or delegate any of their rights or obligations hereunder without the
express written consent of Seller. If any provision of this Agreement shall be
held to be invalid, the remainder of this Agreement shall not be affected
thereby.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the subject matter hereof and supersedes any
prior agreement or understandings among them, oral or written, all of which are
hereby canceled. This Agreement may not be modified or amended without the
express written consent of the parties hereto.
10. CAPTIONS; PRONOUNS. The paragraph titles or captions contained in
------------------
this Agreement are inserted only as a matter of convenience of reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. All pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person or persons may require.
11. NO WAIVER. The failure of any party to seek redress for violation, or
---------
to insist on strict performance, of any covenant of this Agreement shall not
prevent a subsequent act which would have constituted a violation from having
the effect of an original violation.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
SELLER
/s/ STEVE BRUGGER
-----------------------------
Steve Brugger
ARIS CORPORATION, NUMBER OF REDEMPTION
A WASHINGTON CORPORATION SHARES REDEEMED
--------------------
By /s/ PAUL SONG 30,000
----------------------------- ------
Paul Song, President
3
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Steve Brugger hereby assign, transfer and convey to ARIS
Corporation (the "Company") all of my right, title and interest in and to Thirty
Thousand (30,000) shares of the common stock, no par value per share, of ARIS
Corporation (the "Company") standing in my name on the books of the Company and
represented by share certificate number 143, and do hereby irrevocably
constitute Norbert W. Sugayan, Jr., as attorney-in-fact to transfer said stock
on the books of the Company with full power of substitution in the premises.
EFFECTIVE February 28, 1997.
/s/ STEVE BRUGGER
__________________________________
Steve Brugger
4
<PAGE>
STOCK REDEMPTION AND PURCHASE AGREEMENT
THIS STOCK REDEMPTION AND PURCHASE AGREEMENT (the "Agreement") shall be
effective as of February 28, 1997, by and among ARIS Corporation, a Washington
corporation (the "Corporation"), the additional stock purchaser(s) named on the
signature page of this Agreement ("Purchaser(s)") and Donna Coombs, an
individual (the "Seller"), with reference to the following facts:
RECITALS
A. Seller is the record and beneficial owner of one percent (1%) or more
of the issued and outstanding shares of common stock of the Corporation. Seller
would like to sell 200,000 shares of the Corporation's common stock held by
Seller (the "Redemption Shares"), under the terms and conditions of this
Agreement.
B. The Board of Directors of the Corporation has determined that it is
desirable and in the best interests of the Corporation to redeem up to 400,000
shares of the common stock of the Corporation held by shareholders holding one
percent (1%) or more of the issued and outstanding common stock of the
Corporation.
C. Purchaser(s) are willing to purchase any Redemption Shares that are
not redeemed by the Corporation.
D. Seller has determined that it is desirable and in the best interests
of Seller to sell the Redemption Shares to the Corporation and Purchasers at
this point in time, rather than subject Seller to any further market risk with
respect to such Redemption Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, the parties agree as follows:
1. REDEMPTION OF SHARES. Effective as of the date of this Agreement, and
--------------------
subject to the terms and conditions of this Agreement, the Corporation agrees to
redeem and/or the Purchaser(s) agree to purchase from Seller, and the Seller
agrees to sell to the Corporation and/or the Purchaser(s) the Redemption Shares.
2. REDEMPTION PRICE FOR SHARES. The redemption and/or purchase price for
---------------------------
the Redemption Shares shall be Nine Dollars and Seventy Five Cents ($9.75) per
share or an aggregate redemption price of One Million Nine Hundred and Fifty
Thousand Dollars ($1,950,000.00) (the "Redemption Price").
3. CERTAIN COSTS TO BE BORNE BY PURCHASER(S). Purchaser(s) agree to pay
-----------------------------------------
to the Corporation Five Cents ($0.05) for each Redemption Share purchased by
such Purchaser(s) to cover the Corporation's costs in processing and documenting
the purchase of Redemption Shares by Purchaser(s) from Seller.
4. SETTLEMENT OF FUNDS; SHARE CERTIFICATES. The Corporation, Seller, and
---------------------------------------
Purchaser(s) agree that all funds to be paid in connection with the purchase and
sale of the Redemption Shares and the costs to be borne by Purchaser(s) in
paragraph 4 above shall be paid to the respective parties by the close of
business, Friday, March 14, 1997. The Corporation shall use its best endeavors
to issue share certificates to the parties as soon as practicable after
execution hereof.
1
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
--------------------------------------------
represents and warrants that:
(a) Seller is the owner of the Redemption Shares, free and clear of
any encumbrances or rights of third parties;
(b) Seller has the power and authority to enter into this Agreement
and to perform the same, and is not a party to or obligated under or restricted
by any contract or other provision, which has not been waived, that will be
violated in any material respect by making and performing this Agreement;
(c) Seller has received a copy of the Corporation's confidential
shareholder disclosure materials, including without limitation that certain
valuation report by Corporate Advisory Associates of Seattle, Washington dated
effective August 31, 1996, as updated January 1, 1997 (collectively, the
"Shareholder Disclosure Materials"), and has read and understands their
contents;
(d) Seller acknowledges that Seller is aware of the Corporation's
plans with respect to a possible initial public offering ("IPO") of its common
stock, that it has engaged counsel, auditors and investment bankers to assist
the Corporation in connection with its potential IPO, and that Seller has had
the opportunity to review valuation proposals from various investment banks and
potential underwriters (collectively, the "Valuation Proposals") regarding,
among other things, the potential post-IPO value of the Redemption Shares, and
has read and understands their contents;
(e) Seller, either alone or with the assistance of Seller's
professional advisors, has such knowledge and experience in financial and
business matters that Seller is capable of evaluating the Shareholder Disclosure
Materials, the Valuation Proposals, the likelihood of the Corporation's
potential IPO and, accordingly, the benefits and potential costs of the sale of
the Redemption Shares at this point in time;
(f) Seller has either spoken or met with, or been given reasonable
opportunity to speak with, representatives of the Corporation for the purpose of
asking questions of, and receiving answers and information from, such
representatives concerning the Shareholder Disclosure Materials, the Valuation
Proposals, the potential IPO, and the sale of the Redemption Shares at this
point in time; and
(g) Seller is exercising his or her own judgment regarding Seller's
decision to sell the Redemption Shares, and Seller is not relying upon any other
statements or representations of the Corporation, its officers, directors,
agents or advisors, regarding the merits of this transaction.
6. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation
-------------------------------------------------
represents and warrants that:
(a) The Corporation has full power and is duly authorized by law to
obligate itself to redeem the Redemption Shares; and
(b) The Corporation is not a party to or obligated under or restricted
by its articles of incorporation, bylaws, any contract or other provision, which
has not been waived, that will be violated in any material respect by making and
performing this Agreement.
2
<PAGE>
7. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
8. GOVERNING LAW; SURVIVAL OF RIGHTS; SEVERABILITY. This Agreement shall
-----------------------------------------------
be governed by the laws of the State of Washington as such laws are applied by
Washington courts to agreements entered into and to be performed in Washington
by and between residents of Washington, and shall bind and inure to the benefit
of the heirs, executors, personal representatives, successors and assigns of the
parties hereto; provided, that the Corporation and/or the Purchaser(s) may not
--------
assign or delegate any of their rights or obligations hereunder without the
express written consent of Seller. If any provision of this Agreement shall be
held to be invalid, the remainder of this Agreement shall not be affected
thereby.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the subject matter hereof and supersedes any
prior agreement or understandings among them, oral or written, all of which are
hereby canceled. This Agreement may not be modified or amended without the
express written consent of the parties hereto.
10. CAPTIONS; PRONOUNS. The paragraph titles or captions contained in
------------------
this Agreement are inserted only as a matter of convenience of reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. All pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person or persons may require.
11. NO WAIVER. The failure of any party to seek redress for violation, or
---------
to insist on strict performance, of any covenant of this Agreement shall not
prevent a subsequent act which would have constituted a violation from having
the effect of an original violation.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
SELLER
/s/ DONNA COOMBS
-----------------------------
Donna Coombs
ARIS CORPORATION, NUMBER OF REDEMPTION
A WASHINGTON CORPORATION SHARES REDEEMED
--------------------
By /s/ PAUL SONG 200,000
----------------------------- -------
Paul Song, President
3
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Donna Coombs hereby assign, transfer and convey to ARIS
Corporation (the "Company") all of my right, title and interest in and to Two
Hundred Thousand (200,000) shares of the common stock, no par value per share,
of ARIS Corporation (the "Company") standing in my name on the books of the
Company and represented by share certificate number 125, and do hereby
irrevocably constitute Norbert W. Sugayan, Jr., as attorney-in-fact to transfer
said stock on the books of the Company with full power of substitution in the
premises.
EFFECTIVE February 28, 1997.
/s/ DONNA COOMBS
__________________________________
Donna Coombs
4
<PAGE>
STOCK REDEMPTION AND PURCHASE AGREEMENT
THIS STOCK REDEMPTION AND PURCHASE AGREEMENT (the "Agreement") shall be
effective as of February 28, 1997, by and among ARIS Corporation, a Washington
corporation (the "Corporation"), the additional stock purchaser(s) named on the
signature page of this Agreement ("Purchaser(s)") and Jeff Gilles, an individual
(the "Seller"), with reference to the following facts:
RECITALS
A. Seller is the record and beneficial owner of one percent (1%) or more
of the issued and outstanding shares of common stock of the Corporation. Seller
would like to sell 100,000 shares of the Corporation's common stock held by
Seller (the "Redemption Shares"), under the terms and conditions of this
Agreement.
B. The Board of Directors of the Corporation has determined that it is
desirable and in the best interests of the Corporation to redeem up to 400,000
shares of the common stock of the Corporation held by shareholders holding one
percent (1%) or more of the issued and outstanding common stock of the
Corporation.
C. Purchaser(s) are willing to purchase any Redemption Shares that are
not redeemed by the Corporation.
D. Seller has determined that it is desirable and in the best interests
of Seller to sell the Redemption Shares to the Corporation and Purchasers at
this point in time, rather than subject Seller to any further market risk with
respect to such Redemption Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, the parties agree as follows:
1. REDEMPTION OF SHARES. Effective as of the date of this Agreement, and
--------------------
subject to the terms and conditions of this Agreement, the Corporation agrees to
redeem and/or the Purchaser(s) agree to purchase from Seller, and the Seller
agrees to sell to the Corporation and/or the Purchaser(s) the Redemption Shares.
2. REDEMPTION PRICE FOR SHARES. The redemption and/or purchase price for
---------------------------
the Redemption Shares shall be Nine Dollars and Seventy Five Cents ($9.75) per
share or an aggregate redemption price of Nine Hundred Seventy Five Thousand
Dollars ($975,000) (the "Redemption Price").
3. CERTAIN COSTS TO BE BORNE BY PURCHASER(S). Purchaser(s) agree to pay
-----------------------------------------
to the Corporation Five Cents ($0.05) for each Redemption Share purchased by
such Purchaser(s) to cover the Corporation's costs in processing and documenting
the purchase of Redemption Shares by Purchaser(s) from Seller.
4. SETTLEMENT OF FUNDS; SHARE CERTIFICATES. The Corporation, Seller, and
---------------------------------------
Purchaser(s) agree that all funds to be paid in connection with the purchase and
sale of the Redemption Shares and the costs to be borne by Purchaser(s) in
paragraph 4 above shall be paid to the respective parties by the close of
business, Friday, March 14, 1997. The Corporation shall use its best endeavors
to issue share certificates to the parties as soon as practicable after
execution hereof.
1
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
--------------------------------------------
represents and warrants that:
(a) Seller is the owner of the Redemption Shares, free and clear of
any encumbrances or rights of third parties;
(b) Seller has the power and authority to enter into this Agreement
and to perform the same, and is not a party to or obligated under or restricted
by any contract or other provision, which has not been waived, that will be
violated in any material respect by making and performing this Agreement;
(c) Seller has received a copy of the Corporation's confidential
shareholder disclosure materials, including without limitation that certain
valuation report by Corporate Advisory Associates of Seattle, Washington dated
effective August 31, 1996, as updated January 1, 1997 (collectively, the
"Shareholder Disclosure Materials"), and has read and understands their
contents;
(d) Seller acknowledges that Seller is aware of the Corporation's
plans with respect to a possible initial public offering ("IPO") of its common
stock, that it has engaged counsel, auditors and investment bankers to assist
the Corporation in connection with its potential IPO, and that Seller has had
the opportunity to review valuation proposals from various investment banks and
potential underwriters (collectively, the "Valuation Proposals") regarding,
among other things, the potential post-IPO value of the Redemption Shares, and
has read and understands their contents;
(e) Seller, either alone or with the assistance of Seller's
professional advisors, has such knowledge and experience in financial and
business matters that Seller is capable of evaluating the Shareholder Disclosure
Materials, the Valuation Proposals, the likelihood of the Corporation's
potential IPO and, accordingly, the benefits and potential costs of the sale of
the Redemption Shares at this point in time;
(f) Seller has either spoken or met with, or been given reasonable
opportunity to speak with, representatives of the Corporation for the purpose of
asking questions of, and receiving answers and information from, such
representatives concerning the Shareholder Disclosure Materials, the Valuation
Proposals, the potential IPO, and the sale of the Redemption Shares at this
point in time; and
(g) Seller is exercising his or her own judgment regarding Seller's
decision to sell the Redemption Shares, and Seller is not relying upon any other
statements or representations of the Corporation, its officers, directors,
agents or advisors, regarding the merits of this transaction.
6. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation
-------------------------------------------------
represents and warrants that:
(a) The Corporation has full power and is duly authorized by law to
obligate itself to redeem the Redemption Shares; and
(b) The Corporation is not a party to or obligated under or restricted
by its articles of incorporation, bylaws, any contract or other provision, which
has not been waived, that will be violated in any material respect by making and
performing this Agreement.
2
<PAGE>
7. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
8. GOVERNING LAW; SURVIVAL OF RIGHTS; SEVERABILITY. This Agreement shall
-----------------------------------------------
be governed by the laws of the State of Washington as such laws are applied by
Washington courts to agreements entered into and to be performed in Washington
by and between residents of Washington, and shall bind and inure to the benefit
of the heirs, executors, personal representatives, successors and assigns of the
parties hereto; provided, that the Corporation and/or the Purchaser(s) may not
--------
assign or delegate any of their rights or obligations hereunder without the
express written consent of Seller. If any provision of this Agreement shall be
held to be invalid, the remainder of this Agreement shall not be affected
thereby.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the subject matter hereof and supersedes any
prior agreement or understandings among them, oral or written, all of which are
hereby canceled. This Agreement may not be modified or amended without the
express written consent of the parties hereto.
10. CAPTIONS; PRONOUNS. The paragraph titles or captions contained in
------------------
this Agreement are inserted only as a matter of convenience of reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. All pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person or persons may require.
11. NO WAIVER. The failure of any party to seek redress for violation, or
---------
to insist on strict performance, of any covenant of this Agreement shall not
prevent a subsequent act which would have constituted a violation from having
the effect of an original violation.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
SELLER
/s/ JEFF GILLES
-----------------------------
Jeff Gilles
ARIS CORPORATION, NUMBER OF REDEMPTION
A WASHINGTON CORPORATION SHARES REDEEMED
--------------------
By /s/ PAUL SONG 100,000
----------------------------- -------
Paul Song, President
3
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Jeff Gilles hereby assign, transfer and convey to ARIS
Corporation (the "Company") all of my right, title and interest in and to One
Hundred Thousand (100,000) shares of the common stock, no par value per share,
of ARIS Corporation (the "Company") standing in my name on the books of the
Company and represented by share certificate number 103, and do hereby
irrevocably constitute Norbert W. Sugayan, Jr., as attorney-in-fact to transfer
said stock on the books of the Company with full power of substitution in the
premises.
EFFECTIVE February 28, 1997.
/s/ JEFF GILLES
__________________________________
Jeff Gilles
4
<PAGE>
STOCK REDEMPTION AND PURCHASE AGREEMENT
THIS STOCK REDEMPTION AND PURCHASE AGREEMENT (the "Agreement") shall be
effective as of February 28, 1997, by and among ARIS Corporation, a Washington
corporation (the "Corporation"), the additional stock purchaser(s) named on the
signature page of this Agreement ("Purchaser(s)") and David Grams, an individual
(the "Seller"), with reference to the following facts:
RECITALS
A. Seller is the record and beneficial owner of one percent (1%) or more
of the issued and outstanding shares of common stock of the Corporation. Seller
would like to sell 10,000 shares of the Corporation's common stock held by
Seller (the "Redemption Shares"), under the terms and conditions of this
Agreement.
B. The Board of Directors of the Corporation has determined that it is
desirable and in the best interests of the Corporation to redeem up to 400,000
shares of the common stock of the Corporation held by shareholders holding one
percent (1%) or more of the issued and outstanding common stock of the
Corporation.
C. Purchaser(s) are willing to purchase any Redemption Shares that are
not redeemed by the Corporation.
D. Seller has determined that it is desirable and in the best interests
of Seller to sell the Redemption Shares to the Corporation and Purchasers at
this point in time, rather than subject Seller to any further market risk with
respect to such Redemption Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, the parties agree as follows:
1. REDEMPTION OF SHARES. Effective as of the date of this Agreement, and
--------------------
subject to the terms and conditions of this Agreement, the Corporation agrees to
redeem and/or the Purchaser(s) agree to purchase from Seller, and the Seller
agrees to sell to the Corporation and/or the Purchaser(s) the Redemption Shares.
2. REDEMPTION PRICE FOR SHARES. The redemption and/or purchase price for
---------------------------
the Redemption Shares shall be Nine Dollars and Seventy Five Cents ($9.75) per
share or an aggregate redemption price of Ninety Seven Thousand Five Hundred
Dollars ($97,500.00) (the "Redemption Price").
3. CERTAIN COSTS TO BE BORNE BY PURCHASER(S). Purchaser(s) agree to pay
-----------------------------------------
to the Corporation Five Cents ($0.05) for each Redemption Share purchased by
such Purchaser(s) to cover the Corporation's costs in processing and documenting
the purchase of Redemption Shares by Purchaser(s) from Seller.
4. SETTLEMENT OF FUNDS; SHARE CERTIFICATES. The Corporation, Seller, and
---------------------------------------
Purchaser(s) agree that all funds to be paid in connection with the purchase and
sale of the Redemption Shares and the costs to be borne by Purchaser(s) in
paragraph 4 above shall be paid to the respective parties by the close of
business, Friday, March 14, 1997. The Corporation shall use its best endeavors
to issue share certificates to the parties as soon as practicable after
execution hereof.
1
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
--------------------------------------------
represents and warrants that:
(a) Seller is the owner of the Redemption Shares, free and clear of
any encumbrances or rights of third parties;
(b) Seller has the power and authority to enter into this Agreement
and to perform the same, and is not a party to or obligated under or restricted
by any contract or other provision, which has not been waived, that will be
violated in any material respect by making and performing this Agreement;
(c) Seller has received a copy of the Corporation's confidential
shareholder disclosure materials, including without limitation that certain
valuation report by Corporate Advisory Associates of Seattle, Washington dated
effective August 31, 1996, as updated January 1, 1997 (collectively, the
"Shareholder Disclosure Materials"), and has read and understands their
contents;
(d) Seller acknowledges that Seller is aware of the Corporation's
plans with respect to a possible initial public offering ("IPO") of its common
stock, that it has engaged counsel, auditors and investment bankers to assist
the Corporation in connection with its potential IPO, and that Seller has had
the opportunity to review valuation proposals from various investment banks and
potential underwriters (collectively, the "Valuation Proposals") regarding,
among other things, the potential post-IPO value of the Redemption Shares, and
has read and understands their contents;
(e) Seller, either alone or with the assistance of Seller's
professional advisors, has such knowledge and experience in financial and
business matters that Seller is capable of evaluating the Shareholder Disclosure
Materials, the Valuation Proposals, the likelihood of the Corporation's
potential IPO and, accordingly, the benefits and potential costs of the sale of
the Redemption Shares at this point in time;
(f) Seller has either spoken or met with, or been given reasonable
opportunity to speak with, representatives of the Corporation for the purpose of
asking questions of, and receiving answers and information from, such
representatives concerning the Shareholder Disclosure Materials, the Valuation
Proposals, the potential IPO, and the sale of the Redemption Shares at this
point in time; and
(g) Seller is exercising his or her own judgment regarding Seller's
decision to sell the Redemption Shares, and Seller is not relying upon any other
statements or representations of the Corporation, its officers, directors,
agents or advisors, regarding the merits of this transaction.
6. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation
-------------------------------------------------
represents and warrants that:
(a) The Corporation has full power and is duly authorized by law to
obligate itself to redeem the Redemption Shares; and
(b) The Corporation is not a party to or obligated under or restricted
by its articles of incorporation, bylaws, any contract or other provision, which
has not been waived, that will be violated in any material respect by making and
performing this Agreement.
2
<PAGE>
7. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
8. GOVERNING LAW; SURVIVAL OF RIGHTS; SEVERABILITY. This Agreement shall
-----------------------------------------------
be governed by the laws of the State of Washington as such laws are applied by
Washington courts to agreements entered into and to be performed in Washington
by and between residents of Washington, and shall bind and inure to the benefit
of the heirs, executors, personal representatives, successors and assigns of the
parties hereto; provided, that the Corporation and/or the Purchaser(s) may not
--------
assign or delegate any of their rights or obligations hereunder without the
express written consent of Seller. If any provision of this Agreement shall be
held to be invalid, the remainder of this Agreement shall not be affected
thereby.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the subject matter hereof and supersedes any
prior agreement or understandings among them, oral or written, all of which are
hereby canceled. This Agreement may not be modified or amended without the
express written consent of the parties hereto.
10. CAPTIONS; PRONOUNS. The paragraph titles or captions contained in
------------------
this Agreement are inserted only as a matter of convenience of reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. All pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person or persons may require.
11. NO WAIVER. The failure of any party to seek redress for violation, or
---------
to insist on strict performance, of any covenant of this Agreement shall not
prevent a subsequent act which would have constituted a violation from having
the effect of an original violation.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
SELLER
/s/ DAVID GRAMS
-----------------------------
David Grams
ARIS CORPORATION, NUMBER OF REDEMPTION
A WASHINGTON CORPORATION SHARES REDEEMED
--------------------
By /s/ PAUL SONG 10,000
----------------------------- ------
Paul Song, President
3
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, David Grams hereby assign, transfer and convey to ARIS
Corporation (the "Company") all of my right, title and interest in and to Ten
Thousand (10,000) shares of the common stock, no par value per share, of ARIS
Corporation (the "Company") standing in my name on the books of the Company and
represented by share certificate number 146, and do hereby irrevocably
constitute Norbert W. Sugayan, Jr., as attorney-in-fact to transfer said stock
on the books of the Company with full power of substitution in the premises.
EFFECTIVE February 28, 1997.
/s/ DAVID GRAMS
__________________________________
David Grams
4
<PAGE>
STOCK REDEMPTION AND PURCHASE AGREEMENT
THIS STOCK REDEMPTION AND PURCHASE AGREEMENT (the "Agreement") shall be
effective as of February 28, 1997, by and among ARIS Corporation, a Washington
corporation (the "Corporation"), the additional stock purchaser(s) named on the
signature page of this Agreement ("Purchaser(s)") and Bill Lane, an individual
(the "Seller"), with reference to the following facts:
RECITALS
A. Seller is the record and beneficial owner of one percent (1%) or more
of the issued and outstanding shares of common stock of the Corporation. Seller
would like to sell 100,000 shares of the Corporation's common stock held by
Seller (the "Redemption Shares"), under the terms and conditions of this
Agreement.
B. The Board of Directors of the Corporation has determined that it is
desirable and in the best interests of the Corporation to redeem up to 400,000
shares of the common stock of the Corporation held by shareholders holding one
percent (1%) or more of the issued and outstanding common stock of the
Corporation.
C. Purchaser(s) are willing to purchase any Redemption Shares that are
not redeemed by the Corporation.
D. Seller has determined that it is desirable and in the best interests
of Seller to sell the Redemption Shares to the Corporation and Purchasers at
this point in time, rather than subject Seller to any further market risk with
respect to such Redemption Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, the parties agree as follows:
1. REDEMPTION OF SHARES. Effective as of the date of this Agreement, and
--------------------
subject to the terms and conditions of this Agreement, the Corporation agrees to
redeem and/or the Purchaser(s) agree to purchase from Seller, and the Seller
agrees to sell to the Corporation and/or the Purchaser(s) the Redemption Shares.
2. REDEMPTION PRICE FOR SHARES. The redemption and/or purchase price for
---------------------------
the Redemption Shares shall be Nine Dollars and Seventy Five Cents ($9.75) per
share or an aggregate redemption price of Nine Hundred Seventy Five Thousand
Dollars ($975,000) (the "Redemption Price").
3. CERTAIN COSTS TO BE BORNE BY PURCHASER(S). Purchaser(s) agree to pay
-----------------------------------------
to the Corporation Five Cents ($0.05) for each Redemption Share purchased by
such Purchaser(s) to cover the Corporation's costs in processing and documenting
the purchase of Redemption Shares by Purchaser(s) from Seller.
4. SETTLEMENT OF FUNDS; SHARE CERTIFICATES. The Corporation, Seller, and
---------------------------------------
Purchaser(s) agree that all funds to be paid in connection with the purchase and
sale of the Redemption Shares and the costs to be borne by Purchaser(s) in
paragraph 4 above shall be paid to the respective parties by the close of
business, Friday, March 14, 1997. The Corporation shall use its best endeavors
to issue share certificates to the parties as soon as practicable after
execution hereof.
1
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
--------------------------------------------
represents and warrants that:
(a) Seller is the owner of the Redemption Shares, free and clear of
any encumbrances or rights of third parties;
(b) Seller has the power and authority to enter into this Agreement
and to perform the same, and is not a party to or obligated under or restricted
by any contract or other provision, which has not been waived, that will be
violated in any material respect by making and performing this Agreement;
(c) Seller has received a copy of the Corporation's confidential
shareholder disclosure materials, including without limitation that certain
valuation report by Corporate Advisory Associates of Seattle, Washington dated
effective August 31, 1996, as updated January 1, 1997 (collectively, the
"Shareholder Disclosure Materials"), and has read and understands their
contents;
(d) Seller acknowledges that Seller is aware of the Corporation's
plans with respect to a possible initial public offering ("IPO") of its common
stock, that it has engaged counsel, auditors and investment bankers to assist
the Corporation in connection with its potential IPO, and that Seller has had
the opportunity to review valuation proposals from various investment banks and
potential underwriters (collectively, the "Valuation Proposals") regarding,
among other things, the potential post-IPO value of the Redemption Shares, and
has read and understands their contents;
(e) Seller, either alone or with the assistance of Seller's
professional advisors, has such knowledge and experience in financial and
business matters that Seller is capable of evaluating the Shareholder Disclosure
Materials, the Valuation Proposals, the likelihood of the Corporation's
potential IPO and, accordingly, the benefits and potential costs of the sale of
the Redemption Shares at this point in time;
(f) Seller has either spoken or met with, or been given reasonable
opportunity to speak with, representatives of the Corporation for the purpose of
asking questions of, and receiving answers and information from, such
representatives concerning the Shareholder Disclosure Materials, the Valuation
Proposals, the potential IPO, and the sale of the Redemption Shares at this
point in time; and
(g) Seller is exercising his or her own judgment regarding Seller's
decision to sell the Redemption Shares, and Seller is not relying upon any other
statements or representations of the Corporation, its officers, directors,
agents or advisors, regarding the merits of this transaction.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER(S). Purchaser(s)
--------------------------------------------------
hereby represent and warrant that:
(a) Purchaser(s) are purchasing the redeemed shares for their own
investment purposes, and not with a view towards the resale of the Redemption
Shares;
(b) Purchaser(s) have the power and authority to enter into this
Agreement and to perform the same, and none of them is not a party to or
obligated under or restricted by any contract or other provision, which has not
been waived, that will be violated in any material respect by making and
performing this Agreement;
2
<PAGE>
(c) Purchaser(s) have received a copy of the Corporation's
confidential shareholder disclosure materials, including without limitation that
certain valuation report by Corporate Advisory Associates of Seattle, Washington
dated effective August 31, 1996, as updated January 1, 1997 (collectively, the
"Shareholder Disclosure Materials"), and has read and understands their
contents;
(d) Purchaser(s) acknowledges that such Purchaser(s) is aware of the
Corporation's plans with respect to a possible initial public offering ("IPO")
of its common stock, that it has engaged counsel, auditors and investment
bankers to assist the Corporation in connection with its potential IPO, and that
Purchaser(s) has had the opportunity to review valuation proposals from various
investment banks and potential underwriters (collectively, the "Valuation
Proposals") regarding, among other things, the potential post-IPO value of the
Redemption Shares, and has read and understands their contents;
(e) Purchaser(s), either alone or with the assistance of Purchaser(s)'
professional advisors, has such knowledge and experience in financial and
business matters that Purchaser(s) is capable of evaluating the Shareholder
Disclosure Materials, the Valuation Proposals, the likelihood of the
Corporation's potential IPO and, accordingly, the benefits and potential costs
of the purchase of the Redemption Shares at this point in time;
(f) Purchaser(s) has either spoken or met with, or been given
reasonable opportunity to speak with, representatives of the Corporation for the
purpose of asking questions of, and receiving answers and information from, such
representatives concerning the Shareholder Disclosure Materials, the Valuation
Proposals, the potential IPO, and the purchase of the Redemption Shares at this
point in time; and
(g) Purchaser(s) is exercising his or her own judgment regarding
Purchaser(s) decision to buy the Redemption Shares, and Seller is not relying
upon any other statements or representations of the Corporation, its officers,
directors, agents or advisors, regarding the merits of this transaction.
7. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation
-------------------------------------------------
represents and warrants that:
(a) The Corporation has full power and is duly authorized by law to
obligate itself to redeem the Redemption Shares; and
(b) The Corporation is not a party to or obligated under or restricted
by its articles of incorporation, bylaws, any contract or other provision, which
has not been waived, that will be violated in any material respect by making and
performing this Agreement.
8. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
9. GOVERNING LAW; SURVIVAL OF RIGHTS; SEVERABILITY. This Agreement shall
-----------------------------------------------
be governed by the laws of the State of Washington as such laws are applied by
Washington courts to agreements entered into and to be performed in Washington
by and between residents of Washington, and shall bind and inure to the benefit
of the heirs, executors, personal representatives, successors and assigns of the
parties hereto; provided, that the Corporation and/or the Purchaser(s) may not
--------
assign or delegate any of their rights or obligations hereunder without the
express written consent of Seller. If any provision of this Agreement shall be
held to be invalid, the remainder of this Agreement shall not be affected
thereby.
3
<PAGE>
10. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the subject matter hereof and supersedes any
prior agreement or understandings among them, oral or written, all of which are
hereby canceled. This Agreement may not be modified or amended without the
express written consent of the parties hereto.
11. CAPTIONS; PRONOUNS. The paragraph titles or captions contained in
------------------
this Agreement are inserted only as a matter of convenience of reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. All pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person or persons may require.
12. NO WAIVER. The failure of any party to seek redress for violation, or
---------
to insist on strict performance, of any covenant of this Agreement shall not
prevent a subsequent act which would have constituted a violation from having
the effect of an original violation.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
SELLER
/s/ BILL LANE
-----------------------------
Bill Lane
ARIS CORPORATION, NUMBER OF REDEMPTION
A WASHINGTON CORPORATION SHARES REDEEMED
--------------------
By /s/ PAUL SONG 15,000
----------------------------- ------
Paul Song, President
4
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF REDEMPTION
PURCHASER(S) SHARES PURCHASED
- ------------ --------------------
<S> <C>
/s/ Jay Griffin 20,000
- ---------------------------- ------
Jay Griffin
/s/ Tom Averill 20,000
- ---------------------------- ------
Tom Averill
/s/ Dave Melin 25,000
- ---------------------------- ------
Dave Melin
/s/ Bruce Kennedy 12,500
- ---------------------------- ------
Bruce Kennedy
/s/ Bert Sugayan 7500
- ---------------------------- ----
Bert Sugayan
</TABLE>
5
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Bill Lane hereby assign, transfer and convey to Jay
Griffin all of my right, title and interest in and to Twenty Thousand (20,000)
shares of the common stock, no par value per share, of ARIS Corporation (the
"Company") standing in my name on the books of the Company and represented by
share certificate number 107, and do hereby irrevocably constitute Norbert W.
Sugayan, Jr., as attorney-in-fact to transfer said stock on the books of the
Company with full power of substitution in the premises.
EFFECTIVE February 28, 1997.
/s/ Bill Lane
__________________________________
Bill Lane
6
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Bill Lane hereby assign, transfer and convey to Tom
Averill all of my right, title and interest in and to Twenty Thousand (20,000)
shares of the common stock, no par value per share, of ARIS Corporation (the
"Company") standing in my name on the books of the Company and represented by
share certificate number 107, and do hereby irrevocably constitute Norbert W.
Sugayan, Jr., as attorney-in-fact to transfer said stock on the books of the
Company with full power of substitution in the premises.
EFFECTIVE February 28, 1997.
/s/ Bill Lane
__________________________________
Bill Lane
7
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Bill Lane hereby assign, transfer and convey to Dave
Melin all of my right, title and interest in and to Twenty Five Thousand
(25,000) shares of the common stock, no par value per share, of ARIS Corporation
(the "Company") standing in my name on the books of the Company and represented
by share certificate number 107, and do hereby irrevocably constitute Norbert W.
Sugayan, Jr., as attorney-in-fact to transfer said stock on the books of the
Company with full power of substitution in the premises.
EFFECTIVE February 28, 1997.
/s/ Bill Lane
__________________________________
Bill Lane
8
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Bill Lane hereby assign, transfer and convey to Bruce
Kennedy all of my right, title and interest in and to Twelve Thousand Five
Hundred (12,500) shares of the common stock, no par value per share, of ARIS
Corporation (the "Company") standing in my name on the books of the Company and
represented by share certificate number 107, and do hereby irrevocably
constitute Norbert W. Sugayan, Jr., as attorney-in-fact to transfer said stock
on the books of the Company with full power of substitution in the premises.
EFFECTIVE February 28, 1997.
/s/ Bill Lane
__________________________________
Bill Lane
9
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Bill Lane hereby assign, transfer and convey to Bert
Sugayan all of my right, title and interest in and to Seven Thousand Five
Hundred (7500) shares of the common stock, no par value per share, of ARIS
Corporation (the "Company") standing in my name on the books of the Company and
represented by share certificate number 107, and do hereby irrevocably
constitute Norbert W. Sugayan, Jr., as attorney-in-fact to transfer said stock
on the books of the Company with full power of substitution in the premises.
EFFECTIVE February 28, 1997.
/s/ Bill Lane
__________________________________
Bill Lane
10
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Bill Lane hereby assign, transfer and convey to ARIS
Corporation (the "Company") all of my right, title and interest in and to
Fifteen Thousand (15,000) shares of the common stock, no par value per share, of
ARIS Corporation (the "Company") standing in my name on the books of the Company
and represented by share certificate number 107, and do hereby irrevocably
constitute Norbert W. Sugayan, Jr., as attorney-in-fact to transfer said stock
on the books of the Company with full power of substitution in the premises.
EFFECTIVE February 28, 1997.
/s/ Bill Lane
__________________________________
Bill Lane
11
<PAGE>
STOCK REDEMPTION AND PURCHASE AGREEMENT
THIS STOCK REDEMPTION AND PURCHASE AGREEMENT (the "Agreement") shall be
effective as of February 28, 1997, by and among ARIS Corporation, a Washington
corporation (the "Corporation"), the additional stock purchaser(s) named on the
signature page of this Agreement ("Purchaser(s)") and Bob Trantina, an
individual (the "Seller"), with reference to the following facts:
RECITALS
A. Seller is the record and beneficial owner of one percent (1%) or more
of the issued and outstanding shares of common stock of the Corporation. Seller
would like to sell 30,000 shares of the Corporation's common stock held by
Seller (the "Redemption Shares"), under the terms and conditions of this
Agreement.
B. The Board of Directors of the Corporation has determined that it is
desirable and in the best interests of the Corporation to redeem up to 400,000
shares of the common stock of the Corporation held by shareholders holding one
percent (1%) or more of the issued and outstanding common stock of the
Corporation.
C. Purchaser(s) are willing to purchase any Redemption Shares that are
not redeemed by the Corporation.
D. Seller has determined that it is desirable and in the best interests
of Seller to sell the Redemption Shares to the Corporation and Purchasers at
this point in time, rather than subject Seller to any further market risk with
respect to such Redemption Shares.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
contained herein, the parties agree as follows:
1. REDEMPTION OF SHARES. Effective as of the date of this Agreement, and
--------------------
subject to the terms and conditions of this Agreement, the Corporation agrees to
redeem and/or the Purchaser(s) agree to purchase from Seller, and the Seller
agrees to sell to the Corporation and/or the Purchaser(s) the Redemption Shares.
2. REDEMPTION PRICE FOR SHARES. The redemption and/or purchase price for
---------------------------
the Redemption Shares shall be Nine Dollars and Seventy Five Cents ($9.75) per
share or an aggregate redemption price of Two Hundred Ninety Two Thousand Five
Hundred Dollars ($292,500.00) (the "Redemption Price").
3. CERTAIN COSTS TO BE BORNE BY PURCHASER(S). Purchaser(s) agree to pay
-----------------------------------------
to the Corporation Five Cents ($0.05) for each Redemption Share purchased by
such Purchaser(s) to cover the Corporation's costs in processing and documenting
the purchase of Redemption Shares by Purchaser(s) from Seller.
4. SETTLEMENT OF FUNDS; SHARE CERTIFICATES. The Corporation, Seller, and
---------------------------------------
Purchaser(s) agree that all funds to be paid in connection with the purchase and
sale of the Redemption Shares and the costs to be borne by Purchaser(s) in
paragraph 4 above shall be paid to the respective parties by the close of
business, Friday, March 14, 1997. The Corporation shall use its best endeavors
to issue share certificates to the parties as soon as practicable after
execution hereof.
1
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby
--------------------------------------------
represents and warrants that:
(a) Seller is the owner of the Redemption Shares, free and clear of
any encumbrances or rights of third parties;
(b) Seller has the power and authority to enter into this Agreement
and to perform the same, and is not a party to or obligated under or restricted
by any contract or other provision, which has not been waived, that will be
violated in any material respect by making and performing this Agreement;
(c) Seller has received a copy of the Corporation's confidential
shareholder disclosure materials, including without limitation that certain
valuation report by Corporate Advisory Associates of Seattle, Washington dated
effective August 31, 1996, as updated January 1, 1997 (collectively, the
"Shareholder Disclosure Materials"), and has read and understands their
contents;
(d) Seller acknowledges that Seller is aware of the Corporation's
plans with respect to a possible initial public offering ("IPO") of its common
stock, that it has engaged counsel, auditors and investment bankers to assist
the Corporation in connection with its potential IPO, and that Seller has had
the opportunity to review valuation proposals from various investment banks and
potential underwriters (collectively, the "Valuation Proposals") regarding,
among other things, the potential post-IPO value of the Redemption Shares, and
has read and understands their contents;
(e) Seller, either alone or with the assistance of Seller's
professional advisors, has such knowledge and experience in financial and
business matters that Seller is capable of evaluating the Shareholder Disclosure
Materials, the Valuation Proposals, the likelihood of the Corporation's
potential IPO and, accordingly, the benefits and potential costs of the sale of
the Redemption Shares at this point in time;
(f) Seller has either spoken or met with, or been given reasonable
opportunity to speak with, representatives of the Corporation for the purpose of
asking questions of, and receiving answers and information from, such
representatives concerning the Shareholder Disclosure Materials, the Valuation
Proposals, the potential IPO, and the sale of the Redemption Shares at this
point in time; and
(g) Seller is exercising his or her own judgment regarding Seller's
decision to sell the Redemption Shares, and Seller is not relying upon any other
statements or representations of the Corporation, its officers, directors,
agents or advisors, regarding the merits of this transaction.
6. REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The Corporation
-------------------------------------------------
represents and warrants that:
(a) The Corporation has full power and is duly authorized by law to
obligate itself to redeem the Redemption Shares; and
(b) The Corporation is not a party to or obligated under or restricted
by its articles of incorporation, bylaws, any contract or other provision, which
has not been waived, that will be violated in any material respect by making and
performing this Agreement.
2
<PAGE>
7. COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, and all of which, when
taken together, shall constitute one and the same instrument.
8. GOVERNING LAW; SURVIVAL OF RIGHTS; SEVERABILITY. This Agreement shall
-----------------------------------------------
be governed by the laws of the State of Washington as such laws are applied by
Washington courts to agreements entered into and to be performed in Washington
by and between residents of Washington, and shall bind and inure to the benefit
of the heirs, executors, personal representatives, successors and assigns of the
parties hereto; provided, that the Corporation and/or the Purchaser(s) may not
--------
assign or delegate any of their rights or obligations hereunder without the
express written consent of Seller. If any provision of this Agreement shall be
held to be invalid, the remainder of this Agreement shall not be affected
thereby.
9. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the subject matter hereof and supersedes any
prior agreement or understandings among them, oral or written, all of which are
hereby canceled. This Agreement may not be modified or amended without the
express written consent of the parties hereto.
10. CAPTIONS; PRONOUNS. The paragraph titles or captions contained in
------------------
this Agreement are inserted only as a matter of convenience of reference. Such
titles and captions in no way define, limit, extend or describe the scope of
this Agreement or the intent of any provision hereof. All pronouns and any
variation thereof shall be deemed to refer to the masculine, feminine or neuter,
singular or plural, as the identity of the person or persons may require.
11. NO WAIVER. The failure of any party to seek redress for violation, or
---------
to insist on strict performance, of any covenant of this Agreement shall not
prevent a subsequent act which would have constituted a violation from having
the effect of an original violation.
IN WITNESS WHEREOF, the undersigned have executed this Agreement.
SELLER
/s/ Bob Trantina
-----------------------------
Bob Trantina
ARIS CORPORATION, NUMBER OF REDEMPTION
A WASHINGTON CORPORATION SHARES REDEEMED
--------------------
By /s/ Paul Song 30,000
----------------------------- ------
Paul Song, President
3
<PAGE>
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, I, Bob Trantina hereby assign, transfer and convey to ARIS
Corporation (the "Company") all of my right, title and interest in and to Thirty
Thousand (30,000) shares of the common stock, no par value per share, of ARIS
Corporation (the "Company") standing in my name on the books of the Company and
represented by share certificate number 105, and do hereby irrevocably
constitute Norbert W. Sugayan, Jr., as attorney-in-fact to transfer said stock
on the books of the Company with full power of substitution in the premises.
EFFECTIVE February 28, 1997.
/s/ Bob Trantina
__________________________________
Bob Trantina
4
<PAGE>
EXHIBIT 11.1
ARIS CORPORATION
Computation of Net Income per Common and Common Equivalent Share
<TABLE>
<CAPTION>
YEAR ENDED
------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1994 1995 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net income $ 826,000 $2,010,000 $2,014,000
========== ========== ==========
Applicable common shares:
Weighted average outstanding
during the period (1) 4,200,000 6,777,433 6,793,000
Cheap stock shares issued 1,045,900 1,045,900 1,045,900
Weighted average outstanding
stock options (2) 788,235 22,244 101,238
Cheap options granted (3) 520,852 520,852 520,852
---------- ---------- ----------
Weighted average number of
common and common share
equivalent shares outstanding 6,554,987 8,366,429 8,460,990
========== ========== ==========
Net income per common share $0.12 $0.24 $0.24
========== ========== ==========
</TABLE>
(1) Excluding cheap stock shares issued during the period.
(2) Based on the treasury stock method excluding cheap options granted.
(3) Based on the treasury stock method.
<PAGE>
EXHIBIT 21.1
ARIS CORPORATION
List of Subsidiaries
WHOLLY-OWNED SUBSIDIARIES OF ARIS CORPORATION
1. ARIS Software, Inc., a Washington corporation, and
2. Oxford Computer Group Limited, a company organized under the laws of
England and Wales
WHOLLY-OWNED SUBSIDIARIES OF ARIS SOFTWARE, INC.
1. Noetix Corporation, an Oregon corporation.
WHOLLY-OWNED SUBSIDIARIES OXFORD COMPUTER GROUP LIMITED
The following companies organized under the laws of England and Wales are
wholly-owned subsidiaries of Oxford Computer Group Limited:
1. Oxford Computer Applications Limited
2. Oxford Computer Training Limited
3. Online College Oxford Limited
4. OCX Limited
5. Oxford Computer Training Services Limited
6. OCG Limited
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated March 21, 1997 relating
to the consolidated financial statements of ARIS Corporation, which appears in
such Prospectus. We also consent to the application of such report to the
Financial Statement Schedule for the three years ended December 31, 1996
listed under Item 16(b) of this Registration Statement when such schedule is
read in conjunction with the financial statements referred to in our report.
The audits referred to in such report also included this schedule. We also
consent to the use in the Prospectus constituting part of this Registration
Statement on Form S-1 of our report dated March 14, 1997 relating to the
financial statements of SofTeach Corporation, which appears in such
Prospectus. We also consent to the references to us under the headings
"Experts" and "Selected Consolidated and Pro forma Combined Financial Data" in
such Prospectus. However, it should be noted that Price Waterhouse LLP has not
prepared or certified such "Selected Consolidated and Pro forma Combined
Financial Data."
PRICE WATERHOUSE LLP
Seattle, Washington
April 17, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1996
<PERIOD-END> DEC-31-1995 DEC-31-1996
<CASH> 1,241 177
<SECURITIES> 1,250 1,396
<RECEIVABLES> 3,037 5,897
<ALLOWANCES> 279 300
<INVENTORY> 0 0
<CURRENT-ASSETS> 5,560 7,794
<PP&E> 1,561 3,354
<DEPRECIATION> 359 837
<TOTAL-ASSETS> 6,843 12,956
<CURRENT-LIABILITIES> 1,534 4,033
<BONDS> 0 1,500
0 0
0 0
<COMMON> 419 1,943
<OTHER-SE> 4,223 6,267
<TOTAL-LIABILITY-AND-EQUITY> 6,843 12,956
<SALES> 0 0
<TOTAL-REVENUES> 14,751 26,898
<CGS> 7,218 13,707
<TOTAL-COSTS> 4,552 9,945
<OTHER-EXPENSES> (97) (80)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (18) (35)
<INCOME-PRETAX> 3,096 3,361
<INCOME-TAX> 1,086 1,347
<INCOME-CONTINUING> 2,010 2,014
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,010 2,014
<EPS-PRIMARY> .24 .24
<EPS-DILUTED> 0 0
</TABLE>
<PAGE>
EXHIBIT 99.1
ARIS CORPORATION
FINANCIAL STATEMENT SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
BALANCE AT CHARGE TO BALANCE AT
BEGINNING COSTS AND END OF
OF PERIOD EXPENSES DEDUCTIONS PERIOD
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts............. $ 53,050 $ 68,200 $(15,050) $106,200
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts............. $106,200 $233,423 $(60,623) $279,000
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts............. $279,000 $ 50,553 $(29,553) $300,000
</TABLE>
