<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 5, 1997
REGISTRATION STATEMENT NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
CLIENTLINK, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 7373 75-2445706
(STATE OF (PRIMARY STANDARD (I.R.S. EMPLOYER
INCORPORATION) INDUSTRIAL IDENTIFICATION NO.)
CLASSIFICATION CODE
NUMBER)
----------------
3025 WINDWARD PLAZA, SUITE 200, ALPHARETTA, GA 30202
(ADDRESS, INCLUDING ZIP AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
JAMES H. HAMILTON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CLIENTLINK, INC.
3025 WINDWARD PLAZA, SUITE 200
ALPHARETTA, GA 30202
(770) 663-3900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
J. ROWLAND COOK, ESQ. DOM H. WYANT, ESQ.
MICHAEL J. PENDLETON, ESQ. JONES, DAY, REAVIS & POGUE
JENKENS & GILCHRIST, P.C. 3500 SUNTRUST PLAZA
2200 ONE AMERICAN CENTER 303 PEACHTREE STREET, N.E.
600 CONGRESS AVENUE ATLANTA, GEORGIA 30308
AUSTIN, TEXAS 78701-3248 (404) 521-3939
(512) 499-3800
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being 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 the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE
SECURITIES TO BE REGISTERED OFFERING PRICE(1)(2) AMOUNT OF REGISTRATION FEE
- ----------------------------------------------------------------------------------
<S> <C> <C>
Common Stock, $.01 par
value per share.......... $20,000,000 $5,900
- ----------------------------------------------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
(1) In accordance with Rule 457(o) under the Securities Act of 1933, as
amended, the number of shares being registered and the proposed maximum
offering price per share are not included in this table.
(2) Estimated solely for purposes of calculating the registration fee.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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 DECEMBER 5, 1997
SHARES
CLIENTLINK, INC.
COMMON STOCK
Of the shares of Common Stock, par value $.01 per share ("Common
Stock"), offered hereby (the "Offering"), shares are being sold by
ClientLink, Inc. ("ClientLink" or the "Company") and shares are being
sold by certain stockholders of the Company named herein (the "Selling
Stockholders"). See "Principal and Selling Stockholders." The Company will not
receive any of the proceeds from the sale of the shares being sold by the
Selling Stockholders.
Prior to the 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
factors related to the determination of the initial public offering price.
Application has been made to approve the Common Stock for listing on the Nasdaq
National Market under the symbol "CLNK."
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR CERTAIN INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS IN CONNECTION WITH AN INVESTMENT IN THE
COMMON STOCK.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........................ $ $ $ $
- --------------------------------------------------------------------------------
Total(3)......................... $ $ $
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
(1) See "Underwriting" for a description of the indemnification arrangements
with the Underwriters.
(2) Before deducting expenses estimated at $ payable by the Company.
(3) The Company and Selling Stockholders have granted to the Underwriters a 30-
day option to purchase up to an additional shares of Common Stock,
solely to cover over-allotments, if any. If the Underwriters exercise this
option in full, the total Price to Public, Underwriting Discount, Proceeds
to Company and Proceeds to Selling Stockholders will be $ , $ , $
and $ , respectively. See "Underwriting."
-----------
The shares of Common Stock are offered severally by the Underwriters named
herein subject to prior sale when, as and if received and accepted by them,
subject to their right to reject orders, in whole or in part, and to certain
other conditions. It is expected that delivery of the certificates representing
such shares will be made against payment therefor in immediately available
funds at the office of The Robinson-Humphrey Company, LLC, Atlanta, Georgia on
or about , 1998.
THE ROBINSON-HUMPHREY COMPANY LEHMAN BROTHERS
, 1998
<PAGE>
ClientLink and CL are registered service marks of the Company.
----------------
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT COVERING TRANSACTIONS IN SUCH
SECURITIES, AND THE IMPOSITION OF A PENALTY BID IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed information appearing elsewhere in this
Prospectus, including "Risk Factors," "Selected Financial Data" and the
Company's Financial Statements and the Notes thereto. Except as otherwise
indicated, all information in this Prospectus (i) assumes no exercise of the
Underwriters' over-allotment option, (ii) gives effect to a 3 for 1 stock split
effective in December 1994 and (iii) gives effect to a 1.57 for 1 stock split
effective as of December 4, 1997.
THE COMPANY
ClientLink designs, develops and implements customized information technology
("IT") solutions for organizations with mission-critical business processing
needs. The Company's client/server and Internet/intranet-based applications are
designed to improve an organization's business processes and performance. The
Company offers IT solutions using an operating model that integrates client
personnel in the development process, leverages the Company's centralized
application development center and addresses specific key business functions.
The Company targets clients with business processing needs in such areas as
data collection and reporting, financial applications, inventory management,
sales commission calculation, sales force automation and sales pricing. The
Company's principal clients include The Gillette Company, Green Tree Financial
Corporation ("Green Tree"), Hewlett-Packard Company, Honda of America, MCI
Telecommunications Corporation ("MCI"), National Data Corporation and
Plantation Pipe Line Co.
The Company's application development framework encompasses a series of
development phases that enables the Company to create integrated, customized
solutions. This framework is designed to improve the utility of the Company's
solutions, as well as to identify, address and resolve uncertainties early in
the development process. The framework consists of four phases: Definition,
Detailed Design, Development and Implementation. While the application
development framework is designed as an integrated approach, each phase may
involve a separate contractual commitment and concludes with the delivery of a
discrete value-added deliverable. The Company performs the Definition Phase on
a time and materials basis and generally prices each subsequent phase
separately on either a time and materials basis or pursuant to fixed-price,
fixed-timeframe contracts. In addition, the Company complements its application
development services by offering separately-priced post-implementation support
services such as software enhancements and upgrades.
In order to develop and maintain a competitive advantage, organizations
continually seek to improve their product and service offerings, as well as the
processes by which they are delivered. Most of these critical business
processes are dependent on advanced information technology systems and
complementary software. Often, however, currently available software
applications do not specifically address these critical business processes. As
a result, there are a number of current trends which the Company believes are
compelling organizations to seek the services of external IT consultants to
design, develop and integrate customized software applications. These trends
include the increasing complexity of implementing client/server solutions,
pressure to minimize overall IT costs and clients' desire to influence the
development of solutions. As a result of these and other trends, the United
States market for application development, implementation/integration and IT
consulting services is large and growing. In November 1996, Dataquest, an
industry research organization, estimated that the U.S. market for these
services will reach $50.9 billion in revenue in 2000, which implies compound
annual growth of 14.9% from the estimated 1997 level of $33.6 billion in
revenue.
The Company's objective is to be a leader in developing and implementing
high-quality, customized IT solutions that address the core business needs of
its clients. To achieve this objective, the Company seeks to focus on the
following growth strategies: (i) expand relationships with existing clients,
(ii) focus on fixed-price,
3
<PAGE>
fixed-timeframe projects, (iii) attract and retain highly skilled personnel,
(iv) expand its geographic presence, (v) provide post-implementation support
and hosting of applications and (vi) increase its sales and marketing efforts.
ClientLink was incorporated in Delaware in July 1992 under the name "CompuCom
Acquisition Corporation of Texas." The Company's name was changed to
ClientLink, Inc. in August 1994. The Company's executive offices are located at
3025 Windward Plaza, Suite 200, Alpharetta, Georgia 30202.
RISK FACTORS
For a discussion of certain information that should be considered by
prospective investors in connection with an investment in the Common Stock, see
"Risk Factors."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company.......... shares
Common Stock offered by the Selling shares
Stockholders................................
Common Stock to be outstanding after the shares(1)
Offering....................................
Use of proceeds.............................. For repayment of any outstanding balance
under the existing line of credit with
CompuCom, for capital expenditures and for
working capital and other general corporate
purposes.
Proposed Nasdaq National Market symbol....... CLNK
</TABLE>
- --------
(1) Based on the number of shares outstanding as of December 4, 1997. Does not
include (i) 373,660 shares of Common Stock issuable upon exercise of stock
options outstanding under the Company's 1994 Stock Option Plan and (ii)
856,600 shares of Common Stock issuable upon exercise of stock options
outstanding under the Company's 1997 Incentive Plan. See "Management--Stock
Incentive Plans."
4
<PAGE>
RELATIONSHIP WITH COMPUCOM SYSTEMS, INC.
Since inception, the Company has been a subsidiary of CompuCom Systems, Inc.
("CompuCom"). CompuCom is a provider of network integration services and
distributed desktop products to large corporate customers nationwide. Upon
completion of the Offering, CompuCom and its directors and executive officers
will beneficially own more than 50% of the Company's outstanding Common Stock,
and CompuCom will be the Company's largest stockholder. So long as CompuCom
beneficially owns a majority of the outstanding Common Stock, CompuCom will
have the voting power to elect the Company's entire Board of Directors and will
have the practical ability to control all other matters requiring stockholder
approval, even where such matters may not be advantageous to the other
stockholders. Upon completion of the Offering, it is anticipated that four of
the seven members of the Board of Directors of the Company will be directors or
executive officers of CompuCom or CompuCom's largest stockholder. Furthermore,
the Senior Vice President of Finance and Chief Financial Officer of CompuCom
also serves as Chief Financial Officer, Secretary and a director of the
Company. Since 1994, CompuCom has provided capital and management and
administrative services to the Company and the Company's employees have
participated in a number of employee benefit plans maintained by CompuCom, all
in return for certain fees. While the Company intends to reduce its dependence
upon CompuCom for management and administrative services, in order to assure
the continued provision of these services after the completion of the Offering,
the Company has entered into certain agreements pursuant to which CompuCom will
continue to provide certain of such services. See "Risk Factors--Control by and
Relationship with CompuCom," "Management" and "Relationship Between the Company
and CompuCom--Certain Transactions."
5
<PAGE>
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 25, 1994
(INCEPTION) YEAR ENDED DECEMBER NINE MONTHS ENDED
THROUGH 31, SEPTEMBER 30,
DECEMBER 31, --------------------- ---------------------
1994 1995 1996 1996 1997
-------------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenue:
Service .............. $2,496,342 $5,682,236 $8,406,111 $6,318,217 $9,263,048
Product .............. 8,067 292,239 610,132 608,300 196,180
---------- ---------- ---------- ---------- ----------
Total revenue....... $2,504,409 $5,974,475 $9,016,243 $6,926,517 $9,459,228
Operating expenses:
Project related
expenses............. 1,832,104 3,855,186 5,492,114 4,147,979 4,856,875
Cost of products sold. 8,067 292,239 610,132 608,300 196,180
Depreciation and
amortization......... 50,160 141,919 210,004 153,325 218,203
General and
administrative....... 489,159 1,048,544 1,708,750 1,309,762 1,332,310
---------- ---------- ---------- ---------- ----------
Total operating
expenses........... 2,379,490 5,337,888 8,021,000 6,219,366 6,603,568
---------- ---------- ---------- ---------- ----------
Income from operations.. 124,919 636,587 995,243 707,151 2,855,660
Interest expense to
stockholder............ 25,519 76,319 94,952 87,585 20,732
---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 99,400 560,268 900,291 619,566 2,834,928
Income taxes............ 39,760 222,987 358,316 246,588 1,088,612
---------- ---------- ---------- ---------- ----------
Net income.............. $ 59,640 $ 337,281 $ 541,975 $ 372,978 $1,746,316
========== ========== ========== ========== ==========
Net income per share.... $ 0.01 $ 0.06 $ 0.09 $ 0.06 $ 0.31
========== ========== ========== ========== ==========
Weighted average number
of common and common
equivalent shares...... 5,190,989 5,237,731 5,752,599 5,763,945 5,718,806
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------
ACTUAL AS ADJUSTED(1)
---------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................... $1,693,929 $
Total assets.......................................... 4,115,469
Long-term debt, less current portion..................
Total stockholders' equity............................ 2,956,587
</TABLE>
- --------
(1) As adjusted to give effect to the sale of the shares of Common Stock
offered by the Company pursuant to the Offering at an assumed initial
public offering price of $ per share, after deducting the estimated
underwriting discount and offering expenses payable by the Company, and the
application of the net proceeds therefrom.
6
<PAGE>
RISK FACTORS
An investment in the Common Stock of the Company involves certain risks.
Prospective investors should carefully consider the following risk factors, in
addition to the other information contained in this Prospectus, in evaluating
an investment in the Common Stock offered by this Prospectus. In addition,
this Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements as a result of various
factors, including but not limited to those set forth under "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
CUSTOMER CONCENTRATION
The Company has derived, and anticipates that it will continue to derive, a
significant portion of its revenues from a limited number of large clients
with multiple ongoing and new projects. In 1996, the Company derived
approximately 87% of its revenues from a series of contracts with its two
largest clients. In the first nine months of 1997, the Company's two largest
clients accounted for approximately 92% of the Company's revenues. In
addition, revenues from a given client may constitute a significant portion of
the Company's total revenues for a particular quarter. The volume of work
performed for specific clients is likely to vary from year to year, and there
can be no assurance that a significant client in one year will utilize the
Company's services in a subsequent year. In addition, although the revenue
provided to the Company by its large clients generally is attributable to
individual contracts entered into with multiple autonomous departments, there
can be no assurance that these clients or departments will continue to utilize
the services of the Company. Furthermore, no prediction can be made as to
whether or not the pending merger of MCI, one of the Company's largest
clients, with WorldCom Inc. will have an adverse impact on the Company's
relationship with MCI. The loss of any large client could have a material
adverse effect on the Company's business, financial condition or results of
operations.
DEPENDENCE ON CHIEF EXECUTIVE OFFICER
The Company's success will depend in large part upon the continued services
of its Chief Executive Officer, James H. Hamilton. The Company's employment
contract with Mr. Hamilton provides that his employment is terminable at will
by either party. The loss of Mr. Hamilton's services and any resulting loss in
clients or potential clients would have a material adverse effect on the
Company's business, financial condition and results of operations. While the
Company maintains a policy of "key man" insurance on Mr. Hamilton, there can
be no assurance that the proceeds from this policy will adequately compensate
the Company in the event that the Company loses the services of Mr. Hamilton.
There can be no assurance that the Company will retain the services of Mr.
Hamilton or any of its other key employees or that the departure of one or
more key employees would not have a material adverse effect on the Company.
See "Management."
MANAGEMENT OF GROWTH AND PROJECTS
The Company's growth has placed significant demands on its management and
other resources. From the beginning of 1995 through November 17, 1997, the
Company's staff has increased from 25 to 91 full-time employees. Furthermore,
the Company intends to continue to expand its operations and to enter new
geographic markets. The Company's ability to manage its growth effectively
will require it to continue to develop and improve its operational, financial
and other internal systems and business development capabilities, as well as
to train, motivate and manage its employees and independent contractors. In
addition, the Company's future success will depend in large part on its
ability to continue to operate profitably under fixed-price, fixed-timeframe
contracts, maintain high rates of labor utilization and maintain project
quality as the average size of the Company's projects continues to increase.
If the Company is unable to manage its growth or projects effectively, such
inability could have a material adverse effect on the quality of the Company's
services and products, on its ability to retain key personnel and on its
business, financial condition or results of operations.
7
<PAGE>
NEED TO ATTRACT AND RETAIN PROFESSIONAL STAFF
The Company's business is labor intensive. The Company's success will depend
in large part upon the Company's ability to attract, retain, train and
motivate highly-skilled employees, particularly software engineers,
consultants and project managers. There is significant competition for
employees who have the skills required to perform the services the Company
offers. Qualified software engineers, consultants and project managers are in
great demand and are likely to remain a limited resource for the foreseeable
future. In addition, approximately 25% of the Company's labor is obtained
through independent contractors who provide development engineering services.
There can be no assurance that the Company will be successful in attracting a
sufficient number of highly-skilled employees in the future, retaining,
training and motivating the employees it is able to attract or in engaging a
sufficient level of independent contractors to meet its needs. The Company's
inability to do so could impair its ability to adequately manage and complete
its existing projects and to bid for or obtain new projects, and could
adversely affect the Company's business, financial condition or results of
operations. See "Business--Human Resources."
LIMITED OPERATING HISTORY; UNCERTAINTY OF FUTURE FINANCIAL RESULTS
The Company commenced operations in early 1994 and has had a limited
operating history. Despite the fact that the Company has recognized increasing
revenue since its inception, there can be no assurance that the Company will
continue to sustain such growth or maintain profitable levels of operations in
the future. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
VARIABILITY OF QUARTERLY OPERATING RESULTS
The Company's revenues and earnings may fluctuate from quarter to quarter
based upon such factors as the number, size and scope of projects in which the
Company is engaged, the contractual terms and degree of completion of such
projects, delays incurred in connection with a project, employee utilization
rates, the accuracy of estimates of resources required to complete ongoing
projects and general economic conditions. Although the Company's use of
independent contractors generally allows it to adjust the size of its
workforce as needed, a high percentage of the Company's operating expenses,
particularly personnel and rent, are relatively fixed and do not tend to
fluctuate on a quarterly basis. As a result, unanticipated variations in the
number, or progress toward completion, of the Company's projects or in
employee utilization rates may cause significant variations in operating
results in any particular quarter and could result in losses for such quarter.
An unanticipated termination of a major project, a client's decision not to
proceed with a project as anticipated by the Company or the completion during
a quarter of multiple large projects, could require the Company to incur
expenses related to underutilized employees and could therefore have a
material adverse effect on the Company's business, financial condition or
results of operations.
CONTROL BY AND RELATIONSHIP WITH COMPUCOM
Upon completion of the Offering, CompuCom and its directors and executive
officers will beneficially own more than 50% of the Company's outstanding
Common Stock, and CompuCom will be the Company's largest stockholder. So long
as CompuCom beneficially owns a majority of the outstanding Common Stock,
CompuCom will have the voting power to elect the Company's entire Board of
Directors and will have the practical ability to control all other matters
requiring stockholder approval, even where such matters may not be
advantageous to the other stockholders. However, CompuCom will not have any
rights or preferences as compared to any other stockholder of the Company,
other than those it may have by reason of the number of shares of Common Stock
it owns. Upon completion of the Offering, it is anticipated that four of the
seven members of the Board of Directors of the Company will be directors or
executive officers of CompuCom or CompuCom's largest stockholder. Furthermore,
the Senior Vice President of Finance and Chief Financial Officer of CompuCom
also serves as Chief Financial Officer, Secretary and a director of the
Company. Conflicts of interest may arise between the Company and CompuCom in a
number of areas relating to their past and ongoing relationships,
8
<PAGE>
including potentially competitive business activities, marketing functions,
tax and employee benefit matters, indemnity arrangements, registration rights,
sales or distributions by CompuCom of its remaining shares of Common Stock and
the exercise by CompuCom of its ability to control the management and affairs
of the Company. There can be no assurance that any such conflicts will be
resolved in favor of the Company. See "Shares Eligible for Future Sale" and
"Relationship Between the Company and CompuCom--Certain Transactions."
Subject to the restrictions of applicable law and except as provided in any
applicable lock-up agreement, after completion of the Offering, CompuCom may
sell any or all of the shares of Common Stock then owned by it. No prediction
can be made as to the effect, if any, that future sales of Common Stock, or
the availability of Common Stock for future sale, will have on the market
price of the Common Stock prevailing from time to time. Sales of substantial
amounts of the Common Stock, or the perception that such sales might occur,
could adversely affect prevailing market prices for the Common Stock and the
ability of the Company to raise capital by issuing equity securities. See
"Principal and Selling Stockholders," "Underwriting" and "Shares Eligible for
Future Sale."
FIXED-PRICE, FIXED-TIMEFRAME CONTRACTS
An important element of the Company's strategy is to expand the portion of
its revenues generated from fixed-price, fixed-timeframe contracts. In
connection with such contracts, however, the Company's failure to accurately
estimate the resources required for a particular project or the failure to
complete the Company's contractual obligations as set forth in the project
plan could adversely affect the Company's overall profitability, damage
existing client relationships or have a material adverse effect on the
Company's business, financial condition or results of operations. In addition,
although the Company generally seeks to adjust its fees in the event that
unforeseen developments lead to higher than anticipated costs under fixed-
price contracts, there can be no assurance that the Company will be successful
in obtaining such adjustments.
RISKS ASSOCIATED WITH TECHNOLOGICAL CHANGES
The Company has derived substantially all of its revenue from projects based
primarily on client/server architectures. The client/server market is
continuing to develop and is subject to rapid change. The Company's near-term
success is dependent in part on the continued acceptance of information
processing systems that use client/server architectures. Any factors
negatively affecting the acceptance of client/server architectures could have
a material adverse effect on the Company's business, financial condition and
results of operations. The Company's longer-term success will depend to a
large extent on its ability to anticipate and develop solutions that keep pace
with changes in technology, evolving industry standards and changing client
preferences. The Company's failure to anticipate and address these
developments could have a material adverse effect on the Company's business,
financial condition or results of operations. In addition, there can be no
assurance that products, technologies or services developed by third parties
will not render the information technology services of the Company
noncompetitive or obsolete. See "Business--Application Development Framework."
COMPETITION
The market for the Company's services is highly competitive. Generally, the
Company's main competitors are the internal IT departments of its clients. In
addition, the Company currently competes with consulting and software
integration firms, including Andersen Consulting, Computer Sciences
Corporation, Deloitte & Touche LLP, IBM Global Professional Services, Inc.,
Perot Systems, Inc. and SHL Systemhouse, Inc. (a subsidiary of MCI). Many of
these companies have significantly greater financial, technical and marketing
resources than the Company, generate greater revenues and have greater name
recognition than the Company. In addition, there are relatively low barriers
to entry into the Company's markets and the Company has faced, and expects to
continue to face, additional competition from new entrants in its markets. The
Company believes that its ability to compete also depends in part on a number
of competitive factors outside of its control, including the ability of its
9
<PAGE>
competitors to hire, retain and motivate project managers and other senior
technical staff, the development of services that are competitive with those
of the Company's services and the extent of its competitors' responsiveness to
client needs. There can be no assurance that the Company will be able to
compete successfully with its competitors. See "Business--Competition."
INTELLECTUAL PROPERTY RIGHTS
The Company's success is dependent in part upon its object library,
development tools and other intellectual property rights. The Company relies
upon a combination of trade secret, copyright and trademark laws and
contractual arrangements to protect its intellectual property rights. The
Company generally enters into confidentiality agreements with its employees,
contractors and clients. While the Company believes that it takes appropriate
steps to detect and deter any misappropriation of its intellectual property,
there can be no assurance that the Company will be able to detect all
unauthorized uses of, or otherwise successfully protect, its intellectual
property rights. See "Business--Intellectual Property Rights."
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. In order to distinguish
21st century dates from 20th century dates, these date code fields must be
able to accept four digit entries. As a result, computer systems and software
programs used by many companies, including companies for which the Company may
have performed services, may need to be upgraded to comply with such "Year
2000" requirements. Significant uncertainty exists concerning the potential
effects associated with such compliance. Although the Company currently offers
products that are designed to be Year 2000 compliant, there can be no
assurance that the Company's software products or products used by the Company
contain all necessary date code changes. In addition, the Company has
warranted, and may in the future warrant, to certain customers that its
products will be Year 2000 compliant, and the failure of such products to be
Year 2000 compliant could have a material adverse effect on the Company's
business, financial condition or results of operations.
ABSENCE OF PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE; POSSIBLE
VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price of the Common Stock was determined through
negotiations among representatives of the Company, the Selling Stockholders
and the Underwriters, and does not necessarily reflect the price at which the
Common Stock will trade after completion of the Offering. The stock markets
have from time to time experienced significant price and volume fluctuations
and there can be no assurance that an active trading market for the Common
Stock will develop or be sustained. The Company believes that factors such as
actual or anticipated quarterly fluctuations in financial results, changes in
earnings estimates by securities industry analysts and announcements of
material events by the Company, its major clients or its competitors, as well
as general industry or economic conditions, may cause the market price of the
Common Stock to fluctuate, perhaps substantially. See "Underwriting."
CERTAIN ANTI-TAKEOVER PROVISIONS
The Company's First Amended and Restated Certificate of Incorporation and
Amended and Restated Bylaws contain provisions which may make a change in
control of the Company more difficult, even if a change in control were in the
best interests of its stockholders. The Company's Board of Directors may
determine the terms of preferred stock that may be issued by the Company
without approval of the holders of the Common Stock, and as a result may
enable the Board of Directors to prevent changes in management and control of
the Company. In addition, the terms of the Company's Board of Directors are
staggered, whereby approximately one-third of the directors are elected each
year. The inability of the stockholders to replace the entire Board of
Directors in one year may prevent or delay changes in the management and
control of the Company. See "Description of Capital Stock."
10
<PAGE>
DILUTION
The purchasers of the Common Stock in the Offering will experience immediate
and substantial dilution of $ per share in the net tangible book value per
share based upon an assumed initial offering price of . See
"Dilution." In addition, if the Company issues additional shares of Common
Stock in the future, including shares that may be issued in connection with
future acquisitions or upon the exercise of stock options which are currently
outstanding or which may be granted in the future under the Company's stock
incentive plans, purchasers of Common Stock in the Offering may experience
further dilution in net tangible book value per share of the Common Stock.
SHARES ELIGIBLE FOR FUTURE SALE
The Company, its executive officers and directors and the Selling
Stockholders have agreed that they will not sell or otherwise dispose of any
shares of Common Stock without the consent of the Underwriters for a period of
180 days from the date of this Prospectus. Following such period, an aggregate
of shares of Common Stock will be eligible for immediate resale by the
existing stockholders, subject to the notice, manner of sale, volume
limitations and current public reporting requirements imposed by Rule 144
under the Securities Act. The remaining shares to be held by the existing
stockholders upon completion of the Offering will not be eligible for resale
under Rule 144(k). Sales of substantial amounts of Common Stock in the open
market or the availability of such shares for sale following the Offering
could adversely affect the market price of the Common Stock and may make it
more difficult for the Company to sell its equity securities in the future on
terms it deems appropriate. See "Shares Eligible for Future Sale," "Principal
and Selling Stockholders" and "Underwriting."
11
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby are estimated to be $ ($ if the
Underwriters' over-allotment option is exercised in full), assuming an initial
public offering price of $ per share and after deducting the estimated
underwriting discount and offering expenses. The Company will not receive any
proceeds from the sale of shares of Common Stock by the Selling Stockholders.
See "Principal and Selling Stockholders."
The Company plans to use the net proceeds from the Offering to repay any
outstanding balance of the Company's line of credit with CompuCom, for capital
expenditures and for working capital and other general corporate purposes. The
Company may also use a portion of the net proceeds of the Offering to fund
acquisitions of complementary businesses, products or technologies, although
there are currently no plans, commitments or understandings with respect to
any such transactions. Pending such uses, the Company intends to invest such
funds in short-term, investment-grade, interest-bearing instruments. The
Company does not believe that it can accurately estimate the amounts to be
used for each purpose at this time.
DIVIDEND POLICY
The Company has never declared or paid cash dividends on its Common Stock
and currently intends to retain all available funds for use in the operation
and expansion of its business. The Company does not anticipate that any cash
dividends will be declared or paid in the foreseeable future. In addition, any
credit arrangements which the Company may establish with third party sources
of financing may contain, among other provisions, restrictions that prohibit
the Company from paying cash dividends or making other distributions of assets
to stockholders.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
September 30, 1997 (i) on an actual basis and (ii) as adjusted to give effect
to the sale of shares of Common Stock offered by the Company in the
Offering at an assumed initial public offering price of $ per share, after
deducting the estimated underwriting discount and offering expenses. This
table should be read in conjunction with the Company's Financial Statements
and Notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------
AS
ACTUAL ADJUSTED
---------- --------
<S> <C> <C>
Long-term debt, less current portion....................... $ $
Stockholders' equity
Preferred stock, par value $0.01 per share, 2,000,000
shares
authorized; no shares outstanding.......................
Common stock, par value $0.01 per share, 25,000,000
shares
authorized; 3,390,000 shares outstanding;
shares outstanding as adjusted(1)................ 33,900
Additional paid-in capital............................... 257,475
Retained earnings........................................ 2,665,212
---------- --------
Total stockholders' equity............................. $2,956,587 $
========== ========
Total capitalization................................... $2,956,587 $
========== ========
</TABLE>
- --------
(1) Based on the number of shares outstanding as of December 4, 1997. Does not
take into account the 1.57 to 1 stock split on December 4, 1997 and does
not include shares of Common Stock issuable upon exercise of stock options
outstanding under the Company's stock incentive plans. See "Management--
Stock Incentive Plans."
12
<PAGE>
DILUTION
At September 30, 1997, and based on the 3,390,000 shares of Common Stock
outstanding on that date without giving effect to the 1.57 for 1 stock split,
the net tangible book value of the Company was approximately $2.9 million or
$0.85 per share of Common Stock. "Net tangible book value per share"
represents the amount of the Company's total tangible assets less total
liabilities, divided by the number of shares of Common Stock outstanding.
Dilution in net tangible book value per share represents the difference
between the amount paid by purchasers of shares of Common Stock in this
Offering and the net tangible book value per share of Common Stock immediately
after completion of this Offering. After giving effect to the sale by the
Company of shares of Common Stock offered hereby at an assumed initial
public offering price of $ per share (the midpoint of the estimated
public offering price range), and after deducting the estimated underwriting
discount and offering expenses payable by the Company, the net tangible book
value of the Company at September 30, 1997 would have been approximately
$ million or $ per share. This amount represents an immediate
increase in net tangible book value of $ per share of Common Stock to
existing stockholders and an immediate dilution in net tangible book value of
$ per share to purchasers of Common Stock in the Offering as illustrated
in the following table:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share......... $
----------
Net tangible book value per share at September 30,
1997................................................. $0.85
Increase per share attributable to the new investors..
-----
Net tangible book value per share after this Offering...
----------
Dilution of net tangible book value per share to new
investors.............................................. $
==========
</TABLE>
The following table sets forth since 199 , the number of
shares of Common Stock purchased from the Company, the total consideration and
the average price per share paid by the existing stockholders and to be paid
by new investors purchasing shares of Common Stock in this Offering assuming
an initial public offering price of $ per share:
<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION
----------------- ---------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)....... 3,390,000 % $291,375 % $0.09
New investors.................. % %
--------- ---- -------- ---- -----
Total...................... 100% 100%
</TABLE>
- --------
(1) Based on the number of shares outstanding as of September 30, 1997. Does
not take into account the 1.57 for 1 stock split on December 4, 1997 and
does not include shares of Common Stock issuable upon exercise of stock
options outstanding under the Company's stock incentive plans. See
"Management--Stock Incentive Plans."
13
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected financial data for the Company as of
the dates and for the periods indicated. The Balance Sheet Data at December
31, 1995 and 1996 and the Statement of Income Data for the period from March
25, 1994 (inception) to December 31, 1994 and the years ended December 31,
1995 and 1996 have been derived from the Company's financial statements for
such years, which have been audited by KPMG Peat Marwick LLP, independent
certified public accountants. The selected data presented below for the nine
month periods ended September 30, 1996 and 1997, and as of September 30, 1997,
are derived from the unaudited financial statements of the Company included
elsewhere in this Prospectus which, in the opinion of management, have been
prepared on the same basis as the audited Financial Statements and include all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the results of operations and financial position for and
as of the end of such periods. The results of operations for interim periods
are not necessarily indicative of the results that may be expected for the
entire year. The following table also sets forth selected unaudited financial
data for HMP Software Solutions, Inc. ("HMP") which may be deemed to be a
predecessor to the Company. The following selected financial data should be
read in conjunction with the Company's Financial Statements and the Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus. The Company was
incorporated in July 1992 and financial information prior to inception is
insignificant.
<TABLE>
<CAPTION>
HMP SOFTWARE
SOLUTIONS, INC.(1) CLIENTLINK, INC.
------------------ -------------------------------------------------------
PERIOD FROM
MARCH 25,
PERIOD FROM JAN. 1994
10, 1994 (INCEPTION) YEAR ENDED NINE MONTHS ENDED
(INCEPTION) THROUGH DECEMBER 31, SEPTEMBER 30,
THROUGH MARCH 24, DEC. 31, --------------------- ---------------------
1994 1994 1995 1996 1996 1997
------------------ ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
DATA:
Revenue:
Service................ $488,913 $2,496,342 $5,682,236 $8,406,111 $6,318,217 $9,263,048
Product................ 8,067 292,239 610,132 608,300 196,180
-------- ---------- ---------- ---------- ---------- ----------
Total revenue........... 488,913 2,504,409 5,974,475 9,016,243 6,926,517 9,459,228
Operating expenses:
Project related
expenses.............. 258,150 1,832,104 3,855,186 5,492,114 4,147,979 4,856,875
Cost of products sold.. 8,067 292,239 610,132 608,300 196,180
Depreciation and
amortization.......... 50,160 141,919 210,004 153,325 218,203
General and
administrative........ 66,224 489,159 1,048,544 1,708,750 1,309,762 1,332,310
-------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses............. 324,374 2,379,490 5,337,888 8,021,000 6,219,366 6,603,568
-------- ---------- ---------- ---------- ---------- ----------
Income from operations.. 164,539 124,919 636,587 995,243 707,151 2,855,660
Interest expense
(income) to
stockholder............ (5,973) 25,519 76,319 94,952 87,585 20,732
-------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 170,512 99,400 560,268 900,291 619,566 2,834,928
Income taxes............ 68,204 39,760 222,987 358,316 246,588 1,088,612
-------- ---------- ---------- ---------- ---------- ----------
Net income.............. $102,308 $ 59,640 $ 337,281 $ 541,975 $ 372,978 $1,746,316
======== ========== ========== ========== ========== ==========
Net income per share.... $ 0.01 $ 0.06 $ 0.09 $ 0.06 $ 0.31
Weighted average number
of common and common
equivalent shares...... 5,190,989 5,237,731 5,752,599 5,763,945 5,718,806
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------- SEPTEMBER 30,
1994 1995 1996 1997
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)...... $ (239,972) $1,103,686 $ 998,104 $1,693,929
Total assets................... 1,356,403 3,240,452 2,757,704 4,115,469
Long-term debt, less current
portion....................... 1,148,619 587,511
Total stockholders' equity..... 69,630 657,046 1,199,021 2,956,587
</TABLE>
- --------
(1) The Company commenced operations in March 1994 after hiring the former
employees of HMP Software Solutions, Inc. ("HMP"), including Mr. Hamilton,
and purchasing certain assets from HMP.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis of the financial condition and results of operations
of the Company should be read in conjunction with the preceding Selected
Financial Data. Moreover, this Prospectus contains "forward-looking"
statements regarding revenues, operating expenses, earnings, growth rates and
certain business trends that are subject to risks and uncertainties that could
cause actual results to differ materially from the results described herein.
Recipients of this document are cautioned to consider these risks and
uncertainties and to not place undue reliance on these forward-looking
statements. Additionally, the Company's Financial Statements and the Notes
thereto, as well as other data included in this Prospectus, should be read and
analyzed in combination with the analysis below.
OVERVIEW
ClientLink designs, develops and implements customized information
technology ("IT") solutions for organizations with mission-critical business
processing needs. Since its inception in 1994, the Company has operated as a
majority-owned subsidiary of CompuCom Systems, Inc. ("CompuCom"). As such, the
Company has relied on CompuCom for a number of administrative services,
including, without limitation: general administration, payroll, financial
reporting, sales and income tax reporting, accounts payable, insurance and
human resources services. As consideration for these services, the Company has
historically paid CompuCom a management fee equal to 2.5% of revenues. In
addition, the Company has been dependent on CompuCom for its financing needs.
The Company has a $2.5 million line of credit with CompuCom and is charged
interest at a rate of prime plus 1% on its outstanding balance under this
line. The Company believes that the management fee and interest rate charged
by CompuCom approximates the charges that it would have incurred had it
contracted for these services independently. The Company has entered into an
Administrative Services Agreement to be effective during the period from
January 1, 1998 to December 31, 1999 pursuant to which CompuCom will provide
selected administrative services to the Company in return for a fixed monthly
fee of $15,000 per month in 1998 and $7,500 in 1999. The Company intends to
use a portion of the proceeds from this Offering to repay any amounts
outstanding under its line of credit and subsequently terminate such line.
Historically, the Company has generated the majority of its revenue from
services performed on a time and material basis. However, revenue generated
from services performed on a fixed-price, fixed-timeframe basis has become
increasingly important to the Company. For the nine months ended September 30,
1997 time and material billings represented 71% of the Company's revenue while
fixed-price, fixed-timeframe billings accounted for 29% of revenue. The
Company expects the percentage of its revenue generated by fixed-price, fixed-
timeframe contracts to account for a larger percentage of its total revenue in
the future. However, as the initial phases of fixed-price, fixed-timeframe
projects are usually billed on a time and material basis, the percentage of
revenue derived on a fixed-price, fixed-timeframe basis for any particular
quarter may vary depending on the number of projects in process and the phases
in progress for each project. The Company uses an internally developed
estimation process to determine its proposed fixed price for a project. This
process takes into account standard billing rates and the risks associated
with the particular project, such as the number and type of key functions to
be developed, the technology environment and application type to be applied,
the project's timetable and the overall technical complexity of the project.
The Company attempts to align the timing of billings for fixed-price, fixed-
timeframe contracts with the amount of resources required based on the project
plan in order to stabilize its cash flows. A member of the Company's senior
management team must approve each fixed-price, fixed-timeframe proposal.
The Company recognizes revenue from fixed-price, fixed-timeframe projects
using the percentage of completion method, which requires revenue to be
recognized over the term of a contract based on the percentage of work
completed. The cumulative impact of any revision in estimates of the
percentage of work completed is reflected in the fiscal period in which the
changes become known. Although the Company from time to time has been required
to make revisions to its work completion estimates, none of these revisions
has had a material
15
<PAGE>
adverse effect on the Company's operating results. Provisions for estimated
losses on uncompleted contracts are made on a contract-by-contract basis and
are recognized in the period in which the losses are determined. See "Risk
Factors--Fixed-Price, Fixed-Timeframe Contracts".
Although the Company does not generally sell computer products, it has
occasionally sold computer hardware and software licenses to its clients as an
accommodation. These products are usually sold at the Company's cost and thus
do not generate any profit for the Company. These sales are reported as
product revenue in the Statements of Income based on the shipment dates. The
Company expects to discontinue the practice of selling computer products and
consequently does not expect product sales to be material in future periods.
For the year ended December 31, 1996 and for the nine months ended September
30, 1997, product sales represented 6.8% and 2.1% of total revenue,
respectively.
Project related expenses represent the most significant expense that the
Company incurs. These expenses consist primarily of labor costs for personnel,
whether full-time employees or contract development engineers, dedicated to
specific client assignments and are relatively fixed in advance of any
particular quarter. The Company utilizes contract development engineers to
provide it with greater flexibility in adjusting staffing levels when
necessary. However, the Company must maintain a sufficient number of
professionals to oversee existing client projects and to help secure new
business. Accordingly, the unexpected termination of a large client project
could result in under-utilized employees and materially impact the Company's
results of operations.
Since its inception, the Company has been included in the CompuCom
consolidated tax group for federal income tax purposes. However, income tax
expense is calculated using the separate return basis, which reflects the
income tax expense that would have resulted had the Company filed a separate
return.
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenue of certain items
included in the Company's Statements of Income for the periods indicated:
<TABLE>
<CAPTION>
PERIOD FROM YEAR ENDED
MARCH 25, 1994 DECEMBER NINE MONTHS ENDED
(INCEPTION) THROUGH 31, SEPTEMBER 30,
DECEMBER 31, ------------ ------------------
1994 1995 1996 1996 1997
------------------- ----- ----- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:................. 100.0% 100.0% 100.0% 100.0% 100.0%
Service................ 99.7 95.1 93.2 91.2 97.9
Product................ 0.3 4.9 6.8 8.8 2.1
Operating expenses:
Project related
expenses.............. 73.2 64.5 60.9 59.9 51.3
Cost of products sold.. 0.3 4.9 6.8 8.8 2.1
Depreciation and
amortization.......... 2.0 2.4 2.3 2.2 2.3
General and
administrative........ 19.5 17.5 19.0 18.9 14.1
----- ----- ----- -------- --------
Total operating
expenses............ 95.0 89.3 89.0 89.8 69.8
----- ----- ----- -------- --------
Income from operations... 5.0 10.7 11.0 10.2 30.2
Interest expense to
stockholder............. 1.0 1.3 1.0 1.3 0.2
----- ----- ----- -------- --------
Income before income
taxes................... 4.0 9.4 10.0 8.9 30.0
Income taxes............. 1.6 3.7 4.0 3.5 11.5
----- ----- ----- -------- --------
Net income............... 2.4% 5.7% 6.0% 5.4% 18.5%
===== ===== ===== ======== ========
</TABLE>
16
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1996
Revenue. Revenue increased approximately 37% to $9.5 million for the nine
months ended September 30, 1997 from $6.9 million for the same period in 1996
due primarily to an increase in the volume of services delivered to existing
clients. The Company added new clients during the nine months ended September
30, 1997, which also contributed to the increase in revenue when compared to
the same period in 1996. Although the Company derives a large portion of its
revenue from a relatively small number of clients, it frequently performs
services under purchase orders from multiple departments within those clients.
The Company's two largest clients accounted for over 85% of the Company's
revenue in both periods. The Company expects the percentage of total revenue
derived from these clients will represent a substantial portion of the total
revenue for the entire year.
Project related expenses. Project related expenses increased to $4.9 million
for the nine months ended September 30, 1997 from $4.1 million for the same
period in 1996. The increase in project related expenses was primarily due to
an increase in the number of project personnel when compared to the same
period in the prior year. However, project related expenses decreased as a
percentage of service revenue from approximately 66% for the nine months ended
September 30, 1996 to approximately 52% for the same period in 1997. The
improvement as a percentage of service revenue was primarily due to improved
utilization of project personnel and increased utilization of the Company's
application development center.
Cost of products sold. Cost of products sold decreased to $196,180 for the
nine months ended September 30, 1997 from $608,300 for the same period in
1996. This decrease was due to the reduction in product sales during 1997. The
Company expects to discontinue product sales in the future.
Depreciation and amortization. Depreciation and amortization increased to
$218,203 for the nine months ended September 30, 1997 from $153,325 for the
same period in 1996. This increase was primarily due to increased investments
in computer equipment.
General and administrative expenses. General and administrative expenses,
which consist primarily of expenses associated with the Company's management
and administrative groups, occupancy costs, and the management fee paid to
CompuCom, totaled $1.3 million for the nine months ended September 30, 1997
and $1.3 million for the nine months ended September 30, 1996. These expenses
represented approximately 14% of revenues in the nine months ended September
30, 1997 as compared to approximately 19% in the same period in 1996. This
percentage decrease was primarily due to the growth in revenue as the Company
was able to support the increased revenue without incurring additional
administrative costs. During the nine months ended September 30, 1997, the
Company increased its provision for bad debt by approximately $117,000 for
receivables from one customer that were subsequently written off. The Company
will incur a nonrecurring $1.2 million expense in the fourth quarter of 1997
in connection with the waiver of the contractual right of the Company's
President and Chief Executive Officer to receive shares of Common Stock. See
"Management--Employment Agreements." The Company expects to increase its
administrative staff in order to perform many of the services historically
provided by CompuCom. Therefore, the Company anticipates an increase in
general and administrative expenses in future periods, partially offset by a
reduction in the management fee paid to CompuCom.
Income from operations. Income from operations increased to $2.9 million for
the nine months ended September 30, 1997 from $707,151 for the same period in
1996. As a percentage of revenue, income from operations increased to
approximately 30% of revenue for the nine months ended September 30, 1997 from
approximately 10% for the same period in 1996. The improvement in the
Company's operating margin was primarily due to the improvements noted in
project related expenses above, as well as a reduction in product sales.
17
<PAGE>
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
Revenue. Revenue increased approximately 50% to $9.0 million in 1996 from
$6.0 million in 1995. This increase reflected increases in both the size and
number of client projects. Revenue derived from the Company's three largest
clients represented approximately 93% and 87% of total revenue in 1996 and
1995, respectively.
Project related expenses. Project related expenses increased to $5.5 million
in 1996 from $3.9 million in 1995 as the Company increased the size of its
professional staff from 36 at the end of 1995 to 55 at the end of 1996.
However, project related expenses declined as a percentage of service revenue
to 65% in 1996 from 68% in 1995 due primarily to improved utilization of
project personnel and increased utilization of the Company's application
development center.
Cost of products sold. Cost of products sold increased to $610,132 in 1996
from $292,239 in 1995. This increase was due to an increase in products sold
at cost, primarily to one customer.
Depreciation and amortization. Depreciation and amortization increased to
$210,004 in 1996 from $141,919 in 1995, due primarily to increased investments
in computer equipment.
General and administrative expenses. General and administrative expenses
increased to $1.7 million in 1996 from $1.0 million in 1995. The increase was
primarily due to a provision for bad debt associated with one particular
client, a temporary increase in the number of administrative personnel during
1996 and an increase in the management fee paid to CompuCom, which resulted
from the increase in total revenue. General and administrative expenses
represented approximately 19% of revenue in 1996 compared to 18% in 1995.
Income from operations. Income from operations increased to $1.0 million in
1996 from $636,587 in 1995. As a percentage or revenue, income from operations
remained relatively flat at approximately 11% for both years, as the
improvements noted in project related expenses above were offset by increased
product sales at cost during 1996.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO THE PERIOD FROM MARCH 25, 1994
(INCEPTION) TO DECEMBER 31, 1994
Revenue. Revenue increased approximately 139% to $6.0 million in 1995 from
$2.5 million for the period ended December 31, 1994. This increase reflected
increases in both the size and number of client projects as well as the
inclusion of revenue for the full 12 month period in 1995. Revenue derived
from the Company's two largest clients accounted for over 75% of total revenue
in both periods.
Project related expenses. Project related expenses increased to $3.9 million
in 1995 from $1.8 million in 1994 as the Company increased the size of its
professional staff from 18 at the end of 1994 to 36 at the end of 1995. In
addition, 1995 contained 12 months of expenses compared to only nine months in
1994. However, project related expenses declined as a percentage of service
revenue to approximately 68% in 1995 from 73% in 1994 due primarily to
improved utilization of project personnel as well as increased utilization of
the Company's application development center.
Cost of products sold. Cost of products sold increased to $292,239 in 1995
from $8,067 in 1994. This increase was due to an increase in the amount of
product sold.
Depreciation and amortization. Depreciation and amortization increased to
$141,919 in 1995 from $50,160 in 1994, due primarily to increased investments
in computer equipment as well as the inclusion of the full 12 month period in
1995.
General and administrative expenses. General and administrative expenses
increased to $1.0 million in 1995 from $489,159 in 1994. The increase was
primarily due to an increase in the management fee paid to CompuCom, which
resulted from the increase in revenue. As a percentage of revenue, general and
administrative expenses decreased from approximately 20% for the period from
March 25, 1994 (inception) through December 31, 1994 to approximately 18% in
1995.
18
<PAGE>
Income from operations. Income from operations increased to $636,587 in 1995
from $124,919 for the period from March 25, 1994 (inception) through December
31, 1994. As a percentage of revenues, income from operations increased to 11%
of revenue in 1995 from 5% of revenue for the period from March 25, 1994
(inception) through December 31, 1994. The improvement in the Company's
operating margin was primarily due to the improvements noted in project
related expenses above.
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly results of
operations of the Company for 1996 and the first three quarters of 1997. In
the opinion of management, this information has been prepared on the same
basis as the audited Financial Statements and all necessary adjustments,
consisting only of normal recurring adjustments, have been included in the
amounts stated below to present fairly the quarterly information when read in
conjunction with the audited Financial Statements and Notes thereto included
elsewhere in this Prospectus. The quarterly results are not necessarily
indicative of future results of operations. Although the Company's business is
not seasonal, its revenue and earnings may fluctuate from quarter-to-quarter
based on such factors as the number, size and scope of projects in which the
Company is engaged, the contractual terms and degree of completion of such
projects, any delays incurred in connection with a project, employee
utilization rates, the adequacy of provisions for losses, the accuracy of
estimates of resources required to complete ongoing projects and general
economic conditions. See "Risk Factors--Variability of Quarterly Operating
Results." In addition, revenue from a large client may constitute a
significant portion of the Company's total revenues in a particular quarter.
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30,
1996 1996 1996 1996 1997 1997 1997
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Service................ $1,904,037 $2,384,563 $2,029,617 $2,087,894 $2,522,288 $3,066,673 $3,674,087
Product................ 404,218 174,515 29,567 1,832 125,627 51,218 19,335
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenue........ 2,308,255 2,559,078 2,059,184 2,089,726 2,647,915 3,117,891 3,693,422
Operating expenses:
Project related
expenses.............. 1,382,282 1,428,374 1,337,323 1,344,135 1,346,997 1,506,459 2,003,419
Cost of products sold.. 404,218 174,515 29,567 1,832 125,627 51,218 19,335
Depreciation and
amortization.......... 46,439 50,872 56,014 56,679 58,643 60,049 99,511
General and
administrative........ 287,189 583,834 438,739 398,988 329,369 435,210 567,731
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses............ 2,120,128 2,237,595 1,861,643 1,801,634 1,860,636 2,052,936 2,689,996
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from operations.. 188,127 321,483 197,541 288,092 787,279 1,064,955 1,003,426
Interest expense
(income)............... 27,857 42,853 16,875 7,367 24,725 10,657 (14,650)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 160,270 278,630 180,666 280,725 762,554 1,054,298 1,018,076
Income taxes............ 64,108 111,452 71,028 111,728 292,821 404,850 390,941
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. $ 96,162 $ 167,178 $ 109,638 $ 168,997 $ 469,733 $ 649,448 $ 627,135
========== ========== ========== ========== ========== ========== ==========
Net income per share.... $ 0.02 $ 0.03 $ 0.02 $ 0.03 $ 0.08 $ 0.11 $ 0.11
========== ========== ========== ========== ========== ========== ==========
Weighted average number
of common and common
equivalent shares...... 5,810,386 5,763,138 5,718,806 5,718,806 5,718,806 5,718,806 5,718,806
Total revenue:.......... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Service................ 82.5 93.2 98.6 99.9 95.3 98.4 99.5
Product................ 17.5 6.8 1.4 0.1 4.7 1.6 0.5
Operating expenses:
Project related
expenses.............. 59.9 55.8 65.0 64.3 50.9 48.3 54.2
Cost of products sold.. 17.5 6.8 1.4 0.1 4.8 1.6 0.5
Depreciation and
amortization.......... 2.0 2.0 2.7 2.7 2.2 1.9 2.7
General and
administrative........ 12.4 22.8 21.3 19.1 12.4 14.0 15.4
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total operating
expenses............ 91.8 87.4 90.4 86.2 70.3 65.8 72.8
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from operations.. 8.2 12.6 9.6 13.8 29.7 34.2 27.2
Interest expense
(income)............... 1.2 1.7 0.8 0.4 0.9 0.3 (0.4)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 7.0 10.9 8.8 13.4 28.8 33.9 27.6
Income taxes............ 2.8 4.4 3.5 5.3 11.1 13.0 10.6
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. 4.2% 6.5% 5.3% 8.1% 17.7% 20.9% 17.0%
========== ========== ========== ========== ========== ========== ==========
</TABLE>
19
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
To date the Company's financing requirements have been met through a
combination of funds generated from operations and borrowings under a $2.5
million line of credit from CompuCom. The Company has not previously
established a relationship with a third party lender, as the funds generated
from operations together with the funds available under the line of credit
have been sufficient to meet the Company's financing needs. The Company is
charged interest at a rate of prime plus 1% for amounts outstanding under the
line of credit. As of September 30, 1997, the Company had no outstanding
balance under the line of credit. The Company expects to pay off any balance
outstanding under the line of credit with proceeds from the Offering and then
terminate the line of credit. The Company expects that the balance of the
proceeds from the Offering and funds generated from operations will be
sufficient to meet its foreseeable operating needs.
Net cash provided by operations increased to $1.3 million for the nine
months ended September 30, 1997 from $434,009 for the same period in 1996 due
to the Company's improved profitability. Working capital increased to $1.7
million as of September 30, 1997 from $1.0 million as of December 31, 1996.
This increase is due primarily to the Company's profitability and revenue
growth. The Company's accounts receivable increased $697,797 from December 31,
1996 to September 30, 1997 while its current liabilities, which primarily
consist of accrued compensation, increased $184,303. During 1996, the Company
increased its provision for bad debt approximately $228,000, which relates to
disputed accounts receivable from one client that were subsequently written
off. The Company's inability to collect these receivables significantly
impacted the Company's liquidity during 1996.
Capital expenditures, which totaled $687,045 for the nine months ended
September 30, 1997, were primarily related to investments in computer hardware
and software. The Company expects to open an additional application
development center in 1998 and as a result expects its capital expenditures to
increase to between $1.0 and $1.5 million in 1998.
NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," was issued. SFAS No. 128, which supersedes
Accounting Principles Board ("APB") Opinion No. 15, requires a dual
presentation of basic and diluted earnings per share on the face of the income
statement or loss attributable to common stockholders by the weighted-average
number of common shares outstanding for the period. Diluted earnings per share
reflects the potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into common stock
or resulted in the issuance of common stock that then shared in the earnings
of the entity. Diluted earnings per share is computed similarly to fully
diluted earnings per share under APB Opinion No. 15. SFAS No. 128 is effective
for financial statements issued for periods ending after December 15, 1997,
including interim periods; earlier application is not permitted. See Note 1 to
the Company's Financial Statements.
In October 1997, Statement of Position (SOP 97-2) "Software Revenue
Recognition" was issued. SOP 97-2 supersedes SOP 91-1 and provides guidance on
applying generally accepted accounting principles in recognizing revenue on
software transactions. SOP 97-2 is effective for transactions entered into in
fiscal years beginning after December 15, 1997. Earlier application is
encouraged as of the beginning of fiscal years or interim periods for which
financial statements or information have not been issued. Retroactive
application of the provisions of this SOP is prohibited. The Company has not
determined the effects, if any, that SOP 97-2 will have on its financial
statements.
20
<PAGE>
BUSINESS
OVERVIEW
ClientLink designs, develops and implements customized IT solutions for
organizations with mission-critical business processing needs. The Company
offers IT solutions based upon an operating model that integrates client
personnel in the development process, leverages the Company's centralized
application development center and addresses specific key business functions.
The Company's client/server and Internet/intranet based applications are
designed to improve an organization's business processes and performance. The
Company offers IT solutions using an operating model that integrates client
personnel in the development process, leverages the Company's centralized
application development center and addresses specific key business functions.
The Company targets clients with business processing needs in such areas as
data collection and reporting, financial applications, inventory management,
sales commission calculation, sales force automation and sales pricing. The
Company's principal clients include The Gillette Company, Green Tree, Hewlett-
Packard Company, Honda of America, MCI, National Data Corporation and
Plantation Pipe Line Co.
The Company's application development framework encompasses a series of
development phases that enables the Company to create integrated, customized
solutions. This framework is designed to improve the utility of the Company's
solutions, as well as to identify, address and resolve uncertainties early in
the development process. The framework consists of four phases: Definition,
Detailed Design, Development and Implementation. While the application
development framework is designed as an integrated approach, each phase may
involve a separate contractual commitment and concludes with the delivery of a
discrete value-added deliverable. The Company performs the Definition Phase on
a time and materials basis and generally prices each subsequent phase
separately on either a time and materials basis or pursuant to fixed-price,
fixed-timeframe contracts. In addition, the Company complements its
application development services by offering separately-priced post-
implementation support services such as software enhancements and upgrades.
The Company's objective is to be a leader in developing and implementing
high-quality, customized IT solutions that address the core business needs of
its clients. To achieve this objective, the Company seeks to focus on the
following growth strategies: (i) expand relationships with existing clients,
(ii) focus on fixed-price, fixed-timeframe projects, (iii) attract and retain
highly skilled personnel, (iv) expand its geographic presence, (v) provide
post-implementation support and hosting of applications and (vi) increase its
sales and marketing efforts.
INDUSTRY BACKGROUND
The increase in global competition and acceleration of technological
innovation has had a profound impact on organizations across all industries.
In order to develop and maintain a competitive advantage, organizations
continually seek to improve their product and service offerings, as well as
the processes by which they are delivered. Most of these critical business
processes are dependent on advanced information technology systems and
complementary software. Often, however, currently available software
applications do not specifically address these critical business processes. As
a result, organizations are increasingly implementing and utilizing customized
solutions developed by external IT consultants in order to improve their
competitiveness.
There are a number of current trends which the Company believes are
compelling organizations to seek the services of external IT consultants to
design, develop and integrate customized IT solutions:
Increasing Complexity of Implementing Client/Server Solutions. Many
businesses are in the process of migrating from legacy systems, which
use proprietary software, to open systems and client/server
architectures. The development, implementation and management of
business-to-business solutions in an environment of evolving technology
places significant resource demands on business organizations, both in
terms of integration capabilities and expertise in emerging
technologies. As a result, internal IT departments are often at a
disadvantage in designing, integrating, implementing and managing
today's most effective solutions.
Pressure to Minimize Overall IT Costs. Internal IT departments, many of
which have already been reduced in size and scope, are generally
focused on internal systems management. Organizations recognize that it
is not generally cost effective to expand their existing departments to
undertake certain mission-critical development projects. Instead, the
experience of external IT professionals can provide
21
<PAGE>
organizations with a more economical and proven alternative to the
internal development of business solutions.
Clients' Desire to Influence Solutions. Increasingly, clients desire to
influence and participate in the application development process. This
collaboration between clients and developers enables the client to
incorporate its knowledge base into the development process to create a
solution which is best suited for the client promotes acceptance of the
solution by the end-users and more efficiently provides technical
training to the end-users and IT staff. External IT consultants can
often more objectively consider the perspectives of the end-users and
can work in partnership to develop the best solutions.
As a result of these and other trends, the United States market for
application development, implementation/integration and IT consulting services
is extremely large and growing. In November 1996, Dataquest, an industry
research organization, estimated that the U.S. market for these services will
reach $50.9 billion in revenue in 2000, which implies compound annual growth
of 14.9% from the estimated 1997 level of $33.6 billion in revenue. The
Company believes that an increasing share of the revenue generated in this
market will be captured by companies that are able to deliver solutions
rapidly, effectively and with minimal disruption to the client's business
processes.
THE CLIENTLINK SOLUTION
The Company offers IT solutions based upon an operating model that
integrates client personnel in the development process, leverages the
Company's centralized application development center and addresses specific
key business functions. The key attributes of this operating model are:
Apply Client-Driven Development Approach. The Company's development approach
focuses on collaborating with the client to analyze the underlying business
processes and to develop a solution based on that analysis and on the client's
existing systems. The Company believes this approach, which allows the client
to understand and participate in the development process, promotes client
feedback throughout the development phases and improves the utility of the
solution upon its completion. The Company divides its projects into several
smaller solution-oriented phases, which are designed to reduce the risks
associated with larger less-defined projects and to allow the client to
utilize components of the solution more rapidly. The Company has expertise
with respect to multiple software, hardware and operating systems, which
allows it to develop applications based on the systems that it considers to be
best suited for a particular project.
Promote Out-Tasking Rather Than Outsourcing. In developing solutions for
clients, the Company assembles a team consisting of Company and client
personnel to design, develop and implement components of the solution. This
process enables the client to participate in all phases of the development. As
a result, the Company and the client are able to draw upon the collective
knowledge of the team and to align their goals and incentives to jointly
develop a solution that is intended to best serve the client's needs. The
Company believes that this approach allows the client to acquire the technical
knowledge necessary to implement and maintain the customized application,
enhances the acceptance of the solution by the ultimate end-users and
strengthens the ongoing relationship between the Company and its clients. This
out-tasking approach is designed to draw on the expertise of the client's
internal resources rather than impose a solution developed entirely by an
outside consultant.
Leverage the Application Development Center. The foundation of the Company's
operating model is the application development center, where the Company's
development efforts are concentrated. This centralized development site
enhances the Company's ability to leverage the reusable objects in its object
library, promotes the sharing of expertise among the Company's development
staff and improves the Company's ability to implement consistent project
management practices. The Company believes that this centralized approach
better allows it to create quality solutions, retain employees, increase
employee utilization rates and contain project management expenses.
22
<PAGE>
Focus on Mission-Critical Business Solutions. The Company provides solutions
to business functions that are applicable to multiple industries, such as data
collection and reporting, financial applications, inventory management, sales
commission calculations, sales force automation and sales pricing. The Company
believes that this focus allows the Company to increase the reusability of its
object library, leverage its expertise in providing solutions for problems
common to most businesses, expedite the development of customized solutions
and minimize industry-specific economic risks.
STRATEGY
The Company's objective is to be a leader in developing and implementing
high quality, customized IT solutions that address the fundamental business
needs of its clients. To achieve this objective, the Company is pursuing a
strategy which focuses on the following key elements:
Expand Relationships with Existing Clients. The Company seeks to expand the
number and scope of application development services it performs for existing
clients. Often, the Company initiates a relationship by developing a
customized solution for a single department or business unit. The Company
intends to capitalize on the success of its initial projects by marketing its
services to other departments within the client's organization and by pursuing
larger scale projects for such clients. The Company believes that its
operating model, which is designed to foster an ongoing relationship with a
client's IT staff, provides the Company with a competitive advantage in
targeting new opportunities within existing clients.
Focus on Fixed-Price, Fixed-Timeframe Contracts. A fundamental element of
the Company's operating model is to increase the type of services it offers on
a fixed-price, fixed-timeframe basis. The Company believes that properly
structured fixed-price, fixed-timeframe contracts align the Company's
incentives with those of its clients and offer the Company the potential for
greater profitability. In order to reduce the risks that can arise from such
contracts, the Company divides fixed-price, fixed-timeframe projects into
several phases with scheduled deliverables. The Company believes that discrete
project phases enable the Company to estimate the price and timeframe of these
contracts more accurately, meet client expectations, maintain quality and
control costs.
Attract and Retain Highly Skilled, Motivated Employees. The Company seeks to
continue to attract, motivate, reward and retain its employees by compensating
them competitively and providing a stimulating and attractive work environment
that fosters professional development. The Company has adopted stock incentive
plans and believes that its compensation structure effectively aligns the
objectives of its employees with those of the Company. The Company believes
that its operating model provides employees with access to state-of-the-art
development tools and processes, minimizes travel to client locations and
enhances professional development and employee job satisfaction.
Pursue Geographic Expansion. The Company intends to expand into new
geographic markets by establishing additional application development centers
in key information technology markets. The Company believes that its operating
model is transferable to new clients in additional geographic markets and that
geographic expansion will allow the Company to enhance its client base as well
as increase the scope of services it provides to current and future clients
with multiple geographic locations.
Provide Post-Implementation Support and Hosting of Applications. The Company
intends to complement its application development services by offering
separately-priced software enhancements and upgrades, as well as application
hosting services whereby the Company will operate and maintain applications
for clients at the application development center. By providing these
services, the Company will be able to efficiently enhance and upgrade
previously installed applications, develop stronger relationships with its
clients and provide it with a potential source of recurring revenue.
Increase Sales and Marketing Efforts. The Company intends to expand its
sales and marketing department in order to increase direct sales efforts. As
part of that effort, the Company intends to continue to expand its
23
<PAGE>
alliances with software vendors to maintain its ability to provide a broad
range of solutions to its clients. Furthermore, the Company intends to build
upon its relationship with CompuCom in order to stimulate cross-selling and
referral opportunities with CompuCom's national sales force.
APPLICATION DEVELOPMENT FRAMEWORK
The Company's application development framework encompasses a series of
development phases that enables the Company to create integrated, customized
solutions. This framework is designed to improve the utility of the Company's
solutions, as well as to identify, address and resolve uncertainties early in
the development process. The framework consists of four phases: Definition,
Detailed Design, Development and Implementation. While the application
development framework is designed as an integrated approach, each phase may
involve a separate contractual commitment and concludes with the delivery of a
discrete value-added deliverable. The Company performs the Definition Phase on
a time and materials basis and generally prices each subsequent phase
separately on either a time and materials basis or pursuant to fixed-price,
fixed-timeframe contracts. Clients are able to elect at each phase whether to
proceed to the next phase of the process.
The following table summarizes the scope of services the Company typically
provides to clients in connection with each phase of the application
development framework:
PHASE DELIVERABLE KEY CONCEPTS
------------------------------------------------------------------------
Definition .Requirements .Create JAD team
document
.Prototype .Clearly identify and
define objectives and
requirements
.Conduct cost/benefit
analysis
.Employ visual tools
------------------------------------------------------------------------
Detailed Design .Functional design .Develop technical concepts
document from Definition Phase
.Detailed prototype
.Identify appropriate
systems
.Select and enhance objects
from object library
------------------------------------------------------------------------
Development .Components of .Utilize reusable objects
application .Employ open-ended software
and hardware systems
.Deploy and beta test in
client environment on a
limited basis
------------------------------------------------------------------------
.Install the application
Implementation .Completed .Create system
application documentation
.Train end-users
Definition Phase. In the Definition Phase, the Company collaborates with its
clients to analyze their current business processes and outline the goals and
objectives for re-engineering those processes. To more accurately analyze
these processes and the appropriate solution, the Company assembles a joint
application development ("JAD") team, which typically is comprised of between
five and twenty members and consists of representatives from the client's
management, IT personnel and end-users as well as project managers, project
architects and software engineers from the Company. The JAD team conducts the
Definition Phase primarily at the Company's application development center,
which enables the team to access the collective expertise of the Company's
development staff and promotes collaboration between the Company and the
client.
The JAD team's main deliverable during the Definition Phase is a
requirements document, which represents an evaluation of the client's business
processes, current applications, the technical components required to
implement a solution and the procedural parameters involved in developing and
implementing the solution. As a
24
<PAGE>
further evaluation tool, the team creates a prototype of the solution to
evaluate the components of the application for compatibility with the client's
existing systems as well as their functionality for end-users. The prototype
often includes sample data presentation screens, reports and forms. The
prototype gives the client a preview of the proposed solution, and therefore
helps foster commitment to the project from the client's end-users. The
Company believes the results of the Definition Phase allow the Company to
minimize costly reconfigurations and restarts on projects.
Detailed Design Phase. In the Detailed Design Phase, the JAD team uses the
requirements document created during the Definition Phase to develop a
detailed design of each component of the application. The JAD team identifies
the appropriate technical components and how they relate to one another. The
Company's developers also employ application modeling methods to rapidly
evaluate various design alternatives in order to identify the most appropriate
components of the applications. The high-level planning conducted in the
Detailed Design Phase allows the client to better understand the application
on a conceptual level and how it will be implemented.
The JAD team's main deliverable during the Detailed Design Phase is a
functional design document that details the design of each component
identified and expands the technical planning portion of the application
commenced in the Definition Phase. In preparing the functional design
document, the JAD team selects the appropriate objects from the object
library, makes specific software and hardware systems decisions and analyzes
each object which will be contained in the application. The functional design
document also contains a refined, fixed-price, fixed-timeframe budget relating
to the development of the application. The JAD team also utilizes the analysis
contained in the functional design document to develop a more detailed version
of the prototype created in the Definition Phase.
Development Phase. In the Development Phase, the JAD team oversees the
development of the application utilizing the objects and designs identified in
the Detailed Design Phase. The application is developed at the Company's
application development center, which allows the Company to utilize the
relative strengths of its engineers by placing them in daily contact with one
another, rather than dispatching individual engineers to client locations. The
JAD team creates customized applications using, when possible, a series of
reusable objects drawn from the object library as well as new objects created
specifically for the project. The Company's development approach minimizes the
volume of programming code necessary to generate a functional application. The
Company believes that utilizing reusable code objects maximizes the cost
effectiveness and speed of the development process for a client. This approach
also reduces the Company's need for code programmers and promotes consistent
application quality.
Implementation Phase. During the Implementation Phase, the Company deploys
the application, which typically involves installing and documenting the
application, training end-users, integrating application hardware systems with
existing client hardware systems and providing related start-up services.
CUSTOMERS
The Company targets clients with mission-critical business application
requirements such as data collection and reporting, financial applications,
inventory management, sales commission calculation, sales force automation and
sales pricing tools. The Company's clients operate in a variety of industries
and service businesses, and the Company is not dependent on any single
industry or service business as a source of its clients. A representative list
of the Company's principal clients includes: The Gillette Company, Green Tree,
Hewlett-Packard Company, Honda of America, MCI, National Data Corporation and
Plantation Pipe Line Co. In 1996, the Company derived 48% of its revenue from
Green Tree and 39% of its revenue from MCI.
The Company seeks to establish ongoing relationships with its clients by
adding complementary application development services and by expanding its
offering of related services such as hosting applications. Often, the Company
will initiate a client relationship by developing a customized application for
a specific department within the organization and subsequently offer similar
services to other departments. Following the completion
25
<PAGE>
of their initial projects, a number of the Company's clients have contracted
with the Company for other unrelated projects.
SALES AND MARKETING
The Company focuses its sales and marketing efforts on establishing and
maintaining relationships with companies that have large scale business
processing needs. The Company's sales efforts generally have been coordinated
by its President and Chief Executive Officer. The Company intends to expand
its sales and marketing department in order to increase direct sales efforts.
As part of that effort, the Company intends to continue to expand its
alliances with software vendors to maintain its ability to provide a broad
range of solutions to its clients. The Company's relationships with these
vendors typically provide additional networking opportunities, improved access
to new technologies, advanced training and the opportunity to conduct joint
marketing efforts. The Company also intends to build upon its relationship
with CompuCom in order to stimulate cross-selling and referral opportunities
available with CompuCom's national sales force.
The Company believes that its emphasis on developing its direct sales force
will lead to better account penetration and management, longer-term client
relationships and more opportunities for follow-on sales to existing clients.
The Company intends to focus its external marketing efforts on developing
awareness of the Company's name through promotions in local business and trade
journals, developing relationships with key business leaders through industry
associations and community service and developing brochures and conducting
telemarketing campaigns.
COMPETITION
The market for customized application development services is highly
competitive. Generally, the Company's main competitors are the internal IT
departments of its clients. In addition, the Company currently competes with
consulting and software integration firms, including Andersen Consulting,
Computer Sciences Corporation, Deloitte & Touche LLP, IBM Global Professional
Services, Inc., Perot Systems, Inc. and SHL Systemhouse, Inc. (a subsidiary of
MCI). Many of these companies have significantly greater financial, technical
and marketing resources than the Company, generate greater revenues and have
greater name recognition than the Company. In addition, there are relatively
low barriers to entry into the Company's markets and the Company has faced,
and expects to continue to face, additional competition from new entrants in
its markets. Within the Company's current target market, the Company also
competes with an increasing number of middle-tier and development outsourcing
organizations.
The Company believes that the principal competitive factors in its markets
include technical and business expertise, quality of service and deliverables,
project management capability, speed of development and implementation and
price. The Company believes that most of the potential clients in its target
markets make decisions on which firm to engage based on quality,
responsiveness and rapid delivery rather than price. The Company attempts to
distinguish itself from its competitors in its target markets on the basis of
its operating model and full service offering capabilities.
INTELLECTUAL PROPERTY RIGHTS
The Company's success is dependent in part upon its object library,
development tools and other intellectual property rights. The Company relies
upon a combination of trade secret, copyright and trademark laws and
contractual arrangements to protect its intellectual property rights. The
Company generally enters into confidentiality agreements with its employees,
independent contractors and clients. While the Company believes that it takes
the appropriate steps to detect and deter any misappropriation of its
intellectual property, there can be no assurance that the Company will be able
to detect all unauthorized uses of, or otherwise successfully protect, its
intellectual property rights.
26
<PAGE>
The Company's business generally involves the development of software
applications for specific client engagements. The Company develops software
applications for clients in part by using objects from its object library and
in part by developing code specifically for the client's application.
Typically, contractual arrangements between the Company and the client provide
that the Company will retain ownership of the objects from the object library
and the client will become the owner of the overall software application. In
addition, these arrangements typically provide that the Company will grant the
client a nonexclusive license to use the objects from the object library in
conjunction with the client's use of the software application. Issues relating
to the ownership of and rights to use software applications can be complicated
and there can be no assurance that disputes will not arise that affect the
Company's ability to reuse the objects from its object library or its other
intellectual property, which could have a material adverse effect on the
business, financial condition or results of operations of the Company. See
"Risk Factors--Intellectual Property Rights."
"ClientLink" and "CL" are registered service marks of the Company for use in
connection with its business.
HUMAN RESOURCES
As of November 17, 1997, the Company employed 91 full-time employees, of
whom 85 were engaged as development engineers and six were engaged in sales,
administration and management. In addition, as of November 17, 1997, the
Company engaged 23 independent contractors. Generally, the Company's
employees, including its executive officers, have executed agreements that
prohibit them from competing with the Company for specified periods following
termination of their employment with the Company. None of the Company's
employees is covered by a collective bargaining agreement. The Company
considers its relations with its employees to be good.
FACILITIES
The Company's headquarters and principal operations, including its
application development center, are located in approximately 19,000 square
feet of leased office space in Alpharetta, Georgia. The Company expects that
additional space will be required as it expands its business, and believes
that it will be able to obtain suitable space as needed.
LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company is a party or
to which any of its property is subject.
27
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James H. Hamilton(1)....... 39 President and Chief Executive Officer, Director
M. Lazane Smith(2)......... 43 Chief Financial Officer, Secretary,
Director
Edward R. Anderson(1)(2)... 51 Chairman of the Board
Daniel F. Brown............ 51 Director
Christopher J. 43 Director
Moffitt(1)(3).............
Glenn T. Rieger............ 39 Director
</TABLE>
- --------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
JAMES H. HAMILTON has over 17 years of experience in technology related
fields. Mr. Hamilton joined the Company in March 1994 and currently serves as
President and Chief Executive Officer. Mr. Hamilton joined the Company's Board
of Directors in 1994. Prior to joining the Company, Mr. Hamilton served as
President of HMP Software Solutions, Inc., a provider of IT consulting
services, between January and March 1994. Prior to joining HMP Software
Solutions, Inc., Mr. Hamilton served as Chief Operating Officer of Fisher
Business Systems, Inc., a point source restaurant service provider, during
1993. Prior to joining Fisher Business Systems, Inc., Mr. Hamilton served as
Director of Development of MicroBilt Corporation, a software application
development company and which was a subsidiary of First Financial Management
Corporation. Mr. Hamilton's current term as a director expires at the 2000
annual meeting of stockholders.
M. LAZANE SMITH serves as Chief Financial Officer and Secretary. Ms. Smith
joined the Company's Board of Directors in 1997. Ms. Smith has held the
position of Senior Vice President, Finance and Chief Financial Officer of
CompuCom since February 1997. Ms. Smith joined CompuCom in 1993 as Corporate
Controller and was promoted to Vice President Finance and Corporate Controller
in 1994. Prior to joining CompuCom, she served as Vice President Finance of
Score Group, Inc., a trading cards business, from 1992 to 1993 and worked with
Coca-Cola Enterprises from 1986 to 1992, serving in her final role there as
Regional Vice President Finance and Chief Financial Officer. Ms. Smith's
current term as a director expires at the 2000 annual meeting of stockholders.
EDWARD R. ANDERSON joined the Company's Board of Directors in 1995 and
became the Chairman of the Board of Directors in 1997. Mr. Anderson has served
as President and Chief Executive Officer of CompuCom since January 1994. Mr.
Anderson joined CompuCom in August 1993 as Chief Operating Officer and has
been a Director of CompuCom since 1993. Prior to joining CompuCom, he served
as President and Chief Operating Officer of Computerland Corporation from 1989
until 1993. Mr. Anderson's current term as a director expires at the 1998
annual meeting of stockholders.
DANIEL F. BROWN joined the Company's Board of Directors in 1997. Mr. Brown
has served as Executive Vice President, Sales of CompuCom since February 1989,
when he was promoted from Vice President, Sales, a position he had held since
joining CompuCom in 1987. Mr Brown has been a Director of CompuCom since 1990.
Mr. Brown's current term as a director expires at the 1998 annual meeting of
stockholders.
28
<PAGE>
CHRISTOPHER J. MOFFITT joined the Company's Board of Directors in 1997. Mr.
Moffitt co-founded Diamond Technology Partners, Inc. ("Diamond"), a management
consulting firm, in January 1994 and has served as Senior Vice President,
Secretary and a member of the Board of Directors of Diamond since that time.
From 1988 to 1993, he served as Senior Vice President of Technology Solutions
Company, a management consulting firm. From 1986 to 1988, Mr. Moffitt was a
principal in the Management Consulting Group of Arthur Young (now Ernst &
Young LLP) where he became partner in 1988. From 1981 to 1986, Mr. Moffitt
served as Director of Information Systems for Neiman Marcus. Mr. Moffitt began
his career in 1974 with Electronic Data Systems as a systems engineer and
account manager. Mr. Moffitt's current term as a director expires at the 1999
annual meeting of stockholders.
GLENN T. RIEGER joined the Company's Board of Directors in 1997. Mr. Rieger
has served as a Vice President of Safeguard Scientifics, Inc. since January
1994. Prior to joining Safeguard Scientifics, Inc., Mr. Rieger was a Managing
Director of Valley Forge Capital Group, Ltd., a business mergers and
acquisition advisory firm, which he joined prior to 1993. Mr. Rieger's current
term as a director expires at the 1999 annual meeting of stockholders.
The Company intends to elect one additional director to the Board of
Directors who is not affiliated with the Company or CompuCom, prior to
completion of the Offering.
BOARD OF DIRECTORS
Pursuant to the Company's First Amended and Restated Certificate of
Incorporation, the Board of Directors is classified into three classes, each
class being as nearly equal in number of directors as possible. Currently, one
class is serving initially for a one-year term and thereafter will be elected
for a three-year term. A second class of directors currently is serving
initially for a two-year term and thereafter will be elected for a three-year
term. The third class of directors currently is serving a three-year term. Any
director elected to fill a vacancy will hold office for the remainder of the
full term of the class of directors in which the vacancy occurred and until
such director's successor is duly elected and qualified. If at any time the
size of the Board is changed, the increase or decrease in the number of
directors would be apportioned among the three classes to make all classes as
nearly equal as possible. See "Description of Capital Stock--Delaware Law."
COMMITTEES
The Board of Directors has established Audit, Compensation and Executive
Committees.
The Audit Committee reviews the scope and results of the annual audit of the
Company's consolidated financial statements conducted by the Company's
independent auditors, the scope of other services provided by the Company's
independent auditors, proposed changes in the Company's financial and
accounting standards and the Company's policies and procedures with respect to
its internal accounting controls and compliance with applicable laws relating
to accounting practices. The Audit Committee also examines and considers other
matters relating to the financial affairs and accounting methods of the
Company, including selection and retention of the Company's independent
auditors. Mr. Moffitt currently serves on the Audit Committee, and the Company
expects that one additional outside director will be appointed to join this
committee prior to completion of the Offering.
The Compensation Committee administers the Company's stock incentive plans
including, among other things, determining the amount, exercise price and
vesting schedule of stock options awarded under the plans. The Compensation
Committee administers the Company's other compensation programs and performs
such other duties as may from time to time be determined by the Board of
Directors. Mr. Anderson and Ms. Smith currently serve on the Compensation
Committee, and the Company expects that one additional outside director will
be appointed to join this committee prior to completion of the Offering.
29
<PAGE>
The Executive Committee reviews the strategic direction of the Company and
has been authorized to act in the place and stead of the Board of Directors,
to the extent permitted by Delaware law and within certain limits set by the
Board, on matters that require Board action between meetings of the Board of
Directors. Messrs. Hamilton, Anderson and Moffitt serve on the Executive
Committee.
DIRECTOR COMPENSATION
Each director of the Company is reimbursed for travel-related expenses
incurred in attending meetings of the Board of Directors. In addition,
pursuant to the Company's 1997 Incentive Plan, on December 4, 1997 each
nonemployee director received options to purchase 15,000 shares of Common
Stock at an exercise price of $9.00 per share. Additional options to purchase
shares of Common Stock may be granted to nonemployee directors in the future
in accordance with the 1997 Incentive Plan.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to December 1997, the compensation of the Company's executive officers
was established by Mr. Hamilton, the President and Chief Executive Officer of
the Company, and Mr. Anderson, who currently serves as the President and Chief
Executive Officer of CompuCom. In the future, all decisions relating to
executive compensation will be made by the Compensation Committee, which
consists of Mr. Anderson and Ms. Smith, each of whom who is an executive
officer of CompuCom and the Company, and is expected also to include one
additional outside director prior to completion of the Offering. See
"Relationship Between the Company and CompuCom--Certain Transactions."
EXECUTIVE COMPENSATION
The following table sets forth certain information with respect to the
compensation paid by or on behalf of the Company to the Company's President
and Chief Executive Officer, the only executive officer of the Company whose
compensation exceeded $100,000 during the year ended December 31, 1996 (the
"Named Executive Officer"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION(1)
----------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2)
--------------------------- ---- -------- -------- ---------------
<S> <C> <C> <C> <C>
James H. Hamilton
President & Chief Executive Officer..... 1996 $200,000 $400,000 $94,315
</TABLE>
- --------
(1) In accordance with the rules of the Securities and Exchange Commission
(the "Commission"), other compensation in the form of perquisites and
other personal benefits has been omitted because such perquisites and
other personal benefits constituted less than the lesser of $50,000 or ten
percent of the total annual salary and bonus for the Named Executive
Officer for such year.
(2) Includes $3,640 which constitutes matching contributions by CompCom to the
CompuCom 401(k) Matched Savings Plan, $7,800 which constitutes an
automobile allowance and $82,875 which constitutes the amount realized
upon the sale of CompuCom common stock issued upon the exercise of options
granted pursuant to CompuCom's stock option plan.
30
<PAGE>
OPTION GRANTS, EXERCISES AND YEAR-END OPTION VALUES
OPTION/SAR GRANTS IN CURRENT FISCAL YEAR
No stock options or stock appreciation rights were granted to the Named
Executive Officer during the last completed fiscal year. The following table
sets forth information concerning stock option grants to the Named Executive
Officer during the current fiscal year.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
----------------------------------------------- -----------------------
PERCENT OF
TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS GRANTED
UNDERLYING TO EMPLOYEES EXERCISE OR
OPTION/SARS IN FISCAL BASE PRICE EXPIRATION
NAME GRANTED (#) YEAR ($/SH) DATE 5% ($) 10% ($)
- ---- ----------- ------------ ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
James H. Hamilton....... 400,000 46.7% $9.00 12/4/07
</TABLE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
No stock options or stock appreciation rights were exercised by the Named
Executive Officer during 1996 and no stock appreciation rights were
outstanding at the end of that year. The following table sets forth
information concerning the year-end number and value of unexercised options
with respect to the Named Executive Officer.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
AT FISCAL YEAR END (#) AT FISCAL YEAR END($)(1)
------------------------- -------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ------------------------- -------------------------
<S> <C> <C>
James H. Hamilton........... 104,562/69,708
</TABLE>
- --------
(1) Based upon an assumed initial public offering price of $ per share.
STOCK INCENTIVE PLANS
On April 14, 1994, the Company's Board of Directors adopted and the
Company's stockholders approved the 1994 Stock Option Plan (the "1994 Plan").
On December 3, 1997, the Company's Board of Directors adopted and the
Company's stockholders approved the 1997 Incentive Plan (the "1997 Plan"). The
1994 Plan provides for the issuance of a maximum of 942,000 shares of Common
Stock, and the 1997 Plan provides for the issuance of a maximum of 1,400,000
shares of Common Stock. As of December 4, 1997, there were options to purchase
373,660 shares of Common Stock outstanding under the 1994 Plan and options to
purchase 856,600 shares of Common Stock under the 1997 Plan. The Board of
Directors does not intend to grant any additional options under the 1994 Plan.
Both the 1994 Plan and the 1997 Plan (collectively, the "Plans") provide for
the grant of "incentive stock options" within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), to employees, and
"nonstatutory stock options" to employees, nonemployee directors ("Nonemployee
Directors") and consultants. Additionally, the 1997 Plan provides for the
issuance of stock appreciation rights and restricted shares of Common Stock
(collectively, "Awards") to employees. The Plans are not qualified deferred
compensation plans under Section 401(a) of the Code and are not subject to the
provisions of the Employee Retirement Income Security Act of 1974, as amended.
The Plans shall be administered by the Compensation Committee of the Board
of Directors. Subject to special provisions relating to Nonemployee Directors,
the Board of Directors or its designated committee selects
31
<PAGE>
the persons to whom stock options or other Awards may be granted and
determines, as applicable, the number of shares to be subject to each stock
option or other Award, the exercise price and the vesting schedule. In making
such determinations, the Board or its designated committee considers the
person's present and potential contributions to the Company's success and
other relevant factors.
EMPLOYMENT AGREEMENTS
James H. Hamilton is currently a party to an employment agreement with
CompuCom which sets forth the terms and conditions of his employment by the
Company for a term that expires on January 1, 1999. Pursuant to the agreement,
Mr. Hamilton is entitled to an initial annual base salary of $200,000, subject
to adjustment by the Company's Board of Directors. Mr. Hamilton is also
entitled to additional compensation, including a bonus based upon achievement
of certain financial objectives for the Company's fiscal years 1996 through
1998, the amounts and payments of which are within the discretion of CompuCom.
The agreement also provides that Mr. Hamilton is entitled to the right to
receive shares representing up to ten percent (10%) of the outstanding Common
Stock of the Company prior to December 31, 1997, subject to the Company
achieving certain financial objectives. In December 1997, Mr. Hamilton and
CompuCom agreed to waive this right in exchange for a cash payment from the
Company in the amount of $1.2 million, which will be paid in January 1998. Mr.
Hamilton's employment agreement requires him to maintain the confidentiality
of information that is proprietary to the Company. In addition, Mr. Hamilton
has agreed that, during the term of his employment agreement and for a period
of two years thereafter, he will not compete with the Company in any state of
the United States in which the Company is doing business at the time of Mr.
Hamilton's termination of employment. The employment agreement also provides
that for a period of two years following the termination of employment, Mr.
Hamilton shall not solicit the Company's customers or employees.
Mr. Hamilton and the Company intend to replace this agreement with a new
employment agreement between Mr. Hamilton and the Company prior to completion
of the Offering.
RELATIONSHIP BETWEEN THE COMPANY AND COMPUCOM
--CERTAIN TRANSACTIONS
OWNERSHIP OF COMMON STOCK
Upon completion of the Offering, CompuCom and its directors and executive
officers will beneficially own more than 50% of the Company's outstanding
Common Stock, and CompuCom will be the Company's largest stockholder. So long
as CompuCom beneficially owns a majority of the outstanding Common Stock,
CompuCom will have the voting power to elect the Company's entire Board of
Directors and will have the practical ability to control all other matters
requiring stockholder approval, even where such matters may not be
advantageous to the other stockholders. Upon completion of the Offering, it is
anticipated that four of the seven members of the Board of Directors of the
Company will be directors or executive officers of CompuCom or CompuCom's
largest stockholder. Furthermore, the Senior Vice President, Finance and Chief
Financial Officer of CompuCom also serves as Chief Financial Officer,
Secretary and a director of the Company. Since March 1994, CompuCom has
provided capital and management and administrative services to the Company,
and the Company's employees have participated in a number of employee benefit
plans maintained by CompuCom, all in return for certain fees. While the
Company intends to reduce its dependence upon CompuCom for management and
administrative services, in order to assure the continued provision of these
services after the completion of the Offering, the Company has entered into an
agreement pursuant to which CompuCom will continue to provide certain of such
services on an interim basis. See "Risk Factors--Control by and Relationship
with CompuCom," "Management" and "Principal and Selling Stockholders."
In addition, since March 1994, CompuCom and the Company have entered into
several transactions with one another. It is the intention of CompuCom and the
Company that all transactions between them, or between the Company and any
other affiliated party, will be on an arm's-length basis on terms no less
favorable to the
32
<PAGE>
Company than could be obtained from unaffiliated third parties. In this
regard, transactions with CompuCom or other affiliates will be reviewed and
approved by a majority of the outside directors. The following is a
description of the historical and currently contemplated transactions between
CompuCom and the Company:
HISTORICAL TRANSACTIONS
Administrative Services. The Company has relied on CompuCom for a variety of
services on an ongoing basis. These services include, but are not limited to,
general administration, payroll, financial reporting, sales and income tax
reporting, accounts payable, insurance and human resources. In return for
providing these services, the Company has paid CompuCom a management fee equal
to 2.5% of the Company's revenue on a monthly basis. During 1994, 1995, 1996
and for the nine month period ended September 30, 1997, the Company paid
CompuCom $62,610, $149,362, $225,406 and $236,481, respectively, for such
services.
Financing Arrangements. In March 1994, the Company issued to CompuCom a
Subordinated Convertible Note in the principal amount of $500,000 (the
"Subordinated Note"), which accrued interest at a monthly rate of prime plus
1%. The Subordinated Note, which had a maturity date of August 1, 1996, was
convertible into Common Stock at a rate of $.667 per share. On December 29,
1995 the $250,125 in outstanding principal of the Subordinated Note was
converted into 375,000 shares of Common Stock.
Also in March 1994, the Company issued to CompuCom a Revolving Note in the
principal amount of $250,000 (the "Revolving Note"), which accrued interest at
a monthly rate of prime plus 1%. On December 29, 1995 the Revolving Note was
amended to increase the amount available thereunder to $1,000,000. The amended
Revolving Note had an original maturity of August 31, 1997 and accrued
interest at a monthly rate of prime plus 1%. On September 5, 1996, the Company
executed an Amended and Restated Revolving Note (the "Second Amended Revolving
Note") in replacement of the amended Revolving Note and increased the
Company's borrowing availability to $2.5 million. The Second Amended Revolving
Note bears interest at a rate of prime plus 1% and has an original maturity of
April 1, 1998. In the past three fiscal years the largest outstanding
aggregate amount owed by the Company to CompuCom was $1,319,769.
Interest paid pursuant to the foregoing financing arrangements in 1994, 1995
and 1996, and the nine months ended September 30, 1997, totalled $25,519,
$76,319, $94,952 and $20,732, respectively. The outstanding balance under the
Second Amended Revolving Note as of December 31, 1995 and 1996 was $1,148,619
and $587,511, respectively.
Savings Plan. Currently, substantially all of the Company's employees who
have completed at least six months of qualifying service are included in
CompuCom's defined contribution plan (401(k) Matched Savings Plan).
Participants may contribute to the Plan an amount between 1% and 10% of their
total annual compensation. The Company matches 50% of each participant's
qualifying contributions up to 4%, and an additional 25% of the next 2% of the
participants' qualifying contributions. The Company anticipates that its
employees will continue to participate in CompuCom's plans after completion of
the Offering.
Hamilton Note. In March 1994 CompuCom loaned $100,000 to Mr. Hamilton. The
note bears interest at prime rate and is payable in four equal annual
installments beginning March 25, 1996. The outstanding balance of the note as
of December 4, 1997 was $50,000. Mr. Hamilton has made principal payments of
$25,000 in each of 1996 and 1997 and interest payments of $7,250, $9,216 and
$6,443 in 1995, 1996 and the first nine months of 1997, respectively.
CONTRACTUAL AGREEMENTS
In connection with the Offering, the Company and CompuCom have entered into
a number of agreements, which will become effective upon completion of the
Offering, for the purpose of defining certain ongoing relationships between
them. These agreements were not the result of arms-length negotiations between
independent parties, although the Company believes that the pricing and other
terms are comparable to what
33
<PAGE>
could be achieved through arms-length negotiations with unaffiliated parties.
The Company did not retain separate counsel from that retained by CompuCom in
negotiating such agreements. Following the consummation of the Offering,
additional or modified agreements, arrangements or transactions may be entered
into between the Company and CompuCom. Any such future agreements,
arrangements and transactions will be determined through arms-length
negotiations between the parties and will be subject to the approval of a
majority of the outside directors. The following discussion of the agreements
between the Company and CompuCom is qualified in its entirety by reference to
such agreements, which have been filed as exhibits to the Registration
Statement of which this Prospectus forms a part. See "Additional Information."
Administrative Services Agreement. The Company and CompuCom have entered
into an administrative services agreement (the "Services Agreement") pursuant
to which CompuCom will provide various administrative services to the Company,
upon the Company's request, including payroll, treasury functions, insurance
and risk management, tax, human resources and employee benefit plan
administration services that CompuCom has historically provided to the
Company. Pursuant to the Services Agreement, the Company will compensate
CompuCom for such services at a rate of $15,000 per month between January 1,
1998 and December 31, 1998, and $7,500 per month between January 1, 1999 and
December 31, 1999, subject to proration for partial months or early
termination. The Services Agreement will automatically terminate upon the
earlier of December 31, 1999 or such time as CompuCom no longer owns a
majority of the outstanding Common Stock, unless earlier terminated by either
party on 90 days' prior written notice.
Indemnification Agreement. The Company and CompuCom have entered into an
indemnification agreement (the "Indemnification Agreement"), pursuant to which
the Company and CompuCom have agreed to indemnify each other and their
respective directors, officers, employees, agents and representatives for
liabilities arising under federal or state securities laws as a result of the
Offering. The indemnification obligations include liabilities arising out of
or based upon: (i) alleged misrepresentations in or omissions from this
Prospectus or the Registration Statement of which this Prospectus forms a
part; (ii) the businesses and operations conducted or formerly conducted, or
assets owned or formerly owned, by the indemnifying party; or (iii) the
failure to comply with any other agreements executed in connection with the
Offering. The Indemnification Agreement also provides that the Company will
indemnify CompuCom from any liabilities arising from CompuCom's obligations on
behalf of the Company under or in respect of all material guarantees or other
arrangements guaranteeing or securing any liability or obligation in effect on
the date of this Prospectus.
Registration Rights Agreement. The Company has granted registration rights
to CompuCom and the Company's other stockholders (the "Registration Rights
Agreement"), including demand registration rights and certain "piggy-back'
registration rights with respect to Common Stock owned by CompuCom after the
Offering. The Company's obligation is subject to certain limitations relating
to a minimum amount of Common Stock required for registration, the timing of
registration and other similar matters. The Company is obligated to pay all
expenses incidental to such registration, excluding underwriters' discounts
and commissions and certain legal fees and expenses.
CONFLICTS OF INTEREST
Conflicts of interest may arise between the Company and CompuCom in a number
of areas relating to their past and ongoing relationships, including potential
competitive business activities, marketing functions, tax and employee benefit
matters, indemnity arrangements, registration rights, sales or distributions
by CompuCom of its remaining shares of Common Stock and the exercise by
CompuCom of its ability to control the management and affairs of the Company.
There are no contractual or other restrictions on the ability of either the
Company or CompuCom to engage in such activities. Accordingly, circumstances
could arise in which the Company and CompuCom would engage in activities in
competition with one another.
Directors of the Company who are also directors or officers of CompuCom will
have conflicts of interest with respect to matters potentially or actually
involving or affecting the Company and CompuCom, such as acquisitions,
financing and other corporate opportunities that may be suitable for both the
Company and
34
<PAGE>
CompuCom. To the extent that such opportunities arise, such directors may
consult with their legal advisors and make a determination after consideration
of a number of factors, including whether such opportunity is presented to any
such director in his capacity as a director of the Company, whether such
opportunity is within the Company's line of business or consistent with its
strategic objectives and whether the Company will be able to undertake or
benefit from such opportunity. There can be no assurance that conflicts will
be resolved in favor of the Company.
So long as Safeguard Scientifics, Inc. continues to own at least 50% of the
outstanding common stock of CompuCom and so long as CompuCom continues to own
at least 50% of the outstanding Common Stock, the directors and officers of
the Company will, subject to certain limitations, be indemnified by and
insured under insurance policies maintained by Safeguard Scientifics, Inc.
against liability for actions taken or omitted to be taken in their capacities
as directors and officers of the Company, including actions or omissions that
may be alleged to constitute breaches of the fiduciary duties owed by such
persons to the Company and its stockholders. It is contemplated that, if
Safeguard Scientifics, Inc. ceases to own at least 50% of CompuCom or if
CompuCom ceases to own at least 50% of the outstanding shares of Common Stock,
the Company would obtain insurance coverage for its directors and officers in
respect of such matters comparable to that currently provided under the
existing policy.
35
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of shares of the Company's Common Stock as of September 30, 1997,
and as adjusted to reflect the sale of the shares of Common Stock offered
hereby, by (i) each person who is known to the Company to own beneficially
more than 5% of the outstanding shares of Common Stock, (ii) each of the
Company's directors and the Named Executive Officer, (iii) all current
directors and executive officers of the Company as a group and (iv) each
Selling Stockholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO OFFERING(1) SHARES OFFERING(2)
----------------------- BEING ----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ------------------------ ------------ ---------- ------- --------- ----------
<S> <C> <C> <C> <C> <C>
CompuCom Systems, Inc.
(3).................... 4,367,740 82.1%
James H. Hamilton
(4)(5)................. 418,562 7.9%
Edward R. Anderson
(3)(4)(6).............. 47,100 *
Daniel F. Brown (3)..... 28,260 *
M. Lazane Smith (3)..... 4,710 *
Christopher J. Moffitt.. -- *
Glenn T. Rieger......... -- *
All directors and
officers as a group (6
persons) (7)........... 498,632 9.4%
</TABLE>
- --------
* Less than one percent.
(1) Except as set forth in the footnotes to this table and subject to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock shown as beneficially owned by such stockholder.
(2) Shares of Common Stock that are not outstanding, but that may be acquired
by a person within the 60 day period following September 30, 1997, are
included in the number of shares beneficially owned for such person and in
computing the percentage ownership for such person, but are not included
in the number of shares beneficially owned or in computing the percentage
ownership for any other person.
(3) The address for each of CompuCom Systems, Inc., Edward R. Anderson, M.
Lazane Smith and Daniel F. Brown is 7171 Forest Lane, Dallas, Texas 75230.
(4) The address for James H. Hamilton is 3025 Windward Plaza, Suite 200,
Alpharetta, Georgia 30005.
(5) Includes an aggregate of 104,562 shares of Common Stock underlying options
which are immediately exercisable.
(6) Includes an aggregate of 18,840 shares of Common Stock underlying options,
14,130 of which are immediately exercisable and 4,710 of which will be
exercisable within 60 days.
(7) Includes an aggregate of 123,402 shares of Common Stock underlying options
granted to individuals listed in the table, 118,692 of which are
immediately exercisable and 4,710 of which will be exercisable within 60
days.
36
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company currently consists of 25,000,000
shares of Common Stock, par value $0.01 per share, and 2,000,000 shares of
Preferred Stock, par value $0.01 per share.
COMMON STOCK
As of September 30, 1997, there were issued and outstanding an aggregate of
5,322,300 shares of Common Stock held of record by approximately 20
stockholders.
Holders of Common Stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders and do not have cumulative voting
rights. Accordingly, holders of a majority of the outstanding shares of Common
Stock entitled to vote in any election of directors may elect all of the
directors standing for election. Holders of Common Stock are entitled to
receive ratably such dividends, if any, as may be declared by the Board of
Directors out of funds legally available therefor. Upon the liquidation,
dissolution or winding-up of the Company, holders of Common Stock are entitled
to receive ratably the net assets of the Company available for distribution
after the payment of all debts and other liabilities of the Company. Holders
of Common Stock have no preemptive, subscription, redemption or conversion
rights. The outstanding shares of Common Stock are, and the shares offered by
the Company hereby will be, when issued and paid for, fully paid and
nonassessable. The rights, preferences and privileges of holders of Common
Stock are subject to, and may be adversely affected by, the rights of holders
of shares of any series of Preferred Stock that the Company may designate and
issue in the future.
PREFERRED STOCK
The Company's First Amended and Restated Certificate of Incorporation
provides that the Company's Board of Directors may, without further action by
the Company's stockholders, from time to time direct the issuance of up to
2,000,000 shares of Preferred Stock in one or more series and may, at the time
of issuance, determine the rights, preferences and limitations of each series,
including dividend rates, terms of redemption (including sinking fund
provisions), redemption prices, voting rights, conversion rights and
liquidation preferences of the shares constituting such series. The holders of
Preferred Stock would normally be entitled to receive a preference payment in
the event of any liquidation, dissolution or winding-up of the Company before
any payment is made to the holders of the Common Stock.
Although the Board of Directors has no present intention of doing so, the
Board of Directors has the authority to issue shares of Preferred Stock
(within the limits imposed by applicable law) that could, depending on the
terms of such shares, make more difficult or discourage an attempt to obtain
control of the Company by merger, tender offer, proxy contest or other means
and in doing so adversely impact the market value of the stock. In addition,
issuances of Preferred Stock could render the removal of the incumbent Board
of Directors and management more difficult. See "Risk Factors--Control by and
Relationship with CompuCom" and "--Certain Anti-Takeover Provisions."
DELAWARE LAW
The Company is a Delaware corporation and is subject to Section 203 of the
Delaware General Corporation Law. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of
a corporation's outstanding voting stock) from engaging in a "business
combination" (as defined in Section 203) with a Delaware corporation for three
years following the date such person became an interested stockholder unless
(i) before such person became an interested stockholder, the board of
directors of the corporation approved the transaction in which the interested
stockholder became an interested stockholder or approved the business
combination, (ii) upon consummation of the transaction that resulted in the
interested stockholder's becoming an interested stockholder, the interested
stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time such transaction commenced (excluding stock held by
directors
37
<PAGE>
who are also officers of the corporation and by employee stock plans that do
not provide employees with the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer) or (iii) following the transaction in which such persons became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by
the affirmative vote of the holders of at least two-thirds of the outstanding
voting stock of the corporation not owned by the interested stockholder. Under
Section 203, the restrictions described above also do not apply to certain
business combinations proposed by an interested stockholder following the
announcement or notification of one of certain extraordinary transactions
involving the corporation and a person who had not been an interested
stockholder during the previous three years or who became an interested
stockholder with the approval of a majority of the corporation's directors and
which transaction is approved or not opposed by a majority of the board of
directors then in office.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services LLC.
SHARES ELIGIBLE FOR FUTURE SALE
Upon the completion of the Offering, shares of Common Stock will be
outstanding ( shares of Common Stock if the Underwriters' over-allotment
option is exercised in full). Of those shares, shares of Common Stock sold
by the Company in the Offering will be freely tradable without restriction or
further registration under the Securities Act, unless held by an "affiliate"
of the Company (as such term is defined under the Securities Act). Any such
affiliate will be subject to the resale limitations of Rule 144 adopted under
the Securities Act. The remaining shares of Common Stock outstanding
constitute "restricted securities" for purposes of Rule 144 and are held by
"affiliates" of the Company within the meaning of Rule 144. Restricted
securities may not be resold except in compliance with the registration
requirements of the Securities Act or pursuant to an exemption therefrom,
including the exemption provided by Rule 144.
In general, under Rule 144, a person (or persons whose shares are
aggregated), including a person who may deemed to be an "affiliate" of the
Company, is entitled to sell within any three-month period a number of shares
beneficially owned for at least one year that does not exceed the greater of
(i) 1.0% of the then outstanding shares of Common Stock or (ii) the average
weekly trading volume of the outstanding shares of Common Stock during the
four calendar weeks preceding such sale. Sales under Rule 144 are also subject
to certain requirements as to the manner of sale, notice and the availability
of current public information about the Company. However, a person (or persons
whose shares are aggregated) who is not deemed to be an "affiliate" of the
Company at any time during the 90 days preceding a proposed sale by such
person and who has beneficially owned "restricted securities" for at least two
years is entitled to sell such shares under Rule 144 without regard to the
volume, manner of sale or notice requirements.
The Company, together with each of its executive officers and directors and
the Selling Stockholders, who collectively, upon completion of the Offering,
will own an aggregate of shares of Common Stock, have, subject to
certain limited exceptions, agreed not to, directly or indirectly, offer,
pledge, sell, contract to sell, grant any option for the purchase or sale of,
or otherwise dispose of (or announce any offer, sale, grant of an option to
purchase or other disposition), any shares of Common Stock or securities
convertible into, or exercisable or exchangeable for, shares of Common Stock
for shares of Common Stock for a period of 180 days following the date of this
Prospectus without the prior written consent of, The Robinson-Humphrey
Company, LLC, as a Representative.
The Company has reserved an aggregate of 1,773,660 shares of Common Stock
for issuance upon exercise of options or other equity awards granted or to be
granted under the Plans. See "Management--Stock Incentive Plans." The Company
intends to file registration statements on Form S-8 under the Securities Act
to register all of the shares of Common Stock reserved for issuance under the
Plans. Such registration statements are expected to be filed subsequent to
completion of the Offering and will automatically become
38
<PAGE>
effective upon filing. Shares issued under the Plans after such registration
statements are effective may thereafter be sold in the public market, subject,
however, to the limitations imposed by Rule 144 on affiliates of the Company,
the lock-up agreements described above and any transfer or vesting
restrictions imposed on options or equity awards at the time of grant.
An increase in the number of shares of Common Shares that may come available
for sale in the public market may adversely affect the market price prevailing
from time to time of the Common Stock in the public market and could impair
the Company's ability to raise additional capital through the sale of its
equity securities.
39
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company and the Selling Stockholders have agreed to sell to each of the
Underwriters named below, and each of such Underwriters, for whom The
Robinson-Humphrey Company, LLC and Lehman Brothers Inc. are acting as
representatives, has severally agreed to purchase from the Company and the
Selling Stockholders, the respective number of shares of Common Stock set
forth opposite its name below:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
The Robinson-Humphrey Company, LLC.......................
Lehman Brothers Inc......................................
Total................................................
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to the approval of certain legal matters by counsel and
to various other conditions. The nature of the Underwriters' obligations is
such that they are committed to purchase all of the shares of Common Stock
offered hereby if any are purchased.
The Underwriters propose to offer the shares of Common Stock directly to the
public at the public offering price set forth on the cover page of this
Prospectus and to certain other dealers at such price less a concession not in
excess of $ per share of Common Stock. The Underwriters may allow, and
such dealers may reallow, a concession not in excess of $ per share in
sales to certain other dealers. After the Offering, the public offering price
and other selling terms may be changed by the Underwriters.
The Company and the Selling Stockholders have granted to the Underwriters a
30-day option to purchase up to an additional shares of Common
Stock, at the initial public offering price less the underwriting discount, as
set forth on the cover page of this Prospectus solely to cover over-
allotments, if any. To the extent the Underwriters exercise such option, each
of the Underwriters will be obligated, subject to certain conditions, to
purchase approximately the same percentage of shares of Common Stock pursuant
to such option as the number of shares of Common Stock purchased initially by
such Underwriter bears to the total number of shares of Common Stock to be
purchased initially by the Underwriters.
Prior to the Offering made hereby, there has been no public market for the
Common Stock. The initial public offering price for the Common Stock will be
determined through negotiations among the Company and the Representatives and
will not be based upon any independent appraisal or valuation of the Company.
Among the factors to be considered in making such determination are prevailing
market and general economic conditions, the market capitalization of publicly-
traded companies that the Company and the Representatives believe to be
comparable to the Company, the revenues and earnings of the Company in recent
periods, the experience of the Company's management, the economic
characteristics of the business in which the Company competes, estimates of
the business potential of the Company, the present state of the Company's
development and other factors deemed relevant. The Company has applied for
quotation of the shares of Common Stock on the Nasdaq National Market under
the symbol "CLNK."
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority. The Representatives have advised the Company that they intend to
make a market in the Common Stock after completion of the Offering.
The Company, the Selling Stockholders and each of the Company's executive
officers and directors have entered into lock-up agreements with the
Representatives pursuant to which they have agreed not to, directly or
indirectly, offer, pledge, sell, contract to sell, grant any option for the
sale of, or otherwise dispose (or announce any offer, sale, grant of an option
to purchase or other disposition), of any shares of Common Stock or securities
40
<PAGE>
convertible into, or exercisable or exchangeable for, shares of Common Stock
for a period of 180 days from the date of this Prospectus, without the prior
written consent of the Representatives, except, in the case of the Company,
for the granting of options or the issuance of Common Stock upon the exercise
of stock options pursuant to the Plans.
In order to facilitate the offering of the shares of Common Stock, the
Underwriters may engage in transactions on the Nasdaq National Market or
otherwise that stabilize, maintain or otherwise affect the price of the shares
of Common Stock. Specifically, the Underwriters may over-allot in connection
with the Offering, creating a short position in the shares of Common Stock for
their own account. In addition, to cover over-allotments or to stabilize the
price of the shares of Common Stock, the Underwriters may bid for, and
purchase, shares of Common Stock in the open market. Finally, the underwriting
syndicate may reclaim selling concessions allowed to an Underwriter or a
dealer for distributing the shares of Common Stock in the Offering, if the
syndicate repurchases previously distributed shares of Common Stock in
transactions to cover syndicate short positions, in stabilization transactions
or otherwise. Any of these activities may stabilize or maintain the market
price of the shares of Common Stock above independent market levels. The
Underwriters are not required to engage in these activities and may end any of
these activities at any time.
The Company has agreed to indemnify the several Underwriters or contribute
to losses arising out of certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required
to make in respect thereof.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Jenkens & Gilchrist, a Professional Corporation,
Austin, Texas, and for the Underwriters by Jones, Day, Reavis & Pogue,
Atlanta, Georgia.
EXPERTS
The Financial Statements of the Company as of December 31, 1995 and 1996 and
for the period from March 25, 1994 (inception) through December 31, 1994 and
for each of the years in the two-year period ended December 31, 1996, have
been included herein and in the Registration Statement in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein and in the Registration Statement, and upon the
authority of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus, which is a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto. For further information with respect to the
Company and the Common Stock, reference is hereby made to the Registration
Statement and the exhibits and schedules filed as a part thereof. Statements
contained in this Prospectus concerning the provisions or contents of any
contract, agreement, or any other document referred to herein are not
necessarily complete. With respect to each such contract, agreement, or
document filed as an exhibit to the Registration Statement, reference is made
to such exhibit for a more complete description of the matters involved, and
each statement shall be deemed qualified in its entirety by such reference to
the copy of the applicable document filed with the Commission. A copy of the
Registration Statement, including the exhibits and schedules thereto, may be
inspected without charge at the Public Reference section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
at the following regional offices of the Commission: New York Regional Office,
7 World Trade Center, 13th Floor, New York, New York 10048; and Chicago
Regional Office, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of the Registration Statement and the exhibits and schedules thereto
can be obtained from
41
<PAGE>
the Public Reference Section of the Commission upon payment of prescribed
fees. The Commission maintains an Internet web site that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the Commission. The address of that site is
http://www.sec.gov.
Prior to filing the Registration Statement of which this Prospectus is a
part, the Company was not subject to the reporting requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Upon effectiveness of the Registration Statement, the Company will
become subject to the informational and periodic reporting requirements of the
Exchange Act, and in accordance therewith, will file periodic reports, proxy
statements, and other information with the Commission. Such periodic reports,
proxy statements, and other information will be available for inspection and
copying at the public reference facilities and other regional offices referred
to above. The Company intends to register the securities offered by the
Registration Statement under the Exchange Act simultaneously with the
effectiveness of the Registration Statement and to furnish its stockholders
with annual reports containing audited financial statements and such other
reports as may be required from time to time by law or the Nasdaq National
Market.
42
<PAGE>
CLIENTLINK, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Auditors' Report.............................................. F-2
Balance Sheets, as of December 31, 1995 and 1996 and September 30, 1997
(unaudited).............................................................. F-3
Statements of Income for the period from March 25, 1994 (inception) to
December 31, 1994, the years ended December 31, 1995 and 1996, and the
nine months ended September 30, 1996 and 1997 (unaudited)................ F-4
Statements of Stockholders' Equity for the period from March 25, 1994
(inception) to December 31, 1994, the years ended December 31, 1995 and
1996, and the nine months ended September 30, 1997 (unaudited)........... F-5
Statements of Cash Flows for the period from March 25, 1994 (inception) to
December 31, 1994, the years ended December 31, 1995 and 1996, and the
nine months ended September 30, 1996 and 1997 (unaudited)................ F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
ClientLink, Inc.:
We have audited the accompanying balance sheets of ClientLink, Inc. as of
December 31, 1995 and 1996, and the related statements of income,
stockholders' equity, and cash flows for the period from March 25, 1994
(inception) to December 31, 1994 and for each of the years in the two-year
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of ClientLink, Inc. as of
December 31, 1995 and 1996, and the results of its operations and its cash
flows for the period from March 25, 1994 (inception) to December 31, 1994 and
for each of the years in the two-year period ended December 31, 1996 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Dallas, Texas
November 14, 1997, except as to Note 12
which is as of December 4, 1997
F-2
<PAGE>
CLIENTLINK, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
ASSETS 1995 1996 1997
------ ------------ ------------ -------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash................................. $ 51,605 $ 51,861 $ 50,244
Accounts receivable, less allowance
for doubtful accounts of $63,405 in
1995, $82,064 in 1996, and $117,064
in 1997............................. 2,127,309 1,772,845 2,470,642
Unbilled receivables................. 41,759 1,269 214,470
Note receivable from stockholder..... 48,024
Deferred income taxes................ 201,198 35,606
Other................................ 115,088 81,424 39,753
---------- ---------- ----------
Total current assets............... 2,536,959 1,943,005 2,823,133
Property and equipment, net............ 538,063 698,632 1,217,042
Intangible assets, net................. 165,430 116,067 75,294
---------- ---------- ----------
$3,240,452 $2,757,704 $4,115,469
========== ========== ==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C> <C>
Current liabilities:
Accounts payable..................... $ 451,744 $ 161,510 $ 65,551
Accrued compensation................. 437,343 724,383 932,380
Deferred revenue..................... 483,878 8,669 50,869
Deferred income taxes................ 17,869
Other accrued liabilities............ 60,308 50,339 62,535
---------- ---------- ----------
Total current liabilities.......... 1,433,273 944,901 1,129,204
Long-term note payable to stockholder.. 1,148,619 587,511
Deferred income taxes.................. 1,514 26,271 29,678
Commitments and contingencies
Stockholders' equity:
Preferred stock, $.01 par value.
Authorized 2,000,000 shares, none
issued..............................
Common stock, $.01 par value.
Authorized 4,000,000 shares; issued
and outstanding 3,375,000 shares in
1995 and 1996, and 3,390,000 shares
in 1997............................. 33,750 33,750 33,900
Additional paid-in capital........... 246,375 246,375 257,475
Retained earnings.................... 376,921 918,896 2,665,212
---------- ---------- ----------
Total stockholders' equity......... 657,046 1,199,021 2,956,587
---------- ---------- ----------
$3,240,452 $2,757,704 $4,115,469
========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
CLIENTLINK, INC.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 25,
1994 YEAR ENDED DECEMBER NINE MONTHS ENDED
(INCEPTION) 31, SEPT. 30,
THROUGH --------------------- ---------------------
DEC. 31, 1994 1995 1996 1996 1997
------------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
Service............... $2,496,342 $5,682,236 $8,406,111 $6,318,217 $9,263,048
Product............... 8,067 292,239 610,132 608,300 196,180
---------- ---------- ---------- ---------- ----------
Total revenue....... $2,504,409 $5,974,475 $9,016,243 $6,926,517 $9,459,228
Operating expenses:
Project related
expenses............. 1,832,104 3,855,186 5,492,114 4,147,979 4,856,875
Cost of products sold. 8,067 292,239 610,132 608,300 196,180
Depreciation and
amortization......... 50,160 141,919 210,004 153,325 218,203
General and
administrative (note-
7)................... 489,159 1,048,544 1,708,750 1,309,762 1,332,310
---------- ---------- ---------- ---------- ----------
Total operating
expenses........... 2,379,490 5,337,888 8,021,000 6,219,366 6,603,568
---------- ---------- ---------- ---------- ----------
Income from operations.. 124,919 636,587 995,243 707,151 2,855,660
Interest expense to
stockholder............ 25,519 76,319 94,952 87,585 20,732
---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 99,400 560,268 900,291 619,566 2,834,928
Income taxes............ 39,760 222,987 358,316 246,588 1,088,612
---------- ---------- ---------- ---------- ----------
Net income.......... $ 59,640 $ 337,281 $ 541,975 $ 372,978 $1,746,316
========== ========== ========== ========== ==========
Net income per share.... $ 0.01 $ 0.06 $ 0.09 $ 0.06 $ 0.31
========== ========== ========== ========== ==========
Weighted average number
of common and common
equivalent shares...... 5,190,989 5,237,731 5,752,599 5,763,945 5,718,806
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
CLIENTLINK, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
----------------- PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
--------- ------- ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Issuance of common
stock.................. 1,000,000 $10,000 $ $ $ 10,000
Stock split effected as
a stock dividend....... 2,000,000 20,000 (20,000)
Net income.............. 59,640 59,640
--------- ------- -------- ---------- ----------
Balances at December 31,
1994................... 3,000,000 30,000 39,640 69,640
Conversion of
convertible debt....... 375,000 3,750 246,375 250,125
Net income.............. 337,281 337,281
--------- ------- -------- ---------- ----------
Balances at December 31,
1995................... 3,375,000 33,750 246,375 376,921 657,046
Net income.............. 541,975 541,975
--------- ------- -------- ---------- ----------
Balances at December 31,
1996................... 3,375,000 33,750 246,375 918,896 1,199,021
--------- ------- -------- ---------- ----------
Exercise of options
(unaudited)............ 15,000 150 11,100 11,250
Net income (unaudited).. 1,746,316 1,746,316
--------- ------- -------- ---------- ----------
Balances at September
30, 1997 (unaudited)... 3,390,000 $33,900 $257,475 $2,665,212 $2,956,587
========= ======= ======== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
CLIENTLINK, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 25,
1994 (INCEPTION) YEAR ENDED DECEMBER NINE MONTHS ENDED
THROUGH 31, SEPTEMBER 30,
DECEMBER 31, ---------------------- ---------------------
1994 1995 1996 1996 1997
---------------- ----------- --------- --------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income............. $ 59,640 $ 337,281 $ 541,975 $ 372,978 $1,746,316
Adjustments to
reconcile net income
to net cash provided
by (used in) operating
activities:
Depreciation and
amortization......... 50,160 141,919 210,004 153,325 218,203
Noncurrent deferred
income taxes......... (16,951) 18,465 24,757 20,305 3,407
Changes in assets and
liabilities:
Receivables.......... (792,468) (1,334,841) 354,464 365,178 (697,797)
Unbilled receivables. (100,738) 58,979 40,490 26,229 (213,201)
Other current assets. (28,860) (86,228) 33,664 51,623 41,671
Accounts payable..... 451,744 (290,234) (396,048) (95,959)
Accrued compensation. 999,500 (562,157) 287,040 36,194 207,997
Deferred revenue..... 259,605 224,273 (475,209) (345,258) 42,200
Current deferred
income taxes........ (78,747) (122,451) 165,592 127,719 53,475
Other accrued
liabilities......... 27,668 32,640 (9,969) 21,764 3,401
--------- ----------- --------- --------- ----------
Net cash provided by
(used in) operating
activities......... 378,809 (840,376) 882,574 434,009 1,309,713
Cash flows from
investing activities:
Capital expenditures... (84,561) (561,011) (321,210) (157,922) (687,045)
Purchase of intangible
assets................ (250,000)
--------- ----------- --------- --------- ----------
Net cash (used in)
investing
activities......... (334,561) (561,011) (321,210) (157,922) (687,045)
--------- ----------- --------- --------- ----------
Cash flows from
financing activities:
Note payable to
stockholder, net...... 70,487 1,328,257 (561,108) (275,425) (635,535)
Issuance of common
stock................. 10,000 11,250
--------- ----------- --------- --------- ----------
Net cash provided by
(used in) financing
activities......... 80,487 1,328,257 (561,108) (275,425) (624,285)
--------- ----------- --------- --------- ----------
Net increase (decrease)
in cash................ 124,735 (73,130) 256 662 (1,617)
Cash at beginning of
period................. 124,735 51,605 51,605 51,861
--------- ----------- --------- --------- ----------
Cash at end of period... $ 124,735 $ 51,605 $ 51,861 $ 52,267 $ 50,244
========= =========== ========= ========= ==========
Supplemental schedule of
noncash financing
activities:
1995 conversion of long-
term debt to common
stock.................. $ 250,125
===========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
CLIENTLINK, INC.
NOTES TO FINANCIAL STATEMENTS
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
(1) ORGANIZATIONAL HISTORY AND NATURE OF BUSINESS
ClientLink, Inc. ("ClientLink" or the "Company") designs, develops, and
implements large-scale Information Technology ("IT") solutions for companies
with critical business information systems needs. The Company primarily
focuses on developing and supporting client/server and Internet-based custom
applications. The Company also provides additional services to clients
including high-level information technology consulting, developing detailed
business process IT recommendations, maintaining and supporting applications
in production, and hosting Internet and client/server applications for its
clients.
The Company was incorporated in July 1992 under the name "CompuCom
Acquisition Corp. of Texas". The Company did not have any operations until
March 25, 1994, at which time it acquired the rights to a software development
object library from Fisher Business Systems, Inc. and hired a software
development staff. Certain employees of the Company were previously engaged in
the custom software development business at HMP Software Solutions, Inc.
("HMP"). In August 1994, the Company changed its name to ClientLink, Inc.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Financial Instruments
The Company's financial instruments, principally cash, accounts receivable,
accounts payable and accrued liabilities, are carried at cost which
approximates fair value due to the short-term maturity of these instruments.
As amounts outstanding under the Company's credit arrangement bear interest
approximating current market rates, the carrying amount approximates fair
value. Financial instruments which potentially subject the Company to a
concentration of credit risk consist of accounts receivable.
The Company derives a significant portion of its revenues from a limited
number of large clients. The Company performs ongoing credit evaluations of
its customers and generally does not require collateral on accounts
receivable. The Company maintains allowances for potential credit losses. The
Company operates in one industry segment and its customers are headquartered
primarily in North America.
Property and Equipment
Property and equipment, consisting primarily of computer hardware and
software, is stated at cost less accumulated depreciation and amortization.
Provision for depreciation and amortization is computed using the straight-
line method over the estimated useful lives of the related assets ranging from
three to seven years. Leasehold improvements are amortized over the lesser of
the estimated useful lives of the assets or the lease term.
Intangible Assets
Intangible assets consist of a software development object library which is
amortized using the straight-line method over a 5 year period.
Revenue Recognition
The Company derives substantially all of its revenues from information
technology and management consulting, software development and implementation
services. The Company recognizes revenues from fixed-price projects using the
percentage of completion method, which requires revenues to be recognized over
the term of a contract based on the percentage of work completed. The
cumulative impact of any revision in
F-7
<PAGE>
CLIENTLINK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
estimates of the percent complete is reflected in the period in which the
changes become known. Provisions for estimated losses on uncompleted contracts
are made on a contract by contract basis and are recognized in the period in
which the losses are determined. Revenues on products and other materials sold
are recognized upon shipment. Unbilled receivables represent revenue
recognized based on services performed in excess of billings in accordance
with terms of client contracts. Billings in excess of recognized revenue are
classified as deferred revenue.
Income Taxes
Since inception, the Company has been a member of the CompuCom Systems, Inc.
consolidated group for federal income tax purposes. The income tax expense
recognized by the Company is calculated as if the Company filed separate
income tax returns. The Company uses the asset and liability method of
accounting for income taxes. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
Stock Dividend
In December 1994, the Company completed a three-for-one stock split in the
form of a stock dividend. The effect of this split has been retroactively
applied to all share and option amounts, including the option exercise prices.
Net Income Per Share
Net income per share is computed using the weighted average number of shares
of common stock outstanding and dilutive common equivalent shares from stock
options using the treasury stock method. Pursuant to the Securities and
Exchange Commission Staff Accounting Bulletins, such computations include all
common and common equivalent shares issued within twelve months of the initial
public offering ("IPO") as if they were outstanding for all periods presented
using the treasury stock method and the IPO price. Fully diluted and primary
earnings per share are the same for all periods presented.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions affecting the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Accounting for Impairment of Long-Lived Assets
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of," on January 1, 1996. This
Statement requires that long-lived assets and certain identifiable intangibles
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to
F-8
<PAGE>
CLIENTLINK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
be impaired, the impairment to be recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or
fair value less costs to sell. The adoption of this Statement did not have a
material impact on the Company's financial position, results of operations, or
liquidity.
Stock-Based Compensation
In 1996, the Company adopted SFAS No. 123, "Accounting for Stock-Based
Compensation," which gives companies the option to adopt the fair-value method
for expense recognition of employee stock options or to continue to account
for stock options and stock-based awards using the intrinsic-value method as
outlined under Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees" ("APB 25") and to make pro forma disclosures of net
earnings and net earnings per share as if the fair-value method had been
applied. The Company has elected to continue to apply APB 25 for stock options
and stock-based awards.
Research and Development
Research and development costs are expensed as incurred. To date,
substantially all research and development activities of the Company have been
pursuant to customer contracts and, accordingly, have been expensed as a cost
of the projects. For the years ended December 31, 1995 and 1996 and for the
period from March 25, 1994 (inception) to December 31, 1994, the Company did
not incur material research and development costs.
Unaudited Interim Financial Statements
The interim financial statements and the related information in these notes
as of and for the nine months ended September 30, 1996 and 1997 are unaudited.
In the opinion of management, such interim financial statements have been
prepared on the same basis as the audited financial statements and include all
adjustments considered normal and necessary to present fairly the financial
position and results of operations and cash flows for the interim periods. In
the opinion of management, all these adjustments are of a normal and recurring
nature. The results of operations for the interim periods presented are not
necessarily indicative of the results that may be expected for the entire
year.
New Accounting Pronouncements
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share ("Statement
128"). Statement 128 supersedes APB Opinion No. 15, Earnings Per Share ("APB
15") and specifies the computations, presentation, and disclosure requirements
for earnings per share ("EPS") for entities with publicly held common stock or
potential common stock. Statement 128 replaces the presentation of primary EPS
and fully diluted EPS with a presentation of basic EPS and diluted EPS.
Statement 128 is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Management does not expect that
the adoption of Statement 128 will have a material impact on the Company's
reported earnings per share.
In October 1997, Statement of Position (SOP) 97-2, "Software Revenue
Recognition" was issued. SOP 97-2 supersedes SOP 91-1 and provides guidance on
applying generally accepted accounting principles in recognizing revenue on
software transactions. SOP 97-2 is effective for transactions entered into in
fiscal years beginning after December 15, 1997. Earlier application is
encouraged as of the beginning of fiscal years or interim periods for which
financial statements or information have not been issued. Retroactive
application of the provisions of this SOP is prohibited. The Company has not
determined the effects, if any, that SOP 97-2 will have on its financial
statements.
F-9
<PAGE>
CLIENTLINK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
(3) PROPERTY AND EQUIPMENT
The cost and accumulated depreciation of property and equipment at December
31, 1995 and 1996 and September 30, 1997 are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Furniture, fixtures, and other
equipment.............................. $119,937 $130,125 194,342
Computer hardware and software.......... 504,096 793,960 1,396,815
Leasehold improvements.................. 15,303 36,466 41,266
-------- -------- ---------
639,336 960,551 1,632,423
Less accumulated depreciation........... (101,273) (261,919) (415,381)
-------- -------- ---------
Net property and equipment.......... $538,063 $698,632 1,217,042
======== ======== =========
</TABLE>
Depreciation expense for the period from March 25, 1994 (inception) through
December 31, 1994, and for the years ended December 31, 1995 and 1996, was
$10,416, $65,517 and $147,647, respectively.
(4) NOTE PAYABLE TO STOCKHOLDER
On March 25, 1994, the Company issued a $500,000 Subordinated Convertible
Note (the "Subordinated Note") to CompuCom Systems, Inc. ("CompuCom"). The
Subordinated Note, which had an original maturity date of August 1, 1996, was
convertible in common shares of the Company at a rate of $.667/share. Interest
on the Subordinated Note accrued monthly at a rate of Prime plus 1%. Also on
March 25, 1994 the Company issued a $250,000 Revolving Note (the "Revolving
Note") to CompuCom. The Revolving Note was due and payable on August 1, 1996
and accrued interest monthly at a rate of Prime plus 1%. On December 29, 1995
the Revolving Note was amended to increase the amount available to $1,000,000.
The amended Revolving Note had an original maturity of August 31, 1997 and
accrued interest at a rate of Prime plus 1%. On December 29, 1995, the
Subordinated Note was converted into 375,000 shares of the Company's common
Stock. On September 5, 1996, the company executed an Amended and Restated
Revolving Note (the "Second Amended Revolving Note"). The Second Amended
Revolving Note increased the Company's borrowing availability to $2.5 million.
This note bears interest at a rate of Prime plus 1% and is due and payable on
April 1, 1998. Amounts outstanding under the respective credit agreements are
reflected on the Balance Sheets as Note Payable to Stockholder.
Interest paid in 1994, 1995, 1996 and the nine months ended September 30,
1997 amounted to $25,519, $76,319, $94,952 and $20,732, respectively.
(5) INCOME TAXES
The provision (benefit) for income taxes for the period from March 25, 1994
(inception) through December 31, 1994, the years ended December 31, 1995 and
1996 and for the nine months ended September 30, 1996 and 1997 consists of the
following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPT. 30,
-------------------
1994 1995 1996 1996 1997
-------- -------- -------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Current:
Federal...................... $113,631 $274,712 $140,734 $ 82,472 $ 867,795
State........................ 21,827 52,261 27,233 16,092 163,935
-------- -------- -------- -------- ----------
135,458 326,973 167,967 98,564 1,031,730
Deferred....................... (95,698) (103,986) 190,349 148,024 56,882
-------- -------- -------- -------- ----------
Income Tax Expense............. $ 39,760 $222,987 $358,316 $246,588 $1,088,612
======== ======== ======== ======== ==========
</TABLE>
F-10
<PAGE>
CLIENTLINK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
Income tax expense for the period from March 25, 1994 (inception) through
December 31, 1994, and for the years ended December 31, 1995 and 1996 and for
the nine months ended September 30, 1996 and 1997 differed from the amounts
computed by applying the U.S. Federal Income tax rate of 34% to pre-tax income
as a result of the following:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPT. 30,
-----------------
1994 1995 1996 1996 1997
----- ----- ----- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
U.S. Federal Income tax rate............... 34.0% 34.0% 34.0% 34.0% 34.0%
State taxes, net of U.S. Federal income tax
benefit................................... 4.0% 4.0% 4.0% 4.0% 4.0%
Other, net................................. 2.0% 1.8% 1.8% 1.8% 0.4%
----- ----- ----- -------- --------
Effective Income tax rate.................. 40.0% 39.8% 39.8% 39.8% 38.4%
===== ===== ===== ======== ========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities used for financial
reporting purposes and the amounts used for income tax purposes. The Company
believes it is more likely than not that existing deferred tax assets will be
recognized through reversals of tax timing differences and taxable income in
future periods. The Company had the following net deferred tax assets and
liabilities as of December 31, 1995 and 1996 and as of September 30, 1997:
<TABLE>
<CAPTION>
SEPT. 30,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Current deferred tax assets (liabilities):
Deferred revenue............................. $175,963 $ 2,945 $
Accounts receivable, principally due to
allowance for doubtful accounts............. 25,235 32,661 44,953
Unbilled receivables......................... (62,822)
-------- -------- ---------
Net current deferred tax assets
(liabilities)............................. $201,198 $ 35,606 $ (17,869)
======== ======== =========
Noncurrent deferred tax assets (liabilities):
Intangible assets............................ 24,243 37,091 46,524
Accelerated depreciation..................... (19,371) (49,739) (76,526)
Other........................................ (6,386) (13,623) 324
-------- -------- ---------
Net noncurrent deferred tax assets
(liabilities)............................. $ (1,514) $(26,271) $ (29,678)
======== ======== =========
</TABLE>
Income taxes of $222,987, $358,316 and $1,088,612 were added to the note
payable to stockholder for the years ended December 31, 1995 and 1996 and for
the nine months ended September 30, 1997, respectively.
(6) STOCK-BASED COMPENSATION
The Company maintains a stock option plan covering certain key employees and
directors. Under the 1994 Stock Option Plan, options are granted with an
exercise price that approximates the fair value of the stock on the grant
date. All grants to date have been nonstatutory stock options. These options
vest 20% each year and expire after 10 years.
F-11
<PAGE>
CLIENTLINK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
Option activity under the Company's plan is summarized below:
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1995 DECEMBER 31, 1996 1997
----------------- ------------------- ------------------
(UNAUDITED)
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................ 549,500 $0.07 549,500 $0.07 405,060 $0.08
Granted...............
Exercised............. (23,550) 0.48
Canceled.............. (144,440) 0.03
------- ----- -------- ----- ------- -----
Outstanding at end of
year................... 549,500 0.07 405,060 0.08 381,510 0.06
Options exercisable at
year-end............... 109,900 0.07 162,024 0.08 228,906 0.06
Shares available for
future grant........... 392,500 392,500 392,500
</TABLE>
The exercise prices of the options granted range from $0.0021 to $0.477 per
share. The share number and per share price reflect the effect of the 1.57 to
1 stock split.
(7) RELATED PARTY TRANSACTIONS
The Company's majority stockholder, CompuCom Systems, Inc. ("CompuCom")
provides a number of administrative services to the Company on an ongoing
basis. These services include, but are not limited to general administration,
payroll, financial reporting, sales and income tax reporting, accounts
payable, insurance and human resources. In return for providing these
services, the Company pays CompuCom a management fee equal to 2.5% of revenues
on a monthly basis. Amounts paid during 1994, 1995, 1996 and for the nine
month period ended September 30, 1997 were $62,610, $149,362, $225,406, and
$236,481, respectively. The amounts are not necessarily indicative of the
actual costs which may have been incurred had the Company operated as an
entity unaffiliated with CompuCom.
Revenue included $23,534, $68,430, $1,416 and $24,682 for services performed
for CompuCom during the period from March 25, 1994 (inception) through
December 31, 1994, the years ended December 31, 1995 and 1996, and the nine
months ended September 30, 1997, respectively. The Company purchased $21,482,
$27,548, $7,970 and $47,257 of computer equipment from CompuCom during the
period from March 25, 1994 (inception) through December 31, 1994, the years
ended December 31, 1995 and 1996 and the nine months ended September 30, 1997,
respectively.
In March 1994, CompuCom loaned $100,000 to an officer of the Company. The
note bears interest at the Prime rate and is payable in four equal annual
installments beginning March 25, 1996. At September 30, 1997 the outstanding
balance of this note was $50,000.
(8) SIGNIFICANT CUSTOMERS
Two customers accounted for 64% and 20% of total revenue for the period from
March 25, 1994 (inception) through December 31, 1994. Three customers
accounted for 55%, 21% and 11%, respectively, of total revenue in 1995 and 89%
of accounts receivable in aggregate at December 31, 1995. Two customers
accounted for 48% and 39% of total revenue in 1996 and 81% of accounts
receivable in aggregate at December 31, 1996.
F-12
<PAGE>
CLIENTLINK, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1997
IS UNAUDITED)
(9) LEASES
The Company maintains its executive office in Alpharetta, Georgia. This
executive office is subject to an operating lease expiring in 2001. Future
minimum payments under this lease commitment in excess of one year are as
follows at December 31, 1996:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ ----------
<S> <C>
1997......................................................... $ 387,840
1998......................................................... 395,597
1999......................................................... 403,509
2000......................................................... 411,579
2001......................................................... 419,810
----------
$2,018,335
==========
</TABLE>
Rent expense for the period from March 25, 1994 (inception) through December
31, 1994 and the years ended December 31, 1995 and 1996 was $47,747, $202,966
and $232,466, respectively.
(10) SAVINGS PLAN
Substantially all of the Company's employees who have completed at least six
months of qualifying service are included in CompuCom's defined contribution
plan (401(k) Matched Savings Plan). Participants may contribute to the plan an
amount between 1% and 10% of their total annual compensation. The Company
matches 50% of each participant's qualifying contributions up to 4%, and an
additional 25% of the next 2% of the participant's qualifying contributions.
Amounts expensed relating to the Plan were $5,337, $9,619, $23,160 and $25,028
for the period from March 25, 1994 (inception) through December 31, 1994, for
the years ended December 31, 1995 and 1996 and for the nine months ended
September 30, 1997, respectively.
(11) CONTINGENCIES
There are no material legal proceedings to which the Company is a party or
to which any of its property is subject.
(12) SUBSEQUENT EVENTS
In December 1997, the Company completed a 1.57 for 1 stock split, effected
as a stock dividend. After the split, the Company granted options covering
856,600 shares to employees and directors. These options vest over a five year
period and have an exercise price of $9 per share, the estimated fair market
value of the shares at the date of grant.
In December 1997, the Company agreed to make a one time payment of $1.2
million to its Chief Executive Officer in connection with the waiver of his
contractual right to receive shares of Common Stock. The Company will record
this expense in the fourth quarter of 1997.
In December 1997, the Company amended and restated its Certificate of
Incorporation to increase the number of authorized shares of Common Stock to
25,000,000 and authorized the Board of Directors to issue up to 2,000,000
shares of Preferred Stock, $.01 par value, without shareholder approval, with
such rights, preferences, privileges and restrictions as the Board of
Directors may determine.
F-13
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY OF THE UNDERWRITERS
OR ANY OTHER PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE
DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLIC-
ITATION OF AN OFFER TO BUY, ANY SECURITIES OTHER THAN THE SHARES OF COMMON
STOCK OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITA-
TION OF AN OFFER TO BUY ANY OF THE SHARES OF COMMON STOCK OFFERED HEREBY BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHO-
RIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALI-
FIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Use of Proceeds........................................................... 12
Dividend Policy........................................................... 12
Capitalization............................................................ 12
Dilution.................................................................. 13
Selected Financial Data................................................... 14
Management's Discussion and Analysis
of Financial Condition and Results
of Operations............................................................ 15
Business.................................................................. 21
Management................................................................ 29
Relationship Between the Company and CompuCom--Certain Transactions....... 33
Principal and Selling Stockholders........................................ 36
Description of Capital Stock.............................................. 37
Shares Eligible for Future Sale........................................... 38
Underwriting.............................................................. 40
Legal Matters............................................................. 41
Experts................................................................... 41
Additional Information.................................................... 41
Index to Financial Statements............................................. F-1
</TABLE>
UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER
OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PRO-
SPECTUS. THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEAL-
ERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SHARES
CLIENTLINK, INC.
COMMON STOCK
-----------------
PROSPECTUS
-----------------
THE ROBINSON-HUMPHREY
COMPANY
LEHMAN BROTHERS
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the
sale and distribution of the securities being registered, other than the
underwriting discounts and commissions. All amounts shown are estimates except
for the Securities and Exchange Commission registration fee and the NASD
filing fee. All of these fees are being paid by the Company.
<TABLE>
<S> <C>
SEC Registration Fee.......................................... $
NASD Filing Fee...............................................
NNM Listing Fee...............................................
Transfer Agent and Registrar Fees.............................
Accounting Fees and Expenses..................................
Legal Fees and Expenses.......................................
Printing, Engraving and Mailing Expenses......................
Miscellaneous.................................................
----------
Total..................................................... $
==========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of Delaware provides that a
corporation has the power to indemnify a director, officer, employee or agent
of the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred
in connection with an action or proceeding to which that person is or is
threatened to be made a party by reason of such position, if that person acted
in good faith and in a manner that person reasonably believed to be in or not
opposed to the best interests of the corporation, and, in any criminal
proceeding, if such person had no reasonable cause to believe his conduct was
unlawful; provided that, in the case of actions brought by or in the right of
the corporation, no indemnification shall be made with respect to any matter
as to which that person has been adjudged to be liable to the corporation
unless and only to the extent that the adjudicating court determines that such
indemnification is proper under the circumstances.
The Certificate of Incorporation of the Company limits the liability of
directors and officers of the Company to the Company or its stockholders to
the fullest extent permitted by Delaware law. Specifically, directors and
officers of the Company will not be personally liable for money damages for
breach of a duty as a director or an officer, except for liability (i) for any
breach of the director's or officer's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or which involve a
knowing violation of law, (iii) as to directors only, under the Delaware
Business Corporation Act, which relates to unlawful declarations of dividends
or other distributions of assets to stockholders or the unlawful purchase of
shares of the corporation, or (iv) for any transaction from which the director
or officer derived an improper personal benefit.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since November 15, 1994, the Company has issued the following securities in
unregistered sales:
1. On December 15, 1994, the Company issued options to purchase 50,000
shares of Common Stock, at an exercise price of $.75 to five officers and
employees. These shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933, as
amended (the "Securities Act") and Rule 701 promulgated thereunder. At the
time of this issuance, the Company was not subject to the reporting
requirements of the Exchange Act. The Company issued these securities
pursuant to a written compensatory benefit plan. The aggregate offering
price of the securities issued pursuant to this exemption, together with
the value of securities sold pursuant to Rule 701 in the preceding 12
months, did not exceed $500,000.
2. On December 15, 1994, the Company issued 3,003,000 share of Common
Stock to its existing stockholders as part of a three-to-one stock split.
The Company received no consideration for these shares.
II-1
<PAGE>
Additionally, as a result of the stock split, four of the Company's
officers and employees automatically received option to purchase an
additional 200,000 shares of Common Stock. These securities were issued in
reliance on an exclusion from registration requirements inasmuch as a
"sale" did not occur within the meaning of Section 2(3) of the Securities
Act.
3. On December 29, 1995, the Company issued 375,000 shares to CompuCom
Systems, Inc. in exchange for cancellation of indebtedness owed by the
Company in the amount of $250,125.00. These securities were issued in
reliance on the exemption provided by section 4(2) of the Securities Act.
The offering was made only to CompuCom Systems, Inc., a sophisticated
investor who, as principal stockholder of the Company, had access to all
material information about the Company. The Company did not engage in any
public solicitation in connection with this offering.
4. On July 24, 1997, the Company issued 15,000 shares of Common Stock to
Robert J. Boutin, a former officer of the Company, upon his exercise of
stock options at an exercise price of $.75 per share. These securities were
issued in reliance on the exemption provided by Section 4(2) of the
Securities Act and Rule 701 promulgated thereunder. At the time of this
issuance, the Company was not subject to the reporting requirements of the
Exchange Act. The Company issued these securities pursuant to a written
compensatory benefit plan. The aggregate offering price of the securities
issued pursuant to this exemption, together with the value of securities
sold pursuant to Rule 701 in the preceding 12 months, did not exceed
$500,000.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS
<TABLE>
<C> <S>
1 Form of Underwriting Agreement*
3(i) First Amended and Restated Certificate of Incorporation of the
Registrant
3(ii) Amended and Restated Bylaws of the Registrant
4 Specimen certificate for Common Stock of the Registrant*
5 Opinion of Jenkens & Gilchrist, a Professional Corporation, with
respect to the legality of the securities being registered*
10.1 CompuCom Acquisition Corp. of Texas 1994 Stock Option Plan,
dated April 14, 1994
10.2 First Amendment to ClientLink, Inc. 1994 Stock Option Plan,
dated January 17, 1995
10.3 1997 Incentive Plan, dated December 4, 1997
10.4 Administrative Services Agreement between the Company and
CompuCom, dated December 4, 1997
10.5 Indemnification Agreement between the Company and CompuCom,
dated December 4, 1997
10.6 Registration Rights Agreement between the Company and CompuCom,
dated December , 1997*
10.7 Employment Agreement between James H. Hamilton and the Company,
dated .*
10.8 Form of Indemnification Agreement for Directors and Officers of
the Company
10.9 Office Lease between CK Windward and ClientLink, dated September
27, 1996 for property located at Windward Fairways I, 2nd Floor,
Suite 200
10.10 Amended and Restated Revolving Note, dated September 5, 1996,
between the Company and CompuCom in the amount of $2,500,000.
10.11 Letter Agreement between CompuCom and James H. Hamilton dated
December 2, 1997.
11 Statement re computation of net income per share
23.1 Consent of KPMG Peat Marwick LLP (included in Schedule I)
23.2 Consent of Jenkens & Gilchrist (included in Exhibit 5)
24 Powers of Attorney (contained on Page II-4)
27 Financial Data Schedule
</TABLE>
II-2
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES
S-I Independent Auditors' Consent and Report on Financial Statement Schedule
S-II Valuation and Qualifying Accounts
All other schedules have been omitted because they are not required or
because the required information is given in the Financial Statements or Notes
thereto.
- --------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
(a) 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.
(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions contained in the Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws of the Registrant
and the laws of the State of Delaware, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the Offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Alpharetta, State of
Georgia, on December 5, 1997.
ClientLink, Inc.
By: /s/ James H. Hamilton
----------------------------------
Name: James H. Hamilton
Title: President and Chief Executive
Officer
Each individual whose signature below hereby designates and appoints James
H. Hamilton and M. Lazane Smith, and each of them, any one of whom may act
without joinder of the other, as his or her true and lawful attorney-in-fact
and agents (the "Attorneys-in-Fact") 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, which amendments may
make such changes in this Registration Statement as either Attorney-in-Fact
deems appropriate, and any registration statement relating to the same
offering filed pursuant to Rule 462(b) under the Securities Act of 1933 and
requests to accelerate the effectiveness of such registration statements, and
to file each such amendment with all exhibits thereto, and all documents in
connection therewith, with the Securities and Exchange Commission, granting
unto such Attorneys-in-Fact and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as such person
might or could do in person, hereby ratifying and confirming all that such
Attorneys-in-Fact or either of them, or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof. Pursuant to the requirements
of the Securities Act of 1933, this Registration Statement has been signed by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Edward R. Anderson Chairman of the Board of December 5, 1997
- ----------------------------------- Directors
Edward R. Anderson
/s/ James H. Hamilton President, Chief Executive December 5, 1997
- ----------------------------------- Officer
James H. Hamilton and Director
/s/ M. Lazane Smith Chief Financial Officer, December 5, 1997
- ----------------------------------- Secretary and Director
M. Lazane Smith (Principal Financial and
Accounting Officer)
/s/ Daniel F. Brown Director December 5, 1997
- -----------------------------------
Daniel F. Brown
Director December , 1997
- -----------------------------------
Christopher J. Moffitt
Director December , 1997
- -----------------------------------
Glenn T. Rieger
</TABLE>
II-4
<PAGE>
INDEPENDENT AUDITORS' CONSENT AND REPORT ON FINANCIAL STATEMENT SCHEDULE
The Board of Directors
Clientlink, Inc.:
The audits referred to in our report dated November 14, except as to note 12,
which is as of December 4, 1997, included the related financial statement
schedule for the period from March 25, 1994 (inception) to December 31, 1994
and for each of the years in the two-year period ended December 31, 1996,
included in the registration statement. This financial statement schedule is
the responsibility of the Company's management. Our responsibility is to
express an opinion on this financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
We consent to the use of our reports included herein and to the references to
our firm under the headings "Experts" and "Selected Financial Data" in the
prospectus.
KPMG Peat Marwick LLP
Dallas, Texas
December 5, 1997
S-1
<PAGE>
CLIENTLINK, INC.
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1995 AND 1996 AND THE PERIOD FROM MARCH 25, 1994
(INCEPTION) THROUGH DECEMBER 31, 1994
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING OF COSTS AND END OF
PERIOD EXPENSES DEDUCTIONS PERIOD
------------ ---------- ---------- ----------
<S> <C> <C> <C> <C>
Accounts receivable--Allowance
for doubtful accounts
1994 $ $ 38,000 $ $38,000
1995 $38,000 $ 28,090 $ 2,685 $63,405
1996 $63,405 $292,252 $273,593 $82,064
</TABLE>
S-2
<PAGE>
EXHIBIT 3(i)
CORRECTED
FIRST AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CLIENTLINK, INC.
ClientLink, Inc., a Delaware corporation (the "Corporation"), hereby adopts
this Corrected First Amended and Restated Certificate of Incorporation to
correct the First Amended and Restated Certificate of Incorporation (the
"Amended and Restated Certificate") filed with the Delaware Secretary of State
on December 3, 1997. This instrument corrects Article V of the Amended and
Restated Certificate to delete references to specific individuals inadvertently
named as members of the Board of Directors. The Amended and Restated
Certificate, as corrected, is hereafter set forth in its entirety:
I
Pursuant to the provisions of the General Corporation Law of the State of
Delaware, ClientLink, Inc. (the "Corporation") hereby adopts this First Amended
and Restated Certificate of Incorporation (the "Amended and Restated
Certificate"), which accurately reflects the original Certificate of
Incorporation and all amendments thereto that are in effect to date
(collectively, the "Original Certificate") and as further amended by such
Amended and Restated Certificate as hereinafter set forth.
II
The name of the Corporation is ClientLink, Inc. The original Certificate
of Incorporation of the Corporation was filed with the Secretary of State of the
State of Delaware on July 16, 1992 under the name CompuCom Acquisition Corp. of
Texas.
III
This Amended and Restated Certificate has been adopted in accordance with
the provisions of Sections 242 and 245 of the General Corporation Law of the
State of Delaware.
IV
The Board of Directors of the Corporation duly adopted resolutions setting
forth the following amendments (the "Amendments") to the Original Certificate,
declaring the Amendments to be advisable and calling for the submission of the
proposed Amendments to the stockholders of the Corporation for consideration
thereof.
V
The Amendments were adopted by the stockholders of the Corporation by
written consent given in accordance with Section 228 of the General Corporation
Law of the State of Delaware.
VI
The Original Certificate is hereby superseded by the following Amended and
Restated Certificate:
<PAGE>
FIRST AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CLIENTLINK, INC.
I.
The name of the corporation is ClientLink, Inc. (the "Corporation").
II.
The address of the registered office of the Corporation in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, County of
New Castle, Delaware 19801, and the name of its registered agent at such address
is The Corporation Trust Company.
III.
The nature of the business or purposes to be conducted or promoted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the State of Delaware.
IV.
The aggregate number of shares of all classes of stock which the
Corporation shall have authority to issue is twenty-seven million (27,000,000)
shares, consisting of (a) two million (2,000,000) shares of preferred stock, par
value $.01 per share ("Preferred Stock"), and (b) twenty-five million
(25,000,000) shares of common stock, par value $.01 per share ("Common Stock").
1. Provisions Relating to Preferred Stock. The Board of Directors is
--------------------------------------
expressly authorized to provide by resolution for the issuance of serial
Preferred Stock out of the unissued shares of Preferred Stock. Before shares of
any series are issued, the Board of Directors by resolution shall fix and state
the designations, preferences and relative, participating, optional or other
special rights of the shares of each series and the qualifications, limitations
or restrictions thereon, including but not limited to, determination of any of
the following:
(a) the designation of the series, the number of shares to constitute
the series and the stated value thereof if different from the par value;
(b) whether the shares of the series shall have voting rights, in
addition to any voting rights provided by law, and if so, the terms of such
voting rights, which may be full or limited;
(c) the dividends payable on such series and at what rates, if any,
whether any dividends shall be cumulative, and if so, from what dates, the
conditions and dates upon which dividends shall be payable, the preference or
relation which dividends shall bear to the dividends payable on any shares of
stock of any other class or any other series;
2
<PAGE>
(d) whether the shares of the series shall be subject to redemption
by the corporation, and if so, prices and other terms and conditions of such
redemption;
(e) the amount or amounts payable upon shares of the series upon, and
the rights of the holders of such series in, the voluntary or involuntary
liquidation, dissolution or winding up of, or upon any distribution of the
assets of, the corporation;
(f) whether the shares of the series shall be subject to the
operation of a retirement or sinking fund, and if so, the extent to and manner
in which any such retirement or sinking fund shall be applied to the purchase or
redemption of the shares of the series for retirement or other corporate
purposes and other terms and provisions relative to the operation thereof;
(g) whether the shares of the series shall be convertible into or
exchangeable for shares of stock of any other class or any other series or any
other class or classes of securities, and if so, the price or prices or the rate
or rates of conversion or exchange and the method, if any, of adjusting the
same, and any other terms and conditions of conversion or exchange;
(h) the limitations and restrictions, if any, to be effective while
any shares of the series are outstanding upon the payment of dividends or the
taking of other distributions on, and upon the purchase, redemption or other
acquisition by the corporation of, the common stock or shares of stock of any
other class or series;
(i) the conditions or restrictions, if any, upon the creation of
indebtedness of the corporation or upon the issue of any additional stock,
including additional shares of the series or any other class or series; and
(j) any other powers, preferences and relative, participating,
optional and other special rights and any qualifications, limitations and
restrictions.
The powers, preferences and relative, participating, optional and other
special rights of each series of Preferred Stock, and the qualifications,
limitations or restrictions thereof, if any, may differ from those of any and
all other series at any time outstanding. All shares of any one series of
Preferred Stock shall be identical in all respects with all other shares of that
series, except that shares of any one series issued at different times may
differ as to the date from which dividends relating to those shares shall be
cumulative. The Board of Directors may increase the number of shares of the
Preferred Stock designated for any existing series by a resolution adding to
that series authorized and unissued shares of the Preferred Stock not designated
for any other series. The Board of Directors may decrease the number of shares
of Preferred Stock designated for any existing series by a resolution,
subtracting from such series unissued shares of the Preferred Stock designated
for that series, and the shares so subtracted shall become authorized, unissued
and undesignated shares of Preferred Stock.
2. Provisions Relating to Common Stock.
-----------------------------------
(a) Each share of Common Stock of the Corporation shall have
identical rights and privileges in every respect. The holders of shares of
Common Stock shall be entitled to vote upon all matters submitted to a vote
3
<PAGE>
of the stockholders of the Corporation and shall be entitled to one vote for
each share of Common Stock held.
(b) Subject to the prior rights and preferences, if any, applicable to
shares of Preferred Stock or any series thereof, the holders of shares of Common
Stock shall be entitled to receive such dividends (payable in cash, stock, or
otherwise) as may be declared thereon by the Board of Directors at any time and
from time to time out of any funds of the Corporation legally available
therefor.
(c) In the event of any voluntary or involuntary liquidation,
dissolution, or winding-up of the Corporation, after distribution in full of the
preferential amounts, if any, to be distributed to the holders of shares of
Preferred Stock or any series thereof, the holders of shares of Common Stock
shall be entitled to receive all of the remaining assets of the Corporation
available for distribution to its stockholders, ratably in proportion to the
number of shares of Common Stock held by them. A liquidation, dissolution, or
winding-up of the Corporation, as such terms are used in this paragraph (c),
shall not be deemed to be occasioned by or to include any consolidation or
merger of the Corporation with or into any other corporation or corporations or
other entity or a sale, lease, exchange, or conveyance of all or a part of the
assets of the Corporation.
3. General.
-------
(a) Subject to the foregoing provisions of this Amended and Restated
Certificate, the Corporation may issue shares of its Preferred Stock and Common
Stock from time to time for such consideration (not less than the par value
thereof) as may be fixed by the Board of Directors of the Corporation, which is
expressly authorized to fix the same in its absolute and uncontrolled discretion
subject to the foregoing conditions. Shares so issued for which the
consideration shall have been paid or delivered to the Corporation shall be
deemed fully paid stock and shall not be liable to any further call or
assessment thereon, and the holders of such shares shall not be liable for any
further payments in respect of such shares.
(b) The Corporation shall have authority to create and issue rights
and options entitling their holders to purchase shares of the Corporation's
capital stock of any class or series or other securities of the Corporation, and
such rights and options shall be evidenced by instrument(s) approved by the
Board of Directors of the Corporation. The Board of Directors of the
Corporation shall be empowered to set the exercise price, duration, times for
exercise, and other terms of such options or rights; provided, however, that the
consideration to be received for any shares of capital stock subject thereto
shall not be less than the par value thereof.
V.
The members of the Board of Directors of the Corporation shall be staggered
into three (3) classes, designated respectively as Class I (for an initial term
ending at the 1998 annual meeting of stockholders), Class II (for an initial
term ending at the 1999 annual meeting of stockholders) and Class III (for an
initial term ending at the 2000 annual meeting of stockholders).
4
<PAGE>
VI.
The period of duration of the Corporation is perpetual.
VII.
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors of the Corporation is expressly authorized to adopt,
alter, amend or repeal the Bylaws of the Corporation except as otherwise
provided in the Bylaws.
VIII.
Elections of directors need not be by written ballot.
IX.
To the fullest extent permitted by Delaware law, no director of the
Corporation shall be liable to the Corporation or its stockholders for monetary
damages for an act or omission in such director's capacity as a director of the
Corporation. Specifically, a director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or knowing violation of law, (iii) under Section 174 of the Delaware
General
5
<PAGE>
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit. The foregoing elimination of liability to the
Corporation or its stockholders for monetary damages is not exclusive of any
other rights or limitations of liability or indemnity to which a director may be
entitled under any other provision of the Certificate of Incorporation or Bylaws
of the Corporation, contract or agreement, vote of stockholders and/or
disinterested directors, or otherwise.
X.
Meetings of the stockholders of the Corporation may be held within or
without the State of Delaware, as the Bylaws may provide. Unless otherwise
required by applicable law, the books and records of the Corporation may be kept
either within or outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors or in the Bylaws of the
Corporation.
XI.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to such reservation.
XII.
Any action required by statute to be taken at any annual or special meeting
of stockholders may be taken without a meeting, without prior notice and without
a vote, if a consent or consents in writing, setting forth the action so taken,
shall be signed by the holder or holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
such action at a meeting at which the holders of all shares entitled to vote on
the action were present and voted.
XIII.
The Corporation shall indemnify any person who was, is, or is threatened to
be made a party to a proceeding (as hereinafter defined) by reason of the fact
that he or she (i) is or was a director or officer of the Corporation or (ii)
while a director or officer of the Corporation, is or was serving at the request
of the Corporation as a director, officer, partner, venturer, proprietor,
trustee, employee, agent, or similar functionary of another foreign or domestic
corporation, partnership, joint venture, sole proprietorship, trust, employee
benefit plan, or other enterprise, to the fullest extent permitted under the
Delaware General Corporation Law, as the same exists or may hereafter be
amended. Such right shall be a contract right and as such shall run to the
benefit of any director or officer who is elected and accepts the position of
director or officer of the Corporation or elects to continue to serve as a
director or officer of the Corporation while this Article XIII is in effect.
Any repeal or amendment of this Article XIII shall be prospective only and shall
not limit the rights of any such director or officer or the obligations of the
Corporation with respect to any claim arising from or related to the services of
such director or officer in any of the foregoing capacities prior to any such
repeal or amendment to this Article XIII. Such right shall include the right to
be paid by the
6
<PAGE>
Corporation expenses incurred in defending any such proceeding in advance of its
final disposition to the maximum extent permitted under the Delaware General
Corporation Law, as the same exists or may hereafter be amended. If a claim for
indemnification or advancement of expenses hereunder is not paid in full by the
Corporation within sixty (60) days after a written claim has been received by
the Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim, and if successful in
whole or in part, the claimant shall also be entitled to be paid the expenses of
prosecuting such claim. It shall be a defense to any such action that such
indemnification or advancement of costs of defense are not permitted under the
Delaware General Corporation Law, but the burden of proving such defense shall
be on the Corporation. Neither the failure of the Corporation (including its
Board of Directors or any committee thereof, independent legal counsel, or
stockholders) to have made its determination prior to the commencement of such
action that indemnification of, or advancement of costs of defense to, the
claimant is permissible in the circumstances nor an actual determination by the
Corporation (including its Board of Directors or any committee thereof,
independent legal counsel, or stockholders) that such indemnification or
advancement is not permissible shall be a defense to the action or create a
presumption that such indemnification or advancement is not permissible. In the
event of the death of any person having a right of indemnification under the
foregoing provisions, such right shall inure to the benefit of his or her heirs,
executors, administrators, and personal representatives. The rights conferred
above shall not be exclusive of any other right which any person may have or
hereafter acquire under any statute, bylaw, resolution of stockholders or
directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
XIV.
No contract or transaction between the Corporation and one or more of its
directors, officers, or stockholders or between the Corporation and any person
(as used herein "person" means other corporation, partnership, association,
firm, trust, joint venture, political subdivision, or instrumentality) or other
organization in which one or more of its directors, officers, or stockholders
are directors, officers, or stockholders, or have a financial interest, shall be
void or voidable solely for this reason, or solely because the director or
officer is present at or participates in the meeting of the board or committee
which authorizes the contract or transaction, or solely because his, her, or
their votes are counted for such purpose, if (i) the material facts as to his or
her relationship or interest and as to the contract or transaction are disclosed
or are known to the Board of Directors or the committee, and the Board of
Directors or committee in good faith authorizes the contract or transaction by
the affirmative votes of a majority of the disinterested directors, even though
the disinterested directors be less than a quorum; or (ii) the material facts as
to his or her relationship or interest and as to the contract or transaction are
disclosed or are known to the stockholders entitled to vote thereon, and the
contract or transaction is specifically approved in good faith by vote of the
7
<PAGE>
stockholders; or (iii) the contract or transaction is fair as to the Corporation
as of the time it is authorized, approved, or ratified by the Board of
Directors, a committee thereof, or the stockholders. Common or interested
directors may be counted in determining the presence of a quorum at a meeting of
the Board of Directors or of a committee which authorizes the contract or
transaction.
EXECUTED this 4th day of December, 1997.
CLIENTLINK, INC.
By: /s/ M. Lazane Smith
-------------------------------------------
Name: M. Lazane Smith
-----------------------------------------
Title: Chief Financial Officer and Secretary
----------------------------------------
8
<PAGE>
EXHIBIT 3(ii)
AMENDED AND
RESTATED BYLAWS
OF
CLIENTLINK, INC.
A Delaware Corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent............................................ 1
1.2 Other Offices.......................................................... 1
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting......................................................... 1
2.2 Special Meeting........................................................ 1
2.3 Place of Meetings...................................................... 2
2.4 Notice................................................................. 2
2.5 Voting List............................................................ 2
2.6 Quorum................................................................. 2
2.7 Required Vote; Withdrawal of Quorum.................................... 3
2.8 Method of Voting; Proxies.............................................. 3
2.9 Record Date............................................................ 3
2.10 Conduct of Meeting..................................................... 4
2.11 Stockholder Proposals at Annual Meetings............................... 4
2.12 Nominations of Persons for Election to the Board of Directors.......... 5
2.13 Inspectors............................................................. 5
ARTICLE THREE: DIRECTORS
3.1 Management............................................................. 6
3.2 Number; Qualification; Election; Term.................................. 6
3.3 Change in Number....................................................... 6
3.4 Removal................................................................ 6
3.5 Vacancies.............................................................. 7
3.6 Meetings of Directors.................................................. 7
3.7 First Meeting.......................................................... 7
3.8 Election of Officers................................................... 7
3.9 Regular Meetings....................................................... 7
3.10 Special Meetings....................................................... 7
3.11 Notice................................................................. 8
3.12 Quorum; Majority Vote.................................................. 8
3.13 Procedure.............................................................. 8
3.14 Action Without a Meeting............................................... 8
3.15 Presumption of Assent.................................................. 8
3.16 Compensation........................................................... 8
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE FOUR: COMMITTEES
4.1 Designation............................................................ 9
4.2 Number; Qualification; Term............................................ 9
4.3 Authority.............................................................. 9
4.4 Committee Changes...................................................... 9
4.5 Alternate Members of Committees........................................ 9
4.6 Regular Meetings....................................................... 9
4.7 Special Meetings....................................................... 9
4.8 Quorum; Majority Vote.................................................. 9
4.9 Minutes and Actions Without Meetings................................... 10
4.10 Compensation........................................................... 10
4.11 Responsibility......................................................... 10
ARTICLE FIVE: NOTICE
5.1 Method................................................................. 10
5.2 Waiver................................................................. 10
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office......................................... 11
6.2 Removal................................................................ 11
6.3 Vacancies.............................................................. 11
6.4 Authority.............................................................. 11
6.5 Compensation........................................................... 11
6.6 Chairman of the Board.................................................. 11
6.7 President.............................................................. 11
6.8 Vice Presidents........................................................ 12
6.9 Treasurer.............................................................. 12
6.10 Assistant Treasurers................................................... 12
6.11 Secretary.............................................................. 12
6.12 Assistant Secretaries.................................................. 12
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares................................................ 13
7.2 Replacement of Lost or Destroyed Certificates.......................... 13
7.3 Transfer of Shares..................................................... 13
7.4 Registered Stockholders................................................ 13
7.5 Regulations............................................................ 14
7.6 Legends................................................................ 14
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends.............................................................. 14
8.2 Reserves............................................................... 14
8.3 Books and Records...................................................... 14
8.4 Fiscal Year............................................................ 14
8.5 Seal................................................................... 14
8.6 Resignations........................................................... 14
8.7 Securities of Other Corporations....................................... 15
8.8 Telephone Meetings..................................................... 15
8.9 Action Without a Meeting............................................... 15
8.10 Invalid Provisions..................................................... 16
8.11 Mortgages, etc......................................................... 16
8.12 Headings............................................................... 16
8.13 References............................................................. 16
8.14 Amendments to Bylaws................................................... 16
8.15 Indemnification........................................................ 16
</TABLE>
(iii)
<PAGE>
AMENDED AND
RESTATED BYLAWS
OF
CLIENTLINK, INC.
A Delaware Corporation
PREAMBLE
These restated bylaws ("bylaws") are subject to, and governed by, the
General Corporation Law of the State of Delaware (the "Delaware General
Corporation Law") and the certificate of incorporation of ClientLink, Inc., a
Delaware corporation (the "Corporation"). In the event of a direct conflict
between the provisions of these bylaws and the mandatory provisions of the
Delaware General Corporation Law or the provisions of the certificate of
incorporation of the Corporation, such provisions of the Delaware General
Corporation Law or the certificate of incorporation of the Corporation, as the
case may be, will be controlling.
ARTICLE ONE: OFFICES
1.1 Registered Office and Agent. The registered office and registered
---------------------------
agent of the Corporation shall be as designated from time to time by the
appropriate filing by the Corporation in the office of the Secretary of State of
the State of Delaware.
1.2 Other Offices. The Corporation may also have offices at such other
-------------
places, both within and without the State of Delaware, as the board of directors
may from time to time determine or as the business of the Corporation may
require.
ARTICLE TWO: MEETINGS OF STOCKHOLDERS
2.1 Annual Meeting. An annual meeting of stockholders of the Corporation
--------------
shall be held each calendar year on such date and at such time as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting or in a duly executed waiver of notice of such meeting. At such
meeting, the stockholders shall elect directors and transact such other business
as may properly be brought before the meeting.
2.2 Special Meeting. A special meeting of the stockholders may be called
---------------
at any time by a resolution adopted by a majority of the total number of
authorized directors, whether or not there exist any vacancies in previously
authorized directorships (a "Majority of the Board"), provided, however, that a
special meeting of the stockholders of the Corporation shall be called for any
purpose or purposes at the written request of the holders of at least forty
percent (40%) of the voting power of the then issued and outstanding shares of
capital stock of the Corporation entitled to vote for the election of directors,
considered as one class, provided that such written request shall state the
purpose or purposes of the proposed meeting, or as otherwise provided by the
certificate of incorporation of the Corporation. A special meeting shall be
held on such date and at such time as
<PAGE>
shall be designated by the person(s) calling the meeting and stated in the
notice of the meeting or in a duly executed waiver of notice of such meeting.
Only such business shall be transacted at a special meeting as may be stated or
indicated in the notice of such meeting or in a duly executed waiver of notice
of such meeting.
2.3 Place of Meetings. An annual meeting of stockholders may be held at
-----------------
any place within or without the State of Delaware designated by the board of
directors. A special meeting of stockholders may be held at any place within or
without the State of Delaware designated in the notice of the meeting or a duly
executed waiver of notice of such meeting. Meetings of stockholders shall be
held at the principal office of the Corporation unless another place is
designated for meetings in the manner provided herein.
2.4 Notice. Written or printed notice stating the place, day, and time of
------
each meeting of the stockholders and, in case of a special meeting, the purpose
or purposes for which the meeting is called shall be delivered not less than ten
nor more than 60 days before the date of the meeting, either personally or by
mail, by or at the direction of the President, the Secretary, or the officer or
person(s) calling the meeting, to each stockholder of record entitled to vote at
such meeting. If such notice is to be sent by mail, it shall be directed to
such stockholder at his address as it appears on the records of the Corporation,
unless he shall have filed with the Secretary of the Corporation a written
request that notices to him be mailed to some other address, in which case it
shall be directed to him at such other address. Notice of any meeting of
stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy and shall not, at the beginning of
such meeting, object to the transaction of any business because the meeting is
not lawfully called or convened, or who shall, either before or after the
meeting, submit a signed waiver of notice, in person or by proxy.
2.5 Voting List. At least ten days before each meeting of stockholders,
-----------
the Secretary or other officer of the Corporation who has charge of the
Corporation's stock ledger, either directly or through another officer appointed
by him or through a transfer agent appointed by the board of directors, shall
prepare a complete list of stockholders entitled to vote thereat, arranged in
alphabetical order and showing the address of each stockholder and number of
shares registered in the name of each stockholder. For a period of ten days
prior to such meeting, such list shall be kept on file at a place within the
city where the meeting is to be held, which place shall be specified in the
notice of meeting or a duly executed waiver of notice of such meeting or, if not
so specified, at the place where the meeting is to be held and shall be open to
examination by any stockholder during ordinary business hours. Such list shall
be produced at such meeting and kept at the meeting at all times during such
meeting and may be inspected by any stockholder who is present.
2.6 Quorum. The holders of a majority of the outstanding shares entitled
------
to vote on a matter, present in person or by proxy, shall constitute a quorum at
any meeting of stockholders, except as otherwise provided by law, the
certificate of incorporation of the Corporation, or these bylaws. If a quorum
shall not be present, in person or by proxy, at any meeting of stockholders, the
stockholders entitled to vote thereat who are present, in person or by proxy,
or, if no stockholder entitled to vote is present, any officer of the
Corporation may adjourn the meeting from time to time, without notice other than
announcement at the meeting (unless the board of directors, after such
adjournment, fixes a new record date for the adjourned meeting), until a quorum
shall be present, in person or by proxy. At any adjourned meeting at which a
quorum shall be present,
2
<PAGE>
in person or by proxy, any business may be transacted which may have been
transacted at the original meeting had a quorum been present; provided that, if
the adjournment is for more than 30 days or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
adjourned meeting.
2.7 Required Vote; Withdrawal of Quorum. When a quorum is present at any
-----------------------------------
meeting, the vote of the holders of at least a majority of the outstanding
shares entitled to vote who are present, in person or by proxy, shall decide any
question brought before such meeting, unless the question is one on which, by
express provision of statute, the certificate of incorporation of the
Corporation, or these bylaws, a different vote is required, in which case such
express provision shall govern and control the decision of such question. The
stockholders present at a duly constituted meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
2.8 Method of Voting; Proxies. Except as otherwise provided in the
-------------------------
certificate of incorporation of the Corporation or by law, each outstanding
share, regardless of class, shall be entitled to one vote on each matter
submitted to a vote at a meeting of stockholders. Elections of directors need
not be by written ballot. At any meeting of stockholders, every stockholder
having the right to vote may vote either in person or by a proxy executed in
writing by the stockholder or by his duly authorized attorney-in-fact. Each
such proxy shall be filed with the Secretary of the Corporation before or at the
time of the meeting. No proxy shall be valid after three years from the date of
its execution, unless otherwise provided in the proxy. If no date is stated in
a proxy, such proxy shall be presumed to have been executed on the date of the
meeting at which it is to be voted. Each proxy shall be revocable unless
expressly provided therein to be irrevocable and coupled with an interest
sufficient in law to support an irrevocable power or unless otherwise made
irrevocable by law.
2.9 Record Date.
-----------
(a) For the purpose of determining stockholders entitled to notice of
or to vote at any meeting of stockholders, or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion, or exchange of stock or for the purpose of any other lawful action,
the board of directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the board of directors, for any such determination of stockholders, such date in
any case to be not more than 60 days and not less than ten days prior to such
meeting nor more than 60 days prior to any other action. If no record date is
fixed:
(i) The record date for determining stockholders entitled to notice of
or to vote at a meeting of stockholders shall be at the close of business
on the day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the day next preceding the day on which
the meeting is held.
3
<PAGE>
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
(iii) A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of
the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting.
(b) In order that the Corporation may determine the stockholders
entitled to consent to corporate action in writing without a meeting, the board
of directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the board of
directors, and which date shall not be more than ten days after the date upon
which the resolution fixing the record date is adopted by the board of
directors. If no record date has been fixed by the board of directors, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting, when no prior action by the board of directors is
required by law, the certificate of incorporation of the Corporation or these
bylaws, shall be the first date on which a signed written consent setting forth
the action taken or proposed to be taken is delivered to the Corporation by
delivery to its registered office in the State of Delaware, its principal place
of business, or an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to the Corporation's registered office in the State of Delaware, principal
place of business, or such officer or agent shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been fixed by
the board of directors and prior action by the board of directors is required by
law, the certificate of incorporation of the Corporation or these bylaws, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the board of directors adopts the resolution taking such prior action.
2.10 Conduct of Meeting. The Chairman of the Board, if such office has
------------------
been filled, and, if not or if the Chairman of the Board is absent or otherwise
unable to act, the President shall preside at all meetings of stockholders. The
Secretary shall keep the records of each meeting of stockholders. In the
absence or inability to act of any such officer, such officer's duties shall be
performed by the officer given the authority to act for such absent or non-
acting officer under these bylaws or by some person appointed by the meeting.
2.11 Stockholder Proposals at Annual Meetings. At an annual meeting of the
----------------------------------------
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be specified in the notice of meeting (or any supplement thereto)
given by or at the direction of the board of directors, otherwise properly
brought before the meeting by or at the direction of the board of directors or
otherwise properly brought before the meeting by a stockholder. In addition to
any other applicable requirements, for business to be properly brought before an
annual meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not later than 90 days prior to
the date one year from the date of the immediately preceding annual meeting of
stockholders. A stockholder's notice to the Secretary shall set forth as to
each matter the stockholder proposes to bring before the annual meeting (i) a
brief description of
4
<PAGE>
the business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the name and record address
of the stockholder proposing such business, (iii) the class and number of shares
of the Corporation that are beneficially owned by the stockholder, and (iv) any
material interest of the stockholder in such business. Notwithstanding anything
in these bylaws to the contrary, no business shall be conducted at the annual
meeting except in accordance with the procedures set forth in this Section 2.11;
provided, however, that nothing in this Section 2.11 shall be deemed to preclude
discussion by any stockholder of any business properly brought before the annual
meeting in accordance with said procedure.
2.12 Nominations of Persons for Election to the Board of Directors. In
-------------------------------------------------------------
addition to any other applicable requirements, only persons who are nominated in
accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the board of directors of the
Corporation may be made at a meeting of stockholders by or at the direction of
the board of directors, by any nominating committee or person appointed by the
board of directors or by any stockholder of the Corporation entitled to vote for
the election of directors at the meeting who complies with the notice procedures
set forth in this Section 2.12. Such nominations, other than those made by or
at the direction of the board of directors, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice shall be delivered to or mailed and received at the
principal executive offices of the Corporation not later than 90 days prior to
the date one year from the date of the immediately preceding annual meeting of
stockholders. Such stockholder's notice shall set forth (a) as to each person
whom the stockholder proposes to nominate for election or re-election as a
director (i) the name, age, business address and residence address of the
person, (ii) the principal occupation or employment of the person, (iii) the
class and number of shares of the Corporation beneficially owned by the person,
and (iv) any other information relating to the person that is required to be
disclosed in solicitations for proxies for election of directors pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended; and (b) as
to the stockholder giving the notice (i) the name and record address of the
stockholder, and (ii) the class and number of shares of the Corporation
beneficially owned by the stockholder. The Corporation may require any proposed
nominee to furnish such other information as may reasonably be required by the
Corporation to determine the eligibility of such proposed nominee to serve as a
director of the Corporation. No person shall be eligible for election as a
director of the Corporation unless nominated in accordance with the procedures
set forth herein. These provisions shall not apply to nomination of any persons
entitled to be separately elected by holders of preferred stock.
2.13 Inspectors. The board of directors may, in advance of any meeting of
----------
stockholders, appoint one or more inspectors to act at such meeting or any
adjournment thereof. If any of the inspectors so appointed shall fail to appear
or act, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors.
Each inspector, before entering upon the discharge of his duties, shall take and
sign an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares of capital stock of the Corporation
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum, and the validity and effect of proxies
and shall receive votes, ballots, or consents, hear and determine all challenges
and questions arising in connection with the right to vote, count and tabulate
all votes, ballots, or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the
5
<PAGE>
chairman of the meeting, the inspectors shall make a report in writing of any
challenge, request, or matter determined by them and shall execute a certificate
of any fact found by them. No director or candidate for the office of director
shall act as an inspector of an election of directors. Inspectors need not be
stockholders.
ARTICLE THREE: DIRECTORS
3.1 Management. The business and property of the Corporation shall be
----------
managed by the board of directors. Subject to the restrictions imposed by law,
the certificate of incorporation of the Corporation, or these bylaws, the board
of directors may exercise all the powers of the Corporation.
3.2 Number; Qualification; Election; Term. The number of directors which
-------------------------------------
shall constitute the entire board of directors shall be not less than one. The
first board of directors shall consist of the number of directors named in the
certificate of incorporation of the Corporation or, if no directors are so
named, shall consist of the number of directors elected by the incorporator(s)
at an organizational meeting or by unanimous written consent in lieu thereof.
Thereafter, within the limits above specified, the number of directors which
shall constitute the entire board of directors shall be determined by resolution
of the board of directors or by resolution of the stockholders at the annual
meeting thereof or at a special meeting thereof called for that purpose. Except
as otherwise required by law, the certificate of incorporation of the
Corporation, or these bylaws, the directors shall be elected at an annual
meeting of stockholders at which a quorum is present. Directors shall be
elected by a plurality of the votes of the shares present in person or
represented by proxy and entitled to vote on the election of directors. Each
director so chosen shall hold office until the first annual meeting of
stockholders held after his election and until his successor is elected and
qualified or, if earlier, until his death, resignation, or removal from office.
None of the directors need be a stockholder of the Corporation or a resident of
the State of Delaware. Each director must have attained the age of majority.
3.3 Change in Number. No decrease in the number of directors constituting
----------------
the entire board of directors shall have the effect of shortening the term of
any incumbent director.
3.4 Removal. Except as otherwise provided in the certificate of
-------
incorporation of the Corporation or these bylaws, at any meeting of stockholders
called expressly for that purpose, any director or the entire board of directors
may be removed, with or without cause, by a vote of the holders of a majority of
the shares then entitled to vote on the election of directors; provided,
however, that so long as stockholders have the right to cumulate votes in the
election of directors pursuant to the certificate of incorporation of the
Corporation, if less than the entire board of directors is to be removed, no one
of the directors may be removed if the votes cast against his removal would be
sufficient to elect him if then cumulatively voted at an election of the entire
board of directors.
3.5 Vacancies. Vacancies and newly-created directorships resulting from
---------
any increase in the authorized number of directors may be filled by vote of the
stockholders at an annual or special meeting, or by a majority of the directors
then in office, though less than a quorum, or by the sole remaining director,
and each director so chosen shall hold office until the first annual meeting of
stockholders held after his election and until his successor is elected and
qualified or, if earlier,
6
<PAGE>
until his death, resignation, or removal from office. If there are no directors
in office, an election of directors may be held in the manner provided by
statute. If, at the time of filling any vacancy or any newly-created
directorship, the directors then in office shall constitute less than a majority
of the whole board of directors (as constituted immediately prior to any such
increase), the Court of Chancery may, upon application of any stockholder or
stockholders holding at least 10% of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly-created directorships or
to replace the directors chosen by the directors then in office. Except as
otherwise provided in these bylaws, when one or more directors shall resign from
the board of directors, effective at a future date, a majority of the directors
then in office, including those who have so resigned, shall have the power to
fill such vacancy or vacancies, the vote thereon to take effect when such
resignation or resignations shall become effective, and each director so chosen
shall hold office as provided in these bylaws with respect to the filling of
other vacancies.
3.6 Meetings of Directors. The directors may hold their meetings and may
---------------------
have an office and keep the books of the Corporation, except as otherwise
provided by statute, in such place or places within or without the State of
Delaware as the board of directors may from time to time determine or as shall
be specified in the notice of such meeting or duly executed waiver of notice of
such meeting.
3.7 First Meeting. Each newly elected board of directors may hold its
-------------
first meeting for the purpose of organization and the transaction of business,
if a quorum is present, immediately after and at the same place as the annual
meeting of stockholders, and no notice of such meeting shall be necessary.
3.8 Election of Officers. At the first meeting of the board of directors
--------------------
after each annual meeting of stockholders at which a quorum shall be present,
the board of directors shall elect the officers of the Corporation.
3.9 Regular Meetings. Regular meetings of the board of directors shall be
----------------
held at such times and places as shall be designated from time to time by
resolution of the board of directors. Notice of such regular meetings shall not
be required.
3.10 Special Meetings. Special meetings of the board of directors shall be
----------------
held whenever called by the Chairman of the Board, the President, or any
director.
3.11 Notice. The Secretary shall give notice of each special meeting to
------
each director at least three (3) days before the meeting. Notice of any such
meeting need not be given to any director who shall, either before or after the
meeting, submit a signed waiver of notice or who shall attend such meeting
without protesting, prior to or at its commencement, the lack of notice to him.
The business to be transacted at, and the purpose of, any special meeting of the
board of directors need be specified in the notice or waiver of notice of such
meeting.
3.12 Quorum; Majority Vote. At all meetings of the board of directors, a
---------------------
majority of the directors fixed in the manner provided in these bylaws shall
constitute a quorum for the transaction of business. If at any meeting of the
board of directors there be less than a quorum present, a
7
<PAGE>
majority of those present or any director solely present may adjourn the meeting
from time to time without further notice. Unless the act of a greater number is
required by law, the certificate of incorporation of the Corporation, or these
bylaws, the act of a majority of the directors present at a meeting at which a
quorum is in attendance shall be the act of the board of directors. At any time
that the certificate of incorporation of the Corporation provides that directors
elected by the holders of a class or series of stock shall have more or less
than one vote per director on any matter, every reference in these bylaws to a
majority or other proportion of directors shall refer to a majority or other
proportion of the votes of such directors.
3.13 Procedure. At meetings of the board of directors, business shall be
---------
transacted in such order as from time to time the board of directors may
determine. The Chairman of the Board, if such office has been filled, and, if
not or if the Chairman of the Board is absent or otherwise unable to act, the
President shall preside at all meetings of the board of directors. In the
absence or inability to act of either such officer, a chairman shall be chosen
by the board of directors from among the directors present. The Secretary of
the Corporation shall act as the secretary of each meeting of the board of
directors unless the board of directors appoints another person to act as
secretary of the meeting. The board of directors shall keep regular minutes of
its proceedings which shall be placed in the minute book of the Corporation.
3.14 Action Without a Meeting. Any action required or permitted to be
------------------------
taken at any meeting of the board of directors may be taken without a meeting,
without prior notice and without a vote, if all members of the board consent
thereto in writing and the writing or writings are filed with the minutes of the
proceedings of the board.
3.15 Presumption of Assent. A director of the Corporation who is present
---------------------
at the meeting of the board of directors at which action on any corporate matter
is taken shall be presumed to have assented to the action unless his dissent
shall be entered in the minutes of the meeting or unless he shall file his
written dissent to such action with the person acting as secretary of the
meeting before the adjournment thereof or shall forward any dissent by certified
or registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
3.16 Compensation. The board of directors shall have the authority to fix
------------
the compensation, including fees and reimbursement of expenses, paid to
directors for attendance at regular or special meetings of the board of
directors or any committee thereof; provided, that nothing contained herein
shall be construed to preclude any director from serving the Corporation in any
other capacity or receiving compensation therefor.
ARTICLE FOUR: COMMITTEES
4.1 Designation. The board of directors may, by resolution adopted by a
-----------
majority of the entire board of directors, designate one or more committees.
4.2 Number; Qualification; Term. Each committee shall consist of one or
---------------------------
more directors appointed by resolution adopted by a majority of the entire board
of directors. The number of committee members may be increased or decreased
from time to time by resolution adopted by a
8
<PAGE>
majority of the entire board of directors. Each committee member shall serve as
such until the earliest of (i) the expiration of his term as director, (ii) his
resignation as a committee member or as a director, or (iii) his removal as a
committee member or as a director.
4.3 Authority. Each committee, to the extent expressly provided in the
---------
resolution establishing such committee, shall have and may exercise all of the
authority of the board of directors in the management of the business and
property of the Corporation except to the extent expressly restricted by law,
the certificate of incorporation of the Corporation, or these bylaws.
4.4 Committee Changes. The board of directors shall have the power at any
-----------------
time to fill vacancies in, to change the membership of, and to discharge any
committee.
4.5 Alternate Members of Committees. The board of directors may designate
-------------------------------
one or more directors as alternate members of any committee. Any such alternate
member may replace any absent or disqualified member at any meeting of the
committee. If no alternate committee members have been so appointed to a
committee or each such alternate committee member is absent or disqualified, the
member or members of such committee present at any meeting and not disqualified
from voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting in the
place of any such absent or disqualified member.
4.6 Regular Meetings. Regular meetings of any committee may be held
----------------
without notice at such time and place as may be designated from time to time by
the committee and communicated to all members thereof.
4.7 Special Meetings. Special meetings of any committee may be held
----------------
whenever called by any committee member. The committee member calling any
special meeting shall cause notice of such special meeting, including therein
the time and place of such special meeting, to be given to each committee member
at least two days before such special meeting. Neither the business to be
transacted at, nor the purpose of, any special meeting of any committee need be
specified in the notice or waiver of notice of any special meeting.
4.8 Quorum; Majority Vote. At meetings of any committee, a majority of
---------------------
the number of members designated by the board of directors shall constitute a
quorum for the transaction of business. If a quorum is not present at a meeting
of any committee, a majority of the members present may adjourn the meeting from
time to time, without notice other than an announcement at the meeting, until a
quorum is present. The act of a majority of the members present at any meeting
at which a quorum is in attendance shall be the act of a committee, unless the
act of a greater number is required by law, the certificate of incorporation of
the Corporation, or these bylaws.
4.9 Minutes and Actions Without Meetings. Each committee shall cause
------------------------------------
minutes of its proceedings to be prepared and shall report the same to the board
of directors upon the request of the board of directors. The minutes of the
proceedings of each committee shall be delivered to the Secretary of the
Corporation for placement in the minute books of the Corporation. Any action
required or permitted to be taken at any meeting of any committee may be taken
without a meeting, without prior notice and without a vote, if all members of
the committee consent thereto in writing
9
<PAGE>
and the writing or writings are delivered to the Secretary of the Corporation
for placement in the minute books of the Corporation.
4.10 Compensation. Committee members may, by resolution of the board of
------------
directors, be allowed a fixed sum and expenses of attendance, if any, for
attending any committee meetings or a stated salary.
4.11 Responsibility. The designation of any committee and the delegation
--------------
of authority to it shall not operate to relieve the board of directors or any
director of any responsibility imposed upon it or such director by law.
ARTICLE FIVE: NOTICE
5.1 Method. Whenever by statute, the certificate of incorporation of the
------
Corporation, or these bylaws, notice is required to be given to any committee
member, director, or stockholder and no provision is made as to how such notice
shall be given, personal notice shall not be required and any such notice may be
given (a) in writing, by mail, postage prepaid, addressed to such committee
member, director, or stockholder at his address as it appears on the books or
(in the case of a stockholder) the stock transfer records of the Corporation, or
(b) by any other method permitted by law (including but not limited to overnight
courier service, telegram, telex, or telefax). Any notice required or permitted
to be given by mail shall be deemed to be delivered and given at the time when
the same is deposited in the United States mail as aforesaid. Any notice
required or permitted to be given by overnight courier service shall be deemed
to be delivered and given at the time delivered to such service with all charges
prepaid and addressed as aforesaid. Any notice required or permitted to be
given by telegram, telex, or telefax shall be deemed to be delivered and given
at the time transmitted with all charges prepaid and addressed as aforesaid.
5.2 Waiver. Whenever any notice is required to be given to any
------
stockholder, director, or committee member of the Corporation by statute, the
certificate of incorporation of the Corporation, or these bylaws, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be equivalent to the
giving of such notice. Attendance of a stockholder, director, or committee
member at a meeting shall constitute a waiver of notice of such meeting, except
where such person attends for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE SIX: OFFICERS
6.1 Number; Titles; Term of Office. The officers of the Corporation shall
------------------------------
be a President, a Secretary, and such other officers as the board of directors
may from time to time elect or appoint, including a Chairman of the Board, one
or more Vice Presidents (with each Vice President to have such descriptive
title, if any, as the board of directors shall determine), and a Treasurer.
Each officer shall hold office until his successor shall have been duly elected
and shall have qualified, until his death, or until he shall resign or shall
have been removed in the manner hereinafter provided. Any two or more offices
may be held by the same person. None of the officers need be a stockholder or a
director of the Corporation or a resident of the State of Delaware.
10
<PAGE>
6.2 Removal. Any officer or agent elected or appointed by the board of
-------
directors may be removed by the board of directors, with or without cause,
whenever in its judgment the best interest of the Corporation will be served
thereby, but such removal shall be without prejudice to the contract rights, if
any, of the person so removed. Election or appointment of an officer or agent
shall not of itself create contract rights.
6.3 Vacancies. Any vacancy occurring in any office of the Corporation (by
---------
death, resignation, removal, or otherwise) may be filled by the board of
directors.
6.4 Authority. Officers shall have such authority and perform such duties
---------
in the management of the Corporation as are provided in these bylaws or as may
be determined by resolution of the board of directors not inconsistent with
these bylaws.
6.5 Compensation. The compensation, if any, of officers and agents shall
------------
be fixed from time to time by the board of directors; provided, however, that
the board of directors may delegate the power to determine the compensation of
any officer and agent (other than the officer to whom such power is delegated)
to the Chairman of the Board or the President.
6.6 Chairman of the Board. The Chairman of the Board, if elected by the
---------------------
board of directors, shall have such powers and duties as may be prescribed by
the board of directors. Such officer shall preside at all meetings of the
stockholders and of the board of directors. Such officer may sign all
certificates for shares of stock of the Corporation.
6.7 President. The President shall be the chief executive officer of the
---------
Corporation and, subject to the board of directors, he shall have general
executive charge, management, and control of the properties and operations of
the Corporation in the ordinary course of its business, with all such powers
with respect to such properties and operations as may be reasonably incident to
such responsibilities. If the board of directors has not elected a Chairman of
the Board or in the absence or inability to act of the Chairman of the Board,
the President shall exercise all of the powers and discharge all of the duties
of the Chairman of the Board. As between the Corporation and third parties, any
action taken by the President in the performance of the duties of the Chairman
of the Board shall be conclusive evidence that there is no Chairman of the Board
or that the Chairman of the Board is absent or unable to act.
6.8 Vice Presidents. Each Vice President shall have such powers and
---------------
duties as may be assigned to him by the board of directors, the Chairman of the
Board, or the President, and (in order of their seniority as determined by the
board of directors or, in the absence of such determination, as determined by
the length of time they have held the office of Vice President) shall exercise
the powers of the President during that officer's absence or inability to act.
As between the Corporation and third parties, any action taken by a Vice
President in the performance of the duties of the President shall be conclusive
evidence of the absence or inability to act of the President at the time such
action was taken.
6.9 Treasurer. The Treasurer shall have custody of the Corporation's
---------
funds and securities, shall keep full and accurate account of receipts and
disbursements, shall deposit all monies and valuable effects in the name and to
the credit of the Corporation in such depository or depositories
11
<PAGE>
as may be designated by the board of directors, and shall perform such other
duties as may be prescribed by the board of directors, the Chairman of the
Board, or the President.
6.10 Assistant Treasurers. Each Assistant Treasurer shall have such powers
--------------------
and duties as may be assigned to him by the board of directors, the Chairman of
the Board, or the President. The Assistant Treasurers (in the order of their
seniority as determined by the board of directors or, in the absence of such a
determination, as determined by the length of time they have held the office of
Assistant Treasurer) shall exercise the powers of the Treasurer during that
officer's absence or inability to act.
6.11 Secretary. Except as otherwise provided in these bylaws, the
---------
Secretary shall keep the minutes of all meetings of the board of directors and
of the stockholders in books provided for that purpose, and he shall attend to
the giving and service of all notices. He may sign with the Chairman of the
Board or the President, in the name of the Corporation, all contracts of the
Corporation and affix the seal of the Corporation thereto. He may sign with the
Chairman of the Board or the President all certificates for shares of stock of
the Corporation, and he shall have charge of the certificate books, transfer
books, and stock papers as the board of directors may direct, all of which shall
at all reasonable times be open to inspection by any director upon application
at the office of the Corporation during business hours. He shall in general
perform all duties incident to the office of the Secretary, subject to the
control of the board of directors, the Chairman of the Board, and the President.
6.12 Assistant Secretaries. Each Assistant Secretary shall have such
---------------------
powers and duties as may be assigned to him by the board of directors, the
Chairman of the Board, or the President. The Assistant Secretaries (in the order
of their seniority as determined by the board of directors or, in the absence of
such a determination, as determined by the length of time they have held the
office of Assistant Secretary) shall exercise the powers of the Secretary during
that officer's absence or inability to act.
ARTICLE SEVEN: CERTIFICATES AND STOCKHOLDERS
7.1 Certificates for Shares. Certificates for shares of stock of the
-----------------------
Corporation shall be in such form as shall be approved by the board of
directors. The certificates shall be signed by the Chairman of the Board or the
President or a Vice President and also by the Secretary or an Assistant
Secretary or by the Treasurer or an Assistant Treasurer. Any and all signatures
on the certificate may be a facsimile and may be sealed with the seal of the
Corporation or a facsimile thereof. If any officer, transfer agent, or
registrar who has signed, or whose facsimile signature has been placed upon, a
certificate has ceased to be such officer, transfer agent, or registrar before
such certificate is issued, such certificate may be issued by the Corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of issue. The certificates shall be consecutively numbered and shall
be entered in the books of the Corporation as they are issued and shall exhibit
the holder's name and the number of shares.
7.2 Replacement of Lost or Destroyed Certificates. The board of directors
---------------------------------------------
may direct a new certificate or certificates to be issued in place of a
certificate or certificates theretofore issued by the Corporation and alleged to
have been lost or destroyed, upon the making of an affidavit of that
12
<PAGE>
fact by the person claiming the certificate or certificates representing shares
to be lost or destroyed. When authorizing such issue of a new certificate or
certificates the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or to give the Corporation a bond with a
surety or sureties satisfactory to the Corporation in such sum as it may direct
as indemnity against any claim, or expense resulting from a claim, that may be
made against the Corporation with respect to the certificate or certificates
alleged to have been lost or destroyed.
7.3 Transfer of Shares. Shares of stock of the Corporation shall be
------------------
transferable only on the books of the Corporation by the holders thereof in
person or by their duly authorized attorneys or legal representatives. Upon
surrender to the Corporation or the transfer agent of the Corporation of a
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment, or authority to transfer, the Corporation or its
transfer agent shall issue a new certificate to the person entitled thereto,
cancel the old certificate, and record the transaction upon its books.
7.4 Registered Stockholders. The Corporation shall be entitled to treat
-----------------------
the holder of record of any share or shares of stock as the holder in fact
thereof and, accordingly, shall not be bound to recognize any equitable or other
claim to or interest in such share or shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
7.5 Regulations. The board of directors shall have the power and
-----------
authority to make all such rules and regulations as they may deem expedient
concerning the issue, transfer, and registration or the replacement of
certificates for shares of stock of the Corporation.
7.6 Legends. The board of directors shall have the power and authority to
-------
provide that certificates representing shares of stock bear such legends as the
board of directors deems appropriate to assure that the Corporation does not
become liable for violations of federal or state securities laws or other
applicable law.
ARTICLE EIGHT: MISCELLANEOUS PROVISIONS
8.1 Dividends. Subject to provisions of law and the certificate of
---------
incorporation of the Corporation, dividends may be declared by the board of
directors at any regular or special meeting and may be paid in cash, in
property, or in shares of stock of the Corporation. Such declaration and
payment shall be at the discretion of the board of directors.
8.2 Reserves. There may be created by the board of directors out of funds
--------
of the Corporation legally available therefor such reserve or reserves as the
directors from time to time, in their discretion, consider proper to provide for
contingencies, to equalize dividends, or to repair or maintain any property of
the Corporation, or for such other purpose as the board of directors shall
consider beneficial to the Corporation, and the board of directors may modify or
abolish any such reserve in the manner in which it was created.
13
<PAGE>
8.3 Books and Records. The Corporation shall keep correct and complete
-----------------
books and records of account, shall keep minutes of the proceedings of its
stockholders and board of directors and shall keep at its registered office or
principal place of business, or at the office of its transfer agent or
registrar, a record of its stockholders, giving the names and addresses of all
stockholders and the number and class of the shares held by each.
8.4 Fiscal Year. The fiscal year of the Corporation shall be fixed by the
-----------
board of directors; provided, that if such fiscal year is not fixed by the board
of directors and the selection of the fiscal year is not expressly deferred by
the board of directors, the fiscal year shall be the calendar year.
8.5 Seal. The seal of the Corporation shall be such as from time to time
----
may be approved by the board of directors.
8.6 Resignations. Any director, committee member, or officer may resign
------------
by so stating at any meeting of the board of directors or by giving written
notice to the board of directors, the Chairman of the Board, the President, or
the Secretary. Such resignation shall take effect at the time specified therein
or, if no time is specified therein, immediately upon its receipt. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
8.7 Securities of Other Corporations. The Chairman of the Board, the
--------------------------------
President, or any Vice President of the Corporation shall have the power and
authority to transfer, endorse for transfer, vote, consent, or take any other
action with respect to any securities of another issuer which may be held or
owned by the Corporation and to make, execute, and deliver any waiver, proxy, or
consent with respect to any such securities.
8.8 Telephone Meetings. Stockholders (acting for themselves or through a
------------------
proxy), members of the board of directors, and members of a committee of the
board of directors may participate in and hold a meeting of such stockholders,
board of directors, or committee by means of a conference telephone or similar
communications equipment by means of which persons participating in the meeting
can hear each other, and participation in a meeting pursuant to this section
shall constitute presence in person at such meeting, except where a person
participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
8.9 Action Without a Meeting.
------------------------
(a) Unless otherwise provided in the certificate of incorporation of
the Corporation, any action required by the Delaware General Corporation Law to
be taken at any annual or special meeting of the stockholders, or any action
which may be taken at any annual or special meeting of the stockholders, may be
taken without a meeting, without prior notice, and without a vote, if a consent
or consents in writing, setting forth the action so taken, shall be signed by
the holders (acting for themselves or through a proxy) of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which the holders of all shares
entitled to vote thereon were present and voted and shall be delivered to the
Corporation by delivery to its registered office in the State of Delaware, its
principal place of
14
<PAGE>
business, or an officer or agent of the Corporation having custody of the book
in which proceedings of meetings of stockholders are recorded. Every written
consent of stockholders shall bear the date of signature of each stockholder who
signs the consent and no written consent shall be effective to take the
corporate action referred to therein unless, within sixty days of the earliest
dated consent delivered in the manner required by this Section 8.9(a) to the
Corporation, written consents signed by a sufficient number of holders to take
action are delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the Corporation's registered
office, principal place of business, or such officer or agent shall be by hand
or by certified or registered mail, return receipt requested.
(b) Unless otherwise restricted by the certificate of incorporation of
the Corporation or by these bylaws, any action required or permitted to be taken
at a meeting of the board of directors, or of any committee of the board of
directors, may be taken without a meeting if a consent or consents in writing,
setting forth the action so taken, shall be signed by all the directors or all
the committee members, as the case may be, entitled to vote with respect to the
subject matter thereof, and such consent shall have the same force and effect as
a vote of such directors or committee members, as the case may be, and may be
stated as such in any certificate or document filed with the Secretary of State
of the State of Delaware or in any certificate delivered to any person. Such
consent or consents shall be filed with the minutes of proceedings of the board
or committee, as the case may be.
8.10 Invalid Provisions. If any part of these bylaws shall be held invalid
------------------
or inoperative for any reason, the remaining parts, so far as it is possible and
reasonable, shall remain valid and operative.
8.11 Mortgages, etc. With respect to any deed, deed of trust, mortgage, or
---------------
other instrument executed by the Corporation through its duly authorized officer
or officers, the attestation to such execution by the Secretary of the
Corporation shall not be necessary to constitute such deed, deed of trust,
mortgage, or other instrument a valid and binding obligation against the
Corporation unless the resolutions, if any, of the board of directors
authorizing such execution expressly state that such attestation is necessary.
8.12 Headings. The headings used in these bylaws have been inserted for
--------
administrative convenience only and do not constitute matter to be construed in
interpretation.
8.13 References. Whenever herein the singular number is used, the same
----------
shall include the plural where appropriate, and words of any gender should
include each other gender where appropriate.
8.14 Amendments to Bylaws. These bylaws may be altered, amended, or
--------------------
repealed or new bylaws may be adopted only by the affirmative vote of at least a
majority of the entire board of directors at any regular meeting of the board of
directors, or by the affirmative vote of the holders of at least a majority of
the voting power of the then issued and outstanding shares of capital stock of
the Corporation entitled to vote at any regular meeting of the stockholders or
at any special
15
<PAGE>
meeting of the stockholders if notice of such alteration, amendment, repeal, or
adoption of new bylaws be contained in the notice of such special meeting.
8.15 Indemnification. The Corporation shall indemnify any person who was,
---------------
is, or is threatened to be made a party to a proceeding (as hereinafter defined)
by reason of the fact that he or she (i) is or was a director or officer of the
Corporation or (ii) while a director or officer of the Corporation, is or was
serving at the request of the Corporation as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, to the
fullest extent permitted under the Delaware General Corporation Law, as the same
exists or may hereafter be amended. Such right shall be a contract right and as
such shall run to the benefit of any director or officer who is elected and
accepts the position of director or officer of the Corporation or elects to
continue to serve as a director or officer of the Corporation while this Section
8.15 is in effect. Any repeal or amendment of this Section 8.15 shall be
prospective only and shall not limit the rights of any such director or officer
or the obligations of the Corporation with respect to any claim arising from or
related to the services of such director or officer in any of the foregoing
capacities prior to any such repeal or amendment to this Section 8.15. Such
right shall include the right to be paid by the Corporation expenses incurred in
defending any such proceeding in advance of its final disposition to the maximum
extent permitted under the Delaware General Corporation Law, as the same exists
or may hereafter be amended. If a claim for indemnification or advancement of
expenses hereunder is not paid in full by the Corporation within sixty (60) days
after a written claim has been received by the Corporation, the claimant may at
any time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim, and if successful in whole or in part, the claimant shall
also be entitled to be paid the expenses of prosecuting such claim. It shall be
a defense to any such action that such indemnification or advancement of costs
of defense are not permitted under the Delaware General Corporation Law, but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its board of directors or any committee thereof,
independent legal counsel, or stockholders) to have made its determination prior
to the commencement of such action that indemnification of, or advancement of
costs of defense to, the claimant is permissible in the circumstances nor an
actual determination by the Corporation (including its board of directors or any
committee thereof, independent legal counsel, or stockholders) that such
indemnification or advancement is not permissible shall be a defense to the
action or create a presumption that such indemnification or advancement is not
permissible. In the event of the death of any person having a right of
indemnification under the foregoing provisions, such right shall inure to the
benefit of his or her heirs, executors, administrators, and personal
representatives. The rights conferred above shall not be exclusive of any other
right which any person may have or hereafter acquire under any statute, bylaw,
resolution of stockholders or directors, agreement, or otherwise.
The Corporation may additionally indemnify any employee or agent of the
Corporation to the fullest extent permitted by law.
As used herein, the term "proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
arbitrative, or investigative, any appeal in such an action, suit, or
proceeding, and any inquiry or investigation that could lead to such an action,
suit, or proceeding.
16
<PAGE>
The undersigned, the Secretary of the Corporation, hereby certifies that
the foregoing bylaws were adopted by unanimous consent by the directors of the
Corporation as of the 4th day of December, 1997.
/s/ M. Lazane Smith
------------------------------------------------
M. Lazane Smith, Secretary
17
<PAGE>
EXHIBIT 10.1
COMPUCOM ACQUISITION CORP. OF TEXAS
1994 STOCK OPTION PLAN
PREAMBLE
--------
This CompuCom Acquisition Corp. of Texas 1994 Stock Option Plan (the
"Plan") provides for the granting of
(a) Incentive Options (hereinafter defined) to certain key employees of
CompuCom Acquisition Corp. of Texas, a Delaware corporation (the
"Corporation"), or of its Affiliates (hereinafter defined); and
(b) Nonstatutory Stock Options (hereinafter defined) to certain key
employees and non-employee directors of the Corporation or of its
Affiliates and to certain individuals and entities who are not
employees or directors of the Corporation or of its Affiliates but who
from time to time provide substantial advice or other assistance or
services to the Corporation or its Affiliates.
The purpose of the Plan is to provide an incentive for key employees and
directors of the Corporation or its Affiliates and an incentive for individuals
who are not employees or directors of the Corporation or its Affiliates, but
who from time to time provide substantial advice or other assistance or services
to the Corporation or its Affiliates, to remain in the service of the
Corporation or its Affiliates, to extend to them the opportunity to acquire a
proprietary interest in the Corporation so that they will apply their best
efforts for the benefit of the Corporation, and to aid the Corporation in
attracting able persons to enter the service of the Corporation and its
Affiliates.
ARTICLE I
DEFINITIONS
As used in this Plan, the following terms shall have the meanings set forth
below:
"Act" shall mean the Securities Exchange Act of 1934, as amended.
"Affiliates" shall mean (a) any corporation, other than the Corporation, in
an unbroken chain of corporations ending with the Corporation if each of the
corporations, other than the Corporation, owns stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain and (b) any corporation, other than the
Corporation, in an unbroken chain of corporations beginning with the Corporation
if each of the corporations, other than the last corporation in the unbroken
chain, owns stock possessing fifty percent (50%) or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
<PAGE>
"Agreement" shall mean the written agreement between the Corporation and a
Holder evidencing the Option granted by the Company and the understanding of the
parties with respect thereto.
"Board of Directors" shall mean the board of directors of the Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Committee" shall mean the committee appointed pursuant to Section 3.1
hereof by the Board of Directors to administer this Plan.
"Disability" shall mean a physical or mental condition which is expected to
be of long, continued duration and prevents an individual from engaging in any
substantial gainful employment.
"Eligible Individuals" shall mean (a) key employees, including officers and
directors who are also employees of the Corporation or of any of its Affiliates,
and (b) non-employee directors of the Corporation or of any of its Affiliates,
and (c) individuals who are not employees or directors of the Corporation or its
Affiliates but who from time to time provide substantial advice or other
assistance or services to the Corporation or its Affiliates. Notwithstanding the
foregoing provisions of this Paragraph 1.8, to ensure that the requirements of
the third sentence of Paragraph 3.1 are satisfied, the Board of Directors may
from time to time specify individuals who shall not be eligible for the grant of
Options or options or stock appreciation rights or allocations of stock under
any plan of the Corporation or its affiliates (as such terms are used in
subsection (d)(3) of Rule 16b-3 promulgated under the Act); provided, however,
that the Board of Directors may at any time determine that any individual who
has been so excluded from eligibility shall become eligible for grants of
Options and grants of such options or stock appreciation rights or allocations
of stock under any plans of the Corporation and its Affiliates.
"Fair Market Value" shall mean, if the Stock is traded on one or more
established markets or exchanges, the mean of the opening and closing prices of
the Stock in the primary market or exchange on which the Stock is traded, and if
the Stock is not so traded or the Stock does not trade on the relevant date, the
value determined in good faith by the Board of Directors. For purposes of
valuing Incentive Options, the Fair Market Value of stock shall be determined
without regard to any restriction other than one which, by its terms, will never
lapse.
"Holder" shall mean an Eligible Individual to whom an Option has been
granted.
"Incentive Options" shall mean stock options that are intended to satisfy
the requirements of section 422 of the Code.
"Nonstatutory Options" shall mean stock options that do not satisfy the
requirements of section 422 of the Code.
<PAGE>
"Options" shall mean either Incentive Options or Nonstatutory Options or
both.
"Stock" shall mean the Corporation's authorized $.01 par value common stock
together with any other securities with respect to which Options granted
hereunder may become exercisable.
ARTICLE II
STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO THE PLAN
2.1 Description of Stock and Maximum Shares Allocated. The Stock which
-------------------------------------------------
Options granted hereunder give a Holder the right to purchase may be unissued or
reacquired shares of Stock, as the Board of Directors may, in its sole and
absolute discretion, from time to time determine. Subject to the adjustments
provided for in Section 6.6 hereof, the aggregate number of shares of Stock to
be issued pursuant to the exercise of all Options granted hereunder may equal
but shall not exceed 200,000 shares.
2.2 Restoration of Unpurchased Shares. If an Option granted hereunder
---------------------------------
expires or terminates for any reason during the term of this Plan and prior to
the exercise thereof in full, the shares of Stock subject to, but not issued
under, such Option shall again be available for Options granted hereunder
subsequent thereto.
ARTICLE III
ADMINISTRATION OF THE PLAN
3.1 Stock Option Committee. The Plan shall be administered by the
----------------------
Committee. The Committee shall consist of not less than three (3) members of the
Board of Directors, and, except as is provided in the immediately following
sentence, may be constituted by all members of the Board of Directors. In the
event that the Stock is registered under Section 12 of the Act, all members of
the Committee shall be "disinterested persons," as defined in Rule 16b-3(d)(3)
promulgated under the Act; and in such event members of the Committee shall not
be eligible to receive Options or stock options, stock appreciation rights, or
an allocation of stock under any plan of the Corporation or its affiliates (as
such terms are used in subsection (d)(3) of Rule 16b-3 promulgated under the
Act) while they are serving as members of the Committee and must not have been
eligible to receive Options or such options, stock appreciation rights, or an
allocation of stock under any plan of the Corporation or its Affiliates within
one (1) year prior to their appointment to the Committee.
3.2 Duration, Removal, Etc. The members of the Committee shall serve at
----------------------
the pleasure of the Board of Directors, which shall have the power, at any time
and from time to time, to remove members from the Committee or to add members
thereto. Vacancies on the Committee, however caused, shall be filled by action
of the Board of Directors.
<PAGE>
3.3 Meetings and Actions of Committee. The Committee shall elect one of
---------------------------------
its members as its Chairman and shall hold its meetings at such times and places
as it may determine. All decisions and determinations of the Committee shall be
made by the majority vote or decision of all of its members present at a
meeting; provided, however, that any decision or determination reduced to
writing and signed by all of the members of the Committee shall be as fully
effective as if it had been made at a meeting duly called and held. The
Committee may make any rules and regulations for the conduct of its business
that are not inconsistent with the provisions hereof and with the bylaws of the
Corporation as it may deem advisable.
3.4 Committee's Powers. Subject to the express provisions hereof, the
------------------
Committee shall have the authority, in its sole and absolute discretion, (a) to
adopt, amend, and rescind administrative and interpretive rules and regulations
relating to the Plan; (b) to determine the terms and provisions of the
respective Agreements (which need not be identical), including provisions
defining or otherwise relating to (i) subject to Article VI of the Plan, the
term and the period or periods and extent of exercisability of the Options, (ii)
the extent to which the transferability of shares of Stock issued upon exercise
of Options is restricted, (iii) the effect of termination of employment upon the
exercisability of the Options, and (iv) the effect of approved leaves of absence
(consistent with any applicable regulations of the Internal Revenue Service);
(c) to accelerate the time of exercisability of any Option that has been
granted; (d) to construe the respective Option Agreements and the Plan; and (e)
to make all other determinations and perform all other acts necessary or
advisable for administering the Plan, including the delegation of such
ministerial acts and responsibilities as the Committee deems appropriate. The
Committee may correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Agreement in the manner and to the extent it
shall deem expedient to carry it into effect, and it shall be the sole and final
judge of such expediency. The determinations of the Committee on the matters
referred to in this Section 3.4 shall be final and conclusive.
ARTICLE IV
ELIGIBILITY AND PARTICIPATION
4.1 Eligible Individuals. Options may be granted hereunder only to persons
--------------------
who are Eligible Individuals at the time of the grant thereof. Notwithstanding
any provision contained herein to the contrary, a person shall not be eligible
to receive an Incentive Option hereunder unless he is an employee of the
Corporation or an Affiliate, nor shall a person be eligible to receive an
incentive Option hereunder if he, at the time such option is granted, would own
(within the meaning of sections 422 and 424 of the Code) stock possessing more
than ten percent (10%) of the total combined voting power or value of all
classes of stock of the Corporation or an Affiliate unless at the time such
Incentive Option is granted the exercise price per share of Stock is at least
one hundred and ten percent (110%) of the Fair Market Value of each share of
Stock to which the Incentive Option relates and the Incentive Option is not
exercisable after the expiration of five (5) years from the date it is granted.
<PAGE>
4.2 No Right to Option. The adoption of the Plan shall not be deemed to
------------------
give any person a right to be granted an Option.
ARTICLE V
GRANT OF OPTIONS AND CERTAIN TERMS OF THE AGREEMENTS
5.1 Criteria for Granting Options. Subject to the express provisions
-----------------------------
hereof, the Committee shall determine which Eligible Individuals shall be
granted Options hereunder from time to time. In making grants, the Committee
shall take into consideration the contribution the potential Holder has made or
may make to the success of the Company or its Affiliates and such other
considerations as the Board of Directors may from time to time specify. The
Committee shall also determine the number of shares subject to each of such
Options, and shall authorize and cause the Corporation to grant Options in
accordance with such determinations.
5.2 Date of Grant. The date on which the Committee completes all action
-------------
constituting an offer of an Option to an individual, including the specification
of the number of shares of Stock to be subject to the Option, shall be the date
on which the Option covered by an Agreement is granted, even though certain
terms of the Agreement may not be at such time determined and even though the
Agreement may not be executed until a later time. For purposes of the preceding
sentence, an offer of an Option shall be deemed made if the Committee has
completed all such action except communication of the grant of the Option to the
potential Holder. In no event, however, shall an Optionee gain any rights in
addition to those specified by the Committee in its grant, regardless of the
time that may pass between the grant of the Option and the actual execution of
the Agreement by the Company and the Optionee.
5.3 Option Agreement.
----------------
(a) Executed Agreement. Each option granted hereunder shall be
------------------
evidenced by an Agreement, executed by the Corporation and the Eligible
Individual to whom the Option is granted, incorporating such terms as the
Committee shall deem necessary or desirable. More than one Option may be
granted hereunder to the same Eligible Individual and be outstanding
concurrently hereunder. In the event an Eligible Individual is granted both
one or more Incentive Options and one or more Nonstatutory Options, such
grants shall be evidenced by separate Agreements, one for each of the
Incentive Option grants and one for each of the Nonstatutory Option grants.
(b) Forfeiture. Each Agreement may contain or otherwise provide for
----------
conditions giving rise to the forfeiture of the Stock acquired pursuant to
an Option granted hereunder or otherwise and such restrictions on the
transferability of shares of the Stock acquired pursuant to an Option
granted hereunder or otherwise as the Committee in its sole and absolute
discretion shall deem proper or advisable. Such conditions giving rise to
forfeiture may include, but need not be limited to, the requirement that
the Holder render substantial services to the Corporation or its Affiliates
for a specified period of time. Such
<PAGE>
restrictions on transferability may include, but need not be limited to,
options and rights of first refusal in favor of the Corporation and
shareholders of the Corporation other than the Holder of such share of
Stock who is a party to the particular Agreement or a subsequent holder of
the shares of Stock who is bound by such Agreement.
(c) Grant to Individuals Not Subject to Section 16b. Notwithstanding
-----------------------------------------------
the foregoing provisions of this Article V, the President and/or Chief
Executive Officer of the Corporation may, from time to time, at his sole
discretion but subject to the following provisions of this Section 5.3(c),
grant Options to individuals who are not at the time of grant individuals
subject to liability under section 16b of the Act. The total number of
shares of the Stock that shall at any time be subject to grant pursuant to
the immediately preceding sentence shall be specified from time to time by
resolution of the Board of Directors, and such number of shares shall be
included within the numbers of shares stated in Section 2.1. The Board of
Directors may further limit the authority of the President and/or Chief
Executive Officer to grant options and may prescribe some or all the terms
of any such Options to such extent as the Board of Directors deems
appropriate.
ARTICLE VI
TERMS AND CONDITIONS OF OPTIONS
All Options granted hereunder shall comply with, be deemed to include, and
shall be subject to the following terms and conditions:
6.1 Number of Shares. Each Agreement shall state the number of shares of
----------------
Stock to which it relates.
6.2 Exercise Price. Each Agreement shall state the exercise price per
--------------
share of Stock. The exercise price per share of Stock subject to an Incentive
Option shall not be less than the greater of (a) the par value per share of the
Stock or (b) 100% of the Fair Market Value per share of the Stock on the date of
the grant of the Option. The exercise price per share of Stock subject to a
Nonstatutory Option shall not be less than the Fair Market Value per share of
the Stock on the date of the grant of the Option.
6.3 Medium and Time of Payment, Method of Exercise, and Withholding Taxes.
---------------------------------------------------------------------
(a) Payment of Exercise Price. The exercise price of an Option shall
-------------------------
be payable upon the exercise of the Option in cash, by certified or
cashier's check, or, with the consent of the Committee, with shares of
Stock of the Corporation owned by the Holder, including a multiple series
of exchanges of such Stock, or with the consent of the Committee, by a
combination of cash and such shares. Exercise of an Option shall not be
effective until the Corporation has received written notice of exercise.
Such notice must specify the number of whole shares to be purchased and be
accompanied by payment in full of the aggregate Option price of the number
of shares purchased. The Corporation
<PAGE>
shall not in any case be required to sell, issue, or deliver a fractional
share with respect to any Option.
(b) Payment of Withholding Tax. The Committee may, in its discretion,
--------------------------
require a Holder to pay to the Corporation at the time of exercise of an
Option or portion thereof the amount that the Corporation deems necessary
to satisfy its obligation to withhold Federal, state or local income or
other taxes incurred by reason of the exercise. Upon the exercise of an
Option requiring tax withholding, a Holder may make a written request to
have shares of Stock withheld by the Corporation from the shares otherwise
to be received. The number of shares so withheld shall have an aggregate
Fair Market Value on the date of exercise sufficient to satisfy the
applicable withholding taxes. The acceptance of any such request by a
Holder shall be at the sole discretion of the Committee. Where the exercise
of an Option does not give rise to an obligation to withhold Federal income
or other taxes on the date of exercise, the Corporation may, in its
discretion, require a Holder to place shares of Stock purchased under the
Option in escrow for the benefit of the Corporation until such time as
Federal income or other tax withholding is no longer required with respect
to such shares or until such withholding is required on amounts included in
the gross income of the Holder as a result of the exercise of an Option or
the disposition of shares of Stock acquired pursuant thereto. At such later
time, the Corporation in its discretion, may require a Holder to pay to the
Corporation the amount that the Corporation deems necessary to satisfy its
obligation to withhold Federal, state or local income or other taxes
incurred by reason of the exercise of the Option or the disposition of
shares of Stock, in which case the shares of Stock shall be released from
escrow to the Holder. Alternatively, subject to acceptance by the
Committee, in its sole discretion, a Holder may make a written request to
have shares of Stock held in escrow applied toward the Corporation's
obligation to withhold Federal, state or local income or other taxes
incurred by reason of the exercise of the Option or the disposition of
shares of Stock, based on the Fair Market Value of the shares on the date
of the termination of the escrow arrangement. Upon application of such
shares toward the Corporation's withholding obligation, any shares of Stock
held in escrow and not, in the judgment of the Committee, necessary to
satisfy such obligation shall be released from escrow to the Holder.
6.4 Term, Time of Exercise, and Transferability of Options. In addition
------------------------------------------------------
to such other terms and conditions as may be included in a particular Agreement
granting an Option, an Option shall be exercisable during a Holder's lifetime
only by him or by his guardian or legal representative. An Option shall not be
transferable other than by will or the laws of descent and distribution. Each
Option shall also be subject to the following terms and conditions:
(a) Termination of Employment or Directorship - General. The
---------------------------------------------------
provisions of this Section 6.4 (a) shall apply to the extent a Holder's
Agreement does not expressly provide otherwise. If a Holder ceases to be
employed by at least one of the employers in the group of employers
consisting of the Corporation and its Affiliates because the Holder
<PAGE>
voluntarily terminates employment with such group of employers and the
Holder does not remain or thereupon become a director of the Corporation or
one or more of its Affiliates, or if a Holder ceases to be a director of at
least one of the corporations in the group of corporations consisting of
the Corporation and its Affiliates and the Holder does not remain or
thereupon become an employee of the Corporation or one or more of its
Affiliates, the Holder shall have the right for three (3) months after
termination of employment to exercise that portion of an Option that has
become exercisable pursuant to Holder's Agreement but which remains
unexercised on the date of the Holder's termination of employment or
ceasing to be a director, whichever occurs later, and thereafter the Option
shall terminate and cease to be exercisable.
(b) Termination of Employment - For Cause. If a Holder ceases to be
-------------------------------------
employed by at least one of the employers in the group of employers
consisting of the Corporation and its Affiliate because any of such
entities terminates the Holder's employment for cause, the portion, if any,
of an Option that remains unexercised, including that portion, if any, that
pursuant to the Agreement is not yet exercisable, on the date of the
Holder's termination of employment, shall terminate and cease to be
exercisable as of such date. A Holder's employment shall be deemed
terminated "for cause" if terminated by the Board of Directors of the
Corporation or the board of directors of an Affiliate because of
incompetence, insubordination, dishonesty, other acts detrimental to the
interest of the Corporation or its Affiliates, or any material breach by
the Holder of any employment, nondisclosure, noncompetition, or other
contract with the Corporation or one of its Affiliates. Whether cause
exists shall be determined by such board of directors in its sole
discretion and in good faith. Notwithstanding anything contained in this
subparagraph (b) to the contrary, in the event that the definition of "for
cause" contained herein conflicts with the definition of "for cause"
contained in any employment agreement between a Holder and the Corporation
or its Affiliates, the definition of "for cause" contained in such
employment agreement shall control and shall supersede the definition of
such term contained herein.
(c) Termination of Employment - Without Cause. If a Holder ceases to
-----------------------------------------
be employed by at least one of the employers in the group of employers
consisting of the Corporation and its Affiliates because one or more of
such entities terminates the employment of the Holder but not for cause,
and the Holder does not remain or thereupon become a director of the
Corporation or one or more of its Affiliates, the Holder shall have the
right for three (3) months after such termination of employment to exercise
the Option with respect to that portion thereof that has become exercisable
pursuant to Holder's Agreement as of the date of the Holder's termination
of employment but which remains unexercised, and thereafter the Option
shall terminate and cease to be exercisable.
(d) Disability. The provisions of this Section 6.4(d) shall apply to
----------
the extent a Holder's Agreement does not expressly provide otherwise. If a
Holder ceases to be employed by at least one of the employers in the group
of employers consisting of the
<PAGE>
Corporation and its Affiliates by reason of Disability and does not remain
or thereupon become a director of the Corporation or one or more of its
Affiliates, or if the Holder ceases by reason of such Disability to be a
director of at least one of the corporations in the group of corporations
consisting of the Corporation and its Affiliates, the Holder shall have the
right for three (3) months after the date of termination of employment with
or cessation of directorship of such group of employers by reason of
Disability, whichever occurs later, to exercise an Option with respect to
that portion thereof that has become exercisable pursuant to Holder's
Agreement but which remains unexercised, and thereafter the Option shall
terminate and cease to be exercisable.
(e) Death. The provisions of this Section 6.4(e) shall apply to the
-----
extent a Holder's Agreement does not expressly provide otherwise. If a
Holder dies while in the employ of the Corporation or an Affiliate or dies
while a director of the Corporation or an Affiliate, an Option shall be
exercisable by the Holder's legal representatives, legatees, or
distributees for three (3) months following the date of the Holder's death
with respect to that portion thereof that has become exercisable pursuant
to Holder's Agreement but which remains unexercised on the Holder's date of
death, and thereafter the Option shall terminate and cease to be
exercisable.
(f) Ten Year Limitation. Notwithstanding any other provision of this
-------------------
Plan, including the provisions of subparagraphs (a), (b), (c), (d) and (e)
of this Section 6.4, no Incentive Option shall be exercisable after the
expiration of ten (10) years from the date it is granted, or the period
specified in Section 4.1, if applicable. The Committee shall have authority
to prescribe in any Agreement that the Option evidenced thereby may be
exercised in full or in part as to any number of shares subject thereto at
any time or from time to time during the term of the Option, or in such
installments at such times during said term as the Committee may prescribe.
Except as provided above and unless otherwise provided in any Agreement, an
Option may be exercised at any time or from time to time during the term of
the Option. Such exercise may be as to any or all whole (but no fractional)
shares which have become purchasable under the Option.
(g) Issuance of Certificates. Within a reasonable time or such time
------------------------
as may be permitted by law after the Corporation receives written notice
that the Holder has elected to exercise all or a portion of an Option, such
notice to be accompanied by payment in full of the aggregate Option price
of the number of shares purchased, the Corporation shall issue and deliver
a certificate representing the shares acquired in consequence of the
exercise and any other amounts payable in consequence of such exercise. In
the event that a Holder exercises both an Incentive Option, or portion
thereof, and a Nonstatutory Stock Option, or a portion thereof, separate
Stock certificates shall be issued, one for the Stock subject to the
Incentive Option and one for the Stock subject to the Nonstatutory Stock
Option. The number of the shares of Stock transferable due to an exercise
of an Option under this Plan shall not be increased due to the passage of
time, except as may be provided in an Agreement.
<PAGE>
(h) Legend on Certificates. Nothing herein or in any Option granted
----------------------
hereunder shall require the Corporation to issue any shares upon exercise
of any Option if such issuance would, in the opinion of counsel for the
Corporation, constitute a violation of the Securities Act of 1933, as
amended, or any similar or superseding statute or statutes, or any other
applicable statute or regulation, as then in effect. At the time of any
exercise of an Option, the Corporation may, as a condition precedent to the
exercise of such Option, require from the Holder of the Option (or in the
event of his death, his legal representatives, legatees, or distributees)
such written representations, if any, concerning his intentions with regard
to the retention or disposition of the shares being acquired by exercise of
such Option and such written covenants and agreements, if any, as to the
manner of disposal of such shares as, in the opinion of counsel to the
Corporation, may be necessary to ensure that any disposition by such Holder
(or in the event of his death, his legal representatives, legatees, or
distributees), will not involve a violation of the Securities Act of 1933,
as amended, or any similar or superseding statute or statutes, or any other
applicable state or federal statute or regulation, as then in effect.
Certificates for shares of Stock, when issued, may have the following
legend, or statements of other applicable restrictions, endorsed thereon,
and may not be immediately transferable:
The shares of Stock evidenced by this certificate have been issued to
the registered owner in reliance upon written representations that
these shares have been purchased for investment. These shares may not
be sold, transferred, or assigned unless, in the opinion of the
Corporation and its legal counsel, such sale, transfer, or assignment
will not be in violation of the Securities Act of 1933, as amended,
applicable rules and regulations of the Securities and Exchange
Commission, and any applicable state securities laws.
6.5 Limitation on Aggregate Value of Share Under Option that may become
-------------------------------------------------------------------
First Exercisable during any Calendar Year Under an Incentive Option. Except as
- --------------------------------------------------------------------
is otherwise provided in Section 6.6(b) hereof, with respect to any Incentive
Option granted under this Plan, the aggregate Fair Market Value of shares of
Stock subject to such Incentive Option and the aggregate Fair Market Value of
shares of Stock or stock of any Affiliate (or a predecessor of the Corporation
or an Affiliate) subject to any other incentive stock option (within the meaning
of section 422 of the Code) of the Corporation or its Affiliates (or a
predecessor corporation of any such corporation), that first become purchasable
in any calendar year under such Option, may not (with respect to any Holder)
exceed $100,000, with such Fair Market Value to be determined as of the date the
Incentive Option is granted. For purposes of this Section 6.5, "predecessor
corporation" means a corporation that was a party to a transaction described in
section 424(a) of the Code (or which would be so described if a substitution or
assumption under such section had been effected) with the Corporation, or a
corporation which, at the time the new incentive stock option (within the
meaning of section 422 of the Code) is granted, is an Affiliate of the
Corporation or a predecessor corporation of any such corporations, or a
predecessor corporation of any such corporations.
<PAGE>
6.6 Adjustments Upon Changes in Capitalization, Merger, Etc.
-------------------------------------------------------
(a) Stock Dividend or Stock Split. Notwithstanding any other
-----------------------------
provision hereof, in the event of any change in the number of outstanding
shares of Stock effected without receipt of consideration therefor by the
Corporation, by reason of a stock dividend or split, combination, exchange
of shares or other recapitalization, merger, or otherwise, in which the
Corporation is the surviving corporation, the aggregate number and class of
the reserved shares, the number and class of shares subject to each
outstanding Option and the exercise price of each outstanding Option shall
be automatically adjusted to accurately and equitably reflect the effect
thereon of such change, provided that any fractional share resulting from
such adjustment may be eliminated. In the event of a dispute concerning
such adjustment, the decision of the Committee shall be conclusive. The
number of reserved shares or the number of shares subject to any
outstanding Option shall be automatically reduced by any fraction included
therein which results from any adjustment made pursuant to this Section
6.6.
(b) Merger or Consolidation. The following provisions of this Section
-----------------------
6.6(b) shall apply unless a Holder's Agreement provides otherwise. A
dissolution or liquidation of the Corporation, a merger or consolidation
(other than a merger effecting a reincorporation of the Corporation in
another state or any other merger or a consolidation in which the
shareholders of the surviving corporation and their proportionate interests
therein immediately after the merger or consolidation are substantially
identical to the shareholders of the Corporation and their proportionate
interests therein immediately prior to the merger or consolidation) in
which the Corporation is not the surviving corporation (or survives only as
a subsidiary of another corporation in a transaction in which the
shareholders of the parent of the Corporation and their proportionate
interests therein immediately after the transaction are not substantially
identical to the shareholders of the Corporation and their proportionate
interests therein immediately prior to the transaction; provided that the
Board of Directors may at any time prior to such a merger or consolidation
provide by resolution that the foregoing provisions of this parenthetical
shall not apply if a majority of the board of directors of such parent
immediately after the transaction consists of individuals who constituted a
majority of the Board of Directors immediately prior to the transaction),
or a transaction in which another corporation becomes the owner of 50% or
more of the total combined voting power of all classes of stock of the
Corporation (provided that the Board of Directors may at any time prior to
such transaction provide by resolution that the provision immediately
preceding this parenthetical and following the immediately preceding comma
shall not apply if a majority of the board of directors of the acquiring
corporation immediately after the transaction consists of individuals who
constituted a majority of the Board of Directors immediately prior to the
acquisition of such 50% or more total combined voting power) shall cause
every Option then outstanding to terminate, but the Holders of each such
then outstanding Options shall, in any event, have the right, immediately
prior to such dissolution, liquidation, merger, consolidation, or
transaction, to exercise such Options, to the extent
<PAGE>
not theretofore exercised, without regard to the determination as to the
periods and installments of exercisability made pursuant to a Holder's
Agreement if (and only if) such Options have not at that time expired or
been terminated. Such acceleration of exercisability shall not apply to a
given Option if any surviving or acquiring corporation agrees to assume
such Option in connection with the merger, consolidation, or transaction.
6.7 Rights as a Shareholder. A Holder shall have no right as a
-----------------------
shareholder with respect to any shares covered by his Option until a certificate
representing such shares is issued to him. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is prior to the date
such certificate is issued, except as provided in Paragraph 6.6 hereof.
6.8 Modification, Extension and Renewal of Options. Subject to the terms
----------------------------------------------
and conditions of and within the limitations of the Plan, the Committee may
modify, extend or renew outstanding Options granted under the Plan, or accept
the surrender of Options outstanding hereunder (to the extent not theretofore
exercised) and authorize the granting of new Options hereunder in substitution
therefor (to the extent not theretofore exercised). The Committee may not,
however, without the consent of the Holder, modify any outstanding Options so as
to specify a lower exercise price or Base Amount or accept the surrender of
outstanding Incentive Options and authorize the granting of new Options in
substitution therefor specifying a lower option price. In addition, no
modification of an Option granted hereunder shall, without the consent of the
Holder, alter or impair any rights or obligations under any Option theretofore
granted hereunder to such Holder under the Plan, except as may be necessary,
with respect to Incentive Options, to satisfy the requirements of section 422 of
the Code.
6.9 Furnish Information. Each Holder shall furnish to the Corporation all
-------------------
information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
6.10 Obligation to Exercise; Termination of Employment. The granting of an
-------------------------------------------------
Option hereunder shall impose no obligation upon the Holder to exercise the same
or any part thereof. In the event of a Holder's termination of employment with
the Corporation or an Affiliate, the unexercised portion of an Option granted
hereunder shall terminate in accordance with Paragraph 6.4 hereof.
6.11 Agreement Provisions. The Agreements authorized under the Plan shall
--------------------
contain such provisions in addition to those required by the Plan (including,
without limitation, restrictions or the removal of restrictions upon the
exercise of the Option and the retention or transfer of shares thereby acquired)
as the Committee shall deem advisable. Each Agreement shall identify the Option
evidenced thereby as an Incentive Option or Nonstatutory Option, as the case may
be, and no Agreement shall cover both an Incentive Option and Nonstatutory
Option. Each Agreement relating to an Incentive Option granted hereunder shall
contain such limitations and restrictions upon the exercise of the Incentive
Option to which it relates as shall be necessary for
<PAGE>
the Incentive Option to which such Agreement relates to constitute an incentive
stock option, as defined in section 422 of the Code.
6.12 Redemption.
----------
(a) Notice. At such time that the Stock is not registered under
------
Section 12 of the Securities Exchange Act, if a Holder or any other holder
of the Stock received upon exercise of an Option proposes to sell, give,
pledge, exchange or otherwise transfer or dispose of any of the Stock
received upon exercise of an Option, or of any interests therein owned by
him, whether for cash or other consideration, the Holder or such other
holder shall promptly give notice (the "Redemption Notice") to the
Committee setting forth in detail the circumstances of such event. The
Redemption Notice shall state the name and address of the proposed
transferee and the proposed consideration for and terms of the transfer.
The Corporation shall have an option to purchase such Stock within ten (10)
days after receipt by the Committee of the Redemption Notice, on the terms
hereinafter set forth and as may be set forth in the Agreement. The
Corporation shall exercise such option by giving the Holder or such other
holder notice thereof. Such option may be exercised by the Corporation as
to all, but not less than all, of such Stock, and such option shall expire
to the extent not exercised by the Corporation within ten (10) days after
receipt by the Committee of the Redemption Notice. The price per share for
the Stock purchased by the Corporation pursuant to this Section 6.12 shall
be:
(i) the Fair Market Value per share of such Stock on the date the
Committee receives the Redemption Notice, if the proposed transfer is a
gift, or
(ii) the price per share for which the Holder has received a bona
fide offer, as described in the Redemption Notice, if the proposed transfer
is other than a gift.
The value of any noncash consideration included in such bona fide offer
shall be determined in good faith by the Board of Directors, with the
assistance of a third party to the extent the Board of Directors deems
appropriate.
(b) Payment. Upon exercise of its option pursuant to this Section
-------
6.12, the Corporation shall pay the Holder or such other holder the
purchase price (i) within 60 days after receipt of the Redemption Notice by
the Committee in the manner provided in the Agreement between Corporation
and the Holder or (ii) at the election of the Corporation, in accordance
with the terms embodied in any bona fide offer received by the Holder or
such other holder and described in the Redemption Notice. Any Stock that
the Corporation does not purchase as herein provided may be transferred by
the Holder or such other holder to the persons and upon terms and
conditions no more favorable to the purchasers than those set forth in the
Redemption Notice, such transfer must be consummated within ninety (90)
days after receipt of the Redemption Notice by the Committee, and not
otherwise.
<PAGE>
ARTICLE VII
REMEDIES AND LEGEND
7.1 Remedies. The Corporation shall be entitled to recover from a Holder
--------
reasonable attorneys' fees incurred in connection with the enforcement of the
terms and provisions of the Plan and any Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.
7.2 Legend. Each certificate representing shares issued to a Holder upon
------
exercise of an Option granted under the Plan shall be subject to a right
redemption as provided in Section 6.12 of the Plan and shall bear a legend that
complies with applicable law with respect to such restrictions on
transferability such as:
The shares represented by this certificate are subject to
restrictions on transferability imposed by the Stock Option Plan of
CompuCom Acquisition Corp. of Texas which grant to the Corporation an
option to purchase such shares in certain instances. A copy of such
Plan is on file at the principal office of the Corporation, and is
subject to the same right of examination by a shareholder of the
Corporation (in person or by agent, attorney, or accountant) as are
the books and records of the Corporation.
ARTICLE VIII
DURATION OF PLAN
No Options may be granted hereunder after the date that is ten (10) years
from the earlier of (a) the date the Plan is adopted by the Board of Directors
or (b) the date the Plan is approved by the shareholders of the Corporation.
ARTICLE IX
AMENDMENT OF PLAN
The Board of Directors may, insofar as permitted by law, with respect to
any shares at the time are not subject to Options, suspend or discontinue the
Plan or revise or amend it in any respect whatsoever; provided, however, that,
without the approval of the holders of a majority of the outstanding shares of
voting stock of all classes of the Corporation, no such revision or amendment
shall (a) change the number of shares of the Stock subject to the Plan, (b)
change the designation of the class of employees eligible to receive Options,
(c) decrease the price at which Incentive Options may be granted, (d) remove the
administration of the Plan from the Committee, (e) render the members of the
Committee eligible to receive Options under the Plan while serving at such, or
(f) without the consent of the affected Holder, cause the Incentive Options
granted hereunder and outstanding at such time that satisfied the requirements
of section 422 of the Code
<PAGE>
to no longer satisfy such requirements. Furthermore, the Plan shall not, without
such approval of the shareholders, be amended in any manner that will cause
Incentive Options issued under it to fail to satisfy the requirements applicable
to incentive stock options as defined in section 422 of the Code.
ARTICLE X
GENERAL
10.1 Application of Funds. The proceeds received by the Corporation from
--------------------
the sale of shares pursuant to options shall be used for general corporate
purposes.
10.2 Right of the Corporation and Affiliates to Terminate Employment.
---------------------------------------------------------------
Nothing contained in the Plan, or in any Agreement, shall confer upon any Holder
the right to continue in the employ of the Corporation or any Affiliate, or
interfere in any way with the rights of the Corporation or any Affiliate to
terminate his employment any time.
10.3 No Liability for Good Faith Determinations. Neither the members of
------------------------------------------
the Board of Directors nor any member of the Committee shall be liable for any
act, omission, or determination taken or made in good faith with respect to the
Plan or any Option granted under it, and members of the Board of Directors and
the Committee shall be entitled to indemnification and reimbursement by the
Corporation in respect of any claim, loss, damage, or expense (including
attorneys' fees, the costs of settling any suit, provided such settlement is
approved by independent legal counsel selected by the Corporation, and amounts
paid in satisfaction of a judgment, except a judgment based on a finding of bad
faith) arising therefrom to the full extent permitted by law and under any
directors and officers liability or similar insurance coverage that may from
time to time be in effect.
10.4 Information Confidential. As partial consideration for the granting
------------------------
of each Option hereunder, the Holder shall agree with the Corporation that he
will keep confidential all information and knowledge that he has relating to the
manner and amount of his participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to the Holder's spouse, tax and financial advisors, or to a financial
institution to the extent that such information is necessary to secure a loan.
In the event any breach of this promise comes to the attention of the Committee,
it shall take into consideration such breach, in determining whether to
recommend the grant of any future Option to such Holder, as a factor militating
against the advisability of granting any such future Option to such individual.
10.5 Other Benefits. Participation in the Plan shall not preclude the
--------------
Holder from eligibility in any other stock option plan of the Corporation or any
Affiliate or any old age benefit, insurance, pension, profit sharing retirement,
bonus, or other extra compensation plans which the Corporation or any Affiliate
has adopted, or may, at any time, adopt for the benefit of its employees.
<PAGE>
10.6 Execution of Receipts and Releases. Any issuance or transfer of
----------------------------------
shares of Stock to the Holder or to his legal representative, heir, legatee, or
distributee, in accordance with the provisions hereof, shall, to the extent
thereof, be in full satisfaction of all claims of such persons hereunder. The
Committee may require any Holder, legal representative, heir, legatee, or
distributee, as a condition precedent to such payment, to execute a release and
receipt therefor in such form as it shall determine.
10.7 No Guarantee of Interests. Neither the Committee nor the Corporation
-------------------------
guarantees the Stock of the Corporation from loss or depreciation.
10.8 Payment of Expenses. All expenses incident to the administration,
-------------------
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Affiliates; provided,
however, the Corporation or an Affiliate may recover any and all damages, fees,
expenses and/or costs arising out of any actions taken by the Corporation to
enforce its right to purchase Stock under Paragraph 6.11 hereof.
10.9 Corporation Records. Records of the Corporation or its Affiliates
-------------------
regarding the Holder's period of employment, termination of employment and the
reason therefor, leaves of absence, reemployment, and other matters shall be
conclusive for all purposes hereunder, unless determined by the Committee to be
incorrect.
10.10 Information. The Corporation and its Affiliates shall, upon request
-----------
or as may be specifically required hereunder, furnish or cause to be furnished,
all of the information or documentation which is necessary or required by the
Committee to perform its duties and functions under the Plan.
10.11 No Liability of Corporation. The Corporation assumes no obligation
---------------------------
or responsibility to the Holder or his personal representatives, heirs,
legatees, or distributees for any act of, or failure to act on the part of, the
Committee.
10.12 Corporation Action. Any action required of the Corporation shall
------------------
be by resolution of its Board of Directors or by a person authorized to act by
resolution of the Board of Directors.
10.13 Severability. If any provision of this Plan is held to be illegal or
------------
invalid for any reason, the illegality or invalidity shall not affect the
remaining provisions hereof, but such provision shall be fully severable and the
Plan shall be construed and enforced as if the illegal or invalid provision had
never been included herein.
10.14 Notices. Whenever any notice is required or permitted hereunder,
-------
such notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is personally delivered, or, whether actually
received or not, on the third business day after it is deposited in the United
States mail, certified or registered, postage prepaid, addressed to the person
who is to
<PAGE>
receive it at the address which such person has theretofore specified by written
notice delivered in accordance herewith. The Corporation or a Holder may change,
at any time and from time to time, by written notice to the other, the address
which it or he had theretofore specified for receiving notices. Until changed in
accordance herewith, the Corporation and each Holder shall specify as its and
his address for receiving notices the address set forth in the Agreement
pertaining to the shares to which such notice relates.
10.15 Waiver of Notice. Any person entitled to notice hereunder may
----------------
waive such notice.
10.16 Successors. The Plan shall be binding upon the Holder, his heirs,
----------
legatees, and legal representatives, upon the Corporation, its successors, and
assigns, and upon the Committee, and its successors.
10.17 Headings. The titles and headings of Sections and Paragraphs are
--------
included for convenience of reference only and are not to be considered in
construction of the provisions hereof.
10.18 Governing Law. All question arising with respect to the provisions
-------------
of the Plan shall be determined by application of the laws of the State of Texas
except to the extent Texas law is preempted by Federal law. Questions arising
with respect to the provisions of an Agreement that are matters of contract law
shall be governed by the laws of the state specified in the Agreement, except to
the extent Texas corporate law conflicts with the contract law of such state, in
which event Texas corporate law shall govern. The obligation of the Corporation
to sell and deliver Stock hereunder is subject to applicable laws and to the
approval of any governmental authority required in connection with the
authorization, issuance, sale, or delivery of such Stock.
10.19 Word Usage. Words used in the masculine shall apply to the feminine
----------
where applicable, and wherever the context of this Plan dictates, the plural
shall be read as the singular and the singular as the plural.
ARTICLE XI
APPROVAL OF SHAREHOLDERS
The Plan shall take affect on the date it is adopted by the Board of
Directors. However, if this Plan is not approved by the holders of a majority of
the outstanding shares of Stock of the Corporation, within the period ending
twelve (12) months after the date the Plan is adopted by the Board of Directors,
none of the Options granted hereunder shall constitute Incentive Options; and in
the event that the Plan is not so approved on or before the first annual meeting
of stockholders of the Corporation following the date the Board of Directors
adopts the Plan, if any Options are granted under the Plan before the date such
stockholders do approve the Plan to individuals subject to suit under Section
16b of the Act at the time of grant, such Options shall be null, void, and of no
force and effect as of their grant date.
<PAGE>
IN WITNESS WHEREOF, CompuCom Acquisition Corp. of Texas, acting by and
through its officers hereunto duly authorized has executed this instrument,
this 14th day of April, 1994.
COMPUCOM ACQUISITION CORP. OF TEXAS
By: /s/ R. Boutin
----------------------------------
Its: V.P.
---------------------------------
<PAGE>
[THIS IS A BLANK PAGE]
<PAGE>
EXHIBIT 10.2
FIRST AMENDMENT TO 1994 STOCK OPTION PLAN
PREAMBLE
--------
A. CompuCom Acquisition Corp. of Texas entered into the CompuCom
Acquisition Corp. of Texas 1994 Stock Option Plan as of April 14, 1994 (the
"1994 Stock Option Plan").
B. Compucom Acquisition Corp. of Texas has changed its name to
ClientLink, Inc. (the "Corporation").
C. The Corporation has effected a 3-for-1 stock split pursuant to which
the shares of Common Stock of the Corporation have been changed and split on the
basis of three shares for each share of Common Stock outstanding on December 30,
1994.
D. The Corporation desires to change the name of the 1994 Stock Option
Plan and to confirm the current number of share allocated to the 1994 Stock
Option Plan as a result of the 3-for-1 stock split mentioned above.
NOW, THEREFORE, the 1994 Stock Option Plan is hereby amended as follows:
1. Change in Name. The name of the 1994 Stock Option Plan is hereby
--------------
changed to ClientLink, Inc. 1994 Stock Option Plan. All references in the 1994
Stock Option Plan to the "Corporation" are hereby changed to mean ClientLink,
Inc.
2. Amendment to Section 2.1 of the 1994 Stock Option Plan. Section 2.1
------------------------------------------------------
of the 1994 Stock Option Plan is hereby amended in its entirety to read as
follows:
"2.1 Description of Stock and Maximum Shares Allocated. The Stock
-------------------------------------------------
which Options granted hereunder give a Holder the right to purchase
may be unissued or reacquired shares of Stock, as the Board of
Directors may, in its sole and absolute discretion, from time to time
determine. Subject to the adjustments provided for in Section 6.6
hereof, the aggregate number of shares of Stock to be issued pursuant
to the exercise of all Options granted hereunder may equal but shall
not exceed 600,000 shares."
3. Reaffirmation of the 1994 Stock Option Plan. Except as amended
-------------------------------------------
hereby, the 1994 Stock Option Plan remains in full force and effect and, except
as otherwise set forth herein, the Corporation hereby ratifies and confirms its
covenants and agreements contained in, and liabilities under, the Stock Option
Plan.
<PAGE>
IN WITNESS WHEREOF, ClientLink, Inc. acting by and through its officers and
hereunto duly authorized has executed this Amendment, this 17th day of January,
1995 to be effective as of December 15, 1994.
CLIENTLINK, INC.
By: /s/ R. Boutin
--------------------------------
Its: V.P.
--------------------------------
2
<PAGE>
EXHIBIT 10.3
================================================================================
CLIENTLINK, INC.
1997 INCENTIVE PLAN
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. DEFINITIONS........................................................1
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN................................7
2.1 Maximum Number of Shares.............................................7
2.2 Limitation of Shares.................................................7
2.3 Description of Shares................................................9
2.4 Registration and Listing of Shares...................................9
SECTION 3. ADMINISTRATION OF THE PLAN.........................................9
3.1 Committee............................................................9
3.2 Duration, Removal, Etc...............................................9
3.3 Meetings and Actions of Committee...................................10
3.4 Committee's Powers..................................................10
SECTION 4. ELIGIBILITY AND PARTICIPATION.....................................11
4.1 Eligible Individuals................................................11
4.2 Grant of Awards.....................................................11
4.3 Date of Grant.......................................................11
4.4 Award Agreements....................................................11
4.5 Limitation for Incentive Options....................................11
4.6 No Right to Award...................................................11
SECTION 5. TERMS AND CONDITIONS OF OPTIONS...................................12
5.1 Number of Shares....................................................12
5.2 Vesting.............................................................12
5.3 Expiration of Options...............................................12
5.4 Exercise Price......................................................12
5.5 Method of Exercise..................................................12
5.6 Incentive Option Exercises..........................................12
5.7 Medium and Time of Payment..........................................13
5.8 Payment with Sale Proceeds..........................................13
5.9 Payment of Taxes....................................................13
5.10 Limitation on Aggregate Value of Shares That May Become First
Exercisable During Any Calendar Year Under an Incentive Option......14
5.11 No Fractional Shares................................................14
5.12 Modification, Extension, and Renewal of Options.....................14
5.13 Other Agreement Provisions..........................................15
SECTION 6. STOCK APPRECIATION RIGHTS.........................................15
6.1 Form of Right.......................................................15
6.2 Rights Related to Options...........................................15
(a) Exercise and Transfer..........................................15
(b) Value of Right.................................................15
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
6.3 Right Without Option................................................16
(a) Number of Shares...............................................16
(b) Vesting........................................................16
(c) Expiration of Rights...........................................16
(d) Value of Right.................................................16
6.4 Limitations on Rights...............................................16
6.5 Payment of Rights...................................................16
6.6 Payment of Taxes....................................................17
6.7 Other Agreement Provisions..........................................17
SECTION 7. RESTRICTED STOCK AWARDS...........................................17
7.1 Restrictions........................................................18
(a) Transferability................................................18
(b) Conditions to Removal of Restrictions..........................18
(c) Legend.........................................................18
(d) Possession.....................................................18
(e) Other Conditions...............................................18
7.2 Expiration of Restrictions..........................................18
7.3 Rights as Shareholder...............................................18
7.4 Payment of Taxes....................................................18
7.5 Other Agreement Provisions..........................................19
SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS..................................19
8.1 Awards to Committee Members.........................................19
8.2 Ineligibility for Other Awards......................................19
SECTION 9. ADJUSTMENT PROVISIONS.............................................19
9.1 Adjustment of Awards and Authorized Stock...........................19
9.2 Changes in Control..................................................20
9.3 Restructuring Without Change in Control.............................21
9.4 Notice of Restructuring.............................................23
SECTION 10. ADDITIONAL PROVISIONS............................................23
10.1 Termination of Employment...........................................23
10.2 Other Loss of Eligibility - Non-Employees...........................23
10.3 Death...............................................................24
10.4 Disability..........................................................24
10.5 Leave of Absence....................................................24
10.6 Transferability of Awards...........................................24
10.7 Forfeiture and Restrictions on Transfer.............................24
10.8 Delivery of Certificates of Stock...................................25
10.9 Conditions to Delivery of Stock.....................................25
10.10 Certain Directors and Officers......................................25
10.11 Securities Act Legend...............................................26
10.12 Legend for Restrictions on Transfer.................................26
10.13 Rights as a Shareholder.............................................27
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
10.14 Furnish Information.................................................27
10.15 Obligation to Exercise..............................................27
10.16 Adjustments to Awards...............................................27
10.17 Remedies............................................................27
10.18 Information Confidential............................................28
10.19 Consideration.......................................................28
SECTION 11. DURATION AND AMENDMENT OF PLAN...................................28
11.1 Duration............................................................28
11.2 Amendment...........................................................28
SECTION 12. GENERAL..........................................................29
12.1 Application of Funds................................................29
12.2 Right of the Corporation and Subsidiaries to Terminate Employment...29
12.3 No Liability for Good Faith Determinations..........................29
12.4 Other Benefits......................................................29
12.5 Exclusion From Pension and Profit-Sharing Compensation..............29
12.6 Execution of Receipts and Releases..................................30
12.7 Unfunded Plan.......................................................30
12.8 No Guarantee of Interests...........................................30
12.9 Payment of Expenses.................................................30
12.10 Corporation Records.................................................30
12.11 Information.........................................................30
12.12 No Liability of Corporation.........................................31
12.13 Corporation Action..................................................31
12.14 Severability........................................................31
12.15 Notices.............................................................31
12.16 Successors..........................................................32
12.17 Headings............................................................32
12.18 Governing Law.......................................................32
12.19 Word Usage..........................................................32
</TABLE>
iii
<PAGE>
CLIENTLINK, INC.
1997 INCENTIVE PLAN
SCOPE AND PURPOSE OF PLAN
-------------------------
ClientLink, Inc., a Delaware corporation (the "Corporation"), has adopted
this 1997 Incentive Plan (the "Plan") to provide for the granting of:
(a) Incentive Options (hereafter defined) to certain Key Employees
(hereafter defined);
(b) Nonstatutory Options (hereafter defined) to certain Key Employees,
Non-Employee Directors (hereafter defined) and other Persons;
(c) Restricted Stock Awards (hereafter defined) to certain Key Employees
and other Persons; and
(d) Stock Appreciation Rights (hereafter defined) to certain Key
Employees and other Persons.
The purpose of the Plan is to provide an incentive for Key Employees and
directors of the Corporation or its Subsidiaries (hereafter defined) to aid the
Corporation in attracting able Persons to enter the service of the Corporation
and its Subsidiaries, to extend to them the opportunity to acquire a proprietary
interest in the Corporation so that they will apply their best efforts for the
benefit of the Corporation, and to remain in the service of the Corporation or
its Subsidiaries. This Plan has been adopted by the Board of Directors and
shareholders of the Corporation prior to the registration of any securities of
the Corporation under the Exchange Act (hereafter defined) and accordingly
amounts paid under the Plan are exempt from the provisions of Section 162(m) of
the Code (hereafter defined).
SECTION 1. DEFINITIONS
1.1 "Acquiring Person" means any Person other than the Corporation, any
Subsidiary of the Corporation, any employee benefit plan of the Corporation or
of a Subsidiary of the Corporation or of a corporation owned directly or
indirectly by the shareholders of the Corporation in substantially the same
proportions as their ownership of Stock of the Corporation, or any trustee or
other fiduciary holding securities under an employee benefit plan of the
Corporation or of a Subsidiary of the Corporation or of a corporation owned
directly or indirectly by the shareholders of the Corporation in substantially
the same proportions as their ownership of Stock of the Corporation.
1.2 "Affiliate" means (a) any Person who is directly or indirectly the
beneficial owner of at least 10% of the voting power of the Voting Securities or
(b) any Person controlling, controlled by, or under common control with the
Company or any Person contemplated in clause (a) of this Section 1.2.
<PAGE>
1.3 "Award" means the grant of any form of Option, Restricted Stock
Award, or Stock Appreciation Right under the Plan, whether granted individually,
in combination, or in tandem, to a Holder pursuant to the terms, conditions, and
limitations that the Committee may establish in order to fulfill the objectives
of the Plan.
1.4 "Award Agreement" means the written agreement between the Corporation
and a Holder evidencing the terms, conditions, and limitations of the Award
granted to that Holder.
1.5 "Board of Directors" means the board of directors of the Corporation.
1.6 "Business Day" means any day other than a Saturday, a Sunday, or a
day on which banking institutions in the State of Delaware are authorized or
obligated by law or executive order to close.
1.7 "Change in Control" means the event that is deemed to have occurred
if:
(a) any Acquiring Person is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing fifty percent or more of the
combined voting power of the then outstanding Voting Securities of the
Corporation; or
(b) members of the Incumbent Board cease for any reason to constitute
at least a majority of the Board of Directors; or
(c) a public announcement is made of a tender or exchange offer by
any Acquiring Person for fifty percent or more of the outstanding Voting
Securities of the Corporation, and the Board of Directors approves or fails
to oppose that tender or exchange offer in its statements in Schedule 14D-9
under the Exchange Act; or
(d) the shareholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation or partnership
(or, if no such approval is required, the consummation of such a merger or
consolidation of the Corporation), other than a merger or consolidation
that would result in the Voting Securities of the Corporation outstanding
immediately before the consummation thereof continuing to represent (either
by remaining outstanding or by being converted into Voting Securities of
the surviving entity or of a parent of the surviving entity) a majority of
the combined voting power of the Voting Securities of the surviving entity
(or its parent) outstanding immediately after that merger or consolidation;
or
(e) the shareholders of the Corporation approve a plan of complete
liquidation of the Corporation or an agreement for the sale or disposition
by the Corporation of all or substantially all the Corporation's assets
(or, if no such approval is required, the consummation of such a
liquidation, sale, or disposition in one transaction or series of related
transactions) other than a liquidation, sale, or disposition of all or
substantially all the Corporation's assets in one transaction or a series
of related transactions to a corporation
2
<PAGE>
owned directly or indirectly by the shareholders of the Corporation in
substantially the same proportions as their ownership of Stock of the
Corporation.
1.8 "Code" means the Internal Revenue Code of 1986, as amended.
1.9 "Committee" means the Committee, which Committee shall administer
this Plan and is further described under Section 3.
1.10 "Convertible Securities" means evidences of indebtedness, shares of
capital stock, or other securities that are convertible into or exchangeable for
shares of Stock, either immediately or upon the arrival of a specified date or
the happening of a specified event.
1.11 "Corporation" has the meaning given to it in the first paragraph
under "Scope and Purpose of Plan."
1.12 "Date of Grant" has the meaning given it in Section 4.3.
1.13 "Disability" has the meaning given it in Section 10.4.
1.14 "Effective Date" means December 4, 1997.
1.15 "Eligible Individuals" means (a) Key Employees, (b) Non-Employee
Directors only for purposes of Nonstatutory Options pursuant to Section 8, (c)
any other Person that the Committee designates as eligible for an Award (other
than for Incentive Options) because the Person performs, or has performed,
valuable services for the Corporation or any of its Subsidiaries (other than
services in connection with the offer or sale of securities in a capital-raising
transaction) and the Committee determines that the Person has a direct and
significant effect on the financial development of the Corporation or any of its
Subsidiaries, and (d) any transferee of an Award if the Award Agreement provides
for transfer of the Award and the Award is transferred in accordance with the
terms of the Award Agreement. Notwithstanding the foregoing provisions of this
Section 1.15, to ensure that the requirements of the fourth sentence of Section
3.1 are satisfied, the Board of Directors may from time to time specify
individuals who shall not be eligible for the grant of Awards or equity
securities under any plan of the Corporation or its Affiliates. Nevertheless,
the Board of Directors may at any time determine that an individual who has been
so excluded from eligibility shall become eligible for grants of Awards and
grants of such other equity securities under any plans of the Corporation or its
Affiliates so long as that eligibility will not impair the Plan's satisfaction
of the conditions of Rule 16b-3.
1.16 "Employee" means any employee of the Corporation or of any of its
Subsidiaries, including officers and directors of the Corporation who are also
employees of the Corporation or of any of its Subsidiaries.
1.17 "Exchange Act" means the Securities Exchange Act of 1934 and the
rules and regulations promulgated thereunder, or any successor law, as it may be
amended from time to time.
3
<PAGE>
1.18 "Exercise Notice" has the meaning given it in Section 5.5.
1.19 "Exercise Price" has the meaning given it in Section 5.4.
1.20 "Fair Market Value" means, for a particular day:
(a) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges on any national or regional securities exchange
at the date of determining the Fair Market Value, then the last reported
sale price, regular way, on the composite tape of that exchange on the last
Business Day before the date in question or, if no such sale takes place on
that Business Day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to unlisted
trading privileges on that securities exchange; or
(b) If shares of Stock of the same class are not listed or admitted
to unlisted trading privileges as provided in Section 1.20(a) and sales
prices for shares of Stock of the same class in the over-the-counter market
are reported by the National Association of Securities Dealers, Inc.
Automated Quotations, Inc. ("NASDAQ") National Market System (or such other
system then in use) at the date of determining the Fair Market Value, then
the last reported sales price so reported on the last Business Day before
the date in question or, if no such sale takes place on that Business Day,
the average of the high bid and low asked prices so reported; or
(c) If shares of Stock of the same class are not listed or admitted
to unlisted trading privileges as provided in Section 1.20(a) and sales
prices for shares of Stock of the same class are not reported by the NASDAQ
National Market System (or a similar system then in use) as provided in
Section 1.20(b), and if bid and asked prices for shares of Stock of the
same class in the over-the-counter market are reported by NASDAQ (or, if
not so reported, by the National Quotation Bureau Incorporated) at the date
of determining the Fair Market Value, then the average of the high bid and
low asked prices on the last Business Day before the date in question; or
(d) If shares of Stock of the same class are not listed or admitted
to unlisted trading privileges as provided in Section 1.20(a) and sales
prices or bid and asked prices therefor are not reported by NASDAQ (or the
National Quotation Bureau Incorporated) as provided in Section 1.20(b) or
Section 1.20(c) at the date of determining the Fair Market Value, then the
value determined in good faith by the Committee, which determination shall
be conclusive for all purposes; or
(e) If shares of Stock of the same class are listed or admitted to
unlisted trading privileges as provided in Section 1.20(a) or sales prices
or bid and asked prices therefor are reported by NASDAQ (or the National
Quotation Bureau Incorporated) as provided in Section 1.20(b) or Section
1.20(c) at the date of determining the Fair Market Value, but the volume of
trading is so low that the Board of Directors determines in good faith that
such prices are not indicative of the fair value of the Stock, then the
value determined in good
4
<PAGE>
faith by the Committee, which determination shall be conclusive for all
purposes notwithstanding the provisions of Sections 1.20(a), (b), or (c).
For purposes of valuing Incentive Options, the Fair Market Value of Stock shall
be determined without regard to any restriction other than one that, by its
terms, will never lapse. For purposes of the redemption provided for in Section
9.3(d)(v), Fair Market Value shall have the meaning and shall be determined as
set forth above; provided, however, that the Committee, with respect to any such
redemption, shall have the right to determine that the Fair Market Value for
purposes of the redemption should be an amount measured by the value of the
shares of Stock, other securities, cash, or property otherwise being received by
holders of shares of Stock in connection with the Restructuring and upon that
determination the Committee shall have the power and authority to determine Fair
Market Value for purposes of the redemption based upon the value of such shares
of stock, other securities, cash, or property. Any such determination by the
Committee, as evidenced by a resolution of the Committee, shall be conclusive
for all purposes.
1.21 "Fiscal Year" means the fiscal year of the Corporation ending on
December 31 of each year.
1.22 "Holder" means an Eligible Individual to whom an outstanding Award
has been granted, or, pursuant to the terms of the Award Agreement, the
permitted transferee of a Holder.
1.23 "Incumbent Board" means the individuals who, as of the Effective
Date, constitute the Board of Directors and any other individual who becomes a
director of the Corporation after that date and whose election or appointment by
the Board of Directors or nomination for election by the Corporation's
shareholders was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board.
1.24 "Incentive Option" means an incentive stock option as defined under
Section 422 of the Code and regulations thereunder.
1.25 "Key Employee" means any Employee whom the Committee identifies as
having a direct and significant effect on the performance of the Corporation or
any of its Subsidiaries.
1.26 "Non-Employee Director" means a director of the Corporation who while
a director is not an Employee.
1.27 "Nonstatutory Option" means a stock option that does not satisfy the
requirements of Section 422 of the Code or that is designated at the Date of
Grant or in the applicable Award Agreement to be an option other than an
Incentive Option.
1.28 "Non-Surviving Event" means an event of Restructuring as described in
either Section 1.35(b) or Section 1.35(c).
1.29 "Normal Retirement" means the separation of the Holder from
employment with the Corporation and its Subsidiaries with the right to receive
an immediate benefit under a retirement
5
<PAGE>
plan approved by the Corporation. If no such plan exists, Normal Retirement
shall mean separation of the Holder from employment with the Corporation and its
Subsidiaries at age 62 or later.
1.30 "Option" means either an Incentive Option or a Nonstatutory Option,
or both.
1.31 "Person" means any person or entity of any nature whatsoever,
specifically including (but not limited to) an individual, a firm, a company, a
corporation, a partnership, a trust, or other entity. A Person, together with
that Person's affiliates and associates (as "affiliate" and "associate" are
defined in Rule 12b-2 under the Exchange Act for purposes of this definition
only), and any Persons acting as a partnership, limited partnership, joint
venture, association, syndicate, or other group (whether or not formally
organized), or otherwise acting jointly or in concert or in a coordinated or
consciously parallel manner (whether or not pursuant to any express agreement),
for the purpose of acquiring, holding, voting, or disposing of securities of the
Corporation with that Person, shall be deemed a single "Person."
1.32 "Plan" means the Corporation's 1997 Incentive Plan, as it may be
amended or restated from time to time.
1.33 "Restricted Stock" means Stock that is nontransferable or subject to
substantial risk of forfeiture until specific conditions are met.
1.34 "Restricted Stock Award" means the grant or purchase, on the terms
and conditions of Section 7 or that the Committee otherwise determines, of
Restricted Stock.
1.35 "Restructuring" means the occurrence of any one or more of the
following:
(a) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with the Corporation remaining the continuing or surviving
entity of that merger or consolidation and the Stock remaining outstanding
and not changed into or exchanged for stock or other securities of any
other Person or of the Corporation, cash, or other property;
(b) The merger or consolidation of the Corporation with any Person,
whether effected as a single transaction or a series of related
transactions, with (i) the Corporation not being the continuing or
surviving entity of that merger or consolidation or (ii) the Corporation
remaining the continuing or surviving entity of that merger or
consolidation but all or a part of the outstanding shares of Stock are
changed into or exchanged for stock or other securities of any other Person
or the Corporation, cash, or other property; or
(c) The transfer, directly or indirectly, of all or substantially all
of the assets of the Corporation (whether by sale, merger, consolidation,
liquidation, or otherwise) to any Person, whether effected as a single
transaction or a series of related transactions.
1.36 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act
as adopted in Exchange Act Release No. 34-37260 (May 31, 1996), or any successor
rule, as it may be amended from time to time.
6
<PAGE>
1.37 "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as it may be amended
from time to time.
1.38 "Stock" means the common stock, $0.01 par value per share, of the
Corporation, or any other securities that are substituted for the Stock as
provided in Section 9.
1.39 "Stock Appreciation Right" means the right to receive an amount equal
to the excess of the Fair Market Value of a share of Stock (as determined on the
date of exercise) over, as appropriate, the Exercise Price of a related Option
or the Fair Market Value of the Stock on the Date of Grant of the Stock
Appreciation Right.
1.40 "Subsidiary" means, with respect to any Person, any corporation, or
other entity of which a majority of the Voting Securities is owned, directly or
indirectly, by that Person.
1.41 "Total Shares" has the meaning given it in Section 9.2.
1.42 "Voting Securities" means any securities that are entitled to vote
generally in the election of directors, in the admission of general partners or
in the selection of any other similar governing body.
SECTION 2. SHARES OF STOCK SUBJECT TO THE PLAN
2.1 Maximum Number of Shares. Subject to the provisions of Section 2.2
------------------------
and Section 9, the aggregate number of shares of Stock that may be issued or
transferred pursuant to Awards under the Plan shall be 1,500,000 (after giving
effect to a 1.57-for-1 stock split effective December 4, 1997).
2.2 Limitation of Shares. For purposes of the limitations specified in
--------------------
Section 2.1, the following principles shall apply:
(a) the following shall count against and decrease the number of
shares of Stock that may be issued for purposes of Section 2.1: (i) shares
of Stock subject to outstanding Options, outstanding shares of Restricted
Stock, and shares subject to outstanding Stock Appreciation Rights granted
independent of Options (based on a good faith estimate by the Corporation
or the Committee of the maximum number of shares for which the Stock
Appreciation Right may be settled (assuming payment in full in shares of
Stock)), and (ii) in the case of Options granted in tandem with Stock
Appreciation Rights, the greater of the number of shares of Stock that
would be counted if one or the other alone was outstanding (determined as
described in clause (i) above);
(b) the following shall be added back to the number of shares of
Stock that may be issued for purposes of Section 2.1: (i) shares of Stock
with respect to which Options, Stock Appreciation Rights granted
independent of Options, or Restricted Stock Awards expire, are cancelled,
or otherwise terminate without being exercised, converted, or vested, as
applicable, and (ii) in the case of Options granted in tandem with Stock
Appreciation Rights, shares of Stock as to which an Option has been
surrendered in connection with the
7
<PAGE>
exercise of a related ("tandem") Stock Appreciation Right, to the extent
the number surrendered exceeds the number issued upon exercise of the Stock
Appreciation Right; provided that, in any case, the holder of such Awards
did not receive any dividends or other benefits of ownership with respect
to the underlying shares being added back, other than voting rights and the
accumulation (but not payment) of dividends of Stock;
(c) shares of Stock subject to Stock Appreciation Rights granted
independent of Options (calculated as provided in clause (a) above) that
are exercised and paid in cash shall be added back to the number of shares
of Stock that may be issued for purposes of Section 2.1, provided that the
Holder of such Stock Appreciation Right did not receive any dividends or
other benefits of ownership, other than voting rights and the accumulation
(but not payment) of dividends, of the shares of Stock subject to the Stock
Appreciation Right;
(d) shares of Stock that are transferred by a Holder of an Award (or
withheld by the Corporation) as full or partial payment to the Corporation
of the purchase price of shares of Stock subject to an Option or the
Corporation's or any Subsidiary's tax withholding obligations shall not be
added back to the number of shares of Stock that may be issued for purposes
of Section 2.1 and shall not again be subject to Awards; and
(e) if the number of shares of Stock counted against the number of
shares that may be issued for purposes of Section 2.1 is based upon an
estimate made by the Corporation or the Committee as provided in clause (a)
above and the actual number of shares of Stock issued pursuant to the
applicable Award is greater or less than the estimated number, then, upon
such issuance, the number of shares of Stock that may be issued pursuant to
Section 2.1 shall be further reduced by the excess issuance or increased by
the shortfall, as applicable.
Notwithstanding the provisions of this Section 2.2, no Stock shall be treated as
issuable under the Plan to Eligible Individuals subject to Section 16 of the
Exchange Act if otherwise prohibited from issuance under Rule 16b-3.
2.3 Description of Shares. The shares to be delivered under the Plan
---------------------
shall be made available from (a) authorized but unissued shares of Stock, (b)
Stock held in the treasury of the Corporation, or (c) previously issued shares
of Stock reacquired by the Corporation, including shares purchased on the open
market, in each situation as the Board of Directors or the Committee may
determine from time to time at its sole option.
2.4 Registration and Listing of Shares. From time to time, the Board of
----------------------------------
Directors and appropriate officers of the Corporation shall and are authorized
to take whatever actions are necessary to file required documents with
governmental authorities, stock exchanges, and other appropriate Persons to make
shares of Stock available for issuance pursuant to the exercise of Awards.
8
<PAGE>
SECTION 3. ADMINISTRATION OF THE PLAN
3.1 Committee. The Committee shall administer the Plan with respect to
---------
all Eligible Individuals who are subject to Section 16(b) of the Exchange Act
(other than members of the Committee), but shall not have the power to appoint
members of the Committee or to terminate, modify, or amend the Plan. The full
Board of Directors shall administer the Plan with respect to all members of the
Committee. Except for references in Sections 3.1, 3.2 and 3.3, and unless the
context otherwise requires, references herein to the Committee shall also refer
to the Board of Directors as administrator of the Plan for members of the
Committee. The Committee shall be constituted so that as long as Stock is
registered under Section 12 of the Exchange Act, each member of the Committee
shall be a Non-Employee Director and so that the Plan in all other applicable
respects will qualify transactions related to the Plan for the exemptions from
Section 16(b) of the Exchange Act provided by Rule 16b-3, to the extent
exemptions thereunder may be available. The number of Persons that shall
constitute the Committee shall be determined from time to time by a majority of
all the members of the Board of Directors and, unless that majority of the Board
of Directors determines otherwise or Rule 16b-3 is amended to require otherwise,
shall be no less than two Persons. The Board of Directors may designate the
Compensation Committee of the Board of Directors to serve as the Committee
hereunder. To the extent that Rule 16b-3 promulgated under the Exchange Act
requires a system of administration that is different from this Section 3.1,
this Section 3.1 shall automatically be deemed amended to the extent necessary
to cause it to be in compliance with Rule 16b-3.
3.2 Duration, Removal, Etc. The members of the Committee shall serve at
-----------------------
the discretion of the Board of Directors, which shall have the power, at any
time and from time to time, to remove members from or add members to the
Committee. Removal from the Committee may be with or without cause. Any
individual serving as a member of the Committee shall have the right to resign
from membership in the Committee by at least three days' written notice to the
Board of Directors. The Board of Directors, and not the remaining members of
the Committee, shall have the power and authority to fill all vacancies on the
Committee. The Board of Directors shall promptly fill any vacancy that causes
the number of members of the Committee to be below two or any other number that
Rule 16b-3 may require from time to time.
3.3 Meetings and Actions of Committee. The Board of Directors shall
---------------------------------
designate which of the Committee members shall be the chairman of the Committee.
If the Board of Directors fails to designate a Committee chairman, the members
of the Committee shall elect one of the Committee members as chairman, who shall
act as chairman until he ceases to be a member of the Committee or until the
Board of Directors elects a new chairman. The Committee shall hold its meetings
at those times and places as the chairman of the Committee may determine. At
all meetings of the Committee, a quorum for the transaction of business shall be
required and a quorum shall be deemed present if at least a majority of the
members of the Committee are present. At any meeting of the Committee, each
member shall have one vote. All decisions and determinations of the Committee
shall be made by the majority vote or majority decision of all of its members
present at a meeting at which a quorum is present; provided, however, that any
decision or determination reduced to writing and signed by all of the members of
the Committee shall be as fully effective as if it had been made at a meeting
that was duly called and held. The Committee may make any rules and regulations
for the conduct of its business that are not inconsistent with the provisions of
the Plan,
9
<PAGE>
the Articles or Certificate of Incorporation of the Corporation, the bylaws of
the Corporation, and Rule 16b-3 so long as it is applicable, as the Committee
may deem advisable.
3.4 Committee's Powers. Subject to the express provisions of the Plan and
------------------
Rule 16b-3, the Committee shall have the authority, in its sole and absolute
discretion, to (a) adopt, amend, and rescind administrative and interpretive
rules and regulations relating to the Plan; (b) determine the Eligible
Individuals to whom, and the time or times at which, Awards shall be granted;
(c) determine the amount of cash and the number of shares of Stock, Stock
Appreciation Rights, or Restricted Stock Awards, or any combination thereof,
that shall be the subject of each Award; (d) determine the terms and provisions
of each Award Agreement (which need not be identical), including provisions
defining or otherwise relating to (i) the term and the period or periods and
extent of exercisability of the Options, (ii) the extent to which the
transferability of shares of Stock issued or transferred pursuant to any Award
is restricted, (iii) the effect of termination of employment of the Holder on
the Award, and (iv) the effect of approved leaves of absence (consistent with
any applicable regulations of the Internal Revenue Service); (e) accelerate,
pursuant to Section 9, the time of exercisability of any Option that has been
granted; (f) construe the respective Award Agreements and the Plan; (g) make
determinations of the Fair Market Value of the Stock pursuant to the Plan; (h)
delegate its duties under the Plan to such agents as it may appoint from time to
time, provided that the Committee may not delegate its duties with respect to
making Awards to, or otherwise with respect to Awards granted to, Eligible
Individuals who are subject to Section 16(b) of the Exchange Act; and (i) make
all other determinations, perform all other acts, and exercise all other powers
and authority necessary or advisable for administering the Plan, including the
delegation of those ministerial acts and responsibilities as the Committee deems
appropriate. Subject to Rule 16b-3, the Committee may correct any defect, supply
any omission, or reconcile any inconsistency in the Plan, in any Award, or in
any Award Agreement in the manner and to the extent it deems necessary or
desirable to carry the Plan into effect, and the Committee shall be the sole and
final judge of that necessity or desirability. The determinations of the
Committee on the matters referred to in this Section 3.4 shall be final and
conclusive.
SECTION 4. ELIGIBILITY AND PARTICIPATION
4.1 Eligible Individuals. Awards may be granted pursuant to the Plan only
--------------------
to Persons who are Eligible Individuals at the time of the grant thereof.
4.2 Grant of Awards. Subject to the express provisions of the Plan, the
---------------
Committee shall determine which Eligible Individuals shall be granted Awards
from time to time. In making grants, the Committee shall take into
consideration the contribution the potential Holder has made or may make to the
success of the Corporation or its Subsidiaries and such other considerations as
the Board of Directors may from time to time specify. The Committee shall also
determine the number of shares subject to each of the Awards and shall authorize
and cause the Corporation to grant Awards in accordance with those
determinations.
4.3 Date of Grant. The date on which the Committee completes all action
-------------
resolving to offer an Award to an individual, including the specification of the
number of shares of Stock to be subject to the Award, shall be the date on which
the Award covered by an Award Agreement is granted (the "Date of Grant"), even
though certain terms of the Award Agreement may not be
10
<PAGE>
determined at that time and even though the Award Agreement may not be executed
until a later time. In no event shall a Holder gain any rights in addition to
those specified by the Committee in its grant, regardless of the time that may
pass between the grant of the Award and the actual execution of the Award
Agreement by the Corporation and the Holder.
4.4 Award Agreements. Each Award granted under the Plan shall be
----------------
evidenced by an Award Agreement that is executed by the Corporation and the
Eligible Individual to whom the Award is granted and incorporating those terms
that the Committee shall deem necessary or desirable. More than one Award may
be granted under the Plan to the same Eligible Individual and be outstanding
concurrently. In the event an Eligible Individual is granted both one or more
Incentive Options and one or more Nonstatutory Options, those grants shall be
evidenced by separate Award Agreements, one for each of the Incentive Option
grants and one for each of the Nonstatutory Option grants.
4.5 Limitation for Incentive Options. Notwithstanding any provision
--------------------------------
contained herein to the contrary, (a) a Person shall not be eligible to receive
an Incentive Option unless he is an Employee of the Corporation or a corporate
Subsidiary (but not a partnership Subsidiary) and (b) a Person shall not be
eligible to receive an Incentive Option if, immediately before the time the
Option is granted, that Person owns (within the meaning of Sections 422 and
424(d) of the Code) stock possessing more than ten percent of the total combined
voting power or value of all classes of outstanding stock of the Corporation or
a Subsidiary. Nevertheless, Section 4.5(b) shall not apply if, at the time the
Incentive Option is granted, the Exercise Price of the Incentive Option is at
least one hundred ten percent of Fair Market Value and the Incentive Option is
not, by its terms, exercisable after the expiration of five years from the Date
of Grant.
4.6 No Right to Award. The adoption of the Plan shall not be deemed to
-----------------
give any Person a right to be granted an Award.
SECTION 5. TERMS AND CONDITIONS OF OPTIONS
All Options granted under the Plan shall comply with, and the related
Award Agreements shall be deemed to include and be subject to, the terms and
conditions set forth in this Section 5 (to the extent each term and condition
applies to the form of Option) and also to the terms and conditions set forth in
Sections 9 and 10; provided, however, that the Committee may authorize an Award
Agreement that expressly contains terms and provisions that differ from the
terms and provisions set forth in Sections 9.2, 9.3, and 9.4 and any of the
terms and provisions of Section 10 (other than Sections 10.9 and 10.10).
5.1 Number of Shares. Each Award Agreement shall state the total number
----------------
of shares of Stock to which it relates.
5.2 Vesting. Each Award Agreement shall state the time or periods in
-------
which, or the conditions upon satisfaction of which, the right to exercise the
Option or a portion thereof shall vest and the number of shares of Stock for
which the right to exercise the Option shall vest at each such time, period, or
fulfillment of condition.
11
<PAGE>
5.3 Expiration of Options. No Option shall be exercised after the
---------------------
expiration of a period of ten years commencing on the Date of Grant of the
Option; provided, however, that any portion of a Nonstatutory Option that
pursuant to the terms of the Award Agreement under which such Nonstatutory
Option is granted shall not become exercisable until the date which is the tenth
anniversary of the Date of Grant of such Nonstatutory Option may be exercisable
for a period of 30 days following the date on which such portion becomes
exercisable.
5.4 Exercise Price. Each Award Agreement shall state the exercise price
--------------
per share of Stock (the "Exercise Price"); provided, however, that the exercise
price per share of Stock subject to an Incentive Option shall not be less than
the greater of (a) the par value per share of the Stock or (b) 100% of the Fair
Market Value per share of the Stock on the Date of Grant of the Option.
5.5 Method of Exercise. The Option shall be exercisable only by written
------------------
notice of exercise (the "Exercise Notice") delivered to the Corporation during
the term of the Option, which notice shall (a) state the number of shares of
Stock with respect to which the Option is being exercised, (b) be signed by the
Holder of the Option or, if the Holder is dead or becomes affected by a
Disability, by the Person authorized to exercise the Option pursuant to Sections
10.3 and 10.4, (c) be accompanied by the Exercise Price for all shares of Stock
for which the Option is being exercised, and (d) include such other information,
instruments, and documents as may be required to satisfy any other condition to
exercise contained in the Award Agreement. The Option shall not be deemed to
have been exercised unless all of the requirements of the preceding provisions
of this Section 5.5 have been satisfied.
5.6 Incentive Option Exercises. Except as otherwise provided in Section
--------------------------
10.4 or in the Award Agreement, during the Holder's lifetime, only the Holder
may exercise an Incentive Option.
5.7 Medium and Time of Payment. The Exercise Price of an Option shall be
--------------------------
payable in full upon the exercise of the Option (a) in cash or by an equivalent
means acceptable to the Committee, (b) on the Committee's prior consent, with
shares of Stock owned by the Holder (including shares received upon exercise of
the Option or restricted shares already held by the Holder) and having a Fair
Market Value at least equal to the aggregate Exercise Price payable in
connection with such exercise, or (c) by any combination of clauses (a) and (b).
If the Committee elects to accept shares of Stock in payment of all or any
portion of the Exercise Price, then (for purposes of payment of the Exercise
Price) those shares of Stock shall be deemed to have a cash value equal to their
aggregate Fair Market Value determined as of the date the certificate for such
shares is delivered to the Corporation. If the Committee elects to accept
shares of restricted Stock in payment of all or any portion of the Exercise
Price, then an equal number of shares issued pursuant to the exercise shall be
restricted on the same terms and for the restriction period remaining on the
shares used for payment.
5.8 Payment with Sale Proceeds. In addition, at the request of the Holder
--------------------------
and to the extent permitted by applicable law, the Committee may (but shall not
be required to) approve arrangements with a brokerage firm under which that
brokerage firm, on behalf of the Holder, shall pay to the Corporation the
Exercise Price of the Option being exercised and the Corporation shall promptly
deliver the exercised shares of Stock to the brokerage firm. To accomplish this
transaction, the Holder must deliver to the Corporation an Exercise Notice
containing irrevocable instructions
12
<PAGE>
from the Holder to the Corporation to deliver the Stock certificates
representing the shares of Stock directly to the broker. Upon receiving a copy
of the Exercise Notice acknowledged by the Corporation, the broker shall sell
that number of shares of Stock or loan the Holder an amount sufficient to pay
the Exercise Price and any withholding obligations due. The broker then shall
deliver to the Corporation that portion of the sale or loan proceeds necessary
to cover the Exercise Price and any withholding obligations due. The Committee
shall not approve any transaction of this nature if the Committee believes that
the transaction would give rise to the Holder's liability for short-swing
profits under Section 16(b) of the Exchange Act.
5.9 Payment of Taxes. The Committee may, in its discretion, require a
----------------
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of an Option or thereafter, the amount that the Committee deems necessary to
satisfy the Corporation's or its Subsidiary's current or future obligation to
withhold federal, state, or local income or other taxes that the Holder incurs
by exercising an Option. In connection with the exercise of an Option requiring
tax withholding, a Holder may (a) direct the Corporation to withhold from the
shares of Stock to be issued to the Holder the number of shares necessary to
satisfy the Corporation's obligation to withhold taxes, that determination to be
based on the shares' Fair Market Value as of the date of exercise; (b) deliver
to the Corporation sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the Corporation's tax withholding
obligations, which tax withholding obligation is based on the shares' Fair
Market Value as of the later of the date of exercise or the date as of which the
shares of Stock issued in connection with such exercise become includible in the
income of the Holder; or (c) deliver sufficient cash to the Corporation to
satisfy its tax withholding obligations. Holders who elect to use such a Stock
withholding feature must make the election at the time and in the manner that
the Committee prescribes. The Committee may, at its sole option, deny any
Holder's request to satisfy withholding obligations through Stock instead of
cash. In the event the Committee subsequently determines that the aggregate
Fair Market Value (as determined above) of any shares of Stock withheld or
delivered as payment of any tax withholding obligation is insufficient to
discharge that tax withholding obligation, then the Holder shall pay to the
Corporation, immediately upon the Committee's request, the amount of that
deficiency in the form of payment requested by the Committee.
5.10 Limitation on Aggregate Value of Shares That May Become First
-------------------------------------------------------------
Exercisable During Any Calendar Year Under an Incentive Option. Except as is
- --------------------------------------------------------------
otherwise provided in Section 9.3, with respect to any Incentive Option granted
under this Plan, the aggregate Fair Market Value of shares of Stock subject to
an Incentive Option and the aggregate Fair Market Value of shares of Stock or
stock of any Subsidiary (or a predecessor of the Corporation or a Subsidiary)
subject to any other incentive stock option (within the meaning of Section 422
of the Code) of the Corporation or its Subsidiaries (or a predecessor
corporation of any such corporation) that first become purchasable by a Holder
in any calendar year may not (with respect to that Holder) exceed $100,000, or
such other amount as may be prescribed under Section 422 of the Code or
applicable regulations or rulings from time to time. As used in the previous
sentence, Fair Market Value shall be determined as of the Date of Grant of the
Incentive Option. For purposes of this Section 5.10, "predecessor corporation"
means (a) a corporation that was a party to a transaction described in Section
424(a) of the Code (or which would be so described if a substitution or
assumption under that Section had been effected) with the Corporation, (b) a
corporation which, at the time the new incentive stock
13
<PAGE>
option (within the meaning of Section 422 of the Code) is granted, is a
Subsidiary of the Corporation or a predecessor corporation of any such
corporations, or (c) a predecessor corporation of any such corporations. Failure
to comply with this provision shall not impair the enforceability or
exercisability of any Option, but shall cause the excess amount of shares to be
reclassified in accordance with the Code.
5.11 No Fractional Shares. The Corporation shall not in any case be
--------------------
required to sell, issue, or deliver a fractional share with respect to any
Option. In lieu of the issuance of any fractional share of Stock, the
Corporation shall pay to the Holder an amount in cash equal to the same fraction
(as the fractional Stock) of the Fair Market Value of a share of Stock
determined as of the date of the applicable Exercise Notice.
5.12 Modification, Extension, and Renewal of Options. Subject to the terms
-----------------------------------------------
and conditions of and within the limitations of the Plan, Rule 16b-3, and any
consent required by the last sentence of this Section 5.12, the Committee may
(a) modify, extend, or renew outstanding Options granted under the Plan, (b)
accept the surrender of Options outstanding hereunder (to the extent not
previously exercised) and authorize the granting of new Options in substitution
for outstanding Options (to the extent not previously exercised), and (c) amend
the terms of an Incentive Option at any time to include provisions that have the
effect of changing the Incentive Option to a Nonstatutory Option. Nevertheless,
without the consent of the Holder, the Committee may not modify any outstanding
Options so as to specify a higher or lower Exercise Price or accept the
surrender of outstanding Incentive Options and authorize the granting of new
Options in substitution therefor specifying a higher or lower Exercise Price. In
addition, no modification of an Option granted hereunder shall, without the
consent of the Holder, alter or impair any rights or obligations under any
Option theretofore granted to such Holder under the Plan except, with respect to
Incentive Options, as may be necessary to satisfy the requirements of Section
422 of the Code or as permitted in clause (c) of this Section 5.12.
5.13 Other Agreement Provisions. The Award Agreements relating to Options
--------------------------
shall contain such provisions in addition to those required by the Plan
(including without limitation restrictions or the removal of restrictions upon
the exercise of the Option and the retention or transfer of shares thereby
acquired) as the Committee may deem advisable. Each Award Agreement shall
identify the Option evidenced thereby as an Incentive Option or Nonstatutory
Option, as the case may be, and no Award Agreement shall cover both an Incentive
Option and a Nonstatutory Option. Each Award Agreement relating to an Incentive
Option granted hereunder shall contain such limitations and restrictions upon
the exercise of the Incentive Option to which it relates as shall be necessary
for the Incentive Option to which such Award Agreement relates to constitute an
incentive stock option, as defined in Section 422 of the Code.
SECTION 6. STOCK APPRECIATION RIGHTS
All Stock Appreciation Rights granted under the Plan shall comply with, and
the related Award Agreements shall be deemed to include and be subject to, the
terms and conditions set forth in this Section 6 (to the extent each term and
condition applies to the form of Stock Appreciation Right) and also the terms
and conditions set forth in Sections 9 and 10; provided, however, that the
Committee may authorize an Award Agreement related to a Stock Appreciation Right
that expressly
14
<PAGE>
contains terms and provisions that differ from the terms and provisions set
forth in Sections 9.2, 9.3, and 9.4 and any of the terms and provisions of
Section 10 (other than Sections 10.9 and 10.10).
6.1 Form of Right. A Stock Appreciation Right may be granted to an
-------------
Eligible Individual (a) in connection with an Option, either at the time of
grant or at any time during the term of the Option, or (b) independent of an
Option.
6.2 Rights Related to Options. A Stock Appreciation Right granted
-------------------------
pursuant to an Option shall entitle the Holder, upon exercise, to surrender that
Option or any portion thereof, to the extent unexercised, and to receive payment
of an amount computed pursuant to Section 6.2(b). That Option shall then cease
to be exercisable to the extent surrendered. Stock Appreciation Rights granted
in connection with an Option shall be subject to the terms of the Award
Agreement governing the Option, which shall comply with the following provisions
in addition to those applicable to Options:
(a) Exercise and Transfer. Subject to Section 10.9, a Stock
---------------------
Appreciation Right granted in connection with an Option shall be
exercisable only at such time or times and only to the extent that the
related Option is exercisable and shall not be transferable except to the
extent that the related Option is transferable.
(b) Value of Right. Upon the exercise of a Stock Appreciation Right
--------------
related to an Option, the Holder shall be entitled to receive payment from
the Corporation of an amount determined by multiplying:
(i) The difference obtained by subtracting the Exercise Price
of a share of Stock specified in the related Option from the Fair
Market Value of a share of Stock on the date of exercise of the Stock
Appreciation Right, by
(ii) The number of shares as to which that Stock Appreciation
Right has been exercised.
6.3 Right Without Option. A Stock Appreciation Right granted independent
--------------------
of an Option shall be exercisable as determined by the Committee and set forth
in the Award Agreement governing the Stock Appreciation Right, which Award
Agreement shall comply with the following provisions:
(a) Number of Shares. Each Award Agreement shall state the total
----------------
number of shares of Stock to which the Stock Appreciation Right relates.
(b) Vesting. Each Award Agreement shall state the time or periods
-------
in which the right to exercise the Stock Appreciation Right or a portion
thereof shall vest and the number of shares of Stock for which the right to
exercise the Stock Appreciation Right shall vest at each such time or
period.
(c) Expiration of Rights. Each Award Agreement shall state the date
--------------------
at which the Stock Appreciation Rights shall expire if not previously
exercised.
15
<PAGE>
(d) Value of Right. Each Stock Appreciation Right shall entitle the
--------------
Holder, upon exercise thereof, to receive payment of an amount determined
by multiplying:
(i) The difference obtained by subtracting the Fair Market
Value of a share of Stock on the Date of Grant of the Stock
Appreciation Right from the Fair Market Value of a share of Stock on
the date of exercise of that Stock Appreciation Right, by
(ii) The number of shares as to which the Stock Appreciation
Right has been exercised.
6.4 Limitations on Rights. Notwithstanding Sections 6.2(b) and 6.3(d),
---------------------
the Committee may limit the amount payable upon exercise of a Stock Appreciation
Right. Any such limitation must be determined as of the Date of Grant and be
noted on the Award Agreement evidencing the Holder's Stock Appreciation Right.
6.5 Payment of Rights. Payment of the amount determined under Section
-----------------
6.2(b) or 6.3(d) and Section 6.4 may be made, in the sole discretion of the
Committee unless specifically provided otherwise in the Award Agreement, solely
in whole shares of Stock valued at Fair Market Value on the date of exercise of
the Stock Appreciation Right, solely in cash, or in a combination of cash and
whole shares of Stock. If the Committee decides to make full payment in shares
of Stock and the amount payable results in a fractional share, payment for the
fractional share shall be made in cash.
6.6 Payment of Taxes. The Committee may, in its discretion, require a
----------------
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation), at the time of the exercise
of a Stock Appreciation Right or thereafter, the amount that the Committee deems
necessary to satisfy the Corporation's or its Subsidiary's current or future
obligation to withhold federal, state, or local income or other taxes that the
Holder incurs by exercising a Stock Appreciation Right. In connection with the
exercise of a Stock Appreciation Right requiring tax withholding, a Holder may
(a) direct the Corporation to withhold from the shares of Stock to be issued to
the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date of exercise; (b) deliver to the Corporation
sufficient shares of Stock (based upon the Fair Market Value as of the date of
such delivery) to satisfy the Corporation's tax withholding obligations, which
tax withholding obligation is based on the shares' Fair Market Value as of the
later of the date of exercise or the date as of which the shares of Stock issued
in connection with such exercise become includible in the income of the Holder;
or (c) deliver sufficient cash to the Corporation to satisfy its tax withholding
obligations. Holders who elect to have Stock withheld pursuant to (a) or (b)
above must make the election at the time and in the manner that the Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy withholding obligations through Stock instead of cash. In the event
the Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency in the form of payment
requested by the Commission.
16
<PAGE>
6.7 Other Agreement Provisions. The Award Agreements relating to Stock
--------------------------
Appreciation Rights shall contain such provisions in addition to those required
by the Plan (including without limitation restrictions or the removal of
restrictions upon the exercise of the Stock Appreciation Right and the retention
or transfer of shares thereby acquired) as the Committee may deem advisable.
SECTION 7. RESTRICTED STOCK AWARDS
All Restricted Stock Awards granted under the Plan shall comply with and be
subject to, and the related Award Agreements shall be deemed to include, the
terms and conditions set forth in this Section 7 and also to the terms and
conditions set forth in Sections 9 and 10; provided, however, that the Committee
may authorize an Award Agreement related to a Restricted Stock Award that
expressly contains terms and provisions that differ from the terms and
provisions set forth in Sections 9.2, 9.3, and 9.4 and the terms and provisions
set forth in Section 10 (other than Sections 10.9 and 10.10).
7.1 Restrictions. All shares of Restricted Stock Awards granted or sold
------------
pursuant to the Plan shall be subject to the following conditions:
(a) Transferability. The shares may not be sold, transferred, or
---------------
otherwise alienated or hypothecated until the restrictions are removed or
expire.
(b) Conditions to Removal of Restrictions. Conditions to removal or
-------------------------------------
expiration of the restrictions may include, but are not required to be
limited to, continuing employment or service as a director, officer, or Key
Employee or achievement of performance objectives described in the Award
Agreement.
(c) Legend. Each certificate representing Restricted Stock Awards
------
granted pursuant to the Plan shall bear a legend making appropriate
reference to the restrictions imposed.
(d) Possession. The Committee may require the Corporation to retain
----------
physical custody of the certificates representing Restricted Stock Awards
during the restriction period and may require the Holder of the Award to
execute stock powers in blank for those certificates and deliver those
stock powers to the Corporation, or the Committee may require the Holder to
enter into an escrow agreement providing that the certificates representing
Restricted Stock Awards granted or sold pursuant to the Plan shall remain
in the physical custody of an escrow holder until all restrictions are
removed or expire.
(e) Other Conditions. The Committee may impose other conditions on
----------------
any shares granted or sold as Restricted Stock Awards pursuant to the Plan
as it may deem advisable, including without limitation (i) restrictions
under the Securities Act or Exchange Act, (ii) the requirements of any
securities exchange upon which the shares or shares of the same class are
then listed, and (iii) any state securities law applicable to the shares.
7.2 Expiration of Restrictions. The restrictions imposed in Section 7.1
--------------------------
on Restricted Stock Awards shall lapse as determined by the Committee and set
forth in the applicable Award
17
<PAGE>
Agreement, and the Corporation shall promptly deliver to the Holder of the
Restricted Stock Award a certificate representing the number of shares for which
restrictions have lapsed, free of any restrictive legend relating to the lapsed
restrictions. Each Restricted Stock Award may have a different restriction
period as determined by the Committee in its sole discretion. The Committee may,
in its discretion, prospectively reduce the restriction period applicable to a
particular Restricted Stock Award.
7.3 Rights as Shareholder. Subject to the provisions of Sections 7.1 and
---------------------
10.10, the Committee may, in its discretion, determine what rights, if any, the
Holder shall have with respect to the Restricted Stock Awards granted or sold,
including the right to vote the shares and receive all dividends and other
distributions paid or made with respect thereto.
7.4 Payment of Taxes. The Committee may, in its discretion, require a
----------------
Holder to pay to the Corporation (or the Corporation's Subsidiary if the Holder
is an employee of a Subsidiary of the Corporation) the amount that the Committee
deems necessary to satisfy the Corporation's or its Subsidiary's current or
future obligation to withhold federal, state, or local income or other taxes
that the Holder incurs by reason of the Restricted Stock Award. The Holder may
(a) direct the Corporation to withhold from the shares of Stock to be issued to
the Holder the number of shares necessary to satisfy the Corporation's
obligation to withhold taxes, that determination to be based on the shares' Fair
Market Value as of the date on which tax withholding is to be made; (b) deliver
to the Corporation sufficient shares of Stock (based upon the Fair Market Value
as of the date of such delivery) to satisfy the Corporation's tax withholding
obligations, which tax withholding obligation is based on the shares' Fair
Market Value as of the later of the date of issuance or the date as of which the
shares of Stock issued become includible in the income of the Holder; or (c)
deliver sufficient cash to the Corporation to satisfy its tax withholding
obligations. Holders who elect to have Stock withheld pursuant to (a) or (b)
above must make the election at the time and in the manner that the Committee
prescribes. The Committee may, in its sole discretion, deny any Holder's request
to satisfy withholding obligations through Stock instead of cash. In the event
the Committee subsequently determines that the aggregate Fair Market Value (as
determined above) of any shares of Stock withheld or delivered as payment of any
tax withholding obligation is insufficient to discharge that tax withholding
obligation, then the Holder shall pay to the Corporation, immediately upon the
Committee's request, the amount of that deficiency.
7.5 Other Agreement Provisions. The Award Agreements relating to
--------------------------
Restricted Stock Awards shall contain such provisions in addition to those
required by the Plan as the Committee may deem advisable.
SECTION 8. AWARDS TO NON-EMPLOYEE DIRECTORS
8.1 Awards to Committee Members. The full Board of Directors shall
---------------------------
determine the number of Awards to be granted to members of the Committee, the
Exercise Price and the vesting schedule thereof.
8.2 Ineligibility for Other Awards. Non-Employee Directors shall be
------------------------------
eligible to receive any Awards under the Plan other than an Award of an
Incentive Option.
18
<PAGE>
SECTION 9. ADJUSTMENT PROVISIONS
9.1 Adjustment of Awards and Authorized Stock. The terms of an Award and
-----------------------------------------
the number of shares of Stock authorized pursuant to Section 2.1 and Section 8
for issuance under the Plan shall be subject to adjustment from time to time, in
accordance with the following provisions:
(a) If at any time, or from time to time, the Corporation shall
subdivide as a whole (by reclassification, by a Stock split, by the
issuance of a distribution on Stock payable in Stock, or otherwise) the
number of shares of Stock then outstanding into a greater number of shares
of Stock, then (i) the maximum number of shares of Stock available for the
Plan as provided in Section 2.1 shall be increased proportionately, and the
kind of shares or other securities available for the Plan shall be
appropriately adjusted, (ii) the number of shares of Stock (or other kind
of shares or securities) that may be acquired under any Award shall be
increased proportionately, and (iii) the price (including Exercise Price)
for each share of Stock (or other kind of shares or securities) subject to
then outstanding Awards shall be reduced proportionately, without changing
the aggregate purchase price or value as to which outstanding Awards remain
exercisable or subject to restrictions.
(b) If at any time, or from time to time, the Corporation shall
consolidate as a whole (by reclassification, reverse Stock split, or
otherwise) the number of shares of Stock then outstanding into a lesser
number of shares of Stock, then (i) the maximum number of shares of Stock
available for the Plan as provided in Section 2.1 shall be decreased
proportionately, and the kind of shares or other securities available for
the Plan shall be appropriately adjusted, (ii) the number of shares of
Stock (or other kind of shares or securities) that may be acquired under
any Award shall be decreased proportionately, and (iii) the price
(including Exercise Price) for each share of Stock (or other kind of shares
or securities) subject to then outstanding Awards shall be increased
proportionately, without changing the aggregate purchase price or value as
to which outstanding Awards remain exercisable or subject to restrictions.
(c) Whenever the number of shares of Stock subject to outstanding
Awards and the price for each share of Stock subject to outstanding Awards
are required to be adjusted as provided in this Section 9.1, the Committee
shall promptly prepare a notice setting forth, in reasonable detail, the
event requiring adjustment, the amount of the adjustment, the method by
which such adjustment was calculated, and the change in price and the
number of shares of Stock, other securities, cash, or property purchasable
subject to each Award after giving effect to the adjustments. The Committee
shall promptly give each Holder such a notice.
(d) Adjustments under Sections 9(a) and (b) shall be made by the
Committee, and its determination as to what adjustments shall be made and
the extent thereof shall be final, binding, and conclusive. No fractional
interest shall be issued under the Plan on account of any such adjustments.
9.2 Changes in Control. Any Award Agreement may provide that, upon the
------------------
occurrence of a Change in Control, one or more of the following apply: (a) each
Holder of an Option shall immediately be granted corresponding Stock
Appreciation Rights; (b) all outstanding Stock Appreciation Rights and Options
shall
19
<PAGE>
immediately become fully vested and exercisable in full, including that portion
of any Stock Appreciation Right or Option that pursuant to the terms and
provisions of the applicable Award Agreement had not yet become exercisable (the
total number of shares of Stock as to which a Stock Appreciation Right or Option
is exercisable upon the occurrence of a Change in Control is referred to herein
as the "Total Shares"); and (c) the restriction period of any Restricted Stock
Award shall immediately be accelerated and the restrictions shall expire. An
Award Agreement does not have to provide for any of the foregoing. If a Change
in Control involves a Restructuring or occurs in connection with a series of
related transactions involving a Restructuring and if such Restructuring is in
the form of a Non-Surviving Event and as a part of such Restructuring shares of
stock, other securities, cash, or property shall be issuable or deliverable in
exchange for Stock, then the Holder of an Award shall be entitled to purchase or
receive (in lieu of the Total Shares that the Holder would otherwise be entitled
to purchase or receive), as appropriate for the form of Award, the number of
shares of Stock, other securities, cash, or property to which that number of
Total Shares would have been entitled in connection with such Restructuring
(and, for Options, at an aggregate exercise price equal to the Exercise Price
that would have been payable if that number of Total Shares had been purchased
on the exercise of the Option immediately before the consummation of the
Restructuring). Nothing in this Section 9.2 shall impose on a Holder the
obligation to exercise any Award immediately before or upon the Change of
Control, or cause a Holder to forfeit the right to exercise the Award during the
remainder of the original term of the Award because of a Change in Control.
9.3 Restructuring Without Change in Control. In the event a Restructuring
---------------------------------------
shall occur at any time while there is any outstanding Award hereunder and the
Restructuring does not occur in connection with a Change in Control or a series
of related transactions involving a Change in Control, then:
(a) no outstanding Option or Stock Appreciation Right shall
immediately become fully vested and exercisable in full merely because of
the occurrence of the Restructuring;
(b) no Holder of an Option shall automatically be granted
corresponding Stock Appreciation Rights;
(c) the restriction period of any Restricted Stock Award shall not
immediately be accelerated and the restrictions expire merely because of
the occurrence of the Restructuring; and
(d) at the option of the Committee, the Committee may (but shall
not be required to) cause the Corporation to take any one or more of the
following actions:
(i) accelerate in whole or in part the time of the vesting
and exercisability of any one or more of the outstanding Stock
Appreciation Rights and Options so as to provide that those Stock
Appreciation Rights and Options shall be exercisable before, upon, or
after the consummation of the Restructuring;
20
<PAGE>
(ii) grant each Holder of an Option corresponding Stock
Appreciation Rights;
(iii) accelerate in whole or in part the expiration of some or
all of the restrictions on any Restricted Stock Award;
(iv) if the Restructuring is in the form of a Non-Surviving
Event, cause the surviving entity to assume in whole or in part any
one or more of the outstanding Awards upon such terms and provisions
as the Committee deems desirable; or
(v) redeem in whole or in part any one or more of the
outstanding Awards (whether or not then exercisable) in consideration
of a cash payment, as such payment may be reduced for tax withholding
obligations as contemplated in Sections 5.9, 6.6, or 7.4, as
applicable, in an amount equal to:
(A) for Options and Stock Appreciation Rights granted
in connection with Options, the excess of (1) the Fair Market
Value, determined as of the date immediately preceding the
consummation of the Restructuring, of the aggregate number of
shares of Stock subject to the Award and as to which the Award
is being redeemed over (2) the Exercise Price for that number
of shares of Stock;
(B) for Stock Appreciation Rights not granted in
connection with an Option, the excess of (1) the Fair Market
Value, determined as of the date immediately preceding the
consummation of the Restructuring, of the aggregate number of
shares of Stock subject to the Award and as to which the Award
is being redeemed over (2) the Fair Market Value of that number
of shares of Stock on the Date of Grant; and
(C) for Restricted Stock Awards, the Fair Market Value,
determined as of the date immediately preceding the
consummation of the Restructuring, of the aggregate number of
shares of Stock subject to the Award and as to which the Award
is being redeemed.
The Corporation shall promptly notify each Holder of any election or action
taken by the Corporation under this Section 9.3. In the event of any election or
action taken by the Corporation pursuant to this Section 9.3 that requires the
amendment or cancellation of any Award Agreement as may be specified in any
notice to the Holder thereof, that Holder shall promptly deliver that Award
Agreement to the Corporation in order for that amendment or cancellation to be
implemented by the Corporation and the Committee. The failure of the Holder to
deliver any such Award Agreement to the Corporation as provided in the preceding
sentence shall not in any manner affect the validity or enforceability of any
action taken by the Corporation and the Committee under this Section 9.3,
including without limitation any redemption of an Award as of the consummation
of a Restructuring. Any cash payment to be made by the Corporation pursuant to
this Section 9.3 in connection with the redemption of any outstanding Awards
shall be paid to the Holder thereof currently with the delivery to the
Corporation of the Award Agreement evidencing that Award; provided, however,
that any
21
<PAGE>
such redemption shall be effective upon the consummation of the Restructuring
notwithstanding that the payment of the redemption price may occur subsequent to
the consummation. If all or any portion of an outstanding Award is to be
exercised or accelerated upon or after the consummation of a Restructuring that
does not occur in connection with a Change in Control and is in the form of a
Non-Surviving Event, and as a part of that Restructuring shares of stock, other
securities, cash, or property shall be issuable or deliverable in exchange for
Stock, then the Holder of the Award shall thereafter be entitled to purchase or
receive (in lieu of the number of shares of Stock that the Holder would
otherwise be entitled to purchase or receive) the number of shares of Stock,
other securities, cash, or property to which such number of shares of Stock
would have been entitled in connection with the Restructuring (and, for Options,
upon payment of the aggregate exercise price equal to the Exercise Price that
would have been payable if that number of Total Shares had been purchased on the
exercise of the Option immediately before the consummation of the Restructuring)
and such Award shall be subject to adjustments that shall be as nearly
equivalent as may be practical to the adjustments provided for in this Section
9.
9.4 Notice of Restructuring. The Corporation shall attempt to keep all
-----------------------
Holders informed with respect to any Restructuring or of any potential
Restructuring to the same extent that the Corporation's shareholders are
informed by the Corporation of any such event or potential event.
SECTION 10. ADDITIONAL PROVISIONS
10.1 Termination of Employment. If a Holder is an Eligible Individual
-------------------------
because the Holder is an Employee and if that employment relationship is
terminated for any reason other than (a) that Holder's death or (b) that
Holder's Disability (hereafter defined), then any and all Awards held by such
Holder in such Holder's capacity as an Employee as of the date of the
termination that are not yet exercisable (or for which restrictions have not
lapsed) shall become null and void as of the date of such termination; provided,
however, that the portion, if any, of such Awards that are exercisable as of the
date of termination shall be exercisable for a period of the lesser of (a) the
remainder of the term of the Award or (b) the date which is 30 days following
the date of termination. Any portion of an Award not exercised upon the
expiration of the lesser of the periods specified above shall be null and void
unless the Holder dies during such period, in which case the provisions of
Section 10.3 shall govern.
10.2 Other Loss of Eligibility - Non-Employees. If a Holder is an Eligible
-----------------------------------------
Individual because the Holder is serving in a capacity other than as an Employee
and if that capacity is terminated for any reason other than the Holder's death
or Disability, then that portion, if any, of any and all Awards held by the
Holder that were granted because of that capacity which are not yet exercisable
(or for which restrictions have not lapsed) as of the date of the termination
shall become null and void as of the date of the termination; provided, however,
that the portion, if any, of any and all Awards held by the Holder that are then
exercisable as of the date of the termination shall be exercisable for a period
of the lesser of (a) the remainder of the term of the Award or (b) 30 days
following the date such capacity is terminated. If a Holder is an Eligible
Individual because the Holder is serving in a capacity other than as an Employee
and if that capacity is terminated by reason of the Holder's death or
Disability, then the portion, if any, of any and all Awards held by the Holder
that are not yet exercisable (or for which restrictions have not lapsed) as of
the date of termination for death or Disability shall become exercisable (and
the restrictions thereon, if any, shall lapse) and
22
<PAGE>
all such Awards held by that Holder as of the date of termination that are
exercisable (either as a result of this sentence or otherwise) shall be
exercisable for a period of the lesser of (a) the remainder of the term of the
Award or (b) the date which is 30 days following the date of termination. Any
portion of an Award not exercised upon the expiration of the periods specified
in (a) or (b) of the preceding two sentences shall be null and void upon the
expiration of such period, as applicable.
10.3 Death. Upon the death of a Holder, any and all Awards held by the
-----
Holder that are not then exercisable (or for which restrictions have not lapsed)
shall become immediately exercisable (and any restrictions shall immediately
lapse) and such Awards shall be exercisable by that Holder's legal
representatives, heirs, legatees, or distributees for a period of 90 days
following the date of the Holder's death. Any portion of an Award not exercised
upon the expiration of such period shall be null and void. Except as expressly
provided in this Section 10.3, no Award held by a Holder shall be exercisable
after the death of that Holder.
10.4 Disability. If a Holder is an Eligible Individual because the Holder
----------
is an Employee and if that employment relationship is terminated by reason of
the Holder's Disability, then the portion, if any, of any and all Awards held by
the Holder that are not then exercisable (or for which restrictions have not
lapsed) shall become immediately exercisable (and any restrictions shall
immediately lapse) and such Awards shall be exercisable by the Holder, his
guardian or his legal representative for a period of 180 days following the date
of such termination. Any portion of an Award not exercised upon the expiration
of such period shall be null and void unless the Holder dies during such period,
in which event the provisions of Section 10.3 shall govern. "Disability" shall
have the meaning given it in the employment agreement of the Holder; provided,
however, that if the Holder has no employment agreement, "Disability" shall
mean, as determined by the Board of Directors in the sole discretion exercised
in good faith of the Board of Directors, a physical or mental impairment of
sufficient severity that either the Holder is unable to continue performing the
duties he performed before such impairment or the Holder's condition entitles
him to disability benefits under any insurance or employee benefit plan of the
Corporation or its Subsidiaries and that impairment or condition is cited by the
Corporation as the reason for termination of the Holder's employment.
10.5 Leave of Absence. With respect to an Award, the Committee may, in its
----------------
sole discretion, determine that any Holder who is on leave of absence for any
reason will be considered to still be in the employ of the Corporation or any of
its Subsidiaries, as applicable, for any or all purposes of the Plan and the
Award Agreement of such Holder.
10.6 Transferability of Awards. In addition to such other terms and
-------------------------
conditions as may be included in a particular Award Agreement, an Award
requiring exercise shall be exercisable during a Holder's lifetime only by that
Holder or by that Holder's guardian or legal representative. An Award requiring
exercise shall not be transferable other than (i) by will or the laws of descent
and distribution, or (ii) in accordance with the terms of the Award Agreement.
10.7 Forfeiture and Restrictions on Transfer. Each Award Agreement may
---------------------------------------
contain or otherwise provide for conditions giving rise to the forfeiture of the
Stock acquired pursuant to an Award or otherwise and may also provide for those
restrictions on the transferability of shares of the Stock acquired pursuant to
an Award or otherwise that the Committee in its sole and absolute
23
<PAGE>
discretion may deem proper or advisable. The conditions giving rise to
forfeiture may include, but need not be limited to, the requirement that the
Holder render substantial services to the Corporation or its Subsidiaries for a
specified period of time. The restrictions on transferability may include, but
need not be limited to, options and rights of first refusal in favor of the
Corporation and shareholders of the Corporation other than the Holder of such
shares of Stock who is a party to the particular Award Agreement or a subsequent
Holder of the shares of Stock who is bound by that Award Agreement.
10.8 Delivery of Certificates of Stock. Subject to Section 10.9, the
---------------------------------
Corporation shall promptly issue and deliver a certificate representing the
number of shares of Stock as to which (a) an Option has been exercised after the
Corporation receives an Exercise Notice and upon receipt by the Corporation of
the Exercise Price and any tax withholding as may be requested, (b) a Stock
Appreciation Right has been exercised (to the extent the Committee determines to
pay such Stock Appreciation Right in shares of Stock pursuant to Section 6.5)
and upon receipt by the Corporation of any tax withholding as may be requested,
and (c) restrictions have lapsed with respect to a Restricted Stock Award and
upon receipt by the Corporation of any tax withholding as may be requested. The
value of the shares of Stock or cash transferable because of an Award under the
Plan shall not bear any interest owing to the passage of time, except as may be
otherwise provided in an Award Agreement. If a Holder is entitled to receive
certificates representing Stock received for more than one form of Award under
the Plan, separate Stock certificates shall be issued with respect to Incentive
Options and Nonstatutory Options.
10.9 Conditions to Delivery of Stock. Nothing herein or in any Award
-------------------------------
granted hereunder or any Award Agreement shall require the Corporation to issue
any shares with respect to any Award if that issuance would, in the opinion of
counsel for the Corporation, constitute a violation of the Securities Act or any
similar or superseding statute or statutes, any other applicable statute or
regulation, or the rules of any applicable securities exchange or securities
association, as then in effect. At the time of any exercise of an Option or
Stock Appreciation Right, or at the time of any grant of a Restricted Stock
Award, the Corporation may, as a condition precedent to the exercise of such
Option or Stock Appreciation Right or vesting of any Restricted Stock Award,
require from the Holder of the Award (or in the event of his death, his legal
representatives, heirs, legatees, or distributees) such written representations,
if any, concerning the Holder's intentions with regard to the retention or
disposition of the shares of Stock being acquired pursuant to the Award and such
written covenants and agreements, if any, as to the manner of disposal of such
shares as, in the opinion of counsel to the Corporation, may be necessary to
ensure that any disposition by that Holder (or in the event of the Holder's
death, his legal representatives, heirs, legatees, or distributees) will not
involve a violation of the Securities Act or any similar or superseding statute
or statutes, any other applicable state or federal statute or regulation, or any
rule of any applicable securities exchange or securities association, as then in
effect.
10.10 Certain Directors and Officers. With respect to Holders who are
------------------------------
directors or officers of the Corporation or any of its Subsidiaries and who are
subject to Section 16(b) of the Exchange Act, Awards and all rights under the
Plan shall be exercisable during the Holder's lifetime only by the Holder or the
Holder's guardian or legal representative, but not for at least six months after
grant, unless (a) the Board of Directors expressly authorizes that an Award
shall be exercisable before the expiration of the six-month period or (b) the
death or Disability of the Holder occurs before the
24
<PAGE>
expiration of the six-month period. In addition, no such officer or director
shall exercise any Stock Appreciation Right or have shares of Stock withheld to
pay tax withholding obligations within the first six months of the term of an
Award. Any election by any such officer or director to have tax withholding
obligations satisfied by the withholding of shares of Stock shall be irrevocable
and shall be communicated to the Committee during the period beginning on the
third day following the date of release of quarterly or annual summary
statements of sales and earnings and ending on the twelfth business day
following such date (the "Window Period") or by an irrevocable election
communicated to the Committee at least six months before the date of exercise of
the Award for which such withholding is desired. Any election by an officer or
director to receive cash in full or partial settlement of a Stock Appreciation
Right, as well as any exercise by such individual of a Stock Appreciation Right
for cash, in either case to the extent permitted under the applicable Award
Agreement or otherwise permitted by the Committee, shall be made during the
Window Period or within any other periods that the Committee shall specify from
time to time.
10.11 Securities Act Legend. Certificates for shares of Stock, when
---------------------
issued, may have the following legend, or statements of other applicable
restrictions (including, without limitation, restrictions required under any
federal, state or foreign law), endorsed thereon and may not be immediately
transferable:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THE SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED,
TRANSFERRED, OR OTHERWISE DISPOSED OF UNTIL THE HOLDER HEREOF PROVIDES
EVIDENCE SATISFACTORY TO THE ISSUER (WHICH, IN THE DISCRETION OF THE
ISSUER, MAY INCLUDE AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER) THAT
SUCH OFFER, SALE, PLEDGE, TRANSFER, OR OTHER DISPOSITION WILL NOT VIOLATE
APPLICABLE FEDERAL OR STATE LAWS.
This legend shall not be required for shares of Stock issued pursuant to an
effective registration statement under the Securities Act.
10.12 Legend for Restrictions on Transfer. Each certificate representing
-----------------------------------
shares issued to a Holder pursuant to an Award granted under the Plan shall, if
such shares are subject to any transfer restriction, including a right of first
refusal, provided for under this Plan or an Award Agreement, bear a legend that
complies with applicable law with respect to the restrictions on transferability
contained in this Section 10.12, such as:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY IMPOSED BY THAT CERTAIN INSTRUMENT ENTITLED
"CLIENTLINK, INC. 1997 INCENTIVE PLAN" AS ADOPTED BY THE CORPORATION, AND
AN AGREEMENT THEREUNDER BETWEEN THE CORPORATION AND THE INITIAL HOLDER
THEREOF DATED ________________, 199__, AND MAY NOT BE TRANSFERRED, SOLD, OR
OTHERWISE DISPOSED OF EXCEPT AS THEREIN PROVIDED. THE CORPORATION WILL
FURNISH A COPY OF
25
<PAGE>
SUCH INSTRUMENT AND AGREEMENT TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE ON REQUEST TO THE CORPORATION AT ITS PRINCIPAL PLACE OF
BUSINESS OR REGISTERED OFFICE.
10.13 Rights as a Shareholder. A Holder shall have no right as a
-----------------------
shareholder with respect to any shares covered by his Award until a certificate
representing those shares is issued in his name. No adjustment shall be made for
dividends (ordinary or extraordinary, whether in cash or other property) or
distributions or other rights for which the record date is before the date that
certificate is issued, except as contemplated by Section 9 hereof. Nevertheless,
dividends, dividend equivalent rights and voting rights may be extended to and
made part of any Award denominated in Stock or units of Stock, subject to such
terms, conditions and restrictions as the Committee may establish. The Committee
may also establish rules and procedures for the crediting of interest on
deferred cash payments and dividend equivalents for deferred payment denominated
in Stock or units of Stock.
10.14 Furnish Information. Each Holder shall furnish to the Corporation
-------------------
all information requested by the Corporation to enable it to comply with any
reporting or other requirement imposed upon the Corporation by or under any
applicable statute or regulation.
10.15 Obligation to Exercise. The granting of an Award hereunder shall
----------------------
impose no obligation upon the Holder to exercise the same or any part thereof.
10.16 Adjustments to Awards. Subject to the general limitations set forth
---------------------
in Sections 5, 6, and 9, the Committee may make any adjustment in the Exercise
Price of, the number of shares subject to, or the terms of a Nonstatutory Option
or Stock Appreciation Right by canceling an outstanding Nonstatutory Option or
Stock Appreciation Right and regranting a Nonstatutory Option or Stock
Appreciation Right. Such adjustment shall be made by amending, substituting, or
regranting an outstanding Nonstatutory Option or Stock Appreciation Right. Such
amendment, substitution, or regrant may result in terms and conditions that
differ from the terms and conditions of the original Nonstatutory Option or
Stock Appreciation Right. The Committee may not, however, impair the rights of
any Holder of previously granted Nonstatutory Options or Stock Appreciation
Rights without that Holder's consent. If such action is effected by amendment,
such amendment shall be deemed effective as of the Date of Grant of the amended
Award.
10.17 Remedies. The Corporation shall be entitled to recover from a Holder
--------
reasonable attorneys' fees incurred in connection with the enforcement of the
terms and provisions of the Plan and any Award Agreement whether by an action to
enforce specific performance or for damages for its breach or otherwise.
10.18 Information Confidential. As partial consideration for the granting
------------------------
of each Award hereunder, the Holder shall agree with the Corporation that he
will keep confidential all information and knowledge that he has relating to the
manner and amount of his participation in the Plan; provided, however, that such
information may be disclosed as required by law and may be given in confidence
to the Holder's spouse, tax or financial advisors, or to a financial institution
to the extent that such information is necessary to secure a loan. In the event
any breach of this promise comes to the attention of the Committee, it shall
take into consideration that breach in determining whether
26
<PAGE>
to recommend the grant of any future Award to that Holder, as a factor
mitigating against the advisability of granting any such future Award to that
Person.
10.19 Consideration. No Option or Stock Appreciation Right shall be
-------------
exercisable and no restriction on any Restricted Stock Award shall lapse with
respect to a Holder unless and until the Holder thereof shall have paid cash or
property to, or performed services for, the Corporation or any of its
Subsidiaries that the Committee believes is equal to or greater in value than
the par value of the Stock subject to such Award.
SECTION 11. DURATION AND AMENDMENT OF PLAN
11.1 Duration. No Awards may be granted hereunder after the date that is
--------
ten years from the earlier of (a) the date the Plan is adopted by the Board of
Directors or (b) the date the Plan is approved by the shareholders of the
Corporation.
11.2 Amendment. The Board of Directors may, insofar as permitted by law,
---------
with respect to any shares which, at the time, are not subject to Awards,
suspend or discontinue the Plan or revise or amend it in any respect whatsoever
and may amend any provision of the Plan or any Award Agreement to make the Plan
or the Award Agreement, or both, comply with Section 16(b) of the Exchange Act
and the exemptions from that Section in the regulations thereunder. The Board of
Directors may also amend, modify, suspend, or terminate the Plan for the purpose
of meeting or addressing any changes in other legal requirements applicable to
the Corporation or the Plan or for any other purpose permitted by law. The Plan
may not be amended without the consent of the holders of a majority of the
shares of Stock then outstanding to (a) increase materially the aggregate number
of shares of Stock that may be issued under the Plan (except for adjustments
pursuant to Section 9 hereof), (b) increase materially the benefits accruing to
Eligible Individuals under the Plan, or (c) modify materially the requirements
about eligibility for participation in the Plan; provided, however, that such
amendments may be made without the consent of shareholders of the Corporation if
changes occur in law or other legal requirements (including Rule 16b-3) that
would permit such changes. In connection with any amendment of the Plan, the
Board of Directors shall be authorized to incorporate such provisions as shall
be necessary for amounts paid under the Plan to be exempt from Section 162(m) of
the Code.
SECTION 12. GENERAL
12.1 Application of Funds. The proceeds received by the Corporation from
--------------------
the sale of shares pursuant to Awards may be used for any general corporate
purpose.
12.2 Right of the Corporation and Subsidiaries to Terminate Employment.
-----------------------------------------------------------------
Nothing contained in the Plan or in any Award Agreement shall confer upon any
Holder the right to continue in the employ of the Corporation or any Subsidiary
or interfere in any way with the rights of the Corporation or any Subsidiary to
terminate the Holder's employment at any time.
12.3 No Liability for Good Faith Determinations. Neither the members of
------------------------------------------
the Board of Directors nor any member of the Committee shall be liable for any
act, omission or determination taken or made in good faith with respect to the
Plan or any Award granted under it; and members
27
<PAGE>
of the Board of Directors and the Committee shall be entitled to indemnification
and reimbursement by the Corporation in respect of any claim, loss, damage, or
expense (including attorneys' fees, the costs of settling any suit, provided
such settlement is approved by independent legal counsel selected by the
Corporation, and amounts paid in satisfaction of a judgment, except a judgment
based on a finding of bad faith) arising therefrom to the full extent permitted
by law and under any directors' and officers' liability or similar insurance
coverage that may from time to time be in effect. This right to indemnification
shall be in addition to, and not a limitation on, any other indemnification
rights any member of the Board of Directors or the Committee may have.
12.4 Other Benefits. Participation in the Plan shall not preclude the
--------------
Holder from eligibility in any other stock or stock option plan of the
Corporation or any Subsidiary or any old age benefit, insurance, pension, profit
sharing retirement, bonus, or other extra compensation plans that the
Corporation or any Subsidiary has adopted, or may, at any time, adopt for the
benefit of its Employees. Neither the adoption of the Plan by the Board of
Directors nor the submission of the Plan to the shareholders of the Corporation
for approval shall be construed as creating any limitations on the power of the
Board of Directors to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options and the
awarding of Stock and cash otherwise than under the Plan and such arrangements
may be either generally applicable or applicable only in specific cases.
12.5 Exclusion From Pension and Profit-Sharing Compensation. By
------------------------------------------------------
acceptance of an Award (regardless of form), as applicable, each Holder shall be
deemed to have agreed that the Award is special incentive compensation that will
not be taken into account in any manner as salary, compensation, or bonus in
determining the amount of any payment under any pension, retirement, or other
employee benefit plan of the Corporation or any Subsidiary, unless any pension,
retirement, or other employee benefit plan of the Corporation or Subsidiary
expressly provides that such Award shall be so considered for purposes of
determining the amount of any payment under any such plan. In addition, each
beneficiary of a deceased Holder shall be deemed to have agreed that the Award
will not affect the amount of any life insurance coverage, if any, provided by
the Corporation or a Subsidiary on the life of the Holder that is payable to the
beneficiary under any life insurance plan covering Employees of the Corporation
or any Subsidiary.
12.6 Execution of Receipts and Releases. Any payment of cash or any
----------------------------------
issuance or transfer of shares of Stock to the Holder, or to his legal
representative, heir, legatee, or distributee, in accordance with the provisions
hereof, shall, to the extent thereof, be in full satisfaction of all claims of
such Persons hereunder. The Committee may require any Holder, legal
representative, heir, legatee, or distributee, as a condition precedent to such
payment, to execute a release and receipt therefor in such form as it shall
determine.
12.7 Unfunded Plan. Insofar as it provides for Awards of cash and Stock,
-------------
the Plan shall be unfunded. Although bookkeeping accounts may be established
with respect to Holders who are entitled to cash, Stock, or rights thereto under
the Plan, any such accounts shall be used merely as a bookkeeping convenience.
The Corporation shall not be required to segregate any assets that may at any
time be represented by cash, Stock, or rights thereto, nor shall the Plan be
construed as providing for such segregation, nor shall the Corporation nor the
Board of Directors nor the Committee be deemed to be a trustee of any cash,
Stock, or rights thereto to be granted under the
28
<PAGE>
Plan. Any liability of the Corporation to any Holder with respect to a grant of
cash, Stock, or rights thereto under the Plan shall be based solely upon any
contractual obligations that may be created by the Plan and any Award Agreement;
no such obligation of the Corporation shall be deemed to be secured by any
pledge or other encumbrance on any property of the Corporation. Neither the
Corporation nor the Board of Directors nor the Committee shall be required to
give any security or bond for the performance of any obligation that may be
created by the Plan.
12.8 No Guarantee of Interests. Neither the Committee nor the Corporation
-------------------------
guarantees the Stock of the Corporation from loss or depreciation.
12.9 Payment of Expenses. All expenses incident to the administration,
-------------------
termination, or protection of the Plan, including, but not limited to, legal and
accounting fees, shall be paid by the Corporation or its Subsidiaries; provided,
however, the Corporation or a Subsidiary may recover any and all damages, fees,
expenses, and costs arising out of any actions taken by the Corporation to
enforce its right to purchase Stock under this Plan.
12.10 Corporation Records. Records of the Corporation or its Subsidiaries
-------------------
regarding the Holder's period of employment, termination of employment and the
reason therefor, leaves of absence, re-employment, and other matters shall be
conclusive for all purposes hereunder, unless determined by the Committee to be
incorrect.
12.11 Information. The Corporation and its Subsidiaries shall, upon
-----------
request or as may be specifically required hereunder, furnish or cause to be
furnished all of the information or documentation which is necessary or required
by the Committee to perform its duties and functions under the Plan.
12.12 No Liability of Corporation. The Corporation assumes no obligation
---------------------------
or responsibility to the Holder or his legal representatives, heirs, legatees,
or distributees for any act of, or failure to act on the part of, the Committee.
12.13 Corporation Action. Any action required of the Corporation shall be
------------------
by resolution of its Board of Directors or by a Person authorized to act by
resolution of the Board of Directors.
12.14 Severability. In the event that any provision of this Plan, or the
------------
application hereof to any Person or circumstance, is held by a court of
competent jurisdiction to be invalid, illegal, or unenforceable in any respect
under present or future laws effective during the effective term of any such
provision, such invalid, illegal, or unenforceable provision shall be fully
severable; and this Plan shall then be construed and enforced as if such
invalid, illegal, or unenforceable provision had not been contained in this
Plan; and the remaining provisions of this Plan shall remain in full force and
effect and shall not be affected by the illegal, invalid, or unenforceable
provision or by its severance from this Plan. Furthermore, in lieu of each such
illegal, invalid, or unenforceable provision, there shall be added automatically
as part of this Plan a provision as similar in terms to such illegal, invalid,
or unenforceable provision as may be possible and be legal, valid, and
enforceable. If any of the terms or provisions of this Plan conflict with the
requirements of Rule 16b-3 (as those terms or provisions are applied to Eligible
Individuals who are subject to Section 16(b) of the Exchange Act), then those
conflicting terms or provisions shall be deemed inoperative
29
<PAGE>
to the extent they so conflict with the requirements of Rule 16b-3 and, in lieu
of such conflicting provision, there shall be added automatically as part of
this Plan a provision as similar in terms to such conflicting provision as may
be possible and not conflict with the requirements of Rule 16b-3. If any of the
terms or provisions of this Plan conflict with the requirements of Section 422
of the Code (with respect to Incentive Options), then those conflicting terms or
provisions shall be deemed inoperative to the extent they so conflict with the
requirements of Section 422 of the Code and, in lieu of such conflicting
provision, there shall be added automatically as part of this Plan a provision
as similar in terms to such conflicting provision as may be possible and not
conflict with the requirements of Section 422 of the Code. With respect to
Incentive Options, if this Plan does not contain any provision required to be
included herein under Section 422 of the Code, that provision shall be deemed to
be incorporated herein with the same force and effect as if that provision had
been set out at length herein; provided, however, that, to the extent any Option
that is intended to qualify as an Incentive Option cannot so qualify, that
Option (to that extent) shall be deemed a Nonstatutory Option for all purposes
of the Plan.
12.15 Notices. Whenever any notice is required or permitted hereunder,
-------
such notice must be in writing and personally delivered or sent by mail. Any
notice required or permitted to be delivered hereunder shall be deemed to be
delivered on the date on which it is actually received by the Corporation
addressed to the attention of the Corporate Secretary at the Corporation's
office as specified in the applicable Award Agreement. The Corporation or a
Holder may change, at any time and from time to time, by written notice to the
other, the address which it or he had previously specified for receiving
notices. Until changed in accordance herewith, the Corporation and each Holder
shall specify as its and his address for receiving notices the address set forth
in the Award Agreement pertaining to the shares to which such notice relates.
Any Person entitled to notice hereunder may waive such notice.
12.16 Successors. The Plan shall be binding upon the Holder, his legal
----------
representatives, heirs, legatees, and distributees, upon the Corporation, its
successors and assigns and upon the Committee and its successors.
12.17 Headings. The titles and headings of Sections are included for
--------
convenience of reference only and are not to be considered in construction of
the provisions hereof.
12.18 Governing Law. All questions arising with respect to the provisions
-------------
of the Plan shall be determined by application of the laws of the State of
Georgia, without giving effect to any conflict of law provisions thereof, except
to the extent Georgia law is preempted by federal law. Questions arising with
respect to the provisions of an Award Agreement that are matters of contract law
shall be governed by the laws of the state specified in the Award Agreement,
except to the extent that Georgia corporate law subconflicts with the contract
law of such state, in which event Georgia corporate law shall govern
irrespective of any conflict of law laws. The obligation of the Corporation to
sell and deliver Stock hereunder is subject to applicable federal, state and
foreign laws and to the approval of any governmental authority required in
connection with the authorization, issuance, sale, or delivery of such Stock.
30
<PAGE>
12.19 Word Usage. Words used in the masculine shall apply to the feminine
----------
where applicable, and wherever the context of this Plan dictates, the plural
shall be read as the singular and the singular as the plural.
IN WITNESS WHEREOF, the Corporation, acting by and through its officers
hereunto duly authorized, has executed this 1997 Incentive Plan, to be effective
as of December 3, 1997.
CLIENTLINK, INC.,
a Delaware corporation
By: /s/ James H. Hamilton
--------------------------------------
James H. Hamilton, President
31
<PAGE>
EXHIBIT 10.4
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement (this "Agreement") is made and
entered into this 3rd day of December, 1997 by and between CompuCom Systems,
Inc., a Delaware corporation ("CompuCom"), and ClientLink, Inc., a Delaware
corporation ("ClientLink").
BACKGROUND
A. CompuCom currently owns in excess of 80% of the outstanding common
stock of ClientLink.
B. ClientLink intends to effect an initial public offering of shares of
its common stock (the "Offering").
C. Previously, CompuCom has provided ClientLink with certain
administrative and management services and has permitted ClientLink employees to
participate in certain of its employee benefit plans and programs sponsored and
administered by CompuCom.
D. The parties desire to provide for the continuation of certain of such
services, on an interim basis, on the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, the parties, intending to be legally bound, agree as
follows:
1. Administrative Services. CompuCom shall provide to ClientLink, if
-----------------------
and when required by ClientLink, the administrative services described in
Exhibit A and such other services that CompuCom is capable of providing with its
then-current personnel and facilities without unreasonable interference with
CompuCom's normal business operations (collectively with the other services
provided under this Agreement the "Services").
2. Marketing Services. CompuCom will allow its sales staff to
------------------
participate in a referral program to be developed by the parties whereby
ClientLink will compensate individuals on the sales staff for providing sales
leads to ClientLink, for the purpose of creating cooperative cross-selling of
products and services and preserving and enhancing the mutual reputations of
CompuCom and ClientLink.
3. Employee Benefit Plan Administration Services. From and after January
---------------------------------------------
1, 1998 (the "Effective Date"), CompuCom shall permit the employees of
ClientLink (the "ClientLink Employees") to continue to participate in the
employee benefit plans and programs listed on Exhibit A (collectively, the
"Employee Benefit Plans") on the same basis as such employees participated
immediately prior to the Effective Date; provided, however, that nothing
contained in this Agreement shall prohibit CompuCom from modifying or
terminating the Employee Benefit Plans so long as such modification or
termination shall apply to all participants in such Employee Benefit Plans.
CompuCom shall provide to ClientLink ninety (90) days prior written notice of
its intent to terminate any Employee Benefit Plan or effect the modification
thereof in a manner adverse to either ClientLink or any ClientLink Employee.
Notwithstanding anything to the contrary contained in this Agreement, ClientLink
may terminate the participation of
<PAGE>
the ClientLink Employees in any Employee Benefit Plan upon the occurrence of the
following: (a) the receipt of notice of CompuCom's intent to terminate any
Employee Benefit Plan or effect a modification to such plan in a manner adverse
to either ClientLink or any ClientLink Employee; or (b) the disposition by
CompuCom of a sufficient number of shares of ClientLink Common Stock, in the
aggregate, such that the ability of ClientLink Employees to be included in such
a Plan is terminated. The contributions of ClientLink Employees to any Employee
Benefit Plan and the costs associated with participation by ClientLink Employees
in the Employee Benefit Plans shall be accounted for separately from
contributions of and costs associated with participation by persons who are not
ClientLink Employees.
4. Charges for Services. In exchange for receiving the services under
--------------------
this Agreement, ClientLink shall pay to CompuCom the fees set forth on
Exhibit A.
5. Payments. ClientLink shall remit payment of the monthly fee in full
--------
on or before the first day of each month or partial month during the term of
this Agreement. Notwithstanding any other provision of this Section, CompuCom
shall make all payments to third parties necessary to ensure continued services
of the types contemplated in this Agreement. In the event of a dispute as to
the provision of a particular service ClientLink shall promptly notify CompuCom
of any such dispute. Each party will provide the other sufficient records and
information to resolve any such dispute and, without limiting the rights and
remedies of the parties, will negotiate a resolution of the dispute in good
faith. The transfer of funds pursuant to this Agreement shall be made in U.S.
dollars by company check or wire transfer of immediately available funds to an
account or accounts specified by CompuCom. Whenever any payment is required or
requested on a day other than a business day, such payment shall be made on the
next succeeding business day.
6. Performance of Services.
-----------------------
(a) Degree of Care. CompuCom shall perform the Services with the
--------------
same degree of care, skill and prudence customarily exercised by it in respect
of its own business, operations and affairs. It is understood and agreed that
the Services shall be substantially identical in nature and quality to the
Services performed by CompuCom for ClientLink immediately prior to the Effective
Date.
(b) Certain Limitations. Each party acknowledges that the Services
-------------------
shall be provided only with respect to the business of ClientLink and as such
business exists as of the Effective Date, or as otherwise mutually agreed by the
parties, and therefore CompuCom will not be obligated to provide Services for
the benefit of entities other than ClientLink. Each party shall provide and use
the Services only in accordance with all applicable federal, state and local
laws and regulations.
(c) Certain Information. ClientLink shall provide, in a manner
-------------------
consistent with the practices employed by ClientLink prior to the Effective
Date, any information needed by CompuCom to perform the Services. If the
failure to provide such information renders the performance of any requested
Service impossible or unreasonably difficult, CompuCom may upon reasonable
notice to ClientLink refuse to provide such Service.
2
<PAGE>
(d) Further Assurances. During the term of this Agreement, each of
------------------
CompuCom and ClientLink shall use their best efforts to: (i) preserve their
respective and mutual reputations and market positions in strategic markets;
(ii) promote their mutual businesses and cause the retention and expansion of
their clients; and (iii) refrain from taking any action which may jeopardize any
such client relationship without the prior consent of the other party.
7. Limitations on Liability and Indemnification.
--------------------------------------------
(a) Limitations on Liability. Subject to the provisions of
------------------------
Section 7(b), neither party shall have any liability under this Agreement
(including any liability for its own negligence) for damages, losses or expenses
suffered by the other party as a result of the performance or non-performance of
such party's obligations under this Agreement, unless such damages, losses or
expenses are caused by or arise out of the willful misconduct or gross
negligence of such party or a breach by such party of any of the express
provisions of this Agreement. In no event shall either party have any liability
to the other party for indirect, incidental or consequential damages that such
other party or any third party may incur or experience on account of the
performance or non-performance of such party's obligations under this Agreement.
Notwithstanding the foregoing, each party shall use its best efforts to timely
cure any defect in or failure of performance and to otherwise correct or improve
the level of performance in order to render services substantively and
qualitatively equal to or better than those presently being rendered.
(b) Allocation of Tax Liability. With respect to CompuCom's
---------------------------
provision of the tax services listed on Exhibit A, or with respect to
adjustments in the amount or nature of ClientLink's tax liabilities or
CompuCom's consolidated tax liabilities relating to periods prior to the
Effective Date for which CompuCom has provided tax services to ClientLink, the
parties will have the following responsibilities: (i) ClientLink shall be
responsible for paying all amounts which constitute its tax liabilities or its
allocable portion of CompuCom's consolidated tax liabilities; (ii) ClientLink
shall pay to CompuCom, or CompuCom shall pay to ClientLink, as the case may be,
amounts which represent additional tax payments owed or refunds received in
connection with prior tax periods; and (iii) CompuCom shall indemnify, defend
and hold ClientLink and its directors, officers, employees, agents and
representatives from and against all claims, liabilities, damages, losses and
expenses (including reasonable attorney fees and expenses) relating to the tax
services provided to ClientLink under this Agreement, including the imposition
by any taxing authority of interest or penalties relating to ClientLink's
failure to properly pay all taxes when due, to the extent such liability is not
caused by ClientLink's failure to provide CompuCom with the information
necessary to provide such tax services in a timely manner.
(c) Indemnification. Subject to the limitations on liability set
---------------
forth in Section 7(a), each party shall indemnify, defend and hold harmless the
other party and its directors, officers, employees, agents and representatives
from and against all claims, liabilities, damages, losses and expenses
(including reasonable attorney fees and expenses) caused by or arising out of
the willful misconduct or gross negligence of such indemnifying party in the
performance or non-performance of its obligations under this Agreement or the
breach by such indemnifying party of any of the express provisions of this
Agreement.
(d) The provisions of this Section shall survive any termination of
this Agreement.
3
<PAGE>
8. Term of Agreement. This Agreement shall become effective on the
-----------------
Effective Date and shall automatically terminate upon the earlier of December
31, 1999 or the sale by CompuCom of a sufficient number of ClientLink Shares
such that CompuCom no longer owns a majority of the outstanding ClientLink
Shares, unless earlier terminated by either party upon not less than 90 days'
prior written notice to the other party. Termination under this Section or
otherwise shall have no effect on the respective obligations of the parties
prior to the date of such termination or their respective obligations to make
any payment required to be made pursuant to the terms of this Agreement.
9. Confidentiality. Each party will hold in trust and maintain
---------------
confidential and, except as required by law, not disclose to others without the
prior written approval of the other party, any information received by it from
the other party or developed or otherwise obtained by it in connection with the
performance of its obligations under this Agreement (the "Information"). Within
ninety (90) days after the date of termination of this Agreement, each party
will return to the other party or destroy all documents, data and other
materials of relating to the businesses of the other party obtained in
connection with this Agreement; provided that the parties may retain any
Information to the extent reasonably needed to comply with applicable tax,
accounting or financial reporting requirements or to resolve any legal issues
outstanding at the time of termination. The provisions of this Section shall
survive any termination of this Agreement.
10. Miscellaneous.
-------------
(a) Successors and Assigns. This Agreement shall be binding upon,
----------------------
and shall inure to the benefit of, the parties and their respective successors
and permitted assigns. This Agreement may not be assigned by either party
without the prior written consent of the other party.
(b) No Third-Party Beneficiaries. Nothing expressed or implied in
----------------------------
this Agreement shall be construed to give any person or entity other than the
parties any legal or equitable rights under this Agreement.
(c) Entire Agreement. This Agreement constitutes the entire
----------------
agreement among the parties with respect to the subject matter hereof.
(d) Amendment. This Agreement may not be amended except by an
---------
instrument signed by the parties.
(e) Waivers. Either party may (i) extend the time for the
-------
performance of any of the obligations or other act of the other party or
(ii) waive compliance with any of the agreements contained in this Agreement. No
waiver of any term shall be construed as a waiver of the same term, or a waiver
of any other term, of this Agreement. The failure of any party to assert any of
its rights under this Agreement will not constitute a waiver of any such rights.
(f) Severability. If any provision of this Agreement is invalid,
------------
illegal or incapable of being enforced by any rule of law or public policy, such
provision shall be deemed severable and all other provisions of this Agreement
shall nevertheless remain in full force and effect.
4
<PAGE>
(g) Headings. Section headings in this Agreement are included for
--------
reference only and shall not constitute a part of this Agreement for any other
purpose.
(h) Notices. All notices given in connection with this Agreement
-------
shall be in writing. Service of such notices shall be deemed complete: (i) if
hand delivered, on the date of delivery; (ii) if by mail, on the fourth business
day following the day of deposit in the United States mail, by certified or
registered mail, first-class postage prepaid; (iii) if sent by FedEx or
equivalent courier service, on the next business day; or (iv) if by telecopier,
upon receipt by the sender of confirmation of successful transmission. Such
notices shall be addressed to the parties at their principal places of business.
(i) Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the law of the State of Texas without giving
effect to the principles of conflict of laws thereof.
(j) Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be an original, but all of which together shall constitute
but one and the same instrument.
5
<PAGE>
IN WITNESS WHEREOF, CompuCom and ClientLink have caused this Administrative
Services Agreement to be executed on the date first above written.
CompuCom Systems, Inc.
By: /s/ M. Lazane Smith
--------------------------------------------
Name: M. Lazane Smith
-----------------------------------------
Title: SR VP Finance, CFO
-----------------------------------------
ClientLink, Inc.
By: /s/ James H. Hamilton
--------------------------------------------
Name: James H. Hamilton
------------------------------------------
Title: President and CEO
-----------------------------------------
6
<PAGE>
EXHIBIT A
Administrative Services
1. PAYROLL:
a. Use of common paymaster
2. TREASURY FUNCTIONS:
a. Daily reports
b. Account reconciliation
c. Cash management as needed
d. Preparation of financial reports
3. INSURANCE AND RISK MANAGEMENT:
a. Provision of insurance coverage through group policies issued under
CompuCom insurance policies
b. Administration of risk management matters
c. Insurance premiums shall be paid by ClientLink to CompuCom as billed,
consistent with the premiums currently being paid by ClientLink
4. TAX:
a. Preparation and filing of all tax returns
b. Assistance with state and local sales tax and property tax compliance
c. Assistance with financial accounting for taxes
d. Supervision of all federal, state and local tax audits, protests,
administrative proceedings and litigation
e. Qualification and design of all employee benefit plans
f. Preparation and submission of all tax ruling requests
g. Rendering and obtaining all tax opinions
h. Qualification and reporting of stock options
5. HUMAN RESOURCES:
a. Advice and assistance with respect to employee benefits, plan
administration and other employee matters
b. Preparation of offer letters, background checks, drug testing and
other employee processing matters
Employee Benefits Plans
1. Administration of ClientLink, Inc. 401(k) plan
2. Administration of ClientLink, Inc. health insurance plans
3. Administration of ClientLink, Inc. 1994 Stock Option Plan
4. Administration of ClientLink, Inc. 1997 Incentive Plan
<PAGE>
Fees
In exchange for the services provided under this Agreement, ClientLink will pay
to CompuCom an amount equal to $15,000 per month for the period commencing on
the Effective Date and ending on December 31, 1998 and an amount equal to $7,500
per month for the period commencing on January 1, 1999 and ending on
December 31, 1999. This amount shall be prorated for any partial months.
<PAGE>
EXHIBIT 10.5
INDEMNIFICATION AGREEMENT
(ClientLink & CompuCom)
This Indemnification Agreement (this "Agreement") is made and entered into
this 3rd day of December, 1997 by and between CompuCom Systems, Inc., a Delaware
corporation ("CompuCom"), and ClientLink, Inc., a Delaware corporation
("ClientLink").
BACKGROUND
A. CompuCom currently owns in excess of 80% of the outstanding common
stock of ClientLink.
B. ClientLink intends to effect an initial public offering of shares of
its common stock (the "Offering").
C. In connection with the Offering, ClientLink intends to file a
registration statement with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Registration Statement" and "1933 Act,"
respectively).
D. CompuCom and ClientLink desire to indemnify each other against certain
liabilities relating to, arising out of or resulting from their respective
businesses, operations and assets and the Registration Statement, on the terms
set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
-----------
have the following meanings:
(a) "ClientLink Employees" means all employees or former employees of
ClientLink other than any person who as of the Effective Date is an employee of
CompuCom.
(b) "ClientLink Liabilities" means all Liabilities relating to,
resulting from or arising out of the businesses or operations conducted or
formerly conducted or assets owned or formerly owned by ClientLink. "ClientLink
Liabilities" shall also include all Liabilities for any benefits due and payable
with respect to ClientLink Employees accruing from and after the Effective Date,
under any "employee benefit plan," as defined in Section 3(3) of ERISA,
maintained or formerly maintained by ClientLink or CompuCom in which any
ClientLink Employee has at any time participated, as well as any taxes,
penalties, interest or other charges imposed by any governmental agency and
caused by or resulting from any action or omission by ClientLink with respect to
the maintenance and administration of any such plan, whether by CompuCom or
ClientLink; provided, however, that (i) any such liability, including without
limitation, liability for taxes, penalties, interest or other charges imposed by
any governmental agency with respect to any such employee benefit shall be
limited to that portion of such liability or other charge which bears the same
relationship to the whole as the benefit liabilities under such plan
attributable to ClientLink Employees bears to all benefit liabilities under such
plan, (ii) "ClientLink Liabilities" shall include all taxes, penalties, interest
<PAGE>
and other charges imposed solely in relation to the participation of ClientLink
Employees and shall not include any taxes, penalties, interest or other charges
imposed solely in relation to the participation of CompuCom Employees; and (iii)
"ClientLink Liabilities" shall not include any taxes, penalties, interest and
other charges imposed as a result of any error or omission by CompuCom or
failure to take any action within CompuCom's exclusive control in connection
with the maintenance and administration of any plan.
(c) "ClientLink Securities Liabilities" means any Liability under the
1933 Act, the 1934 Act, or any other federal or state securities law or
regulation resulting from or arising out of the Offering, including without
limitation any such Liability arising out of or based upon (i) any untrue
statement or alleged untrue statement of a material fact contained in a
Registration Statement, or in any Prospectus, or (ii) the omission or alleged
omission to state in a Registration Statement or Prospectus a material fact
required to be stated therein or necessary to make the statements made therein
not misleading, but only to the extent that such Liability arises out of or is
based upon any such untrue statement or alleged untrue statement or any such
omission or alleged omission concerning the businesses and operations of
ClientLink, or relating to any ClientLink Employee or otherwise contained in
material furnished in writing by ClientLink expressly for use therein.
(d) "CompuCom Employees" means all employees or former employees of
CompuCom other than the ClientLink Employees and the Excluded Employees.
(e) "CompuCom Guarantee" means any guarantee, surety or performance
bond, letter of credit or other contractual arrangement in effect as of the
Effective Date pursuant to which CompuCom has guaranteed or secured or caused a
third party to guarantee or secure any liability or obligation of ClientLink.
(f) "CompuCom Liabilities" means all Liabilities relating to,
resulting from or arising out of the businesses or operations conducted by
CompuCom, other than ClientLink Liabilities. "CompuCom Liabilities" shall also
include all liabilities for any benefits due and payable with respect to
CompuCom Employees under any "employee benefit plan," as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
maintained by CompuCom in which any CompuCom Employee has at any time
participated, as well as any taxes, penalties, interest or other charges imposed
by any governmental agency with respect to the maintenance and administration of
any such plan; provided, however, that (i) any such liability for taxes,
penalties, interest or other charges posed by any governmental agency with
respect to any such employee benefit plan shall be limited to that portion of
the tax, penalty, interest or other charge which bears the same relationship to
the whole as the benefit liabilities under such plan attributable to CompuCom
Employees bears to all benefit liabilities under such plan, (ii) "CompuCom
Liabilities" shall include all taxes, penalties, interest and other charges
imposed solely in relation to the participation of CompuCom Employees and shall
not include any taxes, penalties, interest or other charges imposed solely in
relation to the participation of ClientLink Employees, and (iii) "CompuCom
Liabilities" shall not include any taxes, penalties, interest and other charges
imposed as a result of any error or omission by ClientLink or its failure to
take any action within ClientLink's exclusive control in connection with the
maintenance and administration of any plan.
2
<PAGE>
(g) "CompuCom Securities Liabilities" means any Liability under the
1933 Act, the Securities Exchange Act of 1934, as amended (the "1934 Act") or
any other federal or state securities law or regulation resulting from or
arising out of the Offering and arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in a
registration statement filed with the Securities and Exchange Commission in
connection with the Offering, or any amendment or supplement thereto (a
"Registration Statement"), or in any prospectus relating to the Offering or in
any amendment or supplement thereto (a "Prospectus"), or the omission or alleged
omission to state in a Registration Statement or Prospectus a material fact
required to be stated therein or necessary to make the statements made therein
not misleading, but only to the extent that such Liability arises out of or is
based upon any such untrue statement or alleged untrue statement or omission or
alleged omission concerning the business and operations of CompuCom or relating
to any CompuCom Employee or otherwise contained in material furnished in writing
by CompuCom expressly for use therein.
(h) "Effective Date" means the date on which the purchase and sale of
shares of common stock of ClientLink pursuant to the Offering first occurs.
(i) "Excluded Employees" means all persons who as of the Effective
Date are employees of both ClientLink and CompuCom.
(j) "Liabilities" means all liabilities and obligations, actual or
contingent, liquidated or unliquidated, accrued or unaccrued, known or unknown,
whenever and however arising, including all costs and expenses (including
reasonable attorney fees) relating thereto, and including without limitation
liabilities and obligations arising in connection with any actual or threatened
claim, action, suit or proceeding by or before any court or regulatory or
administrative agency or commission or any arbitration panel.
(k) "Registration Rights Agreement" means the Registration Rights
Agreement between CompuCom and ClientLink dated as of the date hereof.
(l) "Taxes" means any and all taxes (including interest, penalties and
additions to tax), fees and charges (including sales, use, excise, value added,
personal property and other taxes) imposed by any federal, state or local or
government tax authority in the United States of America or by any foreign
government or taxing authority.
(m) "Underwriting Agreement" means the Underwriting Agreement by and
among The Robinson-Humphrey Company, LLC, and Lehman Brothers Inc. (as
representatives of the several underwriters), CompuCom and ClientLink to be
executed in connection with the Offering.
2. Indemnification by ClientLink. ClientLink shall indemnify, defend and
-----------------------------
hold harmless CompuCom and its past, present and future directors, officers,
employees, agents and representatives from and against any and all losses,
claims, damages, liabilities, demands, suits and actions, including reasonable
attorney fees (collectively, "Indemnifiable Losses"), relating to, resulting
from or arising out of (a) any ClientLink Liabilities, (b) any ClientLink
Securities Liabilities, or (c) any misrepresentation or material breach by
ClientLink of any covenant of ClientLink or any failure by ClientLink to satisfy
any condition required to be satisfied by ClientLink, contained in this
Agreement
3
<PAGE>
or any other agreement executed by ClientLink in connection with the
Offering, except to the extent that such misrepresentation, breach or failure
was caused by or resulted from any statement, act or omission within the
exclusive knowledge or control of CompuCom.
3. Indemnification by CompuCom. CompuCom shall indemnify, defend and
---------------------------
hold harmless ClientLink and its past, present and future directors, officers,
employees, agents and representatives (regardless in each case of whether any
such person serves in one or more similar capacities for CompuCom and
ClientLink) from and against any and all Indemnifiable Losses relating to,
resulting from or arising out of (a) any CompuCom Liabilities, (b) any CompuCom
Securities Liabilities, or (c) any misrepresentation or material breach by
CompuCom of any covenant of CompuCom, or any failure of CompuCom to satisfy and
condition required to be satisfied by CompuCom, contained in this Agreement or
any other agreement executed by CompuCom in connection with the Offering, except
to the extent that such misrepresentation, breach or failure was caused by or
resulted from any statement, act or omission within the exclusive knowledge or
control of ClientLink.
4. Guarantees. ClientLink shall indemnify, defend and hold harmless
----------
CompuCom, and its directors, officers, employees, agents and representatives,
from and against any Indemnifiable Losses relating to, resulting from or arising
out of any CompuCom Guarantee. CompuCom shall not terminate unilaterally or
withdraw any CompuCom Guarantee and shall abide by the terms of the CompuCom
Guarantees.
5. Third Party Claims.
------------------
(a) If any person entitled to indemnification under this Agreement (an
"Indemnitee") receives notice of the assertion of any claim or of the
commencement of any action or proceeding by any person that is not a party to
this Agreement or a subsidiary of any such party (a "Third Party Claim") against
such Indemnitee, the Indemnitee shall promptly provide written notice thereof
(including a description of the Third Party Claim and an estimate of any
Indemnifiable Losses, which estimate shall not be conclusive as to the final
amount of such Indemnifiable Losses) to the party required to provide
indemnification under this Agreement (the "Indemnifying Party") within ten (10)
days after the Indemnitee's receipt of notice of such Third Party Claim. Any
delay by the Indemnitee in providing such written notice shall not relieve the
Indemnifying Party of any liability for indemnification hereunder except to the
extent that the rights of the Indemnifying Party are materially prejudiced by
such delay.
(b) The Indemnifying Party shall have the right to participate in or,
by giving written notice to the Indemnitee, to assume the defense of any Third
Party Claim at such Indemnifying Party's expense and by such Indemnifying
Party's own counsel (which shall be reasonably satisfactory to the Indemnitee),
and the Indemnitee will cooperate in good faith in such defense. The
Indemnifying Party shall not be liable for any legal expenses incurred by the
Indemnitee after the Indemnitee has received notice of the Indemnifying Party's
intent to assume the defense of a Third Party Claim; provided, however, that if
the Indemnifying Party fails to take steps reasonably necessary to diligently
pursue the defense of such Third Party Claim within ten (10) days of receipt of
notice from the Indemnitee that such steps are not being taken, the Indemnitee
may assume its own defense and the Indemnifying Party shall be liable for the
reasonable costs thereof.
4
<PAGE>
(c) The Indemnifying Party may settle any Third Party Claim which it
has elected to defend so long as the written consent of the Indemnitee to such
settlement is first obtained (which consent shall not be unreasonably withheld).
The Indemnified Party shall not settle any Third Party Claim without the written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld).
(d) In the event that a Third Party Claim involves a proceeding as to
which both CompuCom and ClientLink may be Indemnifying Parties, the parties
agree to cooperate in good faith in a joint defense of such Third Party Claim.
6. Contribution. If the indemnification provided for in this Agreement
------------
with respect to ClientLink Securities Liabilities or CompuCom Securities
Liabilities is for any reason held by a court or other tribunal to be
unavailable on policy grounds or otherwise, CompuCom and ClientLink shall
contribute to any Indemnifiable Losses relating to, resulting from or arising
out of the ClientLink Securities Liabilities or the CompuCom Securities
Liabilities in such proportion as to reflect each party's relative fault in
connection with such Indemnifiable Losses. The relative fault of the parties
shall be determined by reference to, among other things, whether the conduct or
information giving rise to the Indemnifiable Losses is attributable to CompuCom
or ClientLink and each party's relative intent, access to information and
opportunity to prevent or correct the Indemnifiable Losses. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who is not guilty of
fraudulent misrepresentation.
7. Allocations Relating to Excluded Employees. Liabilities for any
------------------------------------------
benefits due and payable in respect of Excluded Employees under any "employee
benefit plan," as defined in Section 3(3) of ERISA, maintained or formerly
maintained by ClientLink or CompuCom in which any Excluded Employee has at any
time participated shall be allocated as between ClientLink and CompuCom as
follows: (a) to the extent such liabilities are directly attributable to periods
prior to the Effective Date, they shall be allocated entirely to CompuCom; (b)
to the extent such liabilities are directly attributable to periods on or after
the Effective Date and are directly attributable to an Excluded Employee's
service to ClientLink or CompuCom, they shall be allocated entirely to
ClientLink or CompuCom, respectively; and (c) in all other events, such
liabilities shall be allocated in a manner as nearly proportionate to the
services rendered by such Excluded Employee to ClientLink and CompuCom,
respectively, as may be practicable under the circumstances or as otherwise
mutually agreed by ClientLink and CompuCom. Liabilities allocated to ClientLink
pursuant to this Section shall be deemed to be ClientLink Liabilities for all
purposes of this Agreement, and liabilities allocated to CompuCom pursuant to
this Section shall be deemed to be CompuCom Liabilities for all purposes of this
Agreement.
8. Cooperation. So long as any books, records and files retained after
-----------
the Effective Date by CompuCom or ClientLink relating to the businesses,
operations or assets of the other party (including any books, records and files
retained by ClientLink relating to the conduct of its businesses or operations
or the ownership of its assets prior to the Effective Date) remain in existence
and available, such other party shall have the right upon prior written notice
to inspect and copy the same at any time during business hours for any proper
purpose, provided that such right will not extend to any books, records or files
the disclosure of which would result in a waiver of the attorney-client, work
product or other privileges which permit non-disclosure of otherwise relevant
material in
5
<PAGE>
litigation or other proceedings, or which are subject on the date hereof and at
the time inspection is requested to a non-disclosure agreement with a third
party and a waiver cannot reasonably be obtained. CompuCom and ClientLink agree
that they shall not destroy any such books, records or files without reasonable
notice to the other party or if such party receives within ten (10) days of such
notice any reasonable objection from the other party to such destruction. Except
in the case of dispute between the parties hereto, CompuCom and ClientLink shall
cooperate with one another in a timely manner in any administrative or judicial
proceeding involving any matter affecting the actual or potential liability of
either party. Such cooperation shall include, without limitation, making
available to the other party during normal business hours all books, records and
information, and officers and employees (without substantial disruption of
operations or employment) necessary or useful in connection with any inquiry,
audit, investigation or dispute, any litigation or any other matter requiring
any such books, records, information, officers or employees for any reasonable
business purpose. The party requesting or otherwise entitled to any books,
records, information, officers or employees pursuant to this Section shall bear
all reasonable out-of-pocket costs and expenses (except for salaries, employee
benefits and general overhead) incurred in connection with providing such books,
records, information, officers or employees.
9. Effectiveness. This Agreement shall become effective on the Effective
-------------
Date.
10. Successors and Assigns. This Agreement shall be binding upon the
----------------------
parties and their respective successors and permitted assigns and shall inure to
the benefit of the parties and their respective successors and permitted
assigns. This Agreement may not be assigned by either party.
11. No Third Party Beneficiaries. Except for the persons entitled to
----------------------------
indemnification pursuant to Section 2 or Section 3, each of whom is an intended
third party beneficiary hereunder, nothing expressed or implied in this
Agreement shall be construed to give any person or entity other than the parties
any legal or equitable rights.
12. Entire Agreement. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the subject matter hereof.
13. Amendment. This Agreement may not be amended except by an instrument
---------
signed by the parties.
14. Waivers. Either party may (i) extend the time for the performance of
-------
any of the obligations or other act of the other party, (ii) waive any
inaccuracies in the representations and warranties contained herein, or (iii)
waive compliance with any of the agreements contained herein. No waiver shall be
effective unless signed by the parties. No waiver of any term shall be
construed as a subsequent waiver of the same term, or a waiver of any other
term, of this Agreement. The failure of any party to assert any of its rights
hereunder will not constitute a waiver of any such rights.
15. Severability. If any provision of this Agreement is invalid, illegal
------------
or incapable of being enforced by any rule of law or public policy, such
provision shall be deemed severable and all other provisions of this Agreement
shall nevertheless remain in full force and effect.
6
<PAGE>
16. Headings. Section headings in this Agreement are included for
--------
convenience of reference only and shall not constitute a part of this Agreement
for any other purpose.
17. Notices. All notices given in connection with this Agreement shall be
-------
in writing and shall be delivered to the principal place of business of the
other party.
18. Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the law of the State of Texas, without giving effect to the
principles of conflict of laws of such State.
19. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be an original, but all of which together shall constitute but one
and the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Indemnification
Agreement as of the date first above written.
COMPUCOM SYSTEMS, INC.
By: /s/ M. Lazane Smith
---------------------------------------------
Name: M. Lazane Smith
-------------------------------------------
Title: Senior Vice President
and Chief Financial Officer
------------------------------------------
CLIENTLINK, INC.
By: /s/ James H. Hamilton
---------------------------------------------
Name: James H. Hamilton
-------------------------------------------
Title: President and CEO
------------------------------------------
8
<PAGE>
EXHIBIT 10.8
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made and entered into
as of the 4th day of December, 1997, by and between ClientLink, Inc., a Delaware
corporation (the "Company"), and _________________, a __________ resident
("Indemnitee").
WHEREAS, competent and experienced persons are reluctant to serve or to
continue to serve corporations as directors or in other capacities unless they
are provided with adequate protection through insurance or indemnification (or
both) against claims and actions against them arising out of their service to
and activities on behalf of those corporations;
WHEREAS, the current uncertainties relating to the availability of adequate
insurance for directors and officers have increased the difficulty for
corporations to attract and retain competent and experienced persons;
WHEREAS, the Board of Directors of the Company has determined that the
continuation of present trends in litigation will make it more difficult to
attract and retain competent and experienced persons, that this situation is
detrimental to the best interests of the stockholders of the Company and that
such corporation should act to assure its directors and officers that there will
be increased certainty of adequate protection in the future;
WHEREAS, the Certificate of Incorporation of the Company requires the
Company to indemnify its directors and officers to the fullest extent permitted
by law;
WHEREAS, it is reasonable, prudent, and necessary for the Company to
obligate itself contractually to indemnify its directors and officers to the
fullest extent permitted by applicable law in order to induce them to serve or
continue to serve such corporation;
WHEREAS, Indemnitee is willing to serve, continue to serve, and to take on
additional service for or on behalf of the Company on the condition that he be
indemnified to the fullest extent permitted by law; and
WHEREAS, concurrently with the execution of this Agreement, Indemnitee is
agreeing to serve or to continue to serve as a director or officer of the
Company.
NOW, THEREFORE, in consideration of the foregoing premises, Indemnitee's
agreement to serve or continue to serve as a director or officer of the Company,
and the covenants contained in this Agreement, the parties hereto hereby
covenant and agree as follows:
1. Certain Definitions:
-------------------
(a) Acquiring Person: shall mean any Person other than (i) the
----------------
Company, (ii) any of the Company's Subsidiaries, (iii) any employee benefit plan
of the Company or of a Subsidiary of the Company or of a corporation owned
directly or indirectly by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company, or (iv) any trustee
<PAGE>
or other fiduciary holding securities under an employee benefit plan of the
Company or of a Subsidiary of the Company or of a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
(b) Change in Control: shall be deemed to have occurred if:
-----------------
(i) any Acquiring Person, other than CompuCom Systems, Inc., is
or becomes the "beneficial owner" (as defined in Rule l3d-3 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act")), directly or indirectly,
of securities of the Company representing 20% or more of the combined voting
power of the then outstanding Voting Securities of the Company; or
(ii) members of the Incumbent Board cease for any reason to
constitute at least a majority of the Board of Directors of the Company; or
(iii) a public announcement is made of a tender or exchange offer
by any Acquiring Person for 50% or more of the outstanding Voting Securities of
the Company, and the Board of Directors of the Company approves or fails to
oppose that tender or exchange offer in its statements in Schedule 14D-9 under
the Exchange Act; or
(iv) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, partnership or other
entity (or, if no such approval is required, the consummation of such a merger
or consolidation of the Company), other than a merger or consolidation that
would result in the Voting Securities of the Company outstanding immediately
prior to the consummation thereof continuing to represent (either by remaining
outstanding or by being converted into Voting Securities of the surviving entity
or of a parent of the surviving entity) a majority of the combined voting power
of the Voting Securities of the surviving entity (or its parent) outstanding
immediately after that merger or consolidation; or
(v) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all the Company's assets (or, if no such
approval is required, the consummation of such a liquidation, sale, or
disposition in one transaction or series of related transactions) other than a
liquidation, sale, or disposition of all or substantially all the Company's
assets in one transaction or a series of related transactions to a corporation
owned directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company.
(c) Claim: any threatened, pending, or completed action, suit, or
-----
proceeding (including, without limitation, securities laws actions, suits, and
proceedings), or any inquiry or investigation (including discovery), whether
conducted by the Company or any other party, that Indemnitee in good faith
believes might lead to the institution of any action, suit, or proceeding,
whether civil, criminal, administrative, investigative, or other.
(d) Company: ClientLink, Inc.
-------
2
<PAGE>
(e) Expenses: all costs, expenses (including attorneys' and expert
--------
witnesses' fees), and obligations paid or incurred in connection with
investigating, defending (including affirmative defenses and counterclaims),
being a witness in, or participating in (including on appeal), or preparing to
defend, be a witness in, or participate in, any Claim relating to any
Indemnifiable Event.
(f) Incumbent Board: individuals who, as of December 4, 1997,
---------------
constitute the Board of Directors of the Company and any other individual who
becomes a director of the Company after that date and whose election or
appointment by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board.
(g) Indemnifiable Event: any event or occurrence related to the fact
-------------------
that Indemnitee is or was a director, officer, employee, agent, or fiduciary of
the Company, or is or was serving at the request of the Company as a director,
officer, employee, trustee, agent, or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust, or other enterprise,
or by reason of anything done or not done by Indemnitee in any such capacity.
For purposes of this Agreement, the Company agrees that Indemnitee's service on
behalf of or with respect to any Subsidiary of the Company shall be deemed to be
at the request of the Company.
(h) Person: any person or entity of any nature whatsoever,
------
specifically including an individual, a firm, a company, a corporation, a
partnership, a limited liability company, a trust, or other entity. A Person,
together with that Person's Affiliates and Associates (as those terms are
defined in Rule 12b-2 under the Exchange Act), and any Persons acting as a
partnership, limited partnership, joint venture, association, syndicate, or
other group (whether or not formally organized), or otherwise acting jointly or
in concert or in a coordinated or consciously parallel manner (whether or not
pursuant to any express agreement), for the purpose of acquiring, holding,
voting, or disposing of securities of the Company with such Person, shall be
deemed a single "Person."
(i) Potential Change in Control: shall be deemed to have occurred if
---------------------------
(i) the Company enters into an agreement, the consummation of which would result
in the occurrence of a Change in Control; (ii) any Person (including the
Company) publicly announces an intention to take or to consider taking actions
that, if consummated, would constitute a Change in Control; (iii) any Acquiring
Person (other than CompuCom Systems, Inc.) who is or becomes the beneficial
owner, directly or indirectly, of securities of the Company representing 10% or
more of the combined voting power of the then outstanding Voting Securities of
the Company increases its beneficial ownership of such securities by 5% or more
over the percentage so owned by that Person on the date of this Agreement; or
(iv) the Board of Directors of the Company adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control has
occurred.
(j) Reviewing Party: any appropriate person or body consisting of a
---------------
member or members of the Company's Board of Directors or any other person or
body appointed by the Board (including Special Counsel referred to in Section 3)
who is not a party to the particular Claim for which Indemnitee is seeking
indemnification.
(k) Special Counsel: special, independent counsel selected by
---------------
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld), and who has not
3
<PAGE>
otherwise performed services for the Company or for Indemnitee within the last
three years (other than as Special Counsel under this Agreement or similar
agreements).
(l) Subsidiary: with respect to any Person, any corporation or other
----------
entity of which a majority of the voting power of the voting equity securities
or equity interest is owned, directly or indirectly, by that Person.
(m) Voting Securities: any securities that vote generally in the
-----------------
election of directors, in the admission of general partners, or in the selection
of any other similar governing body.
2. Basic Indemnification and Expense Reimbursement Arrangement.
------------------------------------------------------------
(a) If Indemnitee was, is, or becomes a party to or witness or other
participant in, or is threatened to be made a party to or witness or other
participant in, a Claim by reason of (or arising in part out of) an
Indemnifiable Event, the Company shall indemnify Indemnitee to the fullest
extent permitted by law as soon as practicable but in any event no later than 30
days after written demand is presented to the Company, against any and all
Expenses, judgments, fines, penalties, and amounts paid in settlement (including
all interest, assessments, and other charges paid or payable in connection with
or in respect of such Expenses, judgments, fines, penalties, or amounts paid in
settlement) of or with respect to that Claim. Notwithstanding the foregoing,
the obligations of the Company under Section 2(a) shall be subject to the
condition that the Reviewing Party shall not have determined (in a written
opinion, in any case in which Special Counsel referred to in Section 3 hereof is
involved) that Indemnitee would not be permitted to be indemnified under
applicable law. Nothing contained in this Agreement shall require any
determination under this Section 2(a) to be made by the Reviewing Party prior to
the disposition or conclusion of the Claim against the Indemnitee; provided,
however, that Expense Advances shall continue to be made by the Company pursuant
to and to the extent required by the provisions of Section 2(b).
(b) If so requested by Indemnitee, the Company shall pay any and all
Expenses incurred by Indemnitee (or, if applicable, reimburse Indemnitee for any
and all Expenses incurred by Indemnitee and previously paid by Indemnitee)
within two business days after such request (an "Expense Advance"). The Company
shall be obligated to make or pay an Expense Advance in advance of the final
disposition or conclusion of any Claim. In connection with any request for an
Expense Advance, if requested by the Company, Indemnitee or Indemnitee's counsel
shall submit an affidavit stating that the Expenses incurred were reasonable.
Any dispute as to the reasonableness of any Expense shall not delay an Expense
Advance by the Company, and the Company agrees that any such dispute shall be
resolved only upon the disposition or conclusion of the underlying Claim against
the Indemnitee. If, when, and to the extent that the Reviewing Party determines
that Indemnitee would not be permitted to be indemnified with respect to a Claim
under applicable law, the Company shall be entitled to be reimbursed by
Indemnitee and Indemnitee hereby agrees to reimburse the Company without
interest (which agreement shall be an unsecured obligation of Indemnitee) for
all related Expense Advances theretofore made or paid by the Company; provided,
however, that if Indemnitee has commenced legal proceedings in a court of
competent jurisdiction to secure a determination that Indemnitee should be
indemnified under applicable law, any determination made by the Reviewing Party
that Indemnitee would not be permitted to be
4
<PAGE>
indemnified under applicable law shall not be binding and Indemnitee shall not
be required to reimburse the Company for any Expense Advance, and the Company
shall be obligated to continue to make Expense Advances, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or lapsed). If there has not been a Change in
Control, the Reviewing Party shall be selected by the Board of Directors of the
Company. If there has been a Change in Control, the Reviewing Party shall be
advised by or shall be Special Counsel referred to in Section 3 hereof, if and
as Indemnitee so requests. If there has been no determination by the Reviewing
Party or if the Reviewing Party determines that Indemnitee substantively would
not be permitted to be indemnified in whole or in part under applicable law,
Indemnitee shall have the right to commence litigation in any court in the State
of Texas having subject matter jurisdiction thereof and in which venue is proper
seeking an initial determination by the court or challenging any such
determination by the Reviewing Party or any aspect thereof, and the Company
hereby consents to service of process and to appear in any such proceeding. Any
determination by the Reviewing Party otherwise shall be conclusive and binding
on the Company and Indemnitee.
3. Change in Control. The Company agrees that, if there is a Change in
-----------------
Control and if Indemnitee requests in writing that Special Counsel advise the
Reviewing Party or be the Reviewing Party, then the Company shall not deny any
indemnification payments (and Expense Advances shall continue to be paid by the
Company pursuant to Section 2(b)) that Indemnitee requests or demands under this
Agreement or any other agreement or law now or hereafter in effect relating to
Claims for Indemnifiable Events. The Company further agrees not to request or
seek reimbursement from Indemnitee of any related Expense Advances unless, with
respect to a denied indemnification payment, Special Counsel has rendered its
written opinion to the Company and Indemnitee that the Company would not be
permitted under applicable law to pay Indemnitee such indemnification payment.
The Company agrees to pay the reasonable fees of Special Counsel referred to in
this Section 3 and to indemnify fully Special Counsel against any and all
expenses (including attorneys' fees), claims, liabilities, and damages arising
out of or relating to this Agreement or Special Counsel's engagement pursuant
hereto.
4. Establishment of Trust. In the event of a Potential Change in
----------------------
Control, the Company shall, upon written request by Indemnitee, create a trust
for the benefit of Indemnitee (the "Trust") and from time to time upon written
request of Indemnitee the Company shall fund the Trust in an amount sufficient
to satisfy any and all Expenses reasonably anticipated at the time of each such
request to be incurred in connection with investigating, preparing for, and
defending any Claim relating to an Indemnifiable Event, and any and all
judgments, fines, penalties, and settlement amounts of any and all Claims
relating to an Indemnifiable Event from time to time actually paid or claimed,
reasonably anticipated, or proposed to be paid. The amount or amounts to be
deposited in the Trust pursuant to the foregoing funding obligation shall be
determined by the Reviewing Party, in any situation in which Special Counsel
referred to in Section 3 is involved. The terms of the Trust shall provide
that, upon a Change in Control, (i) the Trust shall not be revoked or the
principal thereof invaded, without the written consent of Indemnitee; (ii) the
trustee of the Trust shall advance, within two business days of a request by
Indemnitee, any and all Expenses to Indemnitee (and Indemnitee hereby agrees to
reimburse the Trust under the circumstances in which Indemnitee would be
required to reimburse the Company for Expense Advances under Section 2(b) of
this Agreement); (iii) the Trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above; (iv) the trustee of the
Trust shall promptly pay to Indemnitee all amounts for which
5
<PAGE>
Indemnitee shall be entitled to indemnification pursuant to this Agreement or
otherwise; and (v) all unexpended funds in that Trust shall revert to the
Company upon a final determination by the Reviewing Party or a court of
competent jurisdiction, as the case may be, that Indemnitee has been fully
indemnified under the terms of this Agreement. The trustee of the Trust shall be
chosen by Indemnitee. Nothing in this Section 4 shall relieve the Company of any
of its obligations under this Agreement.
5. Indemnification for Additional Expenses. The Company shall indemnify
---------------------------------------
Indemnitee against any and all costs and expenses (including attorneys' and
expert witnesses' fees) and, if requested by Indemnitee, shall (within two
business days of that request) advance those costs and expenses to Indemnitee,
that are incurred by Indemnitee in connection with any claim asserted against or
action brought by Indemnitee for (i) indemnification or advance payment of
Expenses by the Company under this Agreement or any other agreement or provision
of the Company's Certificate of Incorporation or Bylaws now or hereafter in
effect relating to Claims for Indemnifiable Events or (ii) recovery under any
directors' and officers' liability insurance policies maintained by the Company,
regardless of whether Indemnitee ultimately is determined to be entitled to that
indemnification, advance expense payment, or insurance recovery, as the case may
be.
6. Partial Indemnity. If Indemnitee is entitled under any provision of
-----------------
this Agreement to indemnification by the Company for some or a portion of the
Expenses, judgments, fines, penalties, and amounts paid in settlement of a Claim
but not, however, for all of the total amount thereof, the Company shall
nevertheless indemnify Indemnitee for the portion thereof to which Indemnitee is
entitled. Moreover, notwithstanding any other provision of this Agreement, to
the extent that Indemnitee has been successful on the merits or otherwise in
defense of any or all Claims relating in whole or in part to an Indemnifiable
Event or in defense of any issue or matter therein, including dismissal without
prejudice, Indemnitee shall be indemnified against all Expenses incurred in
connection therewith.
7. Contribution.
------------
(a) Contribution Payment. To the extent the indemnification provided
--------------------
for under any provision of this Agreement is determined (in the manner
hereinabove provided) not to be permitted under applicable law, then if
Indemnitee was, is, or becomes a party to or witness or other participant in, or
is threatened to be made a party to or witness or other participant in, a Claim
by reason of (or arising in part out of) an Indemnifiable Event, the Company, in
lieu of indemnifying Indemnitee, shall contribute to the amount of any and all
Expenses, judgments, fines, or penalties assessed against or incurred or paid by
Indemnitee on account of that Claim and any and all amounts paid in settlement
of that Claim (including all interest, assessments, and other charges paid or
payable in connection with or in respect of such Expenses, judgments, fines,
penalties, or amounts paid in settlement) for which such indemnification is not
permitted ("Contribution Amounts"), in such proportion as is appropriate to
reflect the relative fault with respect to the Indemnifiable Event giving rise
to the Contribution Amounts of Indemnitee, on the one hand, and of the Company
and any and all other parties (including officers and directors of the Company
other than Indemnitee) who may be at fault with respect to such Indemnifiable
Event (collectively, including the Company, the "Third Parties") on the other
hand.
6
<PAGE>
(b) Relative Fault. The relative fault of the Third Parties and the
--------------
Indemnitee shall be determined (i) by reference to the relative fault of
Indemnitee as determined by the court or other governmental agency assessing the
Contribution Amount, or (ii) to the extent such court or other governmental
agency does not apportion relative fault, by the Reviewing Party (which shall
include Special Counsel) after giving effect to, among other things, the
relative intent, knowledge, access to information, and opportunity to prevent or
correct the applicable Indemnifiable Event and other relevant equitable
considerations of each party. The Company and Indemnitee agree that it would
not be just and equitable if contribution pursuant to this Section 7 were
determined by pro rata allocation or by any other method of allocation which
does take account of the equitable considerations referred to in this Section
7(b).
8. Burden of Proof. In connection with any determination by the
---------------
Reviewing Party or otherwise as to whether Indemnitee is entitled to be
indemnified under any provision of this Agreement or to receive contribution
pursuant to Section 7 of this Agreement, the burden of proof shall be on the
Company to establish that Indemnitee is not so entitled.
9. No Presumption. For purposes of this Agreement, the termination of
--------------
any claim, action, suit, or proceeding, by judgment, order, settlement (whether
with or without court approval), or conviction, or upon a plea of nolo
contendere, or its equivalent, shall not create a presumption that Indemnitee
did not meet any particular standard of conduct or have any particular belief or
that a court has determined that indemnification is not permitted by applicable
law.
10. Non-exclusivity. The rights of Indemnitee hereunder shall be in
---------------
addition to any other rights Indemnitee may have under the Company's Certificate
of Incorporation or Bylaws, the Delaware General Corporation Law or otherwise.
To the extent that a change in the Delaware General Corporation Law (whether by
statute or judicial decision) permits greater indemnification by agreement than
would be afforded currently under the Company's Certificate of Incorporation or
Bylaws and this Agreement, it is the intent of the parties hereto that
Indemnitee shall enjoy by this Agreement the greater benefits so afforded by
that change.
11. Liability Insurance. Except as otherwise agreed to by the Company and
-------------------
Indemnitee in a written agreement, to the extent the Company maintains an
insurance policy or policies providing directors' and officers' liability
insurance, Indemnitee shall be covered by that policy or those policies, in
accordance with its or their terms, to the maximum extent of the coverage
available for any Company director or officer.
12. Period of Limitations. No legal action shall be brought and no cause
---------------------
of action shall be asserted by or on behalf of the Company or any affiliate of
the Company against Indemnitee or Indemnitee's spouse, heirs, executors, or
personal or legal representatives after the expiration of three years from the
date of accrual of that cause of action, and any claim or cause of action of the
Company or its affiliate shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within that three-year period;
provided, however, that, if any shorter period of limitations is otherwise
applicable to any such cause of action, the shorter period shall govern.
13. Amendments. No supplement, modification, or amendment of this
----------
Agreement shall be binding unless executed in writing by both of the parties
hereto. No waiver of any of the
7
<PAGE>
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall that waiver
constitute a continuing waiver.
14. Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of that payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure those rights, including the execution
of the documents necessary to enable the Company effectively to bring suit to
enforce those rights.
15. No Duplication of Payments. The Company shall not be liable under
--------------------------
this Agreement to make any payment in connection with any claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any insurance policy, provision of the Company's charter or Bylaws or
otherwise) of the amounts otherwise indemnifiable hereunder.
16. Binding Effect; Merger. This Agreement shall be binding upon and
----------------------
inure to the benefit of and be enforceable by the parties hereto and their
respective successors, assigns (including any direct or indirect successor by
purchase, merger, consolidation, or otherwise to all or substantially all of the
business or assets of the Company), spouses, heirs, and personal and legal
representatives. This Agreement shall continue in effect regardless of whether
Indemnitee continues to serve as an officer or director of the Company or
another enterprise at the Company's request.
17. Severability. If any provision of this Agreement is held to be
------------
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, that provision shall be fully severable; this Agreement shall
be construed and enforced as if that illegal, invalid, or unenforceable
provision had never comprised a part hereof; and the remaining provisions shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance from this Agreement.
Furthermore, in lieu of that illegal, invalid, or unenforceable provision, there
shall be added automatically as a part of this Agreement a provision as similar
in terms to the illegal, invalid, or unenforceable provision as may be possible
and be legal, valid, and enforceable.
18. Governing Law. This Agreement shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Texas applicable to
contracts made and to be performed in that state without giving effect to the
principles of conflicts of laws or choice of laws.
19. Construction. The headings contained in this Agreement are for
------------
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Pronouns shall be construed to include the
masculine, feminine, neuter, singular and plural as the contest requires.
20. Notices. Whenever this Agreement requires or permits notice to be
-------
given by one party to the other, such notice must be in writing to be effective
and shall be deemed delivered and received by the party to whom it is sent upon
actual receipt (by any means) of such notice. Receipt of a notice by any officer
of the Company shall be deemed receipt of such notice by the Company.
8
<PAGE>
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but in making proof
hereof it shall not be necessary to produce or account for more than one such
counterpart.
EXECUTED as of the date first written above.
CLIENTLINK, INC.,
a Delaware corporation
By:
-----------------------------------
James H. Hamilton, President
INDEMNITEE:
--------------------------------------
-----------------------
9
<PAGE>
Exhibit 10.9
ATLANTA
OFFICE LEASE AGREEMENT
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page(s)
-------
<S> <C>
BASIC LEASE INFORMATION
Paragraph
1. PREMISES AND PROPERTY..................................................3
2. USE....................................................................3
3. TERM AND POSSESSION....................................................3
4. RENT...................................................................4
5. COMPLIANCE WITH LAWS...................................................5
6. ALTERATIONS............................................................5
7. REPAIR.................................................................6
8. LIENS..................................................................6
9. ASSIGNMENT AND SUBLETTING..............................................6
10. INSURANCE AND INDEMNIFICATION..........................................8
11. WAIVER OF SUBROGATION..................................................9
12. SERVICES AND UTILITIES.................................................9
13. ESTOPPEL CERTIFICATE..................................................11
14. HOLDING OVER..........................................................11
15. SUBORDINATION.........................................................12
16. RULES AND REGULATIONS.................................................12
17. ENTRY BY LANDLORD.....................................................12
18. INSOLVENCY OR BANKRUPTCY..............................................13
19. DEFAULT...............................................................13
20. DAMAGE BY FIRE, ETC...................................................15
21. CONDEMNATION..........................................................17
22. SALE BY LANDLORD......................................................17
23. RIGHT OF LANDLORD TO PERFORM..........................................17
24. SURRENDER OF PREMISES.................................................18
25. WAIVER................................................................18
26. NOTICES...............................................................18
27. RENTAL ADJUSTMENT.....................................................18
28. CERTAIN RIGHTS RESERVED TO THE LANDLORD...............................21
29. ABANDONMENT...........................................................21
30. SUCCESSORS AND ASSIGNS................................................21
31. ATTORNEY'S FEES.......................................................22
32. SECURITY DEPOSIT......................................................22
33. TENANT AUTHORITY......................................................22
34. MORTGAGEE AND GROUND LESSOR APPROVALS.................................22
35. MISCELLANEOUS.........................................................22
36. QUIET ENJOYMENT.......................................................23
37. LANDLORD'S LIABILITY..................................................23
38. NO ESTATE.............................................................24
39. SUBSTITUTION OF PREMISES..............................................24
40. LEASE EFFECTIVE DATE..................................................24
</TABLE>
<PAGE>
<TABLE>
<S> <C>
41. HAZARDOUS MATERIALS...................................................24
42. SCHEDULED EXPANSION...................................................24
43. NON-DISTURBANCE.......................................................25
44. GUARANTY..............................................................25
45. RENEWAL OPTIONS.......................................................25
47. MICROWAVE ANTENNA.....................................................25
48. SIGNAGE...............................................................25
49. BROKER'S FEES.........................................................26
</TABLE>
EXHIBIT "A" - RULES AND REGULATIONS
EXHIBIT "B" - TYPICAL LEVEL FLOOR PLAN
EXHIBIT "C" - OFFICE LEASE IMPROVEMENT AGREEMENT
EXHIBIT "C-1" - SCHEDULE FOR EXHIBIT "C"
EXHIBIT "D" - TENANT LEASE ESTOPPEL CERTIFICATE
EXHIBIT "E" - GENERAL CLEANING SPECIFICATIONS
EXHIBIT "F" - LEASE GUARANTY
EXHIBIT "G" - LEGAL DESCRIPTION OF PROPERTY
EXHIBIT "H" - SCHEDULED EXPANSION SPACE
2
<PAGE>
BASIC LEASE INFORMATION
<TABLE>
<S> <C> <C>
LEASE DATE: _________ day of ____________, 19__
LANDLORD: CK WINDWARD #1, LLC, a North Carolina limited liability
company
ADDRESS OF 300 Galleria Parkway, Suite 600
LANDLORD: Atlanta, Georgia 30339
TENANT: ClientLink, Incorporated, a Delaware corporation
ADDRESS OF 3025 Windward Plaza
TENANT: Suite 200
Alpharetta, GA 30202
CONTACT: Office Manager
TELEPHONE:
-----------------------------
PREMISES: On the second floor, suite 200 of the Windward Fairways
I office building as outlined in red on Exhibit "B"
hereto. The approximate rentable area of the Premises
for purposes of this Lease is 18,691 square feet.
The approximate percentage of the Building occupied by
Tenant based on the above-referenced calculations
equals 13.99%. Such percentage shall change in the
event Tenant's premises increases or decreases in size.
The rentable area of the Premises is the product of the
usable area of the premises as reasonably determined by
Landlord's architect using BOMA standards (ANSI Z65 1-
1980, July 31, 1980) multiplied by a factor of 1.095.
Tenant shall have the right to conduct field
measurements of the Premises prior to commencement of
tenant improvements to verify the rentable area.
Commencement of Tenant improvements shall establish
conclusively that the Premises contains the square
footage indicated by this lease. Any dispute between
Landlord and Tenant as to the BOMA field measurement of
the Premises shall be resolved by an independent
architecture firm mutually selected by Landlord and
Tenant. Landlord shall not be responsible for any
delays in the substantial completion of the Premises
due to dispute by Tenant over such field measurement.
Paragraph 1 BUILDING: The approximate rentable area of the Building is
133,540 square feet.
PROPERTY: The land on which the Building is to be erected,
per the legal description of the Property attached
hereto as Exhibit "G".
Paragraph 2 USE: General office purposes
</TABLE>
1
<PAGE>
<TABLE>
<S> <C> <C>
Paragraph 3 LEASE TERM: Sixty (60) months commencing on the Commencement
Date as specified in Paragraph 3(b) herein.
Paragraph 4 RENT: Thirty-Two Thousand Three Hundred Twenty Dollars
($32,320) per month. Said monthly rental consists
of Net Rent and the Expense Stop Rent. The Net
Rent is $14.75 per rentable square foot per year
or Twenty-Two Thousand Nine Hundred Seventy-Four
Dollars ($22,974) per month. The Expense Stop Rent
is $6.00 per rentable square foot per year or Nine
Thousand Three Hundred Forty-Six Dollars ($9,346)
per month. The Net Rent and Expense Stop Rent
shall be adjusted in accordance with Paragraph 27
of the Lease.
Paragraph 32 SECURITY N/A Dollars ($ )
DEPOSIT: ------------------------ ------------
The foregoing Basic Lease Information is hereby
incorporated into and made a part of this Lease.
Each reference in this Lease to any of the Basic
Lease Information shall mean the respective
information hereinabove set forth and shall be
construed to incorporate all of the terms provided
under the particular Lease paragraph pertaining to
such information. In the event of any conflict
between any Basic Lease Information and the Lease,
the latter shall control.
</TABLE>
2
<PAGE>
LEASE
THIS LEASE made as of this ___ day of _________, 19___, between CK WINDWARD #1,
LLC, a North Carolina limited liability company, hereinafter called "Landlord"),
and ClientLink, Incorporated, a Delaware corporation (hereinafter called
"Tenant").
W I T N E S S E T H:
1. PREMISES AND PROPERTY
Landlord hereby demises and leases to Tenant and Tenant hereby accepts and
leases from Landlord those premises (hereinafter called "Premises") outlined in
red on Exhibit "B" attached hereto, made a part hereof, and specific in the
Basic Lease Information, being a portion of a multi-story office building (the
"Building") constructed or being constructed on a parcel of land (the
"Property") located as described in the Basic Lease Information.
2. USE
Tenant shall use and occupy the Premises for the purpose specified in the
Basic Lease Information and for no other use or purpose without the prior
written consent of Landlord. Tenant shall not do or permit anything to be done
in or about the Premises which will in any way obstruct or interfere with the
rights of other tenants or occupants of the Building or injure or annoy them,
nor use or allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose or for any business, use or purpose deemed to be
disreputable or inconsistent with the operation of a first-class office
building, nor shall Tenant cause, maintain or permit any nuisance in, on, or
about the Premises. Tenant shall not commit or suffer the commission of any
waste in, on, or about the Premises.
3. TERM AND POSSESSION
(a) The term of this Lease shall be for the period specified in the Basic
Lease Information (or until sooner terminated as herein provided) beginning on
the "Commencement Date" as hereinafter defined, except that if the Commencement
Date is other than the first day of a calendar month, the term hereof shall be
extended for the remainder of that calendar month at the end of the term unless
otherwise specified in the Basic Lease Information.
(b) The Commencement Date shall be the date, if any, specified in the
Basic Lease Information, or, if no such date is specified, the earlier of (A)
the date upon which the Premises have been substantially completed as defined in
subparagraph 3(c) below in accordance with the plans and specifications of
Landlord (other than any work which cannot be completed on such date provided
such incompletion will not substantially interfere with Tenant's use of the
Premises), or (B) the date on which Tenant takes possession of, or commences the
operation of its business in, any or all of the Premises; provided, however,
that if Landlord shall be delayed in such substantial completion as a result of:
(i) Tenant's failure to agree to plans, specifications, and cost estimates
before the dates referred to in the Office Lease Improvement Agreement attached
hereto as Exhibit "C" and made a part hereof; (ii) Tenant's request for
materials, finishes or installations other than Landlord's standard; (iii)
Tenant's changes in plans; or (iv) the performance or completion by a part
employed by Tenant, the date of substantial completion for purposes of
determining the Commencement Date and the payment of rent hereunder shall be
accelerated by the number of days of such delay, and provided further that if
Landlord cannot substantially complete the Premises as a result of any of events
(i) through (iv) above, Landlord may, at its election complete so much of
Landlord's work as may be practical under the circumstances and, by written
notice to Tenant, establish the Commencement Date as the date of such partial
completion, subject to any applicable accelerations due to delays resulting from
events (i) through (iv) above. Landlord shall notify Tenant in writing as soon
as Landlord deems the Premises to be substantially completed and ready for
occupancy as aforesaid. In the event that the Premises have not in fact been
substantially completed as aforesaid, Tenant shall notify Landlord in writing of
its objections within five (5) days after Tenant received the aforesaid notice
from Landlord. Landlord shall have reasonable time after delivery of such notice
in which to take such corrective action as Landlord deems necessary and shall
notify Tenant in writing as soon as it deems such corrective action, if any, has
been completed so that the Premises are substantially completed and ready for
occupancy. Landlord shall use reasonable
3
<PAGE>
best efforts to substantially complete Premises on or about December 20, 1996
(the "Scheduled Date") and Tenant shall have the right to enter the Premises or
any portion thereof prior to the Commencement Date for work to be performed by
Tenant under the provisions of the Office Lease Improvement Agreement. If the
Commencement Date occurs after December 31, 1996, Landlord shall, as liquidated
damages, abate Tenant's rental one day for each day the Commencement Date is
delayed. The parties hereto acknowledge that the amount of actual damages in
such event would be difficult, if not impossible, to determine and that the
foregoing amount of liquidated damages is a reasonable pre-estimate of the
amount of damages and not a penalty. The Scheduled Date shall be automatically
extended by the period of any delay in substantial completion of construction
caused by (a) Acts of God; casualty (except for any damage or destruction caused
by the neglect, fault, or omission of Landlord, its agents, servants, employees,
or contractors acting under authority of Landlord) damage, extraordinary delays
in obtaining necessary ______ material resulting from causes outside of
Landlord's control (in the event of labor shortages or delays, Landlord will use
diligent efforts to ______ qualified labor to perform professional tasks; in the
event of supply shortages or delays, Landlord will use diligent efforts to
obtain like materials or equivalent quality from alternative sources or
supplies), taking by eminent domain of any part of the Premises which
materially, substantially, and actually causes such delay, or changes in laws,
codes, or ordinances which materially affect Landlord's ability to adhere to the
contemplated construction schedule, or (b) delays caused by Tenant, including
delays in approving plans or changes thereto, change orders initiated by Tenant
which actually delay Landlord's required construction, and failure to coordinate
any work done by Tenant or Tenant's contractors with Landlord's contractors.
(c) Landlord agrees to complete the Building if now under construction and
shall perform the work required to be performed by Landlord under Exhibit "C"
with diligence, subject to events and delays due to causes beyond its reasonable
control. The Premises shall be deemed substantially completed and possession
delivered when Landlord has substantially completed the work to be constructed
or installed pursuant to the provisions of the Office Lease Improvement
Agreement, subject only to the completion of items on Landlord's punch list and
all latent defects, except for those latent defects which are not reported to
Landlord within a reasonable period of time after Tenant's discovery thereof
(and exclusive of the installation of all telephone and other communications
facilities and equipment and other finish work to be performed by parties other
than Landlord). In the event of any dispute as to when and whether the work
performed or required to be performed by Landlord has been substantially
completed, the certificate of an A.I.A. registered architect or a temporary or
final certificate of occupancy issued by the local governing authority shall be
conclusive evidence of such completion, effective on the date of the delivery of
a copy of any such certificate to Tenant.
(d) If substantial completion of the Premises or possession thereof by
Tenant is delayed because any tenant or other occupant thereof holds over, and
the Landlord is delayed, using good faith efforts to Landlord's discretion, in
acquiring possession of the Premises, Landlord shall not be deemed in default,
nor in any way liable to Tenant because of such delay, and Tenant agrees to
accept possession of the Premises at such time as Landlord is able to tender the
same, which date shall thenceforth be deemed the Commencement Date
notwithstanding any other provision hereof to the contrary.
(e) The taking of possession by Tenant shall be deemed conclusively to
establish that the Building, other improvements, and the Premises have been
completed in accordance with the plans and specifications and are in good and
satisfactory condition as of when possession was so taken (except for such items
as Landlord is permitted to complete at a later date, which items shall be
specified by Landlord to Tenant in writing). Upon the Commencement Date, Tenant
shall execute and deliver to Landlord a letter of acceptance of delivery of the
Premises, such ________ to be on Landlord's standard form therefor.
4. RENT
(a) Tenant shall pay to Landlord throughout the term of this Lease rent as
specified in the Basic Lease Information, payable monthly in advance on or
before the first day of each month during the term hereby demised in lawful
money of the United States, without demand, deduction or offset whatsoever, to
Landlord at the address specified in the Basic Lease Information or to such
other firm or to such other place as Landlord may from time to time designate in
writing. Said rental is subject to adjustment as provided in Paragraph 27
hereof. If this Lease commences on a day other than the first day
4
<PAGE>
of a calendar month or ends on a day other than the last day of a calendar
month, the monthly rental for the fractional month shall be appropriately
prorated.
(b) Tenant agrees that if rent or any other payment due hereunder from
Tenant to Landlord remains unpaid ten (10) days after said amount is due, the
amount of such unpaid rent or other payment shall be increased by a late charge
to be paid to Landlord by Tenant in an amount equal to five percent (5%) of the
amount of the delinquent rent or other payment). The amount of the late charge
to be paid to Landlord by Tenant for any month shall be computed on the
aggregate amount of delinquent rents and other payments, including all accrued
late charges then outstanding. Tenant agrees that such amount is a reasonable
estimate of the loss and expense to be suffered by Landlord as a result of such
late payment by Tenant and may be charged by Landlord to defray such loss and
expense. The provisions of this paragraph in no way relieve Tenant of the
obligation to pay rent or other payments on or before the date on which they are
due, nor do the terms of this paragraph in any way affect Landlord's remedies
pursuant to Paragraph 19 of this Lease in the event said rent or other payment
is unpaid after the date due.
5. COMPLIANCE WITH LAWS
Tenant shall not use the Premises or permit anything to be done in or about
the Premises which will in any way conflict with any law, statute, ordinance, or
governmental rule or regulation now in force or which may hereafter be enacted
or promulgated. Tenant shall not do or permit anything to be done on or about
the Premises or bring or keep anything therein which will in any way increase
the rate of any insurance upon the Building or any of its contents or cause a
cancellation of said insurance or otherwise affect said insurance in any manner,
and Tenant shall at its sole cost and expense promptly comply with all laws,
statutes, ordinances, and governmental rules, regulations, or requirements now
in force or which may hereafter be in force and with the requirements of any
board of fire underwriters or other similar body now or hereafter constituted
contributing to or affecting the condition, use, or occupancy of the Premises,
excluding structural changes not related to or affected by alterations or
improvements made by or for Tenant or Tenant's acts. The judgment of any court
of competent jurisdiction or the admission of Tenant in an action against
Tenant, whether Landlord be a party thereto or not, that Tenant has so violated
any such law, statute, ordinance, rule, regulation, or requirement, shall be
conclusive evidence of such violation as between Landlord and Tenant. Landlord
agrees to make, at its sole cost and expense, any structural changes within the
Premises that (i) are not related to or affected by alterations or improvements
made by or for Tenant or Tenant's acts, and (ii) are necessary to comply with
any laws, statutes, ordinances, and governmental rules, regulations, or
requirements in force on the Commencement Date.
6. ALTERATIONS
Tenant shall not make or suffer to be made any alterations, additions, or
improvements in, on, or to the Premises or any part thereof without the prior
consent of Landlord, which consent shall not be unreasonably withheld or
delayed. However, it shall not be unreasonable for Landlord to withhold its
consent under this paragraph 6 if the proposed alteration will adversely affect
the Building's mechanical, electrical, plumbing, or structural systems. Any
such alterations, additions, or improvements in, on, or to said Premises, except
for Tenant's movable furniture and equipment, shall immediately become
Landlord's property and, at the end of the term hereof, shall remain on the
Premises without compensation to Tenant. In the event Landlord consents to the
making of any such alteration, addition, or improvement by Tenant, the same
shall be made by Tenant, at Tenant's sole cost and expense, in accordance with
all applicable laws, ordinances, and regulations and all requirements of
Landlord's and Tenant's insurance policies, and in accordance with plans and
specifications approved by Landlord and any contractor or person selected by
Tenant to make the same and all subcontractors must first be approved in writing
by Landlord, or, at Landlord's option, the alteration, addition or improvement
shall be made by Landlord for Tenant's account and Tenant shall reimburse
Landlord for the reasonable market cost thereof within twenty (20) days after
receipt of a statement. Upon the expiration or sooner termination of the term
herein provided, and provided that Landlord has specified in its notice of
consent to Tenant that subject alteration, addition, or improvement made by or
for the account of Tenant shall be removed upon such expiration or termination.
Tenant shall, upon demand by Landlord, at Tenant's sole cost and expense,
forthwith and with all due diligence, remove any or all alterations, additions,
or improvements made by
5
<PAGE>
or for the account of Tenant and designated by Landlord to be removed, and
Tenant shall forthwith and with all due diligence, at its sole cost and expense,
repair and restore the Premises to their condition as of the Commencement Date
of this Lease.
7. REPAIR
(a) By taking possession of the Premises, Tenant accepts the Premises as
being in the condition in which Landlord is obligated to deliver ______ and
otherwise in good order, condition and repair. Tenant shall, at all times
during the term hereof at Tenant's sole cost and expense, keep the Premises and
every part thereof in good order, condition and repair, excepting ordinary wear
and tear, damage thereto by fire, earthquake, Act of God or the elements. Tenant
shall upon the expiration or sooner termination of the term hereof, unless
Landlord demands otherwise as in Paragraph 6 hereof provided, surrender to
Landlord the Premises and all repairs, changes, alterations, additions and
improvements thereto in the same condition as when received, or when first
installed, ordinary wear and tear, damage by fire, earthquake, Act of God or the
elements excepted. It is hereby understood and agreed that Landlord has no
obligation to alter, remodel, improve, repair, decorate, or paint the Premises
or any part thereof except as specified in Exhibit "C", and that no
representations respecting the condition of the Premises or the Building have
been made by Landlord to Tenant, except as specifically herein set forth.
(b) Tenant shall repair all damage to the Building, including common
areas, restrooms, hallways, elevators, or any other area, fixture, or equipment
of the Building caused by Tenant's installation or removal of its property or
resulting from any act or conduct of Tenant, its employees, contractors, agents,
licensees or invitees.
(c) All maintenance or repairs made by Tenant shall be made in accordance
with all applicable laws, ordinances and regulations, and all requirements of
Landlord's and Tenant's insurance policies and any contractor or person
selected by Tenant to make the same, and all subcontractors must first be
approved in writing by Landlord, or, at Landlord's option, the maintenance or
repair shall be made by Landlord for Tenant's account and Tenant shall reimburse
Landlord for the reasonable cost thereof within twenty (20) days after receipt
of a statement. In any event, all repairs shall be equal in quality and
workmanship to the original work.
8. LIENS
Tenant shall keep the Premises free from any liens arising out of any work
performed, material furnished, or obligations incurred by Tenant. In the event
that Tenant shall not, within ten (10) days, or so long as Tenant uses best
efforts to do so as soon as possible within thirty (30) days following the
imposition of any such lien, cause the same to be released of record by payment
or posting of a proper bond, Landlord shall have, in addition to all other
remedies provided herein and by law, the right, but not the obligation, to cause
the same to be released by such means as it shall deem proper, including payment
of the claim giving rise to such lien. All such sums paid by Landlord and all
expenses incurred by it in connection therewith shall be considered additional
rent and shall be payable to it by Tenant on demand and with interest at the
rate of eighteen percent (18%) per annum or the rate four percent (4%) higher
than the prime commercial lending rate from time to time of Wachovia Bank of
Georgia; whichever is more, provided however that if such rate exceeds the
maximum rate permitted by law, the maximum lawful rate shall apply; the interest
rate so determined is hereinafter called the "Agreed Interest Rate." Landlord
shall have the right at all times to post and keep posted the Premises any
notices permitted or required by law, or which Landlord shall deem proper for
the protection of Landlord, the Premises, the Building, and any other party
having an interest therein, from mechanics' and materialmen's liens, and Tenant
shall give to Landlord at least five business days prior written notice of
commencement of any construction on the Premises.
9. ASSIGNMENT AND SUBLETTING
(a) Tenant shall not sell, assign, encumber or otherwise transfer by
operation of law or otherwise this Lease or any interest herein, sublet the
Premises or any portion thereof, or suffer any other person to occupy or use the
Premises or any portion thereof, without the prior written consent of Landlord
as provided herein, nor shall Tenant permit any lien to be placed on the
Tenant's interest by operation of law. Tenant shall, by written notice, advise
Landlord of its desire from and after a stated date (which shall not be less
than thirty (30) days nor more than ninety (90) days after the date of Tenant's
6
<PAGE>
notice) to sublet the Premises or any portion for any part of the term hereof;
and in such event Landlord shall have the right, to be exercised by giving
written notice to Tenant within fifteen (15) business days after receipt of
Tenant's notice, to terminate this Lease as to the portion of the Premises
described in Tenant's notice and such notice shall, if given, terminate this
Lease with respect to the portion of the Premises therein described as of the
date stated in Tenant's notice. Said notice by Tenant shall state the name and
address of the proposed subtenant, and Tenant shall deliver to Landlord a true
and complete copy of the proposed sublease with said notice. If said notice
shall specify all of the Premises and Landlord shall give said termination
notice with respect thereto, this Lease shall terminate on the date stated in
Tenant's notice. If, however, this Lease shall terminate pursuant to the
foregoing with respect to less than all the Premises, the rent, as defined and
reserved hereinabove and as adjusted pursuant to Paragraph 27, shall be adjusted
on a pro rata basis to the number of square feet retained by Tenant, and this
Lease as so amended shall continue thereafter in full force and effect. If
Landlord, upon receiving said notice by Tenant with respect to any of the
Premises, shall not exercise its right to terminate, Landlord will not
unreasonably withhold its consent to Tenant's subletting the Premises specified
in said notice. Tenant shall, at Tenant's own cost and expense, discharge in
full any outstanding commission obligation on the part of Landlord with respect
to this Lease, and any commissions which may be due and owing as a result of any
proposed assignment or subletting, whether or not the Lease is terminated
pursuant hereto and rented by Landlord to the proposed subtenant or any other
tenant. Tenant shall pay to Landlord immediately upon receipt fifty percent
(50%) of all rent or other consideration received by Tenant from any such
assignee or subtenant, either initially or over the term of the assignment or
sublease which is in excess of the rental obligation required under the terms of
this Lease for the premises or portion for which consent is granted, unless such
assignee or subtenant is an "Affiliate" as defined below, or the Guarantor
_______ Lease as specified in the Guaranty attached hereto as Exhibit "F", in
which case Tenant shall have the right to retain one hundred percent (100%) of
all rent or other consideration received by Tenant.
(b) Any subletting hereunder by Tenant shall not result in Tenant being
released or discharged from any liability under this Lease. As a condition to
Landlord's prior written consent as provided for in this Paragraph 9, the
subtenant or subtenants shall agree in writing to comply with and be bound by
all of the terms, covenants, conditions, provisions and agreements of this
Lease, and Tenant shall deliver to Landlord promptly after execution, an
executed copy of each sublease and an agreement of said compliance by each
subtenant. If an event of default, as hereinafter defined, should occur while
the Premises or any part thereof are then sublet, Landlord, in addition to any
other remedies herein provided or provided by law, may at its option collect
directly from the subtenant all rents and other sums becoming due to Tenant
under the sublease and apply the rent against any sums due to Landlord by Tenant
hereunder, and Tenant hereby authorizes and directs any such subtenant to make
payments of rent directly to Landlord upon receipt of notice from Landlord. No
direct collection by Landlord from any subtenant will be construed to constitute
a novation or a release of Tenant from the further performance of its
obligations hereunder. Receipt by Landlord of rent from any assignee, subtenant
or occupant of the Premises will not be deemed a waiver of the covenants
contained in this Lease or a release of Tenant under the Lease. The receipt by
Landlord from any subtenant obligated to make payments of rent will be a full
and complete release, discharge and acquittance to the subtenant of its
obligations to Tenant to the extent of any such amount of rent so paid to
Landlord. Landlord is authorized and empowered, on behalf of Tenant, to endorse
the name of Tenant upon any check, draft or other instrument payable to Tenant
with respect to the Premises and evidencing payment of rent, and any part
thereof, and to receive and apply the proceeds therefrom in accordance with the
terms hereof.
(c) Landlord's consent to any sale, assignment, encumbrance, subletting,
occupation, lien or other transfer shall not release Tenant from any of Tenant's
obligations hereunder or be deemed to be consent to any subsequent occurrence.
Any sale, assignment, encumbrance, subletting, occupation, lien or other
transfer of this Lease which does not comply with the provisions of this
Paragraph 9 shall be void.
(d) Any transfer of this Lease by merger, consolidation, or liquidation or
any change in ownership of or power to vote the majority of outstanding voting
stock of Tenant or, if Tenant is a partnership, any withdrawal, replacement or
substitution of any partner or partners, either general or limited, shall
constitute an assignment, whether the result of a single or series of
transactions, and shall be subject to Landlord's approval under Paragraph 9(a).
7
<PAGE>
(e) Tenant may assign (or the parent company that wholly owns Tenant may
cause Tenant to assign) the Lease at any time, or sublease all or part of the
Premises, without receipt of Landlord's consent, to any entity which acquires
all or substantially all of Tenant, or which is acquired in whole or
substantially in whole by Tenant, or which entity controls or is controlled by,
directly or indirectly, Tenant, or which is a wholly owned subsidiary of the
parent company that wholly owns Tenant ("Affiliate"), so long as such
transaction was not entered into as of subterfuge to avoid obligations and
restrictions of the Lease and provided that the Affiliate assumes, in writing,
all of Tenant's obligations under this Lease, and provided further, that Tenant
notifies Landlord in writing at least thirty (30) days prior to such assignment
or subletting. Notwithstanding anything to the contrary herein, in no event
shall the Guarantor of this Lease be relieved of its liability for the
obligations of Tenant or an Affiliate of this Lease.
10. INSURANCE AND INDEMNIFICATION
(a) Landlord shall not be liable to Tenant and Tenant hereby waives all
claims against Landlord and any of its partners for any injury or damage to any
person or property in or about the Premises by or from any cause whatsoever,
excepting Landlord's gross negligence or willful acts, and, without limiting the
generality of the foregoing, whether caused by water leakage of any character
from the roof, walls, basement, or other portion of the Premises or the
Building, or caused by gas, fire, Acts of God, discharge of sprinklers,
excessive heat or cold, sewage, odors, noise, bursting or leakage of pipes or
plumbing fixtures, riot, strike, court order, governmental body or authority,
other tenants, or explosion of the Building or the complex of which it may be a
part or any part thereof. Tenant will hold Landlord harmless from damages due
to the interruption of Tenant's business caused by any damage whatsoever.
(b) Tenant shall hold Landlord harmless from and defend Landlord against
any and all claims or liability from any injury or damage to any person or
property whatsoever: (i) occurring in, on, or about the Premises or any part
thereof, (ii) occurring in, on, or about any facilities (including without
limitations, elevators, stairways, passageways or hallways), the use of which
Tenant may have in conjunction with other tenants of the Building, when such
injury or damage shall be caused in part or in whole by the act, neglect, fault
of, or omission of any duty with respect to the same by Tenant, its agents,
servants, employees, or any other person entering the Premises with express or
implied invitation of Tenant. Tenant further agrees to indemnify and save
harmless the Landlord against and from any and all claims by or on behalf of any
person, firm, or corporation, arising from the conduct or management of any work
or thing whatsoever done by the Tenant in or about the Premises, and will
further indemnify and save the Landlord harmless against and from any and all
claims arising from any breach or default on the part of the Tenant in the
performance of any covenant or agreement on the part of the Tenant to be
performed pursuant to the terms of this Lease, or arising from any act or
negligence of the Tenant, or any of its agents, contractors, servants, employees
or licensees, and from and against all costs, counsel fees, expenses and
liabilities incurred in connection with any such claim or action or proceeding
brought thereon. All property in the Building or Premises belonging to Tenant,
its agents, employees or invitees shall be there at the risk of Tenant. Tenant
agrees to indemnify and save harmless Landlord against claims for damage to,
theft, misappropriation, or loss of said property. Furthermore, in case any
action or proceeding be brought against Landlord by reason of any claims or
liability, Tenant agrees to defend such action or proceeding at Tenant's sole
expense by counsel reasonably satisfactory to Landlord. The provisions of this
Paragraph 10 shall survive the expiration or termination of this Lease with
respect to any claims or liability occurring prior to such expiration or
termination.
(c) Tenant agrees to purchase at its own expense and to keep in force
during the term of this Lease a policy or policies of worker's compensation and
comprehensive general liability insurance, including personal injury and
property damage, with contractual liability endorsement in the amount of Five
Hundred Thousand Dollars ($500,000.00) for property damage and One Million
Dollars ($1,000,000.00) per occurrence for personal injuries or deaths of
persons occurring in or about the Premises and a policy or policies of contents'
insurance to protect Tenant's personal property, and all improvements and
alterations provided by Landlord or Tenant for Tenant, and any other fixtures or
equipment controlled or in use by Tenant within the Premises, in the amount of
the replacement cost of said property, such amount being subject to Landlord's
approval. Said policies shall: (i) name Landlord as an additional named
insured and insure Landlord's
8
<PAGE>
contingent liability under this Lease (except for the worker's compensation
policy, which shall instead include a waiver of subrogation endorsement in favor
of Landlord), (ii) be issued by an insurance company which is acceptable to
Landlord and licensed to do business in the State of Georgia, and (iii) provide
that said insurance shall not be canceled unless thirty (30) days prior written
notice shall have been given to Landlord. Said policy or policies or certificate
thereof shall be delivered to Landlord by Tenant upon commencement of the term
of the Lease and upon each renewal of said insurance. The purchase of such
insurance shall not release Tenant of any legal obligations contained within
this Lease.
(d) Landlord agrees to purchase at its own expense and to keep in force
during the term of this Lease a policy or policies of comprehensive general
liability insurance, including bodily injury and property damage, with
contractual liability endorsement, in the amount of Five Hundred Thousand
Dollars ($500,000.00) for property damage and One Million Dollars
($1,000,000.00) per occurrence for bodily injuries or deaths of persons
occurring in or about the Property exclusive of the Premises and to insure the
Building and work to be done pursuant to the terms of Exhibit "C" against damage
with insurance, in such amounts commercially reasonable (but with respect to
property insurance covering the Building not less than 90% of the full
replacement cost thereof).
11. WAIVER OF SUBROGATION
Each of Landlord and Tenant hereby releases the other from any and all
liability or responsibility to the other or anyone claiming through or under
them by way of subrogation or otherwise for any loss or damage to property
caused by fire or any other perils insured in policies of insurance covering
such property, even if such loss or damage shall have been caused by the fault
of the other party, or anyone for whom such party may be responsible, including
any other tenants or occupants of the remainder of the Building; provided,
however, that this release shall be applicable and in force and effect only to
the extent that such release shall be lawful at that time and in any event only
with respect to loss or damage occurring during such times as the releaser's
policies shall contain a clause or endorsement to the effect that any such
release shall not adversely affect or impair said policies or prejudice the
right of the releaser to recover thereunder and then only to the extent of the
insurance proceeds payable under such policies. Each of Landlord and Tenant
agrees that it will request its insurance carriers to include in its policies
such a clause or endorsement. Failure to obtain such an endorsement shall not
release the waiver contained in this Lease.
12. SERVICES AND UTILITIES
(a) Landlord shall maintain the public and common areas of the Building,
including lobbies, stairs, elevators, corridors and restrooms, the windows in
the Building, the mechanical, plumbing and electrical equipment serving the
Building, and the structure itself, and the land, appurtenances, grounds,
surface parking lots, sidewalks, public and common areas of the property in a
manner that is, in Landlord's judgment, customarily furnished in comparable
first class office buildings in the immediate market area in reasonably good
order and condition except for damage occasioned by the act of Tenant, which
damage shall be repaired by Landlord at Tenant's expense.
(b) Provided the Tenant shall not be in default hereunder and Subject to
the provisions elsewhere herein contained, including the Rules and Regulations
of the Building, Landlord agrees to furnish to the Premises during ordinary
business hours:
(1) heating and air conditioning required to maintain temperature inside
the Premises as follows: to an inside temperature of seventy-five
(75) degrees Fahrenheit when the outside temperature is seventeen (17)
degrees Fahrenheit and to an inside temperature of seventy-five (75)
degrees Fahrenheit when the outside temperature is not above ninety-
five (95) degrees Fahrenheit.
(2) elevator service to Tenant's floor, which shall mean service either by
automatic elevators or elevators with attendants, or both, at the
option of the Landlord;
(3) hot or cold water to the restrooms and water to the drinking
fountains;
(4) electric current in reasonably sufficient amounts for normal business
use, including operation of building standard lighting and general
office machines of a type which require no more than a 110 volt duplex
9
<PAGE>
outlet, including desk top personal computers, desk top personal
printers, and desk top calculators, but excluding mainframe computers,
telephone switching equipment, and other non-standard office machines;
and
(5) janitorial services during the times and in a manner that such
services are in Landlord's judgment customarily furnished in
comparable office buildings in the immediate market area (generally as
outlined in Exhibit "H" attached hereto).
(6) Building's freight elevator with reasonable notice to Landlord.
(c) Provided the Tenant shall not be in default hereunder and Subject to
the provisions elsewhere herein contained, including the Rules and Regulations
of the Building, Landlord agrees that with respect to the Premises, and only
during normal business hours or, at Landlord's option, after normal business
hours, it will maintain and adjust at its expense.
(1) All building standard fluorescent lighting. All incandescent and
nonstandard fluorescent lights shall be maintained at Tenant's
expense;
(2) All temperature control devices and air diffusers; and
(3) All Tenant entry door hardware including locks, hinges and closures.
(d) For the purpose of this Lease, normal business hours shall be from
8:00 A.M. to 6:00 P.M. Monday through Friday and from 8:00 A.M. to 1:00 P.M. on
Saturday, excluding the following holidays: New Year's Day, Memorial Day,
Independence Day (4th of July), Labor Day, Thanksgiving Day, Christmas Day and
any other holidays generally recognized from time to time by owners of office
buildings in the Atlanta, Georgia metropolitan area.
(e) Landlord may, at its option, provide additional or after hours heating
or air conditioning at Tenant's request upon reasonable notice, Tenant shall pay
the building standard charge for such services as determined from time to time
by Landlord. The obligation hereunder to ___ such additional utilities will be
subject to the rules and regulations of any municipal or any other governmental
authority regulating the business of providing such utility service. Tenant
agrees to keep closed all window coverings, if any, when necessary because of
the sun's position, and Tenant also agrees at all times to cooperate fully with
Landlord and to abide by all regulations and requirements which Landlord may
prescribe for the proper functioning and protection of said heating,
ventilating, and air conditioning system. Tenant will not without the written
consent of Landlord use any heat generating equipment, machines, or excess
lighting in the Premises which affects the amount of energy required to maintain
the temperature otherwise maintained by the heating, ventilating and air
conditioning system. In the event of such consent, Landlord reserves the right
to install supplementary air conditioning equipment and the cost thereof,
including the ongoing cost of additional electricity, chilled water (if
available at a nominal charge), and/or domestic water (at a nominal charge)
consumed as a result of the use of such equipment, shall be paid by Tenant to
Landlord upon demand. The type, size and location of such supplemental air
conditioning equipment shall be determined or approved by Landlord.
(f) Tenant will not, without written consent of Landlord, use within the
Premises or Building any device or machine, in any number or combination thereof
or for any number of hours, which will in any way increase the amount of
electricity or water normally furnished for use of the Premises as general
office space as defined in Paragraph 12(b)(4). If Tenant in Landlord's judgment
shall require such additional water or electrical current, Tenant shall first
procure the consent of Landlord, which Landlord may refuse, and Landlord may
cause a special meter to be installed so as to measure such additional domestic
water, chilled water (if available), or electrical current. The cost of any
such meters and of installation, maintenance, and repair thereof shall be paid
for by Tenant, and Tenant agrees to pay Landlord or the utility company, as the
case may be, on demand, for the ongoing cost of consumption of such additional
water or electricity. In the event that Landlord is responsible for reading the
meter and invoicing the Tenant, Landlord shall be entitled to charge the Tenant
the reasonable additional expenses for so doing. The Building electrical system
shall be capable of providing a maximum of seven and one-half (7 1/2) watts
live load of power per square foot of Tenant's Premises, exclusive of building
standard lighting. This Paragraph 12(f) only establishes the maximum power
available and does not alter the provisions of Paragraph
10
<PAGE>
12(f) or Landlord's ability to charge Tenant for electricity use above that
normally furnished (in comparable office buildings in the immediate market area)
for use of the Premises as general office space.
(g) Landlord shall not be in default hereunder or be liable for any damage
directly or indirectly resulting from, nor shall the rental herein reserved be
abated by reason of, the (i) installation, use or interruption of use of any
equipment in connection with the furnishing of any of the following services or
utilities, or (ii) failure to furnish or delay in furnishing any such services
or utilities when such failure is caused by Acts of God or the elements,
strikes, governmental orders, accidents, or other conditions beyond the
reasonable control of he Landlord or by the making of repairs or improvements to
the Premises or to the Building in which case Landlord shall diligently work to
mitigate such interruption in services.
(h) It shall be Tenant's responsibility and expense to install, move,
maintain, adjust, and repair its property and fixtures, including but not
limited to, its: signage, pictures, bulletin boards, plaques, furniture, filing
cabinets, computer cables, computer equipment, business machines, draperies,
blinds, kitchen appliances, special water heaters, kitchen cabinets, private
restroom fixtures, special air conditioning or power conditioning equipment,
locks for furniture and filing cabinets, paging systems, modular furniture
components (including task lighting, flat wiring, and power distribution
cables), combination locks, specialty electrical devices, exhaust fans, fire
extinguishers, carpet squares, and/or other furniture, fixtures, or equipment
installed by Tenant, or which were supplied, specified or requested by Tenant
and installed by Landlord.
(i) Any sums payable under this Paragraph shall be considered additional
rent, and Landlord shall have the same remedies for a default in payment of such
sums as for a default in the payment of rent.
(j) Tenant shall not provide any janitorial services to the Premises
without Landlord's written consent and then only subject to the terms and
conditions of Landlord.
(k) If, in order to protect Tenant's property in the building, it shall be
necessary to make emergency repairs to any portion thereof which is the
responsibility of Landlord to repair, and if Landlord, after receipt of notice,
is unable to make such emergency repairs in sufficient time to protect Tenant's
property, Tenant shall have the right to make such repairs. Landlord shall
fully reimburse Tenant for the reasonable costs of such emergency repairs by
direct payment to Tenant. Such payment shall be due within thirty (30) days of
receipt of an invoice from Tenant, and if paid at a later date by Landlord,
shall bear interest at the lesser of twelve percent (12%) per annum or the
maximum rate authorized by law from the date the sum is paid by Tenant until
Tenant is fully reimbursed by Landlord. Landlord, at Landlord's sole option,
may elect to reimburse Tenant by an adjustment in the amount of rent payable by
making written notice of such election to Tenant.
13. ESTOPPEL CERTIFICATE
Within ten (10) days following any written request which Landlord may make
from time to time, Tenant shall execute and deliver to Landlord a certificate
substantially in the form attached hereto as Exhibit "D" and made a part hereof,
indicating thereon any exceptions thereto that may exist at that time. Failure
of the Tenant to execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant that the statements
included in Exhibit "D" are true and correct without exception. Landlord and
Tenant intend that the statement delivered pursuant to this paragraph may be
relied upon by any mortgage, beneficiary, purchaser, or prospective purchaser of
the Building or any interest therein.
14. HOLDING OVER
Tenant will, at the termination of this Lease by lapse of time or
otherwise, yield up immediate possession to Landlord. If Tenant retains
possession of the Premises or any part thereof after such termination or if any
of Tenant's property remains which Landlord has previously requested be removed,
then Landlord may, at its option, serve written notice upon Tenant that such
holding over constitutes any one of (i) creation of a month to month tenancy,
upon the terms and conditions set
11
<PAGE>
forth in this Lease, or (ii) creation of a tenancy at sufferance, in any case
upon the terms and conditions set forth in this Lease; provided, however, that
the monthly rental [or daily rental under (ii)] shall, in addition to all other
sums which are to be paid by Tenant hereunder, whether or not as additional
rent, be equal to one hundred and fifty percent (150%) of the rental being paid
monthly to Landlord under this Lease immediately prior to such termination
[prorated in the case of (iii) on the basis of a 365 day year for each day
Tenant remains in possession]. If no such notice is served, then a tenancy at
sufferance shall be deemed to be created at the rent in the preceding sentence.
Tenant shall also pay to Landlord all damages sustained by Landlord resulting
from retention of possession by Tenant, including the loss of any proposed
subsequent tenant for any portion of the Premises. The provisions of this
paragraph shall not constitute a waiver by Landlord of any right of entry as
herein set forth; nor shall receipt of any rent or any other act in apparent
affirmance of the tenancy operate as a wavier of the right to terminate this
Lease for a breach of any of the terms, covenants, or obligations herein on
Tenant's part to be performed.
15. SUBORDINATION
Without the necessity of any additional document being executed by Tenant
for the purpose of effecting a subordination, this Lease shall be subject and
subordinate at all times to: (a) all ground leases or underlying leases which
may now exist or hereafter be executed affecting the Building, the Property, or
any part thereof, and (b) the lien of any first mortgage or deed of trust which
may now exist or hereafter be executed in any amount for which said Building,
land, ground leases or underlying leases, or Landlord's interest or estate in
any of said items is specified as security together with all renewals,
modifications, consolidations, partitions, replacements, and extensions of any
such first mortgage or deed of trust. Notwithstanding the foregoing, Landlord
or the holder of any first mortgage or deed of trust on the Building or the
Property or any part thereof shall have the right to subordinate or cause to be
subordinated in whole or in part any such ground leases or underlying leases or
any such _______ to this Lease (but not in respect to priority of entitlement of
insurance or condemnation proceeds). In the event that any ground lease or
underlying lease terminates for any reason or any first mortgage or deed of
trust is foreclosed or a conveyance in lieu of foreclosure is made for any
reason, Tenant shall, notwithstanding any subordination, attorn to and become
the Tenant of the successor in interest to Landlord at the option of such
successor in interest. Tenant covenants and agrees to execute and deliver, upon
demand by Landlord or the holder of any first mortgage or deed of trust on the
Building or the Property or any part thereof and in the form requested by
Landlord or the holder of any first mortgage or deed of trust on the Building
or the Property or any part thereof any additional documents evidencing the
priority of subordination of this Lease with respect to any such ground leases
or underlying leases or the lien of any such mortgage or deed of trust. Tenant
hereby irrevocably appoints Landlord as attorney-in-fact of Tenant to execute,
deliver and record any such documents in the name and on behalf of Tenant.
16. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the Rules and Regulations
annexed to this lease as Exhibit "A" and all reasonable modifications thereof
and additions thereto from time to time put into effect by Landlord so long as
the modifications do not materially increase Tenant's obligations or diminish
Tenant's rights granted in this Lease. Landlord shall not be responsible for
the nonperformance by any other tenant or occupant of the Building of any said
Rules and Regulations; however, Landlord shall use good faith efforts to enforce
said rules and regulations for all tenants of the Building.
17. ENTRY BY LANDLORD
Landlord reserves and shall at all times have the right to enter the
Premises to inspect the same to determine if Tenant is complying with all terms
and provisions of this Lease, to perform Tenant's obligations under this Lease
in accordance with Paragraph 23 hereof, to supply janitorial service and any
other service to be provided by Landlord to Tenant hereunder, to show said
Premises to prospective purchasers, mortgagees or tenants, to post notices of
nonresponsibility, and to alter, improve, or repair the Premises and any portion
of the Building of which the Premises are a part or to which access is
conveniently made through the Premises, without abatement of rent, and may for
that purpose erect, use, and maintain scaffolding, pipes, conduits, and other
necessary structures in and through the Premises where reasonably required by
the character of the work to be performed, provided that entrance to the
Premises shall not be blocked thereby, and further provided that the business of
Tenant shall not be interfered with unreasonably. Except during emergencies,
Landlord will provide Tenant with notice of intent to make repairs within
Premises. Tenant hereby waives any claim for damages for any
12
<PAGE>
injury or inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises and any other loss occasioned
thereby. For each of the aforesaid purposes Tenant agrees that its doors shall
be keyed to Landlord's building standard master keying system and that Landlord
shall at all times have and retain master or pass keys with which to unlock all
of the doors in, upon, and about the Premises, excluding Tenant's vaults and
safes, or special security areas (designated in advance), and Landlord shall
have the right to use any and all means which Landlord may deem necessary or
proper to open said doors in an emergency, in order to gain entry to any portion
of the Premises, and any entry to the Premises, or portions thereof obtained by
Landlord by any of said means, or otherwise, shall not under any circumstances
be construed or deemed to be a forcible or unlawful entry into, or a detainer
of, the Premises, or an eviction, actual or constructive, of Tenant from the
Premises or any portions thereof. Landlord shall also have the right at any
time, without the same constituting an actual or constructive eviction and
without incurring any liability to Tenant therefor, to change the arrangement
and/or location of entrances or passageways, doors and doorways, and corridors,
elevators, stairs, toilets, or other public parts of the Building.
18. INSOLVENCY OR BANKRUPTCY
The appointment of a receiver to take possession of all or substantially
all of the assets of Tenant, or an assignment of Tenant for the benefit of
creditors, or any action taken or suffered by Tenant under any insolvency,
bankruptcy, or reorganization act, shall at Landlord's option constitute a
breach of this Lease by Tenant. Upon the happening of any such event or at any
time thereafter, this Lease shall terminate five (5) days after written notice
of termination from Landlord to Tenant. In no event shall this Lease be
assigned or assignable by operation of law or by voluntary or involuntary
bankruptcy proceedings or otherwise and in no event shall this Lease or any
rights or privileges hereunder be an asset of Tenant under any bankruptcy,
insolvency, or reorganization proceedings.
19. DEFAULT
(a) The following events shall be deemed to be events of default by Tenant
under this Lease:
(1) Tenant shall fail to pay when or before due any sum of money becoming
due to be paid to Landlord hereunder, whether such sum be any installment of the
rent herein reserved, any other amount treated as additional rent hereunder, or
any other payment or reimbursement to Landlord required herein, whether or not
treated as additional rent hereunder, and such failure shall continue for a
period of five (5) days after receipt of written notice of default from Landlord
(however, Landlord shall not be required to give such notice when Landlord has
already given such notice at least once in a twelve (12) month period); or
(2) Tenant shall fail to comply with any term, provision or covenant of
this Lease other than by failing to pay when or before due any sum of money
becoming due to Landlord hereunder, and shall not cure such failure within ten
(10) days (forthwith, if the default involves a hazardous condition) after
written notice thereof to Tenant; provided, however, that if the nature of the
cure of the failure is such that it cannot be reasonably completed within such
ten (10) days, then so long as Tenant commences such cure within ten (10) days
and thereafter diligently and in good faith pursues completion of the cure, the
time to do so will be extended; or
(3) Tenant shall abandon or vacate any substantial portion of the
Premises, unless Tenant is satisfying all its obligations of this Lease except
those associated with occupying the Premises; or
(4) Tenant shall fail to vacate the Premises immediately upon termination
of this Lease, by lapse of time or otherwise, or upon termination of Tenant's
right to possession only; or
(5) The leasehold interest of Tenant shall be levied upon under execution
or be attached by process of law or Tenant shall fail to contest diligently the
validity of any lien or claimed lien and give sufficient security to Landlord to
insure payment thereof or shall fail to satisfy any judgment rendered thereon
and have the same released, and such default shall continue for ten (10) days
after written notice thereof to Tenant; or
13
<PAGE>
(6) Tenant shall fail to perform any of its obligations under any
agreement with Landlord; or
(7) Default by any guarantor of this Lease of the terms of its
guaranty, or the bankruptcy or insolvency of any guarantor.
(b) Upon the occurrence of any such events of default described in this
Paragraph or elsewhere in this Lease, Landlord shall have the option to pursue
any one or more of the following remedies without any notice or demand
whatsoever:
(1) Landlord may, at its election, terminate this Lease or terminate
Tenant's right to possession only, without terminating the Lease;
(2) Upon any termination of this Lease, whether by lapse of time or
otherwise, or upon any termination of Tenant's right to possession without
termination of the Lease. Tenant shall surrender possession and vacate the
Premises immediately, and deliver possession thereof to Landlord, and Tenant
hereby grants to landlord full and free license to enter into and upon the
Premises in such event with or without process of law and to repossess Landlord
of the Premises as of Landlord's former estate and to expel or remove Tenant and
any others who may be occupying or within the Premises and to remove any and all
property therefrom, without being deemed in any manner guilty of trespass,
eviction or forcible entry or detainer, and without incurring any liability for
any damage resulting therefrom, Tenant hereby waiving any right to claim damage
for such re-entry and expulsion, and without relinquishing Landlord's right to
rent or any other right given to Landlord hereunder or by operation of law;
(3) Upon termination of this Lease, whether by lapse of time or
otherwise, Landlord shall be entitled to recover as damages, all rent, including
any amounts treated as additional rent hereunder, and other sums due and payable
by Tenant on the date of termination, plus the sum of: (1) an amount equal to
the then present value of the entire amount of the rent calculated using a
discount rate equal to the average discount rate of auctioned 3-month Treasury
Bills as of the date of termination of this Lease, including any amounts treated
as additional rent hereunder, and other sums provided herein to be paid by
Tenant for the residue of the stated term hereof, less the fair rental value of
the Premises for such residue taking into account the time and expense necessary
to obtain a replacement tenant or tenants, including expenses hereinafter
described in paragraph 19(b)(4) relating to recovery of the Premises,
preparation for reletting and for reletting itself, and (ii) the cost of
performing any other covenants which would have otherwise been performed by
Tenant.
(4) (i) Upon any termination of Tenant's right to possession only without
termination of the Lease, Landlord may, at Landlord's option, enter into the
Premises, remove Tenant's signs and other evidences of tenancy, and take and
hold possession thereof as provided in Paragraph 19(b)(2) above, without such
entry and possession terminating the Lease or releasing Tenant, in whole or in
part, from any obligation, including Tenant's obligation to pay therein,
including any amounts treated as additional rent, hereunder for the full term.
In any such case, Tenant shall pay forthwith to Landlord, if Landlord so elects,
a sum equal to the entire amount of the rent, including any amounts treated as
additional rent hereunder, for the residue of the stated term hereof plus any
other sums provided herein to be paid by Tenant for the remainder of the term of
this Lease;
(ii) Landlord may, but need not, relet the Premises or any part thereof
for such rent and upon such terms as Landlord in its sole discretion shall
determine (including the right to relet the Premises for a greater or lesser
term than that remaining under this Lease, the right to relet the Premises as a
part of a larger area, and the right to change the character or use made of the
Premises) and Landlord shall not be required to accept any tenant offered by
Tenant or to observe any instructions given by Tenant about such reletting. In
any such cases, Landlord may make repairs, alterations and additions in or to
the Premises, and redecorate the same to the extent Landlord deems necessary or
desirable, and Tenant shall, upon demand, pay the cost thereof, together with
Landlord's expenses of reletting including, without limitation, any broker's
commission incurred by Landlord. If the consideration collected by Landlord upon
any such reletting plus any sums
14
<PAGE>
previously collected from Tenant are not sufficient to pay the full amount of
all rent, including any amounts treated as additional rent hereunder and other
sums reserved in this Lease for the remaining term hereof, together with the
costs of any repairs, alterations, additions, redecorating, and Landlord's
expenses or reletting and the collection of the rent accruing therefrom
(including attorney's fees and broker's commissions). Tenant shall pay to
Landlord the amount of such inconsistency.
(5) Landlord may, at Landlord's option, enter into and upon the Premises,
with or without process of law, if Landlord determines in its sole discretion
that Tenant is not acting within a commercially reasonable time to maintain,
repair or replace anything for which Tenant is responsible hereunder and correct
the same, without being deemed in any manner guilty of trespass, eviction or
forcible entry and detainer and without incurring any liability for any damage
resulting therefrom and Tenant agrees to reimburse Landlord, on demand, as
additional rent, for any expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease;
(6) Any and all property which may be removed from the Premises by
Landlord pursuant to the authority of the Lease or by law, to which Tenant is or
may be entitled, may be handled, removed and stored, as the case may be, by or
at the direction of Landlord at the risk, cost and expense of Tenant, and
Landlord shall in no event be responsible for the value, preservation or
safekeeping thereof. Tenant shall pay to Landlord, upon demand, any and all
expenses incurred in such removal and all storage charges against such property
so long as the same shall be in Landlord's possession or under Landlord's
control. Any such property of Tenant not retaken by Tenant from storage within
thirty (30) days after removal from the Premises shall, at Landlord's option, be
deemed conveyed by Tenant to Landlord under this Lease as by a bill of sale
without further payment or credit by Landlord to Tenant.
(c) Pursuit of any of the foregoing remedies shall not preclude pursuit
of any of the other remedies herein provided or any other remedies provided by
law (all such remedies being cumulative), nor shall pursuit of any remedy herein
provided constitute a forfeiture or waiver of any rent due to Landlord hereunder
or any damages accruing to Landlord by reason of the violation of any of the
terms, provisions and covenants herein contained. No act or thing done by
Landlord or its agents during the term hereby granted shall be deemed a
termination of this Lease or an acceptance of the surrender of the Premises, and
no agreement to terminate this Lease or accept a surrender of the Premises shall
be valid unless in writing signed by Landlord. Landlord's acceptance of the
payment of rental or other payments hereunder after the occurrence of an event
of default shall not be construed as a waiver of such default, unless Landlord
so notifies Tenant in writing. Forbearance by Landlord in enforcing one or more
of the remedies herein provided upon an event of default shall not be deemed or
constitute a waiver of such default or of Landlord's right to enforce any such
remedies with respect to such default or any subsequent default. If, on account
of any breach or default by Tenant in Tenant's obligations under the terms and
conditions of this Lease, it shall become necessary or appropriate for Landlord
to employ or consult with an attorney concerning or to enforce or defend any of
Landlord's rights or remedies hereunder, Tenant agrees to pay attorney's fees so
incurred.
(d) Without limiting the foregoing, Tenant hereby appoints and designates
the Premises as a proper place for service of process upon Tenant, and agrees
that service of process upon any person apparently employed by Tenant upon the
Premises or leaving process in a conspicuous place within the Premises shall
constitute personal service of such process upon Tenant (provide, however,
Landlord does not hereby waive the right to serve Tenant with process by any
other lawful means).
20. DAMAGE BY FIRE, ETC.
(a) If the Building, improvements, or Premises are rendered partially or
wholly untenantable by fire or other casualty, and if such damage cannot, in
Landlord's reasonable estimation, be materially restored within one hundred
twenty (120) days of such damage, then Landlord may, at its sole option,
terminate this Lease as of the date of such fire or casualty. Landlord shall
exercise its option provided herein by written notice to Tenant within sixty
(60) days of such fire or other casualty. For purposes hereof, the Building,
improvements, or Premises shall be deemed "materially restored" if they are
15
<PAGE>
in such condition as would not prevent or materially interfere with Tenant's use
of the Premises for the purpose for which it was then being used.
(b) If this Lease is not terminated pursuant to Paragraph 20(a), then
Landlord shall proceed with all due diligence to repair and restore the
Building, at Landlord's cost, or the improvements or Premises at Tenant's cost,
as the case may be (except that Landlord may elect not to rebuild if such damage
occurs during the last year of the term exclusive of any option which is
unexercised at the date of such damage).
(c) If this Lease shall be terminated pursuant to this Paragraph 20(a),
the term of this lease shall end on the date of such damage as if that date had
been originally fixed in this Lease for the expiration of the term hereof. If
this Lease shall not be terminated by Landlord pursuant to this Paragraph 20(a)
and in the event that Landlord should fail to complete such repairs and material
restoration within one hundred fifty (150) days after the date of such damage,
Tenant may at its option and as its sole remedy terminate this Lease by
delivering written notice to Landlord, whereupon the Lease shall end on the date
of such notice as if the date of such notice were the date originally fixed in
this Lease for the expiration of the term hereof; provided, however, that if
construction is delayed because of changes, deletions, or additions in
construction requested by Tenant, strikes, lockouts, casualties, Acts of God,
war, material or labor shortages, governmental regulation or control or other
causes beyond the reasonable control of Landlord, the period for restoration,
repair or rebuilding shall be extended for the amount of time Landlord is so
delayed.
(d) Tenant agrees that during any period of restoration or repair of the
Premises, Tenant shall continue the operation of Tenant's business within the
Premises to the extent practicable. During the period from the date of the
damage until the date that the untenantable portion of the Premises is
materially restored, the rent shall be reduced to the extent of the proportion
of the Premises which is untenantable, however, there shall be no abatement of
other sums to be paid by Tenant to Landlord as required by this Lease.
(e) In no event shall Landlord be required to rebuild, repair or
replace any part of the partitions, fixtures, additions and other improvements
which may have been placed in or about the Premises by Tenant after the
Commencement Date, however Landlord has the right but not the obligation to
rebuild, repair or replace at Tenant's expense so much of the partitions,
fixtures, additions and other improvements as may be necessary to ensure that
the Premises are materially restored. Any insurance which may be carried by
Landlord or Tenant against loss or damage to the Building or Premises shall be
for the sole benefit of the party carrying such insurance and under its sole
control except that Landlord's insurance may be subject to control by (i) the
holder or holders of any indebtedness secured by a mortgage or deed of trust
covering any interest of Landlord in the Premises, the Building, or the Property
and/or (ii) the ground lessor of the Property.
(f) Notwithstanding anything herein to the contrary, in the event the
holder of indebtedness secured by a mortgage or deed of trust covering the
Premises, Building or Property or the ground lessor of the Property requests
that any insurance proceeds be paid to it, then Landlord shall have the right to
terminate the Lease by delivering written notice of termination to Tenant within
fifteen (15) days after such requirement is made by any such person, whereupon
the Lease shall end on the date of such damage as if the date of such damage
were the date originally fixed in this Lease for the expiration of the term.
(g) In the event of any damage or destruction to the Building or he
Premises by any peril covered by the provisions of this Paragraph 20, Tenant
shall, upon notice from Landlord, remove forthwith, at its sole cost and
expense, all or such portion of the property belonging to the Tenant or its
licensees from all of the Building or the Premises, or such portion, as Landlord
shall request. Tenant hereby indemnifies and holds Landlord harmless from any
loss, liability, costs, and expenses, including attorney's fees, arising out of
any claim or damage or injury as a result of any alleged failure to secure the
Premises property prior to such removal and/or during such removal.
16
<PAGE>
21. CONDEMNATION
(a) If any substantial part of the building, improvements, or Premises
should be taken for any public or quasi-public use under governmental law,
ordinance or regulation, or by right of eminent domain, or by private purchase
in lieu thereof and the taking would prevent or materially interfere with
Tenant's then existing permitted use of the Premises, this Lease shall terminate
effective when the physical taking shall occur in the same manner as if the date
of such taking were the date originally fixed in this Lease for the expiration
of the term hereof.
(b) If part of the Building, improvements, or Premises shall be taken for
any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and this Lease is not terminated as provided in Paragraph 21(a), this
Lease shall not terminate but the rent payable hereunder during the unexpired
portion of this Lease shall be reduced to such extent, if any, as may be fair
and reasonable under all of the circumstances, and Landlord shall undertake to
restore the Building, improvements, and Premises to a condition suitable for
Tenant's use, as near to the condition thereof prior to such taking as is
reasonably feasible under all circumstances.
(c) Tenant shall not share in any condemnation award or payment in lieu
thereof or in any award for damages resulting from any grade change of adjacent
streets, the same being hereby assigned to Landlord by Tenant, provided,
however, that Tenant may separately claim and receive from the condemning
authority, if legally payable, compensation for Tenant's removal and relocation
costs and for Tenant's loss of business and/or business interruption, except
that no such claim shall diminish or otherwise adversely affect Landlord's award
or the awards of any and all ground and underlying lessors and mortgagees
(including deed of trust beneficiaries).
(d) Notwithstanding anything to the contrary contained in this Paragraph
21, if the temporary use or occupancy of any part of the Premises shall be taken
or appropriated under power of eminent domain during the term of this Lease,
this Lease shall be and remain unaffected by such taking or appropriation and
Tenant shall continue to pay in full all rent payable hereunder by Tenant during
the term of this Lease; in the event of any such temporary appropriation or
taking, Tenant shall be entitled to receive that portion of any award which
represents compensation for the use of occupancy of the Premises during the term
of this Lease, and Landlord shall be entitled to receive that portion of any
award which represents the cost of restoration of the Premises and the use and
occupancy of the Premises after the end of the term of this Lease.
22. SALE BY LANDLORD
The covenants and obligations of Landlord hereunder shall be binding upon
the Landlord named herein and its successors and assigns, _______ with respect
to their respective periods of time as Landlord hereunder. In the event of a
sale or conveyance by Landlord of the Building, the ________ shall operate to
release Landlord from any future liability upon any of the covenants or
conditions, express or implied, herein contained in favor of Tenant, and in such
event Tenant agrees to look solely to the successor in interest of Landlord in
and to this Lease. Tenant agrees to attorn to the purchaser or assignee in any
such sale.
23. RIGHT OF LANDLORD TO PERFORM
All covenants and agreements to be performed by the Tenant under any of the
terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent. If the Tenant shall fail to pay any
sum of money, other than rent, required to be paid by it hereunder or shall fail
to perform any other act on its part to be performed hereunder, and such failure
shall continue for ten (10) days after notice thereof by the Landlord, the
Landlord may, but shall not be obligated so to do, and without waiving or
releasing the Tenant from any obligations of the Tenant, make any such payment
or perform any such act on the Tenant's part to be made or performed as in this
Lease provided. All sums so paid by the Landlord and all necessary incidental
costs, together with interests thereon at the Agreed Interest Rate as defined in
Paragraph 8 hereof from the date of such payments by the Landlord shall be
payable as additional rent to the Landlord on demand, and the Tenant covenants
to pay any such sums, and the Landlord shall have, in addition to any other
right or remedy of the Landlord, the same rights and remedies in the event of
nonpayment thereof by the Tenant as in the case of default by the Tenant in the
payment of the rent.
17
<PAGE>
24. SURRENDER OF PREMISES
(a) At the end of the term or any renewal thereof or other sooner
termination of this Lease, the Tenant will peaceably deliver up to the Landlord
possession of the Premises, together with all improvements or additions upon or
belonging to the same, by whomsoever made, in the same condition as received, or
first installed, reasonable wear and tear, damage by fire, earthquake, Act of
God, or the elements alone excepted. Tenant may, upon the termination of this
Lease, remove all movable furniture and equipment belonging to Tenant, at
Tenant's sole cost, repairing any damage caused by such removal. Property not
so removed shall be deemed abandoned by the Tenant, and title to the same shall
thereupon pass to Landlord. Upon request by Landlord, unless otherwise agreed
to in writing by Landlord, Tenant shall remove, at Tenant's sole cost, any or
all permanent improvements or additions to the Premises installed by or at the
expense of Tenant, provided that Landlord so requested such approval at the time
of giving its consent to the addition or improvement, and all movable furniture
and equipment belonging to Tenant which may be left by Tenant and repair any
damage resulting from such removal.
(b) The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of the
Landlord, either terminate all or any existing subleases or subtenancies, or
operate as an assignment to Landlord of any or all such subleases or
subtenancies.
25. WAIVER
If either Landlord or Tenant waives the performance of any term, covenant
or condition contained in this Lease, such waiver shall not be deemed to be a
waiver of any subsequent break or nonperformance of the same or any other term,
covenant or condition contained herein. Furthermore, the acceptance of rent by
Landlord shall not constitute a waiver of any preceding breach by Tenant of any
term, covenant or condition of this Lease, regardless of Landlord's knowledge of
such preceding breach at the time Landlord accepted such rent. Failure by
Landlord to enforce any of the terms, covenants or conditions of this Lease for
any length of time shall not be deemed to waive or to decrease the right of
Landlord to insist thereafter upon strict performance by Tenant. Waiver by
Landlord of any term, covenant or condition contained in this Lease may only be
made by a written document signed by Landlord.
26. NOTICES
All notices and demands which may or are required to be given by either
party to the other hereunder shall be in writing and shall be deemed given when
delivered or mailed as required below. All notices and demands by the Landlord
to the Tenant shall be either delivered to the Premises or sent by a commercial
interstate courier service offering proof of delivery or by United States
Certified or Registered mail, postage and fees prepaid, addressed to the Tenant
at the Premises, with a copy of such notices sent to: CompuCom Systems, Inc.,
Attention: Property Management, 10100 North Central Expressway, Dallas, Texas
75231, or to such other place as the Tenant may from time to time designate in a
notice to the Landlord. All notices and demands by the Tenant to the Landlord
shall be sent by United States Certified or Registered mail, postage prepaid,
addressed to the Landlord at each of the addresses specified in the Basic Lease
Information, or to such other firm or to such other place as Landlord may from
time to time designate in a notice to the Tenant. If requested by Landlord,
Tenant shall send copies of any notices and demands by Tenant to the holder or
holders of any mortgage or deed of trust on the Property or any part thereof.
27. RENTAL ADJUSTMENT
The Net Rent is Fourteen Dollars and Seventy-Five Cents ($14.75) per
rentable square foot per year on Twenty-Two Thousand Nine Hundred and Seventy-
Four ($22,974.00) per month and the Expense Stop Rent is Six Dollars ($6.00) per
rentable square foot per year, or Nine Thousand Three Hundred and Forty-Six
Dollars ($9,346.00) per month as set forth in the Basic Lease Information on
Page 2 of the Lease. Said Net Rent and Expense Stop Rent shall be subject to
adjustment on the first day of each January after the Commencement Date (the
"Rental Adjustment Date") in the manner set forth below:
(a) On and as of the Rental Adjustment Date for each year, the monthly
Net Rent shall be multiplied by 1.02 and that product shall be the monthly Net
Rent payable commencing with said Rental Adjustment Date.
18
<PAGE>
(b) Rental Adjustment, Operating Cost Increases. In addition to the
-------------------------------------------
payment of Net Rent and Expense Stop Rent, and all other charges provided for in
this Lease, Tenant shall pay as Pro Rata Share of any increase in the total
annual Operating Costs of the Building as hereinafter defined:
1. Definitions
(i) Pro Rata Share: Tenant's Pro Rata Share is defined as the ratio
of the rentable square footage of the Premises to the total rentable
square footage of the Building. In this Lease, Tenant's Pro Rata
Share is 13.99 percent (13.99%) subject to increase or decrease due
to an increase or decrease of the rentable square footage of either
the Building or the Premises. Tenant's Pro Rata Share shall be
adjusted for partial years at the beginning and end of the term.
(ii) Expense Stop: The Expense Stop, for purpose of this Paragraph
27 is $6.00 per square foot of rentable area of the Premises. The
Expense Stop is based upon Landlord's reasonable best estimates of
the Operating Costs for a fully assessed and ninety-five percent
(95%) occupied building.
(iii) Comparison Year. Each calendar year during the term of this
Lease.
(iv) Operating Costs: All expenses incurred by Landlord as
reasonably determined by Landlord to be necessary or appropriate for
the operation, maintenance, and repair of the Building, the personal
property used in conjunction therewith, the land upon which the
Building is situated, and the parking facility situated on the land.
Operating Costs shall include, but are not limited to, all expenses
incurred by Landlord for heating, cooling, electricity, water, gas,
sewers, refuse collection, telephone services not chargeable to
tenants, and similar utility services; the cost of supplies;
janitorial and cleaning, security services, landscaping maintenance
and replacements, window washing, insurance, management fees,
services of independent contractors performing duties necessary to
the operation of the Building, personal and real property taxes, the
Building's pro rata share of assessments made by the Windward
Property Owner's Association, non-capitalized alterations or
improvements made to the Building by reason of the laws and/or the
requirements of any insurer, mortgagee (only where such requirements
form insurer or mortgagee concern safety or structural features of
the Building and are commercially reasonable in light of requirements
generally imposed in the insurance or real estate lending industries
with respect to similar buildings), or governmental agency, the cost
of any capital improvements (a) which are made to the Building by
Landlord during the term which reduce the Operating Costs to the
extent such Operating Costs are actually reduced in any comparison
Year, or (b) which are made to the Building by Landlord after the
date of this Lease and which are required under any governmental law
or regulation which was not applicable to the Building at the
Commencement Date or was not enacted prior to the Commencement Date
(Operating Costs under (a), (b) or the prior item shall be amortized
over the useful life of the improvements at a market rate of
interest), the cost of compensation (including employment taxes and
fringe benefits) of all persons who perform duties in connection with
such Operating Costs, including the Building Manager, and any other
expense or charge which in accordance with generally accepted
accounting and management principles would be considered an expense
of maintaining, operating, or repairing the Building and the land
upon which it is situated.
Operating Costs shall not include the following items:
Leasing commissions, finders fees, brokerage fees and similar fees,
and costs incurred with the registration or enforcement of leases but
not management fees; Rent under any ground leases; Costs of
furnishing services to other tenants or occupants to the extent that
such services are materially in excess of services Landlord offers to
all tenants at Landlord's expense; Lease takeover costs incurred by
Landlord
19
<PAGE>
in connection with new leases at the Property, Costs and expenses of
the sale of all or any portion of the Property, Amounts received by
Landlord through the proceeds of insurance to the extent the proceeds
are compensation for expenses which were previously included in
uprooting expenses; Costs incurred by Landlord with respect to
repairs, goods and services (including utilities sold and supplied to
tenants and occupants of the Property) to the extent that Landlord is
entitled to reimbursement for such costs; Except as otherwise
provided herein, costs incurred by Landlord for alterations which are
considered capital improvements and replacements under generally
accepted accounting principles, consistently applied; Except as
otherwise provided herein, costs of a capital nature, including,
without limitation, capital improvements, capital repairs, capital
equipment and capital tools, all as determined in accordance with
generally accepted accounting principles, consistently applied; Costs
incurred by Landlord due to the violation by landlord of the terms
and conditions of any lease of space in the Property; Interest,
points and fees on debt or amortization or for any mortgage or
mortgages encumbering the Property, or any part thereof, and all
principal, escrow deposits and other sums paid on or in respect to
any indebtedness; whether or not secured by a mortgage lien) and on
any equity participations of any lender or lessor, and all costs
incurred in connection with any financing, refinancing or syndication
of the Property, or any part thereof; Depreciation and amortization;
the costs of the original construction of the Property and the
improvements; Income, franchise, transfer, inheritance, capital
stock, estate, profit, gift, gross receipts or succession taxes;
salaries, fringe benefits and other compensation for personnel not
directly involved in the operation or management of the Building;
costs and expenses of the sale of all or a portion of the Property,
costs of repairs or replacements incurred by reason of fire or other
casualty or condemnation in excess of the value of the insurance
deductible; costs for performing tenant installations for any
individual tenant or for performing work or furnishing services to or
for individual tenants at such tenant's expense and any other
contribution by Landlord to the cost of tenant improvements to the
extent such work is reimbursed or capitalized; Landlord's general
corporate overhead and general administrative expenses, except as
related to the operation or maintenance of the Building; rentals and
other related expenses incurred in leasing air-conditioning systems,
elevators or other equipment ordinarily considered to be of a capital
nature except for customary office equipment. All special assessments
by the local governing authority which may be paid by Landlord in
installments, shall be paid by Landlord in the maximum number of
installments permitted by law and charged as operating expenses only
in the year in which the assessment installment is actually paid.
(v) Actual Costs: The actual amount paid or incurred by Landlord
for Operating Costs during any Comparison year.
(vi) Estimated Costs: Landlord's reasonable estimate of Actual Costs
for each Comparison Year which shall be prepared in good faith by
Landlord.
2. Gross Up: In the event that the Building is not at least 95% occupied
--------
during any period of the Comparison Year, Landlord shall make
reasonable adjustments necessary to project what the Actual Costs
would have been had the Building been 95% occupied during the full
term of the year and those projected Operating Costs shall be deemed
to be the Actual Costs for purposes of this Paragraph.
3. Payment of Tenant's Pro Rata Share of Estimated Costs: At least
-----------------------------------------------------
thirty (30) days prior to the commencement of each Comparison Year
during the term hereof, Landlord shall furnish Tenant with a written
statement, prepared in good faith, setting forth the Estimated Costs
for such Comparison Year, and a statement showing the amount by which
Tenant's Pro Rata Share of the Estimated costs exceed the Expense
Stop. Tenant shall pay one-twelfth (1/12) of its Pro Rata Share of
such excess monthly.
20
<PAGE>
4. Payment of Tenant's Pro Rata Share of Actual Costs: Within forty-five
--------------------------------------------------
(45) days after the close of each Comparison Year, Landlord shall
deliver to Tenant a written statement setting forth the Actual Costs
during that Comparison Year, together with appropriate documentation,
if so requested by Tenant. If such Actual Costs exceed the Estimated
Costs paid by Tenant to Landlord for such Comparison Year, Tenant
shall pay to Landlord its Pro Rata Share of such excess within forty-
five (45) days after receipt of such statement. If the statement
shows such Actual Costs to be less than the Estimated Costs, then
Landlord shall credit the difference against rent due for the
calendar months next following receipt of Landlord's written
statement, or refund the difference to Tenant if the term has
expired.
5. Inspection of Landlord's Books: Tenant shall be entitled to
------------------------------
supporting documentation of operating costs as it shall reasonably
request. Tenant may, upon reasonable notice to Landlord, inspect
Landlord's books and records pertaining to operating cost charges at
their usual location.
28. CERTAIN RIGHTS RESERVED TO THE LANDLORD
The Landlord may enter upon the Premises and/or may exercise any or all of
the following rights hereby reserved without being deemed guilty of an eviction
or disturbance of the Tenant's use or possession and without being liable in any
manner to the Tenant and without abatement of rent or affecting any of the
Tenant's obligations hereunder:
(a) To change the name or street address of the Building;
(b) To install and maintain a sign or signs on the exterior of the
Building;
(c) To designate all sources furnishing sign painting and lettering, food
and beverage vending services, towels, carpet cleaning service, toilet
supplies, lamps and bulbs used on the Premises;
(d) To retain at all times pass keys to the Premises;
(e) To grant to any the exclusive right to conduct any particular
business or undertaking in the Building;
(f) To close the Building after regular working hours and on the legal
holidays subject, however to Tenant's right of admittance, under such
reasonable regulations as Landlord may prescribe from time to time, which
may include by way of example but not of limitation, that persons entering
or leaving the Building identify themselves to a watchman by registration
or otherwise and that said persons establish their right to enter or leave
the Building; and
(g) To take any and all measures, including inspections, repairs,
alterations, decorations, additions and improvements to the Premises or the
Building, and identification and admittance procedures for access to the
Building as may be necessary or desirable for the safety, protection,
preservation or security of the Premises or the Building or the Landlord's
interests, or as Landlord may deem necessary or desirable in the operation
of the Building.
29. ABANDONMENT
Tenant shall not vacate or abandon the Premises at any time during the
term, and if Tenant shall abandon, vacate, or surrender said Premises or be
dispossessed by process of law, or otherwise, any personal property belonging to
Tenant and left on the Premises shall, at the option of Landlord, be deemed to
be abandoned and title thereto shall thereupon pass to Landlord, in addition to
other remedies available to Landlord for Tenant's defaults under this lease.
Notwithstanding the foregoing, so long as Tenant is satisfying all its
obligations of this Lease except those associated with occupying the Premises,
Tenant may vacate the Premises.
30. SUCCESSORS AND ASSIGNS
Subject to the provisions of Paragraph 9 hereof, the terms, covenants, and
conditions contained herein shall be binding upon and inure to the benefit of
the heirs, successors, executors, administrators and assigns of the parties
hereto.
21
<PAGE>
31. ATTORNEY'S FEES
In the event that any action or proceeding is brought to enforce any term,
covenant or condition of this Lease on the part of Landlord or Tenant, the
prevailing party in such litigation shall be entitled to reasonable attorney's
fees to be fixed by the court in such action or proceeding.
32. SECURITY DEPOSIT
(a) Tenant shall pay to Landlord upon execution of this Lease the
security deposit specified in the Basic Lease Information for the faithful
performance of all terms, covenants and conditions of this Lease. Tenant agrees
that Landlord may apply said security deposit to remedy any failure by Tenant to
repair or maintain the Premises or to perform any other terms, covenants, and
conditions contained herein. If Tenant has kept and performed all terms,
covenants, and conditions of this Lease during the term hereof, Landlord will on
the termination hereof promptly return said sum to Tenant or the last permitted
assignee of Tenant's interest hereunder at the expiration of the Lease term.
Should Landlord use any portion of said sum to cure any default by Tenant
hereunder, Tenant shall forthwith replenish said sum to such original amount.
Landlord shall not be required to keep any security deposit separate from its
general funds, and Tenant shall not be entitled to interest on any such deposit.
Upon the occurrence of any events of default described in Paragraph 19 of this
Lease, said security deposit shall become due and payable to Landlord.
(b) Subject to other terms and conditions contained in this Lease, if
the Building is conveyed by Landlord, said security deposit may be turned over
to the Landlord's grantee and, if so, Tenant hereby releases Landlord from any
and all liability with respect to said deposit and its application or return.
33. TENANT AUTHORITY
If Tenant signs as a corporation or partnership, each of the persons
executing this Lease on behalf of Tenant does hereby covenant and warrant that
Tenant is a duly authorized and existing corporation or partnership, as the case
may be, that Tenant has and is qualified to do business in Georgia, that the
corporation or partnership has full right and authority to enter into this
Lease, and that each and all of the persons signing on behalf of the corporation
or partnership are authorized to do so. Upon Landlord's request, Tenant shall
provide Landlord with evidence reasonably satisfactory to Landlord confirming
the foregoing and warranties.
34. MORTGAGEE AND GROUND LESSOR APPROVALS
The approval or consent of Landlord shall not be deemed to have been
unreasonably withheld for purposes of any provisions of this Lease requiring
such consent if any mortgagee (which shall include the holder of any deed of
trust) of the Premises, Building or Property or any portion thereof, or the
ground lessor of the Property, shall refuse or withhold its approval or consent
thereto. Any requirement of Landlord pursuant to this Lease which is imposed
pursuant to the direction of any such mortgagee or ground lessor shall be deemed
to have been reasonably imposed by Landlord if made in good faith.
35. MISCELLANEOUS
(a)(i) The term "Premises" wherever it appears herein includes and shall
be deemed or taken to include (except where such meaning would clearly repugnant
to the context) the office space demised and improvements now or at any time
hereinafter comprising or built in the space hereby demised. (ii) The paragraph
headings herein are for convenience of reference and shall in no way define,
increase, limit, or describe the scope or intent of any provision of this Lease.
(iii) The term "Landlord" in these presents shall include the Landlord, its
successors and assigns. In any case where the Lease is signed by more than one
person, the obligations hereunder shall be joint and several. (v) The term
"Tenant" or the pronoun used in place thereof shall indicate and include the
masculine or feminine, the singular or plural number, individuals, firms or
corporations, and their and each of their respective successors, executors,
administrators, and permitted assigns, according to the context hereof. (vi)
The term "Lease" wherever it appears herein shall be deemed or taken to include
the Basic Lease Information and all paragraphs and exhibits attached hereto and
made a part hereof.
22
<PAGE>
(b) Time is of the essence of this Lease and all of its provisions.
Periods of time expressed in days for performance, unless otherwise specified,
shall mean calendar days.
(c) This Lease shall in all respects be governed by the laws of the State
of Georgia.
(d) This Lease, together with its exhibits, contains all the agreements
of the parties hereto and supersedes any previous negotiations. There have been
no representations made by the Landlord or understandings made between the
parties other than those set forth in this Lease and its exhibits. This Lease
may not be modified except by a written instrument by the parties hereto.
(e) All obligations of Tenant hereunder not fully performed as of the
expiration or earlier termination of the term of this Lease shall survive the
expiration or earlier termination of the term hereof.
(f) If any clause, phrase, provision or portion of this Lease or the
application thereof to any person or circumstance shall be invalid or
unenforceable under applicable law, such event shall not affect, impair or
render invalid or unenforceable the remainder of this Lease or any other clause,
phrase, provision or portion hereof, nor shall it affect the application of any
other clause, phrase, provision or portion hereof to other persons or
circumstances, and it is also the intention of the parties to this Lease that in
lieu of each such clause, phrase, provision or portion of this Lease that is
invalid or unenforceable, there be added as a part of this Lease contract a
clause, phrase, provision or portion as similar in terms to such invalid or
unenforceable clause, phrase, provision or portion as may be possible and be
valid and enforceable.
(g) Whenever a period time is herein described for action to be taken by
Landlord, the Landlord shall not be liable for responsible for, and there shall
be excluded from the computation for any such period of time, any delays due to
causes of any kind whatsoever which are beyond the control of Landlord.
(h) Notwithstanding any other provision of this Lease to the contrary, if
the Commencement Date hereof shall not have occurred before the twentieth (20th)
anniversary of the date hereof, this Lease shall be null and void and neither
party shall have any liability or obligation to the other hereunder. The
purpose and intent of this provision is to avoid the application of the rule
against perpetuities to this Lease.
36. QUIET ENJOYMENT
Landlord represents and warrants that it has full right and authority to
enter into this Lease and that Tenant, while paying the rental and performing
its other covenants and agreements herein set forth, shall peaceably and quietly
have, hold and enjoy the Premises for the term hereof without hindrance or
molestation from Landlord subject to the terms and provisions of this Lease. In
the event this Lease is a sublease, then Tenant agrees to take the Premises
subject to the provisions of the prior leases. Landlord shall not be liable for
any interference or disturbance by other tenants or third persons, nor shall
Tenant be released from any of the obligations of this Lease because of such
interference or disturbance.
37. LANDLORD'S LIABILITY
In no event shall Landlord's liability for any breach of this Lease exceed
the amount of rental then remaining unpaid for the current term (exclusive of
any renewal periods which have not then actually commenced). This provision is
not intended to be a measure or agreed amount of the Landlord's liability with
respect to any particular breach, and shall not be utilized by any court or
otherwise for the purpose of determining any liability of Landlord hereunder,
except only as a maximum amount not to be exceeded in any event. Furthermore,
any liability of Landlord hereunder shall be enforceable only out of Landlord's
interest in the Building or Property and in no event out of the separate assets
of any constituent partner of Landlord. No holder or beneficiary of any
mortgage or deed of trust on any part of the Property shall have any liability
to Tenant hereunder for any default of Landlord.
23
<PAGE>
38. NO ESTATE
This contract shall create the relationship of Landlord and Tenant, and no
estate shall pass out of Landlord. Tenant has only a usufruct, not subject to
levy and sale and not assignable by Tenant, except as provided for herein and in
compliance herewith.
39. SUBSTITUTION OF PREMISES
At any time after the date of this Lease, Landlord may substitute for the
Premises other premises in the Building or premises in another building if such
other building is located within the same business park (the "New Premises"), in
which event the New Premises shall be deemed to be the Premises for all purposes
under this Lease, provided: (i) the New Premises shall be similar to the
Premises in area and appropriateness for the use of Tenant's purposes; (ii) if
Tenant is then occupying the Premises, Landlord shall pay the expense of moving
Tenant, its property and equipment to the New Premises and such moving shall be
done at such time and in such manner so as to cause the least inconvenience to
Tenant; (iii) Landlord shall give to Tenant not less than ninety (90) days'
prior written notice of such substitution; and (iv) Landlord shall, at its sole
cost, improve the New Premises with improvements substantially similar to those
in the Premises.
40. LEASE EFFECTIVE DATE
Submission of this instrument for examination or signature by Tenant does
not constitute a reservation of or option for lease, and it is not effective as
a lease or otherwise until execution by both Landlord and Tenant.
41. HAZARDOUS MATERIALS
Tenant shall not cause or permit the escape, disposal or release of any
biologically or chemically active or other hazardous substances, or materials
in, on, or about the Premises. Tenant shall not allow the storage or use of
such substances or materials in, on, or about the Premises in any manner not
sanctioned by law or by the highest standards prevailing in the industry for the
storage and use of such substances or materials, nor allow to be brought into
the Premises in any such materials or substances except to use in the ordinary
course of Tenant's business, and then only after written notice has been given
to Landlord of the identity of such substances or materials excepting, however,
ordinary office and cleaning supplies. Without limitation, hazardous substances
and materials shall include those described in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
9601 et seq., the Resource Conservation and Recovery Act, as amended. 42 U.S.C.
Section 6901 et seq., any applicable state or local laws and the regulations
adopted under these acts. If any lender or governmental agency shall ever
require testing to ascertain whether or not there has been any release of
hazardous materials in, on, or about the Premises, then the reasonable costs
thereof shall be reimbursed by Tenant to Landlord upon demand as additional
charges if such requirement applies to Tenant's use and occupancy of the
Premises. In addition, Tenant shall execute affidavits, representations and the
like from time to time at Landlord's request concerning Tenant's best knowledge
and belief regarding the presence of hazardous substances or materials
introduced by Tenant on the Premises. In all events, Tenant shall indemnify
Landlord in the manner elsewhere provided in this Lease from any release of
hazardous materials in, on, or about on the Premises occurring while Tenant is
in possession, or elsewhere if caused by Tenant or persons acting under Tenant.
The within covenants shall survive the depreciation or earlier termination of
the lease term. Landlord represents and warrants that the Building does not,
and will not, on the Commencement Date contain hazardous materials or substances
as defined herein, other than those materials that may have been introduced by
Tenant, Tenant's contractor or Tenant's employees.
42. SCHEDULED EXPANSION
Tenant hereby agrees to lease for a term commencing on the first day of the
nineteenth (19th) month of the Lease Term and coterminous with the Lease Term
for the original Premises, an additional 5,000 rentable square feet, being that
remaining portion of the 2nd floor not already then occupied by Tenant, as
outlined in red on Exhibit "H" (the "Scheduled Expansion Space"), brining the
total area of the Premises to approximately 23,691 rentable square feet, and
Tenant's Pro Rata Share in accordance with Paragraph 27 shall adjust
accordingly. Beginning on the first day of the nineteenth (19th) month of the
Lease Term, the Scheduled Expansion Space shall be added to the Premises without
the need for further amendment to the Lease, and the Net Rent and Expense Stop
Rent, as calculated in Paragraph 27 of this Lease, shall be
24
<PAGE>
adjusted to reflect the increase in the Premises. Tenant shall receive no
allowance beyond that provided by Exhibit "C" of this Lease for the improvements
of the Scheduled Expansion Space, it being understood that a portion of the
allowance provided for by Exhibit "C" is for the improvements of the Scheduled
Expansion Space. Improvements to the Scheduled Expansion Space may be made at
the time of improvements to the original Premises in order to take advantage of
construction efficiencies.
43. NON-DISTURBANCE
Landlord shall use reasonable best efforts to secure a Non-Disturbance
Agreement on behalf of Tenant from any present or future mortgages or holders of
other superior interests in the Building.
44. GUARANTY
The guarantee of this Lease ("Guaranty") is set forth as Exhibit "F"
attached hereto and made a part hereof.
45. RENEWAL OPTIONS
Tenant shall have the right and option to renew this Lease for an
additional term of sixty (60) months by delivering written notice thereof to
Landlord at least twelve (12) months prior to the expiration of the primary
term, provided that at the time of such notice, and the end of the Lease Term,
Tenant is not in default hereunder beyond any applicable period for cure. Upon
the delivery of said notice and subject to any conditions set forth in the
preceding sentence, and upon the execution by Landlord and Tenant of an
extension agreement containing such terms and provisions which are consistent
with the provisions of this Paragraph, this Lease shall be extended upon the
same terms, covenants and conditions as provided in this Lease, except that:
(i) the monthly rental payable under Paragraph 4 of the Lease during said
renewal term shall be the prevailing market rate for Premises at the
commencement of such extended term; provided, however, in no event shall the
monthly rental calculated by this Paragraph 46 be less than the monthly rental
payable closest to an prior to the commencement of renewal term;
(ii) any termination of this Lease, any assignment of this Lease or
subletting of the Premises in effect at the time of notice to Landlord of the
exercise of such renewal option (except in the case of assignments or sublets
for which Landlord's consent is not required as provided in Paragraph 9) shall
terminate the option of Tenant contained in this Paragraph 46.
47. MICROWAVE ANTENNA
Tenant shall have the right, subject to approvals of Landlord, including,
but not limited to, approvals of Landlord as to placement position, screening
and coloring, to install a satellite dish antenna in an area designated by
Landlord. Tenant shall install the smallest antennas reasonablely available to
it to accomplish its intended use but in no event shall such antenna exceed 6'
in diameter. The installation, maintenance or operation shall not interfere
with the quiet enjoyment or business operations of other tenants in the
Building. The costs of installation, including compliance with Landlord's rules
and all regulations of a governmental entity or regulatory body, shall be borne
solely and exclusively by Tenant. Landlord shall not be responsible for the
suitability of the Building or Property for the proper operation of the
antennas.
48. SIGNAGE
Tenant, at Tenant's sole cost and expense (but Tenant may use a portion of
Landlord's Allowance for the same), shall be entitled to install signage,
including Tenant's corporate name and logo, on the Building monument sign, as
well as in the Building on the walls of elevator lobbies and entrance doors on
any full floors leased by Tenant. Tenant's exterior signage shall be limited to
the Building monument sign, and such signage shall be underneath and smaller
than signage provided on the monument sign for Vanity Fair. Tenant shall first
provide Landlord with detailed specifications for the design and placement of
any signage for Landlord's approval, which shall not be unreasonably withheld or
delayed. It shall not be unreasonable for Landlord to withhold approval of the
submitted signage if such signage is incompatible with the
25
<PAGE>
design of the Building monument sign or the Building's standard signage or if
such signage would materially detract from the appearance of the Building or the
Building monument sign. Landlord and the Tenant hereby confirm that all exterior
signage is subject to the ordinances of Fulton County and Alpharetta, Georgia,
as well as restrictions imposed by the Windward Business Park. Landlord shall
assist Tenant, to the extent reasonably possible, in obtaining proper
governmental approvals and permits for the requested signage. Signage on any
floor occupied in its entirety by Tenant is not required to conform to the
Building standard signage.
49. BROKER'S FEES
With the exception of The Wesley Co., Landlord and Tenant warrant and
represent, each to the other, that it has had no dealings with any broker or
agent in connection with this Lease, and Landlord and Tenant hereby indemnify
each other against, and agree to hold each other harmless from, any liability or
claim (and all expenses, including attorneys' fees, incurred in defending any
such claim or in enforcing this indemnity) for a real estate brokerage
commission or similar fee or compensation arising out of or in any way connected
with any claim dealings with the indemnitor and relating to this Lease or the
negotiation thereof.
IN WITNESS WHEREOF, the parties have executed this Lease under seal the day
and year first above written.
LANDLORD TENANT
CK WINDWARD #1, LLC, ClientLink, Incorporated, a Delaware
corporation
a North Carolina limited liability
company
By: By: /s/ James H. Hamilton
------------------------------- -------------------------------
(Seal)
Date: Name: James H. Hamilton
---------------------------- -----------------------------
Title: President
----------------------------
Date: September 27, 1996
-----------------------------
ATTEST/WITNESS: ATTEST/WITNESS:
/s/ Bettina May
- ------------------------------- ------------------------------
Its: Its: Operations Manager
--------------------------- -------------------------
(Affix Corporate Seal) (Affix Corporate Seal)
26
<PAGE>
EXHIBIT "A"
RULES AND REGULATIONS
1. Sidewalks, halls, passages, exits, entrances, elevators and stairways shall
not be obstructed by tenants or used by them for any purpose other than for
ingress to and egress from their respective premises. The halls, passages,
exits, entrances, elevators, escalators and stairways are not intended for
the use of the general public and Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence,
in the judgment of Landlord, shall be prejudicial to the safety, character,
reputation and interests of the Building and its tenants, provided that
nothing herein contained shall be construed to prevent such access to
persons with whom any tenant normally deals in the ordinary course of such
tenant's business unless such persons are engaged in illegal activities.
No tenant, no employees or invites of any tenant, shall go upon the roof of
the Building, except as authorized by Landlord.
2. No sign, placard, picture, name, advertisement or notice, visible from the
exterior of the premises shall be inscribed, painted, affixed, installed or
otherwise displayed by any tenant either on its premises or any part of the
Building without the prior written consent of Landlord, and Landlord shall
have the right to remove any such sign, placard, picture, name,
advertisement, or notice without notice to and at the expense of that
tenant.
If Landlord shall have given such consent to any tenant at any time,
whether before or after the execution of the lease, such consent shall in
no way operate as a waiver or release of any of the provision hereof or of
such lease, and shall be deemed to relate only to the particular sign,
placard, picture, name, advertisement or notice so consented to by Landlord
and shall not be construed as dispensing with the necessity of obtaining
the specific written consent of Landlord with respect to any other such
sign, placard, picture, name, advertisement or notice.
All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of the tenant by a person
approved by Landlord.
3. The bulletin board or directory of the Building will be provided
exclusively for the display of the name and location of tenants only and
Landlord reserves the right to exclude any other names therefrom.
4. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, awing, hangings or decorations shall be attached to, hung or
placed in or used in connection with, any window or door on the premises of
any tenant without the prior written consent of Landlord. In any event and
with the prior written consent of Landlord, all such items shall be
installed in such a manner that they shall in no way be visible from the
exterior of the Building. No articles shall be placed or kept on the
window sills so as to be visible from the exterior of the Building. No
articles shall be placed against glass partitions or doors which might
appear unsightly from outside the premises of any tenant.
5. Landlord reserves the right to exclude from the Building between the hours
of 6 p.m. and 8 a.m. Monday through Friday and at all hours on Saturdays,
Sundays, and holidays all persons who are not tenants or their accompanied
guests in the Building. Each tenant shall be responsible for all persons
whom it allows to enter the Building and shall be liable to Landlord for
all acts of such persons.
Landlord shall in co case be liable for damages for error with regard to
the admission to or exclusion from the Building of any person.
27
<PAGE>
During the continuance of any invasion, mob, riot, public excitement or
other circumstance rendering such action advisable in Landlord's opinion,
Landlord reserves the right to prevent access to the Building by closing
the doors, or otherwise, for the safety of tenants and protection of the
Building and property in the Building.
No tenant shall employ any person or persons other than the janitor or
Landlord for the purpose of cleaning the Premises unless otherwise agreed
to by Landlord in writing. Except with the written consent of Landlord no
person or persons other than those approved by Landlord shall be permitted
to enter the Building for the purpose of cleaning the same. No tenant
shall cause any unnecessary labor by reason of such tenant's carelessness
or indifference in the preservation of good order and cleanliness of the
premises. Landlord shall in no way be responsible to any tenant for any
loss of property on the premises, however occurring, or for any damage done
to the effects of any tenant by the janitor or any other employee or any
other person. Landlord shall not be responsible for the preservation of
good order and cleanliness of the premises when the premises are occupied
after normal business hours.
8. Each tenant shall see that all doors of its premises are closed and
securely locked and must observe strict care and caution that all water
faucets or water apparatus are entirely shut off before the tenant or its
employees leave such premises, and that all utilities shall likewise be
carefully shut off, so as to prevent waste or damage, and for any default
or carelessness the tenant shall make good all injuries sustained by other
tenants or occupants of the Building. On multiple-tenancy floors, all
tenants shall keep the door or doors to the Building corridors closed at
all times except for ingress and egress.
9. As more specifically provided in each tenant's lease, each tenant shall not
waste electricity, water or air conditioning and agrees to cooperate fully
with Landlord to assure the most effective operation of the Building's
heating and air conditioning, and shall refrain from attempting to adjust
any controls. Each tenant shall keep window coverings in its premises
closed when the effect of sunlight or cold weather would impose unnecessary
loads on the Building's heating or air conditioning systems.
10. No tenant shall alter any lock or access device or install a new or
additional lock or access device to any bolt on any door of its premises
without the prior written consent of Landlord. If Landlord shall give its
consent, the tenant shall in each case furnish Landlord with a key for any
such lock.
11. No tenant shall make or have made additional copies of any keys or access
devices provided by Landlord. Each tenant, upon the termination of the
tenancy, shall deliver to Landlord all keys or access devices for the
Building, offices, rooms and toilet rooms which have been furnished to the
tenant or which the tenant shall have made. In the event of the loss of
any keys or access devices so furnished by Landlord, tenant shall pay
Landlord therefor.
12. The toilet rooms, toilets, urinals, wash bowls, and other apparatus shall
not be used for any purpose other than that for which they were constructed
and no foreign substance of any kind whatsoever, including coffee grounds,
shall be thrown therein, and the expense of any breakage, stoppage or
damages resulting from violation of this rule shall be borne by the tenant
who, or whose employees or invitees, shall have caused it.
13. No tenant shall use or keep on its premises or the Building any kerosene,
gasoline or inflammable or combustible fluid or material other than limited
quantities necessary for the operation or maintenance of office equipment.
Such limited quantities shall be only stored in containers approved by
appropriate regulatory agencies. No tenant shall use any method of heating
or air conditioning other than that supplied by Landlord.
14. No tenant shall use, keep or permit to be used or kept in its premises any
foul or noxious gas or substance or permit or suffer such premises to be
occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Building by reason or noise, odors and/or vibrations
or interfere in any way with other tenants or
28
<PAGE>
those having business therein, nor shall any birds or animals other than
seeing eye dogs and like animals be brought or kept in or about any
premises of the Building.
15. No cooking shall be done or permitted by any tenant on its premises (except
that use by the tenant of Underwriter's Laboratory approved equipment for
the preparation of coffee, tea, hot chocolate and similar beverages for
tenants and their employees shall be permitted, provided that such
equipment and use is in accordance with all applicable federal, state, and
city laws, codes, ordinances, rules and regulations) nor shall its premises
be used for lodging.
16. Except with the prior written consent of Landlord, no tenant shall sell or
permit the sale, at retail, of newspapers, magazines, periodicals, theater
tickets or any other goods or merchandise in or on its premises, nor shall
tenant carry on, or permit or allow any employee or other person to carry
on, the business of stenography, typewriting, printing, photocopying or any
similar business in or from its premises for the service or accommodation
of occupants of any other portion of the Building, nor shall its premises
be used for the storage of merchandise or for manufacturing of any kind, or
the business of a public barber shop, beauty parlor, nor shall its premises
be used for any improper, immoral or objectionable purpose, or any business
activity other than that specifically provided for in that tenant's lease.
17. If tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's instructions
for their installation. No tenant shall operate any television, radio,
recorder or sound system in such a manner as to cause a nuisance to any
other tenant of the Building.
18. Landlord will direct electricians as to where and how telephone, telegraph
and electrical wires are to be introduced or installed. No boring or
cutting for wires will be allowed without the prior written consent of
Landlord. The location of burglar alarms, telephones, call boxes and other
office equipment affixed to the premises shall be subject to the written
approval of Landlord.
19. No tenant shall install any radio or television antenna, loudspeaker or any
other device on the exterior walls or the roof of the Building. No tenant
shall interfere with radio or television broadcasting or reception from or
in the Building or elsewhere.
No tenant shall lay linoleum, title, carpet or any other floor covering so
that the same shall be affixed to the floor of its premises in any manner
except as approved in writing by Landlord. The expense of repairing any
damage resulting from a violation of this rule or the removal of any floor
covering shall be borne by the tenant by whom, or by whose contractors,
employees or invitees, the damage shall have been caused.
21. No furniture, freight, equipment, materials, supplies, packages,
merchandise, or other property will be received in the Building or carried
up or down the elevators except between such hours and in such elevators as
shall be designated by Landlord.
Landlord shall have the right to prescribe the weight, size and position of
all safes, furniture, files, bookcases or other heavy equipment brought
into the Building. Safes or other heavy objects shall, if considered
necessary by Landlord, stand on wood strips of such thickness as determined
by Landlord to be necessary to distributed properly the weight thereof.
Landlord will not be responsible for loss of or damage to any such safe,
equipment or property from any cause, and all damage done to the Building
by moving or maintaining any such safe equipment or other property shall be
repaired at the expense of the responsible tenant.
Business machines and mechanical equipment belonging to any tenant which
cause noise or vibration that may be transmitted to the structure of the
Building or to any space therein to such a degree as to be objectionable to
Landlord or to any tenants in the Building shall be placed and maintained
by tenant, at tenant's expense, on
29
<PAGE>
vibration eliminators or other devices sufficient to eliminate noise or
vibration. The persons employed to move such equipment in or out of the
Building must be acceptable to Landlord.
22. No tenant shall place a load upon any floor of its premises which exceeds
the loan per square foot which such floor was designed to carry and which
is allowed by law. No tenant shall mark, or drive nails, screw or drill
into, the partitions, woodwork or plaster or in any way deface its premises
or any part thereof.
23. No tenant shall install, maintain or operate upon its premises any vending
machines without the written consent of Landlord.
24. There shall not be used in any space, or in the public areas of the
Building, either by any tenant or others, any hand trucks except those
equipped with rubber tires and side guards or other such material-handling
equipment as Landlord may approve. No other vehicles of any kind shall be
brought by any tenant into or kept in or about its premises.
25. Each tenant shall store all its trash and garbage within the interior of
its premises. No material shall be placed in the trash boxes or
receptacles if such material is of such nature that it may not be disposed
of in the ordinary and customary manner of removing and disposing of trash
and garbage in the city without violation of any law or ordinance governing
such disposal. All trash, garbage and refuse disposal shall be made only
through entryways and elevators provided for such purposes and at such
times as Landlord shall designate.
26. Canvassing, soliciting, distribution of handbills or any other written
materials, and peddling in the Building are prohibited and each tenant
shall cooperate to prevent the same. No tenant shall make room-to-room
solicitation of business from other tenants in the Building.
27. Landlord reserves the right to exclude or expel from the Building any
person who, in Landlord's judgment, is intoxicated or under the influence
of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Building.
28. Without the prior written consent of Landlord, no tenant shall use the name
of the Building in connection with or in promoting or advertising the
business of such tenant except as that tenant's address.
29. Each tenant shall comply with all energy conservation, safety, fire
protection and evacuation procedures and regulations established by
Landlord or any governmental agency.
30. Tenant assumes any and all responsibility for protecting its premises from
theft, robbery and pilferage, which includes keeping doors locked and other
me of entry to the premises closed.
31. The requirements of each tenant will be attended to only upon application
at the office of the Building by an authorized individual. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord, and no employees
will admit any person (tenant or otherwise) to any office without specific
instructions from Landlord.
32. Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of
any other tenant or tenants, nor prevent Landlord from thereafter enforcing
any such Rules and Regulations against any or all tenants of the building.
30
<PAGE>
33. Landlord reserves the right to make such other reasonable rules and
regulations as in its judgment may from time to time be needed for safety
and security, for care and cleanliness of the Building and for the
preservation of good order therein. Each tenant agrees to abide by all
such Rules and Regulations hereinabove stated and any additional rules and
regulations which adopted.
34. All wallpaper or vinyl fabric materials which any tenant may install on
painted walls shall be applied with a strippable adhesive. The use of
nonstrippable adhesives will cause damage to the walls when materials are
removed and repairs made necessary thereby shall be made by Landlord at
that tenant's expense.
35. Each tenant will refer all contractors, contractor's representatives and
installation technicians, rendering any service to such tenant, to Landlord
for Landlord's supervision, approval, and control before performance of any
contractual service. This provision shall apply to all work performed in
the Building, including installations of telephones, telegraph equipment,
provision shall apply to all work performed in the Building, including
installations of telephones, telegraph equipment, electrical devices and
attachments and installations of any nature affecting floors, trim,
windows, ceilings, equipment or any other physical portion of the Building
37. Each tenant shall give prompt notice to Landlord of any accidents to or
defects in plumbing, electrical fixtures, or heating apparatus so that such
accidents or defects may be attended to promptly.
38. Each tenant shall be responsible for the observance of all of the foregoing
Rules and Regulations by its employees, agents, clients, customers,
invitees and guests.
39. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify, alter or amend, in whole or in part the terms,
covenants, agreements and conditions of any lease of any premises in the
Building.
31
<PAGE>
EXHIBIT "B"
32
<PAGE>
EXHIBIT "C"
OFFICE LEASE IMPROVEMENT AGREEMENT
1. IMPROVEMENTS
(a) At Tenant's expense, Landlord shall furnish and install substantially
in accordance with the construction drawings and specifications approved by
Tenant and landlord, partitions, doors, lighting fixtures, acoustical ceiling,
floor coverings, electrical outlets, telephone outlets, air conditioning, fire
sprinklers, signage, wall finishes, and construction clean-up and other
improvements required by Tenant which are normally performed by the construction
trades. Tenant shall cause to be prepared at Tenant's expense all architectural
plans and specifications, and all structural, mechanical and electrical
engineering plans and specifications (the "Plans") required for Tenant's
occupancy. The preparation of the Plans shall not include selection of non-
building standard finishes, or any fixtures or furniture, or any other elements
of interior design. Tenant has selected, and Landlord hereby approves, Godwin &
Associates ("Tenant's Architect") to prepare the Plans.
(b) At Landlord's expense, Landlord shall or has provided the following
(hereinafter referred to as "Landlord's Work"):
1. HEATING, VENTILATION AND AIR-CONDITIONING: Building standard primary
duct work and perimeter supply and return grilles served by a central air system
to provide normal air conditioning and heating. The cost of changes
necessitated by Tenant's work shall be paid by Tenant.
2 CEILING GRID AND STANDARD LIGHTING: Building standard ceiling grid.
Building standard acoustical ceiling tiles in crates stacked on floor. Twenty-
four (24) fluorescent building standard lighting fixtures per 2,000 rentable
square feet in vacuum packed containers stacked on floor. All costs to install
ceiling tiles and light fixtures to be at Tenant's expense.
3. SUBFLOOR: Concrete floor, finished, ready for application of carpet,
vinyl composition tile or other floor covering.
4. FIRE SPRINKLERS: Building standard sprinkler heads in a general
protective pattern as required by code. The cost of changes necessitated by
Tenant's work shall be paid by Tenant.
2. LANDLORD'S ALLOWANCE
As Landlord's contribution to work provided in paragraph 1, Landlord shall
provide Tenant with an allowance of Four Hundred Seventy-Three Thousand Eight
Hundred and Twenty Dollars ($473,820.00), hereinafter referred to as "Landlord's
Allowance"). Notwithstanding the above, Tenant may, at Tenant's discretion, use
all or any portion of the Landlord Allowance for costs related to design and
construction of the Tenant Improvements, Tenant's signage costs, moving expenses
and installation of Tenant's furniture. Any unused portion of the Landlord
Allowance, not to exceed $2.00 per rentable square foot will be used as a credit
towards the initial rent.
3. TENANT'S COST
(a) Tenant shall bear the cost, if any, of the work described in Paragraph
1 over and above the Allowance provided by Landlord under Paragraph 2 (Paragraph
3 work is hereinafter referred to as "Tenant's Cost"). Any modifications of any
part of the work described in Paragraph 1 already completed that are requested
by Tenant shall constitute part of Tenant's Cost.
(b) Tenant shall pay for all costs associated with any Tenant-requested
changes or modifications of the improvements as defined by the Plans in
Paragraph 1 of this Exhibit "C" after the Plans have been approved by Tenant.
Tenant will be liable for any increase in construction costs if Tenant causes
delays as defined in Paragraph 3(b) of this Lease.
33
<PAGE>
(c) Tenant shall pay one-half (1/2) of the amounts payable by Tenant to
Landlord pursuant to this Exhibit "C" immediately following Tenant's approval of
the price to be paid to Landlord as per Paragraph 4(b) hereof, and Tenant shall
pay the remaining amounts immediately upon the Commencement Date of the Lease.
4. PLANNING SCHEDULE
(a) Preparation and Approval of Plans:
(i) Landlord and Tenant shall diligently pursue the preparation of the
Plans. Tenant, at its expense, shall provide Landlord with Preliminary Plans
and Pricing Notes no later than August 19, 1996. Failure of Tenant to provide
said instructions by the date specified above shall constitute a delay by the
Tenant in accordance with the provisions of Paragraph 3(b) of the Lease.
Landlord shall obtain preliminary pricing for Tenant's review based on the
Preliminary Plans and Pricing Notes and deliver such pricing to Tenant within
seven (7) days.
(ii) The Plans shall then be prepared in conformance with Landlord's
requirements and all applicable codes and shall be subject to approval by the
City of Alpharetta Building and Inspections Department. Tenant shall submit
complete construction plans to Landlord no later than October 7, 1996. Failure
of Tenant to provide said plans shall constitute a delay by Tenant in accordance
with Paragraph 3(b) of the Lease.
(b) Upon receipt of the approved Plans, Landlord shall provide a quotation
based upon competitively bid sub-contract pricing for the work to Tenant for
approval as the price to be paid by Tenant to Landlord for Tenant's Cost. Upon
written approval of such price by Tenant, Landlord and Tenant shall be deemed to
have given final approval to the Plans as the basis on which the quotation was
made, and Landlord shall be authorized to proceed with the improvements of the
Premises in accordance with such Plans. Tenant will not unreasonably withhold
its approval of such price. Failure of Tenant to approve or disapprove such
price within seven (7) days after submission thereof by Landlord, or
unreasonable disapproval of such price, shall constitute a delay by Tenant in
accordance with the provisions of Paragraph 3(b) of the Lease. Landlord shall
not be obligated to proceed with any improvements of the Premises until such
time as Tenant approves a price for the Tenant's Cost. Exhibit "C-1" provides
the intermediate actions required of both Landlord and Tenant to satisfy the
schedule hereof.
5. TENANT'S WORK
All work not within the scope of the normal construction trades employed in
the Building, including, but not limited to, furnishing and installing of
telephones, furniture, and office equipment, shall be furnished and installed by
Tenant at Tenant's expense. Tenant shall adopt a schedule in conformance with
the schedule of Landlord's contractors and conduct its work in such a manner as
to maintain harmonious labor relations and as not to interfere unreasonably with
or delay the work of Landlord's contractors. Tenant's contractors,
subcontractors, and labor shall be acceptable to and approved by Landlord and
shall be subject to the administrative supervision of Landlord. Contractors and
subcontractors engaged by Tenant shall employ persons and means to insure so far
as may be possible the progress of the work without interruption on account of
strikes, work stoppages or similar causes for delay. Landlord shall give access
and entry to the Premises to Tenant and its contractors and subcontractors and
reasonable opportunity and time and reasonable use of facilities to enable
Tenant to adapt the Premises for Tenant's use; provided, however, that if such
entry is prior to the Commencement Date, such entry shall be subject to all the
terms and conditions of the Lease, except the payment of rent.
34
<PAGE>
EXHIBIT "C-1"
THE FOLLOWING SCHEDULE MORE CLEARLY DEFINES THE INTERMEDIATE STEPS ESSENTIAL TO
MEET THE DATES AS PROVIDED IN EXHIBIT "C".
<TABLE>
<CAPTION>
ACTION DATE
<S> <C>
1. PRELIMINARY SPACE PLAN PRICING NOTES AUGUST 19
DELIVERED TO LANDLORD BY TENANT NO LATER
THAN:
2. DETAILED PRELIMINARY ESTIMATE COMPLETED BY
LANDLORD AND DELIVERED TO TENANT WITHIN
SEVEN (7) CALENDAR DAYS OF RECEIPT OF TENANT'S
PRELIMINARY SPACE PLAN AND PRICING NOTES.
3. 50% CONSTRUCTION DOCUMENTS DELIVERED TO SEPTEMBER 13
LANDLORD BY TENANT NO LATER THAN:
4. BUDGET PRICING AND PRELIMINARY LANDLORD
COMMENTS ON 50% CONSTRUCTION DOCUMENTS
DELIVERED TO TENANT BY LANDLORD WITHIN TEN
(10) CALENDAR DAYS FROM RECEIPT OF TENANT'S
DOCUMENTS.
5. 100% CONSTRUCTION DOCUMENTS DELIVERED TO OCTOBER 7
LANDLORD BY TENANT NO LATER THAN:
6. FINAL PRICING AND LANDLORD'S COMMENTS ON
100% CONSTRUCTION DOCUMENTS DELIVERED TO
TENANT BY LANDLORD WITHIN TEN (10) DAYS FROM
RECEIPT OF TENANT'S DOCUMENTS.
7. TENANT'S FINAL ACCEPTANCE OF ALL PLANS AND OCTOBER 24
PRICING DELIVERED TO LANDLORD NO LATER THAN:
8. SUBSTANTIAL COMPLETION AND START OF DECEMBER 20
WORKSTATION INSTALLATION ON OR ABOUT:
9. OCCUPANCY AND COMMENCEMENT OF RENT
WITHIN SEVEN (7) CALENDAR DAYS OR
SUBSTANTIAL COMPLETION.
</TABLE>
NOTE: SCHEDULE ASSUMES ALL MATERIALS, EQUIPMENT, AND FINISHES ARE IN STOCK OR
AVAILABLE IN A TIMELY MANNER SO AS TO NOT DELAY THE JOB PROGRESS. SUBSTITUTION
OR DELETION OF SPECIFIED ITEMS MAY BE REQUIRED TO MAINTAIN SCHEDULE.
35
<PAGE>
EXHIBIT "D"
TENANT LEASE ESTOPPEL CERTIFICATE
---------------------------------
Landlord: CK WINWARD #1, LLC. a North Carolina limited liability company
Tenant: ClientLink, Incorporated, a Delaware corporation
Premises:
-----------------------------------------------------------------
Area: Sq. Ft. Lease Date:
---------------------- ----------------------------
The undersigned Tenant under the above-referenced lease (the "Lease")
hereby ratifies the Lease and certifies to ________________________ ("Landlord")
as owner of the real property of which the premises demised under the Lease (the
"Premises") is a part, as follows:
1. That the term of the Lease commenced on _________, 19____ and the
Tenant is in full and complete possession of the Premises demised under the
Lease and has commenced full occupancy and use of the Premises, such possession
having been delivered by Landlord and having been accepted by the Tenant.
2. That the Lease call for monthly rent installments of $_________ to
date, and that the Tenant is paying monthly installments of rent of $______
which commenced to accrue on the day of ________________, 19____.
3. That no advance rental or other payment has been made in connection
with the Lease, except rental for the current month. There is no "free rent" or
other concession under the remaining term of the Lease, and the rent has been
paid to and including ___________________, 19___.
4. That a security deposit in the amount of $______________ is being held
by Landlord, which amount is not subject to any set off reduction or to any
increase for interest or other credit due to Tenant.
5. That all obligations and conditions under said Lease to be performed
to date by Landlord or Tenant have been satisfied, free of defenses and set-offs
including all construction work in the Premises.
6. That the Lease is a valid lease and in full force and effect and
represents the entire agreement between the parties; that there is no existing
default on the part of Landlord or the Tenant in any of the terms and conditions
thereof and no event has occurred which, with the passing of time or giving of
notice to both, would constitute an event of default, and that said Lease has:
(Initial One)
( ) not been amended, modified, supplemented, extended, renewed
or assigned.
( ) been amended, modified, supplemented, extended, renewed or
assigned as follows by the following described agreements:
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
36
<PAGE>
7. That the Lease provides for a primary term of ______ months; the term
of the Lease expires on the ______ day of ___________, 19____; and that:
(Initial One)
( ) neither the Lease nor any of the documents listed in Paragraph 6
(if any), contain an option for any additional term or terms.
( ) the Lease and/or the documents listed under Paragraph 6, above,
contain an option for _________ additional term(s) of ________ year(s)
and _________ month(s) (each) at a rent to be determined as follows:
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
8. That Landlord has not rebated, reduced or waived any amounts due from
Tenant under the Lease, whether orally or in writing, nor has Landlord provided
financing for, made loans or advances to, or invested in the business of Tenant.
9. That, to the best of Tenant's knowledge, there is no apparent or
likely contamination of the real property or the Premises by hazardous
materials, and Tenant does not use, nor has Tenant disposed of, hazardous
materials in violation of environmental laws on the real property or the
Premises.
10. That there are no actions, voluntary or involuntary, pending against
the Tenant under the bankruptcy laws of the United States or any state thereof.
11. That this certification is made knowing that the Landlord is relying
upon the representation herein made.
12. That this certification is made knowing that the Landlord is relying
upon the representation herein made.
Tenant:
-----------------------------
Dated: ---------------- By: ----------------------------
Typed Name: -------------------
Title: --------------------------
37
<PAGE>
CLIENTLINK, INC.
SECRETARY'S CERTIFICATE
The undersigned, Robert J. Boutin, certifies that he is the duly elected
and qualified Secretary of ClientLink, Inc., a Delaware corporation (the
"Company"), and further certifies that the preambles and resolutions attached
hereto as Exhibit A were adopted by the Board of Directors of the Company in
---------
accordance with applicable law. Such resolutions have been entered in the
minute book of the Company, have not been amended, altered or repealed and
remain in full force and effect on the date hereof.
The undersigned further certifies that the following individuals are as of
the date hereof officers of the Company holding the offices indicated below:
James H. Hamilton President
Robert J. Boutin Secretary
IN WITNESS WHEREOF, I have hereunto signed this Certificate on the 26th day
of September, 1996.
CLIENTLINK, INC.
By: -----------------------------
Robert J. Boutin,
Secretary
38
<PAGE>
EXHIBIT A
---------
New Lease Agreement
- -------------------
A discussion then took place with respect to the Possibility of the Company
entering into a lease agreement for new office space. Upon motion duly made and
seconded, the following resolutions were unanimously adopted:
RESOLVED, that the Company is hereby authorized and directed to
enter into a lease agreement with CK Windward #1, LLC providing for
the lease by the Company of new office space for a term of up to 60
months at a rental rate of $32,320 per month (the "Lease Agreement").
FURTHER RESOLVED, that any officer of the Company is hereby
authorized, directed and empowered, acting either alone or together
with another officer of the Company, to execute and deliver all
documents necessary or appropriate, including, but not limited to,
the Lease Agreement, and to take any such other action as any such
officer may deem necessary to effect the intent of the foregoing
resolution, the taking of any such action, for, on behalf or in the
name of the Company, and/or the execution and delivery for, on behalf
and in the name of the Company, of any such document or instrument to
be conclusive evidence that such officer did so deem the same to be
necessary or desirable and in the best interests of the Company.
FURTHER RESOLVED, that any and all actions heretofore taken by the
officers or representatives of the Company, for, on behalf or in the
name of the Company with respect to the foregoing resolutions, be,
and they are hereby ratified, confirmed and approved in all respects
for all purposes.
39
<PAGE>
GENERAL CLEANING SPECIFICATIONS
-------------------------------
Page Two
<TABLE>
<CAPTION>
Item Procedure Frequency
- -------------------------------------------------------------------------------------------
<S> <C> <C>
6. Wet mop all floors using germicidal detergent Daily
7. Refill all towel, tissue holders and soap dispensers Daily
8. Spot clean toilet partitions with germicidal cleaner Weekly
9. Spot scrub floors with band brush Monthly
10. Wash all restroom walls (ceiling to floor and partitions) Monthly
11. Clean air vents Monthly
12. Squeegee clean mirrors Monthly
<CAPTION>
ELEVATORS
- ---------
Item Procedure Frequency
- -------------------------------------------------------------------------------------------
<S> <C> <C>
1. Clean and polish finishes (brass, chrome, wood) Daily
2. Vacuum carpets Daily
3. Clean elevator tracks Daily
4. Dust elevator doors Daily
5. Clean carpets As needed
6. Steam extract carpets As needed
7. Edge vacuum carpets Daily
<CAPTION>
BUILDING EXTERIOR
- -----------------
Item Procedure Frequency
- -------------------------------------------------------------------------------------------
<S> <C> <C>
1. Police area around building, parking lot, shrubbery Daily
and dumpster pad
2. Remove cigarette butts from sidewalk entrance Daily
3. Clean building first floor reachable atrium exterior
glass inside and out Weekly
4. Polish entrance sign Monthly
5. Clean mailbox area Daily
6. Clean light bollard and front door entrance Weekly
7. Wash windows Twice annually
ATRIUM AND ELEVATOR LOBBIES
- ---------------------------
Item Procedure Frequency
- -------------------------------------------------------------------------------------------
<S> <C> <C>
1. Spot clean all entrance glass Daily
2. Polish all metal and wood trim Daily
3. Clean and polish building directory on each floor Daily
4. Vacuum all carpet Daily
5. Spot clean carpet Daily
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
6. Low dust Weekly
7. Dust walls within reach Monthly
8. Completely clean entrance door glass Weekly
9. Clean elevator carpet As needed
10. Damp mop hard surface floors Daily
11. Dust mop hard surface floors Daily
12. Clean ash urns in elevator lobbies Daily
</TABLE>
41
<PAGE>
EXHIBIT "F"
LEASE GUARANTY
--------------
Annexed to and forming a part of Lease dated ___________, by and between CK
Windward #LLC, a North Carolina limited liability company, as Landlord, and
ClientLink, Incorporated, a Delaware corporation, as Tenant.
The undersigned, CompuCom Systems, Inc., whose address is 10100 North
Central Expressway, Dallas, Texas 75231 (hereinafter sometimes referred to as
"Guarantor"), in consideration of the leasing of the leased Premises described
in the annexed Lease ("Lease") to the above-named Tenant ("Tenant"), and for Ten
Dollars ($10.00) in hand paid and other good and valuable considerations, the
receipt and sufficiency of which are hereby acknowledged, does hereby covenant
and agrees as follows:
A. The undersigned does hereby unconditionally and irrevocably guarantee the
full, faithful and timely payment by Tenant of all the payments, under or
pursuant to the Lease. If Tenant shall default at any time in the payment of
any rent or other sums, costs or charges whatsoever, under or pursuant to the
Lease (and such default shall remain uncured after notice to Tenant and the
undersigned as required by the Lease), then the undersigned, at its expense,
shall on demand of the Landlord fully and promptly, and will and truly, pay all
rent, sums, costs, and charges to be paid by Tenant, under or pursuant to the
Lease, and in addition shall, on Landlord's demand, pay to Landlord any and all
sums due to Landlord, including (without limitation) all interest on past due
obligations of Tenant, costs advanced by Landlord, and damages and all expenses
(including attorneys' fees and litigation costs) that may arise in consequence
of Tenant's default. The undersigned hereby waives all requirements of notice
of the acceptance of the Guaranty, notice of default, demand for payment, and
all other notices or demands of any kind.
B. The obligations of the undersigned hereunder are independent of the
obligations of Tenant. A separate action or actions may, at Landlord's option,
be brought and prosecuted against the undersigned, whether or not any action is
first or subsequently brought against Tenant, or whether or not Tenant is joined
in any such action, and the undersigned may be joined in any action or
proceeding commenced by Landlord against Tenant arising out of, in connection
with, or based upon the Lease. The undersigned waives any right to require
Landlord to proceed against tenant or pursue any other remedy in Landlord's
power whatsoever (Guarantor hereby expressly waiving any rights under O.C.G.A.
(S) 10-7-24), any right to complain or delay in the enforcement of Landlord's
rights under the Lease, and any demand by Landlord and/or prior action by
Landlord of any nature whatsoever against Tenant or otherwise.
C. The undersigned agrees that the liability of the undersigned hereunder
shall be based upon the obligations of Tenant set forth in the Lease as the same
may be altered, renewed, extended, modified, or amended. No such alteration,
renewal, extension, or modification, with or without notice to Guarantor, shall
in any manner affect or impair any rights or remedies of Landlord against
Guarantor, Guarantor hereby consenting to any such action. Landlord shall
endeavor to notify Guarantor of any proposed alteration, modification, or
amendment to the Lease, provided, however, that the failure to give any such
notice shall not in any manner affect or impair Landlord's rights or remedies
against Guarantor. No assignment of the Lease by Tenant shall be effective
without Guarantor's prior consent.
D. The undersigned's obligations hereunder shall remain fully binding although
Landlord may have, with or without notice to Guarantor, waived one or more
defaults by Tenant, extended the time of performance by Tenant, released,
returned, or misapplied other collateral at any time given as security for
Tenant's obligations (including other guaranties) and/or released Tenant or any
other obligor for the performance of its obligations under or with respect to
the Lease.
E. This Guaranty shall remain in full force and effect notwithstanding the
institution by or against Tenant, of bankruptcy, reorganization, readjustment,
receivership, or insolvency proceedings of any nature, or the disaffirmance of
the
42
<PAGE>
Lease in any such proceedings or otherwise, Guarantor hereby agreeing to assume
and perform all of Tenant's obligations under the Lease for the original term if
the Lease should be disaffirmed or rejected by any trustee in bankruptcy for
Tenant.
F. The Guaranty shall be applicable to and binding upon the heirs, executors,
administrators, representatives, successors, and assigns of the Landlord,
Tenant, and the Guarantor. Landlord may, without notice, assign this Guaranty
in whole or in part.
G. In the event that Landlord should institute any suit against the Guarantor
for violation of or to enforce any of the covenants or conditions of this
Guaranty or to enforce any right of Landlord hereunder, or should the
undersigned institute any suit against Landlord arising out of or in connection
with this Guaranty, or should either party institute a suit against the other
for a declaration of rights hereunder, or should either party intervene in any
suit in which the other is a party, to enforce or protect its interests or
rights hereunder, the prevailing party in any such suit shall be entitled to the
fees of its attorney(s) in the reasonable amount thereof, to be determined by
the court and taxed as a part of the costs therein.
IN WITNESS WHEREOF, the undersigned has executed this Guaranty this ______
day of ___________, 1996.
GUARANTOR
CompuCom Systems, Inc., A Delaware corporation
Attest: By:
------------------------ --------------------------------------------
Its: Its:
--------------------------- -------------------------------------------
(Authorized Person to Bind Said Entity)
43
<PAGE>
Exhibit 10.10
AMENDED AND RESTATED
CLIENTLINK, INC.
REVOLVING NOTE
$2,500,000 Dallas, Texas September 5, 1996
CLIENTLINK, INC., formerly known as COMPUCOM ACQUISITION CORP. OF TEXAS, a
Delaware corporation, for value received hereby promises to pay to CompuCom
Systems, Inc. ("CompuCom"), or its registered assigns, the principal sum of TWO
MILLION FIVE HUNDRED THOUSAND AND NO/100 DOLLARS ($2,500,000.00), or, if less,
such amount as may have been advanced and be outstanding hereunder, together
with interest on the unpaid principal balance as set forth below. All sums
hereunder are payable to the Holder at its principal office at 10100 North
Central Expressway, Dallas, Texas 75231 .
1. Definitions. Unless the context hereof otherwise requires or
-----------
provides, the terms used herein shall have the following meanings:
a. "Company" means ClientLink, Inc. and any corporation which shall
succeed to or assume the obligations of the Company under this Note.
b. "Holder" means initially CompuCom and thereafter any person who
shall at the time be the registered holder of this Note.
c. "Prime Rate" means that variable rate of interest per annum
established by NationsBank of Texas, N.A. ('NationsBank") from time
to time as its "prime rate" (whether by that or any other name).
NationsBank sets such rate as a general reference rate of interest
and takes into account such factors as NationsBank may deem
appropriate. Many of NationsBank's commercial or other loans are
priced in relation to such rate, but it is not necessarily the lowest
or best rate actually charged to any customer, and NationsBank may
make various commercial or other loans at rates of interest having no
relationship to such rate.
d. "Maximum Rate" means the higher of the maximum interest rate allowed
by applicable United States or Texas law as amended from time to time
and in effect on the date for which a determination of interest
accrued hereunder is made. The determination of the maximum rate
permitted by applicable Texas law shall be made pursuant to the
indicated rate ceiling as defined in Tex. Rev. Civ. Stat. Ann. art.
5069-1.04.
e. "Senior Indebtedness" means the principal of and unpaid accrued
interest on all indebtedness of the Company to banks, insurance
companies or other financial institutions regularly engaged in the
business of lending money, which is for money borrowed by the Company
(whether or not secured), and renewals,
<PAGE>
extensions and refundings of, and indebtedness and obligations of a
successor person issued in exchange for or in replacement of,
indebtedness or obligations of the kind described in the preceding
clause of this definition.
2. Interest Rate.
-------------
(a) The unpaid principal balance of this Note from the date hereof until
maturity (whether by acceleration or otherwise) shall bear interest at a rate
per annum equal to the lesser of:
(i) A fluctuating rate of interest equal to the Prime Rate
(changing as the Prime Rate changes) plus 1%; or
(ii) The Maximum Rate.
(b) Interest calculated in accordance with Section 2(a)(i) shall be
calculated at a daily rate equal to 1/360th of the rate per annum herein
provided, and shall be charged and collected on the actual number of days
elapsed (except that if at any time such would otherwise cause the rate of
interest to exceed the Maximum Rate then for such period the daily rate shall be
1/365th (1/366th in a leap year) of the rate per annum specified therein).
Interest calculated in accordance with Section 2(a)(ii) shall be calculated at a
daily rate equal to 1/365th (1/366th in a leap year) of the Maximum Rate and
shall be charged and collected on the actual number of days elapsed. The rate of
interest on this Note shall change automatically, without notice to the Company,
as of the opening of business on the effective date of each change of the Prime
Rate.
(c) If at any time the rate of interest which this Note would bear if the
rate of interest were determined in accordance with Section 2(a)(i) hereof would
otherwise exceed the Maximum Rate, then the rate of interest which this Note
bears shall be limited to the Maximum Rate as set forth in Section 2(a)(ii)
hereof; provided any subsequent reductions in the interest rate determined in
--------
accordance with Section 2(a)(i) hereof shall not reduce the rate of interest
which this Note bears below the Maximum Rate (or if there is then no such
Maximum Rate, then below the sum of the Prime Rate plus 5%) until the total
amount of the interest paid and accrued on this Note equals the amount of
interest which would have been paid or accrued if the interest rate determined
in accordance with Section 2(a)(i) hereof had at all times been in effect.
(d) All past-due payments of principal and interest under this Note shall
bear interest at the Maximum Rate (or if there is no such Maximum Rate, then at
the Prime Rate plus 5%) from maturity until paid.
3. Payment of Principal and Interest. The accrued interest on this Note
---------------------------------
shall be due and payable on or before the first day of each calendar month
commencing May 1, 1994, and upon the occurrence of an Event of Default (as
defined below). The principal on this Note shall be due and payable on the
earlier to occur of (a) August 31, 1997, (b) the Company obtaining a line of
credit in substitution of the line
2
<PAGE>
of credit evidenced by this Note, and (c) when declared due and payable by the
Holder upon the occurrence of an Event of Default (as defined below). Unless the
Holder in its sole discretion elects to apply payments differently, each payment
on this Note shall be first credited to the discharge of interest accrued on the
unpaid principal balance to the date of the payment, and the remainder shall be
credited to the reduction of principal. The principal and interest due hereunder
shall be evidenced by the Holder's records which, absent manifest error, shall
be conclusive evidence of the computation of principal and interest balances
owed by the Company to the Holder.
4. Events of Default. If any of the events specified in this Section 4
-----------------
shall occur (herein individually referred to as an "Event of Default"), the
Holder of this Note may, so long as such condition exists, declare the entire
principal and unpaid accrued interest hereon immediately due and payable, by
notice in writing to the Company.
(a) Default in the payment of the principal or unpaid accrued
interest of this Note when due and payable; or
(b) The institution by the Company of proceedings to be adjudicated
as bankrupt or insolvent, or the consent by it to institution
of bankruptcy or insolvency proceedings against it or the
filing by it of a petition or answer or consent seeking
reorganization or release under the federal Bankruptcy Act, or
any other applicable federal or state law, or the consent by it
to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar
official of the Company, or of any substantial part of its
property, or the making by it of an assignment for the benefit
of creditors, or the taking of corporate action by the Company
in furtherance of any such action; or
(c) If within sixty (60) days after the commencement of an action
against the Company (and service of process in connection
therewith on the Company) seeking any bankruptcy, insolvency,
reorganization, liquidation, dissolution or similar relief
under any present or future statute, law or regulation, such
action shall not have been resolved in favor of the Company or
all orders or proceedings thereunder effecting the operations
or the business of the Company stayed, or if the stay of any
such order or proceeding shall thereafter be set aside, or if,
within sixty (60) days after the appointment without the
consent or acquiescence of the Company of any trustee, receiver
or liquidator of the Company or of all or any substantial part
of the properties of the Company, such appointment shall not
have been vacated; or
3
<PAGE>
(d) Any declared default of the Company under any Senior
indebtedness that gives the holder thereof the right to
accelerate such Senior Indebtedness, and such Senior
indebtedness is in fact accelerated by such holder.
5. Prepayment. The Company may at any time prepay in whole or in part
----------
the unpaid principal balance of this Note without premium or penalty, and the
interest shall immediately cease on any amount so prepaid.
6. Assignment. The rights and obligations of the Company and the Holder
----------
of this Note shall be binding upon and benefit the successors, assigns, heirs,
administrators and transferees of the parties.
7. Waiver and Amendment. Any provisions of this Note may be amended,
--------------------
waived or modified upon the written consent of the Company and the Holder of
this Note.
8. Notices. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if telecopied or mailed by registered or
certified mail, postage prepaid, at the respective addresses of the parties as
set forth herein. Any party hereto may by notice so given change its address
for future notice hereunder. Notice shall conclusively be deemed to have been
given when personally delivered or when deposited in the mail or telecopied in
the manner set forth above and shall be deemed to have been received when
delivered.
9. Advances Under this Note. This Note evidences indebtedness for
------------------------
advances which will be made from time to time after the date hereof by CompuCom
to the Company for future working capital requirements of the Company.
10. Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of Texas.
11. Heading References. All headings used herein are used for
------------------
convenience only and shall not be used to construe or interpret this Note.
Except where otherwise indicated, all references herein to Sections refer to
Sections hereof.
12. Restatement. This Note is given in amendment and restatement and not
-----------
in payment or satisfaction of and replaces that certain promissory note dated
March 25, 1994, executed by CompuCom Acquisitions Corp. of Texas and payable to
the order of the Holder.
CLIENTLINK, INC.
By: /s/ Lazane Smith
--------------------------------------
Its: Treasurer
--------------------------------------
4
<PAGE>
Name of Holder: COMPUCOM SYSTEMS, INC.
Address: 10100 North Central Expressway
Dallas, Texas 75231
5
<PAGE>
EXHIBIT 10.11
LETTER AGREEMENT
December 2, 1997
Mr. James H. Hamilton
President and Chief Executive Officer
ClientLink, Inc.
3025 Windward Plaza, Suite 200
Alpharetta, Georgia 30005
Re: Modification of Employment Agreement
Dear Jim:
Reference is made to the Employment Agreement made March 25, 1994, as
amended, between you and ClientLink, Inc. One provision of that agreement
provides to you a one-time right to receive up to an additional ten percent of
the then outstanding capitalization of the Company. This letter is to confirm
and memorialize the understanding and agreement reached between you and
ClientLink by which you have fully released your right to the above-mentioned
ten percent equity interest in consideration of the Company's agreement to pay
you cash in the amount of $1.2 million. By your execution of this letter at the
place provided below, you will confirm that this is the agreement we have
reached, and that you fully release, in consideration of such cash payment, all
claims to any further equity interest in the Company arising by reason of the
Employment Agreement. This release is not intended to address or affect any
stock options granted by the Company that you now hold.
Sincerely,
CLIENTLINK, INC.
By: /s/ Edward R. Anderson
--------------------------------
Edward R. Anderson
Chairman of the Board
Agreed and Acknowledged:
/s/ James H. Hamilton
- -----------------------------
James H. Hamilton
<PAGE>
EXHIBIT 11
CLIENTLINK, INC.
COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
PERIOD FROM MARCH YEAR ENDED DECEMBER NINE MONTHS ENDED
25, 1994 (INCEPTION) 31, SEPT. 30,
THROUGH DECEMBER 31, --------------------- ---------------------
1994 1995 1996 1996 1997
-------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net income.............. $ 59,640 $ 337,281 $ 541,975 $ 372,978 $1,746,316
Weighted average common
shares outstanding..... 4,733,550 4,749,645 5,322,300 5,322,300 5,322,300
Weighted average common
share equivalents...... 301,674 332,341 274,554 285,900 240,761
Staff Accounting
Bulletin No. 83 grants. 155,745 155,745 155,745 155,745 155,745
---------- ---------- ---------- ---------- ----------
Average number of common
shares and common share
equivalents
outstanding............ 5,190,989 5,237,731 5,752,599 5,763,945 5,718,806
========== ========== ========== ========== ==========
Net income per share.... $ 0.01 $ 0.06 $ 0.09 $ 0.06 $ 0.31
========== ========== ========== ========== ==========
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CLIENTLINE, INC. BALANCE SHEETS AND IS QUALIFIED IN ITS ENTIRETY BY REFERNCE TO
SUCH FINANCIAL STATMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 51,861
<SECURITIES> 0
<RECEIVABLES> 1,854,909
<ALLOWANCES> 82,064
<INVENTORY> 0
<CURRENT-ASSETS> 1,943,005
<PP&E> 960,551
<DEPRECIATION> 261,919
<TOTAL-ASSETS> 2,757,704
<CURRENT-LIABILITIES> 944,901
<BONDS> 0
0
0
<COMMON> 33,750
<OTHER-SE> 1,165,271
<TOTAL-LIABILITY-AND-EQUITY> 2,757,704
<SALES> 9,016,243
<TOTAL-REVENUES> 9,016,243
<CGS> 610,132
<TOTAL-COSTS> 8,021,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,952
<INCOME-PRETAX> 900,291
<INCOME-TAX> 358,316
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 541,975
<EPS-PRIMARY> .094
<EPS-DILUTED> .094
</TABLE>
